Tomorrow (30 November, 2014), the Swiss are having a referendum on gold. The results should come in at 1pm in Switzerland, which is 7am EST.

So what's it all about? Switzerland was the last country to go off a gold standard, in 1999. In the past, Switzerland used to hold a lot of its reserves in the form of gold. In 1999, 43% of Swiss reserves were gold. By 2009, that had dropped to 18%. Currently, it stands at 7.6%. Furthermore, those gold sales were made at a time when the price of gold was incredibly low at between $300 and $500 per ounce (the current price is ~$1,165 per ounce, down from ~$1,900 per ounce a few years ago). Between 1993 and 2014, Switzerland has sold almost 1,600 tonnes of gold, which puts it at more than three times the much sold by the nearest other country (Belgium) selling a lot of gold. There are all sorts of (conspiracy) theories surrounding that.

Regardless, some people in Switzerland had had enough and decided that they wanted the Swiss National Bank to return to how things were before. That said, the Swiss still hold the most gold per capita (~4 ounces per person). Despite opposition in parliament, because Switzerland is a direct democracy, they can hold referenda whenever 100,000 signatures are gathered (107,000 signatures were gathered). Referenda are regularly conducted in Switzerland over all sorts of issues. This year there have already been nine referenda and last year there were eleven, so this is not an unusual event, per se.

The "Save Our Gold" referendum, if it is passed tomorrow, will have three effects:

1. Repatriation of all Swiss gold. Currently, 30% of Swiss gold is stored abroad (20% at the Bank of England, 10% at the Bank of Canada).
2. No more sales of Swiss gold.
3. At least 20% of reserves held as gold within a five year period.

Normally, authorities, especially at the Swiss National Bank, do not comment on referenda. However, they have been campaigning heavily against this one, as has much of the MSM.

Why? What are the arguments for and against this referendum?

The case against the referendum involves several points, but they basically revolve around the SNB being more restricted in what it can do regarding affecting the value of the Swiss franc, which is currently pegged to the euro. Restricting the SNB's ability to manipulate the currency would likely lead to the Swiss franc becoming very strong, to the point that the SNB would not be able to maintain the peg, and exporters obviously wouldn't like that since they would become extremely uncompetitive. The other issue is that since the SNB has said it will not reduce its other reserves in order to reduce the amount of gold required, if they were forced to acquire reserves of 20% gold, they would need to buy a lot of gold to do so. How much? Initially (i.e. to meet the current requirements), they'd need about 1,700 tons, depending upon the price of gold. To put that in perspective, that's approximately 70% of annual gold production. In other words, it's a lot of gold. There would obviously be major implications for doing so, but I will discuss those later.

The case against the referendum is basically the same as the for case, i.e. restricting the ability of the SNB to manipulate the currency. Further to this, it is argued that the SNB has acquired dangerous numbers of euros, which many on the yes side consider to be a currency with no long term future. There is another point, relating to repatriation of gold, that would take a long time to go into. In short though, in recent years, many people have become concerned that certain countries' reserves abroad aren't what they say they are. Germany tried to get 300 tons back from the US, which the US wouldn't give them. At first, they said they would give it back over seven years. After only having got 5 tons back after a year, the whole idea was quietly shelved. Furthermore, what they did get back was from gold that had been melted down and did not bear the expected German markings. Many people have speculated that the US and other Western nations don't actually have the gold they say they do, and that both China and Russia have been lying about how much gold they have been importing. However, the Netherlands recently repatriated 120+ tons of its own gold. If all of the above is true, then no one wants to be the last one to try to repatriate only to find out that their gold no longer exists where it is supposedly stored.

If the referendum passes tomorrow, the price of gold is likely to increase markedly based upon the knowledge that the Swiss will be locked into buying a lot of it in coming years. However, after rallying somewhat over the past few weeks, the price of gold has dropped precipitously within the past twenty four hours, which brings us to polls of the likely outcome of tomorrow's referendum.

