NYSE Runs Out of Gold Bars: What Happens Next?

[David Guyatt]

Peter

....those with paper gold will have only paper

You are quite right about paper; And it applies to paper anything really - including (even especially) bank notes. They are promises pure and simple and have the same credibility and prospects of being honoured as whoever is making the promise. That in fact is the nub of the matter.

Any English banknote bears the following words, written top and centre of the note:

Bank of England
I promise to pay the bearer the sum of...

Anyone holding a £20 note can, by appointment, visit the head office of the Bank of England and exchange that £20 note for smaller notes - say 2 x £10 or coins or a mixture of both. The same applies to all other issued notes.

That is the sum value of that meaningless promise.

Wasn't it in most countries originally a promise to pay in gold? It was in the US until not that long ago. Whoever was behind that change really knew what they were doing and that the rest of us wouldn't catch on. One could, even with the old promise of gold' doubt if you'd get your gold, but at least it was a promise of something of some intrinsic worth. Now it is monopoly money and even as such, loosing value from nothing to less than nothing, IMO. Ameran currency is backed by the 'full faith and credit' of the Government - which is why I say going from worthless to less than....

In the case of the Dirty Old Lady, the promise was to exchange for silver --- Sterling don't ya know. But that was a long time ago.