"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head" - Warren Buffett .
Hehe. There are so many strange thing happening on Earth that, I believe, gold wouldn't be such a concern. Mentally challenged people are being elected worldwide to lead other through sea of problems and challenges which greatly surpass their mental capability...
Hi Stark, The reason why gold is such a concern to many people is because trusting, innocent people are being misled and manipulated and most importantly being harmed financially by the corrupt profiteers. To me, that's the same problem as a corrupt leader lying to the public about the value of his country's currency. The evil is not different in kind, but in degree only. .
Shares in Coca-cola which relies on the sensible, hard intrinsic qualities of "brand", "marketing" and a complicated impossible to replicate recipe of sugar, carbonated water and a few flavourings is what Buffet understands. These are enduring qualities that are true wealth (and a few cavities).
Since Nixon ended the world from the gold reserve, theoretically it should've been the end of gold. Yet since then (and every day in history before it) it has been dug up put "back into the ground" for a rainy day. The rainy day we know is coming. Especially since Nixon ended the gold reserve system.
They walk into a forest, chop down a tree, process that together with some fluffy stuff they pick out of a field. They then turn out these white sheets, and run them through a whole bunch of processes to put this pattern on them. People then wake up early in the morning most of the days of their lives, go to another place far away from family, friends and loved ones, to spend most of their daylight hours (and then some) doing something they don't want to do in order to get some of these pieces of paper. Martians again would scratch their head - we don't really want the pieces of paper, we want the things we swap that paper for. The "analogy" above becomes even better when you consider that in reality, few people work for cash - they work for numbers typed into a computer!
I think that's more the Goldman Sachs and JP Morgan's. Although he has had some stupid brain farts at times, I would say that Buffet doesn't have a history of fleecing people via the stock market and indeed the opposite - he promotes and builds true value in places that other people aren't looking.
Bunch of guys throwing/kicking/bouncing a ball around a rectangle for a couple of hours and thousands of people watching them
Unfortunately, your analogy fails in the most important way. The notes (or the digits that represent the notes) that you decry are the very notes that actually have a tremendous amount of utility for most people in the world today. People pay their grocery bills with them. People pay for their petro (gasoline) with them. People pay for their clothing and their utilities and their phone bill with them. People use this currency to take a taxi to the airport or take the bus to visit their brother across town. People pay for gifts for loved ones and pay for football game tickets with them. People pay parking and road violations with them. People pay other people to work for them with these very notes. People pay for a new keyboard to type messages on the internet with them. PEOPLE PAY THEIR TAXES WITH THEM. Virtually nowhere in the world today does the utility of currencies like these notes have any competition....certainly not from gold in any meaningful way. I believe that's what Buffet meant by "It (gold) has no utility". Gold, in practical terms today IS NOT MONEY. .
Buffet's quote has nothing to do with "gold is not money" and MM's analogy is related to the quote. Gold clearly has utility however, as why would people want to spend so much effort mining, refining, minting and retailing the stuff? I personally get a lot of utility out of gold and consequently am willing to actively trade other things for it - including the electronic digits that I, and nearly everyone I trade with, am forced to accept as currency in order to pay my taxes else have my liberties stripped from me at the threat of extreme violence.
This reminds me of that videoclip of Korn. In the end the Monkey chooses the Banana over Cash and that makes him according to the jury less intelligent, haha. [youtube]http://www.youtube.com/watch?v=m8fm3Z7jgWM[/youtube]
I'll leave the debate on whether gold is money aside for the moment, and come back to the analogy which you suggest is flawed. I will run both examples now and reword them to explain better how I interpreted them, and arrived at the analogy I came to. I will also state at the outset that I believe fiat currency has no intrinsic value in and of itself other than the decree that it does by those that govern us. If you fundamentally do not agree with this, then, yes, the analogy will be flawed. I would also love to see your argument on why a piece of paper with green ink on it has intrinsic value. Also at the outset, I will say that I believe that gold has an intrinsic value, bought about by desirability, and scarcity. If you fundamentally do not agree with this (please note I have NOT said whether I believe it is over or under valued at present), then again, the analogy will appear to be flawed. You don't, by the way, have to agree that it's a currency (you said money, I know, but it IS money, whereas it's not a recognised currency in wide circulation today, and on that I will sadly, but wholeheartedly agree). In the original example, man digs up gold, refines and purifies it, and then buries it again for safe keeping. Without the understanding that gold has an intrinsic value, those looking upon this exercise from the outside looking in would think it a most foolish waste of time, effort and resources - after all, why dig something up, heat it up, then bury it again? In my analogy, I ask why we would go into a forest, cut down a tree, pick some cotton from a field, process all that, print numbers on it, then spend a large majrity of time doing something many of us don't want to do (working) for these pieces of paper (that have no value beyond decree, and are in fact easily duplicated - something that gold is not). In actual reality, we don't really want these pieces of paper, we want what we can swap them for. To those looking at this process from the outside looking in, it would seem equally absurd to put all this effort and resources into producing easily reproducable pieces of paper for which we then spend so much time working, when we don't really want the pieces of paper at all. Draw your own further conclusions from the fact that in the time I've spent typing this post (which was not a waste of time, I'm not trying to imply that!), if I were using a different computer system, I'd by now be the world's wealthiest (but potentially most wanted!) person... again, for which we spend a large part of our lives working. In this analogy, I'm really nudging the reader to the realisation of how absurdly preposterous our current financial system is... all "money" (it's actually currency) is so easily producable, on demand, that the powers that be really know no limit - they can do exacly as they please, creating money whenever it suits them, and in whatever amount suits them. And for this, they have the "enslavement" of every working person on earth. Remeber, we're talking about something they can conjure on demand, with no practical limit. How absurdly preposterous! I've got a better idea. Elect me, and I'll declare something else that "only I" can create as money. I promise you'll be better off!
