For many Asian families, their gold collection is like a mortgage

Well, no Mr. Guardian caption writer, it isn\’t.

A mortgage is a debt (more formally, it\’s the security for a debt). Gold is an asset.

Terrible mistakes have occured over the centuries when people get these things confused.

7 comments on “For many Asian families, their gold collection is like a mortgage

  1. Come now, there’s no reason to think the caption-writer doesn’t know that. The text of the article quotes Mrs Rashid as saying “It’s like paying a mortgage for 20 years and then having a house worth thousands of pounds afterwards – it’s the same thing with gold”. The caption-writer, pressed for space, has used “mortgage” synecdochically for the whole process of paying for a house over time by means of a mortgage.

  2. Come on, Paul: he could have said “buying a house” if that’s what he meant. Or even “saving up”.

  3. £70,000 in gold but not “particularly wealthy”? I suspect a white middle-class family with £70,000 in savings would be kulaks in the eye of the average Guardianista.

  4. Rob, that comment might be a function of the general misunderstanding of “wealth”. Many people think that wealth is the amount of cash in the bank, whereas real wealth only occurs when the numbers on the screen are used to buy or create something.

    When the GBP disintegrates Britain will still have the houses, the roads, the fields, the gold even, that are wealth.

  5. Given that paper’s history of typos why should we be surprised they don’t know the difference between owing and owning?

  6. Nothing tangible has any value, unless somebody else is prepared to trade a good or service you value more than the good or service you are offering to sell. Remember the humble tulip? All the ‘roads, fields, gold,even’ in the world have no value if nobody wants them. If no one wants the ‘GBP’ then, yes , it will have no value, but since its value is backed by the assets of the UK, then as long as somebody wants to acquire those assts the GBP will have some value. If no one wants those assets, then neither the GBP nor the roads etc will have any value.

  7. Nick Luke:

    The currency is not “backed” by any “assets” whatever but something entirely more slippery called “the full faith and credit” of the nation’s government (and, in the case of the “PIGS,” there is even now speculation how much such “full faith and credit” may prove to be worth when “push comes to shove.”

    All commodities have value deriving mainly from their utility of design: coal or gas for heating, chairs for sitting, meat and bread for eating, etc. ; many have value based on a composite of uses; in addition, virtually all will have some value simply because, in having these aforementioned values, they’ll also command some value for their use in making exchanges.

    What we term “money” is simply that commodity which obtains the greatest proportion of its value from its utility in making exchanges (or storing that utility) rather than from any othwer sorts of uses. However, it’s important to note that money canot be such merely because a government decrees it to be so: it’s only because people treat it that way that makes it “money”; were they to cease so treating it, it would immediately cease being “money.”

    Economists are not unanimous in accepting the explanation I’ve given you; it’s the explanation of the “Austrian School” and, though disputed, I believe unassailable. But the Austrian School goes further in its monetary explanation . It denies the likelihood that “money” was originally the creation of a government or sovereign and suggests the likeliest explanation is that people, in exchanging goods or services of their own production were very frequently faced with the situation that whatever they most wished to acquire was not readily available from the other party to whatever exchange they wished to make nor, in many cases, even in the same locale. In order to best realize the return to their own efforts, therefore, it became usual for folks to trade for whatever got them closer to their own goal: they’d trade for something
    relatively highly valued by almost anyone and even anywhere, especially those things relatively easily stored and transported. In that fashion, and over time, the most-sought items became sought even more prized for their value in facilitating and effecting exchanges, so that their primary value in use became eclipsed by their exchange value. This had proceeded so far that, in much of the developed world, the field had been narrowed to just the two metals, gold and silver, as money commodities and it became customary for the currencies of such developed nations to be defined as some specific weight of one or the other of those metals and, in some cases (though not all), to lend their currencies
    “currency” (viability) by making any legitimate token (paper or base-metal coin) variety easily exchangeable for its nominal precious metal equivalent (especially to facilitate instances of international trade).

    So far–so simple. But there arise instances where such commendable simplicity seems unnecessarily restrictive and, thus, encourage enlargement of the amount of “money” in use without, however, any addition to the stock of precious metals. Those instances break down into two broad categories. First, there is the desire of some governments at some times (some would suggest all governments and at all times) to spend more than they can reasonably expect to raise in taxes; secondly, there is a very broad and general desire of people everywhere (but particularly for businessmen with ambitious plans) for prevailing interest rates and the price of loan money to be less than it actually is (the fact this is “wishful thinking” is quite beside the point . Because government can (and always does, though not all of the time) cater to both of these groups–at least temporarily).

    The processes by means of which this effect is accomplished are known as “currency debasement” and “central banking/ fractional reserve banking.”

    But they’re another story–one not quite as easily explained as has been the foregoing.

    The best treatment is Mises’ HUMAN ACTION.
    It’s heavy. If you muight like a reasonably complete but reasonably easily-understood treatment, I’d suggest ECONOMICS IN ONE LESSON by Henry Hazlitt.

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