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Dylan Grice Explains Why He Likes Gold, And Why $7,500/Oz Makes A Gold Standard Possible

Tyler Durden's picture




 

Three months ago, there was some confusion when SocGen's Dylan Grice, one of the brightest big picture strategists out there, released a report profiling the long-term real return on commodities (which was zero), leading some to speculate he was bearish on gold and/or other precious  metals. Today, Grice puts the matter to rest with his latest Popular Delusions piece: "Why this commodity specific value investor likes gold." To wit: "In the hard sciences knowledge builds cumulatively. It propels the relentless growth in man’s ability to do more with less, which makes commodities such a lousy investment in the long term. Yet in the realm of social decision-making mankind is a fool, unable to learn the wisdom of posterity and doomed to repeat its mistakes: the first credit crunch occurred in the Rome of 33AD and the ancient Greeks lived with high inflation. Confidence in central bankers’ ability to learn from past inflation is as likely to be misplaced as it was in their ability to learn from past credit booms. Gold remains the cleanest insurance against such overconfidence." And confirming gold's very unique position in the investment pyramid, Grice's conclusion borders on the ontological: "Shorting mankind’s ingenuity isn’t a smart thing to do. But ingenuity isn’t wisdom. And shorting mankind’s ability to absorb wisdom … well, aren’t you silly if you don’t? With less of the technological risk you’re taking when you buy any other part of the commodities complex, gold is the oldest, purest and simplest way." It appears ever more are starting to agree with this perspective.

Grice's summary observations on gold, explaining why to so many the concept of precious metals is sufficiently inexplicable to be analyzed through the prism of religion:

I recently showed that the long-term real return on commodities since the 1870s has been zero (Popular Delusions, 15 December 2010), and so I am sceptical of long-only commodity investing. The history of our species has been one of adaptability and innovation, and I argued that to buy commodities was to go short human ingenuity. But some thoughtful observers - see Sean Corrigan profiled on zero hedge for a good example - questioned exactly how “ingenious” humanity really is. They suggest that shorting human ingenuity might not actually be such a bad idea!

This is a valid point and one that I want to explore in more detail this week. In the original note I explicitly excluded gold from my analysis, as I have done in subsequent writing. But I have never properly explained what, on the surface at least, appears to be a stark contradiction: how can such a commodity-sceptic as I be so comfortable owning physical gold? What follows is such an explanation. I’ll let you decide whether it’s any more than an elaborate attempt to relieve a particularly nasty case of cognitive dissonance.

Gold is not like other commodities, and other commodities are not like gold. That difference is central to the reconciliation to come. But it is actually much more. It lies at the heart of the absurd contradiction innate to the human condition: how can a species as capable of the creative resourcefulness embedded in space travel, wireless communication,  genome mapping, Viagra, be at the same time, so hopelessly incapable of learning past wisdom, and apparently doomed to repeat past follies?

Previously, when we discussed Bernanke's hubris when testifying in Congress that it would be impossible to get a gold standard back because there is not enough gold, we countered with the simple argument: just raise the price of gold. Indeed, as Grice points out (again) at $7,500/ounce all the dollars in circulation would be backed by gold.

And Dylan brings the thesis full circle: gold is nothing but insurance, but not so much against deflation, inflation or the end of the world: it is insurance against pure human hubris, such as that exhibited by Central Planners, pardon, bankers, each and every day.

Two thousand years ago, Marcus Cicero said “any man can make mistakes, but only an idiot persists in his error.” By such logic our species is idiotic indeed. For our ability to pass knowledge down through the generations applies only to the physical sciences. In the realms of the social decision making, where humility and realism are so often the dupe of hubris and self-delusion, each generation is condemned to relearn the mistakes of generations past.

The abuse of political power, wars and popular uprisings are as prominent in ancient history as in today’s newspapers. In the 5th century BC the helot serfs tried in vain to overthrow their Spartan masters. Today the Libyan rebels’ struggle to topple Gadaffi may be going the same way. Harry S. Truman once said “there is nothing new, only the history you don’t know.”

Financial history is no different. Indeed, it is the systematic tendency towards precedented folly which is such a fascinating feature of our financial heritage. During the South Sea Bubble, as the stock of the South Sea company entered stratospheric proportions, John Martins of Martins Bank bought stock at the ludicrous price of £500 and justified it thus, “when the rest of the world are mad, we must imitate them in some measure.” Nearly three hundred years later, the then CEO of Citigroup, Chuck Prince, echoed identical idiocy with the now infamous utterances “ … as long as the music is playing, you’ve got to get up and dance.”

