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Jim Rickards On The Last Gasp Of The Fiat Money Regime

Tyler Durden's picture





 

Yesterday, with a modest dose of sarcasm, we pointed out the latest salvo by the fiat regime against gold, in the form of one Op-Ed by Edwin Truman, who very seriously suggested that America should sell all of its gold to plus less then 3% of its massive (and growing) debt hole. Returning the favor of "all seriousness" we said that this is "dumbest idea we have ever heard." Today, Jim Rickards, shares his view on this modest proposal in a far more politically correct manner, via a  King World News exclusive. Here are Rickards' follow up thoughts on this most ridiculous suggestion we have heard in all of 2010.

A Message to Garcia

By James G. Rickards

October 13 (King World News) - One of the most famous and widely published essays of all time was A Message to Garcia by E. Hubbard.  Written in 1899, it recounts the effort of the President of the United States to reach out to a foreign insurgent who was incommunicado.  For this mission impossible, the President relied on U.S. Army Lieutenant Andrew S. Rowan who delivered the message against enormous odds but without hesitation and with complete loyalty and devotion to duty.

Lt. Rowan, meet Ted Truman.

Today’s FT carries a column entitled “America should open its vaults and sell gold” by Edwin “Ted” Truman of the Peterson Institute.  Truman’s thesis, in a nutshell, is that the gold price is a bubble and the U.S. Treasury should take advantage of this by selling “high” and using the proceeds to reduce the national debt by about 2.25% of GDP.  Furthermore, the interest savings on the debt reduction would amount to about $15 billion annually thus helping reduce our deficit even more.  And the appeal of Truman’s idea goes even further because the gold sales would give anxious citizens, “…something to hang around their necks…”  How thoughtful.

The intellectual flaws in Truman’s piece are too numerous to review in detail but here are a few highlights: He says that the price action in gold is driven by the “…hype of the bullion dealers (holding large inventories)…”  Really? My wholesale bullion dealer constantly complains about shortages and occasionally puts his best customers on allocation because he’s short of supply.  Truman also says that the market is accompanied by “…the normal amount of fraud and misinformation accompanying asset price bubbles…”.  Apart from a few sleazy coin dealers, the only fraud and misinformation I’ve seen comes from the Treasury and the Fed who refuse to allow a proper audit of official holdings and who cover-up and deny their gold discussions held at BIS and other nearly impenetrable venues.  More to the point, the price action does not reveal a bubble in gold, it shows the collapse of the paper dollar.  The issue here is understanding the importance of the numerarie or unit of account.  If you make the dollar the numerarie, and think in terms of “dollars per ounce” then the price action may look to some like a bubble.  But if you make gold the numerarie and think about how many ounces your get for a single dollar (now about 0.00075; was 0.00400 in 1999) you can see that the real problem is the dollar is rapidly shrinking to a vanishing point.

Truman’s idea that gold sales and debt reduction would reduce U.S. interest expense by $15 billion per year is the kind of nonsense one gets from static, linear analysis.  In dynamic, nonlinear analysis, such gold sales would so undermine confidence in the dollar as to cause a skyrocketing of interest rates and an explosion of the U.S. deficit easily submerging the savings that Truman posits.  Truman says that the gold standard was associated with “…unstable, prices, output and employment…”.  If by unstable, he means cyclical, yes that’s true (and necessary) but gold was also associated with some of the longest and strongest periods of sustained real growth in U.S. history from 1865 to 1912 until gold’s function was derailed by the creation of the Fed in 1913.  Truman says the U.S. “…has been sitting on [gold] since the Great Depression, receiving no return…”  Actually, gold went from $20.67 per ounce to $1,350 per ounce in that time period; seems like a 6,500% return to me.

Truman says that the gold standard “…has not existed for a century…”.    This is highly revealing. In fact, the U.S. went off domestic gold convertibility 76 years ago, within living memory to many, and only went off international gold convertibility 39 years ago.  But if Truman dates the end of the gold standard not from 1971 or 1933 but from the creation of the Fed in 1913 then he’s right; it has been a century.  That tells you something about how establishment intellectuals like Truman view the real purpose of the Fed regardless of the existence of any formal systemic role for gold.  Nevertheless, gold is not quite the musty relic Truman would like it to be although it is true that an entire generation of finance scholars have come of age since 1971 with no formal analytic training in gold.

We could go on but you get the point.  No amount of analysis will reach the right conclusion if you get the paradigm wrong.  Truman’s paradigm is anchored in a perpetually sound fiat dollar and he is intellectually unable to see the world any other way.  Sadly, he’s not alone.

This leads me to Truman’s most revealing remark of all.  He writes, “Official discussions of the reform of the international monetary system do not include any advocates of a return to gold…” (emphasis added).  The problem with this observation is that he is almost certainly right.  And this is scary.  I have maintained for some time that the return to gold is inevitable and the only issue is whether it would happen through a rigorous and studied process led by the United States or by a chaotic process in which the United States is caught off guard to its disadvantage.  Learning from an insider like Truman that none of the power elite are thinking seriously about gold increases the odds that the dollar dénouement will be chaotic not orderly.

