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Bill Buckler Discusses The Last Price Standing Of "True Money", Answers The Only Question Relevant To Gold Bugs

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Bill Buckler, publisher of The Privateer Report, has released one of the most scathing critiques of paper money we have read to date: "Before it can be exchanged, wealth must be created. Wealth cannot be created out of thin air. By definition, an economic good is “scarce”. If it were not, there would be no such thing as economics or exchange. Neither would be necessary because no effort or choice in the face of alternatives would be required in order to provide the GOODS which further our lives. Before we can talk about money and the VITAL role it performs, we must stress this point. Money is NOT wealth, it is the means by which wealth is exchanged amongst those who produce it. Paper money is not suited to this function." So what is the only rational investment in times in which money's role is so often confused by pretty much everyone? "Ninety-seven percent of all existing Treasury debt has been created since August 15, 1971! Ninety-three percent of it has been created since Mr Volcker “saved” the paper Dollar in late 1979! Please note that the gain in Treasuries and the loss in the US Dollar almost exactly cancel out. Please note also that even the biggest gain in these paper markets fades into insignificance against Gold’s rise."And here is the answer all the "gold bugs" have been waiting for: "The paper money “price” of Gold will last as long as the attempt to make paper money “work” lasts. In the end, Gold will no longer have a “price” because it has reverted to its role as MONEY. Whenever and wherever that happens, that nation can return to the production of wealth - rather than “money."

Buckler's brilliant observations on the inevitable death of fiat, and gold's ascent to the status of "last price standing", need no commentary.

From the Mid-September Issue of the must read Privateer Report

THE LAST PRICE STANDING

Just under eleven months from now, on August 15, 2011, there will be an anniversary that will get little if any coverage in the global financial media. August 15, 2011 will mark 40 years since the momentous decision taken by the Nixon administration to cut the last tie between Gold and the global reserve currency, the US Dollar. We have no idea what the “price” of Gold will be on that date. The one thing we are certain of is that it will be many, many times higher than the mandated $US 35 per troy ounce it was when Mr Nixon made his fateful decision on August 15, 1971.

On September 14, 2010, Gold leaped $US 24.60 to an all time high spot future close of $US 1271.70. We would think that you have already checked out our $US 5 x 3 point and figure chart, but if you haven’t ...
http://www.the-privateer.com/chart/gold-pf.html

This chart shows a bit more than 28 years of the history of the $US Gold price, stretching back to the June 1982 bottom and showing in its entirety the current bull market which is nearing its tenth anniversary. At its September 14, 2010 close, $US Gold was up just over 16 percent in 2010 to date. Barring a fantastic turnaround, we expect 2010 to be the TENTH year in a row during which the $US Gold price has risen. We know of no
equivalent to this unbroken run in any other major investment market.

Of Money And Wealth:

It has been well said by several competent economic historians that there are only two kinds of paper money - those which are already worthless and those which are going to be worthless. There has never been an exception to this rule. At some point in the history of all PURELY paper currencies, prices expressed in them become irrelevant simply because they are no longer used as a medium of exchange. This process is always painful.

While the end destination of paper money can always be foreseen, the route by which it reaches its destination and the time it takes to get there cannot be predicted. But always, at some point in the proceedings, the declining “purchasing power” of the paper money re-awakens the dormant distinction between money (the medium of exchange) and wealth (that which is in fact being exchanged).

Before it can be exchanged, wealth must be created. Wealth cannot be created out of thin air. By definition, an economic good is “scarce”. If it were not, there would be no such thing as economics or exchange. Neither would be necessary because no effort or choice in the face of alternatives would be required in order to provide the GOODS which further our lives. Before we can talk about money and the VITAL role it performs, we must stress this point. Money is NOT wealth, it is the means by which wealth is exchanged amongst those who produce it. Paper money is not suited to this function.

The Global Fiat Currency Era:

Globally, it can best be described as 40 years of monetary chaos. In the US, cushioned by its stewardship of the global reserve currency, it can best be described as a decade of currency chaos - followed by a quarter century of serial credit bubbles - followed by a financial system collapse - followed by a desperate government and central bank holding action. This holding action is still going on, at an ever increasing cost to the future of the US economic system. As we said here in our previous issue (Number 661): “...the US Dollar is the world’s reserve currency. As long as this remains the case, the follies of the US government will remain the most important in the world and the follies of their central bank - the Federal Reserve - will remain paramount.”

These follies can be read directly from the grotesque - $US 400 Billion to $US 13,445 Billion - increase in Treasury funded debt since 1971. Almost 60 percent of that total has been incurred over the past decade. It can be read from the Fed’s manipulation of interest rates, specifically the year of 1.00 percent official rates in 2002-03 and the almost two years of ZERO official rates from December 2008 to date. It can be read from the REAL standard of living of the American people which has gone nowhere since the fiat era began and which has been going backwards since the GFC hit. It can be read from the stagnant nature of US paper investment markets since their 2000 highs. And finally, it can be read by the fact that the physical structure of the US is beginning to literally fall apart at the seams.

The Crumbling Infrastructure:

On September 9, there was a huge explosion in San Bruno, a heavily populated suburb of San Francisco. The explosion was the result of a rupture in a 30 inch (75 cm) gas pipeline. Thankfully, the loss of life was minimal but the destruction of property was vast. The pipeline was built in 1956, at a time when the area was sparsely settled. It has, apparently, been maintained just as sparsely ever since.

In August, a dam built 50 years ago collapsed causing widespread flooding. The famous Gateway Arch in St. Louis was finished in mid 1965. It is now quite literally rusting away. Power lines, sewer lines, roads, railways, bridges, viaducts and all the rest of the complex “infrastructure” on which modern urban (and living depends are in a state of decrepitude. Mr Obama’s latest plan to throw $US 50 Billion at the “problem” is laughable. For years, reputable US engineers have been warning that the bill just for getting the vast US infrastructure repaired, let alone replaced, would run into the multiple $US TRILLIONS.

