Silver and Gold Are Money, Not Just a Store of Value 22 comments
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Do you know how much gold is exchanged daily in dollars? If not, prepare to be shocked.
While gold trades as a currency (or "medium of exchange") and also is a "store of value," and even a "unit of account" for some, and very little is actually consumed. Economically speaking, gold trades even in the modern world as money. Gold is a luxury good with insignificant industrial usage. Its major market as a luxury good is Indian women's jewelry, but to these women gold is their money or insurance if their mate leaves, dies, or is disabled so the metal is not consumed – it can be easily recovered.
To make my case that gold is money, what seems to be little known is that the gold market is also quite large - the LBMA in 2008 traded about $80 billion USD per trading DAY per the data collected by the IFSL 2009 Bullion Markets Report p3/8 - which I took the time to verify to be correct from its original sources - or $20.3 Trillion in turnover in 2008 and 254 LBMA trading days. However, the IFSL makes a significant note that this volume is quite likely three-to-five times larger since much of the transactions are increasingly netted out and cleared without appearing in the statistics. Please compare this to the 2008 GDP of the United States at $15 Trillion and understand the rough estimate that 75% of the world's trade in gold (and half of the world's silver) is traded via the LBMA.
Silver, on the other hand, serves as both an industrial metal and a "store of value" for silver investors. As we learned here, both silver and gold are precious metals since there is very little aboveground stock. All of the gold stock in the world would fit into a cube 20.5 meters to a side. Due to high amounts of industrial usage, the silver stock is even smaller, less than 14.5 meters to a side.
However, as seen below, the silver market size at $10 billion is minuscule – just a tiny fraction of a percent - compared to the gold market. What is really mind-blowing is that the LBMA traded the entire annual mine production of silver every 6 days, while the annual mine production of gold was traded every 4-5 days, despite the fact that silver is priced as if it were a commodity similar to wheat, corn, or copper. You see, the aboveground stock of gold valued at about $4100 billion is equivalent to roughly 5.2 billion troy ounces of gold, but the annual mine production is only 0.087 billion. The aboveground stock of silver valued at $10 billion is estimated at roughly 1.0 billion troy ounces of silver and the annual mine production of silver is about 0.671 billion. (IFSL report, pages 5-8/8.)
So the annual "stocks-to-flow" ratio of gold is 60, meaning that there is the equivalent of ~60 years of production aboveground for every year of production. In contrast, for silver the ratio is about 1.5, which is much closer to typical commodities which all lie around one year of production in aboveground stocks for every year of production. Gold is not just another commodity; mankind will never achieve perfection in all things, but nature's "metal of the sun" is as close to perfect money as mankind is going to get. Modern-day gold mines are lucky to exceed 1 gram of gold from each metric ton (24,250 pounds) ground and processed. If you never have, try holding a one troy ounce (31.1 gram) gold coin in your hand. It's 2.5 times denser than steel and took a lot of effort and risk to mine.
So, the equivalent of the entire aboveground stock of gold is exchanged every 269 trading days while the equivalent of the entire aboveground stock of silver is exchanged every 9 trading days at the LBMA.
I interpret the all of the preceding information to mean that gold has never stopped being used as both a money and a currency, even in the last 38 years of floating fiat exchange rates. Silver is money as well, but is not traded in high enough volumes, in dollar terms since the price per ounce is too low, to be considered a currency. Jason Hommel reinforces my point in his recent speech "Why Silver is Money."
Folks, this "stocks-to-flow" fact is well understood, but remains unstated, by the financial elite, most notably Obama's chief economic advisor, Lawrence Summers. If the world population widely understands the above and begin to both acquire the physical metal and clamor for the restoration of gold and silver as honest money, governments and central bankers could very well lose what is amounting to a stranglehold over the global economy. The world would realize that central banks are not needed whatsoever.
"Financial crisis"? Screw that, this is an all-out Gold War.
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As an aid look at the "Clearing Info" on the L.B.M.A. website. If you follow or hold gold it should be in your favourites list.
www.lbma.org.uk/stats/...
You've got it exactly right, investor demand is completely drowned out by industrial demand. Many applications for silver, like many for my old company, involves massive amounts of silver overall, but only use milligrams at a time -- which is completely stupid to recycle at today's prices.
