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Eric Sprott On How Central Banks Are Setting The Stage For The Next Big Move In Gold
A brief look at the contentious gold/central bank history as it is about to rhyme all over again:
The Federal Reserve System was created in 1913 on a promise of stabilizing the banking system. What followed instead was an unprecedented growth in fractional reserve banking, as well as the money supply, which helped fuel the roaring 20’s. The aggressive money printing created inflated values in bonds and stocks, which peaked in 1929. When the market began its precipitous slide, and the public began to realize that stock and bond values were artificially high, the populace began to convert its cash holdings into gold. The government lacked the ability to satisfy that demand and was thus forced to renege on the currency’s founding promise of gold convertibility. It’s important to point out that without this original promise of convertibility for citizens, the currency may never have been adopted.
In 1933, The Gold Reserve Act was passed by Congress and formalized into law the breaking of the gold standard. This law provided for a controlled-currency issue through the Federal Reserve System which was non-redeemable in gold. Although the link to anything tangible had been broken, the citizens had little choice but to continue using these non-redeemable dollars as a medium of exchange. The currency had already been broadly accepted, proven convenient and a perception of safety had already become entrenched.
After forty years of continued dollar printing, in August, 1971, President Nixon effectively declared the US dollar to be a completely “fiat” currency by refusing to allow foreign governments to convert their US dollar holdings into gold. The right of conversion which had been granted under the post World War II, Bretton Woods agreement could not be honoured because of decades of money supply expansion. The original ‘promise’, which had vaulted US dollar to its status as a global reserve currency and a stable store of value, was now completely broken.
These historical events resulted in a world in which all currencies are fiat; they are not backed by gold or any other tangible asset. The supply is infinite. In fact, the production of today’s newly created paper money in relation to historical commodity-based money is akin to counterfeiting. A US dollar printed today has no ties to anything tangible and as a result carries only four cents of the equivalent purchasing power of a gold-backed dollar of 1913. It is ironic that in a poor choice of wording on Wikipedia, the definition of counterfeiting states that “it is usually pursued aggressively by all governments.” It is only because the evolution of money has occurred slowly over generations that the obvious flaw with fiat currency is not widely understood.
Why Gold, as a consequence of 90 years of paper debasement, will be the next big thing.
We are gold investors because we have made a specific and calculated bet against paper money. Simply put, we are betting against paper money as a store of value. We believe its supply will continue to increase. We do not believe that the world’s major governments have any stake left in protecting it. Government debt loads have grown so massive that printing them away has become obligatory - there is no longer any other feasible option left. In our view, the savers of the world should already be outraged by the dilution they have been forced to suffer at the hands of the Central Banks. Are we to infer that the limited reaction of savers to the combination of zero interest rates and debasement of currency is a result of “learned helplessness”?
In our opinion, the lack of overt inflation to date due to the "successful" implementation of globalization, aka exporting inflation to China and anyone else who needs to purchase US securities, is the sole reason why there has not been an explosion in fiat-denominated prices to date. Yet as Zero Hedge has been pointing out for several months, the global trade picture is now dramatically changed, and China will need to look inward rather than outward. This means, that sooner or later exporting inflation as a fiat policy will fail. When pundits finally comprehend this and start blaring about it every day on CNBC, that is when the rush to gold (plated) safety will finally become acute.
And since in a fiat-debased world, everyone wonders where gold will hit (which in principle is the wrong question, as monetary representation of value will very likely cease should Central Banks finally lose control over the infinite dilution mechanism), here is what Sprott believes:
We also wanted to prepare our readers and clients for the next leg of the gold bull market as it will prove to be extremely volatile. Gold bull markets are unique in that buying becomes driven by both fear and greed. Gold is quickly moving into the hands of those who are unwilling to gamble on fiat currencies or bonds as a store a value. The new owners of gold are unconcerned with its lack of yield but instead are focused on its historic ability to preserve wealth and its unquestionable value. Given the difficulty we have valuing paper money, it becomes extremely difficult to come up with a reasoned price target for gold. Today’s gold market is significantly different from the gold market of the 1970s for two reasons: 1) Central Banks are more likely to be buyers of gold today and 2) They clearly have little ability to dramatically raise interest rates with the massive increases in government issued debt. Thus, it is easy to envision a similar twenty-five fold increase in the gold price that was seen between 1970 and 1980, which would result in a gold price today above $6,000 per ounce. We expect the often quoted “1980 inflation adjusted high” of approximately $2,200 to be achieved in short order. These targets may well prove to be irrelevant, however, as the quality of our lives will be more greatly impacted by the continued evolution of our money and how the general public chooses to value it, or not.
