How Does $9000 Gold Sound? 135 comments
Marc Chandler
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In recent days the Canadian and Swedish central banks have joined the majority of other G10 central banks by indicating that they too may engage in quantitative easing now that the interest rates have been reduced to 25 and 50 basis points respectively. The ECB is wrestling with ways to extend its own form of quantitative easing and an announcement is likely at its next meeting on May 7th.
While some observers have focused on the potential debasement of the US dollar by the aggressive monetary and fiscal policies of both the Bush and Obama Administrations, many investors are worried about the viability of the whole universe of paper money.
As Gillian Tett, award-winning journalist at the Financial Times, put it earlier this month, there has been a four-decade long experiment with fiat currencies not backed by gold or silver. This crisis is so profound that increasingly it appears to have shaken confidence in the experiment. At the same time, the crisis looks to have widened the range of possibilities.
The Special Drawing Rights that the Chinese and others have suggested to eventually replace the dollar does not get beyond paper money. The SDR is a basket of fiat currencies. It is not and cannot be a serious alternative to the US dollar.
Consider that 44% of an SDR is the dollar. The IMF’s figures show that roughly two-thirds of the world’s reserves are in dollars. If countries' reserves were allocated according to the SDR, the dollar’s share of reserves would fall by about a third. While the euro would pick up some slack the big winners would be the yen and sterling, whose share of the SDR is 11% a piece, two to three times larger than their reserve allocation.
If there has been a shift in reserve allocation over recent years, it is not away from the dollar, as so many wrongly claim, but rather away from the yen and toward sterling. And even this shift has been marginal at best. Reserve managers generally want, in order of importance: Security, liquidity, and yield. Japanese bonds are often seen as deficient in both liquidity and yield.
All that Glitters
Can gold return to its role as the anchor for currencies? The advocates of gold are a passionate and vocal minority which appear to be second only to Ayn Rand devotees in terms of intensity. Of course there is a large overlap as Alan Greenspan’s 1966 essay “Gold and Economic Freedom” illustrates.
Top Gold Holders:
US..................8,133.5
Germany........3,412.6
IMF.................3,217.3
France...........2,508.8
Italy.................2,451.8
China.............1,054.0
Switzerland...1,040.0
Japan...............765.2
Netherlands.....621.4
ECB.................553.0
Data from World Gold Council and China
Figures in Metric Tonnes
To appreciate though why gold is ill-suited today to once again back paper money, we need to consider why the gold standard ended in the first place. Simply put, the gold standard provided an economic barrier to the political agenda. That political agenda called for rapid growth to resist the spread of communism. It called for “guns and butter” in the US with the Great Society and the war in Vietnam. The European political agenda included the expansion of the welfare state—from cradle to grave.
Jettisoning gold not only allowed for the pursuit of the political agenda, it helped create the conditions for the rapid and dramatic expansion of trade, capital flows and globalization. What is all too often lost amid the despair and cynicism that the crisis has wrought is the amazing success of that regime. Since 1980, for example, the world economy has grown by 145%. Taking into account the increase in the world’s population, roughly 1.6% per annum, there has been a nearly 40% increase in per capita income.
How such wealth is distributed is an important issue beyond the scope of this discussion. Yet it is interesting to note that longevity, a measure that subsumes numerous other metrics, has risen sharply in both developing and developed countries and that gap between the two has narrowed.
Not Enough
The same problem exists with a new gold standard that existed with the old. There is simply an insufficient amount of gold. Or to say the same thing, the price of gold necessary to put the international monetary regime back on a gold standard is so astronomical as to make it unworkable.
There are different ways to go about conceptualizing the magnitude of the challenge. As the table above indicates, the US has more gold than Germany, France, and Switzerland combined. Given that foreign investors own about $2.5 trillion more of US assets than Americans own of foreign assets, what price of gold is necessary for the US to no longer be a debtor? Answer: More than $8,500 an ounce.
Another approach, suggested by a Swiss investment bank, is to relate the price of gold needed to cover some measure of money supply. By its reckoning, the US would need gold to be worth about $6,000 an ounce to reintroduce a gold standard. However, it may not be sufficient to simply have the US adopt a gold standard. For the US, China, and Japan, the three largest economies as measured by purchasing power parity, to back their money with gold would require a price closer to $9,000 an ounce.
The current price of gold is just above $900 an ounce. Peaking in March 2008 near $1,032, it has averaged $638 over the past five years and $473 over the past ten years. For the yellow metal to reach the kind of levels necessary to make a gold standard mathematically feasible in the present day, the protracted period of deflation necessary would not be politically acceptable.
Where Does that Leave Us?
There is no realistic alternative to the dollar. Not SDRs. Not gold. Not the euro. Not the yuan. That might not be deducible from macro-economic first principles, but it is proven by what central banks are actually doing.
This does not mean that there is no role for gold in individual portfolios, though often people seem to confuse a paper claim on gold for the actual bullion. Also, the touts for bullion often do not include the costs of storage and insurance for gold which has gone decades without appreciating and, of course, generates no income stream.
Central banks that have accumulated large holdings of foreign currencies, like those in Asian and Middle Eastern countries, tend to have relatively little gold. European central banks, which could not get enough gold during the late 1960s and early 1970s, have turned into sellers over recent years. Paradoxically, as they sold off their gold in an orderly way, the price of gold trended higher. Yet many seem to believe that it is a given that the dollar will fall if these same or other central banks sell dollars. Huh?
On April 24th China revealed it has dramatically increased its gold holdings since 2003. In 2001, China said it had roughly 500 tonnes of gold. By 2003, it had risen to a little over 600 tonnes. Now it says it has 1,054 tonnes of gold, more than a 75% increase. Still this means that gold accounts for only about 1.6% of China’s reserves.
China is the world’s largest producer of gold, but it also refines scrap gold. As part of the standard arguments, gold advocates assert that all the gold that has ever been mined is still here. That is true up to a point and it is at that point that it gets interesting. China is exploiting the fact that a ton of computers and cell phones contain several times more gold than a ton of gold ore has.
Central banks in Asia and the Middle East may buy more gold going forward and European sales seem set to slow (though the IMF sales will reportedly go ahead), but it will be barely noticeable in terms of the international monetary regime and the role of the dollar.
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This article has 135 comments:
$9,000 per ounce sounds good to me.
"The advocates of gold are a passionate and vocal minority which appear to be second only to Ayn Rand devotees in terms of intensity."
Guilty as charged. I'm also a Rand supporter, so I guess I am doubly passionate and vocal.
:)
"Simply put, the gold standard provided an economic barrier to the political agenda."
Excellent! Now we can begin to discuss the truth! The problem is that fiat currencies enable the welfare/warfare state, and that they do not fail 'immediately'. In other words, fiat currencies work until they collapse of their own excesses, but in the meantime they provide a mechanism for "expanding" economies to fight wars. Any country that adopts a non-inflatable currency will be put at an immediate disadvantage in the warfare business. If one major country adopts a fiat currency while all others remain on gold standard, the fit country might be able to out-produce its neighbors and conquer them before the fiat bust occurs. This is a critical issue and one which gold bugs (myself included) have not addressed.
