Gold and biological robots

[1nvest]

The British Official Gold Price = £4.25 from 1786 or earlier up to 1945
For much of that time the Pound/Dollar drifted around 4.87 at least up to 1931 (from at least first quarter of 1800’s century)

The amount of gold in a gold coin of £1 legal tender value, i.e. the Sovereign = inverse of the Official Gold Price = 1/4.25 = 0.2353 ounces (of pure gold in a Sovereign gold coin, that was legal tender and in common use as 'cash').

The "I promise to pay the bearer the sum of one pound" on pound notes, reflected that. Up to 1931 you could legally exchange Pound Notes for gold in banks, by law. In 1931 however and there was disconnect between the Pound and gold in the market, inducing many to convert Pound notes into gold, to the extent that the law had to be dropped, conversion discontinued.

Yet today notes still bear the wording of "I promise to pay ...", BUT the more recent gold legal tender coin is the Britannia. Britannia 1 ounce coin = 100 pound legal tender value. At around £1500 gold price per ounce / 100 = £15 of gold per Pound (1/100th ounce). However as of the 1930's the conversion isn't permitted, its a promise in name only. Whilst the wording has seen increasingly smaller fonts with each new edition of paper (now plastic) notes, it still remains. Should really have been removed.

In the present era, Pounds are ... near worthless, just accepted as having value to avoid otherwise having to barter. The state can simply print/spend notes, devaluing all other notes in circulation (inducing inflation - which is just another form of taxation). Even banks just magic up new money when you ask for a loan, credit your account - out of thin air. They no longer need to match deposits/loans, when those deposits used to be gold. Indeed any deposits made are considered as the banks money, free to do with what it likes, along with a IOU record associated to your name.

For all the talk of virtual currencies ... we've already had them for decades, vaporware. When on the gold standard broadly inflation averaged out at 0%, as gold is finite. When you lent your gold, such as gold sovereigns (money) to the state (bought Treasuries/Gilts), it paid interest in return, as did banks against deposits, as they needed those deposits in order to lend to others. That interest was like a real rate of return, such that savers only needed simple deposit accounts or to buy Gilts for decent real rates of return around which retirement funding could be pretty accurately predicted. Stocks were more for pure speculators, and where broadly stock and bond returns were around the same by the time you factored in all of the extra risks/defaults and volatility of stocks.

Nowadays banks nor the state really need your money/deposits, so can afford to pay very little against such, may even charge you (negative real rates after costs/taxation/inflation). Whilst the dollar and Pound were pegged for international trade purposes, along with the US promising to peg the US dollar to gold, that all fell apart, such that since the 1930's the US dollar has tended to decline relative to gold, and the Pound has tended to decline relative to the dollar. Welcome to the age of fiat currency and virtualisation. Investors have to invest to try and offset Pound devaluation, loss of purchase power, and others clamber all over that for a slice of the cake, brokers, market makers, fund managers, taxman ...etc.

A investor who achieves a 4% gross real (after inflation) return, may see that reduced to 3% after costs and taxes. Generationally a family inheritance tax event might trigger once in every 20 years, 40% taxation on amounts above the allowance amount. So £1M of taxable wealth, that grows at 3% real for 20 years, that then has that £1.8M taxed at 40%, leaves a residual of £1M. 20 years of investing for .... nowt other than having paced inflation (maintained purchase power).

To make matters worse, the next-gen is towards digital currencies. In effect total control over wealth, to where that wealth is just a loan, could be confiscated (taxed away, either partially or fully) at the press of a button. Yet for the individual that wealth may represent many years of labour and strife to have accumulated that wealth. So indicative that the state considers peoples efforts to be ... worthless.

Odd world. Most of the next-gen seem to just sit back and accept whatever is dictated to them. But I guess that is how the state likes it. Biological robots.

[scrumpyjack]

Yes it would be nice to have a currency where maintaining its real value was a major objective. Sadly that is last on the BoE's list of priorities.

If such a currency were to exist (and cryptos aren't it, yet if ever), there would be a massive flight from GBP into it, so HMG would have to stop it!

[1nvest]

Yes it would be nice to have a currency where maintaining its real value was a major objective. Sadly that is last on the BoE's list of priorities.

If such a currency were to exist (and cryptos aren't it, yet if ever), there would be a massive flight from GBP into it, so HMG would have to stop it!

Largely that is what investing is all about.

30 year 3.33% SWR = return of your inflation adjusted money via 30 yearly instalments.

Government policies dissuade British government bonds/Gilts and Pounds being a part of that, as do its taxation policies (and others, such as no longer being able to pay cash into other peoples accounts other than your own account for tracking crime prevention reasons - such as (punitive) tax evasion). Obvious answer, don't hold UK cash/assets and instead invest elsewhere where confiscation taxation isn't so prevalent.

The British way ... hit the 1% that pay a third of the total income tax hard, even incite them to move overseas - which regrettably leaves a residual majority having to pay 50% more in taxes in order to fill that hole. American way ... we'll accommodate them - they're welcome here thanks very much, helps reduce the taxation that others would otherwise have to pay.

[Urbandreamer]

The "I promise to pay the bearer the sum of one pound" on pound notes, reflected that. Up to 1931 you could legally exchange Pound Notes for gold in banks, by law.

Not sure it that's entirely correct. The term for our currency is Pound Stirling, or one lb of silver. Gold was more stable, sort of. Hence, the guinea, intended to be valued at £1, but actually having a silver value some 5% higher at the time of minting.

I'm also not entirely sure that this thread belongs on the mining board.

I note that you mention digital currencies. The real advantage of gold over, for example, silver, copper or iron is its low production/mining (inflation) rate. Some digital currencies are designed to inflate (increase in supply) at variable rates, at fixed rates or even to have a hard limit of what can ever have existed. You might want to consider if any matched your ideal supply constraint.

In many ways, most of us in the UK use digital currency. It's what happens when you pay using your phone or debit card. Or what happens for most when paid by their employer. They are just digital records of a fiat currency, the supply of which being controlled by the whim of government. The difference between a central bank digital currency and our current system is that transaction records tied to people are in the hands of private companies, as is permission to transact.

One significant difference between cryptocurrencies, gold, silver and fiat is who or what controls the supply.

The UK is not the only country that had a silver based currency, and all such suffered significant inflation when Argentina (named after silver) started producing large amounts of the stuff.