Tacitus refers to what may be the first recorded credit crunch in 33AD. An edict on usury from the Emperor Tiberius forced money lenders to call in loans and borrowers to sell property at distressed prices, during a “great scarcity of money.” Only when the emperor advanced 100m sisterces to distressed debtors to borrow for three years without interest (the world’s first ZIRP) did the crisis pass. So the credit crunch of 2008 wasn’t the first, and it won’t be the last. Yet only a few years ago we were told that financial crises were a thing of the past.

Central banks knew better. They’d learned the lessons from the past. But history shows that in the realm of social decision making such confidence is rarely warranted. Hubris plays the lead role in all great financial tragedies.

And what is an inflation crisis if not a financial tragedy? Today our central bankers are as confident in their ability to control inflation (Mr. Bernanke claims 100% confidence) as they were in the soundness of the financial system in 2006. Yet history suggests they shouldn’t be, for inflation goes back almost as far as we do. In the ancient Greek comedy, The Frogs, written in 405BC, Aristophanes writes that “the full-bodied coins that are the pride of Athens are never used while the mean brass coins pass hand to hand”. His reference to Gresham’s law predates Sir Thomas Gresham’s first observation during the medieval inflation of Henry VIII’s England by around two thousand years. As the play was written during the closing years of the epic Peloponnesian Wars which would have stretched the government’s budget, we can assume that Aristophanes and his audience witnessed inflation first hand.

Like credit crunches, there is nothing new about inflation crises. It’s not something which happened in the past but which we now understand well enough to ensure it never happens again, any more than systemic banking crises were. Yet when we talk about past inflationary episodes, whether in classical times, medieval times or industrial times we read of the same two villains of the peace each time: financially pressured governments and the politicised issuance of money. With the festering off-balance sheet liabilities threatening public sector solvency throughout the developed world, and central banks little more than fiscal puppets and economic cheerleaders (with the exception of the ECB, for the moment), we’re set to reacquaint ourselves with those villains in the flesh.

Shorting mankind’s ingenuity isn’t a smart thing to do. But ingenuity isn’t wisdom. And shorting mankind’s ability to absorb wisdom … well, aren’t you silly if you don’t? With less of the technological risk you’re taking when you buy any other part of the commodities complex, gold is the oldest, purest and simplest way.

Brilliantly put.

 

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Fri, 03/25/2011 - 10:21 | 1099301 Muir
Muir's picture

Finally!

I'll be able to buy that condo on Park Ave with the park views for 100 oz of gold.

Fri, 03/25/2011 - 11:16 | 1099587 DosZap
DosZap's picture

You would actulally give a 100oz of the precious for a pad in NYC?.

I wouldn't move into one, if it were free.

NYC, and Kali are the scum states of the US.(left wing, anti American in debt so far, they will never see the light of day, ever).

Fri, 03/25/2011 - 12:17 | 1099909 imaginalis
imaginalis's picture

You forgot to mention which fine example of a State that you live in

Fri, 03/25/2011 - 12:27 | 1099961 tmosley
tmosley's picture

NYC was once great, and could be again.

Fri, 03/25/2011 - 10:24 | 1099315 The Axe
The Axe's picture

Finally SOME DOLLAR strength !!!!   Maybe a PM correction today....careful MEN!!!

Fri, 03/25/2011 - 10:29 | 1099345 nobusiness
nobusiness's picture

Weak Dollar bullish.  Strong Dollar even more bullish.  love this market

Fri, 03/25/2011 - 10:39 | 1099406 Sophist Economicus
Sophist Economicus's picture

I've got my sweaty fingers hovering over the Kitco BUY button

Fri, 03/25/2011 - 10:30 | 1099347 PulauHantu29
PulauHantu29's picture

 

GLD, USO, SLV and PALL are the only places to be as the dollar and euro fall in purchasing power.

Fri, 03/25/2011 - 10:56 | 1099478 DoChenRollingBearing
DoChenRollingBearing's picture

I would take the physical gold and other PMs rather than the paper.

USO is a sleazy (high cost) way to play oil.  Try stocks like SLB or NOV instead.