"the price of gold necessary to put the international monetary regime back on a gold standard is so astronomical as to make it unworkable."
Why? What exactly is wrong with $9,000.00 gold? It's a useless barbarous relic, so monetarists shouldn't care what it costs. Anyway, if we keep printing we're liable to wind up with $9,000.00 gold so the point may be rendered moot.
"Also, the touts for bullion often do not include the costs of storage and insurance for gold which has gone decades without appreciating and, of course, generates no income stream."
Gold is a kind of insurance itself. Like fire insurance, one pays it while hoping never to need it.
You reference the recent disclosure by China of its larger gold hoard. I expect China to continue to hoard gold; this would aid the viability of the Yuan as a vehicle for international trade, something China clearly strives toward. The timing of their announcement, right in front of a $100 Billion Treasury supply, is 'interesting' as well.
But, gold can back it all at the right price if freely convertible on open markets. Most people will be happy to hold paper if they know it is freely convertible to something as tangible as gold.
It is likely the gold price will gradually increase until most doubters are satisfied and since few of them are willing to hold and store physical gold that price will be some fraction of paper in circulation. Central banks are buying now (see China) in a race to be part of the new reserve currency of the world.
Anyway, as the author points out, there's not nearly enough gold around at current prices to back up the trillions is paper currency in circulation. However, what if other precious metals such as silver were brought back? Palladium? Even copper? Some tangible store of wealth other than paper.
How about oil? or natural gas? or gasoline? From gold certificates, to silver certificates, to oil certificates? Or natural gas certificates? or gasoline certificates?
On Apr 26 10:13 AM yellowhoard wrote:
> Maybe the US should start purchasing gold in mass and pump some liquidity
> into the system.
>
> $9,000 per ounce sounds good to me.
$9,000 gold isn't so unthinkable, given that the '80 spike is around $2300 when inflation-adjusted. Without the COMEX shorts' dogged resistance; gold would be well over $5000 already; given that the current financial catastrophe makes the 1980 panic pale into insignificance.
Depression could be imminent now if the swine flu becomes a pandemic and panic sets in. We are so vulnerable right now only one crisis can push us into a world wide depression. This could become that crisis.
No gold? Get gold!!
On Apr 26 12:40 PM capt Brian wrote:
> hahaha, I gave u a thumbs up for obvious reasons, BUT, what are they
> gonna purchase the gold with, more taxes? Surely not all the extra
> cash they have laying around....
The fragile state of the Dollar is of grave concern the world over, and people can see the writing on the wall. Clearly there are not sufficient assets in other currencies to enable countries like China to switch even a fraction of their reserves into other currencies without triggering chaos in the markets, which they would not want and a return to the gold standard is not going to happen, but the fiat currency model is a ongoing experiment and clearly needs refining somewhat.
Right now, the base case for investing is wealth preservation and to that end a basket of commodities with a bit of Norwegian Krone seems the best to me.
The real trick is to set the standard globally. Basically, you have to snap a chalk line and just declare that at that point, the exchange rate for gold is the exchange rates between nations. I love the idea. I understand that banks and governments will suffer gravely their political agendas and that some nations will immediately suffer for this decision. America will be one of the hardest hit.
This is something that needs to be set as a short term objective. To understand that we must move into a standard once again. It will provide us with true transparency and level playing fields.
The second piece would be to remove the Fractional Reserve Banking to guarantee we cannot have another boom/bust manipulation from the Federal Reserve. Actually, you have to remove Fractional Reserve Banking under a standard. That's why we removed the gold standard to begin with. We were broke and France new it.
Gold, on the other hand was at 35 dollars in 1933. Now worth 1000. What's the profit?
Let's see. 10000 dollars in 1945 got you 285 ounces. That's 285,000 in todays dollars. Not bad. Still worth the price of a nice house!
Now that's protecting your investment!!!
Four questions need to asked;
1 Why does Governments around the world choose to borrow money from private bankers at interest when governments could create all the interest free money it needs itself?
2 Why create money as debt at all, as the debt is paid that money disappears, so why not create money that circulates permenantly?
3 How can a monetary system that depends on ever increasing growth be used to build a sustainable economy? Isn't ever increasing growth and sustainability incompatable?
4 So what needs to be changed to create sustainable growth and a sustainable economy?
If things change later Heli-Ben just tightens a bit and douses any nascent inflation.
There may be a long case for gold but pinning ones hopes on a fantasy is not realistic.
On Apr 26 11:07 AM Dr. O wrote:
> Wasn't that the problem in the 1930s? Not enough gold to back the
> various currencies, which prohibited expanding the monetary base,
> which intensified the Great Depression?
>
> Anyway, as the author points out, there's not nearly enough gold
> around at current prices to back up the trillions is paper currency
> in circulation. However, what if other precious metals such as silver
> were brought back? Palladium? Even copper? Some tangible store of
> wealth other than paper.
>
> How about oil? or natural gas? or gasoline? From gold certificates,
> to silver certificates, to oil certificates? Or natural gas certificates?
> or gasoline certificates?
26,000 X 32,151 (oz in a tonne) = 835,926,000 oz X $1000./ oz gold (projected 5-07-09) = roughly $8.36 trillion.
This would not even back the projected federal deficit of $13 trillion!
Gold valued at $10,000/oz may be "close" to world monetary backing today.
Now if we project 300-400% world wide inflation over the next 2-4 years, $50,000/oz may be just about right!
Let's look at SILVER. It currently is 5 times SCARCER than gold in quantity available FOR DELIVERY. Industrial use accounts for over 90% of the mined silver each year (production has dropped in 2008-09 vs. 2002-2007) The current silver gold ratio is 69:1 making it the best buy in the past 25 years!!
Estimated silver available for PHYSICAL delivery is pegged somewhere between 600,000-800,000 oz. $10 BILLION could buy up the entire supply @ $12.50/oz! Only $40 BILLION @ $50./oz
Is this crazy or what????????????????
GOLD33VAIN
No common sense or logic, only speculation. Gold won't help in any everything buy gold is worthlesss. Gold holders go down too.
Would it means it could have some "reserve value" no matter what has been imposed by a hazardous pretender to the rest of the world ?
Back to gold standard , yes that's possible, XX trillions deficit have been possible and nobody had even thought such extend could be reached ! And in that respect it seems the game isn't over, another 56 trillions are needed as for now to halt the collapsing economy, time passing adding figures in the trillion unit.
Just see what a certain Alan Grenspan wrote :
...." A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary : he has to gauge it in relation to his reserves and to the status of his investments.
When banks loan money to finance productive and profitable endeavors, the loans
are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and
they begin to curtail new lending, usually by charging higher nterest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold
standard, a free banking system stands as the protector of an economy’s stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide
division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries....."""
So gold at $9000 ? yes.... if has to be !
Note that Ayn Rand's John Galt and all of "Galtville" dealt in Gold, disdaining Mr. Thompson's fiat currency. So it is natural that passion for Ayn Rand and passion for Gold are joined at the hip.
