quicks

Law of Supply & Demand Is Dead for Gold & Silver

I forgot to add:

At 15% coupon, our national debt cost us $1,500 billion, which is HALF the current federal budget.
Granted not all of that would mature immediately, but just the short term borrowing needed rollover would kill the federal government.

Law of Supply & Demand Is Dead for Gold & Silver

Chris B., you write:

"Was gold "real money" that protected wealth in 1981, the most recent time we had a PM bubble? Nobody thought $200 was possible back then,..."

And WHY did that happen, do you know the cause of that change in Gold downwards?

It obviously had to do with a man named Paul Volcker, who (most say) saved the dollar with his interest rate policy and drastic hike, others say he mainly meant to save the Fed.

Whatever the ulterior motive of Paul Volcker,
HIS ACTIONS ON INTERESTS ARE NON-REPEATABLE.

Do you actually believe that Mr Bail-out Bernanke has the guts to hike rates to >15%?
Do you actually believe Mr. Bali-Out Paulson would allow him to do so? (Don't even say that Paulson has no authority to affect Fed Policy. The Fed did not have legal authority to bali out AIG (non-bank institution), nor did Paulson have the legal authority to nationalize Fannie or Freddie).
AND, do you actually believe that the US economy could survive mortgage rates of 21%?

Volcker's CHEMO-THERAPY was able to cure the patient (really just a 25 year remission),
BUT Bernanke's CHEMO, if attempted, would kill the patient, because the patient's general state of health is way too weak.

Your insistence of valuing real-money in terms of an illegitimate surrogate shows your lack of understanding of the actual issue involved.
Real money, in a system that does not subvert it, DOES NOT produce any "investment" gains at all, and that is not its function.
BTW, think about what your "long-term average 2%" means, when that just about happens to be the very-long term average growth of the gold-supply!

Law of Supply & Demand Is Dead for Gold & Silver

And don't you just love the argument of people like danny boy:

"A global gold standard of the sort we had before ww1, the problem is, is great for global trade, but not so good for managing regional recessions. A country without fiat money and thus no ability to conduct local fiscal policy will suffer through far more severe recessions than would've been the case otherwise."

Maybe this would be correct IF fiscal AND MONETARY policy did not HAPPEN to cause just that same recession that you say they they should help alleviate.

If you misdiagnose the problem, of course you will provide the wrong cure, thus making the paitient even sicker, and at some point terminal.

Law of Supply & Demand Is Dead for Gold & Silver

To dlaw and others who believe in the notion of fiat "money" , look at the famous situation quoted above by marxbites of German housewives burning billion-mark bills for their intrinsic value as heating supplies.

And, take it back closer to home by about two generations:

What destroyed the value of most dollars of the Confederate States of America?
Was it that their currency lost its value because their issuing government was defeated (thus no more full faith and credit"), or because the intrinsic worth of all that "money" was that of paper?

If you believe the former, then you are a fiat money guy, and you can have all the CSA notes you want.
As for me, I believe in the latter, and as a hard money person, I would love to have more of those nifty PM CSA coins!

Want another example? You fiat guys can have all the 1933-1945 Reichsbank Notes you want, for my part, please give me those nice 1, 2, and 5 Reichsmark coins (and I don't want them for the swastika either, which seems to be the big ticket on ebay).

Just so you get the point, as it seems too hard to convey, neither of those currencies went down the drain because they were inflated away (would have in the long run of course), and yet after the collapse some had value some didn't.

Law of Supply & Demand Is Dead for Gold & Silver

marxbites writes:

"And although I still love Reagan for his rhetoric, I now see he was only little more able to speak and do his mind than all the other CFR puppets before him and since. He did not fight the establishment he criticized when running for office - they were placed in his cabinet by the truckloads."

It is interesting to note that Reagan, as Ron Paul only recently pointed out, was in favor of a return to the gold standard.

Once in office we did not hear that from the White House any more.
WHAT changed?
Reagan did have a rather encompassing reform agenda, part of which was sound money, and perhaps even an emasculation of the FED.
Some of his reforms (what we now call supply side, cutting, etc), where implemented, but the money/FED thing was never takled.