Photography, silverware - lot easier to recycle though!!
Check out the IFSL report on total mined by mankind - its 5.5 billion oz for gold and 40-odd billion for silver, so your intuition is exactly right!! (linked in article) Ted Butler from investment rarities is the fellow I first learned this fact from.
On Mar 30 07:00 AM drevno wrote:
> If I understand it correctly, the article says that in terms of weight,
> there's about 5x as much gold than silver in above-grounds stocks.
>
>
> This does not seem to make sense: silver is more plentiful in ore
> than gold; silver is easier to mine; silver is a byproduct of mining
> copper, nickel, etc. and so on.
>
> So how come there's 5x as much gold than silver?
> Is it maybe because silver is used much more by the industry and
> so it is not available for trading and hence is not in the statistics?
(1) production costs seem to be only $500/ounce, so any commodity priced at 2x production cost can have setbacks
(2) rising interest rates could hammer gold; consider that gold was near today's price 30 years ago when Volker killed it by raising rates
(3) safety of ETFs. Can paper ETFs be turned into the hard metal during a time of crisis? Not all of this is in vaults, and ETFs rely on counterparties to deliver.
On balance, I don't think gold is the place to lock up a substantial portion of one's wealth. If I had to make a one decision investment to protect against inflation, it would be in common stocks of companies which have world class franchises, pay dividends, and have pricing power.
For the record, I own gold ETFs, and sleep better for that, but there is signiifcant risk in gold at this price due to the above factors, especially the prospect of rising rates in spite of giovernment efforts to suppress them.
Sell GLD June 100 calls, and sell GLD June 80 puts.
Very true, but how likely is this to happen? Gold will remain chiefly an inflation hedge unless we experience a complete collapse. The central bankers and politicians who support them are invested in fiat currencies that can be manipulated. "The world population" is gleefully ignorant and will remain so until the fiat money runs out. Then, watch out. It'll be revolution time. My prediction: ain't gonna happen. The world will not end and prosperity will return; but," in the long run, we'll all be dead."
"Gold is a luxury good with insignificant industrial usage."
This is purely because of its cost. There are many industrial uses for which gold is well-suited, but cost prohibitive.
"To make my case that gold is money, what seems to be little known is that the gold market is also quite large - the LBMA in 2008 traded about $80 billion USD per trading DAY..."
Um.... so? I guess equities are money, too. The stocks making up the S&P 500 average more than $80 billion in daily volume, even at today's valuations.
"...despite the fact that silver is priced as if it were a commodity similar to wheat, corn, or copper."
What? By my reckoning, silver trades for more than 100 times copper - more than gold's multiple of silver.
"I interpret the all of the preceding information to mean that gold has never stopped being used as both a money and a currency..."
When was the last time you paid for something using gold?
"If the world population widely understands the above and begin to both acquire the physical metal and clamor for the restoration of gold and silver as honest money, governments and central bankers could very well lose what is amounting to a stranglehold over the global economy."
And still, the point is hard to discern. However, I think the thrust of your argument makes for a good argument AGAINST gold as a backing for money. If the money supply can't grow as fast as real GDP (which gold certainly can't), deflation will result, and deflation is death to a modern economy.
"The world would realize that central banks are not needed whatsoever."
Neither is economic growth - for a while. "Need" is a relative term.
> I have been reading history recently and I have come to conclude
> that Gold is the pillar of human economy without it ,you are in
> pyramid scheme waiting to collapse .
What is the inherent value of gold?
Just for the sake of being complete, I'd point out that the period of American history where the greatest advances in standard of living were made occurred while the money supply was limited by the amount of gold the country held and the industrial revolution got into high gear. The 'modern' economy on a gold standard was a great success for millions who arrived here with nothing and built a life for themselves with hard work and savings.
If the supply of money actually does remain fixed, then your constant paycheck buys more stuff every year. No need for a raise just to keep your head above water. Also, every bit of previous savings becomes MORE valuable over time instead of less valuable as it does today.
That doesn't mean you can't operate such a system with fiat currency because theoretically you can. However, once the gub'mint figures out they can increase the supply of money, it does so, devaluing every bit of savings you ever sacrificed to put aside.
The reason why gold worked so well as money is that the gub'mint can't print more of the stuff. It has to be earned via productive enterprises or mined at a cost.
