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Mr. Denninger and Gold or Why the Dollar-Deflationists Are Wrong
Those who know Mr. Denninger know that he, well, for lack of a better word, hates Gold. It only goes to show the level of disinformation and ignorance prevalent in our society when even smart people like Karl fail to get it. From what I hear anybody even mentioning the word Gold runs the risk of being permanently banned from one of his "forums". In a recent commentary entitled "Ten Things for 2010" he was at it again bashing Gold. Here is what he had to say:
We're not looking at hyperinflation folks, in my view - we're looking at a deflationary collapse…If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them. Why? Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can't eat it. If you try to get around the tax man structure you're going to get creamed; governments can and WILL prevent that from working. My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you're wrong.)
Really Karl? LEAP Calls? In a hyperinflation? That’s a good way to lose 5% your portfolio. I’m assuming you know what hyperinflation is - in a hyperinflation the currency becomes worthless, as in toilet-paper. Why would anyone want to get paid their "winnings" in a worthless currency, assuming there are stock indices and counterparties left who can pay off these worthless winnings when countries collapse?
And the tax structure is FAR more favorable for Gold than ANYTHING else, if only you are not in the habit of bending over. Buy cash and keep your mouth shut – it’s very simple – or just move to another country where the government is not as intent on raping its citizens. I know privacy is a foreign concept in America these days, but still. All your other assets, including stock market profits, are fully open to the government and there is nothing stopping them from taxing them to the hilt. Trust me, when it all hits the fan Gold in your personal possession will be your best friend.
Which brings me to my favorite part:
gold has never performed well on a contemporary basis .vs. inflation
Poor Gold. The thing gave an instant 75% profit when Roosevelt confiscated it in 1933 and rose 24x (yes, that’s 24 TIMES) from $35 to about $850 in a space of 10 years from 1970 to 1980. And even during the past decade from 2000-2010 it has risen 5x outperforming ALL asset classes. Overall, from 1933 till date it has risen about 60x. That is, if you simply held Gold since 1933 you would be now 60 times richer, at least in nominal terms. Yet nobody remembers all that. All they remember is the lousy 20 years from 1980-2000 when the full force of the derivatives market was brought to bear upon it to suppress it’s price (well, that’s a topic for another post), as is being done even now absent which it would have easily crossed 10x (from the 2000 low) by now – which it will at some point in the future as the market cannot be suppressed forever. Indeed, the longer the suppression, the more forceful the eventual price rise as happened when the London Gold Pool collapsed during the late sixties soon after which Gold shot up 24x during the next decade. If you’re not that devoted a disciple of Karl I suggest you hang on to your Gold for a little while longer. In my humble opinion, it will outpace all gains in all other asset classes since the creation of the dollar – in not only nominal, but real purchasing power terms.
And then there was this again:
The last time I checked they didn't take 100oz bars at WalMart, but they sure do take $100 bills
And the last time I checked Karl, they weren’t taking stock certificates and bonds either. Also, there was a funny thing I noticed: there was NOTHING stopping me from getting dollar bills, euros, yen – you name it – for my Gold. In fact, everytime I sold some Gold I got even more paper tickets than the last time – which meant that I could buy even more stuff with the same amount of Gold. How surprising, no?
Well, Karl was definitely surprised:
Precious metals will not be a safe haven: Clean miss. Gold and silver have both performed well.
And talk about reaching wrong conclusions:
Discovery that the metals market has been "polluted" to the point of irrelevance would mean that those around the world who had bought and were holding alleged gold bars that in fact aren't gold had tendered good money for nothing. This would be a monstrous deflationary event - after all, the definition of deflation is the destruction of money, and that's exactly what would have happened, just as if you took a stack of $100 bills and burned them in your back yard.
No Karl, the bills still exist – in the bank account of whoever was paid to obtain the said Gold. It is the Gold which is discovered to be no longer existing, thus causing the apparent supply to be further reduced and spiking the price.
Karl thinks he’ll be safe watching these “fireworks” from the sidelines. Not so Karl. By not buying Gold (and holding dollars), you are smack in the middle of them. You are not simply “missing out” on some investment gain but stand to lose everything as the purchasing power of the dollar is decimated. This is why those advocating holding only paper cash as a “safe alternative” are in fact harming those who listen to them.
