This page has been archived and commenting is disabled.

The "Sovereign Man" On What To Look For "When The Gold Market Tops"

Tyler Durden's picture




 

Yesterday we got to hear Doug Kass recite Howard Marks' most recent views on gold by memory (badly) and come up with the conclusion that gold may drop 25%, something not even Marks was foolish enough to suggest. Today, we present a contrary view, that of the extremely original and always provocative Simon Black, aka Sovereign Man. Writing from Auckland, New Zealand, the activist who has previously openly defended expatriation as a means of "revolting" against the collapse of US economics and society, turns his attention to gold and shares his thoughts on what to look for "when the market tops." As always Black, who has encountered more cultures in the past few months than most do in their entire lifetime, gives an unorthodox view on the metal's prospects, which if nothing else, are based on a much broader sampling of data, than merely the (biased) read of the opinion of just one other person. His conclusion is not that surprising for someone who has a worldview that is wider than just the FDR through the West Side Highway: "People are only starting to wake up to the reality that unbacked paper currency is fundamentally flawed, and it will be a long time before this belief becomes widespread once again, just as it was in ancient times."

From Sovereign Man:

When the Gold Market Tops

Date: December 21, 2010
Reporting From: Auckland, New Zealand

My friend Doug Casey has frequently written that you'll know the bull market for gold has peaked when there's a picture of a golden bull tearing up the dollar or the New York Stock Exchange on the cover of Time Magazine.

I have a similar view, but with a different indicator.

I'm sure you've seen those TV commercials, fliers, and billboards that say "WE BUY GOLD". The business model is simple-- they take in whatever gold you can find around the house (a false tooth, granny's wedding ring, etc.) and trade you for worthless paper money.

If that's not bad enough, they capitalize on people's ignorance of the gold market and offer a ridiculously low valuation, sometimes less than 50% of the spot price for gold. People are getting ripped off, and they're happy about it because they're able to sell their 'junk' for a few extra bucks.

These are the types of things that are common in a rising bull market that has plenty of room to run-- the public, largely ignorant about gold, is happy to trade physical wealth for worthless paper.

At the top of the market, we'll be seeing the exact opposite. The public will have wised up; the vast majority of people walking the streets will know the price of gold and be able to distinguish a Maple Leaf from an American Eagle. 

At this point, everyone will want to own gold, and the signs will change from "WE BUY GOLD" to "WE SELL GOLD"... and they'll be everywhere.

Entrepreneurs, flush with all the bullion they've been racking up over the years from false teeth and wedding rings, will start unloading their gold holdings to the very people who supplied them to begin with... all at a handsome profit.

In certain parts of the world, we're already seeing early signs of this. I've seen hoards of Chinese people queuing up to buy small gold bars in Shanghai during their lunch breaks. Same in India.

Gold "ATM" machines are sprouting up in Europe and Asia-- you can pop a few hundred euro (or your credit card in some cases) into what looks like a vending machine, and out comes a small, assayed bar of gold.

I've been following the spread of these machines with great interest, and I noticed that the first of them arrived to the United States in Boca Raton, Florida a few days ago.

Don't get me wrong-- this one machine doesn't constitute a top. Not even close. There would have to be thousands of these machines across the country at McDonalds and Starbucks before that happens.  If you need extra convincing, ask your neighbor what the price of gold is.

Years from now, though, I'm willing to bet that the sucker who ends up paying the highest price ever for an ounce of gold before the metal starts to decline will probably do so standing in front of one of these machines at a shopping mall somewhere in suburbia.

Another 'top indicator' that I look for is the occupancy rates for safety deposit box facilities like The Storage in Hong Kong or Commonwealth Vault right here in Auckland.

When these firms have a long waiting lists, or new facilities are sprouting up, it suggests that public awareness for gold is increasing... and the more that happens, the closer we get to the top.

Again, this is also starting to happen. Singapore's recent Freeport facility leased out to capacity almost instantly, and you're hard pressed to find an available safety deposit box at any of Singapore's banks. Buy hey, that's Singapore... not exactly representative of the entire world.

Here in Auckland, Commonwealth Vault has plenty of availability, and they charge peanuts.

Bottom line, while some of these 'top indicators' are starting to emerge, I think it will be several years before they're ubiquitous. People are only starting to wake up to the reality that unbacked paper currency is fundamentally flawed, and it will be a long time before this belief becomes widespread once again, just as it was in ancient times.