In October, polls showed support for the referendum to be about 45%, and opposition to it to be about 39% (with 16% undecided). Recently, however, those numbers have basically reversed to 38% for, 47% against, and 15% undecided. Although not certain, it seems that at this point, the referendum is likely to fail.

In the short term, it seems likely that precious metals will continue to take a beating in the market. In the medium to long term, who knows what will happen. Both sides have made their points and with little ground between them, one is going to win big, and one is going to lose big. Those in favour of the referendum are obviously bearish on the status quo and claim that something will eventually give, likely that China, Russia and others will eventually reveal huge holdings of gold and (semi-)back their own currencies with gold, thereby crushing the USD, euro, and many other fiat currencies, and completely changing the situation on the geopolitical stage (which would have all sorts of flow on effects, many of them very negative). Those against the referendum are obviously bullish on the Keynesian status quo and the ability for that to lead to renewed prosperity in many parts of the world currently foundering.

So what do I think? Why have I started this thread?

I suspect that the referendum is likely to fail. I actually have a foot in each camp. On the one hand, whilst not fully a gold bug (i.e. I still have the overwhelming majority of my net worth in things other than precious metals, and intend to keep it that way), I have come around much more to their position in recent months. Beyond gold itself, I am actually quite opposed to what I believe is a globalist agenda to break nations and peoples and reinstitute some kind of neo-feudalism and would like to see them taken down a peg or two if possible. The heavy opposition from the MSM also raises my hackles. These days, I largely take any MSM position to be a short hand for something that I should vigourously oppose. You could say that I trust the MSM about as far as I could spit a rat, but that would be to grossly overestimate both my rodent projecting abilities and my faith in the media. Aside from that, I do believe that the current economic situation in many countries and with many currencies is simply unsustainable. I don't believe that there is going to be any magic recovery in many countries. Something has to give.

On the other hand, I would like precious metals to remain really low in price for the short to medium term so that I can increase my holdings of them. I recently bought physical gold and silver for the first time, and got them both at extremely low prices. I still currently only have a few percent of my net worth in precious metals, but would like to get that up to at least 5%, but more likely 10% or even a little more. However, I'd prefer not to liquidate existing positions in other things to do so for a number of reasons I won't go into here, and would rather increase my precious metal holdings by using income over coming months and years to do so. So, from a purely selfish point of view, I'd like to see this referendum fail and for gold and silver to absolutely crash and burn in the short to medium term so that I can buy as much of it as possible before the what I believe will be a (Western and Japanese) fiat implosion.

I hope this post has been interesting and informative. There is a lot more that I could have written, but I wanted to keep it relatively short. We'll see what happens tomorrow anyway.

Has anyone else been following this, and if so, what are your thoughts?

The polling shows the referendum is going to fail. That is why gold slumped in the last two days.

TPTB would never allow a return to even a partial gold standard, so this ref was doomed from the start.

Edit: Jim Rickards, a guy who is really into precious metals, recommends for most people to hold about 10% of their portfolio in precious metals (and max 20% if they are very risk tolerant). Makes sense since you ideally want a balanced portfolio and being too heavy in precious metals can make your portfolio too volatile.

Here is Alan Greenspan's recent comments on gold (very controversial for a former Fed Chairman):

Quote: (11-29-2014 07:53 AM)The Texas Prophet Wrote:  

The polling shows the referendum is going to fail. That is why gold slumped in the last two days.

TPTB would never allow a return to even a partial gold standard, so this ref was doomed from the start.

Edit: Jim Rickards, a guy who is really into precious metals, recommends for most people to hold about 10% of their portfolio in precious metals (and max 20% if they are very risk tolerant). Makes sense since you ideally want a balanced portfolio and being too heavy in precious metals can make your portfolio too volatile.

