[neeraj0272]

Originally Posted by alpha1

You are forgetting that the "demand" for gold is also SOLELY because of trust by people that it will hold its "value" if not increase with time. There is no other use of gold that lends it utility value.
This whole vicious circle of trust lends the "Value" to gold.

This is no different from trust on Fiat money issued by Govts worldwide.

While there is some truth that Gold holds and even increases it value due to 'people's trust' in it but there are some qualities in gold which makes it very valuable and why it does not lose its value.
While ignoring its atheistic value as it is a very subjective matter, gold has some very important properties like it is the most ductile and most malleable material and one of the best conductor of electricity and heat. Due to its high price it is not used extensively in industrial applications. As and when gold prices comes down then gold will find more and more uses in industrial applications replacing other cheaper but inferior metals.
So right now and for some foreseeable future gold being a rare material it will not lose its value as it has not done for the past thousands of years.

[NetfreakBombay]

Originally Posted by alpha1

You are forgetting that the "demand" for gold is also SOLELY because of trust by people....This is no different from trust on Fiat money issued by Govts worldwide.

One big difference is liquidity beyond the country.

For example, when a country's currency becomes useless; gold still holds value.

Recent situation in Afghanistan/Turkey/Pakistan or earlier in Zimbabwe have showed that even if govt mismanages currency, value stored in gold is still preserved.

https://www.nytimes.com/2021/12/21/w...ng-prices.html

[neeraj0272]

Originally Posted by neeraj0272

While ignoring its atheistic value as it is a very subjective matter, gold has some very important properties.

Oops. What I meant was while ignoring it's "aesthetic" value

Originally Posted by NetfreakBombay

One big difference is liquidity beyond the country.

For example, when a country's currency becomes useless; gold still holds value.

Recent situation in Afghanistan/Turkey/Pakistan or earlier in Zimbabwe have showed that even if govt mismanages currency, value stored in gold is still preserved.

https://www.nytimes.com/2021/12/21/w...ng-prices.html

Exactly. As I explained even if gold is not used for jewellery or even if people lose trust in gold's capability to hold it's value, still gold has a very good intrinsic value which is that for many applications gold is a better material than other metals. Only reason gold is not used is it being much costlier (because it's rarer and much expensive to mine) than other materials.

[alpha1]

Originally Posted by neeraj0272

gold has some very important properties like it is the most ductile and most malleable material and one of the best conductor of electricity and heat.

So right now and for some foreseeable future gold being a rare material it will not lose its value as it has not done for the past thousands of years.

Really, come on!
Do you actually agree with the bold part or just paraphrasing what physical gold backed currency peddlers have been saying.
That Gold's current price exists because it is malleable, ductile, good conductor?

Originally Posted by NetfreakBombay

One big difference is liquidity beyond the country.

For example, when a country's currency becomes useless; gold still holds value.

Recent situation in Afghanistan/Turkey/Pakistan or earlier in Zimbabwe have showed that even if govt mismanages currency, value stored in gold is still preserved.

what you are talking about is:
1) new gold cannot be created (new mining rates are practically negligible), therefore if goods and services supply - demand equilibrium remains same then the value of gold will remain same.

2) govt's have a free hand in creating currency therefore mismanagement can lead to currency devaluation (producing more currency, even though there is no change in the goods and services supply demand equilibrium). This is done mainly to fund gov't ever rising expenses without corresponding increase in public taxes.

So what we are coming to is general mistrust of govts in managing the currencies. Yes it is a real concern in banana republics, but let us hear some examples of the "First world".

Incidentally most of the gold backed currency touts are from "First world" - I find it quite strange!

[NetfreakBombay]

Originally Posted by alpha1

So what we are coming to is general mistrust of govts in managing the currencies. Yes it is a real concern in banana republics, but let us hear some examples of the "First world".

Incidentally most of the gold backed currency touts are from "First world" - I find it quite strange!

Do you consider Germany to be First World ?

[alpha1]

Originally Posted by NetfreakBombay

Do you consider Germany to be First World ?

Definitely not after the colossal losses in the first world war.

[neeraj0272]

Originally Posted by alpha1

Really, come on!
Do you actually agree with the bold part or just paraphrasing what physical gold backed currency peddlers have been saying.
That Gold's current price exists because it is malleable, ductile, good conductor?



what you are talking about is:
1) new gold cannot be created (new mining rates are practically negligible), therefore if goods and services supply - demand equilibrium remains same then the value of gold will remain same.

No. I didn't say that gold's high prices are due to its industrial uses. Gold is a very rare material and it's mining cost is very high.
But my point is that if gold were to get cheaper it will start replacing other metals.
Gold's current price = people trust in it + it's aesthetic demand + it's industrial demand + it's mining cost.
If we remove first two then it will be combination of balance two.
If by removing first two, gold demand drops and hence it's prices then it will replace other metals. For example electrical wiring in your house can be of gold instead of copper! Already high end electronics and audio use gold plated connections. If gold is cheaper then may be instead of gold-plated, these will be made of solid gold!
Again being a rare metal, so as you can see there is a limit to which gold prices can drop. It will always remain much more expensive than other metals.

[NetfreakBombay]

Originally Posted by alpha1

Definitely not after the colossal losses in the first world war.