Fri, 03/25/2011 - 13:48 | 1100336 au_bayitch
au_bayitch's picture

+1 on the USO comment

Fri, 03/25/2011 - 15:49 | 1100949 dumpster
dumpster's picture

PulauHantu29

 

slv the only pladce to be ,,

as the silver is plundered out leaving a shell of paper ,,

you may wish to study whats going on here

china and others to get the silver are exchanging the shares form the real

when the game of musical chairs is winding down  .. you seat has been taken

 

Fri, 03/25/2011 - 10:30 | 1099350 GoldCore
GoldCore's picture

Excellently put both by Tyler and by Dylan Grice. Gold and silver are money unlike corn, pork bellies, oil and lead. Most ZH readers know that but the "man in the street" is a long way from realising that.

This is why they have retained value throughout history as graphically shown in the most watched video on gold bullion so far in 2011:   'GoldNomics - Cash or Gold Bullion?' - http://www.youtube.com/watch?v=-HaqwFJj4ZY   

 

Fri, 03/25/2011 - 10:32 | 1099358 Thomas
Thomas's picture

Somebody should mention that the miracles of compounding is total fiction. If you invested $100 in something that returned 3% (inflation adjusted) at the time of Christ--spanning the period in which civilization essentially grew to what it is today--you would have 6 x 10exp25 dollars. Of course, that is total nonsense (says Avogadro). So maybe 3% is not really sustainable, eh? You dial back the assumed return and discover the obvious: we essentially create wealth at the rate that we consume or destroy it. The annual growth rate in what we call wealth is miniscule. Within a rounding error, the last 2000 years has been an accumulation of knowledge. Period/full stop. I thought this analysis was really instructive and then noticed that in Adam Smith's Wealth of Nations, the same analysis (up to the 18th century, of course) using a 5% return (what an optimist that Smith was) would generate "an orb of gold 100 million times the size of the moon." (That's from memory, but it is something like that, and the "orb of gold" part is the operative phrase. Berkeley's Albert Bartlett has been attempting to educate modern humans that the exponential function needs to be understood.

Take home lesson: Don't bet on much of a return in the long run.

Fri, 03/25/2011 - 11:27 | 1099642 tmosley
tmosley's picture

No no no.  You are thinking about it wrong.  You are assuming the interest money comes from the ether.  It doesn't.  It comes from consumer spending.  You CAN get a 3% constant return forever IF you spend those three percent back into circulation.  Otherwise, as you accumulate more and more of society's capital, interest rates fall, and will eventually approach 0% as you approach 100% capture of circulating money.  The individual "dollars" that remain in circulation will rise in value as this process occurs.  This is good, because the capital that has been pumped into the system is allowed to increase production efficiency thanks to your amazing ability to refrain from spending.

Interest rates and the value of money reflect society's consumption preferences.  If society just wants to save save save, interest rates will be driven down.  If it wants to spend spend spend, interest rates will go up.

The Fed is dangerous because it directs consumption and savings by manipulating the interest rates.  Eventually, we will fall into the fiscal equivalent of a diabetic coma.  The Fed, being full of Keynesian numbskulls, assume that the "body" is slowing down because there isn't enough sugar in the bloodstream, so they keep dumping it, until the victim (the economy) is dead.

Fri, 03/25/2011 - 13:25 | 1100243 Double down
Double down's picture

Nicely put

The time value of money is a meaingful but inert formula.  Yes, a dollar is worth more today than tomorrow but only if it is available.

Fri, 03/25/2011 - 14:52 | 1100703 LawsofPhysics
LawsofPhysics's picture

Just like commodities.  They don't anything useful for the economy unless they are being put to work.  If they are unavailable, well, then you are just fucked.

Fri, 03/25/2011 - 11:32 | 1099667 DosZap
DosZap's picture

Your examples leave out Inflation, and it wreaks havoc on piddly return rates.The compunding efect works if you never touch it, and it's in a vacumn.

Every dollar of every paycheck is now losing (at a min)ten more cents, so in reality your getting .$0.90.

 

Fri, 03/25/2011 - 11:51 | 1099779 BigJim
BigJim's picture

If Smith did indeed say that a 5% return would generate "an orb of gold 100 million times the size of the moon" then I'm surprised. There is a finite limit to the amount of gold; but not what it purchases per ounce.

Fri, 03/25/2011 - 10:33 | 1099372 youngman
youngman's picture

I agree that in 20 years or so gold will not be very valueable...something else will be developed for ease of use....but for the next few years as curriencies and countries collapse..it will become very valueable....I do  think Governments will try to take it somehow...make it illegal..confiscate it..whatever...in their minds we work for them..and they are broke..so those with money or gold..they will take it to feed their pensions or their voter base..401k´s have already been mentioned as being a target...time will tell who is crazy and who has forethought...I know I am crazy...lol

Fri, 03/25/2011 - 11:34 | 1099681 DosZap
DosZap's picture

Not to be a toad, but I do not believe 90% of us will be here in 20yrs.

