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Guest Post: Gold, The Improbable Answer To Life, The Universe, And Everything
Submitted by Bo Peng
Gold, The Improbable Answer To Life, The Universe, And Everything
"Alright," said the computer and settled into silence again. The two men fidgeted. The tension was unbearable.
"You're really not going to like it," observed Deep Thought.
"Tell us!"
"Alright," said Deep Thought. "The Answer to the Great Question..."
"Yes...!"
"Of Life, the Universe and Everything..." said Deep Thought.
"Yes...!"
"Is..." said Deep Thought, and paused.
"Yes...!"
"Is..."
"Yes...!!!...?"
"Forty-two," said Deep Thought, with infinite majesty and calm.
-- Hitchhiker's Guide To The Galaxy, Douglas Adams.
(With apologies to Mr. Adams, may he rest in peace, I never get tired of quoting H2G2.)
There's no rational basis for valuing gold in terms of anything else.
Unlike all other widely traded metals, gold has relatively little
inherent value and its above-ground quantity never decreases because,
well, gold is forever (while diamonds burn up).
These (little inherent value, inert) plus the relative rarity make
gold a very good medium for trade, i.e., money. The ideal medium for
trade is something that
A. has 0 inherent value and
B. can never be created and
C. can never be destroyed.
Since human stupidity is hard to measure or divide into smaller chunks, gold will have to do.
It's worth noting that digitized fiat currencies of today meet two of
the three requirements 100%. If we find a way to make it hard to create,
it would be a better choice than gold. Independent central banks were
created specifically to make it harder to create fiat currency. But the
game nature of human society dictates that every system will be
corrupted, and every good idea turned bad, over time. As such, the
central-bank experiment, while brilliant and noble, has come to an
abrupt end in failure since the 08 crisis. Global fiat currency system
was an ingenious and bold experiment except for its reliance on an
optimistic view of human's ability to overcome greed and fear. Soft
inhibition/prohibition against the creation of money, be it moral,
legal, or political, is not enough to prevent us from caving in to greed
and fear when the time is right (or wrong). We need something stronger
to save us from ourselves. Back to gold.
It is no accident
that the dollar started its slide and gold its rise both around early
2002. The terrorist attacks of 9/11 alerted the world to the
unthinkable, the possibility that all the powers of US could not
provide protection against the new type of threats. The ensuing domestic
and international policies of the Bush administration tirelessly
proved this right. Perhaps more importantly, the Bush administration
showed the world that, lacking the ability to generate organic growth
and wealth, the US is perfectly willing to abuse the trust the world
had bestowed upon it, by making the dollar the global reserve currency,
in order to fund a war without fronts, borders, goals, endings, or
clearly definable enemies. Obama strangled any budding audacity of hope
by resolutely wasting the best historical opportunity for
financial/economic/regulatory/legal reform in generations, allowing
himself to be bullied around and weakened in the process.
Somewhere along the process, however, the Perverse Gold has become more
than the dollar hedge. It gradually dawned upon the world that we're
faced with a paradox:
A. The dollar cannot serve as the global reserve currency, and
B. There's no alternative to the dollar as the global reserve currency.
How to get out of this Catch 42, nobody knows, although creative/crazy
ideas abound. Gold is most definitely not the answer, at least not in
the old style of gold-backed currencies. But when everything else proves
even uglier, the original ugly begins to look better and better. I
still don't believe we'll go back to the old gold standard but it's the least improbable among the improbables. And, with the Infinite Improbability Drive technology owned by the Fed, it's becoming less and less improbable.
Since 2002, gold has used every pathetic excuse to go up. When the
dollar is weak, it's a dollar hedge; when the dollar is strong, it's the
euro hedge; when crisis hits, it's the safe harbor; when the economy
is good, it's the inflation hedge. Now central banks are no longer
ashamed of hoarding gold. Various countries and localities are talking
about using gold to settle trades, e.g., India, Commonwealth of Virginia (yes, gold, Virginia).