Now don’t get me wrong - I agree with a lot of what he says in general – he’s a good reporter (which is why I keep him on my “must read” list) - but when it comes to Gold, Karl simply doesn’t “get it”. First of all, when you talk about deflation you have to ask the question, “In terms of what?”. Most people ala Mish, Prechter, Karl et. al. when they talk about deflation are referring to deflation in terms of the dollar, i.e. they are, in fact, “dollar-deflationists”*. One can’t really blame them since the dollar is considered by most people as “money” today and is therefore their frame of reference. But this is a critical error of perception that will prove fatal to those who hold their life’s savings in dollars when it all finally implodes. The dollar today is just another fiat currency created at will out of thin air by bankrupt and corrupt governments and their Central Banks. It is an illusion of money, not money; which brings us to the question of:
What is money?
This is a topic which can fill an entire book, but I’ll just quote the best one I found (Mises):
In the marketability of the various commodities and services there prevail considerable differences. There are goods for which it is not difficult to find applicants ready to disburse the highest recompense which, under the given state of affairs, can possibly be obtained, or a recompense only slightly smaller. There are other goods for which it is very hard to find a customer quickly, even if the vendor is ready to be content with a compensation much smaller than he could reap if he could find another aspirant whose demand is more intense. It is these differences in the marketability of the various commodities and services which created indirect exchange. A man who at the instant cannot acquire what he wants to get for the conduct of his own household or business, or who does not yet know what kind of goods he will need in the uncertain future, comes nearer to his ultimate goal if he exchanges a less marketable good he wants to trade against a more marketable one. It may also happen that the physical properties of the merchandise he wants to give away (as, for instance, its perishability or the costs incurred by its storage or similar circumstances) impel him not to wait longer. Sometimes he may be prompted to hurry in giving away the good concerned because he is afraid of a deterioration of its market value. In all such cases he improves his own situation in acquiring a more marketable good, even if this good is not suitable to satisfy directly any of his own needs.
A medium of exchange is a good which people acquire neither for their own consumption nor for employment in their own production activities, but with the intention of exchanging it at a later date against those goods which they want to use either for consumption or for production.
Money is a medium of exchange. It is the most marketable good which people acquire because they want to offer it in later acts of interpersonal exchange. Money is the thing which serves as the generally accepted and commonly used medium of exchange...
(All emphasis mine)
Money was created by the markets; by humans trading goods and services amongst themselves; by the need for indirect exchange. This is one of the major misconceptions of the dollar-deflationists - that money is what the government says it is. Although Governments do their best to convince people otherwise, including putting a gun to their collective heads via legal tender laws, they cannot dictate what money is – not for long periods of time anyways – which is why whereas Gold has been money for thousands of years, you’d be hard pressed to find a fiat currency that has existed past a few decades. The present period is one such short period of mass delusion where the majority has been convinced – including, apparently, Mr. Denninger - that the colored pieces of paper being printed by various men behind the curtains is, in fact, money.
Gold is the commodity that humans chose to be “money”- the most marketable good. It didn’t happen overnight, but over thousands of years of evolution. Billions of trading decisions over centuries made by free men of their own volition – the collective wisdom – installed Gold as money. It needs no government violence to enforce as money because the force of nature that is the market chose it to be money. Indeed, it was the governments who hijacked the free-market commodity money of Gold into “backing” their various fraudulent paper money scams using fractional reserve systems. Why? Because the power to create money is the ultimate power. It is not for no reason that Mayer Amschel Rothschild said:
“Give me control of a nation's money and I care not who makes her laws.”
And why do we know Gold is still money today? It’s simple – Gold has the highest stocks to flow ratio of any commodity i.e. its total above ground stockpile is very large compared to its annual production which is NOT the case for other commodities. The reason for this is that while other commodities are primarily mined for consumption, Gold is not consumed but hoarded. Its primary function is that of a store of value – a wealth reserve. Why do you think the Central Banks keep Gold on their balance sheet even today? Right. Even the Gold jewellery demand in countries like India is, in fact, investment demand in disguise – hidden firmly behind veils of religion and culture to protect their real wealth from the depredations of various rulers and governments that have pillaged her over the many thousands of years of her existence.