The reaction of the gold community and various bloggers to Truman’s op-ed was swift and predictable.  He was ridiculed as espousing the “dumbest idea we have ever heard” by zerohedge.com.  Others were simply incredulous and assumed that Truman must have wandered onto the FT op-ed pages after decades alone on a deserted island.  While I might not disagree with zerohedge, there is one problem with this response.  Ted Truman is not a nobody.  He’s one of the most seasoned, experienced and highly respected international monetary experts in the world. His academic, government, scholarly and think-tank credentials are nonpareil.  He speaks to finance ministers, sovereign wealth funds, IMF officials, and Wall Street CEO’s on a daily basis.  Importantly, he was a staff economist to the FOMC.  I have personally worked with many of his colleagues at the Peterson Institute on matters relating to international finance and national security and they are uniformly of the highest intellectual calibre and operate with a truly warm and collegial demeanor.

And that is the point.  Ted Truman is not a fringe figure or a minor intellectual; he is a giant in the field.  He is not just close to the establishment.  He is the establishment.  An op-ed by Truman appearing one day after the IMF semi-annual meeting ended with no effective solutions on the currency wars is no coincidence.  It is a metaphorical Message to Garcia, to the gold insurgents, from the President and the powers that be.  It is price suppression without having to engage in actual sales.  It is a warning to gold bugs that they may get crushed.  It is meant to induce fear into those newly interested in gold that it’s a rough game with no holds barred.  It is a show of bravado by the fiat money crowd.  But it is also a sign of desperation; the last gasp of the ancien régime of fiat money.  If a smart guy like Ted Truman is reduced to the old canard about gold being good only for hanging around your neck, then what else is there to say? The intellectual opponents of gold are now as exhausted as the mines.

Follow Jim Rickards on Twitter at twitter.com/JamesGRickards

As long as we have the mainstream with this type of elitist attitude towards gold, there is ample room for price appreciation.  This debate is far from over, stay tuned for updates and developments.  The only question is, will events in the market place overtake the policy debate?

Eric King
KingWorldNews.com
To return to BLOG click here.

 

 


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Wed, 10/13/2010 - 17:19 | Link to Comment JLee2027
JLee2027's picture

Ted Truman is not a nobody.  He’s one of the most seasoned, experienced and highly respected international monetary experts in the world

Not any more bitches.

Wed, 10/13/2010 - 18:12 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

Now he's just a whore.

Wed, 10/13/2010 - 19:10 | Link to Comment masterinchancery
masterinchancery's picture

Careful, our local whores may sue you for ruining their good name!

Thu, 10/14/2010 - 01:32 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

And here's another retard. Would you subscribe?

http://news.goldseek.com/GoldSeek/1286982300.php

It can't be Johnny Bravo going on his forecasts, can it? Have we found him or is it Jon Nadler's nom de plume?

Thu, 10/14/2010 - 14:46 | Link to Comment akak
akak's picture

Oh damn, I saw that one too!  In fact, I thought the article/interview was so outrageously absurd in its Nadleresque denial of reality that I made a lengthy post in another forum about it.

Yeah, "Remove the Crises Mentality, and Gold looks Precarious"!  That's like saying "Remove all the water, and the oceans would be a desert!"  What a clueless fuck.  Must be Jeffrey Christian's twin brother.

Wed, 10/13/2010 - 17:24 | Link to Comment Hero Protagonist
Hero Protagonist's picture

 

I think this sums up QE2...

http://bit.ly/cdm1Vw

 

Wed, 10/13/2010 - 17:25 | Link to Comment Sarah Conner
Sarah Conner's picture

I wouldn't be surprised if Ted Truman is buying GLD in size in his p.a...

Wed, 10/13/2010 - 17:26 | Link to Comment Sudden Debt
Sudden Debt's picture

KEEP BOOSTING UP THE MORAL TYLER! YOU'RE DOING A BANG UP JOB!

now where is my scotch bottle...

Thu, 10/14/2010 - 00:39 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

Scotch, phht. Come over to the dark side where one drinks mor...ale.

Wed, 10/13/2010 - 17:27 | Link to Comment midtowng
midtowng's picture

We are reaching an inflection point with the old global monetary regime, much like we did in 1933.

http://www.docudharma.com/diary/23391/the-crowning-failure-of-the-old-go...

Thu, 10/14/2010 - 01:17 | Link to Comment Temporalist
Temporalist's picture

That link gives a good perspective.  If the U.S. sold its gold for $1300 it would be about $340 Billion.

The bonuses for Wall St. this year = $144 Billion.

In just 2 years time Wall St. could buy nearly all of the U.S. gold "holdings."  Clearly gold should be priced much higher.

Thu, 10/14/2010 - 05:40 | Link to Comment Crime of the Century
Crime of the Century's picture

That was a very erudite commentary. I hope by quoting Krugman they don't mean to endorse him. It certainly seemed to be a neutral reference.

Wed, 10/13/2010 - 19:36 | Link to Comment JuicyTheAnimal
JuicyTheAnimal's picture

I have fear.  I fear that I won't be able to realign my PM ETF options tomorrow anywhere near the price point where I sold today due to a gap up tonight.  And yes, I understand the difference between ETFs and physical.  Gotta make paper money to trade for physical some how. 

Wed, 10/13/2010 - 17:33 | Link to Comment truont
truont's picture

The Fiat-Kings must be very desperate indeed to dispatch the intellectually exhausted illogical arguments of Ted Truman.

I wonder what their next move is to discourage the plebes from protecting their wealth by buying gold?

Maybe the Teleprompter of the Unites States should say in a fireside chat on the evening news: 

"Don't buy gold.  Gold is old!  Ewwww!  Yucky!"