> Gold is on the way up, although $9000 seems a bit moch at this point
> in time. But why not? Anyway, $900+ is just the beginning.
Keep in mind that gold hit near $900 in 1978, so the 30-year real return on gold is around negative 4-5%. That in mind, I was not scared in 1978. I'm scared in 2009.
There is absolutely no reason that commodities cannot back paper which leaves all the the cards in the hands of the resource rich countries like The US, Russia. China, Canada, Brazil etc.etc.
Backing your paper with the stuff you have in the ground as security against default is a natural. And it has been done before. German reparations after the first and second world wars were partially paid in agricultural goods and manufactured products. On that basis, most of the west has nothing to fear from devaluation as it can be brought under control through the novel use of commodity trading on the open markets.
The downside unfortunately will be for holders of equities in resource companies as they are nationalized by the Government for political expediency, to protect National Security and to stabilize the economy.
On the other hand,...if gold does hit 9000 dollars, then the lunatic fringe who predicted a Dow of 45,000 will be having the last laugh. We will be rich and broke in the same breath. Yikes!
Cam
The question is, how much inflation do we want? The government says it wants a strong dollar, which helps the USA finance its import addiction. But like any addiction, the longer we delay our day of reckoning, the worse it will be.
My own view is that we should start printing money instead of selling some percentage of T-bills. That will reduce our need to refinance our national debt while creating a period of relatively higher inflation. The printed money should go to safety nets for the poor for social stability and long-term investments in our competitiveness to preserve a seat at the table as other countries grow and our economy becomes #4 instead of #1.
With the government buying less debt, companies will find debt easier to raise. As the dollar falls, imports will become more expensive and so we will get weaned off foreign imports.
Now here's the key - at the SAME time, we should triple the gas consumption tax. That will make gas so expensive that demand will stay flat or drop, and then the oil countries cannot raise their prices as quickly as inflation. (An aggressive cap and trade scheme might be a hidden way to do this). The trick here is to consider that the oil countries cannot charge more than the market will bear, and so the more we add to the price, the less of the total price they can keep and the more we keep in the country.
We should keep on with the above, until China gets mad and floats the RMB and our trade balances will restore. Then the country will stop exporting its future wealth - as it has been over the past few decades - and get on with the business of surviving in a new and multi-polar world order.
Six months of hyperinflation @50%/month could do it.
Sounds unlikely now; but if you'd told a German in 1914 that gold would be a trillion Deutschmarks an ounce in 10 years time; they'd have looked on you with pity.....
I rarely see writers who are balanced and not just strong advocates for or against gold.
> other than history, why back money with gold? why is gold valuable?
> why not water? or oil? something with more than intangible material
> value...
The inherent value of gold as money is less irrational than the inherent value of any other store of value/medium of exchange. This is due to its rarity, portability, durability, divisibility, beauty, and most importantly its ability to resist corruption by debasement. Gold represents discipline, something anathema to petulant central bankers and welfare-warfare governments alike.
On Apr 26 06:24 PM Boston BizGuy wrote:
> Governments do not want a gold standard because it would remove their
> ability to print money. Printing money lets the government create
> a hidden tax on its citizens. (What they do with that is good or
> bad in the eye of the beholder). So they will bitterly resist a
> fixed standard like Gold, and that is why Gold is at $900 and not
> $9000.
>
> The question is, how much inflation do we want? The government says
> it wants a strong dollar, which helps the USA finance its import
> addiction. But like any addiction, the longer we delay our day of
> reckoning, the worse it will be.
>
> My own view is that we should start printing money instead of selling
> some percentage of T-bills. That will reduce our need to refinance
> our national debt while creating a period of relatively higher inflation.
> The printed money should go to safety nets for the poor for social
> stability and long-term investments in our competitiveness to preserve
> a seat at the table as other countries grow and our economy becomes
> #4 instead of #1.
>
> With the government buying less debt, companies will find debt easier
> to raise. As the dollar falls, imports will become more expensive
> and so we will get weaned off foreign imports.
>
> Now here's the key - at the SAME time, we should triple the gas consumption
> tax. That will make gas so expensive that demand will stay flat
> or drop, and then the oil countries cannot raise their prices as
> quickly as inflation. (An aggressive cap and trade scheme might
> be a hidden way to do this). The trick here is to consider that
> the oil countries cannot charge more than the market will bear, and
> so the more we add to the price, the less of the total price they
> can keep and the more we keep in the country.
>
> We should keep on with the above, until China gets mad and floats
> the RMB and our trade balances will restore. Then the country will
> stop exporting its future wealth - as it has been over the past few
> decades - and get on with the business of surviving in a new and
> multi-polar world order.
thus, u.s.a "paper" money is more "real" in china than a roman denarius was.
any constrained basis currency is deflationary on its face, as history has shown.
real "wealth" as measured in human years lived has gone up, as noted, as soon as breton woods ii removed the artificial standard.
I sincerely hope someone has the wherewithal to dispute this concept???
Don't hold you breath waiting for them do this. They know more on any given Tuesday about gold than all the members here ever will.
GLD most likely only has 200-300 tonnes PHYSICAL GOLD on hand in their London vaults...IF THAT! Anyone actually seen it? Assayed it? The other 800-900 most likely are PAPER tonnes. Tonnes of PAPER! Anyone heard of any PHYSICAL WITHDRAWS by share holders?
GOLD33VAIN
Like the FED...smoke & mirrors...ANOTHER PONZI
This hype of China increasing its Gold reserve by 75% has been widely misinterpreted. Most people did not noticed that the 600 tons of gold they had in 2003 represented about 1.9% of China's 2003 total FX reserve. In other words, the allocation of China's reserve to Gold is basically unchanged to slightly DECREASED (from 1.9% in 2003 to 1.6% now). The increase in totally due to the increase of China's total FX reserve.
I believe China may be negotiating with the IMF to buy most of the 400 tons of gold that IMF has said they wanted to sell. This is not going to be a market transaction and won;t have a lot of impact short term.
I am long term bullish on commodities in general. So after I sell GLD, I will turn around and buy other commodities with the proceeds. (Oil or probably Nat Gas, which is really down-trodden)
About H.R. 1207 which was recently introduced by Ron Paul and it calls for a FULL AUDIT of the Federal Reserve. It has gathered many co-sponsors on both sides of the isle and is gaining in popularity every day. And as soon as there's even more bad news, my guess is that we're ALL going to witness the Fed being audited, (though there'll be MUCH kicking and screaming FOR IT and even some by the Fed predictably against it) for the first time in any one that's around right now's lifetime. In fact, I can't recall that the Fed has ever been audited by any outside entity. Regardless, it's long past time to put these paper pushing criminals out of business and then behind bars, where they belong. That their government sponsors think they can escape the coming wrath....history teaches us that's not always so. But apparently (and besides obviously flunking in economics) they weren't any good at learning about history either.
Change is coming.....got gold??