Read the full note here.
And when you are done, here is another just released note from Sprott's John Embry, in which he expects gold to go up by 30% in the near-term.
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Seriously, do you work for JPM?
If you bought gold in ancient Rome with $1,000, you have a time machine. Can I see it?
Anyways, what do you think 10 Benjamins discovered under your mattress will be worth 2000 years from now?
Mr. Sprott's arguement would be better received if he wasn't in the business of selling little doodads made of gold.
The $1000 ounce of gold bought a gladiator suit in ancient Rome and the maker of the suit was killed because the ounce of gold didn't protect him from the spear.
Nah - he is a 20-something smartass who imagines he has lived beyond his years...
What will happen to gold when it becomes clear over time that there is no runnaway inflation, as deleveraging outpaces money printing? As Gary Shilling says, I think we live in a deflationary world where the dollar will remain king for a long time.
Oh, COME ON! That would never happen. We all know that the world is going to end tomorrow, and you'll be wiping your butt with dollars while I'm using my gold to buy cans of creamed corn and spam!
Gold to 17 million dollars by next year bitchez! I'm so glad I listened to Glenn Beck and all the gold ads, cause I'm going to be rich when the US prints 64 trillion dollars next year!
/sarcasm
you have just described what happened to the latest fiat currency to fail (zimbabwe).
Damn me for overlooking the fact that Zimbabwe and the United States are obviously completely similar!
I should have known that the world's strongest economy is going to suffer the same fate as the world's 353rd strongest economy and third world shithole!
yes, you should have known.
Sorry, I was busy waiting for pigs to fly, since that's a more probable event.
if in 1982 when i spent several months in zimbabwe (courtesy of the british council) someone said to me that the currency would collapse one day , there would be food shortages, and civil unrest, i probably would have dismissed it as nonsense. zimbabwe was becoming quite modern and progressive.and was also attracting overseas investment.
however. if an accountant showed me fiscal position of the us ,an economist showed me the fundamentals of the us, and a banker the monetary policy, and together they chorused ' its fine, we can see the us pulling out of this without any major catastrophies'. i would rip one of their legs off and beat them to death with the soggy end for taking the piss.
rofl
keep it up ...
need a bit of sanity to prevail!
If that is an apples and oranges comparison, maybe the ussr is a better example....can you say 30-1 rubles to the dollar in 1990 to 34000-1 today? That's probably not a fair comp earlier as they were the only other superpower and one that relied on confidence in their system to survive... I agree in a dollar rally short term followed by inflation or other "event"....but I couldn't let your short memory go by unchallenged...
In a long term deflation, money outperforms everything else.
Gold is money.
But Gold has retained its value only in comparison to fiat currencies. The price of Gold today is not measured in drams of sugar, horsepower, or bushels of wheat. It's measured in US dollars.
Once fiat currencies are hyperinflated to toilet paper and are worthless, then what do we measure Gold against? Probably against Goldman shares..... hehe.
The Rothschild's will let you know how much it is worth in relation to land, etc.
What a lovely golden cow you are!
Is your first name Rachel and are you on MSNBC?
inflation is already here, its just taxiing up the runway. king dollar is dead. you dont need dollars to buy oil now and correct me if im wrong but i can buy just about anything i need elsewhere cheaper than the us.
.......
That's seems to be the conventional wisdom right now (deflation), so the price of gold in dollars is hardly reflective of an inflationary worldview.
