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Guest Post: A Comeback For Gold-Backed Money?

Tyler Durden's picture




 

Submitted by Andrey Dashkov of Casey Research

A Comeback for Gold-Backed Money?

Several legislative initiatives caught our attention recently. All of
them are related to the monetary role of gold and range from proposals
to return to the gold standard, to minting gold and silver as an alternative currency, to having all state transactions carried out in gold and silver coins, to permitting citizens to run their own mints.

Do
these proposals signal a significant attitude change among politicians
and mainstream economic institutions toward gold? No. They are largely
regarded as fringe ideas and dismissed out of hand. The third link above
is written in a condescending tone that implies everyone knows that the
gold standard is bad for an economy and it caused the Great Depression.
Still, it’s quite telling that opinions that gold can be incorporated
into a modern economy are becoming numerous, and actually making it onto
the legislative agenda in various jurisdictions.

Last November,
clearing house ICE Europe began accepting gold bullion as initial margin
for crude oil and natural gas futures. This year, JPMorgan Chase
announced that it would accept physical gold as collateral for a number of transactions. According to the Wall Street Journal,
stock exchanges in New York, Chicago and Europe recently agreed to
accept gold as collateral for certain trades, too. The World Gold
Council is gaining traction in its push to have the Basel Committee on
Banking Supervision accept the precious metals as a Tier-1 asset for
banks, along with government bonds and currencies. Private and public
institutions alike are clearly rethinking their attitude toward gold.

Perhaps most telling of all, the world’s central banks were net buyers of gold in 2010and
in 2009, after being net sellers for the previous 20 years. As World
Bank President Robert Zoellick said last November, gold has become the
"yellow elephant in the room" that needs to be acknowledged by
policymakers of major economies.

No one can predict exactly how this will all shake out, but Doug Casey has long said that a return to a gold standard,
or some modern equivalent, is almost inevitable. That’s because, for
the reasons Aristotle outlined 2,000 years ago (it’s durable, divisible,
consistent, convenient, and has intrinsic value), gold is hands-down
the world’s best money.

Now, Gresham’s Law tells
us that bad money drives out good, but that’s only true when legal
tender laws hold sway (incentivizing people to hoard what’s perceived to
be “good” money and spend the “bad” money as fast as they can). When
people give up on the local legal tender, Gresham’s Law goes into
reverse, and good money chases out bad. The dollarization of third-world
economies is an example of this, the dollar being perceived as being
good when compared to many shakier currencies.

So, what happens if
fiat currencies as a class start to be perceived as bad money? Gresham,
and history, tells us that they’ll eventually be abandoned, unless made
good (put back on some acceptable standard of value, like gold).

The
key point here is that it can’t happen just a little bit, just as you
can’t get a little bit pregnant. Once it starts, the good money will
drive out the bad, and in today’s wired global economy, the phenomenon
will be worldwide, fast and devastatingly thorough.

The investment implications, broadly, are obvious; you want to own gold for safety and speculate on gold stocks for profit. The details on how best to do this are the current raison d’être of our metals publications.

 

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Sun, 03/13/2011 - 15:23 | 1046961 snakebrain
snakebrain's picture

A local antique dealer in Ireland told me yesterday that a few of his accounts lately have been settled in scrap gold, something he could never have done before...

Sun, 03/13/2011 - 15:55 | 1047020 CH1
CH1's picture

I continue to believe that digital gold (and silver, and...) currencies could be a significant part of the answer.

www.dgcmagazine.com

Sun, 03/13/2011 - 15:27 | 1046966 DoChenRollingBearing
DoChenRollingBearing's picture

I do not think that a gold standard is workable or likely.

I do think that gold will become much more visible and talked about in the entire investment community.  And soon.

I'm with FOFOA on gold.  Just let it go, be untied to currencies.  Let it be what it used to be:

The best wealth preserver in town.

fofoa.blogspot.com

Sun, 03/13/2011 - 16:27 | 1047073 zaknick
zaknick's picture

Another is complemented by professor Fekete

2011-02-10

Position Paper professorfekete #5, February 10, 2011, Silver And Opium

2011-02-07

Position Paper professorfekete #4, February 7, 2011, Chinese Puzzle

2011-01-31

Position Paper professorfekete #3, Jan. 31, 2011, Bring Back, Bring Back, Bring Back My Gold Bond to Me!

2011-01-17

Position Paper professorfekete #2, January 17, 2011,
Stupid Wager or Clever Prestidigitation?

2011-01-11

Position Paper professorfekete #1, January 11, 2011,
Gold and Honey*

2011-01-09

Sound Navigation Requires Sound Measurement

2010-11-01

Position Paper professorfekete #10, November 1, 2010
More Real Bill Fallacies

2010-10-29

Position Paper professorfekete #9, October 29, 2010
Real Bills and Gold

2010-10-27

Position Paper professorfekete #8, October 27,2010
Is There Life After Sudden Death?*

2010-10-06

The Deep Cause of the Great Financial Crisis:
The Peace Diktat of Versailles

2010-09-27

Position Paper professorfekete #7, Sept. 27, 2010
The Donkey In The China Shop

2010-09-24

Remobilize Gold to Save the World Economy!

2010-09-09

position paper professorfekete #6, Sept. 9, 2010.
Where Krugman Went Wrong

2010-07-26

position paper of professorfekete #5, July 26, 2010
Gold Basis Screwed

2010-07-25

position papers of professosrfekete #4, July 25, 2010.
Real Bills Revisited

2010-07-05

position papers of professorfekete #3, July 4, 2010.
Floating Exchange Rates: Scheme to Embezzle the
Dollar Balances of Surplus Countries

2010-06-27

position papers by professorfekete #2, June 27, 2010.
Krugman's Opium War On China

2010-06-22

Architecture for a New World Financial System

2010-06-06

What you always wanted to know about Gold*

2010-05-12

The New Austrian School of Economics

2010-05-05

position papers of professorfekete #1, May 5, 2010.
HYPERINFLATION OR HYPERDEFLATION?

2010-02-19

Hedging Non-Gold Investments with Gold

2010-02-09

Front-Running the Fed in the Treasury Market

2010-01-18

There Is No Business Like Bond Business

2009-10-28

Forgotten Anniversary

2009-10-17

The Gold Basis Is Dead -- Long Live The Gold Basis!

2009-09-30

The Supply of Oxen at the IMF

2009-09-09

Has Barrick Been Barricked by the U.S.?

2009-08-28

“Gold Is Pale Because It Has So Many Thieves Plotting Against It”

2009-08-25

More Dress Rehearsal For The Last Contango

2009-08-24

Dress Rehearsal For The Last Contango

2009-07-19

The Federal Reserve As An Engine of Deflation (sic!)

2009-07-10

Remobilize Gold To Save The World Economy!

2009-06-29

The Revisionist Theory and History of Depressions

2009-06-24

Is Aggregate Debt Excessive?
The Obama administration is looking at the wrong ratio

2009-06-23

The Vanishing Of The Gold Basis
and its implications for the international monetary system

2009-06-10

Fiat Money In Death Throes

2009-05-06

Interview In Daily Bell

2009-04-27

Falsifying Bank Balance Sheets

2009-04-17

The Significance of the Gold Standard

2009-04-11

A Critique of the Quantity Theory of Money

2009-03-30

The Marginal Productivity of Debt

2009-03-22

The Gold Standard Institute

2009-03-21

There Is More Where This Gift Has Come From

2009-03-08

That Accursed Propensity to Save

2009-03-04

Iron Law of the Burden of Debt

2009-02-12

Growth And Debt: Is There A Trade-off?