If at all.

Fri, 03/25/2011 - 10:36 | 1099385 gdogus erectus
gdogus erectus's picture

I've come to realize that we need both systems to work side-by-side for a little while.  As long as the old fiat based currency is still working AND precious metals are going up - I'll have a window to pay off all my freaking debt.  I read that those who owned gold and had debt in the Argentine peso collapse of 2002 did very well.

I think that there will be a narrow window of time to pay off debt before they change the rules.

Fri, 03/25/2011 - 10:37 | 1099388 Pez
Pez's picture

When alien civilizations come to visit earth, they'll have a riddle to solve about the extinct hhumanoid civilization. How come some of them died with gold coins in their stomachs.

Fri, 03/25/2011 - 11:53 | 1099789 BigJim
BigJim's picture

Maybe they were using it to flush out all the FRNs they'd previously eaten?

Fri, 03/25/2011 - 10:42 | 1099417 Bob Paulson
Bob Paulson's picture

Man's ingenuity is not the issue. It's his greed and evil that are.

If that's not a good enough reason to buy gold, I don't know what is.

Fri, 03/25/2011 - 11:23 | 1099625 LawsofPhysics
LawsofPhysics's picture

"Man's ingenuity is not the issue. It's his greed and evil that are."  In that case I'll stick with my arable land, guns and ammo and several like-minded neighbors.

Fri, 03/25/2011 - 11:35 | 1099686 DosZap
DosZap's picture

Cain & Abel, hasn't changed one WHIT.

Fri, 03/25/2011 - 19:22 | 1101581 Fiat Money
Fiat Money's picture

yep: although "ethnic conflict" is the basis for all great empire vs empire wars, the basis of ethnic conflict often distills down to brother vs brother... civil war.

    see my above comments, is all boils down to our animal, primal urge to reproduce and control territory vs others... the more powerful our weapons & technological toys,  the more like jealous,  social primates we revert to. 

Fri, 03/25/2011 - 12:43 | 1100062 DoChenRollingBearing
DoChenRollingBearing's picture

LawsofPhysics, ¨Arable land, guns and ammo¨, very good.

But, gold will give you some extra protection as well. 

.gov can raise your property taxes, and maybe take more of your crops...

Fri, 03/25/2011 - 14:48 | 1100669 LawsofPhysics
LawsofPhysics's picture

That is why you surround yourself with like minded neighbors.  A meteor might hit the earth tomorrow too, so what.  The government might be GONE tomorrow as well.  When it come down to a man with gold against the man with a AR-15, well I guess it depends on the range and the shape of the gold.

Fri, 03/25/2011 - 14:50 | 1100672 LawsofPhysics
LawsofPhysics's picture

That is why you surround yourself with like minded neighbors.  A meteor might hit the earth tomorrow too, so what.  The government might be GONE tomorrow as well.  When it come down to a man with gold against the man with a AR-15, well I guess it depends on the range and the shape of the gold.

Fri, 03/25/2011 - 13:13 | 1100190 Double down
Double down's picture

Greed and evil are problems, but the beginning is the seduction to the idea that something for nothing can be achieved.  When that failure begins to appear the method of hiding the failureis what is evil.  That method support those who are greedy,ie bankers.  

The appearance of the failure is noticed by the faithful who begin to believe we must try harder to get something for nothing.  These people then ally themselves with the greedy who do not object to becoming richer.

The two parties eventually become indistinguishable and jointly go nuclear either in a malaise or catastrophe. 

Great article.  Thanks Tyler

Fri, 03/25/2011 - 19:14 | 1101564 Fiat Money
Fiat Money's picture

"Greed and evil are problems, but the beginning is the seduction to the idea that something for nothing can be achieved"

 Actually,  TECHNOLOGY  _DID_  give us  "something" for nearly nothing - with the aid of a powered harvester or combine, one man could do the work of several men, and several complete horse/mule teams plowing or harvesting grain fields - turning the American west into the bread basket of the world.

    That EXPLOSION in productivity (and industry) - powered by OIL -  powered the Great Golden Age of America, the half century post WWII.  However, we humans, LIKE MOST OTHER ANIMALS, are genetically engineered to have HIGH REPRODUCTION RATES - so within just a few decades, the EXPONENTIAL human POPULATION GROWTH (from about one billion humans at the beginnings of the 1800s, to SEVEN BILLION today)  has taxed even the magic genie of technology.