In the meantime, as long as central banks keep pumping their currencies full of hot air, gold should continue to have strong, long-term growth potential as the 'anti-currency'.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 12/21/2010 - 21:16 | 822806 FreedomGuy
FreedomGuy's picture

That's actually part of the reason that gold is worth anywhere from about $5k/oz. to as high as $56k/oz. if you try to divide all fiat currency by the amount of gold. However, I think gold is like peak oil. The higher the price the more that becomes available as people melt down rings, candleabras and fillings. So, the total amount of gold available can fluctuate dramatically depending upon what people try to turn in to pseudo-currency.

Tue, 12/21/2010 - 22:25 | 822976 DoChenRollingBearing
DoChenRollingBearing's picture

I disagree, there is plenty of gold.  You just have to pay the price.

Tue, 12/21/2010 - 19:10 | 822479 AUD
AUD's picture

Entrepreneurs, flush with all the bullion they've been racking up over the years from false teeth and wedding rings, will start unloading their gold holdings to the very people who supplied them to begin with... all at a handsome profit.

I've said it before, this Simon Black is a bullshit artist. These 'entrepreneurs' will lend the government their gold in return for a promise to repay them nothing?

What sort of profit is that?

Though maybe Simon Black will do it & the government will laugh at him.

Tue, 12/21/2010 - 20:40 | 822689 Nostradumbass
Nostradumbass's picture

.

.

I think he said those entrpreneurs would be selling the gold BACK to the ones it was purchased from - no? I don't recall gov't. being mentioned at all.

Tue, 12/21/2010 - 20:43 | 822700 AUD
AUD's picture

Selling BACK to them for WHAT dumbass?

Tue, 12/21/2010 - 21:51 | 822899 Bearster
Bearster's picture

Bingo!

Black calls fiat "worthless" but is eager to accept it from his subscribers and the people who feel they need him to be introduced to bankers and lawyers and the Atlas 400, etc.

If fiat is worthless (it isn't yet, but it will be) then THERE WILL NOT BE A 'TOP' IN GOLD.  Gold is constant, and paper is sinking.  Paper will sink to zero.  I pity the fools who trade away their gold for paper because the "price" seems "high".  And then at the end, their paper is worthless.

Oh, can we use Simon Black to call a top in bubble-top-calling?  Seriously, the cash4gold people are making a *spread*.  Get it, a spread?!?  They buy gold for X, and sell gold for 2X or whatever.  They can keep their profits in whatever currency they want (if they get it) or they can buy AAPL and GOOG with it.  Or maybe a bigscreen TV for the rear seat of their SUV they need to cruise the shopping malls.

Tue, 12/21/2010 - 23:56 | 823169 AUD
AUD's picture

I put Mr Black in the same 'tranche' as FOiFamOstOOpidFOA. F-

About the same as the government credit Mr Black says the entrepreneurs will accept for their gold... because it's a bubble.

Tue, 12/21/2010 - 19:11 | 822483 Oquities
Oquities's picture

went to a christmas party sat night - 15 -20 couples & a few singles.  one of the guys there owns a coin shop.  nobody cornered him about an ongoing bubble, didn't even seem to be an awareness of what he did.  he did, however, say that he's never seen anything like people's current interest in silver.  so, seems awareness is building, but not near a peak from this anecdote. 

Tue, 12/21/2010 - 19:33 | 822534 Quinvarius
Quinvarius's picture

What will gold have a top versus?  The price of fiat beenie babies is what is coming down.

Tue, 12/21/2010 - 20:44 | 822705 SofaPapa
SofaPapa's picture

This is the piece I am trying to wrap my head around.  So let's say things go as badly as the true EOTWAWKI folks are saying, then what does a "top" in gold even mean?  Because it's not that gold is increasing in value -- the dollar is becoming increasingly worthless.  Why would you trade back into an increasingly worthless vehicle?  I ask this as an honest question, for I am a rank amateur.  Thanks.

Tue, 12/21/2010 - 21:22 | 822823 FreedomGuy
FreedomGuy's picture

You trade only temporarily to purchase something and only if you cannot trade the metal directly. Once currency stabilizes you can make a profit and pay your fiat loans and bills by trading your PM's for fiat. Fiat will not go away, it will just get endlessly revalued.

It also depends on why you buy metals. If you buy it as an insurance policy against the worst, i.e. superinflation or hyperinflation, then you never sell it except to get things you need. If the worst never happens you keep your insurance policy in your safe deposit until you retire or let your kids inherit it.