Moreover, even though most people don’t realize it, even today the dollar is only acceptable as money because it is indirectly “backed” by Gold (via the derivatives market) i.e. you can get Gold in exchange for paper dollars on the open market. The proof of this lies in the fact that were, for some reason, the convertibility of Gold into dollars suspended today [on the open market], the dollar would instantly collapse.
Gold IS Money – not the dollar, not ANY fiat currency. Period.
As the king of banksters J.P. Morgan himself testified before the Pujo Committee in 1913:
“Gold is money and nothing else”.
The Fiat Money Scam
Throughout history no fiat currency has survived – ever. There is a reason for it. Paper money is inherently a scam – a scheme to loot the people who actually produce the goods and services in the economy. Just because it is legalized and its perpetrators hold fancy government titles does not mean it is not a fraud. The issuer can create unlimited pieces of paper – or computer bits today – at essentially no cost and use them to appropriate real goods and services in the economy. So whereas you and I have to actually do real work to procure it, the printers of the currency can basically print whatever they need. This is why there is a constant inflation of money supply under a fiat money regime as has been the case since the Federal Reserve was established in the US in 1913, as constant theft requires constant creation of new money. The evidence of this inflation is the annihilation of the dollar’s purchasing power since then:
The Dollar's Purchasing Power Since the Creation of the Federal Reserve in 1913
This is why we have legal tender laws making the unconstitutional Federal Reserve Notes legal tender with the monopoly of the private banking cartel (i.e. the Federal Reserve) enforced by the courts enabling the banks and the government to essentially enslave the populace. This is also exactly why the founders of America prohibited anything except Gold and Silver to be used as money, and why the governments go to great lengths to suppress their price. Indeed, America today is the very antithesis of what its founders intended.
The fraudulent money system today is the source of all the rottenness. The various scams in progress today - the entrenched corruption - can be all be traced back to it. The rot is at the very top of the pyramid from which the fountain of fiat money emanates. It is indeed telling that the two World Wars occurred right after creation of the Federal Reserve. Further, no amount of prosecution will fix the system because the prosecutors themselves have been corrupted. As Ayn Rand said:
"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world? You are.”
It is too lucrative a scam to be given up voluntarily by those owning the printing press while the going is still good. It is like expecting a thief to stop stealing while not only being immune from any sort of legal prosecution, but actually having the power to create laws. The system cannot be fixed - the only way this will stop is a collapse of the existing system so that a new one can be built – and we are in the middle of it right now.
Deflation in Terms of Gold, Hyperinflation in Terms of the Dollar
By its very nature, due to economic control being concentrated in a few hands and fraudulent creation of money out of thin air, the fiat money system creates massive misallocations of capital and resources throughout the economy. The economy under a fiat money system is no different than a centrally planned one, such as the Soviet Union. Moreover, since the entire world is on a fiat money standard today – with the various fiat currencies themselves being “backed” by the fiat dollar - misallocations of capital have occurred throughout the world resulting in malinvestments. These misallocations are both material and human, as exemplified by the skyrocketing unemployment rate. The malinvestments now need to be liquidated i.e. converted to the most liquid form – “the most marketable good” or money - so that the capital can be reallocated to more productive uses. Loans are called in as they can no longer be serviced. This results in deflation, i.e. rising demand for money in relation to everything else, and consequently falling prices and increasing purchasing power of money. Moreover, economic uncertainty means that more and more people want to hold “the most marketable good” i.e. money thus further increasing the demand for money.
Now normally – since a lot of debt-money is destroyed in the process and there is a rising demand for money - this would lead to a rising dollar (in terms of purchasing power, not the meaningless DXY), but that would mean that the whole “theft-via-inflation” scam would fall apart. The government can’t tax a rising purchasing power! They simply CANNOT allow deflation in a fiat money regime as it would defeat its very purpose – that of allowing them to appropriate resources from the rest of the economy. This would threaten their very existence. This is why holes created on the banks’ balance sheets by defaulting loans – which would normally create deflation - are being eagerly filled by the Central Banks. This is why the Fed is now simply printing money out of thin air – both overtly and covertly, with the derivatives market being cleverly used to absorb the excess money creation (so you were wondering why the derivatives monster is increasing exponentially in size?) - to fund the government’s operations as there is not enough money in the market to lend to the government. Hiding under esoteric nonsense terms like “quantitative easing” does not change the fact that it is simply creating money via ledger entries and outright STEALING.