Midnight Man. I just re-read my post and it appeared to come across as some sort of oblique criticism. It wasn't meant as such. It's just that when I saw your post, thoughts of life imitating art or history repeating itself or Samuel turtling Beckett or something came to mind. Apologies in advance for any offence caused.
None taken whatsoever - in fact, I had thought of the very same parallel myself about an hour after posting it! I found it somewhat amusing - and sobering at the same time As for your signature, I can only offer a wry smile, a nod of agreement, and potentially a mutual wish that all our stackers here end up getting enough of the stuff!
Thanks for clarifying your comments. We agree on at least one point...that fiat currency has no intrinsic value. Further, I assert that neither notes, coinage, nor currency has intrinsic value. Where we disagree strongly is that while somehow you believe that gold has intrinsic value (but what you describe as examples of intrinsic value is anything but) I know that it has none. It has intrinsic properties or characteristics (which make it desirable by some) but this is very different than having intrinsic value. VALUE is ALWAYS what the individual subjectively places on an object, commodity, or asset. Value has to be extrinsic by definition when it comes to these inanimate objects / items. So intrinsic value is an oxymoron when it comes to gold or fiat currency. Gold had no value (intrinsic or otherwise) before some humans placed a value on it 4 or 5 thousand years ago. It always had properties in spite of the fact that humans weren't even around to discover what those properties are. A misconception that you seem to hold is that because something is rare or scarce, that this makes it valuable or that it attains intrinsic value because of this. This is utterly untrue. I could create a list of things that are rare or even one-of-a-kind that virtually no one in the world would place high value on and this list would be much, much, much, much longer than any list you could create of less scarce or rare things that have greater value to many or most people. It would be very easy for me to do this. There may be some things that are scarce or rare that are greatly valued by many people, but rarity or scarcity alone are not at all requisites for high (or even low for that matter) valuation. Intrinsic value means to have value without individuals placing value on something. Gold has no value but that which groups of people in societies place on it. By definition, gold has ONLY extrinsic value. Sentient individuals, people and animals, have intrinsic value. These individuals need no extrinsic judgement or valuation to have value unto themselves. Fiat currency, gold, osmium-184, polonium, erbium, or the most sophisticated rocket ship have no intrinsic value...the value is derived by what individuals or groups of similar-minded people place on it. The myth that is sadly perpetrated by the investment industry that gold has intrinsic value is troubling because it confuses many people, even some otherwise intelligent people. Other points of disagreement we have other than gold is not money is that you believe that it's bad that today gold isn't a recognized currency. I don't see it as particularly bad. Having gold as a currency will NOT resolve the problems we have today caused by our addictions to debt. Whether we install gold as a competing currency or not, human behavior will not change significantly because of that I'm sorry to inform you. Additional points where we are in agreement are: 1) money or currency is not the bottom line...it's what the money allows us to access or buy 2) our country's current fiscal policies are corrupt and dangerous I would vote for you if your policies are those that I think would be best for people I believe deserve to have their concerns addressed first but would not repress anyone's fundamental interests (ie., to not be treated as property, etc). Good day to you! .
Blah blah. Nothing has intrinsic value only intrinsic properties. Intrinsic properties of electronic digits are essentially non-existent. Intrinsic properties of gold are many which means it has a price. Wrcmad will hate me, but IMO if you are "investing" in precious metals for nominal fiat price gain then you aren't stacking, you're speculating. Speculation has nothing to do with any intrinsic properties, only its price.