"Since 1980, for example, the world economy has grown by 145%. Taking into account the increase in the world’s population, roughly 1.6% per annum, there has been a nearly 40% increase in per capita income. "
Um, that also means that INFLATION has been 145 percent since then. The Federal Reserve's calculator shows 165 percent inflation since then. So where is the advantage here? I may have more pieces of paper in my wallet, but I have much less buying power. My grandfather, a master plumber, brought home $2.00 per hour in 1940, and that allowed him to buy a house for cash on a beautiful street along with doctors, lawyers, and judges. Thanks to the removal of the gold standard, that same lifestyle now would cost you a minimum of $31.00 per hour (again, the Fed calculator). More dollars, same lifestyle. There is no advantage to having a purely fiat currency.
Once the rest of the world loses confidence in the dollar, and they will thanks to the idiotic printing and spending by Bernacke, et al, the price of gold will shoot up as the dollar takes a nice swan dive from 85 on the dollar index to 52 or less.
Got gold?
:::The problem is that fiat currencies enable the welfare/warfare state, and that they do not fail 'immediately'. In other words, fiat currencies work until they collapse of their own excesses, but in the meantime they provide a mechanism for "expanding" economies to fight wars.:::
We were a warfare state even when we were on the gold standard (Recall Teddy Roosevelt's "gunboat diplomacy". What of the Spanish-American-Phili... War or WWI?)
If you think that going back to the gold standard is going to somehow magically lead to a fiscally conservative utopia, you've got another thing coming.
On Apr 26 11:07 AM Dr. O wrote:
> Wasn't that the problem in the 1930s? Not enough gold to back the
> various currencies, which prohibited expanding the monetary base,
> which intensified the Great Depression?
>
> Anyway, as the author points out, there's not nearly enough gold
> around at current prices to back up the trillions is paper currency
> in circulation. However, what if other precious metals such as silver
> were brought back? Palladium? Even copper? Some tangible store of
> wealth other than paper.
>
> How about oil? or natural gas? or gasoline? From gold certificates,
> to silver certificates, to oil certificates? Or natural gas certificates?
> or gasoline certificates?
On Apr 27 07:10 AM DONE_SONZ wrote:
> 9K can be the new 900 some day.It doesnt really sound that crazy.
it will be the last money standing along with silver i guess. if things are bad enough then even gold surrenders to barter.
i bought my insurance long ago. i am very happy that it has performed its' function very well. if it should take a hit i will add to the insured savings. the frns do not glitter, they do not have that solid feel, they are born from debt ad they promise nothing.
Patience will be rewarded. Gold and silver will shine.
It is in that respect that paper money should be backed by an equivalent amount of specie. However, if we reflect on the global fiat currency system, individual currencies must be valued comparative to one another in a way that is reflective of the underlying economic fundamentals of the country – that is the goal of any true currency.
In not mentioning what year or century!
For me it is sound's like a salesman with a golden chain around is neck pushing for consuming.
I believe Gold will go up with a very"moderate " case, $3500 in 4 to 5 years.
On Apr 26 02:59 PM gold33vain wrote:
> From the above charts and some guestimating, there is approximately
> 26,000 metric tonnes of gold now held by banks and countries &
> ETF's. Lets do the math:
>
> 26,000 X 32,151 (oz in a tonne) = 835,926,000 oz X $1000./ oz gold
> (projected 5-07-09) = roughly $8.36 trillion.
>
> This would not even back the projected federal deficit of $13 trillion!
>
>
> Gold valued at $10,000/oz may be "close" to world monetary backing
> today.
>
> Now if we project 300-400% world wide inflation over the next 2-4
> years, $50,000/oz may be just about right!
>
> Let's look at SILVER. It currently is 5 times SCARCER than gold in
> quantity available FOR DELIVERY. Industrial use accounts for over
> 90% of the mined silver each year (production has dropped in 2008-09
> vs. 2002-2007) The current silver gold ratio is 69:1 making it the
> best buy in the past 25 years!!
>
> Estimated silver available for PHYSICAL delivery is pegged somewhere
> between 600,000-800,000 oz. $10 BILLION could buy up the entire supply
> @ $12.50/oz! Only $40 BILLION @ $50./oz
>
> Is this crazy or what????????????????
>
> GOLD33VAIN
>
On Apr 26 02:59 PM gold33vain wrote:
> From the above charts and some guestimating, there is approximately
> 26,000 metric tonnes of gold now held by banks and countries &
> ETF's. Lets do the math:
>
> 26,000 X 32,151 (oz in a tonne) = 835,926,000 oz X $1000./ oz gold
> (projected 5-07-09) = roughly $8.36 trillion.
>
> This would not even back the projected federal deficit of $13 trillion!
>
>
> Gold valued at $10,000/oz may be "close" to world monetary backing
> today.
>
> Now if we project 300-400% world wide inflation over the next 2-4
> years, $50,000/oz may be just about right!
>
> Let's look at SILVER. It currently is 5 times SCARCER than gold in
> quantity available FOR DELIVERY. Industrial use accounts for over
> 90% of the mined silver each year (production has dropped in 2008-09
> vs. 2002-2007) The current silver gold ratio is 69:1 making it the
> best buy in the past 25 years!!
>
> Estimated silver available for PHYSICAL delivery is pegged somewhere
> between 600,000-800,000 oz. $10 BILLION could buy up the entire supply
> @ $12.50/oz! Only $40 BILLION @ $50./oz
>
> Is this crazy or what????????????????
>
> GOLD33VAIN
>
The big fall will be when gold's price manipulation will no longer be mastered by bullions banks, their leveraged short positions are nearly not bearable anymore. They will blow in a flash and US economy with it, watch out very carefully, they don't manage to maintain it below $800. These banks are already bankrupt, gov, fed and all cannot hide the facts cooking the book more than they already did.
It is like a lost of control for a nuclear reaction. It is on its way !!
So gold to $9000 nobody can tell but you can be an easy fortune teller saying the $ will sink, soon you'll need a wheelbarrel of $ to get a hot dog !
You don't make money with gold, or better said you don't increase your buying power, you just avoid to lose it.
I wonder what silver would be at if gold went to 9K? Wow! More chills!
I wish I could pay off my debts by simply firing up a printing press. A situation like that would have me smiling and my creditors nervous.
The value of everything is relative to each other - free floating fiat currencies acheive that. Re: $9000 /oz gold - sure - it possible just like DOW 30,000 - and one day it may happen.
Btw I see no mention of India in this article or comments. India has gold reserves estimated to between 25000 - 30000 tons - these reserves are privately held and widely dispersed among her billion people and estimated to be 2 - 3 X more than the US the next largest gold repository.
Read "Meltdown" by Thomas Woods; he debunks all these negative arguements.
On Apr 26 10:22 AM SW Richmond wrote:
> I agree with you that SDR's are a vain hope. Since SDR's are valued
> as a basket of other currencies, printing SDR's merely debases all
> the currencies in the basket in proportion to their representation.
> Printing SDR's is nothing more than obfuscation.
>
> "The advocates of gold are a passionate and vocal minority which
> appear to be second only to Ayn Rand devotees in terms of intensity."
>
>
> Guilty as charged. I'm also a Rand supporter, so I guess I am doubly
> passionate and vocal.
> :)
>
>
> "Simply put, the gold standard provided an economic barrier to the
> political agenda."