Deflation will just make it more difficult for Government to maintain their deficit expansion. And as deflation heats up the pressure on the Government increases to borrow even more to support the economy. Deflation causes more people to default on their personal debt liabilities, hurting the economy and reducing tax revenue. If you have a high amount of debt the last thing you want is a reduction in income/prices. Face it, the Government is always better off with inflation (the hidden tax).
Scenario 1: You are going to be dropped off in an unknown country anywhere in the world. You get to pick which money you will take with you in your "survival kit". You get to choose between 1 ounce of gold (assume it comes sub-1 oz denominations), or $1000 US. Which will it be?
Scenario 2: You enter into a wager that will not pay off for a year. You can choose to be paid in $1000 US or 1 oz of gold. Which will it be?
I'll bet a lot of gold haterz nevertheless answered "gold" for both of the above.
No I picked the $ US. I'll meet you back here in one year and I'll sell you an ounce of gold for $1000.
Here we go again, another debate on Gold. Where's Chumba & GG to set you all straight ffs!
Getting their asses chewed out by their wife about losing money by buying GOLD BITCHEZ?
"I thought I told you to get off the ZH and take out the trash! Now you lost 10000 bucks buying Gold?!?!"
"B.b.b.but honey! Here's a gold maple leaf that's worth 20% less than what I paid for it!"
"Shut up! I'm going to screw the mailman because you don't pay attention to me and you pissed away your inheritance!"
"Awwww... honey! Maybe Taraxias, GG, and me can get together and play hide the sausage this Saturday?"
"Only if you take out the garbage!"
I don't think so mate.
On the other hand, you waiting for that bloodbath for the bears all week may have some explaining to do where the money went.
This is a financial site, get educated before you post.
When did I say I was waiting for a bloodbath for the BEARS? I was short last week, nucka!
I said the markets would have a bloodbath, and gold would go down too.
Obviously, I was right on both counts. Maybe you didn't read my post correctly.
Not only you are ill informed, it appears you also a liar.
by Master Bates on Mon, 01/25/2010 - 19:43 #205853
Well, it's a lot like how any stock or index can't get past it's first level of resistance on the first time.
Tomorrow is going to be another bear bloodbath, which will be good for the dollar.
Oh, I can see where you would have interpreted that, but it's not what I meant!
Like I said, I was short all week.
And why would the markets going UP be good for the dollar anyway? That right there should clue you in to what I meant. I meant that there'd be a bear bloodbath, like the bears would kill the long people.
Now flag my post as junk like a homo again.
Yeah, right, you were posting about a bear bloodbath but you were short all week
Got it. Best of luck to you mate, you'll need it.
Look, you obviously don't read my posts often.
How would I think that the market going up would be good for gold, or the dollar?
And WHY do you copy and paste my posts and save them anyway?
A) you misunderstood what I meant
B) That's really lame and creepy.
I've been bearish on the markets like I've been bearish on gold. Anybody with a rudimentary understanding of TA would be.
I can link you to my facebook blog so you can see that I was really bearish if you'd like, but I'm not sure I want you knowing my real identity.
I consider myself a serious T&A afficionado, but not a master like RoboTrader.
And just so we're on the same page... what do you do, like copy and paste my posts or something? That's pretty gay. Almost as gay as flagging my posts as junk because you disagree with them.
Then again, you are the cockmaster.
BUSTED there is no way to defend that .
You are starting to annoy the crap out of most people, i am afraid. Why don't you find a nice digital playground with kids your own age... Leave the audlts alone, before they tell you to go to your room.
+100 Trillion Zimbucks
Wow that's a good fear spell. You're quite the shadow knight. I'm shivering.
Oh wait it was just a fart. One of those rattling ones that's like a death rattle but smells much sooner.
If you don't make the right choice you do not deserve to be righteous. Thus you will be punished with a nagging wife full of malman semen. And I'm totally empowered to make that happen. Because I work for the FED and I can force the mailman to start fucking your wife or I'll cut his budget and job.
I almost understood what you mean by that.
Besides, I'm not stupid enough to get married at this age!
Nor am I stupid enough to buy gold at its peak!
