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How Not to Trade the Dollar

Monetary Metals's picture





 

I hope this essay provides some food for thought. It is not my intention to insult or belittle anyone, but using humor and cold logic, to help people understand an abstract topic with many counterintuitive principles. The ultimate goal is to protect what you have and make some more (in that order).

Gold is money. We have published a video to make the point that one should use gold to measure the economic value (i.e. price) of everything else including the dollar.

So what does that make the dollar? It is a form of credit, and its quality is constantly falling because the Fed is incessantly forcing more counterfeit credit into the market. The price of the dollar is in long term decline, starting at around 1.6g of gold in 1913 to around 21.3mg (yes milligrams) today.

The price of the dollar sometimes rises for reasons that may not be obvious. The financial system today is highly leveraged. Small changes at the margin, such as intermittent pressure on debtors, can be amplified by this gearing. In the casino of FX markets, traders chase momentum. The occasional crisis somewhere in the world can put enormous (if short term) buying pressure on the dollar. Fear, misinformation, and even delusion can make the crowd run the wrong way. How many people sold their gold on the rumor that Cyprus might sell 10 tons of gold on the market?

The dollar is not suitable to measure the value of gold. It is too volatile, not to mention that it is generally falling. This idea has profound implications on investing and trading. I address one of them in this article.

The central fact of gold today is both self-evident and non-obvious. Most people find it hard to get their heads around the fact that a rising gold price does not produce gains for gold owners. Our whole lives, we’re trained not only to think of the dollar as money, but to think that the dollar price of everything is its value. It is a deeply held belief that if you increase the number of dollars you own, then you have a gain. It is time for this illusion to be dispelled.

Consider a simple trade. First, you buy gold. Then the price of gold goes up. Then you sell the gold. You have a profit, right?

Wrong.

You have more dollars (and the government will tax you on the increase). Each of them is worth less, in precise proportion to the number of them that you gained. To underscore this, let’s look at it from outside the dollar bubble. A rise in the gold price from $1350 to $1500 is really a drop in the dollar from 23mg of gold to 20.7mg. If you bought an ounce of gold with 1350 dollars you still have one ounce worth of dollars when the dollar has fallen to 1/1500 ounce (or 1/5000).

This means that a strategy of buying and holding gold for the long term does not produce wealth. It protects wealth, because gold does not fall. To get richer, you must either invest to receive a yield in gold, or speculate on an asset with a rising gold price. Producing a yield on gold is the reason why Monetary Metals was formed. Speculating on rising asset prices is challenging because as we head into this greater depression, demand is falling. I recommend checking out www.pricedingold.com, which has charts of many different things priced in gold.

It is possible to trade the short-term volatility in the dollar. To frame this objectively, it is buying the dollar when it is down and selling when it is up. I deliberately did not state this as people commonly think of it today: buying gold when it is down and selling gold when it is up. Gold is not going anywhere; it is the dollar that is volatile and falling.

Your first choice is whether to use leverage. Leverage would allow you to profit from the rising gold price because you will gain more dollars at a faster rate than the dollar is losing value. Let’s illustrate this with two examples.

The first example uses no leverage. You buy 100 ounces of gold for $1460 per ounce, a total of $146,000. The gold price eventually doubles to $2920. You have twice as many dollars, but unfortunately each of them is worth half as much. Your net worth in gold is still 100 ounces.

The second example uses 5:1 leverage. You buy 500 ounces of gold at $1460 per ounce, or $730,000 worth of gold, but you only need the same $146,000 as in the first example. The bulk of the capital, $584,000, is credit. Then, the gold price doubles to $2920. Now your 500 ounces is worth $1,460,000. You can sell 200 ounces to pay the debt, and you are left with 300 ounces free and clear. Your net worth tripled from 100 to 300 ounces.

However, there is a dark side to leverage. When the price falls, leveraged accounts are subject to margin calls. The trader must immediately put in more dollars or else the broker will sell everything, and the trader could lose everything. Just ask anyone who was leveraged a few weeks ago when gold was near $1600 what happened, and if he still has a gold position, or any capital left in his account at all.

This kind of event is exceedingly hard to predict. We did not predict it from our analysis of the basis (though we did make a bold and controversial prediction and trade recommendation that has performed quite well). Following April 15, the basis allowed us to see that large quantities of physical gold and silver were flushed out of someone’s hands and into the market. And as we go forward, it will allow us to see the changes in scarcity of gold and silver.

Not counting the Keynesians, or the perma-bears who have long thought that gold should collapse to $250, some technical analysts put out bearish calls on gold and a few called for a significant and rapid price drop.

Trading the downside in gold is very difficult because no matter how the technicals look, there is a risk that some central bank or big player could make an announcement that would drive the gold price up sharply. Indeed, we predict that volatility will rise as we go forward. For this reason, and of course the upward bias to the gold price, we never recommend a naked short position in gold or silver.

If you do not use leverage, it is difficult to produce a real gain. Remember that a generally rising gold price is just a generally falling dollar. You can’t make a profit from this. You rely on short-term volatility. You buy gold at a lower price and then sell it at a higher price. And you must hope that the gold price falls again. If not, then your strategy has failed.