A notable exception is 2008. But it was not because people liked cash
more than gold, it was because people needed cash to unwind their
positions just to get through the day. And in various scenarios some
fiat currencies may be considered temporary safe heaven. But the
candidate pool is shrinking and the safety duration is shortening.
I profess zero love for gold; it doesn't hug me back. But as far as
sustaining the things that do, gold is a necessary evil, the most benign
evil at this point in time. I always liked Virginia; if they actually
pass the alternate-currency law, I would be very tempted to move there,
if only for the cool factor and the clean conscience knowing my
children's future wouldn't be volunteered to keep some irresponsible
bums on their spending high. My children hug me back and I'd like to
keep it that way.
When you're on the right side of a macro
trend, supposedly random events inexplicably go right with improbably
high probability. I can live with such blatant disregard of nice
mathematical properties. What I cannot live with is the lack of
understanding when the trade may end. There're many ways the gold trade
may end, but valuation is not one of them (though valuation may cause
temporary pull-backs once in awhile). As I said in the beginning,
there's simply no rational basis for gold valuation in anything else.
It is, quite simply, whatever value the market is willing to pay for.
So, until the world figures out what the next common medium for trade
is, gold is the temporary universal answer to Life, the Universe, and
Everything. It is the question that you need to figure out for yourself.
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First guy to get a degree in my family, about as blue collar as they come.
I want to believe FOFOA is right. But the inability for anyone to address my concerns is disquieting. I gave up on his blog after the cry was to read the archives more. If the answer is "Read the Holy Book!", I can get that in church.
I'm personally mostly in gold for my tiny amount of assets, as are my parents. I just find to many logical errors with to many points in the argument. I have others but I like the arb one because everyone should be able to understand it.
Gold will be great, but so will silver, or bulk wheat, or oil. I'd prefer to be in things people really need an that can't be printed into resistance, but can bulk store oil or wheat. So I think it's great you are getting into gold, I just wouldn't expect a freegold system.
As to the big players, I think it is scattered. Because I doubt freegold I assume that they will use their leverage to buy up companies that get resources and companies that make things. It's what I would do. I would use free money from a pet CB aka the Fed to go out and buy up land, mineral rights, water rights, and companies that make things. Doesn't matter what I pay for them because I know the currency will get burned down so I can do it on leverage. In effect free via the Fed. When the bomb goes off, own the things people need and extract wealth from them, turn around and rebuy or remake financial firms. But who knows, that's just what I would be looking at in their place. It would be a great way to further consolidate wealth and ride out the fiat collapse. Us little guys are stuck trying to hold PMs or other commodities without free money.
@ ITG
What? There are no conspiracies?
I'd sooner investigate my suspicians that a group of people would conspire to gain and hold the reins of power, than accept the status quo because of normalcy bias.
Are you telling me that the guys at Goldman didn't conspire to make money against their clients by selling them products they were shorting?
Are you telling me that the banks didn't conspire to fraulently and illegally foreclose on mortgagors?
Are you telling me that 13 private bankers didn't conspire to overturn the constitution and create a Central Bank that would get the POTUS' approval to print the nations money, therby circumventing their obligations to settle accounts with gold?
Having gained that advantage, the power to buy things without ever having to pay for them, wouldn't it be within the bounds of reason that they would conspire to maintain their influence and advantage in the market, by promoting the credibility of their irredeemable credit note cheque kiting scheme over gold as a unit of account. Hell, all they had to do was print their own money and buy whatever they want wiith it. Your , gold , your house, your children.
Are you telling me that Hitler didn't conspire to invade Poland?
Of course you are, there are no conspiracies. These events just magically popped into reality without any human planning at all.
Tip toe,
through the tulips,
with me.
It is the question that you need to figure out for yourself.
Here is a mathemetical formula that might help: MV=FucQ
thats why gold is going to be used because it hasn't been all used up and most of it is held with governments and like it or not. We don't use diamonds because they are hard to determine value do to different sizes. Coal Silver platinum natural gas and oil will use REFERENCE POINT GOLD.