Whether they “allow” it or not deflation WILL take place – not in terms of dollars, but in terms of Gold. It’s simply forces of nature – the market – at work. The dollar deflationists expect the dollar to suddenly reverse its 100 year long drop in purchasing power. Ain’t gonna happen. What the government is doing now – i.e. spending raw printed money into a contracting economy - assures us that we will end up with the hyperinflation of the dollar. The only thing they can do is prolong its demise with intermittent bouts of induced apparent “deflation” to keep the inflationary scam going a little bit longer - remember 2008? (h/t Gary). Initially, of course, many people (such as Mr. Denninger) – mistakenly thinking the dollar to be “money” – will rush to its perceived safety causing the dollar to rise. But ultimately, as more and more people realize that the government will not – indeed, cannot – stop inflating the currency into oblivion, will choose to hold the ultimate “marketable good”, i.e. Gold. This is the reason why Gold is the only asset class at new all time highs. Rest assured, even the big boys are holding Gold in their private vaults, not dollars. Is there any sense in holding something you can create at will?
Ultimately, there can only be deflation in terms of commodity based money such as Gold since it cannot be created out of thin air. Indeed, we have already been deflating in terms of Gold for the past decade. Just look at the various commodities, the stock market, real estate – pretty much anything - priced in Gold – it’s all going down.
SPX priced in Gold (2000-2010)
As capital goes down the liquidity pyramid in search of the most marketable good, all the money derivatives – including the dollar – will collapse returning all capital to where it came from: Gold; a global reset, if you will, with only holders of Gold left standing when the dust settles:
Exter's Liquidity Pyramid
You Cannot Eat Gold, But You Can’t Eat Dollars Either
That has to be one of the lamest arguments against Gold – ever. It is the sign of a closed mind. It shows that you don't know ANYTHING about human history, which is not surprising considering the sorry state of our government controlled "education system". You cannot eat FRN’s either – why not just burn them? The function of money is not to be eaten but to be used as a medium of exchange and store of wealth i.e. to get what you want to eat at an indefinite time in the future. And while with Gold you are assured of getting at least something in return in the future, whether it is an edible product or not, it is not so with dollars. Fiat money has a problem in that it lasts only as long as the government enforcing its use does. In times of economic uncertainty, such as today, when the very survival of various governments is at stake (yes, that includes the US Government) do you want to hold Gold or their worthless colored paper tickets? Gold is the only money that has outlasted empires and governments - no fiat currency has. Think about it - what will your dollars be worth when there is no government to enforce it as legal tender? Yup – zip, zilch, ZERO. And to those who say that we will not need Gold (but something else like food or guns) in such extreme circumstances, I say that empires and governments have constantly collapsed throughout history but it did not mean the end of the world. As long as you believe that human society will exist and there will be division of labor, you need money (i.e. Gold) – because:
a) You cannot store indefinitely all your needs especially perishable items such as food.
b) You do not know with 100% certainty what you will need in the future.
c) You cannot produce/manufacture everything that you will need today or in the future by yourself.
Even if the government does not collapse there is nothing stopping it from devaluing the currency at will in a step function thereby instantly appropriating a vast amount of your savings, as has already happened not once but twice with the dollar since the creation of the Federal Reserve. I mean really, the facts are so obvious that you have to be either be in total and complete denial (perhaps due to having already put all your eggs in the dollar basket) or in collusion with the people promoting the paper money scam.
Gold is the currency beyond Governments. It is the most liquid form of money accepted throughout the world – the true reserve currency of the world - whereas Dollars, Yuans and Euros etc. are only guaranteed to be accepted within their own respective countries, and as long as their respective governments last. Why would you want to tie yourself down to the paper currency of a particular nation, especially in times of such turbulence? It points to a very limited sphere of thinking when you advocate that holding only dollars is the best strategy. It is a fallacy to believe that there is no refuge outside the system; that you have to be trading paper tickets all the time to “keep up” with the dilution of your purchasing power or just stand by idly holding dollars while the government rapes you. Gold is your refuge outside the system.
Got Gold, Mr. Denninger?