There are other downsides to the unleveraged strategy. One is that you must hold falling dollars at times. You buy gold, hold it for an hour or a day or a week and then you sell it. You’re left holding dollars, hoping for a lower gold price. During that time, you are exposed not only to the falling dollar, but also to the credit of your bank or broker as well. We would prefer a strategy that allows one to sleep at night, especially Friday, Saturday, and Sunday night.

I corresponded with a gold dealer in Cyprus following their collapse. He recommended to people to buy gold. Not one person took his advice. Now, of course, they regret their decisions. This is not because consumer prices rose in Cyprus, but because what they thought of as “money” has turned out to be just bad credit, a defaulted piece of paper. Gold does not default.

At the end of the day, when the dollar collapse takes on a more vicious dynamic and rapid pace, the gold price will be rising sharply, perhaps exponentially. What will you do then? If the charts say that gold is overbought, will you take your profits? Will you sell at a record high price? Will you trade all of your gold for dollars immediately prior to the dollar becoming utterly worthless?

With or without leverage, trading any market without better information and/or a superior understanding than the other traders is a sucker’s game. Having faith in a $50,000 gold price and a conspiracy theory that a Dark Cabal manipulates it down to $1460 is not information or understanding. It is just hope plus words of comfort to use after each wounding.

The gold market has price moves that cannot be predicted in advance and in some cases do not have an obvious cause in contemporaneous news coverage. In my article on the gold price drop, I do not point the finger at the rumors of Cyprus being forced to sell its gold, Texas or Germany demanding their gold, etc.

Today, at $1460, the question is: are there dissatisfied traders who held on during the crash, and who are now waiting for a slightly higher price to sell? Will these people outweigh the hungry buyers who look at the current price as a sale, in the short term? We would not care to make a prediction on this. The long term is much easier to predict. The catch is that without leverage, you cannot profit from it and with leverage you can get squeezed out in a price drop before the price rises.

Technical analysts that we respect now say that massive damage has been done to the gold and silver charts, and there is a likely to be a further drop in the prices. Some technicians are calling for a price at or below $1100. Will it happen? Maybe, and if it does, it won’t be caused by the Dark Cabal.

It will be dollar-oriented traders, eager to sell low because gold is “falling”, and the destructive dynamics of stop orders, margin calls, momentum chasers (who do sometimes short gold naked), etc. As when gold’s price was rising, now that it’s falling traders are trying to outguess the others in the market, who are trying to outguess them. The picture of a Ouija Board is not too inaccurate.

It is possible to trade gold professionally, to make a profit measured in gold. If you want to trade, then you ought to know about the mechanics of the market (e.g. arbitrage, about the concept of relative gold scarcity (i.e. the gold basis), and about monetary science (e.g. pressures on markets related to changes in credit). Develop your trading strategy around them, rather than on whispers of big London or Chinese buyers, and curses at Dark Cabals.

 


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Wed, 05/01/2013 - 18:20 | Link to Comment zipit
zipit's picture

RE" "I corresponded with a gold dealer in Cyprus following their collapse. He recommended to people to buy gold."  

Asking a gold dealer if you should buy gold is like asking a barber if you need a haircut.

Wed, 05/01/2013 - 14:36 | Link to Comment Cobra
Cobra's picture

One of my main reasons for holding PMs is the tendency to spend ALL
of my Fiat. Up until a couple of years ago, I had no savings. If my holdings
were cash under the mattress I'd be raiding it every Friday night and waking up in Florida every Monday morning, so to speak.

Wed, 05/01/2013 - 13:01 | Link to Comment outside1
outside1's picture

So when I bought gold for $400 8 years ago and sold it for $1600 this year, I did not realize a profit?? I know the dollar is dropping rapidly, but not that much..

Wed, 05/01/2013 - 12:52 | Link to Comment outside1
outside1's picture

So when I bought gold 8 years ago for $400 and sold it this year for $1600, I did not make any money? I know the dollar is rapidly losing value, but at that rate.....

Wed, 05/01/2013 - 12:33 | Link to Comment Mojeaux18
Mojeaux18's picture

An additional "problem" with gold is that it doesn't go always up with a recession/depression, it many times goes down.  You can look at GLD during 2008 it actually dropped substantially at times.  The reason is that if you need your money then you need to sell your gold. This depresses the as there are more sellers than buyers.  Something to keep in mind. 

Wed, 05/01/2013 - 16:07 | Link to Comment daveO
daveO's picture

Cyprus was his best argument. Something's better than nothing when credit collapses. Money and debt are the same in fiat currencies. The bad bank credit will either be inflated away(Bernanke) or taxed(stolen) away(Cyprus). Maybe, a combination. Either way, dollar savings are guaranteed to buy less in the future.  

Wed, 05/01/2013 - 11:58 | Link to Comment NEOSERF
NEOSERF's picture

I can imagine a world where a box of ammo or a can of spam is more valuable than a shiny coin...at least for several months.  At some point prices stabilize, speculators jump in and the shiny coin has value when the food chain is re-established.