The problem with the "increase the money supply as fast as GDP" line of reasoning is that there's no way to actually do it. To wit:
I sell you a hammer for $20, then you sell it to your neighbor for $25, and he sells it to his brother in law for $30. Is the GDP really 'increased' by $75? It's the same hammer. How much money do you add to the money supply after the three transactions are compiled into billions of dollars of economic statistics? How much of that GDP is actually the same stuff being sold multiple times? You could triple the GDP without producing anything if you just sold everything three times as much as today.
How do you account for stuff that is produced and then sold at a loss due to overproduction? I spend $100 on parts to build a widget only to find it sells for $20 on the market. Every sale is a positive transation ($120 total spent on parts or finished widget), but I suffered a loss. Should the money supply increase or not? By how much? There's no way to tell or account for every transaction because the GDP doesn't really mean anything.
Again, the "increase the money supply as fast as GDP" argument sounds sensible, but it cannot be accomplished in reality. The only way to minimize loss of purchasing power in the unit of account is to have a fixed supply and let prices trend downward as productivity increases. You get further ahead even if you don't get a raise every year.
Anybody over the age of 40 can probably remember when gasoline cost less than 80c per gallon. Does the gas have less value or is it the currency that has lost value? Anyone can see it's the latter, and that's not a good thing.
Thanks for writing back, I'd like to take a stab at your response.
On Mar 30 08:50 PM Vox Rationalis (aka BS Detector) wrote:
> What a rambling missive.
>
> "Gold is a luxury good with insignificant industrial usage."
>
> This is purely because of its cost. There are many industrial uses
> for which gold is well-suited, but cost prohibitive.
Exactly, we agree here. If you study the World Gold Council stats, perhaps a better phrase is "insignificant industrial consumption" instead of usage/uses. Lenin famously wanted to eliminate money and use gold to line toilets - doesn't tarnish, I guess - but was dissuaded when it was pointed out the toilets would be stolen.
> "To make my case that gold is money, what seems to be little known
> is that the gold market is also quite large - the LBMA in 2008 traded
> about $80 billion USD per trading DAY..."
>
> Um.... so? I guess equities are money, too. The stocks making up
> the S&P 500 average more than $80 billion in daily volume, even
> at today's valuations.
If your S&P data is correct, you've just reinforced my point. My point here is $80 billion/day is significant.
> "...despite the fact that silver is priced as if it were a commodity
> similar to wheat, corn, or copper."
>
> What? By my reckoning, silver trades for more than 100 times copper
> - more than gold's multiple of silver.
I think you are being silly here if you think for a moment. The comparison of the PRICE of silver per gram and the PRICE of copper/iron/wheat per gram is completely immaterial. When you buy some thing with $15-17 (street price of silver) you are making a choice between 1 oz of silver and XX pounds of copper.
> "I interpret the all of the preceding information to mean that gold
> has never stopped being used as both a money and a currency..."<br/>
>
> When was the last time you paid for something using gold?
Uh last week. goldgrams @ goldmoney.com
If I was actually rich perhaps I would trade at the LBMA, but it's too rich for my blood. If your point is that the common folk don't use gold as a currency, well, duh!! We do live in Bretton Woods II.
When was the last time you paid for something using fiat electrons?
> "If the world population widely understands the above and begin to
> both acquire the physical metal and clamor for the restoration of
> gold and silver as honest money, governments and central bankers
> could very well lose what is amounting to a stranglehold over the
> global economy."
>
> And still, the point is hard to discern. However, I think the thrust
> of your argument makes for a good argument AGAINST gold as a backing
> for money. If the money supply can't grow as fast as real GDP (which
> gold certainly can't), deflation will result, and deflation is death
> to a modern economy.
In my humble opinion, we are seeing the failure of the current monetary system. Gold's supply is limited rather nicely at 1.7% of supply - which would definitely increase a bit if it was given a monetary premium.
However, this is a good point you made that needs more discussion in another article or elsewhere.
> "The world would realize that central banks are not needed whatsoever."
>
>
> Neither is economic growth - for a while. "Need" is a relative term.