*In general we can state that they are “fiat-money deflationists” since the process of money creation is same in all the countries i.e. money is created as debt and the collapse will follow a similar route. The only caveat in my opinion is that since the dollar backs all the other fiat currencies, it *might* collapse last. Also, to keep things simple, for the rest of the discussion, we’ll simply use the term “dollars” with the understanding that it can be used interchangeably with the general terms “fiat currency” or “fiat money” since it is one itself.
For an excellent discussion refuting the dollar-deflation theory and why the dollar WILL eventually hyperinflate, please refer to "No Free Lunch".
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Snizzle rizzle on da fizzle nizzle...a 24 carat bitch slap...LOL.
i read stuff like that and I laugh out loud too, SME. i bought gold at 427....so, even if nothing else happens, i've got a triple in gold, and a four bagger in silver.
and i didn't have to deal with the rigged casino. it was all very simple....
Once again you decide to broadcast your ignorance with a megaphone. The fire is not out, Bates. They are getting ready to turn a gasoline hose on it. Burying your head in the sand will keep your hair, but I'm sure your crispy hindmost sticking up will still be abused the depraved paper kings.
And yet you've shown no proof that the economy is NOT improving.
The funny part is that every economic indicator on the planet says that it is.
The only people that say that the economy ISN'T improving are the people on zerohedge, who missed the entire rally.
Ok Johnny if you really think that the economy is improving will you change your tune about gold and the economy if
1) Gold has reached another new high by next year?
2) The stock market is relatively flat or possibly lower by next year?
3) Unemployement (official) is still 10% or more?
... only silence. Master Bates/Johnny B. where are you?
+.9999
I think that there is a basic human tendency to want to believe everything will be OK. People find comfort in other people also believing that everything will be OK. Sometimes they do this because the implications of the truth are so distasteful, they would prefer to believe the falsehood. Those who would hold PM's are in effect questioning the rational on which these people find comfort. This makes it harder for them to continue to believe the falsehood, so they attack the messenger.
I had a job once where I would warn organization on different occasions, "we should not do things this way, it will not end well." After a heated debate, the organization would proceed in a direction counter to my advice. I would suck it up, and do everything possible to make bad approach work. When the effort failed miserably, I would be blamed, since I had predicted it would fail, I was somehow responsible for the failure. Same thing here. If/when things do go south, those with PM's will be accused of being "hoarders", "speculators", "opportunists", and "fearmongers" who CAUSED the collapse. Mark my words, these same people saying we are wrong will in the end say we CAUSED it.
seen this a MILLION times.
They hate me more because I tell them that I told them so, but there's this creeping envy that you were right and they were not.
They want people around who were dumb and clueless like they...an ego thing, methinks.
It's like the flip side of the "misery likes company" coin ---- insecurity HATES surity.
For me, anyway, PMs are only insurance. They fit nicely inside 4" PVC, sealed and buried (not on my land). I sleep well at night.
You buy insurance before you get cancer, not when you already have cancer.
If you try to buy insurance when you have cancer, it costs far too much and is worthless.
The economy has cancer. The time to buy insurance is not now.
Right now the economy has gum cancer, or a cancerous spot on its nose. Yet to come is the brain cancer, lung cancer, colon cancer, and lymphoma.
Many people are incapable of investing in precious metals.
It takes a certain mentality. You essentially have to assume that everyone, everywhere is out to fuck you over and steal from you. The government and cat-burgerlers are one in the same.
It takes a certain type of person. Someone with a survivalist outlook on things. Have you ever met a sucessful independent miner? Someone with a dredge and a gold claim? Try asking them about how much gold they have on their claim or where their claim is located or try to pick them out of a crowd? I have met plenty of people like this. They don't 'look' wealthy and they certainly don't advertise their wealth.
Why in the world would you EVER UNDER ANY CIRCUMSTANCES tell someone besides a close family member or broadcast to anyone that you have a hoard of precious metals rat-holed in you house?!?
Sure, when it all melts down, your begging to get robbed if you show up trying to barter for food with 1 oz Gold eagles. I much prefer holding 5 gram bars, silver eagles, junk silver and old gold coins.
If you can find one, go chat it up with a depression era coin shop owner. There are still some of these guys around and they will set you straight on precious metals.
Bullshit again.
Evident over the past 10 years, gold is a good investment regardless if there is Armageddon.
And yet there wasn't armageddon, and I doubt you've been holding gold for ten years.
If you were, you made the right choice.