>
> Excellent! Now we can begin to discuss the truth! The problem is
> that fiat currencies enable the welfare/warfare state, and that they
> do not fail 'immediately'. In other words, fiat currencies work until
> they collapse of their own excesses, but in the meantime they provide
> a mechanism for "expanding" economies to fight wars. Any country
> that adopts a non-inflatable currency will be put at an immediate
> disadvantage in the warfare business. If one major country adopts
> a fiat currency while all others remain on gold standard, the fit
> country might be able to out-produce its neighbors and conquer them
> before the fiat bust occurs. This is a critical issue and one which
> gold bugs (myself included) have not addressed.
>
> "the price of gold necessary to put the international monetary regime
> back on a gold standard is so astronomical as to make it unworkable."
>
>
> Why? What exactly is wrong with $9,000.00 gold? It's a useless barbarous
> relic, so monetarists shouldn't care what it costs. Anyway, if we
> keep printing we're liable to wind up with $9,000.00 gold so the
> point may be rendered moot.
>
> "Also, the touts for bullion often do not include the costs of storage
> and insurance for gold which has gone decades without appreciating
> and, of course, generates no income stream."
>
> Gold is a kind of insurance itself. Like fire insurance, one pays
> it while hoping never to need it.
>
> You reference the recent disclosure by China of its larger gold hoard.
> I expect China to continue to hoard gold; this would aid the viability
> of the Yuan as a vehicle for international trade, something China
> clearly strives toward. The timing of their announcement, right in
> front of a $100 Billion Treasury supply, is 'interesting' as well.
That does not make much sense when you consider that the "Communist Manifesto" calls for a central bank, and thus the ability of a communist government to print money arbitrarily.
So what was the US doing? Fighting communism with communism?
But you are probably right, considering that much of what the US government does, does not make any sense. Unless of course, you consider that there must be a "method to the madness."
www.321gold.com/charts...
If you consider just the jewelry in Hollywood & Long Island, we would possibly hold more than India!
No I did not do the math on oil or other commodities. Physical investing in oil, copper, zinc, etc are not sensible because of storage problems.
Regarding the possible transfer of gold from the IMF to China being a "private" transaction that wouldn't effect the market price of gold, I'd view it as a transfer from "weak" hands to "strong" hands, which would, imo, be a bullish sign.
On Apr 27 12:37 AM HaavBline wrote:
> I bought GLD only a week ago, and I am going to sell it for some
> short term gains.
>
> This hype of China increasing its Gold reserve by 75% has been widely
> misinterpreted. Most people did not noticed that the 600 tons of
> gold they had in 2003 represented about 1.9% of China's 2003 total
> FX reserve. In other words, the allocation of China's reserve to
> Gold is basically unchanged to slightly DECREASED (from 1.9% in 2003
> to 1.6% now). The increase in totally due to the increase of China's
> total FX reserve.
>
> I believe China may be negotiating with the IMF to buy most of the
> 400 tons of gold that IMF has said they wanted to sell. This is not
> going to be a market transaction and won;t have a lot of impact short
> term.
>
> I am long term bullish on commodities in general. So after I sell
> GLD, I will turn around and buy other commodities with the proceeds.
> (Oil or probably Nat Gas, which is really down-trodden)
More realistically, diversified baskets of commodities are a better protection for those who (justifiably) mistrust fiat currencies.
Technology has eroded gold's claim to be the sole source of "real value." ETFs are the way most individuals own gold. An electronic device is now the accepted substitute for the real metal.
So, if ETFs are the way (and it's the only practical way in which gold could be thought of as a substitute for trillions of fiat currency), why not a more diversified and sophisticated mix of commodity ETFs, rather than just gold?
I see gold doing well in the inflationary future. That's why I own GDX. However, its days as a sole alternative for "money" are over, thanks to technology. The demand for gold will remain the same as for other commodities, a bit above production costs.
LordDarley
I didn't read every comment in detail, but I didn't see anyone mention the gradual solution for sound money advocated by Ron Paul and some of the Austrian economists. First, abolish the central bank, thereby eliminating the major tool of government's war-making and welfare-expansion policies. Second, allow a free market in money, with private coinage and reserve notes or other commodity-backed currency systems. Let them exist and compete alongside the fiat currencies, including the dollar. In short, let the free market decide what true money is, and end the argument once and for all.
Of course, the federal government will allow this when pigs fly, but some of us are out here cross-breeding our pigs with golden eagles. For the sake of civilization.
are the fluctuations in the price generated by the need for the commodity in industry. Gold
is best because it is practically useless- except as money. The rarity or price of the metal needed to back the paper money is not
relevant. A slow, mild deflation caused by the increase in the world
population and knowhow outpacing mine production would be welcome; rewarding
saving and investment and discouraging consumption. Severe
deflation only follow collapse of bubbles, which F.A. Hayek showed
were generated by central banks, not by gold.
On Apr 26 11:07 AM Dr. O wrote:
> Wasn't that the problem in the 1930s? Not enough gold to back the
> various currencies, which prohibited expanding the monetary base,
> which intensified the Great Depression?
>
> Anyway, as the author points out, there's not nearly enough gold
> around at current prices to back up the trillions is paper currency
> in circulation. However, what if other precious metals such as silver
> were brought back? Palladium? Even copper? Some tangible store of
> wealth other than paper.
>
> How about oil? or natural gas? or gasoline? From gold certificates,
> to silver certificates, to oil certificates? Or natural gas certificates?
> or gasoline certificates?
Gold will not go up while people are in "decession", remember I told you my new word was to say we were in the transition from recession to depression.
On Apr 26 01:22 PM Cetin Hakimoglu wrote:
> With the fed printing an arbitrary amount of money gold has much
> further to run.
Oh hell, even if I am way off, you figure it out, and 9000 / oz would not be a good start. So gold standard, SDR's not likely.
What would work, perish the thought, is a one world currency, and I am not sure if even that will work out.
So buy gold if u like, (I am) and it will always have a value if due to rarity if nothing else. But I predict $1,300 soon, like this year, $2000 soon after that, and higher probably as the inflation will be totally out of control world wide, and there ain't no stoppin' it,, unless you listen to me and I fix easy ( I have the answer to the medical insurance too and I think it would cost each American on the 'plan', somewhere around $120 a month to be fully covered, with no deductable, no co- pay, and for the first time in this totally insane world, Teeth would become a part of the human body.
happy pursuing life liberty and happiness.
Capt Brian.
We have a fiat currency and once everyone in the world learns quadrillion (1,000,000,000,000,000) comes after trillion the hurting will begin. Nobody knows the outcome or the unintended consequences of throwing trillions into the fray.
It is my pleasure to announce the much anticipated New World Currency! As deficits skyrocket and new paper money is printed its nice to know that there is a safety net waiting for the US Dollar. Welcome back to the gold standard friends!
Greenspan advocated a return to the gold standard. I must agree. The Gold Eagle has been minted in the following denominations.