As to the FED, Paul Volcker saved it, by restoring its "credibility" with his high interest policy (which BTW is non-repeatable today). One could even argue that his real motive was NOT to save the dollar or the US Economy, but only to save the FED itself.

The simple answer to the WHAT changed question is:
Reagan the man himself.
He was almost killed in March, and people who knew him well, all said that he was a changed man after that, and never the same again.

So perhaps there was more to it than a crazy, Jodi Foster obsessed, loner.
Whatever the case, Reagan abandoned many of his earlier positions (which would have been good for the country, bud bad for the puppetmasters) after the assassination attempt.

Anyone insterested in speculation on this, just google John Hinckley, and look at the Hinkley-Bush familiy ties, and the prospective meeting between Scott Hinkley and Neil Bush the night of the shooting, to see that there could be much more there than we know.
.

Law of Supply & Demand Is Dead for Gold & Silver

dlaw writes:
"The Contest Is On: Gold or Fiat Money. Reactionary Capitalism or Socialism. Fiat Money will win, hands down."

What blather!
Sure the choice by the powers that be, and also by the people, will be for the quick fix, and seeming solution of fiat money. In that sense, fiat money will WIN the in the game made by people.

BUT, there are certain rules in this "game", which man can not alter, and eventually will win out.

Thus the logical consequences of your win argument is actually against you, that is, fiat money leads to hard money in the long run through its ultimate demise.

REACTIONARY? Far from it. A system that empowers the little guy (if he only chooses to play), and which has the power to bind the big guys hands, thus increasing, not decreasing personal and societal liberties, is anything BUT reactionary.

It is liberating. If you do not believe that, then you must believe that our founders (Washington, Jefferson, Andrew Jackson a bit later) were reactionaries. Which of course they were not.
Hamilton though was, and that is why he was in FAVOR of central banking and fiat money.

And your socialism is the top-down kind, where the whole protects the big guy from the little guy, which is the opposite of what socialism PRETENDS to do.

So dlaw, you have it all backwards!

Law of Supply & Demand Is Dead for Gold & Silver

Even if the physical demand mentioned by chris b. were a drop in the bucket (coins, jewelry, which it isn't as the last poster has said,
DON'T you know that prices are made at the margin? Thus, a supply / demand imbalance in favor of demand as today, has that marginal effect you claim does not exist.

As to paper Ag/Au, yeah right, just try to take delivery on the COMEX? Ever heard of Nelson and Bunker? Far from being anything like manipulators, they were the ones who were manipulated out of billions.
GLD/SLV: 50,000oz of SLV, that's for Joe Average for sure to take delivery of.

Paper PM's only reason for being is to channel investor demand for PMs into a paperform, to make it just as susceptible to all sorts of dealings as any other paper promise. You buy it because it is convenient, and thus trade your security away for it.

Have the Gold ETF's "Tonnes in the Trust" Bottomed?

Florian is right. "it's all there". To quote Bill clinton, it all depends on what is is.

The Germany government may still have legal ownership of all 3417 tonnes, but as far as actual posession, no. And only real posession matters (such as DeGaulle bringing it home).
Ever since the WestPoint depository changed its Gold accounting to show custodial/swapped gold, that is the smoking gun.
Other than the Mexican swaps, the US has only swapped with Germany.
So here is what happened: The US couldn't sell / lease gold legally, so it needed to be clandestine. BUT since the West Point gold was moslty 1933-melt gold bars (at 900/1000) selling that material would have telegraphed the source immediately.
Instead German gold was swapped for WestPoint coin-bars, and the German gold hit the market physically, obscuring the source.
So now, technically, the US is out of legal ownership of much of its Gold, but physically still posesses the same quantity.
So the actual fool is the German side, because in an emergeny or dire situation, how would they ever enforce this swap contract?
We suckered them, they sold their gold for our benefit, and in any showdown, we will just say, you want your Gold, get it from WestPoint if you can.