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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

The ultimate hole-in-the-wall machine

Well, for all you gold bugs out there, here is a spiffy new banking facility, although it so far is confined to the Gulf.

Ayn Rand and Ludwig von Mises would have approved, I’m sure. By the way, the price of gold is currently around $1,250, a new record. Given the various “quantitative easing” programmes of central banks in recent months, the hunger for the yellow metal is not surprising. I must say that at current levels, it does seem a pretty risky idea to push even more money into gold, since there has been so much of a rally already. If – and this is one hell of an if – some governments start to reduce their debt burdens and try to squeeze monetary growth in some parts of the world (like in Australia), then some of that “fear premium” in gold may start to fade.

17 comments to The ultimate hole-in-the-wall machine

  • thanks for your info. i dont know that there is new style of crime

  • llamas

    Oh, this is insane.

    For the price of one ounce of essentially-useless yellow metal, I can buy a supply of MREs that will assure me 2000 high-quality calories a day for a whole year. For two ounces, me and her both. For three ounces, both Dobermans get to eat for a year, too. If everything does indeed go sideways, I’m guessing that, along about the third month, the price of gold will be – extremely reasonable. And I still wouldn’t buy it.

    The ‘fear premium’ would be better named a ‘stupid premium’. Gold is only a useful and meningful investment in a system that is still functioning 98.987% normally – in which case, it really does you no good at all, and most trading in it merely involves fleecing people whose fear overcomes their common sense.

    There’s a TV commercial in the US presently, in which Watergate conspirator Gordon Liddy urges you to buy gold! And he clinks some gold coins in his hand and says ‘ Now that’s real money!’ No, Gordon – those are slugs of metal. The only reason they have any value is that deluded people will spend other forms of wealth to get them – which means that they have an excess of other forms of wealth – which means that society is probably not on the brink of collapse. When the lights go out, your gold will be worth – zero.

    Wish I’d had this job when I was designing ATMs, though – it would have been a bit of cake to do.



  • Laird

    I see that Llamas is up on his anti-gold high horse again. Can we simply stipulate to his disapproval and move on?

    Back to the specific issue at hand, though, I like this gold ATM on a number of levels, but most especially because (according to the article) it is tied directly, and nearly real-time, to the world market price of gold. There’s no indication (although perhaps the author simply didn’t think to mention it, or even to ask the question) about any markup. But assuming there is none, or only a minimal one to cover the operating costs of the ATM, that takes care of one of the biggest problems I have with buying gold: the high markups (10%+) applied by gold dealers. The US Treasury mints high-grade gold coins and bars, which because of their provable size and content would be very useful as items of trade following a societal collapse*, but it won’t sell them to the public, only to dealers. And it won’t even give you a reliable list of approved dealers. Getting reliable price quotes is difficult (notwithstanding all the advertising by gold dealers, including Gordon Liddy’s ads), and apparently the market is inefficient enough that they can make those markups. I’d like to see the profit margins be more in line with those of securities dealers. Perhaps machines like these will help get there.

    * Llamas’ demurral is hereby noted.

  • llamas

    Laird wrote:

    ‘. . . very useful as items of trade following a societal collapse . . .’

    and despite his pre-stipulations, I have to jump in anyway.

    In the case of ‘societal collapse’, gold will be worthless, certainly in any immediate sense. What will count are food, shelter and weapons. Gold? Pah. It’s like taking your accordion hunting – just a load of useless baggage. You cvan’t eat gold, it won’t keep you warm, and as a weapon, it’s about as sueful as a chocolate teapot. I suppose it would make decent body armor, in a pinch.

    But – that is not to say that gold is not a useful item of trade following a societal downturn, which is a different thing than a ‘collapse’. Kind-of like what we have today. But there’s no getting around the fact that almost-all of that usefullness’ is the result of trading on the irrational fears of others, which are assuaged by the possession of what they fancy to be a physical token of value.

    Buy gold if it makes you happy. Just don’t try and convince anyone that, when the s**t really hits the fan, those shiny eagles will help you in any way.



  • RRS

    When adjusted for inflation this is probably not the highest U S $ price for gold.

  • feynman's adrenal gland

    another consideration or two to make about precious metals and the dealers/brokers who only have your best interests at heart:
    precious metal certificates ‘suggesting’ you own a share of a vault in zurich is only realistic if the vault actually has the gold. more often than not certs are sold with the notional and entirely derivative idea of ‘future gold’ to be delivered within x years. if you’ve purchased a derivative paper based on the price of gold (or other precious metal) and not the physical asset then you basically have an i.o.u., but how many other i.o.u.s exist for the same thing out there? if recent fraudulent activity is to be any indication then values sold far far exceed values available. (otherwise this vending machine would be spitting out perfectly acceptable paper because it’s the same thing right? right?)

    while considering the above; realize that the paper cert/etf is an entirely notional value that somehow magically loses 30% in fees should you ever want to actually get what it says is supposed to be yours between storage/delivery/admin fees for having to deliver what is already considered ‘yours’. this mechanic alone is intended to remove any thought of possession and certainly instills ‘trust’ and ‘value’.

    and that right there is a basic underpinning of free market theory. trust. if there is no one to trust then what value is an i.o.u.? as blankfein said and has been repeated ‘we have no moral obligation to protect the interests of our clients’….sure, but i paid you to see to them right? right?

  • Following on gland’s comment, fractional reserve anyone?

  • Paul Marks

    llamas is correct – if the world reaches the everyone trying to eat everyone else stage (“yum yum – my brother’s brain tastes really nice”) then gold will indeed be of no use.