Stupid people don't exist. You have to make them stupid by making yourself smart. You make yourself smart by making yourself right and them wrong. Apparently you are a bit insecure with your choices as you seem to feel the need to try to fear away the gold bugs by threatening them with nagging wifes full of mailman semen and all the humiliation and despair that goes along with being "stupid" which is really just being wrong. You should really worry more about more powerful forces that are able to make you wrong.
Narrow is the path to heaven. Wide is the path to destruction. I don't know about you but I don't like something that is able to make people wrong all the time so that theres only a tiny sliver of right. Sounds like a scam to me and source of injustice.
So we're all here in school learning various ways the world and universe can fuck us over and make us wrong and it does it such a minipulative way that you just can't help but lose most of the time. You're really afraid of being wrong becuase it makes you 'stupid" this and 'stupid' that. So the best way to be 'not stupid' is to get agreement with the most people, and this teaches us all the joys of gang violence. We just need to take this out of the mental realm and into the physical realm so that the contest can be a completely different kind of stupid. I'll make some soft useless gold knives and you make some paper cuting tools and we can meet in central park and have a gang rumble. This becomes too apparent and obvious to people involved in the rumble because then you ended up killing all the people you were trying to make stupid and you can't take advantage of them by forcing them into a inferior stupid position, because all the people who had gold are now dead and all the people who had paper are alive or vice versa and theres no stupid people who were wrong who are now forced to capitulate and buy your very expensive gold or sell your gold for cheap and buy your expensive paper. So we are going to have to keep this in the mental realm otherwise it JUST WON"T FUCKING WORK and create the necessary righteousness and wrongness and the big fat profits from choosing the right gang.
So instead I'll just ask are you mac fag or a pc fag? Because thats worth killing over because both sides just watch porn and don't have children so they both cut off future profits and we need to do some killing. So sharpen up you're utra thin mac into a slashing weapon and I'll put my big fat heavy pc on the end of a stick and then we can kill each other.
Boooyaaaa!!!
You know who you remind me of? Did you ever watch wrestling in the 80's?
You know that guy, the Ultimate Warrior? Your speech reminds me of one of his.
http://www.youtube.com/watch?v=lHZzLQ1F7M0
"Speak to me WARRIOR!!!"
LOL
es you have done much damage to my self esteem. You have sucessfully diminished me and I am know a placid unresistant receptacle to your know it allness easily forced into my natural inferior postion.
Bible The reality version.
After God delivers his speach about all the things he knows and Job doesn't and who is he to question how he does things because the universe is inhabited by powerful sovereign beings. Job picks up a hammer and smashes god into a pile of goo spitting on him and ritely discerning that he is a sadistic know it all son of bitch and learning from him is going to get him hurt. Because really justifying cruelty with a vague, probably never happened promise of receiving twice as much next time after you suffer through it just doesn't make sense. Either God's a liar or he doesn't understand how this can be applied to everyone as he doesn't understand limits of systems.
The story of Adam and Eve.
http://www.youtube.com/watch?v=4-yslBFoOBk
You had to deflect that post that way because you didn't know what to do with it. A little heavy on the stream of consciousness, word salad style (how do you discern crazy and a poet?), but a whole lot of truth in there.
Meanwhile, you warn us with your name what you are up to and I think that is fair. I am not being sarcastic.
However, given your project, I'd say Hephasteus f@cked your stuff up pretty bad, given this shit is just pixels and all.
Hephasteus, winner of this round, by pixelated fiat.
You might have won in the markets last week, but some other shit is really wrong.
By the way, since you work for the Fed, you should hook me up. I either want to work there or for Goldman Sachs when I grow up.
I can't predict the future, so I don't know if gold/silver is a good investment.
However, I can play a little gedanken game, try to guess the possible outcomes, and prepare accordingly to the best of my ability.
Maybe things can and will go on the way they are, exponentials be damned, beyond my expiration date. In that case, gold would serve no purpose other than maybe some piece of mind, a bad investment, or a gift for the kids.
Maybe things will get better for the country/economy/dollar. Politicians actually reduce spending, set up a schedule to repay the debt incrementally, chart a return to manufacturing and other profitable endeavors consistent with a well-managed fiat currency. Or maybe via less desirable means, such as war, economic issues are circumvented. Again, gold never really comes into play.