    In short, our selfish primal (animal) urges to breed, reproduce, and CONTROL resources  vs our fellow humans, is far more powerful than our social self restraint in the now hair-trigger  nuclear/technology/exponential population growth era. 

you know, a REPEAT of 1914, when all the "CIVILIZED" and Christian leaders & people of Europe, had NO IDEA how devastating the "Great War" that was bearing down on them was going to be....  

Fri, 03/25/2011 - 10:47 | 1099441 Spigot
Spigot's picture

...owning physical gold...

Well, alrighty then!

"Gold, Bitchez!"

Fri, 03/25/2011 - 10:50 | 1099453 mogul rider
mogul rider's picture

Let's see how would CNBS blockheads position this?

 

OK people there is chaos all over the world and here in the US we are the capitlaist centre of the universe. The only place to invest. Chaos is good for US stocks............... Now a word from the Squid our illustrious sponsor

Fri, 03/25/2011 - 11:00 | 1099490 bbq on whitehou...
bbq on whitehouse lawn's picture

The hard sciences have fixed rules "laws" that cannot be broken, so this allows for innovation within these rules.  Boxes can free the mind to explore without end.

Financials have fuzzy rules and they are political in nature.  Without solid fixed rules "innovation" takes over and seeks to bypass those rules. Gold helps act as a "solid" rule for finance.

The problem we have today is the same we had under the gold standard.  Innovation took over and created products, assets and "new money" all of which now needs a price in "cash".  Problem is if we print this cash then we get hyper-inflation; or deflation by selling these products at market.

Finance needs unbreakable rules, like the laws of nature. Or humans will continue to have problems with money.

Gold so far seems to be better then nothing; nothing is what we have now.

Fri, 03/25/2011 - 11:37 | 1099704 DosZap
DosZap's picture

If Gold were allowed to float in price to the amount of currency printed, this would not be an issue.

It could be done right now (as posted),but thats not the plan.

Fri, 03/25/2011 - 12:47 | 1100099 DoChenRollingBearing
DoChenRollingBearing's picture

Beats me what their plans are DosZap, so the Hell with them.

Au, Ag, Pt, Pd.

And the guns & ammo to defend them.  No arable land though or off the grid water source though.  Besides I do not have the skill set to farm, and a condo living Bearing at 55 yrs, well, it ain´t going to happen.

...

As long as there is no Mad Max or 1984, I´m OK.

...

I do have a little something in Peru to land OK here if I have to check out of the Roach Motel that may befall America.

Fri, 03/25/2011 - 11:01 | 1099500 Spigot
Spigot's picture

The first aliens that arrive on earth probably would be ushered into a Goldman meeting to try to sell them on some derivatives or something. I'm pretty sure they would then nuke the earth, considering it a cesspool of insane criminality, from which the universe would need protection.

Fri, 03/25/2011 - 11:01 | 1099503 apberusdisvet
apberusdisvet's picture

Since most assume that 99% of all gold ever mined still exists, do you ever wonder where it is?  Certainly not at Ft Knox or West Point or COMEX or LBMA or even at the bullion banks (all paper, dontcha know).  The amount of Gold that is lent, leased, and mouse clicked back and forth is probably less than one year's production.

I would imagine that the families that own the FED have many hidden protected vaults filled with gold.  They will be the ultimate decision makers on gold; it will be in their best interest to get a higher price.

Fri, 03/25/2011 - 11:02 | 1099510 plata pura
plata pura's picture

A GSR of 38.13 be intolerable.

Fri, 03/25/2011 - 11:06 | 1099534 Josh Randall
Josh Randall's picture

This was Jim Rickards take too actually - need to find the link (believe it was Dec 2010) he outlined it beautifully. The scenario of the Ben Bernank exporting hot money to our supposed ally China only to watch them implode as we bail the US currency out with a partial Gold backing. Obviously this dovetails with Road to Roota theory of Bix Weir as well, defaults, imploding enemies, and then dramatically returning King Dollar to its rightful place - in the name of national security in the nick of time by backing it with a basket that includes Gold. 

Fri, 03/25/2011 - 14:26 | 1100111 DoChenRollingBearing
DoChenRollingBearing's picture

That seems a tad conspiratorial and complex to me.  .gov and the Fed do not seem like they could pull that off, especially as it would need to be kept secret.

Occam´s Razor and all that.