Politicians love infrastructure spending, especially with money created out of thin air for the purpose. The spending is visible, especially when a politician gets to cut a ribbon opening a new bridge or freeway or dam. They don’t love infrastructure maintenance. The maintenance is invisible. Worse, it is a reminder that while the money used to build the infrastructure can be and is conjured out of thin air, repairs and maintenance absorb REAL wealth  which cannot be used for new “headline” projects.

The gas pipeline rupture in San Bruno is symptomatic of the entire situation. US federal government officials state quite plainly that they have recorded 2,840 “significant pipeline accidents” over the past two decades, more than a third of which resulted in significant death and injury. They go on to point out that the US has more than 2  million miles of gas pipelines and about 100 federal inspectors. Yep, that’s 20,000 miles per inspector. Clearly, “maintenance” is NOT a plum government job.

The funds necessary to build and maintain “public or “regulated” utilities are NOT earned on the market. They are extracted by law from the public. There is no pressure to maintain or replace them as they age. A private company which neglects its vital standing plant would go out of business, not being able to compete with those who do NOT neglect theirs. A government is different. It can extract the means it needs by force of law. The result is a working facade which hides a rusted-out functional core. The contrast is becoming more obvious every day in the area of vital infrastructure. But it is much more acute, if sadly less visible, in the area of financial infrastructure and its core - which is the MONEY.

Many Years Of Advance Warnings:

The warnings go back a bit more than ten years. In the bear market which followed the $US 850 January 1980 high, Gold fell below $US 500 to stay in June 1981. A year later in June 1982, that bear market bottomed with Gold just under $US 300. Those two points - $US 300 and $US 500 - formed a trading range in which Gold remained for nearly two decades. The Gold price exceeded the $US 500 level only twice - for very short periods - in early 1983 and late 1987. It dropped below the $US 300 level twice - again for very short periods - in June 1982 and again in February/March 1985. The first “advance warning” came in November/December 1997 when Gold dropped below $US 300 - and stayed there.

November/December 1997 was the point when what had been an Asian financial crisis went global. In early December 1997, President Clinton was attending an APEC (Asia-Pacific Economic Co-operation) summit in Vancouver Canada. On the first day of the meeting, he called the Asian crisis a “glitch in the road”. A decade later, President Bush used that exact phrase to describe the early stages of the GFC.

Twenty-four hours after Mr Clinton’s use of the phrase and after some sobering behind-closed-doors  conversation with his Asian colleagues, he had changed his tune. The “glitch” became a global crisis. Writing about it at the time - in our Early December 1997 issue (Number 338) - The Privateer described Mr Clinton’s about face over the Asian Crisis as “a global post-war turning point”.

This was so because for the first time since Bretton Woods and the elevation of the US Dollar to global reserve currency status, the US “authorities” suddenly realised that they could NOT stave off a financial upheaval all by themselves. They needed help for this one. And they got it, not least in the form of a globally concerted effort to debunk once and for all the REAL alternative to paper money - Gold. At the end of 1997, Gold was forced below a trading range which had confined it ever since mid 1981. And Gold remained below that trading range for well over four years, up until the beginning of April 2002.

Forcing Gold below $US 300 and its long-term trading range was a HUGE mistake made by the global financial “authorities” led by the Bank of England and their Gold “auctions”. It exposed their desperation as nothing else would have. It also made it certain that once Gold did regain the $US 300 level, a long bull market would be the outcome. In April 2002, Gold regained $US 300. It’s been all up from there.

The “Lost Decade” - For Paper:

As stated, Gold regained the $300 level on April 2002. On September 14, 2010, the spot future price reached an all time high closing level of $US 1271.30. That’s a rise of just under 324 percent. Over the same period, silver rose from $US 4.40 to $US 20.43. That’s a rise of just over 364 percent.

How have the “paper” markets fared over that same eight and a half year period? Here’s a sampling:

  • The Dow: 10301 to 10526 - a gain of 2.2 percent
  • The Nikkei: 11347 to 9299 - a loss of 18 percent
  • The (Australian) All Ords: 3350 to 4670 - a gain of 39.4 percent
  • The US Dollar Index (USDX) - 118.00 to 81.33 - a loss of 31.1 percent
  • US Treasury Bonds: 101.00 to 133.00 - a gain of 31.7 percent

Please note that the gain in Treasuries and the loss in the US Dollar almost exactly cancel out. Please note also that even the biggest gain in these paper markets fades into insignificance against Gold’s rise.

At the dawn of the 21st century, looking back over the previous five years, US investors were complacently looking forward to annual gains on their stock market of 20 percent “in perpetuity”. What they got was a decade of stagnant prices. In the period since February 2002, when the US Dollar began its long slide, the only “investment” to approach those expectations has been the precious metals. From February 2002, Gold has risen a compound 18.5 percent a year and silver, 19.8 percent.

Forty Years Of Unbridled Inflation:

In the period of ever rising paper markets and especially stock markets which took place between mid 1982 and the beginning of 2000, there was little if any mention of inflation or deflation. Over that period, the Dow in the US rose from 776 to 11723 points. That’s a gain of 1412 percent or a compound annual gain of about 16.25 percent. Not quite as good as Gold since 2002 but sustained over a far longer period.

In reality, this almost two decades of paper asset boom was inflationary to an extent that left the 1970s for dead. There were two reasons why the 1970s were and still are known as the “inflationary” decade. The  first was the HUGE increase in the amount of Treasury debt compared to the two preceding decades. The second was that the new money created by this increase did not go into paper assets, but into alternatives.