We will just change the system mid stream and fuck the ENTIRE MIDDLE CLASS
is having lots of 14K gold jewlery a good hedge
yes because prior to nixon cutting the gold window no one wore gold jewelry it was silver or platinum.
You can melt your 14k jewelry down because you won't be able to wear it thats for sure.
Just go to Daily job cuts .com there is a jeweler going out of business everyday around the nation. They won't be selling gold jewelry anymore...period
what a coincedence/shocker......just went to that website for the 1st time and saw Robbins 8th and Walnut 2 philly has closed its doors .....I paid over 10K for my wifes engagement ring at that store in the 90s......wouldnt pay 1/10th of that today ....thanks for the website
So, you're saying your wife's a cunt. Nice.
The price of a tv is a true free market price it comes out its high priced and the price falls. The price of natural resources is completely different it takes labor and they are finite and the lifeblood of a nation. We may get a free market in natural resources at 20 dollars a gallon if the dollar is no longer the reserve currency. College and Health Care are examples of big corporations distorting the free market due to government intervention. and yes the colleges are now a corporation as well.
This is exactly why we must cherish the First Amendment and protect it with the Second Amendment. So that someone can feel free to publish TOTAL CRAP and not be censored.
a government can monetize anything it wants as long as its rare and uniform.....Gold has fit that bill for over 4000 years maybe more. I like it when governments have been irresponsible. Now is that time. There is a time and place for everything. After revaluation you can sell and collect the interest until the next revaluation 80 years from now.
the dow is at like 11500..oil around 90 we have seen this movie before if the dow wants to go to 14k it has to battle 150 oil maybe more this time. Thats not going to work they system broke in 2008 and we will be getting a new one shortly except the US won't be getting free oil this time and with no real backup and infrasture in place we are fucked either way.
Lose the baggage, dude. Gold is money. There is no need of a "reserve currency". It is a nonsensical concept used to make people think the dollar can replace the only real global currency. The dollar enjoyed a massive valuation bubble for a long time. The dollar is no different than tech stocks or the South Seas bubble. Nothing is going to make the dollar hold its value against gold until all US gold is at the proper price to back all of the US dollars in circulation. Gold is the only true financial asset a government has. Not guns. Not tanks. Not land. Not people. Only gold is a financial asset. Therefore only gold can back our money supply and counterbalance our debt. The US gold supply will equal the US national debt in price. You can be confused and hate on it all you want. But that is how it has gone down every other time.
I have a friend in Missouri that likes to wheel and deal in coins and bullion. One of his deals was to a banker that was hoarding silver. He informed my friend that silver was going to go big, and this was when it was going for about 10x face. This guy was buying all the junk silver coins he could find. This was around 2006.
My Eagles are money as declared by public law 99-16.
Good until it isn't.
Why, pray tell, does gold meet the "B" standard? After all, people dig "new gold" out of the earth all the time.
Why, pray tell, does money supply have to be fixed in a world of rising productivity and rising population? Or what happens when population starts falling? Does that mean Babies are Deflationary and Death is Inflationary?
The supply of gold is "practically" fixed. Unlike paper money, it can't be doubled overnight. It's increase in supply is very slow, and quite steady.
Money supply should be fixed because it makes economic calculations much easier. Babies being born are a blessing. Deflation means falling prices. Babies mean more production, more capital accumulation. It makes sense that prices will come down. Death is inflation. Inflation is sickness until death. We've seen enough to undertand that.
+ $1375 for a most excellent reply.
If the supply of gold/money is practically fixed AND the supply of production is increased based on more babies (a blessing), that means deflation (more goods per amount of money). Obviously, the MORE productive society is, the less money each person in society gets.
I guess the concept of production being equivalent to capital accumulation depends on how you define "capital accumulation." If capital is money, and a fixed supply of gold/money across a larger number of producers means negative accumulation of gold/money per person/producer.
If one "accumulates" capital by owning ever more stuff which has ever less monetary value, then babies = production = capital accumulation.