1 ounce: $50 face value
1/2 ounce: $25 face value
1/4 ounce: $10 face value
1/10 ounce: $5 face value
So, your "new" dollar is worth about $17.81 in current paper dollars, or 1/50th of an ounce of gold, at the time of this writing. Conveniently the Silver Eagle has a one dollar face value and assumes the value of silver as 1/50th that of gold. No need to mint new coins in denominations less than a dollar as the current ones will suffice.
This is not a matter of "if" its a matter of "when" this becomes the new accepted form of currency.
the govt. can not stand for
> it`s citizens to make a living (from gods hands to yours)..with
> out it`s tax man to get most of what you labor for !...every body
> wants a piece of your pie that you work and labor for , and you get
> the pie dish....knows what I am talking about !..
And this is NEWS?
Even during Jesus's time, people were griping about "oppressive" tax collectors.
Tell us something we haven't heard before.
Well my first point was as a realist who is looking to make money by investing. Since governments want to use inflation as a tool, they will never re-peg to gold; the price will not be $9000 in the foreseeable future, and I am out of Gold at the moment.
Now as a commentator: I advocate for a weaker dollar, because it will help us balance our trade deficit and it would reduce our effective long-term debt burden. Consider that there is no point arguing about where to sail a boat if it has a hole in the bottom! In our case we are leaking our wealth when we import items for one-time consumption (e.g. oil). We need the weaker dollar to kill the trade deficit and then we can move forward. The government can do this by printing money despite protests from China and Middle East.
My plan is different from Obama's. I do want a disciplined budget, and I want the government to cut 10% of its spending on entitlements (which has grown to a massive part of the budget). Then add 10% to its revenue base through a gas tax, printing money, and a small tax increase on the wealthy. The lower budget and higher income should let us balance the budget and then have moneys left over to invest in America's long-term future.
"Investing in America" for me means something specific. I see it including education, basic research, infrastructure, _preventative_ healthcare, and the arts and parks. All these things make our people smarter, our businesses more efficient, and our country more appealing. The point is that the government needs to stop spending and start investing ONLY in projects that have a future return on investment that creates more wealth for the country than it consumed in the first place.
The only extent to which I want to see tax money go to support the poor is when there is no choice due to truly inhumane conditions. Also, I do not support unions since they extort shareholders to give back profits that the business earned fairly. I would like to see us set a "premium wage" and then agree that no union can form at a company, if its workers already receive the premium wage or more. A premium wage might be e.g. $15-20/hour plus basic healthcare benefits.
On Apr 26 10:13 PM Suncatcher wrote:
> Bosten BizGuy, I didn't follow all you were trying to say, but, I
> am alarmed by what I did catch. First you acknowledge that printing
> money is a tax, then you advocate for it, to (I assume keep the poor
> from eating our lunch) add to the poor dependency. Then you hope
> for an additional tax on oil (not sure where that tax goes) to slow
> down our consumption here. All of this seemingly to make us more
> competitive as producers here. I don't get it- none of this will
> raise us up financially- it will just pull us down. Do you work for
> the Obama administration? Why don't you get a head start and park
> your car and give half of what you've got to Acorn or someone and
> leave me out of it?
Can't fault your thinking, however, your figures are a little off. Gold/Silver is weighed in troy ounces: 12 = 1 lb.
Gold/silver is weighed in metric tonnes and there are 32,151 Troy ounces in a metric tonne. Re-do the math.
you have to change it in :
How Does $ 12 Gold Sound?
Answer: With the new USD maybe in 1- 2 years.
SW Richmond beat me to it. The above is the truthful explanation from which discussion can commence.
The political agenda might be vote buying (OK, it is ALWAYS vote buying...at least in democracies), or devaluing a currency to gain more favorable conditions as a debtor (I notice Uncle Sam is staring at his shoes).
Regardless, until the MANIC grip of the state over the people is broken, the gold standard will not return TO STATE CURRENCIES that are now fiat. For a state to leave their fiat currency would mean a retreat on state powers...and there isn't a sign of that happening on this planet. States will choose war, massive deaths, fascism...anything over a retreat of their powers.
If gold was $9000 an oz, wouldn't that give reason to go to war over? To kill each other for? For a shiny bit of metal originally from asteroids that hit earth during it's formation?
Now if gold was $9000 an oz, wouldn't that rising tide up the price of platinum and silver? What would those go up to?
Maybe the only thing worse than worshipping paper is worshipping metal.
Get real. It's a metal, not a religion.
Oh yea, the Bond movie (think 007, not financial) - "Goldfinger".
The gold bug villain, appropriately named Auric Goldfinger, was going to irradiate Fort Knox so his gold bars would be worth thousands of dollars each.
The weapons here would be policy, not nuclear devices...
the barrier implied by the gold standard is also known as reality.
Back to $9000 gold, the way the FED is printing money $9000 is low, way too low!!!
The reality is that social democracies, including the US, are informally bankrupt. Governments promised vastly more in welfare money than their populations could possibly support from earnings. As the entitlement crisis looms over us, governments hurl trillions at bailout and stimulus fantasies that destroy more of our dwindling capital base.
Quantitative easing won't make the world's economies more productive or prosperous. It will merely lead to further capital consumption, reduced production--and at some not distant point--virulent inflation. Already, we see broad based evidence that lending is resurrecting amidst the rubble of the recession.
Gold may not emerge as a formal currency anytime soon. But it is launched on a super bull market that will carry it to towering heights. The fundamental force behind the bull is not the fervor of Ayn Rand devotees or gold bugs. It is simply the destruction of the store-of-value role of fiat money that is taking place with ominous and disturbing speed.
As a matter of fact, I recently saw photographs of gold which has been privately mined in the past year by two "good ol' boys" that have spent a few summer months each of the past several years with a gas powered sluice box in Alaska (where exactly I don't know). I'd call it a semi-serious hobby. They have filed several claims and this year they found a very rich vein.
I would conservatively estimate the value of the gold in the photo I saw at around $2 million using current gold prices. There were eleven 16 oz jars full of nuggets and four sizeable piles as well. Most of this amount was taken out in a few short months by two adult men with shovels and a sluice box. Hard work no doubt, but in their case it has paid off.
Granted, they now have another problem of how to convert their gold to cash without starting a giant parade of people following them back to their site. Not impossible, and I imagine it would be a nice problem to have.
Like most things you really want, it can be done if you're willing to sacrifice and put in the effort long enough and use a little bit of brains.
If/when the dollar devalues from continuous printing there will come a time when foreign countries stop accepting them for purchases or issuing loans denominated in dollars.
Things could get very ugly if world-wide division of labor breaks down due to lack of trust in the unit of exchange. What happens when all the "stuff" manufactured overseas (and not in the US any more) can't be bought anywhere? How long before industries can be revived that have migrated overseas in the last 30 years?
What about OIL? Not pretty.
People need to understand that Gold is a hard currency and we will always have paper currency. The issue is if we are going though a period of time in which the paper currency is being debased at a faster rate than 'usual'. It is. Investors need to pay more attention to the rate of 'debasement' than spend time hoping for the end of the world in order to cash out their $10,000 gold coins.
And if gold is SO superior to paper money...how come all those people on the commercials talking about gold going into thousands of $s take PAPER MONEY for it?? Think people...
