Do USA banknotes go out of date ? Removed posts

[Fulgeo]

Every fiat currency in the last 2000 years had ended in devaluation and eventual collapse. Fundamentally the US dollar has the same short comings as the pound. Think of it this way, all fiat currency eventually gets resolved to its intrinsic value. Your best bet to get yourself some "value insurance" is to put away something of high intrinsic value. As mentioned in an earlier post gold and silver are your best bet. Since I see that you live in the UK I would hardily recommend that your purchase a few british gold sovereigns. They contain about a quarter ounce of gold ( 0.2354 Troy ounces ). They are very recognizable around the world. They have been in production for over 500 years and they are still being cranked out.

Gold and Silver...Get some!

 

[JCD]

Re: Do USA banknotes go out of date ?

If an investor has a reasonable expectation of positive inflation, then better than investing in US currency would be to invest in US Treasury Inflation Protected Securities (TIPS). As the name implies, these securities protect the investor against inflation by essentially maturing in real dollars, as opposed to nominal dollars, in addition to earning interest. For more information, see here.

As far as investing in gold, I believe Warren Buffet said it best:

"[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."

 

[Fulgeo]

Re: Do USA banknotes go out of date ?

JCD history is more than what can be found on wikipedia. Let us not forget that Warren Buffet had accumulated an estimated 130 million ounces of silver in one hoard before. Some say gold (and silver) is an investment...it is not. Some say gold is a hedge against inflation...it is not. Gold is a store of value outside the inflationary deflationary loop of political fiat currency. The OP was looking for some insight on diversification into another fiat currency. I feel that this is not the way to protect yourself from a loss of value. History does indeed repeat itself or at the very least rhyme. People have not change that much in a millennium nor have the tricks used by the rich and powerful to take advantage of them. At one time the pound sterling was the de-facto world currency. It lost its crown to the US dollar. It would be foolish to think that the dollar will never be replaced. This fate is by deficit spending accelerated and exasperates those that have a surplus of dollars, think Japan and China. It is quite possible if the euro fails that the dollar could gain strength. It is also quite possible if the euro fails people might wise up on the whole fiat currency game and demand real money. By real money I mean that which's value is not based on faith and by faith I mean in the central banking entity who printed the funny numbers on the piece of paper in question.

 

[JCD]

Re: Do USA banknotes go out of date ?

Gold is a store of value outside the inflationary deflationary loop of political fiat currency. … By real money I mean that which's value is not based on faith and by faith I mean in the central banking entity who printed the funny numbers on the piece of paper in question.

I think you might have missed the point Buffet was making. Gold is also an arbitrary store of value, no different from a "fiat currency." Its value relative to commodities isn't constant with respect to time or location, making it a poor choice upon which to base a country's currency.

There are better investments than gold to protect ones wealth from devaluation due to inflation.

 

[Fulgeo]

Re: Do USA banknotes go out of date ?

I think you might have missed the point Buffet was making. Gold is also an arbitrary store of value, no different from a "fiat currency." Its value relative to commodities isn't constant with respect to time or location, making it a poor choice upon which to base a country's currency.

There are better investments than gold to protect ones wealth from devaluation due to inflation.

Actually JCD I did not miss the point that you are trying to make. I just disagree with it. Gold is a better store of value relative to commodities than fiat currencies with respect to time and/or location. I state once again that gold is not an investment and it is folly to apply investment strategy to it. When you say that gold is no different from a fiat currency as an arbitrary store of value you could not make a more illogical statement. Gold's intrinsic value is itself. If you cut a one ounce gold piece in half, the pieces are worth a half an ounce of gold. The pieces equate the value of the whole. If you cut a 100 dollar bill in half you have two pieces of paper.

 

[Fulgeo]

Re: Do USA banknotes go out of date ?

You might notice that gold is not that high on their list. They use it, but not in qty like the others. The other reason might be that gold prices are historically high, while other commodities are reasonably low.