However, buying gold at this point in time is a disaster waiting to happen. It will have the same results as those who bought gold in 1980.
Gold is good to buy at the peak of the business cycle, and is best to sell at the lows of the business cycle.
You do not buy insurance when a bad event occurs because the price of insurance has already increased. You buy insurance in the good times to prepare for the bad.
If gold is insurance, the time to buy it was ten years ago. You don't buy insurance at the peak of a crisis. The value of that insurance only decreases as the crisis is brought back to normal.
I finally stopped laughing.
"However, buying gold at this point in time is a disaster waiting to happen. It will have the same results as those who bought gold in 1980."
Would that be trading in their rapidly depreciating greenbacks at the 1980 high of $850 or the low of $481???
Did not GG's nosediving chart of the "value" of depreciating dollars of 1980 vintage vs. today's cellar dweller make any sense to you when you posted the above comment???
Try this instead;
http://www.measuringworth.com/uscompare/result.php?use[]=DOLLAR&use[]=GDPDEFLATION&use[]=VCB&use[]=UNSKILLED&use[]=MANCOMP&use[]=NOMGDPCP&use[]=NOMINALGDP&year_source=1980&amount=1.00&year_result=2010
Anyone who bought gold and held from 1980 until now is considerably more healthy, wealthy and wise for doing so...no ulcers...no sleepless nights...no Volker's, Greenspans and Bernanke's.
Gold is not a trade for most...it's a place holder that will always increase against fiats through time...book it.
And besides, I'm kinda rooting for you currency mooks in pushing it down further...I'm/we're waiting, with lot's of cash ;-)
a pure zit kid face // acting in an adult world ,, out of work ,, probably on food stamps .
teaching his superiors in age , experience , results, and with the hubris that comes with being a total jerk .
some sold gold 1n 1980 (before you were born) for 800 bucks
built a business , hired kids like you to file the papers ,
sold said business to fidelity at the 2000 apex , bought gold 300 setting on 900 an oz profit .
and you come on.. sans work sans experience and some how try to make a case against gold ,, in the face of a debt bubble . bond bubble , and nations buying gold ,
with the likes of richard russell jim sinclair , jim dines
all in the business a combined 150 years .
and a host of credible adult humans
either your a masochist or some one with a tin ear .
and trolling for chump change . and selling out for a hunk of meat thrown on the floor.
and at 1500 gold .. will be get this same screed of loopy spin .
JB - Maybe thats the gold argument GG and the other gold bugs have posed - that we are not yet at the lows of this cycle.
I do not agree with that assessment.
The assessment that i made regarding GG and co's views, or that we havent yet seen the lows?
We agree to disagree
You have to be the most disingenuous, reprehensible and malevolent troll I have ever encountered. Your hysterical and furious loathing for gold, and your swarming of every thread in which gold is the topic of conversation, speaks volumes about your character and your malicious intent.
Your posts here are nothing more than intellectual and moral vandalism.
I was thinking of assertions like this one:
A bit too big for me to chew.
The discriminative call against fiat currency. All currencies have failed (excluding those that have not yet failed)
Currencies based on gold also failed.
Yet only fiat currencies are mentioned as failures.
There are many more but hey...
While fiat currencies inevitably fail, due to human greed and lust for power by the issuing authorities, gold as money has NEVER failed --- it has only been kidnapped or killed by those same sociopathic liars whom we call government.
That sociopathic stuff, not my cup of tea.
Currency based on gold failed. They all failed.
While gold currencies inevitably fail, due to human greed and lust for power by the supplying authorities, paper as money has NEVER failed --- it has only been kidnapped or killed by those same sociopathic liars whom we call government.
Works in both cases. And wrong in both cases.
All currencies (excluding the ones pending for failures) failed, gold based or not.
That is a wild assertion. Gold doesn't fail, people do. Gold is an object, how it is used or misused is not a reflection on gold.
Uh...Paper money always fails because it has no intrinsic value.