Consider the two decades prior to the “inflationary” 1970s:

  • 1950s - Treasury debt rose from $US 257 Billion to $US 290 Billion - up 12.8 percent
  • 1960s - Treasury debt rose from $US 290 Billion to $US 393 Billion - up 35.5 percent

Contrast that to the 1970s, the first decade of a purely paper US Dollar:

  • 1970s - Treasury debt rose from $US 393 Billion to $US 930 Billion - up 137 percent

You can see the stark difference, made even more stark by the fact that in the US, both stock and bond markets - the traditional paper markets - had a horrible ten years in the 1970s. It is a well known fact that had it not been for Fed Chairman Volcker and his decision in late 1979 to let US rates be set by the markets, the US Dollar would likely not have survived long into the 1980s as a purely paper currency. Tragically, thanks to 20 percent plus rates in 1981, the world was lured back into paper Dollars and the fiat currency era was prolonged - for another 30 years - and counting.

Consider the record over those 30 years, in the raw numbers as well as the annual percentage increase:

  • 1980s - Treasury debt rose from $US 930 Billion to $US 3,233 Billion - up 248 percent
  • 1990s - Treasury debt rose from $US 3,233 Billion to $US 5,674 Billion - up 75.5 percent
  • 2000s - Treasury debt rose from $US 5,674 Billion to $US 13,500 Billion (estimate) - up 138 percent

Ninety-seven percent of all existing Treasury debt has been created since August 15, 1971!

Ninety-three percent of it has been created since Mr Volcker “saved” the paper Dollar in late 1979!

Treasury debt is the ONLY backing the US Dollar has. Every bit of that debt rise is pure INFLATION.

Since 1982, the inflation has been reflected in serial credit-induced bubble markets. In the US, the last of the “market” bubbles, the real estate bubble, imploded more than three years ago. All that is left is the last of ALL the bubbles, the one in Treasury debt itself. That one is the very end of the road.

A Gold Bubble?:

Descriptions of the ever rising $US “price” of Gold have been veering into the “bubble market” category ever since the $US Gold price broke above its 1981-1997 $US 300 to $US 500 trading range at the end of 2005. The “bubble market” talk intensified when Gold topped its January 1980 $US 850 high at the beginning of 2008 and intensified still further when Gold established itself above the $US 1000 level in October 2009. It is still with us. We quote Mr George Soros from a Reuters article published on September 15: “Gold is the only bull market currently. ...I called Gold the ultimate bubble, which means it may go higher. But it’s certainly not safe and it’s not going to last forever.

The Wikipedia (which is as good a guide to popular perceptions as any) defines a “bubble” as: “trade in high volumes at prices that are considerably at variance with intrinsic values.” In economics, there is no such thing as an “intrinsic value”. Human beings impart value to economic goods by their buying or abstention from buying. The result is prices expressed in terms of money. As long as Gold is an “alternative” money, it will have a price. That will end once it re-assumes its age-old role as money itself.

The Morbid Fear Of Falling Prices:

If there is anything that keeps central bankers all over the world awake at night, it is their fear of falling prices. This is taken for granted right across the spectrum of those who administer or rely upon the global fiat money economy with the paper US Dollar at its centre. It is a most interesting phenomenon, given the fact that ALL rational economic action since human beings descended from the trees has been aimed at LOWERING the cost of producing economic goods. It is surely an easily grasped FACT that in an economy based on indirect exchange through the use of money, all eras of true prosperity have been eras in which the purchasing power of money was GROWING and prices were therefore falling.

It really is a rather simple proposition, if one actually thinks it through. If a unit of money is to be viable over the longer term, the term essential for the build up of new wealth through new and improved means of production, that unit of money must retain or INCREASE its purchasing power. If it retains its purchasing power, it will allow people to save. If it increases its purchasing power, it will encourage them to save. From the simplest economic endeavour to the most complex one, savings must PRECEDE production which must in turn PRECEDE consumption. The only form of money which has ever been found to maintain and increase its purchasing power is the precious metals. The only form of money which has always been found to lose purchasing power to the end point of extinction is paper.

One of the distinguishing features of every productive economic era in history is that prices FELL throughout the era. Even in eras of capital consumption like the one which began in earnest in 1971, the most successful products were the ones which FELL in price despite the galloping depreciation of the money. The best example of that in the modern era has been the prices of computers and electronics. In the face of all these economic FACTS, why are central bankers so worried about falling prices?

Real Money Needs No “Collateral”:

Sound money needs nothing behind it to perform perfectly all the functions of money. Unsound money, especially paper money backed by nothing but debt to be paid by future generations, is TOTALLY dependent on the prices of the collateral being held against the debt which “backs” it. For forty years, the world has operated on a debt-based monetary system which is fuelled by means of credit creation. It stands or falls on the assumption that the debt upon which it is based will, someday, be repaid.

The only means to assess the worth of the (paper) collateral which is the underpinning to the monetary and financial system today is to look at the PRICE commanded by that collateral on the secondary markets. Any reduction in the price affects confidence in the future viability of the money. The bigger the price reduction, the more adversely confidence is affected. When central bankers and politicians talk about “deflation”, they are talking about a fall in the market value of the paper which underpins the money they issue. Any fall in that market value literally undermines the foundations of the system. They know it, most of their victims do not. All they know is that what used to “work” no longer does.

The US central bank, the Fed, prints the reserve currency. The US Treasury prints the debt paper which is the only “reserve” behind the US Dollar. That being so, the global demand for Treasury debt greatly exceeds the demand for any other type of “collateral”. That has allowed the US to go on living beyond its means for far longer than it otherwise would have found possible. The limits to this situation were revealed in March 2009 when the Fed began monetising Treasury debt and were underlined in August 2010 when the Fed resumed their task. No matter what, the “collateral” value must be maintained.

The Last Price Standing?:

The paper money “price” of Gold will last as long as the attempt to make paper money “work” lasts. In the end, Gold will no longer have a “price” because it has reverted to its role as MONEY. Whenever and wherever that happens, that nation can return to the production of wealth - rather than “money”.

h/t Robert

 

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Mon, 09/20/2010 - 10:07 | 591754 MsCreant
MsCreant's picture

I bet most states would secede and the military would join them. 

I don't think enough people understand government or history to make that happen if/when it needs to. I wish I was wrong. Complain, yeah. Riot? I can hope. Know to bust up the lie that America is? No.