2009-02-02

How To Stop The Depression

2009-01-11

Open The Mint To Gold!

2008-12-31

An Unhappy New Year

2008-12-21

Forward Thinking On Backwardation

2008-12-18

Backward Thinking On Backwardation

2008-12-14

Backwardation That Shook The World

2008-12-10

There Is No Fever Like Gold Fever

2008-12-08

Has The Curtain Fallen On The Last Contango In Washington?

2008-12-05

San Francisco School of Economics, June– Aug 2009
MONEY AND BANKING

2008-12-05

RED ALERT: GOLD BACKWARDATION!!!

2008-11-27

"Thou Shalt Not Crucify Labor On This Cross Of Paper Money"

2008-11-04

Revisionsist Theory of Depressions

Can It Happen Again?

2008-11-03

Monetary Reform: Gold and Bills of Exchange

2008-10-16

Committee for Monetary Research and Education (CMRE)

THE MECHANISM OF CAPITAL DESTRUCTION

2008-10-10

Troubled Ass Relief Program (TARP)

2008-10-03

The Gold Standard Strikes Back. . .
. . .With A 36-Year Lag Part 2

2008-09-25

The Gold Standard Strikes Back. . .
. . .With A 36-Year Lag Part 1

2008-09-16

Has Hedging Killed The Goose That Was To Lay The Golden Egg?

2008-09-09

Has Hedging Killed The Goose That Was To Lay The Golden Egg?

2008-08-30

Cut Off Your Tail To Save My Face

2008-07-02

Farewell Address

2008-06-11

Putting Loin-Cloth On The Naked Bogeyman

2008-06-04

It's Not a Dollar Crisis: It's a Gold Crisis

2008-04-28

GOTTERDÄMMERUNG

2008-04-01

Gold In Hoards versus Gold On The Go

2008-03-28

Forgotten Anniversary Haunts The Nation

2008-03-01

Paper Tiger Preying On Gold Bugs

2008-02-29

The Anti-Gold Gospel According to Frieden

2008-02-25

The Anti-Gold Gospel According To Smith

2008-02-05

Opening The Mint To Gold And Silver

2008-01-31

The Double Whammy of Geopolitical Global Gold Games

2008-01-28

The Crash Of The Bank Of United States

2008-01-26

The Anti-Gold Gospel According To Kaletsky

2008-01-17

Gold: How High Is High?

2007-12-16

Fiat Currency: Destroyer of Labor

2007-12-05

Fiat Currency: Destroyer of Capital

2007-11-24

Our Diseased Monetary Bloodstream

2007-11-01

The Shadow Pyramid

2007-11-01

The Saga Of The Naked Boogieman

2007-10-04

Peak Gold! Part Five

2007-09-23

Exploding the Myth of Silver Shortage

2007-09-23

Can We Have Inflation And Deflation?

2007-09-20

Peak Gold! Part Four

2007-09-19

Peak Gold! Part Three

2007-08-31

Peak Gold! Part Two

2007-07-26

Keeping Our Eyes Peeled for the Silver and Gold Basis

2007-07-12

Have Gold Bugs Been Barricked by the US?

2007-06-15

Peak Gold! Part One

2007-05-31

Gold Vanishing Into Private Hoards

2007-05-30

The Golden Thorn In The Flesh Part Two

2007-05-18

The Decoy of the Falling Dollar Revisited

2007-03-31

The Golden Thorn In The Flesh Part One

2007-03-07

Gold, Interest, Basis

2007-01-15

The Root Cause Of Unemployment Part Two

2007-01-11

The Root Cause Of Unemployment Part One

2007-01-05

Forbidden Research

2006-12-14

Can The Second Coming of Paul Volcker Save The Dollar?

2006-12-03

Where Friedman Went Wrong

2006-10-07

When Atlas Shrugged Part Two

2006-08-24

When Atlas Shrugged Part One

2006-08-11

To Barrick Or To Be Barricked That Is The Question

2006-08-07

Real Bills: "Waggon-Way in the Air"

2006-07-26

Federal Reserve Follies: What Really Started the Great Depression

2006-06-30

The Last Contango In Washington

2006-06-25

Monetary Versus Non-Monetary Commodities

2006-06-23

The Rise And Fall Of The Gold Basis

2006-05-11

Ultracrepidarian Musings

2006-05-04

Bull In Bear's Skin?

2006-01-09

The Gold Standard Manifesto

2006-01-09

Gold Standard Manifesto

2005-12-02

Silver Charade, Gold Charade

2005-11-21

The Fall And Rise Of The Gold Standard

2005-11-15

The Myth Of The New American Gold Standard

2005-10-09

Economic Entropy

2005-09-30

Unemployment: Human Sacrifice On The Altar Of Mammon

2005-09-26

A Revisionist Theory and History of Money: Real Bills and Employment

2005-09-22

A Revisionist Theory And History of Money

2005-09-16

When Mises Went Wrong

2005-07-28

The Year Of The Euro

2005-07-12

Detractors Of Adam Smith's Real Bills Doctrine

2005-05-01

The Goldbug, Variations V

2005-04-20

The Goldbug, Variations IV

2005-04-01

The Goldbugs, Variations III

2005-03-28

The Goldbugs, Variations II

2005-03-25

The Goldbugs, Variations I

2005-03-21

Burning Birdges and Halfway House

2005-03-13

Is Linkage Broken? No, Symmetry of Speculation Is

2005-03-07

Tsunami In The Bond Market

2005-03-01

Greenspan Has Taken The Horse To Water: But Can He Make It Drink?

2005-02-27

The Decoy of the Falling Dollar

2005-02-14

Two Views On The Self-Immolation Of Paper Money

2005-01-24

Causes and Consequences Of Kondratiev's Long Wave Cycle

2005-01-20

The Supply Of Oxen At The Federal Reserve

2004-05-04

What Gold And Silver Analysts Overlook

2004-04-02

Contrarian Roundtable On The Fed

2003-12-15

Contrarian Roundtable On Inflation

2003-12-15

Contrarian Roundtable on Central Bankers And gold

2003-09-25

The Gold-Demonetization Hoax: Gary North Is Wrong On Gold

2003-09-22

Gold Is The Cure For The Job Drain

2003-08-23

How To Protect One's Pension With Gold

2003-06-27

The Bubble That Broke The World

2003-06-25

Stop Greenspan From Plunging America Into A Depression

2003-06-10

Tainted Research: Lysenkoism - American Style

2002-05-02

The Texas Hedges Of Barrick

2002-03-13

Revisionist View Of The Great Depression Part Two

2002-03-06

Revisionist View Of the Great Depression Part One

1996-10-02

Whither Gold?

Sun, 03/13/2011 - 16:52 | 1047130 Debtman And Robbin
Debtman And Robbin's picture

I would suggest you edit your post.

http://www.professorfekete.com/articles.asp would do it.

Sun, 03/13/2011 - 20:24 | 1047678 Yen Cross
Yen Cross's picture

Times 17. Junk!

Sun, 03/13/2011 - 16:40 | 1047108 Debtman And Robbin
Debtman And Robbin's picture

You are right. It would not be workable.

A rigid gold standard would probably destroy the world.

FOFOA and Fekete know this, although they have quite a different approach.