As for end of the world economy scenarios...it is much more useful to have food, water, land in a remote area, guns and ammo if this comes to pass...so lets just hope this does not happen as most of us don't have all these things.
We can't even imagine the collapse of economic activity if we went back to cash, let alone some ancient form of exchange like gold.
Too much supply is part of what can drive prices higher, you also need demand and pricing power. We are printing lots of dollars now but do you feel like you can go spend lots of them because they are cheap? Doesn't really work that way.
The discussion is not the use of gold in daily exchanges. If all we had were gold and no one was extending credit, I'd open up Hot Richard's Gold Credit Card and make a fortune. Same market opportunities exist for gold as currency as do for paper. But that's not going to happen unless we do away with the state...which ain't happening any time in any of our lives.
Compare the dollar to Enron stocks. If you owned Enron and they issued 1 trillion more shares, that dillutes your holdings. If they took the cash raised and burned it (or gave it to buddies), that ends any chance of a return. If they cooked their books to cover up that they're broke, your stock is worthless. But you don't HAVE to be in Enron stock!
I don't ever expect to buy a tank of gas with gold, but I do expect to exchange large gold accounts and physically held gold for a to-be-determined currency in the future that will provide me with better returns than if I had held dollars or stocks. I also expect to have to sheild those returns from confiscatory tax policies of the USSA...because America has made any amount of wealth creation evil and government's role is to Robin Hood it for the children. Hey, just looking at the latest poll results.
To really understand one of the extreme reasons for the run on gold, go watch Casablanca. All those people trading whatever they had (sometimes gold, sometimes lady bits) to get out of the country. Historically, gold helps people survive. In times of great crisis, paper currency becomes worthless while gold still retains some value (at least more than the paper currency).
The more reasonable run on gold has to do with the fact that I cannot find a currency not being devalued by its print master.
Let me tell you about my great-uncle who was worth several millions at the end of his life. Upon learning he'd give up about half his life's earnings to the state if he wanted to help out his friends and family, he did something pretty nifty. He converted almost all of his wealth to gold, took delivery, gave it to loved ones as he pleased, and then made it very clear to the country in which he lived that he'd dumped it all in the ocean as performance art.
That power alone makes gold really, really hot...because my death is not a revenue opportunity for you.
Gold in fact IS money. You can cash in your bullion at many jewelers, coin shops and - in some countries - even banks. Gold is currency, when & where you travel and if you chose to spend it.
Poor people respect gold most of all. It's gratefully accepted around the world!
That's the nutbag trifecta!!!
Then I read it and realized how well written it is- and you're absolutely right that gold is no longer suitable as a monetary base, and that it's demise in favor of fiat currency allowed for greater economic growth- a point lost on too many people.
I do find it interesting that even the Swedes (who supposedly had found the secret of economic sustainability) are searching for more ways to ease monetary policy. I'm not sure our central bank has actually done enough of that themselves.
Why in world will anybody in his or her sound mind give away their high-in-demand products and their natural resources for free? It is a crazy idea.
But it is exactly the present state of world economy. It is NOT a stable situation. It is a transitional situation from the times when the USA and leading EU countries were producing the overwhelming bulk of competitive advanced & highly desirable for the rest of world industrial and agricultural products but it is not a case any more.
As of now, it is a history. Furthermore, the USA and leading EU countries cannot militarily impose their will on the rest of world. As of now, Asian countries and Russia will not allow this to happen. Iraq was a "swan song" of American imperialism.
Yes, the world is in a transition. Everybody started to print money learning this from the USA and England.
The only question I have: how orderly will this transition be (with or without hyper inflation & deep depression the USA and major world military confrontations)?
From 1887 to 1918, Russia issued montains of Treasury bonds guaranteed 100% they said. They built the trans-siberian with it and developped the country.... until the Bolshevists decided not to refund..... a single cent !
For France that meant 15 gold billions of the time, 1/3 of the French savings, 1.5 million peoples ruined !
The Chinese just don't want this to happen and they started to take adequat mesures a good year ago, but the amount is so massive they can't get out quickly. The day they will be ready, the USA will bite the bullet. There is no pity when the game is to run the world.
During these kind of extraordinary times, paper get its value as....paper, nothing else, and gold get its value to the only credible way of exchange.
But you may think we are far from a such disastrous situation....
On Apr 28 10:32 PM Smarty_Pants wrote:
> One other thing to conisder:
>
> If/when the dollar devalues from continuous printing there will come
> a time when foreign countries stop accepting them for purchases or
> issuing loans denominated in dollars.
>
> Things could get very ugly if world-wide division of labor breaks
> down due to lack of trust in the unit of exchange. What happens
> when all the "stuff" manufactured overseas (and not in the US any
> more) can't be bought anywhere? How long before industries can be
> revived that have migrated overseas in the last 30 years?
>
> What about OIL? Not pretty.
On Apr 29 02:28 PM nova wrote:
...........
> The only question I have: how orderly will this transition be (with
> or without hyper inflation & deep depression the USA and major
> world military confrontations)?
Of all times it has always be "WITH", don't expect it to be different but you knew the answer, just afraid to face it, that's understable.
>
On Apr 27 04:57 PM gold33vain wrote:
> India may turn out to be a non factor in "gold reserves" as their
> religious beliefs would not allow the "private reserves" to enter
> the market to a great degree. In the past 3 mos they sold off "old
> jewelry" for scrap melt, however, they just used the money to purchase
> NEW "gifts" of gold.
>
> If you consider just the jewelry in Hollywood & Long Island,
> we would possibly hold more than India!
>
> No I did not do the math on oil or other commodities. Physical investing
> in oil, copper, zinc, etc are not sensible because of storage problems.
On Apr 29 12:14 PM Analyste de Boston wrote:
> Gold at $3,000? Catastrophe! OTOH, a 5-10% stake in bullion is an
> excellent hedge against complete collapse or long-term eroded value
> during inflationary times.
>
> Gold in fact IS money. You can cash in your bullion at many jewelers,
> coin shops and - in some countries - even banks. Gold is currency,
> when & where you travel and if you chose to spend it.
>
> Poor people respect gold most of all. It's gratefully accepted around
> the world!
9k? If USD is no longer the preferred reserve currency, yes. In fact, it will be 1 billion/ oz.
That's as ridiculous as people thinkin GOOGLE will be the next Berkshire Hathaway and that the GOOG will trade over $100,000 per share
The idiocy of using a gold standard is that you have ZERO LEVERAGE so the idea of gold being a currency is like sayin our economy is going back to the barter system of trading 1 donkey for 10 chickens
How this currency is given credibility is important for the long term, but it is not as immediate for economic life as the provision of credit.
The availabilty of credit is a function of trust.
The current contraction is a direct manifestation of the disappearance of trust.
In the case of sub-prime debt, the trust should not have existed in the first place.
For the US and the UK 40 years of credit-growth may well need to be followed by a few decades of "sustainability" experiments.
A new gold standard for dollar and pound would be an interesting start.
There is nothing wrong with fiat money as a means of exchange, as long as you understand its behavior.