If not, then babies = deflation, and death (fewer producers) means inflation (fixed money supply, fewer goods).
Easier than what? If you have a fixed supply of money, and a fluctuating (uncertain) quantity of goods, and each person has ever less money to spend on the goods, that is not any "easier" to calculate than adding to money supply by X% every year in order to make 'natural deflation' (based on increased productivity, and increased number of producers) trend closer to zero.
I don't see why 'it makes sense.' There is nothing inherently better about X% annual deflation than X% annual inflation.
...is kind of pithy, but it really means nothing.
Another golden commodity: corn. You can eat corn, you can't drink ethanol. Gov requires corn to be grown and converted to ethanol, with a negative energy output/input factor and removing a valuable resource form the market. Socialist/communist/collectivist central planners distort markets and production, redistribute wealth and serve their own selfish interests, until the system collapses. Then the price of corn and gold reflect their real values. F**K MON
you can't drink ethanol
Whew! Ya scared me for a minute. I drink it all the time, actually. So do many people. This does not take away from your broader point, however.
42= The lifespan in years for the USD. 2013 FTW!
A. has 0 inherent value and
B. can never be created and
C. can never be destroyed and.....
D. Is the perfect substance to stamp fierce animals on...and cuddly ones too.
+ 1 Panda, 1 Koala, and 1 Roo.
With gold at 2 million dollar a kilo
it could be a very powerfull debt erasser.
America would own 16 trillion in gold.
Europe would own 20 trillion in gold.
Revaluation would make balance sheets
of CB look much better.
What is the path of least resistance for Gold? Why ask more questions?
http://theopeningrange.blogspot.com/
This article was ok but when you wrote that you don't personally don't like gold I tuned out. It doesn't matter if YOU don't like it. 99% of people do....even it they don't know it yet. I don't like caviar but it's still worth a lot to rich people and I don't dispute it's worth.
"As such, the central-bank experiment, while brilliant and noble, has come to an abrupt end in failure since the 08 crisis"
Brilliant? Noble? Wow!
Which meaningful analysis of anything (even gold) can start with this flawed premise? May I suggest the Creature from Jekyll Island to the Author? How about Secrets of the Federal Reserve?
Sort of stopped paying attention right there...
Really strange, the fact that people can get their heads around one convenient "conspiracy" and miss the elephant breathing down their neck.
ORI
http://aadivaahan.wordpress.com
The greatest irony is that same can be said for prime real estate except that: 1. It generally pays a dividend 2. It's difficult to acquire even in tough economic times 3. 99% of you idiots cant purchase it because you don't have the sophistication, industry contacts and above all the dollars to own it. Gold in effect is a poor/dumb man's real property and/or the mother of all momentum trades for the hegde fund oligarchs.
Thank you for one of the most inane arguments ever made in this forum.
You may want to go look up the definitions of the words "liquidity" and "divisibility" while you are honing your rhetorical skills.
Yes, give me 5,000 more years of that temporary solution, how about in the form of freegold ... I can live with that. Strange piece, kind of neurotic, ... you cant live with them and you cant live without them.
With fiat currencies what we have is complete relativity. It's like a system of planets rotating around one another. There's no absolute point of reference. You can't even mathemtically determine the trajectories of just three bodies subject to Newton's law of gravitation.
With currencies we have a similar problem. For instance, I believe up to two thirds of the dollar index is weighted by the euro. So how do you make sense of that? Then you've got the euro fluctuating against both the dollar and gold but everything works or otherwise you would have an arbitrage. Then throw in the yen, the AUD, etc. You are forced to rely on charts which probably only provide false hope of making sense of all of these mutual interactions. No doubt the big quant brains at GS have all this figured out and aren't subject to cargo cults like TA.
So it would appear that the closest you can come to having a coordinate system in which to express currencies is the price of gold in those currencies.
That's not the system we have at all.