At that point Germany also lost its currency. If it can happen to premier power in Europe; it can happen in pretty much any other country.

Keeping money in Gold is a hedge against such scenarios.

Currently, Turkey is also going through something similar.

[Gansan]

Originally Posted by neeraj0272

Gold's current price = people trust in it + it's aesthetic demand + it's industrial demand + it's mining cost.

Not only that. It is a store of value from time immemorial. Right from the dawn of civilization. It is ingrained in our racial memory. And it is universal. Anyone from anywhere in earth will accept it as payment. Even more readily than silver, though it is equally ancient.

People don't accept newer metals such as Platinum as readily.

[dragracer567]

India has signed an FTA with the UAE in what is promised to be a slew of FTAs with countries/blocs including the UK, EU, Australia, Canada, New Zealand and Israel. Out of these, the first rounds of negotiations have already started with the UK and Australia. The deal with the UAE is interesting as they are our third largest trading partner after US and China (fourth including EU as a bloc) and it is hoped that trade would increase to $100 billion from the current $60 billion in 5 years. Did you know that there is actually a CKD assembly plant for Ashok Leyland buses in the UAE?

News link

The next one to watch out for would be the India - UK FTA which is significant given the underwhelming trade between the UK and India despite the historical, cultural and diaspora links. This should also be politically important to the Brits given that India is the only other large market available for an FTA since China is bolted shut while the US isn’t really interested. Also, ironic that most of these deals are expected with the Angloshere with whom India had actively tried to distant itself politically as much as possible after independence but the cultural links with the strong & visible diaspora is just too strong to ignore at this point (plus again the history of the commonwealth, whether we like it or not).

For India, this is very important as exports had actually reduced steadily from 2014 till 2017 before increasing sharply in 2018 and 2019 before the pandemic hit. Meanwhile, smaller countries like Vietnam (which has the same population as Maharashtra) has almost caught up in exports (not per capita, overall exports), though a lot of this was due to re-export of Chinese products to circumvent the US-China trade war. It seems that during the pandemic, we had given but also had to receive tonnes of aid during the second wave which probably brought the government to the realisation that India cannot survive independently with import substitution. So, a mix of FTA’s and PLI schemes is being used to trigger an increase in exports and concurrently economic growth.

How this actually turn out remains to be seen given the structural issues with Human Resources, women’s rights etc which directly affects productivity. Also, the difference in productivity between the Western/Southern states and the Northern/Eastern states is just alarming!

[Samurai]

The input costs are rising... but how did the profit margins rise?

https://www.youtube.com/watch?v=SgjPl-YW6Hc

[carboy]

Originally Posted by dragracer567

For India, this is very important as exports had actually reduced steadily from 2014 till 2017 before increasing sharply in 2018 and 2019 before the pandemic hit.

Exports actually reduced in 2019. 2019 exports was lesser than 2018 exports - https://www.macrotrends.net/countries/IND/india/exports

Between 2014 to 2019, 2018 was the only year our exports did decent. It was a flop all other years - either negative growth or tiny positive growth.

Re Vietnam, Vietnam exports 10 times as much electronics as India & also 10 times as much mobile phones as India. Vietnam used to export less than India around 10-11 years back, I think.

[srvm]

Originally Posted by Samurai

The input costs are rising... but how did the profit margins rise?
.....

Jon Stewart always makes common sense arguments. It's a pity that a comedy anchor makes more hard hitting and relevant news than regular news anchors. Wish we had someone like him in Indian TV.

[landcruiser123]

A very interesting read on why Dr. Rajan thinks India should consider skipping manufacturing led growth.
https://thewire.in/economy/full-text...mic-strategies

[thanixravindran]

Originally Posted by SnS_12

So its currency valuation will take a hit every time the value of Oil goes down if the currency is backed by oil.

Also Russia cannot decide the price of global oil but can definitely decide where the price of gold goes from here by doing this.

Originally Posted by Samurai

When every country is buying rubles, how are they paying for it? In the form Russia prefers, using other foreign currencies, bonds or commodities and even gold. There are numerous ways to hedge against demand going down.

I get it the way of buying with the options that Samurai has written (emphasized in Bold by me). I believe it is best is by commodities (Barter system, right?) which will make the trade balanced automatically but it is severely limited due to the global demand and supply.

But for payment in any foreign currency, there has to be equivalent demand for that currency in other markets. Example: If India is paying in Rupees, Russia should have something to buy in Rupees (Balance of payment) or use Indian rupee to buy something from some other county. For the sheer number of countries, I think this is practically infeasible as not every country can balance their trades. So I believe this is where Gold become the standard of exchange and later the dollar. So essentially all countries can use Gold or Dollar and buy anything across the globe. Am I right? A crude analogy I can think of is language to communicate with others (Over a period of time, English become the De-facto global language though I know many don't agree).

If this above context is correct, then, isn't Yuan be the natural successor given China's economic heft?

I also read about BANCOR that was proposed at end of world war 2, to be the global currency that each country can buy based on their buying power and use it for export and import. But I could not get how that will work? Was it planned to work with each currency at the predetermined rate? If so, how it was different from gold?

I know this is Ukraine crisis thread and both of you 'agreed to disagree', so do not want to derail the thread. So if possible can some one clarify or mods move to the may be 'Understanding economics' or any other suitable thread.