To me it seems increasingly likely that we will see a 'correction' in my lifetime. Even so, it is not clear that gold would actually be of much use.
Say we go all Mad Max - total collapse and lawlessness. Having gold might be good in that you can maybe buy things that others cannot. But being the only house in town with the lights on (ala Twilight Zone) can be hazardous to your health. If word gets out that you have gold, you might as well paint a big target on your back. But, you say, no worries, I have guns. Sure, even if you keep them with you all the time, day and night, that guy with the hunting rifle that you don't see in the bush off to the left will soon have his own stash of gold. So for the Mad Max scenario, gold may help or it may not.
Maybe we go partial collapse, with the government essentially still in power. Bank holidays and money market freezes. Maybe the price of gold shoots to the moon and then to Saturn and eventually leaves the galaxy all together. I can't really see the government allowing a black market circumventing their controls and new currencies. So, you say, I have guns, they won't get mine when they outlaw possession (again). Maybe they don't have to - maybe they just have to put word out that anyone turning in someone who tries transacting in gold will qualify for a hefty reward. So there you sit, well-fed, with that shiny new generator and surrounded by the starving masses who have just been screwed out of their life savings. Good luck.
Likely the reality will be like none of the above and quite a surprise to all. Regardless, it does seem to me to be wise to own a little gold just in case - even if it is just enough to 'bribe the border guards', as they say.
"Maybe things will get better for the country/economy/dollar. Politicians actually reduce spending, set up a schedule to repay the debt incrementally, chart a return to manufacturing and other profitable endeavors consistent with a well-managed fiat currency. Or maybe via less desirable means, such as war, economic issues are circumvented. Again, gold never really comes into play."
Huh?
If you assume that a fiat currency can work and those in power actually find some restraint, the role of gold may remain essentially unchanged - an investment which is sometimes profitable and sometimes not so much.
Not saying it's likely, just trying to look at various possibilities.
OT and not. Tethys, I reread what you wrote that Silver is King reposted.
What you wrote is not new, but it brought sharply into focus just how much greed has torn apart the fabric of our country.
Tethys, I am really damn sad.
Greed Bitchex.
Know the feeling. When I go through the process of trying to hedge the future, I tend to focus on worst case scenarios. This can lead to depression, but, surprisingly, also to something else.
Seeing how close we may be to the brink first led me to the 'usual' preparations - gold, food, guns, bug-out kits dispersed around town, and a plan A, B, C for what to do when TSHTF (not bad preparation in earthquake country regardless of economic conditions - two birds with one arrow).
This had me somewhat comfortable until I started thinking about what actually may go down when the $hit jumps off. This blew out my comfort level somewhat, but also led to some 'enlightenment':
Regardless of how well you are prepared - it is quite likely that things will really suck if/when we go over the brink. Nothing you can do about it. Except - take every chance you can to enjoy what is around you now. People, nature, civilization, hot water. Hell, even toilet paper.
If you think about it, not taking your life for granted can be a tremendous gift - even if things don't go south. My sadness, though, is for those who will have to pick up the pieces.
[My sadness, though, is for those who will have to pick up the pieces.]
No. The ones who get to pick of the pieces get to set the rules for the next run. We need to teach them now what went wrong. Next time, the rules will be different.
This I imagine is what people were saying in the streets of Rome in 470AD. Did it matter, then? Maybe it did; we had a fairly good 1,500 years, since then.
Teach your children well.
cougar
Cougar - FYI from the Rise of Christianity until about 1500, Usury was prohibited (I mean usury in the actual sense - interest)
That might have been part of the reason (but don't tell the greedy American populace that! They read the same bible Jesus wrote! Err except he didn't write any of it ;) )
You wrote all that to basically say that gold is useless under all scenarios.
I can't believe I wasted my time reading the whole thing.
Gold has been, is and will be the most sought after medium for preserving wealth. Get used to it.
Or may be you think CB's are buying it to use it as ballast in their vaults for preventing their buildings from tipping over.