BTW, since you understand the Euro as explained by FOFOA, you might like Fekete's theory about digital hyperinflation and (physical) paper deflation. A Federal Reserve Note belongs to the Fed - forever. You are only allowed to use it. A Euro Bill is yours as soon as you hold it in your hand. Therefore this can't happen to the Dollar in the same manner. It would not make sense.

http://2.bp.blogspot.com/_cvdgPlEKW9k/TSZ-Ie085cI/AAAAAAAABmA/ZqKxn6-KtY...

Assets:Gold

Liabilities: Banknotes

So what is backed by what? ;-)

And what does that tell us about all the Euro bashers?

 

 

Sun, 03/13/2011 - 20:30 | 1047690 Yen Cross
Yen Cross's picture

I apologize for interrupting your thread, Debtman And Robbin. That is RICH. creative for sure!

Sun, 03/13/2011 - 20:32 | 1047709 hamurobby
hamurobby's picture

everyone knows that the gold standard is bad for an economy and it caused the Great Depression.

 

The reason it will not work, just as back then, is because the fed res cannot infinitely expand credit until an economy crashes and burns. Sound money cannot exist with a national bank.

Sun, 03/13/2011 - 15:31 | 1046972 ivars
ivars's picture

For silver, afer peaking at 45 USD in April 2011, quite reasonable prices between 25-32 in 2011-April 2012. After that, silver starts to go up. Either supply problem, or Obamas USD devaluation plan in action ( or threat of devaluation plan), or both supply and USD devaluation threat. Looking at stock market prediction I do not think devaluation will be real, but attempts to devaluate the USD to do something as second recession will hit in Q1 2012 may lead to silver price spike . Or, rumours the FED is going to be totally changed/liquidated under the government which will win 2012 elections. That would lead to scooping of silver and gold. That explains a spike during election time. And afterwards high level as e.g. gold standard is reintroduced at different higher level .

http://saposjoint.net/Forum/download/file.php?id=2673

If I very approximately apply the same thinking to gold, it will peak at the same time, April 2011, at around 1600-1700 USD, and , if there is a talk about gold standard in 2013, the level to set it will be around 3000-3500 USD/ounce. But most likely that is not going to work, as there will be substabtive resistance no only from USA and Europe bankers, but all holders of USD and treasuries.

Sun, 03/13/2011 - 16:17 | 1047065 fredquimby
fredquimby's picture

there will be substabtive resistance no only from USA and Europe bankers,

But the Euro LOVES gold! ECB gold reserves were valued on 31st October 2010 140 BILLION Euros more than previous MtoM.... and the Dec 31st MtoM increased them by another 33 BILLION Euros....

 

Sun, 03/13/2011 - 18:42 | 1047472 Non Passaran
Non Passaran's picture

1) And how much have their debts increased in the same period? Probably by several times that much.

2) If they love gold, how come individuals have to pay all kinds of crappy taxes to buy this - supposedly "free" - gold?  I call BS on that one.  It's "fakegold" - countries may want to use gold to ensure their own survival, but citizens aren't allowed to do the same for themselves (unless they want to give up 20% or more in form of BS taxes).

Let's see if the EU will allow (and encourage!) private ownership of gold without idiotic taxes. Until then, I say that theory (freegold) is worthless.

Sun, 03/13/2011 - 15:30 | 1046973 jimijon
jimijon's picture

Hey I minted my first silver coin and am waiting for just one ZH'r to step up and sponsor an official ZH coin. I can do copper, silver or gold.

Write me if interested

http://www.mundogold.com

cheers

Sun, 03/13/2011 - 16:56 | 1047136 watchingdogma
watchingdogma's picture

Your web site makes it difficult to see your work.  With everyone's time in so much demand, a poorly designed web site is a significant barrier to attracting clients.

Sun, 03/13/2011 - 16:57 | 1047138 dark pools of soros
dark pools of soros's picture

is this you and your gold?

http://www.youtube.com/watch?v=ee1699JUf70

 

Sun, 03/13/2011 - 17:10 | 1047161 mt paul
mt paul's picture

clicked twice

still could not

find price..

Sun, 03/13/2011 - 22:20 | 1048195 Unbeliever
Unbeliever's picture

- Why do you have "Fifty" on the coin?

- Why do you have no good high-res pics of the coins?

Sun, 03/13/2011 - 15:32 | 1046975 tellsometruth
tellsometruth's picture

we shall see...there is more than enough evidence a momentum is building, and at least to warrant a true discussion on the topic which I welcome.

Sun, 03/13/2011 - 15:33 | 1046976 Scottj88
Scottj88's picture

There will be gold, but there will be other things as well.  Silver seems likely (if not certain) to be a monetary metal, but holds resistance for its demand in the technological world.  Investing in silver is the best investment in technology you can make... think chinese solar panals....

The banking cartel will not allow this... they have been up to this ponzi scheme for so long, and gold is their arch nemesis.  They own the physical, but sell the paper... what a fucking joke. 

For those interested in learning the most in depth history of the western banking families, I offer you this documentary that even the most light-deprived internet wanders trouble to find.  The author did a fantastic job.

http://thehardrightedge.com/uroko/

Sun, 03/13/2011 - 18:46 | 1047487 Non Passaran
Non Passaran's picture

1) I don't want to click on your link because it sounds like it could be some conspiracy claptrap.

2) You can't spell, which doesn't help your credibility.

 

Sun, 03/13/2011 - 21:14 | 1047952 Scottj88
Scottj88's picture

Luckily it is not my work, I am just sharing it.

Suit yourself.

Sun, 03/13/2011 - 15:50 | 1046980 Zero Govt
Zero Govt's picture

I don't believe paper money has to be 'backed' by Gold or Silver from my research, the only thing we do need is a competitive 'free' market in money. That provides for competition to improve each money system, provides competition to keep each money system honest and provides competition so that if one money system fails (as some will) we as consumers have competitors (ie. options/power) to fall back on in that event.

Only a free competitive market in anything provides the best for business and consumers all round. Monopolies of anything always provide ALL the problems and the biggest systemic failures.

So we need a competitive free market in money. If competing systems include Gold or Silver backed money that's absolutely fine. Let them compete.

But what we must not do is go back to one monopoly money system. We MUST have competition and a free competitive market in money with zero State involvement (ie. no licensing or regulation etc)  

Sun, 03/13/2011 - 15:58 | 1047026 CH1
CH1's picture

Yes: FREE MARKET MONEY, where each provider must convince you that his currency is good, or you choose another.

Sun, 03/13/2011 - 16:03 | 1047033 Eternal Student
Eternal Student's picture

So, can you give one single instance where a "free" market, devoid of State interference, didn't lead to monopolies? I'd really be interested in hearing your best shot here, because from what I've seen, they've always lead to monopolies.

Sun, 03/13/2011 - 16:31 | 1047089 CH1
CH1's picture

Umm... the free market, devoid of state interference, has pretty much NEVER led to monopolies.

In the absence of state force, monopolies form only in isolated places where there is no available competition. (Some people are simply pigs. Ah well.) That has ZERO to do with a free market... distance just excludes market players there. Bad luck.

The evidence to the contrary is minimal (near zero) and consists of fiscal Ghost Stories. "The Big, Bad Rich Monster set up a store, and...."

A monopoly does not stand in the face of competition. The entrepreneurs pick it apart. Only state force preserves a monopoly.

I've waited for years to find actual evidence of free market monopolies, and I'm still waiting.

Sun, 03/13/2011 - 16:41 | 1047111 Eternal Student
Eternal Student's picture

Ok, so what are your best examples? They are clearly lacking, and all you're posting is conjecture at this point.

Sun, 03/13/2011 - 20:19 | 1047657 BigJim
BigJim's picture

No, your thesis that free markets lead to monopolies is unsupported conjecture.