Wed, 10/13/2010 - 20:29 | Link to Comment Fred Hayek
Fred Hayek's picture

Are average people really buying gold?  I doubt that there's really much need for the powers that be to get all worked up over that yet.

Thu, 10/14/2010 - 07:13 | Link to Comment i-dog
i-dog's picture

Truman: "Official discussions of the reform of the international monetary system do not include any advocates of a return to gold…"

King: "Learning from an insider like Truman that none of the power elite are thinking seriously about gold"

This made me ROFL! Holy fuck, Eric ... if you needed Truman to tell you that then I've lost all respect for you.

The oligarchs have not spent hundreds of years building a ponzi scheme around fractional reserves and fiat money to have their power flushed away by a gold-backed global currency. They didn't get to be oligarchs by being brain-dead!

BTW, they do think about gold ... they love gold ... just not in anyone else's hands. Trying to get the UST to sell what little, if any, they have left is part of the plan ... then it's off to the Bundesbank to get theirs, too.

Wed, 10/13/2010 - 17:38 | Link to Comment pachanguero
pachanguero's picture

He is a point man for the New World Order.  Death to the New world Order.

Wed, 10/13/2010 - 17:42 | Link to Comment Implicit simplicit
Implicit simplicit's picture

What truman meant to say was Americans ,not America, should sell all their tresuries because they are in a bubble, then quickly buy as much gold as possible before the country goes broke.

He was having an elderly moment.

Wed, 10/13/2010 - 17:45 | Link to Comment rapacious rachel wants to know (not verified)
Wed, 10/13/2010 - 17:45 | Link to Comment web bot
web bot's picture

This ijit's suggestion is akin to giving his eyeballs away and getting a pair of sun glasses in return.

 

Wed, 10/13/2010 - 17:48 | Link to Comment wowser22
wowser22's picture

Someone better tell Mr. Truman there's no gold to sell.  Fort Knox is full of air.

Wed, 10/13/2010 - 19:54 | Link to Comment jharry
jharry's picture

I agree with wowser22.  The irony is no gold remains in Fort Knox or any public repository to which the Fed has access.  It's in their private coffers with their names on it.  Otherwise, why wouldn't they allow an audit by US?

Thu, 10/14/2010 - 03:49 | Link to Comment i-dog
i-dog's picture

If they can get the mighty UST to pretend to sell what they don't have, then the non-ZH public will be convinced that gold will be yucky and worthless [and illegal!] in the New Ponzi Order ....... and should be sold immediately ....... before it's too late!

Wed, 10/13/2010 - 21:55 | Link to Comment Segestan
Segestan's picture

maybe thats the whole point.. to make believe that the Gold actually exist? Plus the added benefit of reducing the importance of gold in the minds of the sheeple.

Wed, 10/13/2010 - 17:52 | Link to Comment Bearster
Bearster's picture

This is but one aspect of the fight between Statism and Individual Rights.  The Statists never had an argument.  They rely on being in control (literally), allowing their cronies to broadcast but no their enemies, intimidation, etc.

In an outright debate on a level playing field, using facts and reason, there is no defense intellectually or morally for why people should be made into slaves.

An irredeemable fiat paper currency is but one aspect of enslaving men.

Thu, 10/14/2010 - 01:03 | Link to Comment akak
akak's picture

An irredeemable fiat paper currency is but one aspect of enslaving men.

That line, Bearster, is, um, pure gold!

Excellently said.

Wed, 10/13/2010 - 17:56 | Link to Comment silver surfer
silver surfer's picture

Everything is going according to big bankers longstanding plan;

Pump up the credit bubble, let it crash.. wait a little while and get some more credit

then lever up with final fiat and by physical gold.

Wed, 10/13/2010 - 19:02 | Link to Comment Deckarda
Deckarda's picture

its a nice plan but it needs more greed...much, much more greed...

if the banking cartel really knew what they were doing they would have been quietly buying up physical gold and taking major positions in gold mining companies for years whilst simultaneously suppressing the price of gold (taking control of the physical whilst shorting the paper) - may be throw in a few phd talking heads putting out articles on how the barbaric relic can't be eaten and doesn't pay interest is a good idea too....

If you were really really greedy it would make sense to make sure that no one else had any gold of any sizeable amount...(there's nothing like a nice monopoly) and if anyone does have a stack then advise them to sell the useless stuff quickly...if your really good you could convince them to do this at a low in the gold price 

All that is left to do now is to let nature run it's course - fiat has a history of going tits up at some point and (since your in control of it) you could give it a nudge in the preferred direction by orchestrating a huge debt binge (you can make fortune here too) then when the debt binge implodes you get the goverments to bail you out (fat arsed profits here)

then whilst governments invariably try to monetise the debt ball they've been landed with via currency devaluations (nice for the price of gold) and inflation (if you've really done a good job hyperinflation - you lucky banker) alls that left for you to do is retire to a nice tax haven without any extradition proceedures and sit back a watch the fireworks...or finance a few of them....but surely no one's that greedy.......?  

 

 

Wed, 10/13/2010 - 17:57 | Link to Comment gwar5
gwar5's picture

Thanks for the J Rickards piece.

Jim Rickards has been spot on for months regarding the world gold standard vs fiat currency war going on among TPTB.

He's not a NWO advocate for world fiat currency. He prefers a gold standard as a way out of the USA default and default of the West, with revalutaion of gold to market discovery prices ($5000-8000), as the most pragmatic and least painful pathway among the alternatives available to the West. 