¨Three can keep a secret if two of them are dead.¨

 

EDIT: bad grammar above

Fri, 03/25/2011 - 11:08 | 1099543 edmondantes
edmondantes's picture

Presentation on gold by Bullion Vault:

http://gold.bullionvault.com/How/GoldValue

May be of interest if not already posted

 

Fri, 03/25/2011 - 11:12 | 1099563 werealldoomed
werealldoomed's picture

7.5k an ounce? Let me get my coat..

Fri, 03/25/2011 - 11:16 | 1099594 Pseudo Anonym
Pseudo Anonym's picture

how can a species as capable of the creative resourcefulness embedded in space travel, wireless communication,  genome mapping, Viagra, be at the same time, so hopelessly incapable of learning past wisdom, and apparently doomed to repeat past follies?

that's easy. It has nothing to do with human ingenuity.  People are gullible and easy to deceive by con artists in positions of power. Especially if some segments, i.e. hofjuden, are allowed to print confetti or emit digital credits in lieu of money at no cost.

Fri, 03/25/2011 - 18:51 | 1101500 Fiat Money
Fiat Money's picture

long, long ago - a decade or two before the AIPAC neo-cons (including their GS, JPM = Fed = rothschilds treasury looting economy wrecking financial arm)  HIJACKED America,  I called this the "WERNER von BRAUN syndrome" -

 - how could people so smart, so intelligent, so resourceful and rooted in "modern era" science & technology as von Braun's Nazi rocket scientists,  devote their lives to something so evil as the Nazi regime?

  Well, needless to say, Stalin's henchmen Beria was even more expert at getting scientist to PRODUCE RESULTS through the sheer application of terror than von Braun's mostly willing and enthusiastic German V2 rocket scientists.  

      And, needless to say, the INSATIABLE, economy gutting greed & lust of the GS, JPM, Fed banksters - in concert with their blood lust to BOMB, invade, occupy, & destroy one country (Iraq) which  had nothing to do with the 9-11 attacks,  proves that we are ALL susceptible to the primitive, murderous passions of our clan, tribal, primal origins.

Fri, 03/25/2011 - 11:18 | 1099598 RobotTrader
RobotTrader's picture

General Jim must be pulling his hair out.

Another company bamboozled by nefarious Canadian investment banks.

Amazing how the OTC Derivatives have trapped this thing, still trading at the same price as when gold was at $600 four years ago!

Fri, 03/25/2011 - 11:29 | 1099654 lieutenantjohnchard
lieutenantjohnchard's picture

actually, gentleman him sinclair as you call him is awaiting a call from you (he loves good comedy) from your 600 square feet apartment overlooking a paved paradise freeway in los angeles for your sage investment advice, where you happen to be the only gold and silver investor in the continental usa that's lost money.

Fri, 03/25/2011 - 12:56 | 1100123 DoChenRollingBearing
DoChenRollingBearing's picture

General FOFOA would point out that $600 Au has become over $1400 Au.

My General does not like the miners as much as the real thing: physical gold!

Fri, 03/25/2011 - 11:28 | 1099656 TexDenim
TexDenim's picture

OK guys, I'll plan for $7500 gold. Sure.

Fri, 03/25/2011 - 12:22 | 1099938 Pez
Pez's picture

Will you take a cashier's check from BoA?

Fri, 03/25/2011 - 11:31 | 1099675 Horatio Beanblower
Horatio Beanblower's picture

For your entertainment...

 

"Now Is The Time For The Next Big Short To Emerge And It Will Be In Gold"

Read more: http://www.businessinsider.com/the-next-big-trade-2011-3#ixzz1Hcrahvzw

Fri, 03/25/2011 - 11:37 | 1099703 Joey Big Balls
Joey Big Balls's picture

Heyyyy JoooEY

Every options up today, heard we're taking a breather today

Fri, 03/25/2011 - 11:47 | 1099752 FoieGras
FoieGras's picture

Is Grice as "bright" as perma bear and broken clock Albert Edwards?

Fri, 03/25/2011 - 11:49 | 1099775 Bluntly Put
Bluntly Put's picture

The US Dollar stock is unquantifiable really due largely to so many fictional credit creations by the financial sector, so why do analysts try to come up with gold ounce/dollar equivalents?

Seems more logical to just equate labor to it's medium of exchange, after all that is what money is and evolved from. If you accept that argument then I could easily see something like a 1/10 a silver ounce equated to an average laborer's daily wage (historical norm) with the historical average of 15 oz silver = 1 oz gold.