If you are a trader then you buy and sell it like any other commodity or even a stock or bond. You hope if hyperinflation strikes you happen to be holding it. Most likely, you just sold it out thinking you were surely at the top.

Tue, 12/21/2010 - 22:46 | 823014 akak
akak's picture

If you are a trader then you buy and sell it like any other commodity or even a stock or bond. You hope if hyperinflation strikes you happen to be holding it. Most likely, you just sold it out thinking you were surely at the top.

I always wonder how many investors and traders in Zimbabwe, or Weimar Germany, or in almost any Latin American nation throughout the 1960s, 70s or 80s cashed out of their investments simply because the depreciating fiat currency had sent them the erroneous price signal that some arbitrary "top" had been reached, when it fact they had only passed yet another mile post on the hyperinflationary superhighway.

 

Wed, 12/22/2010 - 18:47 | 825009 FreedomGuy
FreedomGuy's picture

I have actually wondered the same. It's academic until you and I have to start making the same choices. Let's be honest. If we were holding gold back in about '81 when it hit $850 we would like to have unloaded a little as it subsided back to $200. However, the 80's at their worst were not hyperinflation. In fact, it wasn't much worse than about 3/4 of the world sees regularly. The problem I see in hyperinflation is "Can you make your PM's last long enough till they fix or stabilize the fiat?"

Tue, 12/21/2010 - 19:34 | 822535 Common_Cents22
Common_Cents22's picture

What's the link and role here with the IMF selling some of their gold?  reportedly 1/8 of their inventory?   Will gold continue to increase until the IMF has sold most of its position?  Then they'll try to pull the plug and/or govt's start plans to seize gold?

I like to look at motivations of the powers that be.

Wed, 12/22/2010 - 02:29 | 823343 strannick
strannick's picture

I guess that depends if you figure you can differentiate between US gold/IMF gold/GLD

Wed, 12/22/2010 - 02:36 | 823350 akak
akak's picture

Or if any of the above actually represent ANY real, physical gold at all.

In particular, the IMF's double-entry accounting for their gold that is simultaneously on the books of its member nation's central banks, is as opaque and questionable as Enron's formerly "gold standard" accounting practices.

Tue, 12/21/2010 - 20:14 | 822625 sgorem
sgorem's picture

GOLD, FRANKINCENSE, AND MYRRH..............have a metalmerry Christmas......love ALL of your opinions, good, bad, and ugly. 

Tue, 12/21/2010 - 20:31 | 822651 razorthin
razorthin's picture

All I know is that PMs are basing, and while tad parabolic intermediately, far from a blow-off.  On the other hand, the technician in me is looking at a developing shooting evening star on the monthly for SLV with some concern.

Tue, 12/21/2010 - 22:33 | 822988 jez
jez's picture

I'm thinking of changing my name to Tad Parabolic.

Tue, 12/21/2010 - 20:24 | 822654 erik
erik's picture

as long as central banks keep pumping their currencies full of hot air, gold should continue to have strong, long-term growth potential

that is a rather large caveat. 

Tue, 12/21/2010 - 21:07 | 822778 Diamond Jim
Diamond Jim's picture

I'm thinking of starting some vending machines that will give you diamonds for your gold, whaddya think ????????

Tue, 12/21/2010 - 21:22 | 822824 Missing_Link
Missing_Link's picture

Again, this is also starting to happen. Singapore's recent Freeport facility leased out to capacity almost instantly, and you're hard pressed to find an available safety deposit box at any of Singapore's banks. Buy hey, that's Singapore... not exactly representative of the entire world.

It's because Singapore is tiny.

Wed, 12/22/2010 - 06:33 | 823439 Lord Koos
Lord Koos's picture

It's also due to the fact that a much bigger percentage of people in Asia understand the value of PMs

Tue, 12/21/2010 - 21:47 | 822886 steve from virginia
steve from virginia's picture

The smart money is getting out of gold already. Non- money gold holders are ignoring the market price.

The appearance of gold vending machines in China/India are indicators of hyperinflation in those countries. Alternate 'black market' currencies in a country are a good indicator. Is gold a currency in the US?

Another 'top indicator' that I look for is the occupancy rates for safety deposit box facilities like The Storage in Hong Kong or Commonwealth Vault right here in Auckland.

When these firms have a long waiting lists, or new facilities are sprouting up, it suggests that public awareness for gold is increasing... and the more that happens, the closer we get to the top.

Right! This is a 'currency' that will replace plastic, that requires safe deposit boxes.