Here is Alan Greenspan's recent comments on gold (very controversial for a former Fed Chairman):

A couple of points. Yes, I agree that this was always going to fail in all likelihood because I think it's premature. I would even argue that, for the same kind of selfish reasons that I have (i.e. the ability to buy more PMs cheaply), China and Russia would want it to fail. It is currently in the interests of TPTB to see it fail.

However, I don't believe that TPTB are a unified front. Their actions demonstrate this. China, Russia and others (i.e. everyone not the West or Japan) wouldn't be buying enormous amounts of gold if they were essentially on the same page as the West. Why would they be doing that? Furthermore, why would China especially be trying to keep the amount they are acquiring and the amount they have so opaque? Something is obviously going on in the global chess game right now. So yes, in the short term, it suits the major players that gold will remain cheap, but for very different reasons based upon very different long term games.

As for portfolio allocations, I understand the theory behind all of that, but I think volatility and risk are two different things a lot of the time. They do overlap in the short term, but I think far less so in the long term. If a person is looking at potentially selling something in ten years or more, then it doesn't really matter what it does next week or next year except unless it moves a lot and you either want/can buy a lot more, or you need to sell (e.g. if you're retired and need it for income). Whenever I see my portfolio go up or down 5%, I couldn't care less either way. When I see that my portfolio has dropped $5,000 or $10,000 in a day, I couldn't care less. I have no emotional reaction to it. I think volatility is overstated a lot of the time. In fact, in the short term, I hope all of my positions drop markedly because then I will be able to buy more of them on the cheap. If something is a good deal at $1 and the fundamentals don't change, then it's an absolute bargain at $0.50. Put it this way: if for some crazy reason, silver dropped to $1/ounce tomorrow, rather than freaking the hell out, I would be quite happy to temporarily have an 80, 90 or more percent position in it. Typical theory on asset diversification would say that's a really bad idea. Of course, I think that's also why the average man out there gets very mediocre results.

Funny how Greenspan is now that he can speak freely. It shows you what a load of bs those guys talk when they're on the job.

TBTB? MSM?

Put a sock in the Rothschild conspiracy nonsense. It has no place in intellectual discourse. It makes it really difficult to take any of your ideas seriously.
If you want to know what is actually going on in Switzerland, it has little to do with the merits or disadvantages of the gold standard. It is about domestic politics. There is a far right Swiss political party, the Swiss People's Party, that is based on good old fashioned demagoguery. They have had considerable success whipping people up into a frenzy over immigration, and seek to replicate that attention whoring with a manufactured crisis over the "gold issue."
If Switzerland really had a problem managing their economy, which they don't, they could just look to the example of the Norwegian Sovereign Wealth Funds, which hold over 1% of global equities and guarantee the standard of living for every Norwegian man, woman, and child for at least the next hundred years.

Ya its refreshing to see Greenspan come out. Interesting none the less. Good post/thread OP.

Quote: (11-29-2014 09:15 AM)VolandoVengoVolandoVoy Wrote:  

If Switzerland really had a problem managing their economy, which they don't, they could just look to the example of the Norwegian Sovereign Wealth Funds, which hold over 1% of global equities and guarantee the standard of living for every Norwegian man, woman, and child for at least the next hundred years.

If anyone is dumb enough to believe a government (or anyone) can plan out 100 years they deserve what's coming to 'em.

I wouldn't feel comfortable predicting even 100 days into the future, much less 100 years.

The problem in Switzerland is not the missing gold, the problem is that they have pegged the CHF to the EUR. So they will go down with it...

This, Swiss People's Party (Schweizerische Volkspartei) is hugely popular in Switzerland and most of the referendums and polls that it called for worked in it's interest before. So I think it's very likely they pass through the legislation and get the gold back.
Also the Netherlands did that a week or two ago.

Quote: (11-29-2014 09:36 AM)Samseau Wrote:  

If anyone is dumb enough to believe a government (or anyone) can plan out 100 years they deserve what's coming to 'em.

I agree in theory, but I think your view is biased because of USA's awful government. Plenty of countries manage to pull off various long-term projects, just like USA used to do in the past.