Hehe, I need central banks like I need a heart attack, do you realize what they have done? Wasn't Geithner's '97 "brilliant" actions in Asia's crisis enough damage to the world? To say nothing about Bernanke.... www.nolanchart.com/art...
Props to you, sir or madam!! Far better response on this than mine
> the period of American history where the greatest advances in standard of living
> were made occurred while the money supply was limited by the amount
> of gold the country held and the industrial revolution got into high
> gear. The 'modern' economy on a gold standard was a great success
> for millions who arrived here with nothing and built a life for themselves
> with hard work and savings.
This is a popular misconception. Over the period 1790 through 2008, real GDP increased 3.76% per year (all data from measuringworth.com unless otherwise noted). However, due to population growth, real GDP growth PER CAPITA has increased much more slowly - just 1.72% per year.
Because population growth was much higher earlier in our nation's history, the impact of population growth on GDP was much more significant then. From 1790 to 1860, population growth was about 3% per year. Between the beginning of the civil war and WWI, population growth declined to about 1.7% per year. By WWII, it had declined to about 0.7% per year. With the baby boom, it increased to an average of 1.8% per year, but has since declined to about 1.1% over the last 45 years.
So for example, when real GDP growth peaked at 6.4% per year for the 1843-53 period, real GDP growth per capita was 2.9% per year. By contrast, when real GDP growth peaked at 4.8% per year for the 1958-68 period, growth per capita was 3.3% per year.
What's the bottom line? When measured in terms of average standard of living, the gains during the industrial revelution were not as large as gains since WWII. Here are some average annual growth rates for various periods:
Year - - - Real GDP - - - - Real GDP per capita
1790-1860 - 4.32% - 1.31%
1985-1907 - 4.03% - 1.81%
1948-2008 - 3.32% - 2.07%
By the way, I would contest the notion that the American economy during the industrial revolution was a modern economy by today's standards.
> If the supply of money actually does remain fixed, then your constant
> paycheck buys more stuff every year. No need for a raise just to
> keep your head above water.
No. If businesses are selling their wares for less each year, they have less money to pay workers. Profit margins will narrow, and wages will decline.
> Also, every bit of previous savings
> becomes MORE valuable over time instead of less valuable as it does today.
Deflation means savers lack incentives to productively invest savings to capture real returns - they can literally stuff their mattresses and gain real wealth. The problem is obvious - less incentive to invest means less investment, less investment means lower GDP growth. Death to a modern economy.
Also consider the many investments on the margin, where profits are small enough to be overwhelmed by falling prices. These investments would never occur.
> once the gub'mint figures
> out they can increase the supply of money, it does so, devaluing
> every bit of savings you ever sacrificed to put aside.
Another popular misconception. Increasing prices are not the problem; the uncertainty surrounding prices is the problem. In the fictional theoretical efficient economy, if inflation is constant and 100% predictable (and not negative), it makes no difference whether the level is 0% or 2% or 10%. Agents in the economy will build the inflation rate into their decision-making and it will have no real impact.
> The reason why gold worked so well as money is that the gub'mint
> can't print more of the stuff. It has to be earned via productive
> enterprises or mined at a cost.
How do you define "worked so well"? Can you support an argument that the U.S. hasn't benefited from the current monetary system since the end of WWII?
> The problem with the "increase the money supply as fast as GDP" line
> of reasoning is that there's no way to actually do it. To wit:<br/>
> I sell you a hammer for $20, then you sell it to your neighbor for
> $25, and he sells it to his brother in law for $30. Is the GDP really
> 'increased' by $75?
No. You're calculating GDP incorrectly. In this case, you, I, and my neighbor are all businesses, reselling the hammer for an added margin. Only the final sale adds to GDP. Or else the hammer is sold used, in which case it is also not counted.
> How do you account for stuff that is produced and then sold at a
> loss due to overproduction? I spend $100 on parts to build a widget
> only to find it sells for $20 on the market. Every sale is a positive
> transation ($120 total spent on parts or finished widget), but I
> suffered a loss....There's no way to tell or account for every transaction because
> the GDP doesn't really mean anything.
Of course it means something. Since GDP is made up just the FINISHED goods, GDP increases by $20 per unit. Another way of calculating GDP is by adding all of the income each factor of production receives. In this case, the input sellers receive $100, the widget seller loses $80, for a total applicable to GDP of $20.