No, gold has been around as a currency since the beggining of civilization, it is still used as money, and will be continued to be used as money. Just because the US does not recognize it as "money" or rather "legal tender" does not make it any less real money. Gold has never failed and will never fail. Gold is money because it is the product of labor and has intrinsic properties that make it the best store of value. Fiat money is a deception because its nominal value is set by regulators and its real value is constantly inflated away. If you want a good idea for what "value" really means go to coinflation.com and look at the real value of all the US issued coins. It will give you a general idea of what I mean. Nothing like paying merchants with money that is only worth a tiny fraction of the denominations real value lawl.You equate gold as a currency no matter what. The same could be done with sex, coming to the conclusion that sex never failed because it has always been on demand.
People keeping to confuse gold as a currency and gold as a commodity will always fail in their analysis.
All currencies based on gold failed. Gold currencies of the past are now traded either as antiques or as a commodity. They are no longer currencies.
All currencies (at the exclusion of the ones pending to fail) have failed.
Fiat or gold, there is no difference in this regard.
The story of the government manipulation stands the same for fiat currencies.
You are absolutely correct.
Gold IS NOT coextensive with "currency."
Sure it is. I have a 1 ounce gold American Eagle right here on my desk that says "Fifty Dollars" right on it, fresh from the U. S. Mint.
And yet you STILL keep repeating the same nonsense ---- are you a compulsive liar, or just an ignorant idiot?
Gold, as a pure currency, has NEVER failed because it CANNOT fail. Its (temporary) abolition as money has ALWAYS been the result of governmental manipulation, debasement and force. As opposed to fiat money, which MUST eventually fail due to its inherent contradictions and fraud. Fiat currrency is the weapon through which gold has been killed, over and over, only to inevitably rise again, as it is the free choice of individuals acting voluntarily within the marketplace, and not as a result of governmental coercion.
Really, I would be embarrassed to be making such blind assertions as you have done given such a glaring lack of knowledge as you apparently possess.
You call this fellow a liar, and idiot, and say that he makes embarrassing blind assertions.
Yet, what will you trade your gold for?
"failed currency."
As the economy recovers, you will earn less failed currency for your gold than you pay for it during times of crisis.
The time to buy gold was in 1999. The time to sell gold is right about now.
Unless you believe in buying high to sell low, that is.
http://goldmoney.com/is-gold-in-a-bubble.html
You are a complete fool. I don't plan to ever sell my gold. I plan to trade it.
Ahahaha... that has got to be the most misguided thing I've heard all day.
When do you plan to do so? After the United States becomes Zimbabwe?
You'd better start trading it now, before the value plummets...
Better stock up on that canned ham now!
Canned hamz bitchez!
So, where is all that new gold going to come from, once the paper dollar becomes unusable?
Dick Fuld will simply shit bricks of it in his 500,000 dollar bathroom.
LMAO!
Ignorant how?
What is a pure currency? Are you selling that truer than true false line of argumentation?
Gold based currencies all failed. All of them are now traded on the basis of a commodity or as antiques.
Gold based currencies failed in places where fiat money was unknown and before fiat money was invented.
Nothing blind. Just recalling some facts.
Gold as a choice of free choice of individuals acting voluntarily within the market place? Come on, give yourself a break , look at the periods gold were used as a currency and stop the indoctrination.
If, by "failure", you mean that these currencies de-coupled from gold (or silver), then that is true. The typical justification is war (England during the Napoleonic wars, the US during the Civil War, and the European powers during and after WWI). At other times mere inflation is enough (I don't have a gold-standard instance at hand, but western countries dropped silver coinage in the 1960s.).
This is a fair point. There is considerable pressure for easy credit and inflation (someone asked about the "Cross of Gold" speech, which is a famous example. At other times a currency devaluation may be the simplest, least disruptive way out of a credit crisis (like Greece at the moment). In these cases, the currency will be devalued and will 'fail', if not as a medium of exchange, then as a store of value.
I would submit, however, that paper-only currencies also fail. The West's current experiment with unbacked currency will be 40 years old next year. Whether it will hold on for 100 years (as did the 1815-1914 gold standard) is open to question and probably depends on policy choices that will be made by the major players. So any currency, like any empire, has a sell-by date. The failure of a government necessarily entails the failure of its un-backed currency, as its ability to compel is all that maintains that currency.
But the gold coins emitted under the gold standard continue to have value, and to have value as coins, even those with no collector value, even those with odd amounts of the metal. Why is that? Why aren't they made into jewelry?