Mon, 09/20/2010 - 10:47 | 591886 Miss Expectations
Miss Expectations's picture

On the 4th of July I asked a woman to stop letting her dog into my back yard.  (It was on a long retractable leash and was in my garden.)  She got upset with me.  I went up and sat on my porch and she walked past my yard and said to me, "You know,  today's the 4th of July and instead of approaching me about my dog, you should spend the day celebrating your freedom.  My husband is in Iraq fighting for your freedom."  WTF.

So, MsCreant I believe you are (unfortunately) correct in your assessment. 

Mon, 09/20/2010 - 11:28 | 592030 MsCreant
MsCreant's picture

In her defense (and there is oh so little to defend her with) if my husband was currently over there I might be tempted to drink that Koolaide too, so that I could feel self righteous instead of like an entitled, exploited, dumbassed, pawn. 

I almost got into a physical altercation with a man who let his Mastiff do what it wanted on the lawn. He told me I was too uptight and was shocked when I approached him aggressively. I told him children play where he was letting his illegally unleashed dog shit and that he should at least have the bag he is supposed to for the poop. He said, "Are you going to physically assault me over this?" I told him he had no integrity and that he better move on. The woman he was with was so embarrassed. I felt sorry for her, and if this was her worm husband, oh lord. Thing is, compared to him, I was pretty fit and strong. He kept walking by (circling) asking me if I was going to hit him, must have been five or six times. I think he really wanted a woman to hit him so that he could hit me back "in self defense." Or maybe sick his shitty dog on me. I wanted to pretty bad, but had the restraint not to. 

So entitled. You're supposed to let her dog do anything it wants to because her husband is fighting for business interests over in Iraq. Your neighbor is the queen of a turd mountain, pay her the respect she deserves. Nice. 

Good story.

Mon, 09/20/2010 - 13:23 | 592386 DosZap
DosZap's picture

MsCreant,

You should have reached down, snagged the turd, and thrown it on him.......He would got the point......would have been priceless.

If HE were this aggresive, you should have called the Cops.......

 

Mon, 09/20/2010 - 13:56 | 592482 MsCreant
MsCreant's picture

DosZap,

With my luck, I would have been charged with aggravated assault! If I get a felony conviction, I lose my job. But the idea is beautiful. Even holding it and threatening him would have been pretty good.

On calling the cops, I get followed jogging all the time. I have called before. I am very sad to say they ask me "what do you expect us to do?" Serious. So I don't call. I do carry sometimes, and I have a permit.

Tue, 09/21/2010 - 02:51 | 594178 WaterWings
WaterWings's picture

Oh what a wicked ASP baton would have wrecked...okay, cannot...my restraint is that I cannot initiate force...if someone shits on my lawn does that justify...?

"Mister, your hand is better full of disease-infested shit before you hit that corner...(neck vein ripple)..."

Mon, 09/20/2010 - 13:14 | 592358 DosZap
DosZap's picture

MsCreant,

You shouldn't be so down on the American people, your correct that about 85% fit your definition.

But the other 15% do not...........and I see the possiblity of that very thing happening, esp since the Natl Emg Plan an EO, has already separated the entire country in 10 Separate regions, with 10 Separate Governors/SS leaders, answering to Der Fuehrer.

Mon, 09/20/2010 - 13:58 | 592490 MsCreant
MsCreant's picture

I'll go look that up. Thanks.

Mon, 09/20/2010 - 17:23 | 593163 Max Hunter
Max Hunter's picture

You shouldn't be so down on the American people, your correct that about 85% fit your definition.

Interesting.. I was just on the phone with a friend and told him that only 15% (max) are even capable of understanding the world around them. Regardless of how "smart" people think they are or others are not..

15%.. that's our maximum potential.. I suspect we are about 1/3-1/2 the way there.. An economic collapse or war would bring the rest around.. Then what??

Tue, 09/21/2010 - 02:59 | 594182 WaterWings
WaterWings's picture

The early dead have no say - history books are written by the tyrants and opposed by Producers . . . 

Sun, 09/19/2010 - 21:55 | 591289 Rich_Lather
Rich_Lather's picture

"The Wikipedia (which is as good a guide to popular perceptions as any) defines a “bubble” as: “trade in high volumes at prices that are considerably at variance with intrinsic values.” In economics, there is no such thing as an “intrinsic value”. Human beings impart value to economic goods by their buying or abstention from buying. The result is prices expressed in terms of money. As long as Gold is an “alternative” money, it will have a price. That will end once it re-assumes its age-old role as money itself."

 

And that's where your hype marketing fails. It will never become money again because it is economically unfeasable. If it did become an economic basis of world trade, you can be assured that the government, any government, would not allow their serfs to own any.

 

 

 

Sun, 09/19/2010 - 22:05 | 591301 JLee2027
JLee2027's picture

Gold will never be money?  Gold and Silver are the only money...that ever was and will ever be.

Mon, 09/20/2010 - 10:10 | 591379 RockyRacoon
RockyRacoon's picture

It will never become money again...

If it did become an economic basis of world trade...

Well, which is it?  You've contradicted your entire thesis.  You say it cannot, yet make an allowance for the possibility.  With a philosophy like that I'd say you should stay away from precious metals.  You don't have the stomach to ride the gold train.

And whoever junked this comment doesn't have the stomach to comment -- PUSSY!

Mon, 09/20/2010 - 10:18 | 591789 MsCreant
MsCreant's picture

"Fuck you" to the coward(s) junking Rocks all over the blog without the balls to debate him. If he is wrong, convince me. If I should doubt what he has to say, show me. Your cowardly little junks make me think he is right and you just hate that he is right and in a pathetic, passive aggressive effort to try and tell yourself that he does not totally and absolutely "own" you, you junk and run away. Right now, he owns you because you won't tell us your position, never mind defend it. 

Fight club, Bitch! Show me he is wrong. Or at least make me doubt him.