He is right to portray Truman as an agent of TPTB trying to head fake gold to antiquity -- they want a new, ("my precious") world fiat currency by the IMF to start over with.

.

 

 

 

 

Wed, 10/13/2010 - 17:57 | Link to Comment Traveler-2
Traveler-2's picture

This guy was a monetary expert, a world class whatever to the elites.  Now, he is an old man who has been drug out, put forth by Bernake and little Timmy ( and maybe Obama) to try to play down/cap a powerful movement by you and me and other knowledgeable people into tangible assets and fundamentally sound investments and financial policies.

All the stops are being played by these very intelligent, elite jerks to protect theirs and to hang on to what they gained and what they put over on the American people since 1913.  They found a way to exploit a wonderful country and its people, and now they are frantic that its' ponzi excesses are unmasked and slipping away. When they drag out these old guys, they are close to the end. 

We have done nothing wrong.  Keep the faith, keep up the pressure, support candidates who work for change, hope for a reserve currency based on a basket inclusive of gold and silver.

Wed, 10/13/2010 - 18:06 | Link to Comment Citxmech
Citxmech's picture

Boy - if that crap was supposed to "spook" the market - it sure was a dismal failure...  up $20+ dollars today - No fear in this market except that of the falling dollar!

Wed, 10/13/2010 - 19:29 | Link to Comment masterinchancery
masterinchancery's picture

The market took it as desperation.  In all seriousness, when last did the central banks defeat  strong market forces?

Wed, 10/13/2010 - 18:09 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

How does anyone with half a brain think the world's central banks will stop printing money?  They have no choice.  Fiats are only going to depreciate further against gold going forward, at an ever increasing rate.

Wed, 10/13/2010 - 23:32 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture

I had a Fiat once. It was factory pre-rusted and depreciated very fast.

Thu, 10/14/2010 - 05:46 | Link to Comment Crime of the Century
Crime of the Century's picture

Fix It Again Tony

Wed, 10/13/2010 - 18:18 | Link to Comment nmewn
nmewn's picture

"seems like a 6,500% return to me."

Bottom line bitchez.

Wed, 10/13/2010 - 18:19 | Link to Comment Shameful
Shameful's picture

How are gold bugs supposed to be afraid of a sale?

1. China is desperate to get assets.  They are dumping US paper and buying things.  With the escalating currency/trade war with US and China they would be eager to buy any gold Uncle Sugar brought to the table.

2. Where is the gold.  This hearkens back to the IMF sales, are the gold sales even legit?  Sprott tried to get some of that sweet, sweet IMF gold and they were having none of it.  This also assumes that the USA still has the gold they claim.  Anyone who is not full bore retarded knows the gov lies, cheats, steals, and commits fraud.  It would be an act of ridiculous faith to believe that Uncle Sugar has not fiddled with that gold in Ft. Knox since the last audit.

Sell it out Uncle Sugar, give me another chance to load the truck up before the infinite black hole of debt eats this country.  It's not like any of it would be used ot help the people anyway.  In a collapse I'm quite certain that it will be "lost" in such an event.  Still waiting on a Ft. Knox audit so I can laugh maniacally.

Wed, 10/13/2010 - 18:26 | Link to Comment snowball777
snowball777's picture

$14T / 621.5m troy oz == $22526/troy oz

Only $21156/oz to go!

Wed, 10/13/2010 - 19:31 | Link to Comment masterinchancery
masterinchancery's picture

Assuming that the US starts balancing the budget and eliminates entitlements.  More like 221,156/oz.

Wed, 10/13/2010 - 18:29 | Link to Comment Unmisinformed
Unmisinformed's picture

I guess Truman is truly a giant the field of buggy whip manufacturing.

He is an expert in fiat.  Now that fiat is dying, he knows nothing.

 

Wed, 10/13/2010 - 19:33 | Link to Comment masterinchancery
masterinchancery's picture

He and Mad Ben could remake "Dumb and Dumber".

Wed, 10/13/2010 - 18:38 | Link to Comment atomicwasted
atomicwasted's picture

Jim Rickards is a mad genius.  He's like Blofeld but on our side.  I hope.

Wed, 10/13/2010 - 20:11 | Link to Comment silvertrain
silvertrain's picture

++ that.. Jim Rickards is always a must listen to, the dude just drops baddass knowledge..

Wed, 10/13/2010 - 18:54 | Link to Comment Acidtest Dummy
Acidtest Dummy's picture

Truman says, "The Treasury secretary, with the approval of the president, has the power to sell (and buy) gold on terms that the secretary considers most beneficial to the public interests." And, "The us [is not a party to] the Central Bank Gold Agreement."
If GATA said those same things I'd want links.
Truman says "The us holds 261.5m fine troy ounces of gold."
Dear Mr. Truman, Extraordinary claims demand extraordinary proof. to wit: Pics or it didn't happen.

Wed, 10/13/2010 - 19:28 | Link to Comment atomicwasted
atomicwasted's picture

Dox or STFU, Mr. Truman.

Wed, 10/13/2010 - 19:26 | Link to Comment Goldmund
Goldmund's picture

How did this intellectual giant not mention the sine qua non of the anti-gold crowd?

 

"You can't eat it"

Wed, 10/13/2010 - 20:14 | Link to Comment espirit
espirit's picture

China wanting to buy up may be the beginning of the endgame. Drive gold up, USD down until Uncle Sugar screams mercy in a broke pathetic humiliating moment. 