 

Tue, 12/21/2010 - 23:06 | 823061 Oh regional Indian
Oh regional Indian's picture

Cannot speak for China, but there are no Gold ATM's in India (yet).

 

ORI

Wed, 12/22/2010 - 00:06 | 823187 goldsaver
goldsaver's picture

Steve, I'll assume you are not a troll. Please name the "smart money" that is getting out of gold. Would that be the Chinese? Or maybe the CBs? Would that be the same smart money that said that real estate would never go down in price? Or the smart money that is buying NFLX at current prices?

Gold is not a currency. Gold is money. It is possible that eventually we would use gold as a currency again. Trading in grams of gold. This does not preclude using plastic. I can easily see local money traders (similar to paypal) holding gold accounts, 100% redeemable for physical, and using plastic for convenience. Lets say you are paid an ounce a week. Your boss transfers the ownership of the ounce to you (serial number reference). You get the credit in your account and spend it using your plastic. But, just like with FRNs, you can go to the bank or ATM and draw gram chips. Possibly silver coins along side for smaller transactions.

If a money trader starts practicing fractional banking, people would run on them and close the accounts.

Wed, 12/22/2010 - 01:50 | 823289 trav7777
trav7777's picture

getting out of gold and going to WHERE?

Cash?  ROTFL.

Yes, I am aware of the deflationists' absurd claims that fuckin printed paper will become more valuable, even precious.

Wed, 12/22/2010 - 02:04 | 823313 akak
akak's picture

The only things truly deflating today in the USA are intelligence, morality, integrity and courage.  Note that the dollar is not among them.

Wed, 12/22/2010 - 08:00 | 823469 Oh regional Indian
Oh regional Indian's picture

Awesome! Ironic. Sad and funny.

And not just in the US, I do believe it is a global phenom.

ORI

Wed, 12/22/2010 - 12:06 | 823920 DoChenRollingBearing
DoChenRollingBearing's picture

ORI, I think you are right about it being worldwide.  Same in Peru.

Wed, 12/22/2010 - 18:30 | 824970 Clinteastwood
Clinteastwood's picture

You got that right, but don't ask or tell.

Wed, 12/22/2010 - 01:58 | 823303 theworldisnotenough
theworldisnotenough's picture

The appearance of gold vending machines in China/India are indicators of hyperinflation in those countries. Alternate 'black market' currencies in a country are a good indicator.

 

Black market? Indians can buy gold coins at the local post office... The vending machines are an indication of... demand.

Tue, 12/21/2010 - 21:59 | 822914 lawrence1
lawrence1's picture

Gold has always been money and by the time the masses in the US recognize this most will not have the means to buy any. Gold will never be in a bubble; it is not a bubble phenomenon.
Who will sell it for paper? Owners will trade/exchange it for things of real value. Get it now while you can get it with paper.

Wed, 12/22/2010 - 09:29 | 823533 Bitch Tits
Bitch Tits's picture

Gold. Diamonds. Silver. Beanie Babies. Cabbage Patch Dolls. Pogs. Dotcoms.

Isn't it interesting that all of these things have, or have had, a certain "value" to some people, yet that value is not always continuous?

Gold is a metal. What is gold used for? Its applications are what gives it value, its benefits to the human race and society at large. Industry, medicine, computers and electronics, jewelry, and so on. Value is found only in what humans NEED in order to survive and prosper.

The truth is that gold is merely another tool used by predators in the financial class to muddy true value to their own personal benefit. If fiat is a delusion, it's a delusion we have all bought into collectively, and the only way to maintain the illusion is to support it.

Real value lies only in need and in meeting those needs. In that respect, the world provides abundance. Personally, I would rather invest in a beehive than in gold. The value of honey as a commodity or source of payment for other goods is more reliable as a store of "value". You can't eat gold, and if the worse is to come (as some proclaim loudly) then that is what it will come down to - eating to survive. One foodstuff in exchange for another.
Gold will be worthless.

Wed, 12/22/2010 - 18:34 | 824979 Clinteastwood
Clinteastwood's picture

No........I don't think gold will become worthless.

The statement is a bit extreme.

Tue, 12/21/2010 - 22:47 | 823024 MiningJunkie
MiningJunkie's picture

There are a great many more "topping indicators" flashing right now than you would like to admit, one of which is that the investing public is now catching on, to the extent that "gold deals are like assholes; everybody's got one..."

Not true for silver and the exploration arena is still far from frothy but make no mistake, the retail public may not be back in the "stock market" but they sure are crowding into the junior golds now. Chatrooms are bubbling and every former dotcom cowboy is now an amateur geologist.