> Again, the "increase the money supply as fast as GDP" argument sounds
> sensible, but it cannot be accomplished in reality.
I think you're arguing it can't be done accurately. It is difficult. But simply put, a bit of inflation is much, much better than a bit of deflation, for the reasons I mentioned above.
> The only way
> to minimize loss of purchasing power in the unit of account is to
> have a fixed supply and let prices trend downward as productivity
> increases.
Not true. At a basic level, nominal interest rates contain three elements: a demanded real rate of return, an estimate of future inflation, and a risk premium reflecting the uncertainty in the inflation estimate.
> You get further ahead even if you don't get a raise every
> year.
By the same logic, the business owner gets further behind every year.
> Anybody over the age of 40 can probably remember when gasoline cost
> less than 80c per gallon.
> Does the gas have less value or is it the currency that has lost
> value? Anyone can see it's the latter, and that's not a good thing.
I think it was some time in 1979 when gas was $0.80, though it might have hit that low in 1986 in some parts of the country (Texas, for example). In 1979, the average annual earnings were $11,736 (EROP table B47); at $0.80/gallon, that's 14,670 gallons of gas. In November 2008, average annual earnings had climbed to $31,879; at $2.05/gallon, that's 15,550 gallons.
All such figures are relative, and meaningless without context.
"I think you are being silly here if you think for a moment. The comparison of the PRICE of silver per gram and the PRICE of copper/iron/wheat per gram is completely immaterial. When you buy some thing with $15-17 (street price of silver) you are making a choice between 1 oz of silver and XX pounds of copper."
So wait, you think I'm being silly when I consider the AMOUNT being purchased? So by your "logic" if gold were sold by the grain instead of the gram it would fundamentally change the nature of the commodity? This is absurd.
"> When was the last time you paid for something using gold?
"Uh last week. goldgrams @ goldmoney.com"
Clearly you misunderstood me. I'll rephrase: When was the last time you purchased something using gold as your money? You know, took some gold in to a store, gave it to the shopkeeper, and left with something else?
"If your point is that the common folk don't use gold as a currency, well, duh!! We do live in Bretton Woods II.
When was the last time you paid for something using fiat electrons?"
My point is that NOBODY uses gold as a currency - it is NOT money by the most basic definition.
The so-called Bretton Woods II is irrelevant.
"Fiat electrons"? You're desperate, aren't you? The answer is last Wednesday, and that transaction was completed using not only dollars backed by nothing, but my promise to pay backed by nothing. And it wouldn't work any better were either backed by reserves in a vault.
"In my humble opinion, we are seeing the failure of the current monetary system. Gold's supply is limited rather nicely at 1.7% of supply..."
Care to try that one again?
"...which would definitely increase a bit if it was given a monetary premium."
Here's another one. If it's a bad thing for the U.S. to rely on foreign countries for our energy, is it bad if we have to rely on foreign countries for our currency supply?
"Hehe, I need central banks like I need a heart attack, do you realize what they have done?"
I do, but I think you don't. The Fed kept the financial system from grinding to a complete halt with its first loan to AIG. It enabled businesses to continue to make payroll by entering the commercial paper market. It helped currencies around the world stay liquid by providing unlimited dollar swaps to other central banks. It's helped to make business cycles since WWII much milder, with longer expansions and shallower recessions, than those that came before.
"Wasn't Geithner's '97 "brilliant" actions in Asia's crisis enough damage to the world?"
I'm interested to learn more about this, and would like you to provide a summary. What I read was a single article about a former Australian PM who was very upset that only Japan and Australia contributed to the rescue funds for Indonesia. Was Geithner at IMF? What was his role? What were the decisions made, and how did he fit in? Where are the details?
"To say nothing about Bernanke.... nolanchart.com/art..."
This link so incoherent it can barely be followed. I'll try again after some sleep.
Thanks for your reply, I think you have a sharper mind than I do! Please let me know where your writings are. Please let me take a stab again ")
Jake
On Mar 31 02:00 AM Vox Rationalis (aka BS Detector) wrote:
> Jake Towne wrote:
>
> "I think you are being silly here if you think for a moment. The
> comparison of the PRICE of silver per gram and the PRICE of copper/iron/wheat
> per gram is completely immaterial. When you buy some thing with $15-17
> (street price of silver) you are making a choice between 1 oz of
> silver and XX pounds of copper."