Wed, 10/13/2010 - 21:29 | Link to Comment Goldenballs
Goldenballs's picture

Can,t sell what you haven,t got.

Wed, 10/13/2010 - 21:37 | Link to Comment anonnn
anonnn's picture

...Treasury and the Fed who refuse to allow a proper audit of official holdings...

"offficial holdings" is misunderstood. Holdings are only what is held...for whose account? Whose ownership Whose benefit?

For Kingdom of Saudi Arabia? For Kuwait's Sabah? For X? For Y? For Z? For USA?

The audit being sought is for quantities of demonstrated, unencumbered USA ownership and for quantities owned by USA having known degrees of encumbrance.

A valid audit requires transparency  with fully defined nomenclature and done by acredible source. Who today has that credibility?

 

Wed, 10/13/2010 - 22:07 | Link to Comment proLiberty
proLiberty's picture

The Federal government owns a surprising percent of US land.  Rather than sell portable gold, it would be far better to sell some (un-portable) land parcels.

 

Wed, 10/13/2010 - 22:12 | Link to Comment Rob Jones
Rob Jones's picture

What surprises me is that all the other academics and fiat money supporters haven't jumped on the bandwagon and seconded Mr. Truman's proposal. The silence from this quarter has been deafening. After all, if gold is really just a "barbarous relic", then it would make perfect sense to sell it when the price is high.

I think that even academics instinctively realize that gold is important and is not just another commodity.

Wed, 10/13/2010 - 22:52 | Link to Comment GoinFawr
GoinFawr's picture

Telling indeud. Excellent observation Mr.Jones.

Nos Da

 

Wed, 10/13/2010 - 23:29 | Link to Comment Alchemist
Alchemist's picture

Just exactly what is so special about gold? I am yet to hear a well constructed argument that doesnt involve "the sky is falling" cliche

Wed, 10/13/2010 - 23:46 | Link to Comment honestann
honestann's picture

Okay, rather than be clever, I'll put it this way...

  gold cannot be created at zero cost.

In other words, when you exchange real, physical goods for real, physical goods (including gold, silver, platinum, palladium, lumber, eggs, etc), you cannot be swindled by paper-printing thieves.

Who wants to live in a world where you must invest your time, effort, knowledge, experience and resources to create real, physical goods... then exchange them with craven predators for something they create at zero cost or effort and in unlimited quantity.

Only a complete, drooling moron would support that.

Thu, 10/14/2010 - 01:25 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

I'd like to pass that on to family and friends but at this late stage in the great unwinding, I'm labeled as psychopathic and in need of professional help. I'm apparently nutty and deluded to think that our governments would knowingly conspire against us (in collusion with the banks and illuminati professors) to denude us of our property through overt (when you want to take the time to look) theft . Fucking rabbit holes. Why do I keep falling down them?

Thanks for the post.

Thu, 10/14/2010 - 01:26 | Link to Comment SilverIsKing
SilverIsKing's picture

Only an alchemist can create something at zero cost or effort and in unlimited quantity.

Hmmmm......

Fri, 10/15/2010 - 02:17 | Link to Comment honestann
honestann's picture

Okay, how about "infintesimal" rather than the literal zero?

Ask yourself this.  How much must you or the federal-reserve pay to add 12 zeros behind the "1" on a $1 "federal reserve note"?

Does that ink make the utility or real value of that piece of paper one trillion times greater?

That is just about as close to zero cost as you can get, because the $1,000,000,000,000 bill is the same size as the $1 bill, so you've only moved the ink into a different pattern, not even added any ink.  Therefore, you have an increase of 1,000,000,000,000 times in fiat/fake/fictional/supposed "value" at literally ZERO cost (not even more ink).

Isn't that essentially zero, or as close as anyone can get?

Thu, 10/14/2010 - 02:41 | Link to Comment Alchemist
Alchemist's picture

Gold is absolutely arbitrary.. It can be dug up from the ground in a number of arbitrary countries.. Does it make these countries special?  There are a lot of other things that cannot be created at zero cost.. So what?  What is the right price of gold? Is the fair price 5000 or 200? it's a commodity so it's worth as much as people are willing to pay for it for whatever reason.

Money is a medium of exchange.. So long as a monetary system works to balance out the supply and demand of money there is nothing wrong with paper currencies.. Monetary economics is a lot more advanced than it was 100 years ago.  People are buying gold because opportunity cost is nil in zero-interest rate world and because they delude themselves into believing that "money is being printed" whereas in fact in a balancesheet recession monetary velocity is dead and there is a LOT less to QE2 than meets the eye

Thu, 10/14/2010 - 05:54 | Link to Comment Crime of the Century
Crime of the Century's picture

Painfully stupid - yet arrogant! Well played, sir.

Thu, 10/14/2010 - 06:48 | Link to Comment nmewn
nmewn's picture

Heh heh ++++ an ounce.

Within a fiat system, ultimately, what is the point of working?

They can just print it up at will and pass it out to the masses can't they...why just think of the possibilities ;-)

Fri, 10/15/2010 - 02:21 | Link to Comment honestann
honestann's picture

Yeah, pretty soon they'll realize they can just fly around in helicopters and drop tons of $100 bills over the streets.  What a concept!

Fri, 10/15/2010 - 02:07 | Link to Comment honestann
honestann's picture

Your problem seems to be that you cannot stop thinking in painfully inappropriate but conventional ways.