I guess he should have made the more intelligent argument "GOLD BITCHEZ!"
Then he could be cool like you and GG and that other guy.
For someone that has been so duly disgraced on this forum, you sure are in the habit of posting a lot.
Sorry, mate, I calls dem as I sees dem.
LOL. Disgraced? Yeah, I go to bed every night thinking what some crazy guy who copies my posts and is down on his gold portfolio thinks of me.
Especially when I've been right about gold's decline since its peak.
You should have copied my posts at gold's peak about it going down. Wait... did you? Cause it wouldn't really surprise me.
"Disgraced in the forum"
Wow, now there's something I haven't heard before. Dude, shit, now I'm going to go get drunk or something.
Don't let your mom catch you with that bottle. You know how you get when she cuts off your internet. :)
Actually, I own physical gold and silver (fortunate to have bought before the recent ramps up), and may buy more. My intent was not to say it is useless.
But in all the back-and-forth on gold, I haven't seen many people take their thinking beyond 'when TSHTF at least I will have gold/silver'. It may be useful to consider what happens next - 'ok, TS has HTF, now how am I going to use my gold to my best advantage without getting perforated in the process?'.
1. This country has a long time to go before SHTF like Zimbabwe.
2. Don't buy the dips, cause then you're just going to end up dollar cost averaging into oblivion! Buying the dips means that you have to sell at the peak, but the peak has passed and you'd just be catching a falling knife.
What was your call on gold in the year 2001? Going down then, or just a useless metal?
That was the year I started accumulating both PMs.
When you started posting you almost sounded credible. Your agenda is quite clear now. You really should go away. No one likes you. No one listens to you. Everything you say is wrong. At this point you are just wasting everybodys time.
I don't want him to go away. So don't speak for me. If you want him to go away you stop interacting or connecting with him.
Ah yes, because governments would NEVER buy anything at a high - they are notorious for buying low and selling high. Right?
Well said, Tethys. An Argentinian or Weimar style collapse seems much more likely than any other scenario at this point. Unless God smiles on us fools and the FedTreas doesn't manage to destroy the currency, in which case having some gold is hardly going to hurt.
Gold.... f*K gold... Lead, M60 and MRE...
mre's, fuck that, cup-o-noodles beef stew rice-a-roni no sense making the suffering worse
The timing is the key in any money-making investment..
As for fiat currencies, any appearance (real and/or imaginary) of financial discipline responsible for so long for viability & stability of the international fiat currencies system is crumbling very fast.
It is very difficult to predict geopolitical processes responsible for a new world order. Timing predictions are always extremely difficult. However, undoubtedly, a new international currency system is a reality in a not to faraway future with gold being one of its important component.
does anyone realize, how small the amount of silver is, that is available for physical delivery, why do you think JPM shorts 10 years worth of production, while even in this terrible economy, the demand for silver is rising. gold has a hot little sister, and she's looking better all the time
Gold isn't to spend during a SHTF scenario... it is a bridge... a preserver of wealth from one failed monetary system into the next/new monetary system that rises from the ashes.
Exactly my friend. Gold/Silver is the value bridge to a new world monetary system, which will likely be a reset of the same scam as the old system. Only the new system will supposedly be backed by gold in an effort to legitimize it and expedite it into wider acceptance...just like in the past. A gold-backed system would also enable TPTB to continue more reasonable control of gold price, which may ultimately serve to defeat the gold bridge theory. As always, timing can be tricky.
But individuals won't be building that society ... the oligarchs will be. And they are not going to share in that work with gold hoarders ... the will kill them and take their gold and build a new society that continues their power. In with the new, just like the old.
Basic power dynamics folks. Sell before you hear the soldiers coming.
cougar
Sprott was a good read....comments on exporting inflation was really well stated. Good to see.
Thought provoking article and comments.
Two brief comments...
First, in "adversity" there is "opportunity" (and we've got a bushel basket of each in this financial climate/mess).
Second, there is "strength" in "diversity". Gold and silver are part of the mix, for many of the reasons cited in article and comments...but not the only two, "tools" in the "tool-kit".