Please give us some examples of monopolies that were not the result of government intervention.

Sun, 03/13/2011 - 21:27 | 1047989 Eternal Student
Eternal Student's picture

Take your pick of any of the monopolies broken up by the US government of around 100 years ago.  Or even IBM 30 years ago, though the economic climate of a century ago was far less restrictive than of the latter 20th century.

Mon, 03/14/2011 - 05:31 | 1049452 CH1
CH1's picture

IBM was a monopoly? Sorry, I was there 30 years ago and did business with quite a few other computer and biz machine companies. FAIL.

Next?

Mon, 03/14/2011 - 11:22 | 1050134 Eternal Student
Eternal Student's picture

Ok. Now you've established for certain that you have absolutely no idea whatsoever of what you're talking about. For someone who claims to have been there 30 years ago, you should very well know that IBM had legal action against them by the US government for being a monopoly. And that they were operating under a Consent Decree for decades. The suit was brought up in the 1950's, for Pete's sake. And it was still an issue about 5 years ago, when IBM used their monopoly status against the only real competition they had left in Mainframes, against a small company named PSI.

The Consent Decree was certainly a part of PSI's legal defense at the time.

Which, of course, is a superb example of how companies who succeed at becoming a monopoly in a "free market", abuse their position to squash competition.

Thank you for helping to prove my point.

 

Sun, 03/13/2011 - 16:33 | 1047092 Zero Govt
Zero Govt's picture

Eternal Student

yes food is still largely free competitive market but the biggest free markets are black market (knock-off clothes, grass, cocaine etc). 40% of Italian GDP is black market.

Any true free market will develop some dominant players for a brief period in time but smaller competitiors always out-think or out-flank these larger 'established' players and get taken apart (see how forests evolve).

Your 'fix' of monopolists if you analyse it are actually monopolists who stay propped up by the State protection racket using legislation to pervert the free market, mainly add costs to stop small business naturally competing and taking out the dinosaurs.

As example the car market where small competitiors cannot enter without being forced to add  dozens of safety devices (airbags, crumple zones etc) and enviro garbage (catalystic convertors etc) which all prevent innovation and add costs (barriers to entry). 

I read a statistic the other day 1 in 3 businesses now need a Govt license to operate (exist) from 1 in 30 a few decades ago.

All the worst examples of monopolies you can imagine I guarantee are monopolies propped up by the State 

Sun, 03/13/2011 - 16:36 | 1047099 Zero Govt
Zero Govt's picture

CH1  -  spot on

Sun, 03/13/2011 - 16:39 | 1047106 CH1
CH1's picture

ZG: Thx. :)

Have a link on "how forests evolve"?

Sun, 03/13/2011 - 16:57 | 1047127 Eternal Student
Eternal Student's picture

Sorry, I have to disagree about food still largely being a free market. Agribusiness is anything but, and has been extremely effective at forcing out the small producer. The question of State interference is probably valid, but that wasn't your statement here.

As far as the Black Market goes, using one of your own examples of cocaine distribution, the history and growth of the Drug Lords is a superb example to the contrary of your thesis. Unregulated, they attempt to eliminate their competition completely in the most ruthless manner possible.

So I'd say the evidence is clearly lacking still.

Sun, 03/13/2011 - 17:07 | 1047156 Zero Govt
Zero Govt's picture

Eternal

yes agree many aspects of the Agri biz have some giants, in farming and the supply industry such as fertilisers that have driven out smaller farmers. But there are still many smaller operators, mainly specialists such as wine growers and suppliers through to farmers markets outside of the carve-up that is the major food retailers.

Regards 'Drugs Lords' there's too much international competition and product competition too. As a consumer you'd have seen a constant churn in this free market of players and products with nobody being able to dominate the industry as in the legal, and more dangerous to your health, drugs industry where major players like Pfizer etc have huge protection rackets known as Health Depts and Drug Approval Regulators. The contrast between legla drugs and illegal is clear evidence and in how they perform too.

Nobody is more ruthless at defending their turf than these legal dinosaurs who use the State apparatus to destroy competition. Please note Al Capone hurt nobody, he just ran moonshine to happy consumers. No drug gangs shoot consumers, they may shoot the occasional competitor in a turf war but not their customers unlike legal drugs businesses that force their dangerous drugs down consumers throats year after year. 

 

Sun, 03/13/2011 - 17:20 | 1047183 Zero Govt
Zero Govt's picture

CH1  -  just pop down to your local forest and see how big (established) trees dominate for a while but eventually die and are replaced by younger competitors. Capitalism is the same life cycle as anything in nature of birth, teen, establish, mature and die. Markets have the exact same 'churn' of players...  why would capitalism be any different to nature, it is afterall a human system and we are first and foremost, animals

Sun, 03/13/2011 - 18:40 | 1047468 Eternal Student
Eternal Student's picture

My local forest consists of Redwoods. These are the biggest trees around, and the trees alone last for hundreds of years. The forests last for thousands.

 

Mon, 03/14/2011 - 05:42 | 1049455 CH1
CH1's picture

Dude, you have a doctrine that you're fighting to uphold. You're not going to find the truth (of whatever) that way.

If you are interested, a good deal of the truth can be found here:

http://www.amazon.com/Myth-Robber-Barons-Business-America/dp/0963020315/...

Mon, 03/14/2011 - 09:01 | 1049784 Zero Govt
Zero Govt's picture

Fulsom did a very good job re-writing the history of the myth of the 'Robber' Barons by differentiating between real US industrialists who built the wealth of America and the fake moguls who were propped up by the US Govt to their wealth.

This is the recurring history of capitalism in a nutshell. The difference between wealth creators who deliver innovation and productivity and wealth consumers (parasites) who consume this wealth via the No.1 parasite system in history, and biggest wealth destroyer, Government. Competition versus monopolist  

Mon, 03/14/2011 - 11:25 | 1050158 Eternal Student
Eternal Student's picture

You miss the point. Namely, even using the silly example that you have, ecosystems do indeed evolve large giants which shut out competition. It's a little hard to grow, when your big competitor is shutting out the sunlight. And they last for an extremely long period of time, without outside intervention. Such as is done by the State.

 

Mon, 03/14/2011 - 09:09 | 1049813 Zero Govt
Zero Govt's picture

Every plant (and animal) in the forest has a different life cycle. Some like the Redwood lives 100's of years. Others live a few years. The same 'churn rate' is present in markets. Take music, you get 1 hit wonders and you get bands like The Rolling Stones that stretch for decades. Forests do indeed last thousands of years, music will too probably whereas VHS videos lasted barely 20 years before a new technology usurped its place.

Point being life cycles in capitalism work according to natural (Darwins) laws of evolution. And the parasites (big monopoly corporates) in society know this and try to cheat their demise and cheat the free market by monopolising their industry using the greatest monopoly weapon, Government.

Government is the root of 90% of all evil in our markets. It is the ratchet monopolists use using societies wealth via taxation to keep their monopolies going and 'cheat' death by abusing the State apparatus (law, legislation, regulation, subsidies, bailouts etc etc)  

Sun, 03/13/2011 - 18:37 | 1047462 Eternal Student
Eternal Student's picture

The Ag business is more than what you're portraying. The big outfits are getting bigger, and the small outfits either sign up or go out of business. Wheat, poultry and milk are excellent examples. Together, big Ag is a superb example of Monopoly Capitalism at its worst, contrary to your thesis.  Where there are exceptions, I'd say it's because they haven't been as targeted.  Yet. However, I still see the same principles starting to apply. That includes the wine industry. Sure, there are specialists. But those cater to a limited market.  The exception if you will. Not the norm. The fact remains that it's hard or impossible to compete against economies of scale.