HarryN I think you are right on the money with your post and will +1 it. The only thing you have wrong is the quoted statement above. Gold is very high on China's list. They are now the 2nd largest consumer of gold, bested only by India. Not too long ago they went from 400 tons in reserve to 1000+ tons. This was considered a "stealth" move since no one was aware they were accumulating. They just suddenly stated they had 1000+ tons. They have hardily suggested their citizenry purchase gold and have made gold products available to the common folk. Quite interesting when you consider it a communist country.

 

[JCD]

Re: Do USA banknotes go out of date ?

Actually JCD I did not miss the point that you are trying to make. I just disagree with it. Gold is a better store of value relative to commodities than fiat currencies with respect to time and/or location. I state once again that gold is not an investment and it is folly to apply investment strategy to it. When you say that gold is no different from a fiat currency as an arbitrary store of value you could not make a more illogical statement. Gold's intrinsic value is itself. If you cut a one ounce gold piece in half, the pieces are worth a half an ounce of gold. The pieces equate the value of the whole. If you cut a 100 dollar bill in half you have two pieces of paper.

If you cut a $100 bill in half, you still have a $100. If you split an ounce of gold, there still exists an ounce of gold. There is no difference. There is nothing intrinsic about the value of either. We can arbitrarily base the value of goods and services on their value relative to gold, relative to dollars, relative to fresh water, or anything else we choose.

Gold's market value is far disconnected from its utility value. As has been pointed out, its market value is due to confidence in its future value. If that confidence is reduced, the value of gold will drop relative to commodities. Similarly, the value of the US dollar is based on confidence in the American taxpayer to continue paying taxes and supporting their government. If that confidence falls, the demand for dollars will decline, reducing their value relative to commodities.

 

[Fulgeo]

Re: Do USA banknotes go out of date ?

If you cut a $100 bill in half, you still have a $100. If you split an ounce of gold, there still exists an ounce of gold. There is no difference. There is nothing intrinsic about the value of either. We can arbitrarily base the value of goods and services on their value relative to gold, relative to dollars, relative to fresh water, or anything else we choose.

Gold's market value is far disconnected from its utility value. As has been pointed out, its market value is due to confidence in its future value. If that confidence is reduced, the value of gold will drop relative to commodities. Similarly, the value of the US dollar is based on confidence in the American taxpayer to continue paying taxes and supporting their government. If that confidence falls, the demand for dollars will decline, reducing their value relative to commodities.

You sir do not know the definition of intrinsic. Also let me see if I can explain the obvious with my cutting a $100 bill in half analogy. If you perfectly cut a $100 bill in half and try to pass off the half as $50.00 you will fail. Fiat US currency's intrinsic value is paper and a smattering of ink. If you do not understand this so be it.

Saying that the "value of the US dollar is based on confidence in the American taxpayer to continue paying taxes" is a very small facet of the issue. The biggest debasement of the US dollar is the introduction of more of them into circulation. The concept of more dollars chasing fewer items. If this privilege is abused beyond the tolerance of the world's people who are using the US dollars as a reserve currency (or de-facto world currency if you will) the dollar could collapse and hyper inflation ensue. Take the Troubled Asset Relief Program. In one fell swoop the government comes up with 356 billion dollars (some say 700 billion or 2.9 trillion) to basically bail out the bankers. At the time the TARP was announced it's stated cost was greater than the UK's total holdings of US Treasure Securities. This is what kills currencies. This concept is repeated again and again thru history. There is too much temptation by the powers that be to abuse a political fiat currency. In the troubled financial world we are currently in I would stay away from too much exposure to any paper denominated wealth. Holding items of intrinsic (look it up) value will serve you better. Gold, silver, rice, dried beans, tools, flashlights (had to throw it in), arable land, hard liquor, firearms, ammunition, cigarettes, toilet paper etc...take your pick. Look at it this way if you believe that there is only a 5% chance of the US dollar collapsing or losing its' reserve currency status, would it not be wise to have 5% of your net worth in gold and silver?

 

[JCD]

Re: Do USA banknotes go out of date ?