Thanks for sharing.
Thought provoking article and comments.
Two brief comments...
First, in "adversity" there is "opportunity" (and we've got a bushel basket of each in this financial climate).
Second, there is "strength" in "diversity". Gold and silver are part of the mix, for many of the reasons cited in article and comments...but not the only two, "tools" in the "tool-kit".
Thanks for sharing.
Thought provoking article and comments.
Two brief comments...
First, in "adversity" there is "opportunity" (and we've got a bushel basket of each in this financial climate).
Second, there is "strength" in "diversity". Gold and silver are part of the mix, for many of the reasons cited in article and comments...but not the only two, "tools" in the "tool-kit".
Thanks for sharing.
The world will be mainly focused on the World Cup in South africa. However, after its conclusion this summer, I expect financial mayhem. Probably going to be heavy gold purchases by the millions of tourists to south africa. Probably big demand for krugerands this summer.
on Sat, 01/30/2010 - 18:57
#212159
If you assume that a fiat currency can work and those in power actually find some restraint, the role of gold may remain essentially unchanged -
********************************
Of course that would work--it just never has--
Without a monetary anchor,we always end up--here--
jimmyjames
Without a sense of communtiy, without caring, without the common sense to know you don't kill "the host" "the golden goose" "the cash cow."
If we looked at consequences, rather than short term gain, we would not "be here."
MsCreant
************************************
Good words--
The stern disipline inforced by a hard backed currency,will reserve a spot for those important and necessary ingredients,to avoid becoming a greedy,dysfunctional society--
Put this to rest. There is a time buy gold but from 1982 until 2003, over 20 years, gold basically did nothing was worth on a yearly average less in 2003 than 1982. And we had no inflation during that period? If you really wanted to have money you should have bought a house in San Fransisco over the same period.
Today we are in a deflationary trap and amount of money printing will change the debt bubble. And, now Obama wants to freeze spending, Hoover here we come.
on Sat, 01/30/2010 - 23:22
#212306
Put this to rest. There is a time buy gold but from 1982 until 2003, over 20 years, gold basically did nothing was worth on a yearly average less in 2003 than 1982. And we had no inflation during that period?
*********************************
Not sure what your trying to say--
If its that the price of gold does poorly in inflation,compared to realestate--i agree--
Gold only works well (at least in a floating currency world) in 3 scenarios--
hyper-inflation--deflation and currency upheavel--
We have two of those on the front burner now and one on the back--
I'll hold gold for those 3 reasons--
Excellent points Jimmy. Let us not forget that central banks have been manipulating gold by leasing it for years (by their own admissions). Alan Greenspan said the Fed stands ready to lease gold in ever increasing quantities. The Fed saw what happened in the early 1980's and knows what happens when confidence is lost in currency.
Another factor is our economy was rapidly expanding from 1980-2000 (arguably the greatest 20 years of innovation in the 20th century). Confidence in the growing economy reached a peak in 2000 and instantly disappeared with the popping of the tech bubble. A vibrant, growing, innovative economy isn't that concerned with gold, there's too many growth opportunities elsewhere. A decaying economy with a falling standard of living and deficits as far as the eye can see is a pretty strong argument for gold as other options for capital appreciation in the economy shrink. Throw 0% interest rates into the mix that punishes savers, and gold gets even better.
Most of us buying and holding metals are not doing it to make 10% in a week or two. I hold it because it is an INSURANCE PREMIUM.You trust the clowns running the printing presses and steering the ship, its like dumb and dumber on steroids. The only thing that would maybe make me stop buying gold is Volker coming back and raising interest rates to 20% overnight. Unfortunately they can't do it because the unemployement rate would go to 30% and we would still be screwed.I used to think only our dollar would be pounded but now I believe that all world currencies are and will be worthless.You can't believe the chinese, euro is toast, Cad is doomed w/o the US economy, so basically we default to metals.