As far as the Drug Lords' go, I'm sorry, but you just have absolutely no idea of what you are talking about. To suggest that Al Capone "hurt nobody" is absolutely outrageous and insulting to the victims of his violence.  The bloody gang warfare of Chicago is well documented. I suggest you start by looking up the St. Valentine's day massacre, before leaping to outrageous and insulting conclusions.

Sun, 03/13/2011 - 20:29 | 1047699 BigJim
BigJim's picture

I think you're both missing the point about the illegal drug business.

The profits that drive the criminality derive entirely from the governments' prohibition laws. If these were removed, the prices would drop to a fraction of their current levels. We wouldn't see drug dealers shooting each other in turf wars for the same reason we don't see doughnut sellers offing each other - because when practically anyone can produce, buy, and sell the stuff, it's impossible to control the market.

As for monopolies in general - yes, smaller companies have trouble competing with larger companies in mature industries. So what? The larger companies can only survive if they maintain lower prices, which benefits the consumer. Remember, though it's easy for companies to reduce competitors (by buying them out) it's virtually impossible for them to eliminate competition.

Sun, 03/13/2011 - 22:00 | 1048069 Eternal Student
Eternal Student's picture

Your point about prohibition is valid. However that would bring in regulation. The original discussion was about an example of the Black Market, being claimed as the biggest free market.

Mon, 03/14/2011 - 05:43 | 1049458 CH1
CH1's picture

"Regulation" is not a free market thing - it is a state force thing.

Again, point fails.

Mon, 03/14/2011 - 11:04 | 1050169 Eternal Student
Eternal Student's picture

Yes, which is why I corrected the poster; the original discussion was about free markets and the lack of state force.

Mon, 03/14/2011 - 09:51 | 1049956 Zero Govt
Zero Govt's picture

BigJim

Correct and a good example of where the usual State/monopoly 'shut out' of competitors is usurped is the European airline business. The national flag carriers defended against new entrant Virgin by the usual restriction of airport slots, even airport desks and baggage carriers etc.

But Ryanair avoided the whole lot by going to smaller airports who wanted their business instead of the major Eurozone airports that wanted to defend their monopoly carriers. Ryanair is now the largest airline in Europe and has been constantly hassled by national and European regulators but, thankfully, have succeeded by changing the game.

Competition, you simply can't beat it for progress and improving everyones lot

Sun, 03/13/2011 - 20:38 | 1047727 ItsEvolutionBaby
ItsEvolutionBaby's picture

There are good and bad monopolies.

Good monopolies are created by the free market (and remain good as long as the consumer desires) and bad monopolies are created by government through regulation and cronyism (and last forever until the false protections are dismantled). 

I don't know why you are afraid of monopolies. If a company delivers a product to the consumer at a price no one else can match with a high quality then i'm all for monopolies. The problem comes when they get into collusion with the government and they sell shit products and don't let anyone compete with them through exclusionary legislative instruments.

Sun, 03/13/2011 - 21:58 | 1048116 Eternal Student
Eternal Student's picture

The problem also comes in when they use their size to stifle competition. This is often seen in "dumping", and is generally recognized as being harmful to the consumer. Sure, it might be helpful to the consumer in the short term; but not the long term.  Unfortunately, by the time the government can intervene, it's too late for the small company.

Monopolies exert great power to stay that way. In an unregulated market (which was what this topic is about), there is nothing to stop them from stifling competition.

Mon, 03/14/2011 - 09:34 | 1049888 Zero Govt
Zero Govt's picture

Eternal Student

You write, "In an unregulated market ..there is nothing to stop them (monopolies) from stifling competition."

Yes there is. Profitability. There is only so many times a monopoly can afford to 'dump' products cheaply onto the market. And there's only so many times a monopolist can afford to keep buying up (from their stored previous profits) smaller competitors.A big dinosaur eventually becomes too tired (unprofitable) defending its turf from 1,000 smaller cuts by smaller faster businesses.  

This is precisely why monopolists use the State apparatus. They need the prop, the money of taxpayers, to constantly bailout their businesses and to do their dirty work using regulations to pervert the competitive market.

Without the money (subsidy) of taxpayers and power (law, regulation etc) of the State all monopolies die due to the competitive market. The free market does not allow monopolies to live forever. In fact as soon as one appears new entrants are keen as mustard to attack it.

Huge monopolies such as the US and European energy companies (Exxon, BP, Total etc) would be long gone by now from smaller explorers and retailers. The fact they've been around decades and we've had no new entrants to supply our petrol etc is proof of the effective 'shut-out' by corrupt Govts to stop the constant churn of new entrants to the energy market   

Mon, 03/14/2011 - 11:08 | 1050181 Eternal Student
Eternal Student's picture

Sorry, but that is just conjecture again; and with significant evidence to the contrary. It wasn't the Free Market which shut down Rockefeller, or other monopolies, but rather State intervention.

 

Mon, 03/14/2011 - 17:31 | 1052012 GoinFawr
GoinFawr's picture

Great thread all. But I think ES has got ya: Excepting some physcial laws, absolutes don't operate well in the real world. All political and economic structures require a 'mix' of ideaologies to function effectively.

This is because, for whatever reason, some who lust for power are lacking the modicum of conscience society requires to prevent them from enriching themselves by forcibly encroaching on the rights of others.

You 'free market idealists' claim that such a lack would inevitably be found out and the market would deal with the problem effectively/efficiently; the problem is that once great power has been amassed it can take a very, very long to time to usurp, and the process is invariably painful for those in the yoke. (In truth, though I'll bet you'll argue differently, you're advocates of anarchy, or pure communism, which are fails for the same reason.)

I'd say we're witness to some of those manifestions of egregious economic hegemony holding an 'unregulated' gun to the entire planet's heads, right now. I don't think the proposed vacuum offers any recourse at all, rather just another unwitting opportunity for those thugs currently running things.

Regards

Mon, 03/14/2011 - 09:20 | 1049843 Zero Govt
Zero Govt's picture

EvolutionBaby

there are not "good and bad" monopolies. All monopolies are bad. Period.

Monopolies are a spanner in the works on many. many levels. In particular just by restricting consumer choice. That leads to sloth, low productivity, innovation, efficiency and even profitability in the monopoly. Check out GE a vast Govt propped up corporate who returns barely 1% on capital employed (it'll go bankrupt as soon as its biggest prop, Govt, goes bankrupt). 

So the problem with monopolies is they give consumers no choice. This compounds in many ways problems and means 'disease' (such as low productivity) are not cured by consumers being able to go to another business who provides high productivity. Monopolies I can assure you DO NOT EVER provide low prices unless they are subsidised by Govt. Subsidies are the 'cheat'. They provide a fake low market price but is cheating because the taxpayer pays up the other part of the bill (high price) 

Mon, 03/14/2011 - 05:38 | 1049456 CH1
CH1's picture

One last correction:

The illegal drug business is TOTALLY dependent on state force. If those plants and extracts weren't forbidden, and their use punished with violence, the price would be a small fraction of what it is now and normal people (non-criminals) would be involved in the business.

Again, FAIL.

Mon, 03/14/2011 - 11:19 | 1050187 Eternal Student
Eternal Student's picture

This was addressed previously. You've offered three Fails, and have failed miserably.