Fri, 03/25/2011 - 12:05 | 1099859 camoes
camoes's picture

I buy gold so I can go long Phd economists stupidity and the sheeple's conformity

Fri, 03/25/2011 - 17:46 | 1101317 Fiat Money
Fiat Money's picture

" long Phd economists stupidity and the sheeple's conformity"...

   agreed.  after spending several tens-of-thousands (taking a year off from work) on a Political Science undergrad degree, I was allowed to take a few post-grad courses pending application to the program... and I wuz astounded to learn that we (grad students) were basically PROHIBITED from talking about ANYTHING  of substance or value, ANYTHING that could potentially reflect badly on the masters of the state run school system (i.e. the state government).   THEY could bitch & bad-mouth "LIBERALS" and "socialists" all day long... if you discovered or investigated one of their cozy, sleazy profits at taxpayer expense deals (with connected real estate developers, industries, lobbyists, etc.) you were a black mark on the entire school!   (See, for example, the cowardly senator john kerry STANDING THERE, PASSIVELY, as Florida cops beat and tasered a student for daring to ask him WHY HE QUIT the election recount in 2004 so easily... after PROMISING that he wouldn't give in like Gore did in 2000.) 

  Sadly, your comment is only the tip of the iceberg:  EVERY economics, finance, accounting, 'journalism,' and political science department, at EVERY university in America, is part of the WHITEWASH of the "FREE MONEY for connected, thieving, failed, fraudulent big bankers [the 'Fed' Reserve VERY PRIVATE BANKING CABAL] -  pink slips, poverty, austerity, wars, and police-state prison camps for everyone else. 

  Actually, but for a brief shining moment in the late 1960s & early 1970s, (when the USA exited the Vietnam War) it has ALWAYS been that way:  SEGREGATION and MURDEROUS "midnight visits" from the sheriff's deputy didn't end until the mid-1960s!,   and tens of thousands of good paying jobs, college educations, and entire communites were funded in the decades post- WWII  by the building & financing of the vast US nuclear weapons and conventional military arsenal during the Cold War.

  Within a dozen months of the end of the dreaded "Cold War",  the Neo-Cons & neoConfederates were conspiring to SABOTAGE the American economy, and DISMANTLE the New Deal, Great Society, union wages & benefits, access to universal education (much less health care) and other items it had taken working men & women 100 years of blood, sweat, tears, and trauma to bring about during America's  "golden era" post WWII - and that SABOTAGE now includes  EVERY  university and 'news' paper in America, NONE of whom will confront the FREE MONEY abuses of the Fed & Wall St. member/owner banksters. 

 

Fri, 03/25/2011 - 12:16 | 1099913 Dr. Gonzo
Dr. Gonzo's picture

It's not that far fetched to go back to a gold and silver standard. It's what always happens...Everytime. We'll eventually starve to death if we stay with Ben Bernanke's irredeemible dollar QE Plan. I would prefer to be able to eat food so I'm hoping they go back to a hard currency and a real economy instead of having to die of starvation like all the foriegn people he is killing off with malnutrition.

Fri, 03/25/2011 - 12:35 | 1100022 Arttrader
Arttrader's picture

If you look on eBay, you will largely find that the people making those purchases (at about 85% spot for the silver content in sterling items and about 95% spot for the gold content of 14K items) are not extremely wealthy investors holding physical.  The buyers are primarily refiners.  I've sold scrap, often to the same buyers.  The shipping addresses are VERY close to some the refiners.   They make excellent profit from the spread of selling .999 troy to PM enthusiasts who like shiny things. 

And anyone that holds scrap will either need to get the equipment and skills to refine, or take a big hit when you eventually sell to one of these guys.  You're not going to find a bargain there.  These guys know better than to buy higher than market price.  If you don't know better, you'll learn when you sell them your high premium retail scrap. 

If you think scrap gold will become an exchangeable currency and everyone will walk around with acid-test kits and electronic testers you should probably be stocking up on bullets, beans, and band-aids.

Fri, 03/25/2011 - 12:59 | 1100145 DoChenRollingBearing
DoChenRollingBearing's picture

I agree.  It is my preference to hold 1 oz US Eagles in the PM space.

If the SHTF, those who DO have the equipment and skills to test gold and gold jewelry and/or become refiners could do very well.

Fri, 03/25/2011 - 12:56 | 1100133 tiger7905
tiger7905's picture

Latest comments by Don Coxe (Mar. 25th), commodities will remain strong and still very positive for gold and silver

http://goldandsilverlinings.com/?p=361

Fri, 03/25/2011 - 13:41 | 1100311 DoctoRx
DoctoRx's picture

One flaw in Mr Grice's argument is that he implicitly disses an (alleged) real return of zero from commodities.  When prices are rising 7-10% and cash yields nothing, keeping up with the 7-10% inflation rate with commodities sounds pretty OK if not good to me.