If you perfectly cut a $100 bill in half and try to pass off the half as $50.00 you will fail.

You are confusing the money with the note. Cut a certificate for an ounce of gold in half and try to cash in one half of it. It is just as worthless.

The biggest debasement of the US dollar is the introduction of more of them into circulation. The concept of more dollars chasing fewer items.

Incorrect. The current system allows the market to determine when value is added to the economy. With a gold backed system, the economy can only grow at the rate that gold is mined. Or, put another way, the only value added labor in the economy would be gold mining. A gold backed system stymies economic growth. That is not a problem with our current system.

In the troubled financial world we are currently in I would stay away from too much exposure to any paper denominated wealth. Holding items of intrinsic (look it up) value will serve you better. Gold, silver, rice, dried beans, tools, flashlights (had to throw it in), arable land, hard liquor, firearms, ammunition, cigarettes, toilet paper etc...take your pick.

I don't need to look up intrinsic value, but thanks for your concern. Of your examples, gold has the least utility value. Its usefulness in minimal. Selecting it to back currency is a poor, arbitrary choice that would cause far more economic problems than it could solve.

Look at it this way if you believe that there is only a 5% chance of the US dollar collapsing or losing its' reserve currency status, would it not be wise to have 5% of your net worth in gold and silver?

No. There are better investments. Right now is a very bad time to buy gold, due to its relative high value. Like any other investment, buy low, sell high applies. If one wants to invest in metals, it would be much wiser to invest in one with a utility value that is growing at an increasing rate, instead of one which has a future value dependent upon consumers' superficial desire for bling.

 

[Fulgeo]

Re: Do USA banknotes go out of date ?

JCD I think we are going to have to agree to disagree. You are definitely carrying the party line. When the party ends you might have a chance to see behind the lifted veil. Do not get me wrong I hope the party never ends, but alas I am a realist and history is the example I hold forth. I was tempted to pick apart your posts but I am not sure it would do any good. You are pointedly ignoring the vast history of mankind and specifically economics. Although when you said "The current system allows the market to determine when value is added to the economy", I fell off my chair laughing. Good day sir!

 

[JCD]

Re: Do USA banknotes go out of date ?

I have a small supply of gold and also some Euros, but was thinking of some $ for spreading the risk, I would consider this to be more of a disaster prep than an investment.

Cash is a near necessity for disaster prep. Multiple currencies hedges your bets, if you think that one (or more) currency may collapse.

 

[JCD]

Re: Do USA banknotes go out of date ?

JCD I think we are going to have to agree to disagree. You are definitely carrying the party line. When the party ends you might have a chance to see behind the lifted veil. Do not get me wrong I hope the party never ends, but alas I am a realist and history is the example I hold forth.

I'm definitely not carrying any party line. I've often been accused of that, though, usually by people parroting the psuedo-economic gibberish of Ron Paul, MD, without realizing that that particular politician's expertise is in medicine, not economics (about economics he remains woefully ignorant). Unfortunately, most of his followers aren't interested in actually learning about economics; they just want to spread the sky is falling rhetoric. To be fair, I had many of the same ideas until I actually studied mathematics, economics, and finance.

Although when you said "The current system allows the market to determine when value is added to the economy", I fell off my chair laughing.

Sometimes it's healthy to be able to laugh at reality.

 

[Fulgeo]

Re: Do USA banknotes go out of date ?

JCD you should add a history book or two to your curriculum. It is good to study. I would not stop thou best to continue on and constantly learn. Also you sound a lot like a Keynesian or Neo-Keynesian. If you are one this is fine. When you run into lets say some of the Austrian School of economic theory you can describe them as you say "psuedo-economic gibberish" but this is pigeon holing. You can ignore different economic theories but this leads to ignorance. I understand your points I just disagree with you.

You said earlier and I quote "You (Fulgeo in this case) are confusing the money with the note. Cut a certificate for an ounce of gold in half and try to cash in one half of it. It is just as worthless". I was not talking about cutting a gold certificate in half. I was talking about a gold piece i.e. a gold coin. You profess to be learned but you completely missed the point. So you either can not comprehend the concept or you are trolling. If there is a third possibility I would be interested in reading it.