Most of us buying and holding metals are not doing it to make 10% in a week or two. I hold it because it is an INSURANCE PREMIUM.You trust the clowns running the printing presses and steering the ship, its like dumb and dumber on steroids. The only thing that would maybe make me stop buying gold is Volker coming back and raising interest rates to 20% overnight. Unfortunately they can't do it because the unemployement rate would go to 30% and we would still be screwed.I used to think only our dollar would be pounded but now I believe that all world currencies are and will be worthless.You can't believe the chinese, euro is toast, Cad is doomed w/o the US economy, so basically we default to metals.
Life is nothing but a game of rock paper sissors. When TSHTF, lead (shaped as bullets) will be worth more than gold.
I agree with Sprott except I think he should have clarified that he expects gold covered tungsten bars to go to 6000/oz.
Solid gold is going to cost a lot more.
-MobBarley
Precious metals are not for trading, they are a savings medium. As I don't have the where-with-all or balls to place my savings at risk in some futures or options play, I'll stick to gold and silver as my numeraire against all other asset classes. My lack of sophistication limits my options, so I'll just trade them for fiat when needed. At the least, they seem to be outperforming sea shells at this point in history.
Here in Asia gold and silver have always been used both as money and a store of wealth, very easy to trade at myriad retailers.
Cannot see that changing; quite the opposite in fact
Thank you for that insight from your location in the world. Was in China for a few weeks in 2009 and it was obvious how god and silver do indeed play a far higher important roll than in the USA. Many Chinese banks, mall jewelry stores, etc has gold bullion for sale and it was very much highlighted on display in their front windows. This was in MANY places all over the cities.
By contrast, in America you virtually never see gold bullion in mainstream stores or banks. Not in malls, not in store windows, not at banks. Very different than in Asia, as in America gold/silver bullion is very hidden on purpose. The USA citizens have been 'programmed' out of bullion and into being consumer goods (cloths, electronics, etc) and of course the 'almighty' dollar.
More Americans need to wake up and realize that gold and silver are money and very easy to exchange for localized 'paper' money or goods/services virtually anywhere in the world.
for a hunk a junk we look at, whenever any topic on gold is posted on zero hedge we sure do get a lot of posts.
for a hunk a junk we just look at, for some reason any gold topic always has a lot of posts.
Nothing is a bubble until it becomes one.i haven't seen any housewives buying gold so far.
Ha! You haven't seen my wife. To tell the truth, however, all those purchases were in the form of jewelly---nothing less than 18K for her. I have alot of 22K and 24K from Saudi Arabia and bought online from Thaigems.com, back when they were a decent outfit.
went into a gold dealer in my local town on saturday. asked him what he was paying for 99.9, 1 oz coins. he said £550, i said spot price is close to £675. he then said , "who are you, a dealer".
i laughed and left. gold is nowhere near a bubble if your considered a dealer if you know the spot price.
thats in the uk, isle of wight. by the way.
Pardon me, but is not the Country of Rothschild, err...I mean the United Kingdom notorious for miseducating their citizenry as to the value of PM's precisely to avoid inducing a real interest in the Gold trade in the populance?
Isn't the public display of gold jewelry abhorred as a very real offense to our cultured Anglo-Saxon sense of style and social grace?
I mean, ostentatious display is the province of nouvou riche (contorted face of arrogantly contemptuous disgust with more than a hint of comedic mockery)
Just leave the gold to the Amschel family and their City of London (not a part of the united kingdom, btw) all will be well.
-MobBarley
thanks for the advice, but on balance i think i will buy some more of the vulgar shiny stuff. its true though , nonone seems to know much about pm's over here.
With the Fed and present day banking system and all the corruption in the government, I personally don't think you could implement any system whether logical or not that would last very long before they would twist it to their advantage. In these circles everybody is serving the same master.
Threads on gold (physical) are always interesting because the comments separate the "traders" from the "investors".
Traders look for ways to make more paper. Investors look for ways to preserve worth when the paper is worthless. Anybody concerned only with short term market movements shouldn't bother with gold. Those looking to preserve their wealth long term (after ensuring survival needs are met in a dollar collapse) should look closely at gold and silver.
Remember, If You Don't Hold It, You Don't Own It! Only physical bullion in your possession is worthy of purchase.
prepare yourself
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