Quote: (11-29-2014 09:15 AM)VolandoVengoVolandoVoy Wrote:  

TBTB? MSM?

Put a sock in the Rothschild conspiracy nonsense. It has no place in intellectual discourse. It makes it really difficult to take any of your ideas seriously.

Do you even know what those acronyms stand for?

(hint: the power to be and main stream media)

Reminds me of what Gordon Brown did to the gold reserves of the UK treasury. He sold a lot off at cheap prices and now its worth a lot more.

When shit hits the fan, when the Euro collapse, and it will collapse we will need something there which you can touch. None of this computer and paper money bullshit we have now. No credit dreams where money is magically created.

Its like owning a gun, its there if you need it. No point saying you have a gun if you can't actually use it because its is in some banks deposit box.

Quote: (11-29-2014 01:35 PM)frenchie Wrote:  

Quote: (11-29-2014 09:15 AM)VolandoVengoVolandoVoy Wrote:  

TBTB? MSM?

Put a sock in the Rothschild conspiracy nonsense. It has no place in intellectual discourse. It makes it really difficult to take any of your ideas seriously.

(hint: the power to be and main stream media)

I think it's "The Powers That Be"

Quote: (11-29-2014 03:08 PM)iknowexactly Wrote:  

Quote: (11-29-2014 01:35 PM)frenchie Wrote:  

Quote: (11-29-2014 09:15 AM)VolandoVengoVolandoVoy Wrote:  

TBTB? MSM?

Put a sock in the Rothschild conspiracy nonsense. It has no place in intellectual discourse. It makes it really difficult to take any of your ideas seriously.

(hint: the power to be and main stream media)

I think it's "The Powers That Be"

It's funny because I got it wrong

First of all great writeup OP.

Unfortunately I don't think the Referendum will pass, but the fact that it exists is meaningful. The main economic reasons against it really don't hold up to simple scrutiny. For a start, any institution which willingly ties itself to the mess that is the Euro is an institution whose restriction is a positive, not a negative as the detractors suggest.

The idea that the initiative would force the value of the Swiss Franc higher is correct, but the idea that this would be deleterious is not correct. Exporters would not be instantly made uncompetitive - the chief determinant of their competitiveness is the quality of their product. A rising currency creates the situation in which the exporters might have to reduce their prices in the short term, but the same strong currency also means that their costs decline. As such is it still possible to maintain a healthy profit margin. The Franc, has been on an uninterrupted rise since the 1970s, until the 2011 decision to peg to the Euro. Swiss exporters did just fine.

Exporters always cry for weaker currencies because it is effectively a subsidy paid to them by the rest of society. Instead of having to maintain competitiveness, they get an artificial boost in demand for their goods. The 'benefits' of all of this are only short term because over time, the cheaper currency creates a rise in goods generally, which means exporters eventually must face a rising cost of production. The rest of society also suffers by having its purchasing power reduced.

The Swiss seemingly understand this and want to bring some discipline back to their economy. They have a strong economy sure, but that was always the case. The SNB did not build that strong economy, and the actions it has taken in recent years has only introduced instability in the form of a possible housing bubble. The chains have only been off of the SNB for a short period of time, and the Swiss aren't like what they're seeing. As I said, the Referendum will probably fail, but if the SNB succeeds in following the rest of the West off of a cliff, the issue will likely be revisited.

Quote: (11-29-2014 04:23 PM)Dismal Operator Wrote:  

First of all great writeup OP.

Unfortunately I don't think the Referendum will pass, but the fact that it exists is meaningful. The main economic reasons against it really don't hold up to simple scrutiny. For a start, any institution which willingly ties itself to the mess that is the Euro is an institution whose restriction is a positive, not a negative as the detractors suggest.