>
> So wait, you think I'm being silly when I consider the AMOUNT being
> purchased? So by your "logic" if gold were sold by the grain instead
> of the gram it would fundamentally change the nature of the commodity?
> This is absurd.
>
> "> When was the last time you paid for something using gold?
> "Uh last week. goldgrams @ goldmoney.com"
>
> Clearly you misunderstood me. I'll rephrase: When was the last time
> you purchased something using gold as your money? You know, took
> some gold in to a store, gave it to the shopkeeper, and left with
> something else?
>
> "If your point is that the common folk don't use gold as a currency,
> well, duh!! We do live in Bretton Woods II.
> When was the last time you paid for something using fiat electrons?"
>
>
> My point is that NOBODY uses gold as a currency - it is NOT money
> by the most basic definition.
>
> The so-called Bretton Woods II is irrelevant.
>
I don't view "money" and "currency" in the same way you do. They are different. And of course I agree with you that gold is not often used by the common man - AS A CURRENCY. Try Jason Hommel's link above on silver.
> "Fiat electrons"? You're desperate, aren't you?
I am not at all desperate actually. Isn't "fiat electrons" that fluctuate purchasing power (think FOREX) daily a valid description of what you and I typically use as currency?
The answer is last
> Wednesday, and that transaction was completed using not only dollars
> backed by nothing, but my promise to pay backed by nothing. And
> it wouldn't work any better were either backed by reserves in a vault.
Sorry, my question was rhetorical, you didn't have to answer.
>
>
> "In my humble opinion, we are seeing the failure of the current monetary
> system. Gold's supply is limited rather nicely at 1.7% of supply..."
>
>
> Care to try that one again?
OK!!
"In my humble opinion, we are seeing the failure of the current monetary system. The unknown credit introduced from derivatives and other sources is distorting the prices of every piece of property or goods on the planet. At least in the case of gold, the rate of increase in the stock of gold, currently 1.7%, isn't chosen by central bankers, but is limited by the free market."
>
> "...which would definitely increase a bit if it was given a monetary
> premium."
>
> Here's another one. If it's a bad thing for the U.S. to rely on
> foreign countries for our energy, is it bad if we have to rely on
> foreign countries for our currency supply?
>
Well, we probably would agree It's a hell of a lot better than relying on them for our energy supply!!! :)
Actually, if you study history a bit it gives you the answer - I will never-mind the fact that the US is still a major gold/silver producer - one of many countries.
In colonial times in our country, they had the same problem - no silver/gold supply, but they traded their goods for the money - the dollar was a unit of mass of silver that came from any US coin, but from the Spaniard's "pieces of eight"
It worked out fairly well since we had a lot of resources - which is much the same case today. I recommend Rothbards "History of Money and Banking in the United States" available for free at mises.org
> "Hehe, I need central banks like I need a heart attack, do you realize
> what they have done?"
>
> I do, but I think you don't. The Fed kept the financial system from
> grinding to a complete halt with its first loan to AIG. It enabled
> businesses to continue to make payroll by entering the commercial
> paper market. It helped currencies around the world stay liquid
> by providing unlimited dollar swaps to other central banks. It's
> helped to make business cycles since WWII much milder, with longer
> expansions and shallower recessions, than those that came before.
I grant you that eventually the FED acts to try to make the situation better - doesn't mean they have succeeded though.
However, I view the FED as the CAUSE of the cycle, and I disagree that the recessions are getting any "shallower." since 1945. If you read the Bernanke article I wrote you will see that even he blamed the FED for the Great Depression
www.nolanchart.com/art...
>
>
> "Wasn't Geithner's '97 "brilliant" actions in Asia's crisis enough
> damage to the world?"
>
> I'm interested to learn more about this, and would like you to provide
> a summary. What I read was a single article about a former Australian
> PM who was very upset that only Japan and Australia contributed to
> the rescue funds for Indonesia. Was Geithner at IMF? What was his
> role? What were the decisions made, and how did he fit in? Where
> are the details?