And I might add that your lack of knowledge about IBM, when you claim to be an expert there, is rather embarrassing.

Sun, 03/13/2011 - 15:36 | 1046982 Azannoth
Azannoth's picture

I am afraid of a gold standard, what would prevent the governments from artificialy low gold price let's say 100$ per ounce ? And making private trade in gold illegal

I don't think the bankers(real rulers of the world) to go out without a fight, they will bring the house down before letting us have an independent(from them) currency

Sun, 03/13/2011 - 15:56 | 1047023 DonutBoy
DonutBoy's picture

I take it then that you've already abandoned fiat currency as a store of wealth?  This is where we were before, prior to WWII, when gold was confiscated.

I think your fear is rational, as a consequence you must consider how much of your precious metals do you want anyone to know about?  Will there be a transation record with your name on it at purchase?  Was it subsequently lost or stolen?  Would you turn it over to a government who paid you for it at a rate of their choosing?  If you believe 2008 was the pre-season warm-up to the big game, you owe it to yourself and your family to have thought through these questions.  Is the government acting as a guardian of the citizen's wealth or a guardian of Goldman Sachs?

Sun, 03/13/2011 - 16:30 | 1047086 Bobbyrib
Bobbyrib's picture

+1, no to the gold standard. They will confiscate gold, give you a new currency, then get rid of the gold standard leaving you with fiat again. Politicians are scum.

Sun, 03/13/2011 - 18:52 | 1047503 Non Passaran
Non Passaran's picture

Your arguments don't make any sense.

1) If "they" wanted to confiscate gold, why would they have to reintroduce gold standard?

2) If "they" introduced gold standard, what would prevent people such as yourself to accumulate even more (everyone who saves could)

3) The reintroduction of "the new dollar" would hurt you only if you held your gold at the bank (why would you do that except for some pocket change needed for basic things?)

Mon, 03/14/2011 - 06:23 | 1049478 Bobbyrib
Bobbyrib's picture

1) Right now they have no basis for confiscating gold (other than when the dollar collapses) When the dollar does collapse they will need something of value to trade with other countries. They could reintroduce the gold standard and confiscate gold (to back the new currency) like they did from the 30's to early 70's. Politicians then worried more about people's opinions than they do now. People were smarter and knew the government may try to rip them off at that time (30's to early 70's). The average person today...not so much.

2) If they forced the trading of gold to a black market, it certainly may stop people from accumulating more. Right now it is quite easy to obtain gold.

3) If they forced conversion, you would be stuck with "the new dollar," not your gold. That is why I outright reject the idea.

Sun, 03/13/2011 - 18:55 | 1047519 Non Passaran
Non Passaran's picture

artificialy low gold price let's say 100$ per ounce ? And making private trade in gold illegal

I'd love that... 14:1 is not bad. Everyone would buy it anyway..

But the idea is nonsensical in the first place because that couldn't work (for many reasons, but to mention just one in form of questions: How much would in that case silver cost?  And what would happen with the price of oil - would it cost $8 per barrel?)

Sun, 03/13/2011 - 15:40 | 1046987 Steroid
Steroid's picture

According to prof. Fekete, the Gold Standard itself would not be enough. It should be paired with the discounting system of Real Bills. I think this should be discussed more widely considering the implications.

Mon, 03/14/2011 - 15:30 | 1051546 Thisson
Thisson's picture

I generally support Fekete's work, but Real Bills are inflationary for two reasons: #1 They are commercial paper and function as money; #2 they can be defaulted upon, and then have to be "bailed out" by the sovereign.  Mish did an excellent piece on the Austrian view of Real Bills.

The gold standard can work, but alone doesn't prevent inflationary issuance of credit unless accompanied by a prohibition on fractional reserve banking.

As we can see, people are afraid to operate in a world without credit, because it slows growth.

Mon, 03/14/2011 - 16:32 | 1051853 akak
akak's picture

As we can see, people are afraid to operate in a world without credit, because it slows growth.

Exactly, becuase the average person has been taught by our duplicitous and short-term-thinking Keynesian masters that the unsustainable, unhealthy, malinvestment-infected bubbleness of the top of our artificial, fractional-reserve-banking-spawned business cycle that is deemed "growth" is somehow healthy and normal, when in fact it is nothing of the sort, but is just part of the engineered financial whipsawing designed to strip us of our savings and our assets.

Sun, 03/13/2011 - 15:42 | 1046988 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

I don't want a receipt for gold, i want the gold in my possession! That's the only way i'll have faith in it.

The problem is not fiat monetary systems as such, it's the fact that we are run by the most evil criminal scum on the earth and they use it as a transfer of wealth vehicle from us to them.

Even if we had a gold backed currency, if the powers in charge were still crooked, then they would just change the ratio to gold the currency is worth. One day a note would be worth 1/10th ounce, next, when they feel like it (or through some engineered catastrophe) they would change it to, say, 1/20th of an ounce of gold.

Change the people in charge! Force the filth out that have been ruling us for centuries through their inbred bloodlines!

Sun, 03/13/2011 - 16:31 | 1047088 Bobbyrib
Bobbyrib's picture

+1 again.

Sun, 03/13/2011 - 20:34 | 1047705 BigJim
BigJim's picture

Changing the people at the top of the heap won't help. You'll just get similar scum crawling to the top again.

Flatten the heap.

Sun, 03/13/2011 - 15:48 | 1047006 Bagbalm
Bagbalm's picture

Gold is already money between central banks and nations.

They are however not going to abandon the fiat currencies.

What will happen is the vast majority of people and small business will have NO access to 'good' currencies. The gap between the rich and the poor will expand with the upper tier using gold to settle critical business and the poor limited in the market to what fiat will buy. Those able to settle in gold will have first pick of the goods at the best rates.

Sun, 03/13/2011 - 16:40 | 1047078 dearth vader
dearth vader's picture

Shines a new light on the division of "haves" and "havenots".

Got Au?

Sun, 03/13/2011 - 15:50 | 1047009 Sudden Debt
Sudden Debt's picture

Here in Belgium, my sunday newspaper had:

 

The first page (full page)

The second page (full page)

The 2 middle pages (full pages)

The last page (full page)

 

As 1 big advertising: WE BUY ALL YOUR GOLD.

I've never seen a company do such adversings because those are really expensive!

There must be a hughe demand for gold, otherwise this wouldn't be profitable to do.

 

Also I expect tomorow a lot of Japanese funds to jump into PM's as the BOJ will pump in exesive amounts of money in the market to keep it from going down.

 

Sun, 03/13/2011 - 15:51 | 1047012 bankrupt JPM bu...
bankrupt JPM buy silver's picture

What with the inclinations that prices will top $45 and then plummet to $25...?  Please explain this lunacy.

 

www.silvergoldsilver.blogspot.com

Sun, 03/13/2011 - 17:58 | 1047329 ivars
ivars's picture

Money will move to oil.

Sun, 03/13/2011 - 15:54 | 1047018 glenlloyd
glenlloyd's picture

price controls are nothing more than legal tender laws, so Gresham's Law would apply and gold would either go into hiding or leave the country.

People criticize the gold standard but as medium of exchange there's nothing wrong with it, in fact it's very good for that purpose. Also, annual production is low enough to prevent bouts of serious inflation and it can't be debased by government.

Opposing a stable currency policy is really just supporting the opposite, a medium of exhange that can be debased, which in the end only benefits a limited few and the expense of the many, and precisely what we have now.