Sun, 09/19/2010 - 22:04 | 591300 dark pools of soros
dark pools of soros's picture

let's not forget that PG&E is a subsidiary of a private company..  not the government..

This is a good article except that falsehood of this statement:

 "A private company which neglects its vital standing plant would go out of business, not being able to compete with those who do NOT neglect theirs. "

 

So are we going to have competing pipelines going to the same neighborhoods?  Exactly why privatizing utilities is a total lose-lose.  They only have to worry about profits and no direct competition. 

 

 

 

Sun, 09/19/2010 - 22:36 | 591326 blindman
blindman's picture

where is the coffee party?

and the tobacco party?

Mon, 09/20/2010 - 17:56 | 593265 themosmitsos
themosmitsos's picture

Tokin' & drinkin' ;)

Sun, 09/19/2010 - 22:48 | 591335 spinone
spinone's picture

The doubling time of the price of gold since 1971 so far is about 7.5 years.

 2600 in 2017

 5200 in 2025

10400 in 2032

20800 in 2040

41600 in 2047

83200 in 2055

 

 

 

 

Sun, 09/19/2010 - 22:55 | 591341 CashCowEquity
CashCowEquity's picture

its going to double much faster than that, we are up against "fiat end game"

I expect Gold to be at least 5k within 3 years.

Sun, 09/19/2010 - 23:16 | 591365 onlooker
onlooker's picture

====I'm an old man. I'm gonna be rich and dead at the same time.====

The doubling time of the price of gold since 1971 so far is about 7.5 years.

 2600 in 2017

 5200 in 2025

10400 in 2032

20800 in 2040

41600 in 2047

83200 in 2055

Sun, 09/19/2010 - 23:25 | 591375 KevinB
KevinB's picture

Bill Buckler?!

I still haven't forgiven him for letting a ball roll through his legs in the '86 series...

Sun, 09/19/2010 - 23:56 | 591400 JLee2027
JLee2027's picture

Yeah Sox up by 2 runs in 10th inning. 2 outs nobody on and one out from winning the series. Then 3 hits a wild pitch and then finally Buckner's error. All Buckner's fault.

Sun, 09/19/2010 - 23:52 | 591397 Mark Beck
Mark Beck's picture

Fundamentally there is something wrong with describing fiat debasement and then pricing gold in the same dollars to make a point. The problem with the fiat comparison is just as the artical says, how can you determine real worth of something, gold for example, priced in the same fiat. If we accept for the moment, that the fiat is losing value everyday. How do we accurately price gold, and in what? Also, at some point we would like convertabllity, but we would be wise not to convert into debased fiat in any large amounts.

Can you ultimately take profits in the same fiat you have hedged against? No, not really. The reason for investment in gold, is not to price in USDs. It is to minimize holdings in USDs. The question is why would you convert back? Obviously to buy food. But, when we take a close look at the strategy, the decision for investment in gold is abondonment of the USD, and by extension the US fiat central bank.

So we see the reasons to buy gold are many times rooted in the principles of sound money. While at the same time, this is also a vote against our central bank and the politicians that support it. There is no middle ground here.

What will you ultimately take profits in?

Comments?

Mark Beck

Mon, 09/20/2010 - 00:12 | 591411 chopper read
chopper read's picture

exactly a protest, Mark.  I'm giving my gold to my kid.  instructions: trade for food only in emergency.  no 'profits' necessary.  it ain't a profit deal; its a protest deal, as you have so eloquently stated.  

Mon, 09/20/2010 - 02:55 | 591487 Snidley Whipsnae
Snidley Whipsnae's picture

Silver for daily, small transactions. Gold for occasional, large transactions.

That is the way it used to be...that is the way it will be in the future.

Mon, 09/20/2010 - 08:11 | 591593 blindman
blindman's picture

satisfaction of debt,  mostly in realestate.

a guess.

Mon, 09/20/2010 - 09:23 | 591674 Miss Expectations
Miss Expectations's picture

What will you ultimately take profits in?

As George Bailey said, "You're thinking about this place all wrong."

I can see if you were in a casino and won a bunch of  plastic colored chips, you'd want to trade them in for money (dollars).  Now, if you were instead playing and winning gold coins, the thought of trading them in for plastic chips or dollars would not (should not) occur to you.  When you've got gold, you've cashed in.  Like on a Merry go Round, what you get for the gold ring could be a free ride. 

Mon, 09/20/2010 - 10:13 | 591772 RockyRacoon
RockyRacoon's picture

I like that.

Mon, 09/20/2010 - 00:13 | 591412 bankonzhongguo
bankonzhongguo's picture

I am all for GLD, but there are logistics to running an economy.  If its not a fiat currency in a country, then its company script good at the company store.  The smartest guys in the room are not going to let the USD fall into an abyss.  Nor are people working under the SEIU just going to wait for their iron rice bowl to be filled.  People got pot to smoke, beer to buy and NASCAR to watch.  They are going to relativitize the USD verses other currencies and commodities and make  the BANCOR cum XDR, or whateverthefuck safe and secure in the netherworld of untouchable, carbon tax collecting power.  That is the real point of all this commotion.  Buy all the physical gold you want.  Someone will come and take it from you, just like your home's value or your career.  'Mommy.  How does the economy work.?  Well dear, there are very smart men in a far away land that learned a long time ago that we can't be trusted to take care of ourselves.  They love us so much that they let us eat.'

Mon, 09/20/2010 - 00:23 | 591422 macholatte
macholatte's picture

Damn near eloquent, Gonzo.

 

Mon, 09/20/2010 - 03:18 | 591500 dark pools of soros
dark pools of soros's picture

the weak link is the pawns they have to use to coerce the sheeple

locking up your community when you see real crime can easily be rationalized, but enforcing total bullshit on your own community invites interesting tangents into the psyche on both sides.  Their families gets shuned.  People start to ignore authority more and more.. will they bring in the army? Another country's army??