For example, when you ask "how much should gold cost?", you should realize that is a totally bogus question.  What matters is "how much gold must I exchange for xxxxx?", where "xxxxx" is any and every real, physical good you want.

The difference between asking this question about gold and fiat paper is... gold is real, gold is physical, gold is not prone to degredation over time, gold is not prone to degredation in any but extreme and unusual environments, and gold cannot be created at [near] zero cost.

Please notice that you can substitute any other real physical utilitarian good for "gold" in the above paragraph, and the statement is still true in essense, except other real, physical goods are not quite as good as gold for this purpose in some respect or other.

Perhaps those of us who advocate the "gold standard" should point out more carefully that we really do mean "standard".  We mean "standard" just like the metric system is a standard for measuring length, mass, etc.

We absolutely positively do not wish to force anyone to save their wealth in the form of gold, or exchange their gold for other goods, or exchange their goods for gold.

Unlike the central gangster-banksters and their cronies in governments, we would be revolted to force you to do or not do anything at all... except do not harm or defraud others, or their property.

What we're saying is, gold seems to be the most perfect of all real, physical goods to act as a store of value and standard of exchange.  If we want to exchange the eggs we produce for lumber and nails and ceramic tiles that others produce, what are the appropriate exchange rates?  That is extremely difficult to figure, especially since there would be millions of different exchange rates for all combinations and permutations of real, physical products and services... which is simply impractical in its overwhelmingness.

All this can be solved by adopting some single real, physical good as a standard, and keeping track of the exchange rate for each good to that standard.  Then it is a simple two step process to determine the exchange rate between any two real, physical goods or services by trivial arithmetic.  You do that now with dollars, but dollars are utterly fiat, fake, fraudulant, counterfeit, unconstitutional, and controlled by a gang of elitist criminals bent on enslaving and controlling mankind while enriching and empowering themselves... all without producing anything real, physical or valuable.

In other words, those of us who advocate the gold standard are 100% happy and satisfied for you to save your wealth as silver, nickel, platinum, palladium, lumber, wheat, eggs, or anything else you wish.  However, we hope you note what care must be taken with each to prevent degradation or spoilage.  And we also are 100% happy and satisfied for you to seek to directly exchange the goods you produce directly for any other goods you want without going through the two-step process of exchanging your products for gold, then exchanging your gold for other products.

We leave you 100% free to decide for yourself.  We simply do not accept the arbitrary control and theft perpetrated by the creators of fiat, fake, bogus, fraudulant paper substitutes for real wealth.  We do not want to be left holding a bunch of totally bogus paper with no real value, and thereby enrich the predators-that-be of this world who dominate and enslave due to their unethical practice of creating FAKE value, which is to say NON-VALUE, and passing it off for real, physical goods that require time, effort, skills, expertise and resources to produce.

Do you understand now?

Wed, 10/13/2010 - 22:43 | Link to Comment tony bonn
tony bonn's picture

i think tweedle dee and tweedle dum were having a debate which i will interrupt....

the economic cyclicality present under the gold standard is both a non sequitur and a conflation of colinearity with causality....economic cyclicality is due principally to the fractional nature of the currency....it results in runs because poor investment decisions made by incompetent banksters are made which eventuates a run on a bank...it has absolutely nothing to do with the gold standard.

and no, selling gold would not undermine confidence in the dollar, nor would a loss of confidence be a bad thing...every fiat paper in america should be burned at a giant rally.

finally, anyone who believes that there is any more gold in ft knox other than what is needed to plate tungsten bars is pure out and out fucktard....

fekete is correct - to save the economy the treasury must open the mint to the free mintage of money (gold).

Wed, 10/13/2010 - 23:42 | Link to Comment honestann
honestann's picture

Good post, except I wonder whether everyone understands that selling gold would not undermine the dollar, because everything possible has already been done.

BTW, what is more fun is to honestly reverse the statement "selling gold for fiat paper"... and say what it really is, which is "buying fiat paper with gold".  Now, how can anyone be stupid enough to "buy fiat paper with real, physical gold"?  Especially if you're the scumbags who print fiat paper at zero cost.

The entire concept is pure retard.

Wed, 10/13/2010 - 23:12 | Link to Comment Coldfire
Coldfire's picture

Ted Truman is an erudite somebody. But the moral flaccidity, mendaciousness and sheer idiocy of his message suggest a comparison to the talking turd in Jonathan Franzen's "The Corrections".

It was a sociopathic turd, a loose stool, a motormouth.
....
       "Get away, get away," Alfred said, planting an elbow in the carpeting as he exited the bed headfirst.
       "No way, Jose," the turd said. First, I'm gonna get in your clothes."
       "No!"
       "Sure am, fella. Gonna get in your clothes and touch the upholstery. Gonna smear and leave a trail. Gonna stink so bad."
       "Why? Why? Why would you do such a thing?"
       "Because it's right for me," the turd croaked. "It's who I am ... ."

p. 282, Franzen J., The Corrections, 2001.

Wed, 10/13/2010 - 23:15 | Link to Comment Alchemist
Alchemist's picture

Gold is in a bubble indeed but that bubble is far from over.. We will probably end up going to $2000 before we crash back to $500..