Geithner was at Treasury and went to the IMF afterwards. He fit in by - small surprise - trying to bail them out. The Aussie PM is sort of right when he says Geithner is to (I would insert "PARTLY" here) blame for the buildup of FOREX reserves of China and other countries. Try the below 2004 article
www.bloomberg.com/apps...
>
> "To say nothing about Bernanke.... nolanchart.com/art..."
>
>
> This link so incoherent it can barely be followed. I'll try again
> after some sleep.
Thanks, I look forward to your input on this Bernanke article!!
Sorry I missed the your first point
> "I think you are being silly here if you think for a moment. The
> comparison of the PRICE of silver per gram and the PRICE of copper/iron/wheat
> per gram is completely immaterial. When you buy some thing with $15-17
> (street price of silver) you are making a choice between 1 oz of
> silver and XX pounds of copper."
>
> So wait, you think I'm being silly when I consider the AMOUNT being
> purchased? So by your "logic" if gold were sold by the grain instead
> of the gram it would fundamentally change the nature of the commodity?
> This is absurd.
What exactly is absurd? That I would utilize and value a bushel of grain differently than a ton of iron or (dare I say) an ounce of gold at a given point in time? And that these amounts have different inputs of supply-side cost?
"However, I view the FED as the CAUSE of the cycle, and I disagree that the recessions are getting any "shallower." since 1945. If you read the Bernanke article I wrote you will see that even he blamed the FED for the Great Depression"
The Fed is widely blamed for turning a bad recession into the Great Depression. Since 1945, however, GDP growth has been much more regular. Let's use 1867-1907 as an average pre-Fed period, and 1958-2008 as an average Fed-world period. The standard deviation of the earlier period is 4.43%, while for the latter period is 2.05%. MUCH less variation, much more regular growth. In the latter period, real GDP increased by more than 7% during two years, and fell by 1% just once (-1.9% in 1981-2). In the former period, real GDP increased by more than 7% during 11 years, and fell by more than 1% during 5 years, including drops of 5.8%, 4.8%, and 3.5%.
It's important to understand that these numbers are the growth rate of the average level of GDP each year, not a top-to-bottom calculation. Even so, the underlying volatility difference is undeniable.
FRB issues new money BEFORE growth, which is both dishonest and presumptuous.
And now a rhyme:
<i>FR Bankers
You juggle this, you juggle that,
in your crafty banker's craft.
You loot the poor with fiat.
You know much better?
Is that a fact?
You take their wealth
and give them jobs.
Until you don't!
Sob! Sob!
Will they be ungrateful,
the folks you've robbed? </i>
"Thus with other commodities left to themselves, 'natural forces,' i.e. the ordinary forces of the market, would tend to bring their rate of interest down until the emergence of full employment had brought about for commodities generally the inelasticity of supply which we have postulated as a normal characteristic of money. Thus in the absence of money and in the absence—we must, of course, also suppose—of any other commodity with the assumed characteristics of money, the rates of interest would only reach equilibrium when there is full employment. Unemployment develops, that is to say, because people want the moon;—men cannot be employed when the object of desire (i.e. money) is something which cannot be produced and the demand for which cannot be readily choked off. There is no remedy but to persuade the public that green cheese is practically the same thing and to have a green cheese factory (i.e. a central bank) under public control."
Watch out for that silly green cheese!
On Apr 08 02:41 AM Conan the Barbarian wrote:
> Hey VOX: If the Tag Team(engineers both) tries to engulf with quotes
> from sundry sources(usually footnotes from a single book), I'll happily
> lend a hand.
>
Both of them have gone out of their way to crush views they disagree with. Smarty leads the way and Moonbat joins in.
Smarty had the misfortune of Bragging about what he was doing. (Its in his comment stream)
If you have what he considers to be a "dangerous" idea, that idea must never see the light of day again...ever. Moonbat just happens to show up and between the two of them they ream the designated party. I've seen this duo in action before.
Both of them have been quiet for a few months.
Meanwhile VOX and I settled on a "agreement to disagree". VOX can handle them but I am quite willing to toss in a rabbit punch or two just because Smarty wants to rule the roost.
Yeah, Smarty... its good to have you back...remember when you went out of your way to tell me I was ignorant regarding buying scrap gold(jewelry). and then I found your comments extolling the same thing twice in months previous. Of course, you do. You went MIA for a while thereafter.
Welcome Back Moonbat.