 

There needs to be a million man dig at the BP beaches to really see what tipping point is next...

 

 

Mon, 09/20/2010 - 09:30 | 591680 Miss Expectations
Miss Expectations's picture

A literal and figurative line in the sand?  No pitch forks or torches.  Just plastic shovels.

Mon, 09/20/2010 - 09:34 | 591690 tip e. canoe
tip e. canoe's picture

awesome idea, especially the irony of using plastic...cheers to both of you

Mon, 09/20/2010 - 10:26 | 591816 MsCreant
MsCreant's picture

Women can dig it too. I'd go.

Mon, 09/20/2010 - 14:07 | 592503 DosZap
DosZap's picture

I can answer you..............the tipping point is 100% when/if you see Blue Helmets on our streets.

Turn out the lights.........cause it will be game ON.

Several years ago their was Hypothetical test given Marine recruits.

One of the questions was IF ordered would you fire on U.S. Citizens.

Over 80% said No way...........20% siad they would,depending on the circumstances. The U.N. is the one to watch, IF the SHTF,and local LE.

There(I have found over years of experience around LE,Military folks) are two kinds of folks that enter LE.(Esp local LE)

One, a person who Genuinely wants to serve the Community, and Two, someone with something to prove,( Ego,low self esteem as a young person) and the power of the uniform,Badge, and weapon.

This is far more obvious the younger the officer/s.

Tue, 09/21/2010 - 03:09 | 594188 WaterWings
WaterWings's picture

Humans digging is pretty cheap - 50 billion is a lot of immediate paydirt if you re-direct administration costs into simple wood and metal + disposal (which is an eco-joke, but hey, every effort counts). The epitomy of "shovel-ready". Fuck you, BP.

Wait, let me say it again: "FUCK YOU, BP. FUCK YOU."

Mon, 09/20/2010 - 06:31 | 591540 Seer
Seer's picture

"The smartest guys in the room are not going to let the USD fall into an abyss."

Hello!  They have lost control already!  This was predestined, it's a matter of the physics of growth.  And given this hardcore, irrefutable fact, it follows that they are most assuredly NOT smart!  They're no more than paid criminals working for the elite.  If one has to attribute any intelligence it's that they are very good at deception, which is good for the elite, bad for the rest.

The revolution is over, we just don't know it yet.  And, THEY, the "smart" guys, fucking lost, as they should, as they always will.  Nature/physics/god dictates it.

Mon, 09/20/2010 - 00:16 | 591417 Ignatius
Ignatius's picture

"The road will seem so straight and fair to travel, you will kick yourself for struggling through the brambles for so long, and wonder at your neighbors who STILL can't see the path, though it is truly a freeway."  FOFOA

Mon, 09/20/2010 - 00:17 | 591418 lucasjackson
lucasjackson's picture

So Sandi....what union are you in?  

Mon, 09/20/2010 - 20:06 | 593525 Dr. Sandi
Dr. Sandi's picture

So Sandi....what union are you in? 

The United States of America. As with most unions, banding together for the common good seemed like a smart idea at the time.

Mon, 09/20/2010 - 00:20 | 591421 macholatte
macholatte's picture

Before we can talk about money and the VITAL role it performs, we must stress this point. Money is NOT wealth, it is the means by which wealth is exchanged amongst those who produce it. Paper money is not suited to this function."

 

 Another guy starting off on the wrong foot. Amazing!

How about we start with the definition of money: a convenient medium of exchange. OK?

So let's say I want to buy a farm in Australia and I live & work in France. What's more convenient, bundling up a few tons of gold and hauling it to Australia or simply giving an instruction to my banker to wire the "money" to Australia? You get one guess?

That's why fiat currency works. It's convenient.

And what about all the gold bugs "holding" gold? How many of them are simply holding a paper claim to an imaginary stash in some imaginary vault somewhere?

Get a grip!

Yes, the USA is in the shit house. No argument. Yes, fiat currency is scary, expecially the US dollar and especially now. So are you going to take a Krugerrand to the super market to buy this weeks groceries? No. You're going to use your plastic or your paper cause it's convenient and use your home computer or cell phone to check your futures contracts on precious metals cause that's convenient too.

Faith, baby. It's all about faith. 

 

 

 

 

Mon, 09/20/2010 - 03:04 | 591493 Snidley Whipsnae
Snidley Whipsnae's picture

You hold onto your faith, plastic, debt and fiat. I will hold onto gold. Good luck to you.

BTW, our fiat is supposed to be a transactional currency and a store of value. It's the store of value that was lost.

Mon, 09/20/2010 - 05:27 | 591526 nuinut
nuinut's picture

macholatte said:

How about we start with the definition of money: a convenient medium of exchange. OK?

No. You have only one third of the definition of money there. Money is three things:

 

  1. medium of exchange
  2. store of wealth
  3. unit of account (numeraire)

OK?


Bill Buckler said:

Before it can be exchanged, wealth must be created. Wealth cannot be created out of thin air. By definition, an economic good is “scarce”. If it were not, there would be no such thing as economics or exchange. Neither would be necessary because no effort or choice in the face of alternatives would be required in order to provide the GOODS which further our lives.

OK

 

Before we can talk about money and the VITAL role it performs, we must stress this point. Money is NOT wealth, it is the means by which wealth is exchanged amongst those who produce it. Paper money is not suited to this function.

Buckler seems to be with macholatte here, implying that money has only the single function, the medium of exchange. Of course he knows better than that. If we add two words to that statement we can fix that:

 Money is NOT wealth, it is the means by which wealth is <stored and> exchanged amongst those who produce it.

OK, that's better.

 

Paper money is not suited to this function.

Paper money, and its digital counterpart are perfectly suited to the medium of exchange function, but terrible at the store of wealth function, due to constant inflation of the paper money supply.

Solution: Use freely floating physical Gold as the store of wealth, fiat as the medium of exchange. Split the functions between two forms of money. Float the store of wealth in the medium of transaction.