Price of gold in US dollars= 1384.46
Price of gold in Euro's = 1063.76
Ratio 1384.46/1063.76= 1.3015
Eur/usd=1.30149
Everything is relative to gold. But they still operate off fractional reserving. If the economy wasn't in the toilot and manfactured goods were not doing anything and the need to settle between accounts is 50 percent less than it was a couple years ago. Gold would be at 1900 right here right now.
If they actually goosed the economy and got people buying it would be like a massive inflamatory injection to gold. Like when my girlfriends charpee Mr. Bruno messed with a bug and ended up with lips the size of dinner plates a couple hours later.
They absolutely will not gun this economy and in fact may cool it significantly as it's inflating while operating at 50 percent capacity.
Christmas shopping junk was nothing. They knew it would be ignored and had no hopes or aspirations to fulfill. It was simply window dressing as are all the figures coming out about what happened. I can say this with absolute certitude. Because if there were any big economic activity. People would be screaming what just happened to prices!!!
KAaaaaa Boooooooommmmm
10.
Bullion prices will probably top out when the Q-ratio bottoms:
http://dshort.com/articles/Q-Ratio-and-market-valuation.html
Compare with Dax In Gold:
http://www.realterm.de/DAXinGold.php
Bitcoin fits A, B, and C.
Well, it's still being created, but there is a hard wall that is reached asymptotically.
bitcoin.org has a forum and FAQ with lots of info.
gold has far more value than these vain (fucktarded) musings.
I'm no expert at this, but I've been doing a lot of reading on it lately. What I see is that;
On one hand, people argue that fiat has no intrinisic value, and on the other, the anti-gold-is-money argument is that gold doesn't either (you can't eat it). It seems to me, based on my readings, that gold, while it can be faked, is less likely to be manipulated by these means and is more stable.
Others would argue that fiat can be stable if the currency is issued in non-debt form by the government. This argument is made by the 'Money Masters' doc. That it only matters who controls its quantity, not what the unit is.
I can agree that governments have a poor record with debt based, central bank money. I can't make any argument for one thing being the end all of currency solutions. I have to consider it all and try to make the best financial decisions. So for me, I think that Gold and Silver will be good bets for the forseeable future, but I shouldn't be so beholden to them that I lose perspective.
Whether a gold backed currency comes to replace the current system comes to pass, the main question for me is whether it is trustworthy or not. My best hope for tomorrow is that the corruption of the current financial and political class can be routed out with as little violence and misery as possible so that we may return to putting money back to productive use.
+42
Unlike all other widely traded metals, gold has relatively little inherent value
This guy gets it wrong in the first paragraph. If gold has no inherent value then other metals sure don't. Gold has the highest utility of any commodity, it can be exchanged for any other, that's why it is the highest form of money - money being what extinguishes debt.
There's no alternative to the dollar as the global reserve currency
How to get out of this Catch 42, nobody knows
I know, by not reading shit like this.
...the game nature of human society dictates that every system will be corrupted...
Darn well expressed. I contribute that the essence of "game" is "winning" despite any alleged rules or referrees. The essence becomes the only rule. E.g., the winner of a coup d'etat controls any investigation...that's a hoot!
Often overlooked , or even unknown, are 2 vital qualities of gold:
1. Its perhaps unique nature to demonstrate credibility. In nearly any city, in any part of the world, a local goldsmith can quickly identify pure gold, say at least 99% pure, with certainty and without loss of mass...and without loss of form, either, if the object is maximum about one-eigth inch thick...simply by application of heat from a mixed-gas torch. The telltale color is uniform; any impurities will be visible; etc to an experienced eye at controlled sub-melt and melt temperatures. Gold has no peer in this regard. [Not applicable to sub-24 carat.]
Thus pure gold has inherent credibility.
2.In all known history, its buying power is unrivalled in politics and trade for consistent performance. Gold communicates, as perhaps no other inanimate object.
[Caveat: while gold is nearly indestructible in normal course of events, it can be made radioactive by proximity to neutron sources, and thereby harmful.]