My thesis is that they continue to 'circulate' between savers and dealers. There is no gold 'currency', there are only grains, grams, ounces, or whatever. Some packages (k-rands, sovereigns, ducats, dinars) may be more popular than others, but the melting pot is the great equalizer.
Answered above. And gold used for currencies has longer history than back to napoleonic times.
The fact is that no gold based currencies made it.
Gold coins are either traded as a commodity (id for the material they are made in) or as antiques.
Calm down, take a breath, and see the good side of this.
When all anti-gold comments (or screeds like KD's) are based on mere assertion, wilful misreading, sloppy use of terms, straw-men, and so forth, then they unwittingly make the case that they in fact have no case. After all, one generally leads with one's best arguments, as presumably these guys would if they had any good arguments.
So sit back, nod your head, and realize that this sort of blather is a positive indicator.
Anti gold comments?
15 years ago, I spotted gold as a potentially very good speculative asset. This was done on the basis of the extraction rate of gold and the high likeliness that most of the earthed gold has been extracted.
Seems that it has been confirmed.
This said, I wont declare that gold as a currency is different in terms of failure from any other kind of currency.
So, over thousands of years, people keep going back to gold after a fiat currency fails, yet when gold "fails" (i.e. the currency is hijacked by the government), do they go back to some traditional paper money? No, they use a new, made-up one. Old, failed paper currencies are worthless. Old, "failed" gold retains its value. This is why gold is not the same as any other kind of fiat paper.
Same stuff as earlier. You confuse the material a currency is made of with the currency itself.
Without the introduction of computers, I could as well have told that people return each time to paper to issue fiat currencies.
Old failed gold currencies are traded either as commodities or as antiques (in the last case, they might be worth much more than the amount of gold they were melted in)
Gold and paper have different physical properties. One is that paper is usually a one shot use material whereas gold can be melted into new currencies.
Dont apply physical properties as economical properties.
Gold as a currency has none of the properties some claim it has.
Blithely making foolish assertions in the face of all historical evidence to the contrary does not an argument make.
To equate the governmental hijacking and destruction of gold within the monetary system with the failure of fiat paper Ponzi schemes displays either a willful disingenuousness or a woeful ignorance of monetary history.
I suggest you try looking, reading and learning beyond your university Keynesian economic orthodoxy education (sic).
Many wild assertions in the opening post. Anyone pointing them out is a troll.
There is a lot of good evidence/arguments to back up these "wild" claims, but then it would be a book - not a blog post. There is a lot of material in there that needs a more detailed analysis, IMO. The idea was to present all the facts/arguments as concisely as possible, yet the post is already a bit long for my taste. I'll try to delve a bit deeper into things in upcoming posts - or perhaps I just might need to write a book :-) In the meantime Google is your best friend.
NPR did a piece on the 1-800-GOLD types of folks out there. The 1-800-GOLD folks bought for 200/oz and sold for 400/oz (with current spot round, what is it, 1280?). That is one heckuva nasty bid-ask spread/price point for the retail public. I agree that fiat currencies can go down the tubes, but what kind of bid-ask spread will there be, and at what price point for the retail folks when they need to "use" their gold? Nasty, nasty, nasty.
Also, William Jennings Bryan's Cross of Gold speech comes to mind. In remembering the speech, seems that going to the gold standard significantly benefited lenders (rather than the farmer borrowers).
Applied to today, it is lenders that should take haircuts (I'm shrugging at the lender's pleading to be saved from their folly at the expense of the rest of us), so I'm really starting to ask who really benefits from a return to the gold standard, the lenders who should never have lent (and who should now attain their market-based reward for their lending)?
I don't think that you will use gold to barter for essentials. Even a small coin would represent too much value. Small silver coins are better.
Bryan's speech was in the context of a time with no inflation and a 5% interest rate on savings or govt. bonds. Small farmers on the prairie were not productive enough to pay 5% off the top, and wanted easy credit. But why did they need credit? Because they were under-capitalized.
Farmers of the time were indeed exploited, for example by monopoly rates charged by railroads. But their interest cost was not the result of a monopoly: the gold standard and (4-6%) real interest rate were worldwide (e.g., they are cited in Bagehot's Lombard Street), so America was not a special case.
The current lenders who resist taking haircuts are a different breed, relying essentially on the falling value of paper money to make their profits. With a gold standard (or any comparable stable peg of value), bankers of the current type would not exist.
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