Gold for saving (longer term), fiat for spending (shorter term). Easy to exchange one for the other, depending upon your time preference. No longer any need to take risks with your capital trying to maintain its purchasing power.



Mon, 09/20/2010 - 10:22 | 591798 RockyRacoon
RockyRacoon's picture

Well done!  Doubtful that Mr. Latte will be back to see your reply, however.  Most folks of that ilk drop their load and move on.  When you are so right why seek out any other opinion?  Only pure ego (to see how many praised his insight) brings them back -- a la Johnny Bravo.

Tue, 09/21/2010 - 00:36 | 594033 macholatte
macholatte's picture

Rocky Raccoon checked into his room
Only to find Gideon's bible
Rocky had come equipped with a gun
To shoot off the legs of his rival
His rival it seems had broken his dreams

 

 

About half way down on the left is where they keep the mirrors.....

Mon, 09/20/2010 - 10:17 | 591787 augmister
augmister's picture

+1   I love these gold bugs who don't see the Big Yellow Bubble....when the damn breaks, everything gets flushed down the toilet, including their shiny shiny....

Mon, 09/20/2010 - 10:26 | 591809 RockyRacoon
Mon, 09/20/2010 - 14:13 | 592523 DosZap
DosZap's picture

aug,

Yes, there will be a time when a TRUE Bubble forms, but we are so far away from it, no need to discuss it.

This run has at least another 5min-10+yrs to it.

Face it, Globally, the entire worlds econs are screwed.Along with their currencies..........(with the exception of a few in Asia).

You going to hold Chi Com YUAN?......Uh.,No.

Mon, 09/20/2010 - 00:43 | 591431 JLee2027
JLee2027's picture

Gold just set a new all time high overseas. 1282

Mon, 09/20/2010 - 01:24 | 591443 Spalding_Smailes
Spalding_Smailes's picture

Oh Ya, .... Put this in your pipe and smoke it.

 

Congressmen Weiner and Waxman Set Gold Hearing

 


Just as the government is trying to prevent people from investing in anything other than T-Bills by raising taxes on taxable interest and dividends to confiscatory levels, it's also trying to prevent you from parking your wealth in assets, like gold, that compete with the paper dollars issued by the Federal Reserve and the Treasury. A press release from Rep. Anthony Weiner, Democrat of New York, not yet (as of this instant) posted on Mr. Weiner's Web site, announces that a September 23 hearing of the Subcommittee on Commerce, Trade, and Consumer Protection (a subcommittee of Rep. Henry Waxman's Commerce Committee) will focus on "legislation that would regulate gold-selling companies, an industry who's [sic] relentless advertising is now staple of cable television."

From the press release: "Under Rep. Weiner's bill, companies like Goldline would be required to disclose the reasonable resale value of items being sold." That's great. Are Mr. Weiner and Chairman Bernanke also going to agree to print on every dollar the reasonable expectation that its value will be eroded by inflation?

Gold investors (or speculators) are already punished by the federal government by having their investment, even in a gold exchange-traded-fund, taxed at the higher rates that apply to collectibles rather than long term capital gains.

http://seekingalpha.com/article/225579-congressmen-weiner-and-waxman-set...

Mon, 09/20/2010 - 01:42 | 591451 JLee2027
JLee2027's picture

Yeah, like any of that will ever happen

Mon, 09/20/2010 - 01:54 | 591456 Spalding_Smailes
Spalding_Smailes's picture

“All safe deposit boxes in banks or financial institutions have been sealed… and may only be opened in the presence of an agent of the I.R.S.”

- President F.D. Roosevelt, 1933

Mon, 09/20/2010 - 02:14 | 591467 JLee2027
JLee2027's picture

Whatever. Stop responding to me.

Mon, 09/20/2010 - 02:21 | 591471 Spalding_Smailes
Spalding_Smailes's picture

The budget should be balanced; the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.

-- Cicero 55 BC

Mon, 09/20/2010 - 06:40 | 591543 Seer
Seer's picture

Bzzt!  It's one thing to pass along right-wing propaganda (god, don't people get tired of being programmed?), it's another to cloak it in a lie that it's attributable to some long ago dead person.  As noted here (http://message.snopes.com/showthread.php?t=28532), Rome can hardly be confused as having operated as some benevolent invader.  What raised my eyebrows was "public assistance."  Whomever concocted this shit should be lined up and shot.

Mon, 09/20/2010 - 08:58 | 591637 fiftybagger
fiftybagger's picture

Snopes. 2 people in a basement.

 

Hahahahahaaha

Bwaaa hahahahahahaha

 

EPIC FAIL!

Mon, 09/20/2010 - 03:07 | 591496 Snidley Whipsnae
Snidley Whipsnae's picture

More gov azzhats 'protecting us from ourselves'...just what we do not need.

Prosecuting the fraudsters selling bogus stuff was the old way. The new way is to pass more laws that will not be inforced.

The pols are desperate cause they know that we know that their fiat is garbage.

Mon, 09/20/2010 - 01:38 | 591449 Something Wicke...
Something Wicked This Way Comes's picture

All I wanna know is when is the ponz going supernova?

Mon, 09/20/2010 - 02:52 | 591485 The Navigator
The Navigator's picture

I was hoping for another 2-3 years to get better prepped and buy more PM's. But it could happen between the time I instruct my banker to wire funds to Australia and the time I land there 15 hours later - thus my paranoia and belief in ONLY physical Ag Au & Pb.

Best wishes for a safe harbour for us all. It's gonna be one hell of a storm.

Mon, 09/20/2010 - 03:07 | 591491 Boston Wealth
Mon, 09/20/2010 - 04:52 | 591518 Sudden Debt
Sudden Debt's picture

Don't buy Gold or Zilver coins on Ebay! There are a lot of fake ones out there!

Mon, 09/20/2010 - 05:24 | 591525 StychoKiller
StychoKiller's picture

Prices are way over spot as well!