Sun, 03/13/2011 - 16:36 | 1047098 Bobbyrib
Bobbyrib's picture

Respectfully disagree. Right now everyone in the US has the right to the private ownership of gold (whether they buy it or not is up to them if they have the money). If we go back to the gold standard, the thieves will not allow private consumers to hold gold.

Sun, 03/13/2011 - 16:04 | 1047035 Muir
Muir's picture

-

"A Comeback For Gold-Backed Money?"

 

ZH's gold bugs' wet dream.

 

Why would the PTB so singularly oblige?

 

-

 

Sun, 03/13/2011 - 16:06 | 1047044 Saxxon
Saxxon's picture

Yes, own gold and silver.  No, no PM-backed paper for a long time.  Until the entire shithouse goes up in flames, it will not happen.  They will print to their dying breath.  NO $5,000 gold, you not rich yet.

ZZZzzzz next.

Sun, 03/13/2011 - 16:11 | 1047053 three chord sloth
three chord sloth's picture

The governments of the world will not allow a return of any kind of real gold standard. Even if a nation, for example China, was to re-establish a partial gold standard, it would be only a temporary measure, done for strategic political reasons (domestic or international).

The reason is both simple and obvious; governments cannot afford to let their people store wealth. So-called "modern" governments need their own bonds to be the closest thing to a store of wealth available... they cannot let the people exchange their paper money for gold and then stick it in a home safe or safety deposit box, or even stash the cash itself. They need you to spend it, invest it, or preferably loan it to them. That is why governments abandoned gold standards, and why they all push for inflation instead of price stability.

Sun, 03/13/2011 - 16:40 | 1047113 zaknick
zaknick's picture

Agreed but if the SHTF and Tahrir Square on the Potomac takes place, who's to say things can't change? Indeed, this country has no gold anymore so the "authorities" won't be able to enact one they can control.

What about Real Bills described by Fekete? Apparently, this was the natural gold system pre-Versailles Treaty and replacement by bank credit.

I guess it boils down to whether you see the banksters losing power or not.

Sun, 03/13/2011 - 17:21 | 1047194 css1971
css1971's picture

Money is a means of exchange. It doesn't also have to be a store of wealth... In fact it isn't' currently.

Gold makes a reasonably good store of wealth but as a means of exchange?

  • It's heavy
  • it can be shaved
  • It's now too expensive for small things 1 gram is about $50 just now,
  • you have to trust the face value or carry a measuring implement around with you.

 We are where we are today exactly becaue gold is not an ideal means of exchange on it's own, the bankers were so successful because people were happy to hand their gold over.

We will simply end up back where we are now; trading paper or bytes. Fractional reserve banking works fine with gold as the reserve, so it doesn't even solve the problem which we have just now anyway.

Sun, 03/13/2011 - 17:28 | 1047205 css1971
css1971's picture

dupe

Sun, 03/13/2011 - 20:44 | 1047771 Greenhead
Greenhead's picture

That is one of the most insightful comments on paper vs gold I've seen in some time.  Thanks for the post

Sun, 03/13/2011 - 16:22 | 1047070 falak pema
falak pema's picture

I think that gold will go down as the flight to uncertainty will push up USD and that will then backfire into euros and then to yens again then to PM and finally into nothing. As the financial world would have collapsed by then through refusing to acknowledge it's damaged state worse than reactor #1. I don't think the financial world has the ability to resist the upcoming tsunami and subsequent meltdown of assets any more than the town that went down in Japan did. Wait for the big one. It's coming to our globalized, electronically wired casinos, HFT biased or not. Pray that Benocide  doesn't throw the switch too fast or too wide. So that the ride gets worse than swimming in the mess of a tsunami after-wake. Pray he can organize a mega zillion Marshall plan of a size and scale that has the real economy working full time to rebuild Japan, Egypt, Tunisia and you name it. With what money? Ask Benocide! He has the printing press.

Sun, 03/13/2011 - 16:38 | 1047105 Bobbyrib
Bobbyrib's picture

There will be a time when the flight to safety is nothing? Uh, you may have gone too far.

Sun, 03/13/2011 - 16:37 | 1047104 tiger7905
tiger7905's picture

As McEwen says, "Gold IS Money" , I find his recent comments on silver more interesting. http://goldandsilverlinings.com/?p=196

Sun, 03/13/2011 - 16:38 | 1047107 monkeys.pick.bottoms
monkeys.pick.bottoms's picture

What's wrong with everybody using fractions of grams of gold stored digitally in your wallet and physically in the safety deposit? It would be moved physically from time to time but not with each transaction. If it makes no sense then why can't each person be part of the system of gold exchange the way central banks operate now? It they make it work why can't we? Banks should be reduced to the role of record keepers. Does that make any sort of sense? Also, where can I make a bet that Ron Paul will become the next president of the US? I'd like to make some money on this bet:)

Sun, 03/13/2011 - 16:57 | 1047140 quasimodo
quasimodo's picture

You lost me at the "digitally" and "safety deposit"

Sun, 03/13/2011 - 17:38 | 1047190 akak
akak's picture

And I'm still waiting for my local bank to offer rentals of "safety deposit boxes", in which I can store all of my safety.

Folks, for the last time, it's a "safe deposit box", NOT a "safety deposit box"!

Those boxes are for making a safe deposit, not for storing safety --- as if one could!  Otherwise, somebody please show me how one can physically store safety, as I would be fascinated to see the process in person

Sun, 03/13/2011 - 18:59 | 1047527 Non Passaran
Non Passaran's picture

Banks should be reduced to the role of record keepers.

I don't trust banks. I want the government to be in charge of that responsible job!

Sun, 03/13/2011 - 16:44 | 1047120 dryam
dryam's picture

How would a gold standard affect the fractional reserve banking system?  Seems like it would end it completely.  The banks would have to go back to being banks.

Sun, 03/13/2011 - 17:32 | 1047234 css1971
css1971's picture

Gold is the reason fractional reserve banking was created in the first place.

You give your gold over. Get a receipt. Use the receipt to buy stuff. Meanwhile banker loans out your gold.

Sun, 03/13/2011 - 20:23 | 1047679 savagegoose
savagegoose's picture

well they noticed that although people deposited all their money and took paper they rarely came to collecty all the gold.

so they could lend out more paper than they had god in stock. at interest no less.

soon it was discovered how much " actual " gold was needed to be on hand, the reserve requirement. around %20 i believe it was decided.

of course now with the actual reserve being paper to start with it is totally a farce.

Sun, 03/13/2011 - 16:44 | 1047121 DrStrangelove
DrStrangelove's picture

As the US dollar gradually loses its status as the reserve currency of the world, the idea of a global or world currency becomes more appealing. Especially to the strong nations who have an opportunity to be represented in a basket of currencies more stable than US dollars or Euros (which are currently utilized as the 25% of the world's reserve currency). The United Nations has called for a new reserve currency, the International Monetary Fund (IMF) has been vocal as well. In February of this year, Dominique Strauss-Kahn (Managing Director) proposed a new reserve currency. The creation of a world currency has become quite popular in the upper levels of finance and politics, though it has been done before.

 

This new currency WILL be fractionally backed by gold.

 

http://nationaleconomist.blogspot.com/

Sun, 03/13/2011 - 16:54 | 1047132 Quinvarius
Quinvarius's picture

If your monetary system can't work on a gold standard, then it just can't work.

Sun, 03/13/2011 - 17:13 | 1047167 silvertrain
silvertrain's picture

 It can work, for how long is the only question to be answered...