    Gold may even fall (as government sell their gold reserves) – but should civilization survive then gold will indeed be useful. So the price will be go up again.

    Alisa – you temp me to one of my subjects of choice. But I will content myself with the following:

    Fractional reserve banking may or may be “fraud” – I leave that for another time, but it is certainly very silly indeed and should be avoided.

    Also “gold standards” should be avoided. Gold (or silver or whatever people have CHOSEN to use in their voluntary contracts as money) is either the money or it is not – it must not be the “base” for some sort of inverted pyramid of credit money (as in the late 1920’s).

  • Laird

    If you’re buying gold purely for investment, it only makes sense if you think that your currency is going to devalue in relation to it. (Which is probably a good bet right now, at least for the Dollar and the Euro.) It’s an inflation hedge, and for that purpose having a depository receipt from a bank in Zurich is probably OK. But if you’re buying it for use after an economic collapse* you’re crazy to leave it anywhere but in your personal safe; you need to take physical delivery. Which is why coins and small bars would be the preferred form. But that gets back to my complaints about the dealers: in addition to the large markups (on both the buy and sell sides) it is very difficult to take delivery. Commercial banks won’t deal in gold (I’ve asked), so you’re forced to turn to independent dealers with unknown reputations who want good funds now but won’t promise delivery for several weeks. If anyone here has had good experiences buying and taking delivery of gold I’d love to hear about it.

    * Llamas is probably right that gold would have little utility in the immediate aftermath of a societal collapse; then the “currencies” of choice will indeed be food and ammunition. But eventually (and probably fairly quickly) things will settle down and a new order will arise, at which time gold will again be a useful medium of exchange.

  • Richard Thomas

    If things get really bad, gold will be pretty useless its true. No only will it have little intrinsic value beyond prettiness but plenty of people will be dying off and leaving supplies behind in the form of jewelery. Not to even mention all the stores available for looting.

    As a hedge against inflation, it makes more sense. But you want the real thing, not just a certificate or you’re just betting on what is potentially just another worthless piece of paper. Though you probably don’t want to be keeping it in your safe either. Or at least not all of it. Don’t count on the government not to want to confiscate all that they’ve sold.

  • All the conflicts between the gold bugs and the anti gold bugs would be solved if only we instituted the Land Value Tax.

  • Laird

    Correction: the Land Value Tax and Esperanto. Then we will have achieved Nirvana.

  • Is there a way to figure Ayn Rand into this?

  • Johnathan Pearce

    Llamas’ rather bizarre contempt for gold as a medium of exchange makes no sense. Get rid of legal tender laws – thereby flipping Gresham’s Law on its head – and I can see quite a few cases of people, long before any period of “societal collapse”, choosing to use gold as a store of value and medium of exchange, given the freedom to do so.

    In Russia, around the time of the 1998 debt default crisis, gold – along with the dollar – was preferred by the locals as a medium of exchange. The same applies in parts of Africa. I am sure that, if Mugabe’s vile regime were overthrown and gold was accepted as legal tender, it would be used instead of the shit that passes for a currency there.

    Let the market reign. What’s so hard about that to understand?

  • llamas

    Johnathan Pearce wrote:

    ‘Llamas’ rather bizarre contempt for gold as a medium of exchange makes no sense.’

    Well, it would make no sense – if that was what I had actually said.

    What I actually have contempt for is the idea that gold is somehow a superior medium of exchange in any normally-functioning economic system. And absent such a system, it is a completely-irrational medium of exchange. Maybe I was not clear.

    I will make so bold as to suggest that using the collapsing Soviet-bloc nations, or the economic vandalism of an insane despot like Mugabe, as examples we should follow when it comes to a meaningful medium of exhange – wants a little more thinking about. In that same neo-Soviet system, cartons of Kent cigarettes circulated freely as a medium of exhange – does that make cartons of Kent cigarettes a preferable medium of exhange in 2010?

    If you want to use gold as a medium of exchange – have at it! I just object the the suggestion (rooted in failed economies or the economic conditions of 500 years ago) that it is somehow a superior means of exchange, or that gold has magickal properties that render the normal rules of economic function invalid. It’s just a relatively-rare metal. There are many others similarly situated. It is a hedge against inflation in an economic downturn, to be sure – except that inflation just isn’t a serious issue right now, in most places. Most of the profit to be made from it is the rankest fear-mongering, playing on the economic illiteracy of the majority. “Now that’s real money!” No, Gordon, they are just slugs of metal. When the s**t really hits the fan, they will be ballast, nothing more.



  • Johnathan Pearce

    I will make so bold as to suggest that using the collapsing Soviet-bloc nations, or the economic vandalism of an insane despot like Mugabe, as examples we should follow when it comes to a meaningful medium of exhange – wants a little more thinking about. In that same neo-Soviet system, cartons of Kent cigarettes circulated freely as a medium of exhange – does that make cartons of Kent cigarettes a preferable medium of exhange in 2010?

    And that is the problem: you think that the way banking operates in the West is, by and large, normal. Well in a tautologous way I guess it is: it is regarded as the “norm” and that anything else is eccentric, or doomed to fail.

    But as I said, get rid of legal tender laws, and I would not be surprised if some folk used gold/other precious metals-backed currencies, given half a chance.

    In any event, I have no particular enthusiasm for the metal as a source of money per se, but it does always make me wonder why, given gold’s centuries-old standing as a unit of exchange, that anti “gold bugs” are quite as dismissive as they are.