 

Wed, 12/22/2010 - 01:54 | 823294 trav7777
trav7777's picture

Bullshit.

There is no gold bubble.

Those who cannot conceive of production ever declining seem to think all prices are cyclical.

Gold production will continue to decline, eventually there will be less for would-be hoarders to hoard.

In terms of real value, other real assets may rise vis a vis gold, but its cash price is NOT in anything even vaguely resembling a bubble.

To be in a bubble, the SINGLE THING that highlights the presence of a fucking bubble is CREDIT.  To my knowledge, NOBODY at retail is buying gold on freaking margin to FLIP IT.  There is no bigger idiot/pyramid/ponzi dynamic to gold.

Gold's rise in price is level or rising demand against declining supply - simple as that.

Wed, 12/22/2010 - 02:12 | 823319 akak
akak's picture

The only bubble relating to gold today is in all the talk about gold being in a putative bubble.  This oftens comes from the same idiots who fearmonger about the NEVER before seen "threat" of hyperdeflation --- under a fiat currency regime, no less!  I would be much more worried about the threat of drowning in the middle of the Sahara Desert, or the threat of being attacked by a polar bear while hiking in Belize.

Wed, 12/22/2010 - 03:43 | 823386 AUD
AUD's picture

What exchange are you looking at?

With a few notable exceptions, junior golds on the ASX are doing extremely poorly. There is no interest in them at all. I know because I own some & quite frankly, their performance has been disappointing considering I acquired them in Oct-Nov '08 & the price of gold has about doubled since then.

There is no bubble in gold & no bubble in junior golds.

Tue, 12/21/2010 - 22:56 | 823044 Nutsac
Nutsac's picture

I got a beer guzzling, Football watching friend who disbelieve everything I said about the state of the economy. He is the last person on Earth that would get informed of what's really going on around him, and the last person on Earth I would expect to be buying Gold.

The day this guy calling and ask where can he get gold, is the day Gold is official at it's top!

Wed, 12/22/2010 - 00:07 | 823191 owensdrillin
owensdrillin's picture

Simon Black is an idiot. Anyone who thinks that the behaviour of the public has anthing to do with the price of gold does not see the forest. Until all these countries quit fabricating money out of thin air, gold has no limit.

There is a change of lifestyle coming and it isn't going to be that your kid will go to Harvard instead of Gonzaga. It's time for the fat people to get real jobs. A lot of people still work hard but there is a shitpile of people who don't do fuck and the government still likes their vote. Keep on consuming, that's the answer. Don't produce fuck all. Makes me fucking sick.

On another note. Young people WON'T do shit because they are entitled apparantly and should be playing with their Wi or texting every five fucking seconds. I guess working at the quarry or cutting Christmas trees is just above these fucking morons. Good luck in the future America. It was only a hundred years ago that people actually provided for themselves instead of being 350 pounds and waiting for their check.

Wed, 12/22/2010 - 01:10 | 823252 kensuneit
kensuneit's picture

Great comments!!  No puntches pulled here, and there shouldn't be.  Oh, and I remember getting junked for suggesting that we crash the Sun into the horizon offshore well to stop the leaking oil!  Which I still think we could do anyways.  Thank you Gold Bytchez for bitchen!!

Wed, 12/22/2010 - 05:01 | 823412 owensdrillin
owensdrillin's picture

Didn't mean to be so crass. The only reason I know we didn't go to the moon is that engineers were involved. We work with the cocksmokers every day and they couldn't get out of a paid holiday much less this atmosphere.

Wed, 12/22/2010 - 05:01 | 823413 owensdrillin
owensdrillin's picture

Didn't mean to be so crass. The only reason I know we didn't go to the moon is that engineers were involved. We work with the cocksmokers every day and they couldn't get out of a paid holiday much less this atmosphere.

Wed, 12/22/2010 - 01:32 | 823272 antidisestablis...
antidisestablishmentarianismishness's picture

Was anyone alive in 1980? None of this shit happened then so i guess that wasn't a top either.

Wed, 12/22/2010 - 01:47 | 823286 theworldisnotenough
theworldisnotenough's picture

When I got my safty deposit box there were only two branches of my credit union that had any availability. The staff there hints that they know everyone is saving gold. I do not think that safty deposit box availability will be the indication of the top. When self storage facilities start opening up safety deposit boxes you know the top is near.