Sun, 03/13/2011 - 18:16 | 1047351 ivars
ivars's picture

Silver will fal to 26 USD, gold to approx 1000 USD in May 2011 (reaching 45USD and 1700 USD respectively before that)  and stay for most of 2011 and until April 2012 below 32 respectively 1200 USD. After that, they will both  will shoot up to 100 and 3000 USD, respectively.

So there will be plenty of time to buy. Whole year. Do not jump in at 35 USD. Or jump but sell at 45 USD. Here is silver graph, to save words, just picture. Gold will behave similarly.

http://saposjoint.net/Forum/download/file.php?id=2673

Sun, 03/13/2011 - 18:13 | 1047368 Snidley Whipsnae
Snidley Whipsnae's picture

China has built a floor under gold and they are increasing the height of the floor as the dollar is being devalued by Ben/Tim. This is why I have continued to say that this move in gold is secular and will not stop unless QE stops...

Why is China doing this?

China has several trillions of US Treasuries and they are being slowly defaulted on by massive monetization of dollars/FRNs/Treasuries...printing more iows.

China effectively ties the dollar to gold by raising the 'buyer of last resort' price as the dollar is devalued. China's bid price for gold is in dollars, not Yuan. So as Ben/Tim print more dollars and trade them to China for goods, and the dollar falls in purchasing power, China protects their US Treasury holdings by hedging with a higher dollar bid for gold...effectively setting a new, higher floor under gold (in dollars) each time the dollar dips in purchasing power. Voila, gold rises in price even though the full might of Western Central Banks and the Fed are pitted against a rise in PMs... China continues to run over the short bullion banks and Ben continues to print.

So, China is accumulating gold in massive quantity. China has lots of FRNs/treasuries to use to purchase gold. China buoys the price of gold higher in dollars as their treasuries fall in value...ie, their treasuries are falling in value but their gold is rising in value measured in dollars so China's various US T holdings are  hedged with gold. 

This is not really so much different than how the gold/Euro work in concert. As the Euro falls the gold held by European banks, and individuals, rises denominated in Euros.

Here is a short clip extracted from an interview of Lehmann and Forbes... very telling... 'China is Hoarding Gold'...

http://video.forbes.com/fvn/inidaily/richard-lehmann-china-hoarding-gold?partner=yahootix

 

 

Sun, 03/13/2011 - 18:22 | 1047402 tony bonn
tony bonn's picture

aristotle was wrong about a lot of things but he got it right with gold.

Sun, 03/13/2011 - 20:26 | 1047689 tradewithdave
tradewithdave's picture

I'm sure I have posted this before, but the plan has already be presented several times publicly.  There will be two forms of currency.  The first will be transactional and will satisfy the double coincidence of wants.  It won't be fractional and basically will be represented by the $5,000 everyone spends every month for housing, utilities, etc.  It will eliminate systemic risk because it won't be leveraged. 

The second form of currency for wealth accumulation will have a significant gold component and will be a fractional reserve system.  Most likely gold ownership will be outlawed or regulated out of practical existence.  There's only two questions that a speculator needs to find the answer to; a) the exchange rate on reset day, and b) when is reset day. 

Beyond that there's a very valid argument that the search capabilities of the internet disintermediate the double coincidence of needs significantly better and more efficiently than even a bank system as ubiquitous as the VISA network for example.  With mobile technology, if you need a coffee per se, you have something to offer back to the network that is quite manageable from an accounting standpoint.  This is the biggest threat to the transactional system, it being disintermediated by the combined power of mobile internet and search.  If, as in the example you could get your coffee and then remit a commensurate value to the system, there would be no need for a percentage to be skimmed by the network.  The banks will try to stop it, but there are people hard at work coming up with solutions.  Most solutions would require jailbreaking virtual currencies (currently illegal), but there will be a quite practical way to do it that will be legal, just unexpected. 

As far as the wealth accumulating currency with the gold backing, it will be so restricted (like a CD or a 401(k)) that it will mitigate most of the systemic risk associated with the type of counterparty risk and mass electronic bank runs that we witnessed during the credit crisis.  Who knows the timing on the reset switch and who knows what the exchange rates will be when the reset button is hit including the percentages in the new SDR/Bancor currency basket.  

There's one thing that is entirely obvious.  The reset switch will be hit when the next crisis ensues.  From all appearances, everyone is accelerating the advent of the next crisis from the Chairman of the Federal Reserve all the way to Ron Paul and the readers of Zero Hedge.  Everyone's hard at work bringing the system down.  How long will it take?  That's the first question.  

Here's a link to Mervyn King's proposal for a "divorced" currency.  What's amazing to me is that it's the same speech as Isaiah Berlin's Two Concepts of Liberty, wave-particle duality in quantum mechanics, Cass Sunstein's two choice architecture of libertarian paternalism or Jean-Paul Sartre's claim of separation through existence precedes essence.  They're all the same strategy... divide & conquer... separate the mark from the source... or in this case the fool from his money.   http://tradewithdave.com/?p=5310  

One other thing.  If the web disintermediates the transactional currency, what would disintermediate the wealth currency?  That's easy, things that represent abundance such as pure water, fertile land, productive and healthy agriculture, efficient/safe/low-impact/on-demand production, clean air to breath, abundant community and precious metals if they're precious to you.  Whatever it is that is precious to you is what would represent wealth.  When I had my first kid and was making $14,000 per year and my wife was making $20,000 it meant quiting her job and staying home with the kids.  What represents abundance to you?  Then that's what would be a store of wealth. 

All the experts in gold, if you dig deep enough, will lead you to human consciousness as the only measurement of the value of gold.  In other words, we value it because we value it.  When that changes, then the gig is up.  Until that time, he who has the gold makes the rules and the rule may just be that you're not allowed to hold, own or transact with gold... unless you're a bank or operating off the grid.  

Dave Harrison

www.tradewithdave.com  

Sun, 03/13/2011 - 20:47 | 1047800 trendybull459
trendybull459's picture

We need your help,come to us and make your voting(it takes 5sec from you):

http://trendybull777.blog.com/2011/02/21/hello-world/

tell it to friend,we need to rich every interesting one to make his vote for FED existence,thank you to all for your choice

Mon, 03/14/2011 - 04:38 | 1049414 speculator
speculator's picture

25 relatively cheap gold producers: 

http://miningalmanac.com/stock-lists/value-gold-mining-companies

List is based on cash flow and earnings relative to company valuation. I made the list, but you can modify it to be more or less inclusive using the filter settings.

 

Mon, 03/14/2011 - 04:43 | 1049419 speculator
speculator's picture

Good Ron Paul interview w/ Simon Constable (the best WSJ reporter IMO):

http://www.youtube.com/watch?v=VTzfDktv0F4

He mentions globalists wanting a single currency, just waiting for the dollar to collapse as the opportunity. No doubt he's right that lots of bankers and bureaucrats want this, but I don't think it will happen just yet - they don't have enough unity within Europe, let alone the whole world, to pull this off. 

Mon, 03/14/2011 - 13:43 | 1050988 profg
profg's picture

If I may, I recommend reading the paper I presented to the Mises Institute's "Austrian Scholars' Conference" last year: "Ending the Fed From the Bottom Up: Re-Introducing Competitive Currency by State Adherence to Article I, Section 10" - http://ssrn.com/abstract=1570108

The Constitutional Tender Act does not propose to institute "gold-backed money" or a national "gold standard" - it is a State-level bill, which would return the State to its Constitutional requirement of only using gold & silver for all financial transactions.

View last week's GA House subcommittee hearing here: http://constitutionaltender.blogspot.com/2011/03/constitutional-tender-a...

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