 

[JCD]

Re: Do USA banknotes go out of date ?

When you run into lets say some of the Austrian School of economic theory you can describe them as you say "psuedo-economic gibberish" but this is pigeon holing.

The problem with the Austrian economic theory is that it's not mathematically consistent. It doesn't accurately model economics on paper or in the real world.

I was not talking about cutting a gold certificate in half. I was talking about a gold piece i.e. a gold coin.

Right, which is why your analogy failed. You weren't performing equivalent actions. The note isn't the stored value; the note symbolically represents the stored value. The gold certificate isn't the stored value, the gold certificate symbolically represents the stored value. If you wish to accurately illustrate the scenario, you have to compare money to the gold certificate, not the metal itself.

You profess to be learned but you completely missed the point. So you either can not comprehend the concept or you are trolling. If there is a third possibility I would be interested in reading it.

Third option: Perhaps I'm not the one who completely missed the point and lacks comprehension of the subject matter.

 

[Fulgeo]

Re: Do USA banknotes go out of date ?

Perhaps I'm not the one who completely missed the point and lacks comprehension of the subject matter.

And then again perhaps you are just trolling. Well you have low post count so you are new to this forum. I will refrain from being baited by you and only comment if you introduce additional information that is pertinent to this thread.

 

[JCD]

Re: Do USA banknotes go out of date ?

And then again perhaps you are just trolling. Well you have low post count so you are new to this forum. I will refrain from being baited by you and only comment if you introduce additional information that is pertinent to this thread.

Why is it that so many people like to accuse others of trolling instead of addressing the points of the discussion? Just because I've examined and justifiably dismissed the claims made by Austrian economists does not make me a troll.

 

[Badbeams3]

Re: Do USA banknotes go out of date ?

Be cool dudes. Remember to only attach a post...not the poster. And also remember...no one really knows how the future will unfold.

Even now as I post this J P Morgan has posted great earnings . Albeit, they did so by investing in the stock market :duh2:. Never the less, things should continue to very slowly improve. If real estate could come under control things could improve quicker...jobs + jobs.

 

[Fulgeo]

Re: Do USA banknotes go out of date ?

I believe the commercial real estate bubble must pop and adjust before we have a chance of any improvement. Residential real estate has not fully adjusted yet either. A lot of speculation out there that we have another 25-30% drop to go in residential real estate. It was quite interesting to see the latest assessment on my house, funny thing thou that my property taxes where higher in 2009 than 2008 on a house that lost 45%-50% of its value:thinking: I also find it quite distressing that the major players/culprits/regulators that caused this problem are still embedded in place and stronger than ever. The latest solution they have been kicking around is to give the Federal Reserve even more regulatory power, trumping Congress in the process. To me this is akin to letting the fox guard the hen house once half the chickens are dead. The fox's justification is hey you better put me in charge else you will lose more chickens.

 

[JCD]

Re: Do USA banknotes go out of date ?

I also find it quite distressing that the major players/culprits/regulators that caused this problem are still embedded in place and stronger than ever. The latest solution they have been kicking around is to give the Federal Reserve even more regulatory power, trumping Congress in the process. To me this is akin to letting the fox guard the hen house once half the chickens are dead. The fox's justification is hey you better put me in charge else you will lose more chickens.

Since it was the lack of regulation of the financial derivatives (Gramm-Leach-Bliley Act, Commodity Futures Modernization Act of 2000), specifically credit default swaps, that was the underlying cause of the housing bubble and the recession of 2008, more regulation is the wise and prudent course of action.

 

[Empath]

These posts, removed from the original thread, have become a flamefest. Since they deal with a tangential theme, rather than the thread's question, their removal should not detract from the theme of the original thread.

This thread created from the removal of the posts, is now closed. Subsequent posts of the same nature to the original thread will be removed. Discuss the topic in the Underground if you wish.