The idea that the initiative would force the value of the Swiss Franc higher is correct, but the idea that this would be deleterious is not correct. Exporters would not be instantly made uncompetitive - the chief determinant of their competitiveness is the quality of their product. A rising currency creates the situation in which the exporters might have to reduce their prices in the short term, but the same strong currency also means that their costs decline. As such is it still possible to maintain a healthy profit margin. The Franc, has been on an uninterrupted rise since the 1970s, until the 2011 decision to peg to the Euro. Swiss exporters did just fine.

Exporters always cry for weaker currencies because it is effectively a subsidy paid to them by the rest of society. Instead of having to maintain competitiveness, they get an artificial boost in demand for their goods. The 'benefits' of all of this are only short term because over time, the cheaper currency creates a rise in goods generally, which means exporters eventually must face a rising cost of production. The rest of society also suffers by having its purchasing power reduced.

The Swiss seemingly understand this and want to bring some discipline back to their economy. They have a strong economy sure, but that was always the case. The SNB did not build that strong economy, and the actions it has taken in recent years has only introduced instability in the form of a possible housing bubble. The chains have only been off of the SNB for a short period of time, and the Swiss aren't like what they're seeing. As I said, the Referendum will probably fail, but if the SNB succeeds in following the rest of the West off of a cliff, the issue will likely be revisited.

Of course. I was trying to be somewhat impartial though, at least for the first part of what I wrote. Obviously, a weak currency is terrible for consumers and all of the rest that you wrote, including competitiveness. Upon reflection of what you wrote, I think you are correct there.

I think the people currently running the SNB need to be taken out and publicly flogged. I think Switzerland has generally been on a terrible path for the past few years. I was disappointed when the Swiss didn't basically tell the US, Germany, etc. to go and take a hike when those nations started leaning on them about their banking secrecy laws. In ten hours we will know how all of this has turned out. I fear that Switzerland will lose another little bit of what once made it a great nation. In terms of revisiting the issue, I think that by then it may be too late because at that point they would be playing catch up. All of the West would/will.

It failed by a 78% no vote. Personally, i get the impression the "seeds" have be sown for this issue to pop up again if the monetary system gets a shhock to it and things get bad.

I am not surprised that the referendum lost, for the reasons Feisbook wrote about, tying the hands of the Swiss Central Bank. I am surprised it lost by so much.

I am invested in precious metal miners, because I think the money printing of the Fed, ECB and Japanese CB will eventually lead to inflation, but I could be wrong. I will probably take a beating tomorrow on those stocks, but over the year expect to make money.

There is an ongoing argument between the idea of gold as money, and gold as an obsolete relic without intrinsic value other than as an industrial commodity and jewelry. I am not sure what the right answer is, but I think that at least in the next few years, the price of gold will go up in times of inflation and conflict. If nothing else, it is a hedge against inflation.

It's unfair to brand skepticism and awareness of what has been clear market manipulation and shady dealings in the markets as "Rothschild conspiracy nonsense." In the last year we have seen the LIBOR interest rate rigging scandal and even last weeks charges of rigging the platinum and palladium markets.

Since the price of gold is linked to interest rates, commodity prices and even wages in ways I don't fully understand, it's rational to suspect there is rigging of the gold price by central banks, private banks, and governments (aka TPTB). The habitual dumping of naked shorts on the market as a slamdown for the price, particularly in tandem with bad political and economic news should give anyone pause.

For daily commentary on the gold and other markets, I read this blog.

http://jessescrossroadscafe.blogspot.com/

It's a continual catalogue of shady events in the markets.

Not to mention Zero Hedge. You can take or leave these comments on their own merits and your objective knowledge of reality, but the fact is there are real conspiracies in this world.

Quote: (11-29-2014 07:51 AM)Feisbook Control Wrote:  

Despite opposition in parliament, because Switzerland is a direct democracy, they can hold referenda whenever 100,000 signatures are gathered (107,000 signatures were gathered). Referenda are regularly conducted in Switzerland over all sorts of issues. This year there have already been nine referenda and last year there were eleven, so this is not an unusual event, per se.