Mon, 09/20/2010 - 14:19 | 592529 DosZap
DosZap's picture

Brother you said a mouthfull there, there have to be some illiterate monkeys buying PM's off of eGay.Between them, and sister company PayPal they can stick it. Anti Constiution/anti gun Socialistas.

Mon, 09/20/2010 - 09:20 | 591667 JLee2027
JLee2027's picture

The silver fakes are easy to spot and removed quickly. Not so much with the Gold.

Mon, 09/20/2010 - 10:30 | 591827 RockyRacoon
RockyRacoon's picture

Don't buy Gold or Zilver coins on Ebay!

eBay is a venue for sellers, each of whom is different.  Like going to a flea market, you can't judge the entire place by one seller.   KNOW YOUR SELLER!  Buy from reputable sellers with whom you've done business before, and talked with them on the phone!

Mon, 09/20/2010 - 05:39 | 591529 aleph0
aleph0's picture

Certainly the best  explanation on terms of clarity that I have yet seen.

Excellent article.

Mon, 09/20/2010 - 07:10 | 591552 Fred123
Fred123's picture

Don't worry, the Chinese Renminbi is here to save the day..........

Mon, 09/20/2010 - 07:18 | 591554 Silverhog
Silverhog's picture

The climbing price of Silver is drawing more phony crap to eBay. Wasn't to bad a few months ago but now bogus German coins, Mills bars and all kinds of Morgan Dollar reproductions, who the hell wants to buy a worthless copy of a Morgan Dollar??  

Mon, 09/20/2010 - 10:32 | 591833 RockyRacoon
RockyRacoon's picture

Who wants a Morgan dollar, period?  It's not bullion, it's numismatic.  If you want junk silver, buy junk silver.  That is not worth producing fakes for the Chinese counterfeiters.  Buy from a seller you know.  I've been buying from a handful of sellers on eBay for over 10 years and NEVER been burnt.  It's just like anything else, do your DD.

Mon, 09/20/2010 - 07:24 | 591556 plocequ1
plocequ1's picture

Its 1999 for everyone kids.. Futes are up, Gold is up, OctoMom is going to ask Govenor Terminator for welfare... Its all good

Mon, 09/20/2010 - 08:24 | 591602 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

I would like to be entombed in a Pyramid, wrapped in a golden sarcophagus ...

Gold is irrational. Maybe the greatest trick the devil ever pulled was convincing you that YOU were rational. Or that the only choice was one or the other.

Marx's analysis of capital ultimately fails because he is drawn into the cheap parlor tricks of western metaphysics, i.e. capital becomes the new sacred cow. But that does not leave us off the hook to the fundamental problem, that the creation of wealth comes from work and that the "holder" for this work across time has always been manipulated by a few at the expense of the many.

If one is in agreement that the creation of wealth comes from work, where do we go from there? Gold is not a solution, it's a symptom of the problem.

Mon, 09/20/2010 - 10:35 | 591850 RockyRacoon
RockyRacoon's picture

How do you store your work?  You've been thrashed on this several times yet you continue to say the same thing.

Mon, 09/20/2010 - 12:08 | 592166 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

I'm not taking a stance. These are real question(s). Very difficult questions. How do you create wealth, how do you store wealth, how do you use your wealth to transact?  I don't think gold answers this at all since the concept of wealth cannot in my opinion be divorced from work and labor. It may make a great investment in uncertain times but a shiny metal with symbolic / magical properties is not the answer in and of itself. The cheerleading for gold becomes a self reinforcing bias.

You have pointed out more than once that gold is in effect a political tool to take back monetary control from the CBs. Ok, good. Then what? You've substituted gold for fiat under questionable assumptions. You've also got to assume a level playing field so that the market can price gold versus whatever correctly. Same problems. If everyone lost faith in gold because only a few large horders controlled it, etc. etc.  And the individual will never be able to attain enough in the face of large competition.

Taking assumptions for granted does not advance thought. Questions are more important than answers. Answers left unattended become dogma. Pushback is part of the process.

Mon, 09/20/2010 - 08:26 | 591603 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Dupe, sorry.

Mon, 09/20/2010 - 08:43 | 591622 fiftybagger
fiftybagger's picture

Silver putas !!!!!!

Mon, 09/20/2010 - 08:59 | 591633 MarketFox
MarketFox's picture

Another point of view would be to view the economy had there not been a fractional reserve system....just what would today's economy look like ?

Would the economy be 1/100000th the size of today's economy ?

Would gold have been hoarded by the few elite families in each country ?

Think about this point...

....................................

And remember this....

Markets should never be void of  human fear and greed and human errors...

..................................

Today's real gold should be common stock shares....

This is the internet age....and the common stock market should be at least 2 billion RETAIL accounts being serviced and not gamed by the banks.....

Let the INTERNET AGE develop stocks to the degree that the over 2 billion wireless handhelds WILL PRESS THEIR OWN BUTTONS......

 

Mon, 09/20/2010 - 09:58 | 591732 Womb Service
Womb Service's picture

"Today's real gold should be common stock shares...."

 

Without sound money and banking, markets are meaningless.

Mon, 09/20/2010 - 11:15 | 591982 Grand Supercycle
Grand Supercycle's picture

DOW weekly chart shows key resistance around 10,700

http://stockmarket618.wordpress.com

Mon, 09/20/2010 - 12:33 | 592250 Strider52
Strider52's picture

I have wanted to get into Physical Silver ever since I got into gold. Last Friday, amid tons of reports (especially Harvery Organs blog) that Silver seems to be hard-to-get, I got (a horse-choking load) of 1-ounce silver .999 bars. I should get them tonight. I will need small denoms of real money to barter with when TSHTF.

Mon, 09/20/2010 - 20:08 | 593532 Dr. Sandi
Dr. Sandi's picture

Last Friday, amid tons of reports (especially Harvery Organs blog) that Silver seems to be hard-to-get, I got (a horse-choking load) of 1-ounce silver .999 bars.

Nice horse, what's his name?

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