If you do not have lots of money, you spend it immediately and its value is relative to a day's work (again more or less).
Holding excess fiat money is the problem.
1. In CD's you actually loose money and get taxed.
2. In Real Estate, taxes, maintenance and insurance erode value. Change in demographics, zoning, weather, fad trends etc. can put downward pressure on value.
3. Gold, Silver, and anything that is valuable but not perishable does not get taxed and moves along with the prevailing inflation.
Ancient Greeks and Romans stored gold and silver as well as non- perishable foods as ways of accumulating wealth like olive oil and olives. (Grains to a lesser degree as they do not hold for long time.)
Conclusion, if you don't spend it convert some of it into silver and gold coins.
BTW: there are fireproof blankets in the market that can withstand 2000 degrees of heat.
As to the debate of the se of gold vs paper as a medim for exchange...
The price of anything is what the buyer and seller agree upon. The unit(s) of exchange are agreed upon also. Theoretical useless paper money beats gold economically everytime. New gold supplies do not appear quickly enough to buy up other things that can be more readily and easily produced. ( a clearly deflationary scheme- why buy today with an asset that will probably buy more tomorrow? a psychological barrier to gold's exchange)- mining gold is also a waste of effort when it produces an item of limited uses - compared to paper money which can be cheaply produced and needs to be loaned or spent in order to avoid its continuous devaluation- currency devaluation pressures encourage exchange of money for other things-(interest return on cash- included) this is of course a better utilization of creative efforts (building and creating a diverse range of products vs mining)- In the end, an ideal currency should be gauged by its fluid ability to be exchanged easily.
On May 01 12:11 AM wootis@yahoo.com wrote:
> My reading of the many complaining blog entries herein is that the
> stability of currency is threatened by government actions. Business
> plans are more difficult or impossible to make when current and future
> valuations are unpredictable- there is , of course much more to this...
>
>
> As to the debate of the se of gold vs paper as a medim for exchange...
>
>
> The price of anything is what the buyer and seller agree upon. The
> unit(s) of exchange are agreed upon also. Theoretical useless paper
> money beats gold economically everytime. New gold supplies do not
> appear quickly enough to buy up other things that can be more readily
> and easily produced. ( a clearly deflationary scheme- why buy today
> with an asset that will probably buy more tomorrow? a psychological
> barrier to gold's exchange)- mining gold is also a waste of effort
> when it produces an item of limited uses - compared to paper money
> which can be cheaply produced and needs to be loaned or spent in
> order to avoid its continuous devaluation- currency devaluation pressures
> encourage exchange of money for other things-(interest return on
> cash- included) this is of course a better utilization of creative
> efforts (building and creating a diverse range of products vs mining)-
> In the end, an ideal currency should be gauged by its fluid ability
> to be exchanged easily.
Think about it. When economies are actually in failure gold means nothing. The items that actually have value are things we eat, drink, clothe ourselves with, and use for transportation. A gallon of gasonline or clean drinking water would be far more valuable and easily exchangeable than gold. Goods and services are the basis of baseline economies -- not pretty shiny minerals.
People who are really worried about this type of scenario need to build large fences and bomb shelters. They need to stockpile food, load up on firearms and ammunition, and secure a good source of drinking water. Now, that is a person truly prepared for hyper-inflation.
In contrast, I will look at the world through boring analytical eyes, apply modern portfolio theory (and hold many kinds of investments with low coefficients of corelation), buy companies that look like they are on sale, and hold onto the fact that we, as a people, have always emerged from each challenge by unleashing potential and becoming stronger and better. We have had no shortage of challenges before, and we will continue to have challenges in the future.
Stockpiling gold will probably not really address the issues of fear in the people suggesting hyperinflation.
On Apr 26 02:59 PM gold33vain wrote:
> From the above charts and some guestimating, there is approximately
> 26,000 metric tonnes of gold now held by banks and countries &
> ETF's. Lets do the math:
>
> 26,000 X 32,151 (oz in a tonne) = 835,926,000 oz X $1000./ oz gold
> (projected 5-07-09) = roughly $8.36 trillion.
>
> This would not even back the projected federal deficit of $13 trillion!
>
>
> Gold valued at $10,000/oz may be "close" to world monetary backing
> today.
>
> Now if we project 300-400% world wide inflation over the next 2-4
> years, $50,000/oz may be just about right!
>
> Let's look at SILVER. It currently is 5 times SCARCER than gold in
> quantity available FOR DELIVERY. Industrial use accounts for over
> 90% of the mined silver each year (production has dropped in 2008-09
> vs. 2002-2007) The current silver gold ratio is 69:1 making it the
> best buy in the past 25 years!!
>
> Estimated silver available for PHYSICAL delivery is pegged somewhere
> between 600,000-800,000 oz. $10 BILLION could buy up the entire supply
> @ $12.50/oz! Only $40 BILLION @ $50./oz
>
> Is this crazy or what????????????????
>
> GOLD33VAIN
>
And, of course, an increase in demand wouldnt hurt.
9000????
We will all be living with 25 deadbolts on our doors with shotgun's in hand....
I will continue to POUND the TABLE
Gold will see AT LEAST 750 before 1000, period.
This last run to 900 was a headfake, and yet again was a BEATIFULL entry to the short side.
erikmarketview.blogspo...
Is this what the media resorts to pull in "retail investor" money off the sidelines....geez.
How does "PUMP n DUMP" sound.
We are in DE-FLATION, and GOLD is going to 750 at the very least. Pull up the charts, stop trading off emotion.
9000? LOL.....how does "i just want someone to read this article please? sound
erikmarketview.blogspo.../
"Gold isn't going to $2,000 an ounce"www.321gold.com/editor...
And - why is the writer assuming that dollar would be part of the "basket" of currencies? I don't think so - the whole purpose is to get out of the failing dollar.
On behalf of the dollar, it still is the currency of the most powerful country of the world. A currency value is based on the type of assets you can buy with it, and everybody likes the USD because you can go with USD to the US and buy pretty much everything (from shoes, to cars, to top world class education). Can you do that with the ruble, the yuan? No, you can´t. So, anything that debases the USD vs other currencies (without huge inflation in the US, which seems, for now, its not going to happen) even against gold, i would be a USD buyer for sure.
That sounds conditional. You would be - but are you?
Actually one can go just about anywhere and buy stuff using Euros. Even NY stores have been known to prefer Euros when dollar is sliding.
A loaf of bread will most likely cost $250., Milk $169. a Quart and Ham $799/lb. A ham sandwich with milk would be around $150. (if available and if you made it yourself)!
As gold increased to $9,000. the only good thing would be I could pay off my current mortgage, car and credit card debt with hugely inflated $$$.
Being debt free would be a great benefit!!
On Apr 28 07:04 PM HerrHansa wrote:
> Currencies are backed by GDP
I'm not going the Tonnes or Troy route, in oz. thats 3.2 Billion. Now I'm going with $10K as the price for Gold because it will overshoot to the upside.
$32 Trillion?(too many damned zeros) World debt is probably around 20 times that amount.
Sure you can use it for future debt, but how are you going to handle what is already in play?