To my knowledge, this is limited (or semi) direct democracy. People have the right to intervene with the legislative power when they have enough numbers. A direct democracy would be all the citizens voting on bills without representative, and it's only being used in certain cantons of Switzerland.
I've always been fascinated by the notion of direct democracy. When reached a certain level of education and income (and technology), it can easily work. Some point in the future this can be the solution to all political disputes. It removes the chance of corruption.

IMO, gold is being pedestalized too much in discussions about it. Paper money is just an approximation of value of a good/service in a complex economy. We chose to trade pieces of paper/plastic simply because the overall costs and inefficiencies are the smallest that way. There is no big mystery or fiat about it, nor is it removed from reality. Sure, it can be stretched and distorted if you abuse it, but the last time I checked gold coins can also be debased.

The immigration referendum was also voted no, meaning Switzerland won't restrict immigration to the proposed. 2%.

Quote: (11-30-2014 12:02 PM)turkishcandy Wrote:  

Quote: (11-29-2014 07:51 AM)Feisbook Control Wrote:  

Despite opposition in parliament, because Switzerland is a direct democracy, they can hold referenda whenever 100,000 signatures are gathered (107,000 signatures were gathered). Referenda are regularly conducted in Switzerland over all sorts of issues. This year there have already been nine referenda and last year there were eleven, so this is not an unusual event, per se.

To my knowledge, this is limited (or semi) direct democracy. People have the right to intervene with the legislative power when they have enough numbers. A direct democracy would be all the citizens voting on bills without representative, and it's only being used in certain cantons of Switzerland.
I've always been fascinated by the notion of direct democracy. When reached a certain level of education and income (and technology), it can easily work. Some point in the future this can be the solution to all political disputes. It removes the chance of corruption.

The biggest disadvantage of direct democracy is the tyranny of the majority complex. All types of democracy have this, but direct is the worst. Like you said education levels have to be uniformly high enough as well.

I am not surprised that this referendum did not pass, but I am surprised at what an absolute hammering the yes side took. The recent polls were way off unless a lot of people changed their minds recently. I suspect that not only will the SNB continue what it has been doing, but it will go into overdrive as it now has a pretty clear mandate. What has happened to Switzerland? We have to bear in mind that this massive change in attitude has happened in less than a generation. In many ways, it parallels a lot of the other significant cultural changes that have occurred over the same time frame.

As was to be expected, PMs got crushed in the market after this. Silver, in particular, really took a hit.



Burn, baby, burn, all the way back to $4/ounce!!! I'll have a solid silver statue made of myself and install it in my front yard and I'll put solid silver rims on my fifteen year old piece of crap car!

frenchie: The trouble is that that's a bit like trying to buy insurance -- and in such an instance, gold would be a form of insurance -- after the fact. It's a bit like putting your seat belt on after you've already crashed. When everybody wants gold, there isn't going to be much of it around, at least not cheaply.

Sp5: I am actually surprised that you're into gold. Do you have gold itself, or only miners? More in a reply to your PM.

HCE: I think it's a lot harder to get away with debasing precious metal products these days, the occasional dodgy shipment of gold foil wrapped bars in Hong Kong aside. APMEX is based in Oklahoma. I imagine they'd literally face a militia marching on their facilities if they tried to pull anything dodgy.

I actually don't like being into precious metals for a whole lot of reasons, the two biggest ones being that it doesn't produce a dividend and that you either have to risk storing it at your own facilities or trust someone else to store it at theirs. I used to debate a gold bug frequently on another forum, but in recent months I have come more and more around to the notion that this is all a massive shit storm brewing and he's right, if slightly over the top. The trouble is that where do you turn to at the moment? The entire bloody financial system is a mess and full of manipulation and massive distortion. If you're in cash, inflation is eating it. If you're in anything else, you have to deal with governments playing their funny money games blowing bubbles. Maybe you can pick up a diamond in the rough, but realistically, for a lot of people, the choice is between getting crushed by inflation or risking blowing up. It used to be that you could still get a safe, positive return, even after inflation. Likewise, it's not just a matter of the West being on edge. Where do you turn to? Japan? China? Russia? Emerging markets? Any and all of those places have their own major issues and a very strong case could be made for them being in worse shape than the US or other Western nations.

