On 16 Jan 2002, at 0:42, SnowDog wrote: > ... Let's say that the Euro is backed by 15% of its value in gold.
In my previous posting, I challenged everybody to define what this actually meant. Here is how I stated the problem: Let E be the total number of euros in circulation. Let G be the number of troy ounces of gold reserves. Find P, the percentage of euros E "backed by" the gold G. If I had this formula, then for a given E and G I could verify that P was at least 15%. Without the formula, I have no way of knowing P. Well, nobody took me up on the challenge. That's because everybody knows the real answer: that the gold is valued at the spot market price IN EUROS. SnowDog has already pointed out the ironic emptiness of this definition of "reserves": > ... Let's say that the Euro is backed by 15% of its value in > gold. Then, if you started to inflate the Euro, the price of gold would go > up, and it would still be backed by 15% of its value in gold -- not matter > how many Euros you printed. So here is the actual formula for P, the portion of euros "backed by" gold: P = (G*S) / E G is the troy ounces of gold reserves, E is the number of euros in circulation, and S is the spot price of gold in euros/troy ounce. All the units work out properly so that P is a unitless ratio. Currently S is at 322.85 euros/troy ounce, and let's say that E=100,000,000,000. Assuming P = 0.15, then G = 46,461,205 troy ounces of gold in reserve. However, SnowDog's cynical but true observation is that the more euros they print, the higher the price of gold in euros. So if E jumps to 200,000,000,000, then S will presumably jump to roughly 645.70 euros/troy ounce, and P will still be 15%. Therefore, they can double the euro float, not add a single gram to their gold reserves, and still maintain the 15% "backing". That is why speaking of gold backing is meaningless unless the euro is DEFINED as a specific quantity of gold, just as the dollar was once defined as 23.22 grains. But in that case, there is no such thing as a "percentage" of gold reserves, because each euro would be backed 100% by its defined amount of gold! But even defining the euro as a specific quantity of gold would not be enough. The euro would have to be redeemable for actual gold, or the definition would have no teeth. The redemption promise is essential, because when the first person steps up to the window and is refused gold, then the word gets out that the politicians are up to no good. Without the redemption promise, there is no way for the people to verify that the politicians are honouring the definition. -- Patrick --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED] Use e-gold's Secure Randomized Keyboard (SRK) when accessing your e-gold account(s) via the web and shopping cart interfaces to help thwart keystroke loggers and common viruses.