There is nothing special about gold.. it's a piece of yellow metal that has very little industrial use.. It's being hyped up by all this nonsense talk about "money printing" but the truth of the matter is that most people dont understand how QE works and how balance sheet recessions evolve.. Without demand for credit there is no money printing.. The Fed is merely replacing interest-bearing money (govie bonds) with non-interest bearing money (cash).. Money supply can only be created by extra marginal demand for credit from consumers or from the government.. And that will not happen for a long time to come..

 

Gold is fine for a trade but after the pump dont forget to dump..

Wed, 10/13/2010 - 23:37 | Link to Comment honestann
honestann's picture

Real, honest money supply can only be created by mining.

Wed, 10/13/2010 - 23:40 | Link to Comment Alchemist
Alchemist's picture

that's metal supply which is rather arbitrary.. how about we measure money supply in uranium or molibdenium or Dutch tulips?

Fri, 10/15/2010 - 01:44 | Link to Comment honestann
honestann's picture

True, mining or other productive activity.

I advocate the notion that any real, physical good is a perfectly fine basis for exchange (for other real, physical goods and services).

However, not every real, physical good is equally good as a means to save (store wealth for a moderate to long period).  Perfectly good real, physical goods like eggs and bread spoil rather quickly, and thus do not hold value very well at all.

In the end, precious metals seem best, and gold seems the best of the bunch.  But sure, other goods are fine.  All that really matters is that nobody allow any form of fiat non-asset (including so-called paper receipts for real assets) be inserted between production of real physical goods and their eventual exchange for other real, physical goods.

The bottom line is, "money" is a dangerous term.  Those of us who advocate the so-called "gold standard" are actually advocating honesty, ethics, justice, liberty, individualism, productivity and voluntary interactions.  We consider gold to be the best real physical good to be the "standard" of value and exchange, but we have absolutely no desire to force anyone to save gold versus silver, lumber or any other asset they choose, and we have absolutely no desire to force anyone to exchange their goods for gold versus any other real, physical good.  All we really want to avoid is the insertion of ANY form of fiat paper fiction non-asset into the process, because that guarantees the rise of a powerful, authoritarian predator class with the ability create those bogus units out of thin air, and eventually gain control over the entire financial system of the planet, and enslave all productive humans.

The only alternative to obscene tyranny is the gold standard.  But again, when we say "gold standard", we only mean gold is a standard, not any kind of requirement or prohibition.  It is exactly like saying we advocate adopting the "metric standard"... but leave anyone and everyone free to measure in the english system, the babylonian system, the martian system, or any other system.  Thus, every other system is tyranny, while the gold standard is honesty, ethics, liberty and justice.  Not to mention real.

Thu, 10/14/2010 - 01:11 | Link to Comment akak
akak's picture

Alchemist, I am not sure which of your absurdities to highlight and mock first --- your neoKeynesian notions about the Fed and the abomination of our fiat currency debt-enslavement, so-called "currency" system, or your Nadlerite ignorance on the historical significance and monetary character of gold.  Suffice it to say, your credibility has just taken a swirling swim down the porcelain throne.

Thu, 10/14/2010 - 02:34 | Link to Comment Alchemist
Alchemist's picture

Is there an ounce of argument in this bunch of gibberish you just scribbled?

Thu, 10/14/2010 - 03:36 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

Paper is a claim against future labor.

Gold in hand represents labor already accomplished.

If you don't understand the difference then you haven't a clue about the value of either.

The rising price of gold vs fiat currencies is a reflection of people's fear that fiat currencies will be devalued...which they will be.

The rising price of gold also reflects the repricing of past labor to bring gold to market...a repricing of past labor in today's devalued currencies.

Only a fool would prefer a paper currency, that can be printed in infinite amounts, over gold that is available in very finite amounts.

 

Thu, 10/14/2010 - 20:24 | Link to Comment Alchemist
Alchemist's picture

why gold and not uranium or timber?  Gold doesnt represent accomplished labor.. There is finite amount of gold in the world - does that mean that capacity of labor is finite? So population growth would be immediately deflationary?  Read your Great Depression history - gold peg was the main cause..

Yes sure paper could be printed in infinite amounts but that would take an irresponsible central back doing t within an irresponsible institutional framework that has no checks and balances.. Just like any driver can sporadically drive on the sidewalk and kill a lot of people.. But yet, when you see cars on the road you dont immediately assume that any or all of these cars can arbitrarily run for the sidewalk in order to mow you down..

One needs a certain paranoia to hold to this view and there is clearly plenty of paranoia in the current environment to fuel the gold bubble for another year or two

 

 

Thu, 10/14/2010 - 21:05 | Link to Comment akak
akak's picture

Alchemist, if I were as uninformed as you are on the topic of gold and its monetary history and attributes, I would do a lot more reading and a lot less talking.

why gold and not uranium or timber?

Because neither is easily portable, durable, easily recognizable (OK, maybe timber), readily divisible, limited in supply (uranium might pass here), nor a concentrated store of wealth, all of which are however attributes of gold (the fact that gold is neither radioactive and toxic, nor prone to rotting, is just another selling point in its favor).  You seem to think that gold is some arbitrary fetish of goldbugs, who spurn any and all other possible monies, but it is the MARKETPLACE that chose gold, and silver, as the most ideal forms of money, time after time, in hundreds of societies over literally thousands of years.  Yes, other physical commodities can be and have been used as money (notably copper & bronze), but gold and silver were simply found to be the best overall choices for money by the collective decisions of market participants.