I believe that we live in very uncertain financial, and thus geopolitical, times. Now, of course, there will be big winners and losers in that, so there are great opportunities now, and some people are laying the foundations of great wealth now. I hope I am one of them. Yet you need balls of steel to come through it all, and nothing is certain, and not just because any form of investing always has some inherent risk, but because you could do all the right things and still get wiped out if your government decides to play funny games. I still remember reading about a Cypriot guy who lived in Australia most of his life, worked hard, saved his money and retired back in Cyprus. He had a million dollars and should have been sitting pretty until the bail in. Then, he was completely fucked. That's not right. Ordinary people should be able to work hard their lives and not have to worry that they'll be cheated, otherwise people will either drop out or revolt. Maybe he should have seen it coming. Yet drivers who have never so much as had a parking ticket in their lives get cleaned up by drunk dickheads running red lights also. The difference is though that most people recognise that drunk guys running red lights and killing some guy and his family are motherfuckers. We certainly don't put them in charge of the Traffic Commission.

TravelerKai: I am in no way in favour of democracy of any form. I thought that direct democracy worked relatively well in Switzerland because it kept things fairly honest due to the citizenry being fairly sensible, as far as large groups of people can be. Apparently the Swiss didn't get the recent memo that you never go full retard. They've gone full retard.

Ah, I understand what you mean Zel, definitely valid arguments. But you have to always consider two flip sides (this is an oxymoron, I know): A) "would gold provide a person with a greater level of security?", and B) "does the same reasoning apply to entire country?".

In the case of your million-dollar Cypriot guy, I agree that he should have diversified into gold, although he could have just as well diversified into shares, bonds, other currencies, land, buildings and he would have achieved the same amount of risk reduction, arguably at a lower cost than that imposed on him by gold's massive fluctuations (i.e. unpredictably moving +/- 200% in value during good times/crises and extremely dependent on market speculators).

But, speaking on a personal level, you're absolutely right: gold would have provided him with a nice insurance policy. It's worth it. Barring an extreme like government actually physically seizing it from his safe, it's a worthy protection measure for an individual.

On government/nation level, though, does this assumption continue to hold? I wouldn't say so. Consider for example the recent bankruptcy of Iceland in 2008/9. Its currency took enormous beatings, temporarily dipping down to only 15% of its former value, temporarily truly becoming worthless (the 2008 dip in this chart).

But did it stay that way? Of course not. Iceland exports large amounts of energy (through aluminum production) and has beautiful nature and intriguing culture that attracts tourists. It also has a strong fishing industry, and produces some important pharmaceutical products. Because the printed icelandic krona is just a proxy for actual products/services, it didn't stay at that bottom for long, and it quickly corrected itself and regained enough value to allow for continued trade and monetary functions. No gold included, no gold needed. Iceland didn't go bankrupt in the way that the Cypriot guy ended up being permanently crushed without gold; it just experienced a temporary slump.

I posit that it is physically impossible for any country except for a total shithole that has absolutely no inherent economic value (I'd say Afghanistan, but even Afghanistan seems to have ore deposits and could provide attractive agricultural production and skiing or ecological tourism resorts if it weren't so fucked up) to have a "worthless currency" for more than a very short time. Sure, horrible fiscal and monetary policy can send the currency down the drain of "bankrupcy", but only for a short while. As long as there is something of value in that country, its currency will reset to reflect it, no matter if it's in the form of paper money or something else.

I don't believe in "paper" holdings. If you don't own your metals in your bare hands you don't truly own it.

I personally think there are more paper claims to gold than actual gold.

Does that mean i'd convert all of my wealth into bars of gold? No, but i'd like to diversify what I have.