And who knows- past need not be prologue.  Maybe it will be stocks that give a zero real return for the next century.  Lord knows they're overpriced enough. 

Fri, 03/25/2011 - 14:42 | 1100632 Jerry Maguire
Jerry Maguire's picture

He's not counting all the "dollars" that would have to be covered.  The true figure would be more like $27,000 per ounce:

http://strikelawyer.wordpress.com/2011/01/16/28th-amendment-section-3/

There are several other posts on that blog further explaining things.  But the $7500 per ounce figure is undoubtedly way too low.

 

Fri, 03/25/2011 - 14:57 | 1100714 jmc8888
jmc8888's picture

It does so, because the monetary system rewards it (through a few).  End monetarism, and mankind will not have an economic system that is predicated on such ignorance of the of the past's wisdom. (that is if we go American Credit System and not a different version of the same lame game)

When there is an economic imperative for some to induce the world to repeat mistakes, then the world will repeat it.

The scourge of monetarism, of sophistry, of imperialism, are the primary causes that keep man from being creative to solve his problems.  Why solve the problems monetarism says....when you can print money, and hold people back, create needless scarcity, etc.  Or with imperialsim, you can steal it from someone else, or create the manufactured conditions to keep them down.  Or with sophistry to distract the inhabitants of said crappy system to take up false debates, and push non-solutions.

If we don't say Fuck Monetarism, and Fuck Aristottle, then the sophistry inherent in monetarism will say Fuck the human race.

Greed has a great deal to due with humans ignoring wisdom and precedent, but not 'your' greed, but 'theirs'. Getting YOU to believe greed was good, allowed them the cover for 'them' to act on big bankster greed on a much more macro, worldwide level.  People just bought the bullshit, and when they did, no one could see the flaws that were right in front of their faces.  The flaws that actually made their lives worse, even if they 'profited' through their own small time greed. 

Haven't we learned that monetarism is inherently fraught with hubris? I wonder why. (not really)

Let's hand over more of the economic strings to the 'blind to hubris' banksters who never see 'bad times' coming. After all, that's what we've done, and the evidence shows us......well, look around. 

Glass-Steagall

American (Hamiltonian) Credit System

NAWAPA (water, power, terraforming)

Fusion/Fusion Arc (long term energy, resource creation)

Space program (science driver, machine tools)

Mag-lev (transportation efficiency)

None of these things will be done at all (or done 1/50 of the scale required) because of monetary hubris and greed for the allocation of 'money' to be levereged elsewhere the ponzi deems 'more profitable in fiat'. Who needs to find a real way to profit off more water and energy when you can create a faux reality, under manufactured conditions, where printing money without doing anything is much easier and quicker to become rich...well for 'them' of course.

The Human race won't survive (well maybe 2 people will survive, but not 7 billion and growing) unless the nations of the world latch onto their own versions of the above remedies. 

It's not inherent in US, it's inherent in how we act, based on 'a reality' of our fucked up, imperial monetary system (ideologically based on sophistry).  Is any animal inherently dangerous? What about one backed into a corner?  Because the surroundings DO matter. [and the surrounding from Aristottle to now has been the scourge and outgrowths of monetarism and sophistry...when you base things on bullshit, the result will end up as bullshit.]

Glass-Steagall

Fri, 03/25/2011 - 19:09 | 1101552 nuinut
nuinut's picture

Brilliantly put?

Not as far behind the curve as average, but quite a ways behind it nonetheless.

Fri, 03/25/2011 - 19:19 | 1101573 PulauHantu29
PulauHantu29's picture

 

 

Anyone who does not own a bucket full of GLD or the physical stuff (even better) is crazy imho.

Fri, 03/25/2011 - 23:05 | 1102092 Stuck on Zero
Stuck on Zero's picture

The Author, like so many others, insists that the Fed is using faulty logic in pursuing their course of action.  They are not.  They are thieves who are very busy looting the national treasury.  Their actions are measured, calculated, planned and executed with great precision.  The useful idiots we know analyze these actions with exquisite care, detailed analysis and great consideration.   Would you psychoanalyze the motivations and policies of your local car thief or just hang him from a tree.  The Fed banksters and their cronies in government are just hopped up thieves. Treat them as such.

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