You ask why WE chose gold as the best money and store of wealth?  Well, you are asking the wrong question:  It is not we who made the choice, but MILLIONS of other men (and women) over the span of recorded human history.  If you want to rail against gold, and deny its monetary attributes and value, then you need to take issue with virtually the whole of worldwide monetary history as well.

 

There is finite amount of gold in the world

Yes, and therein lies the value of gold.  Keynesian propagandists and sympathizers never seem to be able to grasp this point.  WHY would you want, as money, anything that can easily produced in any indefinite amount whatsover?  And WHY will the proponents and defenders of political (fiat) currency never allow those who would rather use hard money over their producible-on-a-whim fiat currency the option to use the money of their own choosing, instead of forcing them to use a constantly depreciating fraudulent "money" under threat of violence by the State?  Gold and silver have never needed legal tender laws (i.e., the force of the State) to circulate as money; fiat currencies always have, and do.

 

So population growth would be immediately deflationary?

Perhaps, perhaps not --- it also depends on the annual mine production of gold, and the growth in productivity within the society and economy in question, among other factors.  But you ask that as if you automatically assume that a deflationary monetary environment is a bad thing --- why?  What is wrong with having one's money, and one's savings, INCREASE in value over time, instead of the perverted system we live under today, in which attempts to store wealth are constantly subjected to the theft of currency depreciation?  Real, honest deflation rewards thrift and long-term thinking; inflation rewards consumption, short-term thinking, and financial irresponsibility in general.  I know which choice I would make, if I were free to choose.

 

One needs a certain paranoia to hold to this view and there is clearly plenty of paranoia in the current environment to fuel the gold bubble for another year or two

I strongly suspect that had one told you in 2006 what was in store for the economy, financial system and Wall Street over the following three years, you would have summarily labeled it "conspiracy theory" and "paranoia" as well.  I never fail to be amused by the blinkered thinking of conventionalist, conformist establishment believers who lash out at every warning of financial and economic damage caused by the power elite as "paranoia" and "conspiracy theories", and yet upon seeing such warnings and predictions play out in real life time after time, they instantly purge from their memories all those prior warnings and predictions in complete cognitive dissonance, lest their pro-establishment world view be overturned.

Thu, 10/14/2010 - 07:48 | Link to Comment Poor Grogman
Poor Grogman's picture

Alchemists never were successful in replicating golds properties, what clever contrivance would this wise alchemist have us use as money?

Wed, 10/13/2010 - 23:36 | Link to Comment honestann
honestann's picture

Wow, what a massive effect Edwin Truman had on the price of gold... all the way down to $1377 !!!

Seems like the predators-that-be have progressed from pushing on a string with one finger to pummeling all strings with both feet.

I just hope those strings are high tensile material, because we're gonna need every string we can get to hang all the predators-that-be for endless treasons and crimes against humanity.

Thu, 10/14/2010 - 03:40 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

$1387.50 this morning. Eddy Truman are you out there? If so, make some more assinine suggestions today...Perhaps you can push gold over $1,400!

Where do TPTB store these clowns when they are not in use?

Thu, 10/14/2010 - 00:06 | Link to Comment Temporalist
Temporalist's picture

I think a great opportunity is being missed by dismissing this great man's idea.  It would only make sense that the first step before selling is to audit what there is to sell.  First things first.

Thu, 10/14/2010 - 01:29 | Link to Comment Moonrajah
Moonrajah's picture

It shows that most financial blogs just don't have the propper understanding of real-world economics that could only be obtained courtesy of a Phd.

/s

Thu, 10/14/2010 - 03:20 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

I think this PHD is running a scheme up the flagpole for feedback. Sooner or later the US Gov is going to have to come clean and admit that there is no unencumbered gold. If they do a fake sale now it will eliminate a 'come clean' moment later.

Thu, 10/14/2010 - 05:59 | Link to Comment GFORCE
GFORCE's picture

3% cut off the deficit? Ben would fill that hole in a week.

Thu, 10/14/2010 - 08:59 | Link to Comment MrMorden
MrMorden's picture

If we had enough gold to completely pay off the debt, how long do you think it would take to be back in debt again by the same amount?  Ten years?  Five?  The problem is the political class and its complete willingness to dispense cash to buy votes and power.

Thu, 10/14/2010 - 10:42 | Link to Comment FreddyInBangkok
FreddyInBangkok's picture

some people's brains would be best compressed in a large antique vice so that what was once contained therein would be uncontained thereout.

Sun, 10/17/2010 - 03:23 | Link to Comment honestann
honestann's picture

The proposal to sell of US gold is an attempt at self-fulfilling prophesy by poison pill.

This is an attempt to make it absolutely impossible for the USSA to revert to a gold standard after the fiat currency meltdown coming soon to planet earth.

The predators-that-be, starting with the FederalReserve, will do absolutely anything, no matter how destructive to humans and the world economy, to keep total control of governments and populations after their fiat con game explodes in everyones faces.

They know very well that the natural and rational reaction to the explosion of their fiat currency scams is a return to real money == gold.  They want to make this utterly suicidally impractical for the USSA to return to gold by dumping all gold before the fiat collapse begins.  By reducing reserves of real, honest gold money to zero, popular support incentive for a gold standard would be greatly damaged.

This is a craven attempt to essentially say, "if you put us fiat-scam-artists out of business, we shall utterly and totally destroy this country, if not the world".

These cretins are pure craven, diabolical predators.

No price is too high to get rid of these murdering predators-that-be.

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