I pitty the fools that don't have gold
[IMG]http://i54.tinypic.com/1zpppw5.gif[/IMG]
Enough Jibber Jabber! BTFD Fool!
O/T but did Assieland get HAARPed or what? Maybe it is ironic that the strongest currentsea got awshed up in the floods. [shrugs]
But the game nature of human society dictates that every system will be corrupted, and every good idea turned bad, over time.
Entropy increases.
Soft inhibition/prohibition against the creation of money, be it moral, legal, or political, is not enough to prevent us from caving in to greed and fear when the time is right (or wrong). We need something stronger to save us from ourselves. Back to gold.
Back to gold, or build our systems using fundamental building blocks of nature. Make our money, enforcement of our laws, and our political systems all subject to the laws of nature, so that they just happen, without input nor interference from mere mortals.
I am Chumbawamba.
This is INSANE!!! The U.S. is BROKE, ROME IS BURNING and the PEOPLE are completely deluded to the ARMAGEDDON on the horizon!!!
Watch the video “THE AMERICAN DELUSION – THIS IS INSANE!!” at (http://www.youtube.com/watch?v=-lVTo6XmhOk).
Anonymous-
The problem is that there really ISN'T a crisis in America due to the anesthetics of Ben Bernanke. People who don't have jobs are "earning" and income for 99 weeks, and then they get food stamps after that. People won't wake up until the carpet gets pulled from under them and a McDonalds? burger sells for $250!
"...digitized fiat currencies of today meet two of the three requirements 100%. If we find a way to make it hard to create, it would be a better choice than gold. Independent central banks were created specifically to make it harder to create fiat currency. But the game nature of human society dictates that every system will be corrupted, and every good idea turned bad, over time. "
Derivatives
Gold is fine as backing for currency, it's just a matter of price for gold
Gold doesn't have to back 100% of currency, probably about 40% for confidence
To make a transition all the Federal Reserve needs to do is start buying gold on the open market. Gold would quickly shoot to market level pricing and we would be on a de facto gold standard
The Fed could do a two-fer with silver as a bimetal standard
The US and a couple European nations are gold superpowers and China is a midget, so it works for us
But the central banks want a pure fiat before they would consider defaulting to a gold standard
Boys, boys, calm down. you missed the fucking point. Come over to Ulysses someday and we'll talk.
I'll be digging all the beaches for BlackBeard's gold!
I' know it's got to be there somewhere.
It seems to me that as a society, we simply are not ready for the alternatives to gold as a means of trade. No, you can't eat gold, but anything edible has a short lifespan, so is not a reasonable means of trade. Gold is heavy, and has a high cost of transport, which makes digital currency seem more likely to succeed. Digital currency is too easy to inflate. So what is left to trade with, store value over time, and has no inherent value (I assume, in the physical sense, since food does have inherent value). What is value anyway?
Time, energy, and maybe water could work. Water is physical though, so cost to transport is high, and it is relatively abundant. That leaves only time or energy as a means of trade. Digital curreny was supposed to represent energy, but that failed, and time is a tough one to quantify in terms of trade value. This is why gold is the certain medium at this stage of society, and will be until a certain level of long term confidence in the stability of societies (they have a poor track record so far) can be reached, and a level of technological capability is acheived. Either the gold trade will end, or society will, that much is certain. I guess if you prefer the gold trade to continue infinitely, then you better be stocked up on ammo as well, since that is the course of action under the gold trade.
To go a bit off track, I've read about people who say they can live off the light from the sun alone, and no longer need to eat, and only consume fresh clean air and pure water. Physical needs can be met, satisfied and exceeded in this world, but desires know no bounds. Maybe someday enough people will be properly trained and educated on how to live life in a more masterful fashion, and then the gold trade will end, and a new age will begin.
I think I'm done rambling now.
'As such, the central-bank experiment, while brilliant and noble, has come to an abrupt end in failure since the 08 crisis.'
Where did ya find this wingnut???
What the feck is so brilliant about the central bank ponzi scheme? Did Bernank proof read the article?