When people speak of the top I always think, what top? If the dollar is siubject in anyway to a fundamental realignment in value it will drop then slowly gain value as the US is forced to balance the budget and increase manufacturing. That is a generation long proces. It is impossible to raise rates, if the Fed did that our debt payments would balloon out of control. The only way out for the dollar is to fix the structural problems in the economy. Therefore I expect gold and silver to skyrocket then slowly lose value over time. The "fix" will be an elimination of the structural barriers we have placed on ourselves. I expect to see a few things in the next 5 years.

 

  1. A soft metal backing. Silver certificates or bonds payable in silver.
  2. The Sierra Club will stop running US energy policy. A free for all on domestic energy will be likely.
  3. Yucca Mountain will be open for business
  4. The minimum wage will be either reduced, gone of have so many exemptions it will become moot. most likely the later.
  5. The tax base will broaden, tax rates will go down while exemptions decrease.
  6. An increase in manufacturing which will be greased by the cheap energy free for all and lowered expectations.
  7. Education will tilt severely away from liberal arts.
  8. Etc, etc...
Wed, 12/22/2010 - 10:01 | 823588 hrrreardon
hrrreardon's picture

This might have been mentioned yesterday, I can't remember, sorry. Non availability of safety deposit boxes represents mass angst and sheeple-like movement of the uninformed copying what they see everyone else doing even though they may not fully understand why. It indicates a concern level, not much else. Rumor has it that during some crisis, the govt. will impound all boxes and confiscate all hard currency along with the weapons they find within. Keeping things safe is half the trick, getting to them when you want is the other half so once again, government (of, for and by the people) is enemy #1.  

Wed, 12/22/2010 - 11:33 | 823817 romanko
romanko's picture

That happened in the UK recently. Don't have the link, but there was a privately run safety deposit outlet where the police suspected some of the boxes contained drug money. What did they do? They impounded the entire facility, searched box by box, and EVERY box renter had to prove where the got the contents in order to get it back. Don't have a receipt for that gold bar in your box, sorry, the state will assume it was acquired illicitly and confiscate it.

What a lot of people haven't accepted yet is that "innocent until proven guilty" is a quaint no longer applicable concept. All the authorities have to do is pull out the "terrorist" card, and they can do whatever they like.

Wed, 12/22/2010 - 12:19 | 823947 Calmyourself
Calmyourself's picture

Related to two and three the Government teat will be withdrawn from the global warming scam and real energy solutions will once again be accessible.

Wed, 12/22/2010 - 01:58 | 823302 trav7777
trav7777's picture

Until/unless production rises, the price is driven by rising or level demand against declining supply.

SIMPLE AS THAT.  There's no goddamned bubble until and unless people start buying gold WITH CREDIT in order to FLIP.  That is the ONE mark of a bubble, the only one that matters.  In ALL OTHER bubbles, margin buying by retail participants was the sign of a bubble, yet even with this, the housing and .com bubbles ran for half a decade prior to inflecting and there was plenty of time to GTFO if you desired.

Wed, 12/22/2010 - 10:25 | 823635 mark mchugh
mark mchugh's picture

True.  I think it's funny how much more stringent PM dealers are with credit.  That alone clues you in as to what's real and what's not.

Wed, 12/22/2010 - 10:18 | 823621 mark mchugh
mark mchugh's picture

I have one key criticism about this article:

Once the idea takes hold, trading something of value for something "worthless" will never reverse, period.  It never did in Zimbabwe - there was no amount of Zimbabwe dollars that would get you any gold (no one would quote gold in Z-dollars).

In order for the USD - gold trade to reverse, the paper's value must be defended with much higher interest rates and balanced budgets, and that is nowhere on the horizon.

As long as people are content to let the government spend twice what it collects, the paper is worthless and gold safe.  Don't out-think it.

 

Wed, 12/22/2010 - 18:41 | 824996 Clinteastwood
Clinteastwood's picture

Exactly right.

Wed, 12/22/2010 - 10:31 | 823646 mark mchugh
mark mchugh's picture

Here's another thing that would make me sell PM's:

Treasury offering to redeem treasuries in gold and/or silver.  They produce all three, right, so why not ship me some eagles in exchange for my government bonds?

Hhahahahahahaahahahahaaha!

(I crack myself up sometimes)

Wed, 12/22/2010 - 13:55 | 824240 Titus
Titus's picture

Gold vending machines all over America? If I had one close I'd go visit the area at night with my brother and his flat bed pick up and bale loader. He's also a welder, we'd have the sucker open in no time. 

Do NOT follow this link or you will be banned from the site!