Wed, 05/01/2013 - 11:32 | Link to Comment Mike Cowan
Mike Cowan's picture

Gold is money only for sane people. Insane people print. 

Wed, 05/01/2013 - 11:37 | Link to Comment strannick
strannick's picture

Wiener starts out appealing to ''cold logic'', only to have his trademark anti-gold pretentions come screeching out.

Having faith in a $50,000 gold price and a conspiracy theory that a Dark Cabal manipulates it down to $1460 is not information or understanding.

Wiener should spend more time on ZH reading why gold crashed in mid April. The manipulative Dark Cabal (Bullion Banks selling 500 tons of papergold futures in hours) is about as close to the mark as you get.

Wed, 05/01/2013 - 14:41 | Link to Comment akak
akak's picture

The man's name (weiner) speaks for itself.

Wed, 05/01/2013 - 11:25 | Link to Comment augustusgloop
augustusgloop's picture

i can envision a scenario where i buy an asset with the physical bullion i have stored. the gold may be be have a dollar value, like ticks on a measuring cup, but there is no need to trade it in for dollars. if merchants in berlin are accepting bitcoin, it's not so hard to envision them accepting gold & silver coin. i bet you there are a fair number of merchants accepting payment in gold in utah doing this already. 

Wed, 05/01/2013 - 10:35 | Link to Comment H_Manatee
H_Manatee's picture

As long as the dollar is not redeemable in gold increasing your wealth in gold terms is not possible to an average person. Leveraging is betting against the "dark cabal". Remember Apr 12th and 15th?  :-)

Wed, 05/01/2013 - 11:34 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

No, no, don't you get it, you have been imagining this Dark Cabal.  There hasn't been any orchestrated, organized take down of gold prices, at any time in the last 5-25+ years. 

Apparently someone is living in a fantasy land, and that is the guy who thinks there ain't no 'Dark Cabal'.  Whats next, you will suggest people let COMEX, HSBC, and JPM take custody of their gold???

Wed, 05/01/2013 - 10:28 | Link to Comment H_Manatee
H_Manatee's picture

An ounce of gold not spent is an ounce of gold gained. Does that count as growth in gold terms? Dr.Keith's idea sounds too subjective to me.

Wed, 05/01/2013 - 10:18 | Link to Comment ebworthen
ebworthen's picture

I don't want leverage, I want real money - tangible money - therefore I buy Gold and Silver.

Fuck Ben Bernanke, Wall Street, and the Banksters.

CONgress doesn't deserve a thought.

POTUS neither.

Tools.

Wed, 05/01/2013 - 16:17 | Link to Comment daveO
daveO's picture

If you believe the FED will kill the dollar, then leverage works. If you think they'll stop short of collapsing it, then just stack it and forget it. 

Wed, 05/01/2013 - 10:01 | Link to Comment blindman
blindman's picture

shut up and drive.
keep stacking.

Wed, 05/01/2013 - 10:05 | Link to Comment blindman
blindman's picture

what you neglect is the segment of the
investing public that does not look to
gold to make any gain or profit. they
have already done that and would like to
store it safely for when they will need
it. they are not gaming anything as you
insist is the play of the professional.
and , yes, there is a very real cabal that
is dedicating its existence and intention
to stealing these people's hard earned wealth.
you cannot see it? fine, sleep well on Friday
night. are you a fucking crook I ask with
all due respect!
you may have noticed around you people who
work for a living? no? not work at playing
with other people's money, work as in make things,
do a service that is actually valuable to other
people. work which is compensated in unsatisfactory
debt notes and commitments that no one takes seriously.
still, the work and service and product was faithfully
produced or rendered. they created the wealth you
trade with leverage to take something for your
speculation if successful, or lose your client's shirt.
.
best to you, may you not lose your clients' shirts.

Wed, 05/01/2013 - 08:24 | Link to Comment laomei
laomei's picture

That's why you ignore the hilarious US taxes on gold.  Take your fiat from selling gold at a higher price, and then rebuy the next dip, increasing the amount of physical gold you are sitting on.  This is what I do, day and and day out on gold and silver.  A few extra grams here and that, and in a normal month I'm packing away a free ounce or two.  This is the only reason to bother with paper.

Wed, 05/01/2013 - 11:26 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

It works until the day it doesn't, and if you are in fiat on that day, well, your whole strategy resulted in 0 ounces.

Wed, 05/01/2013 - 16:39 | Link to Comment daveO
daveO's picture

That assumes the banks are honest. Gold will always be worth something. Bernanke Bucks, less by the day. Weiner's tribe is trying to capture some of the action.

Wed, 05/01/2013 - 07:58 | Link to Comment goose3
goose3's picture

There are many things that influence the value of the dollar, not just how much the Fed prints, things like the dollar's reserve status, interest rates domestically and internationally, world crisis events, and so on.   Thus if gold skyrockets from $1450 to $2900 because people suddenly "get it," well, that has nothing to do with the Fed printing doubling the supply of dollars.  

 

 

Wed, 05/01/2013 - 07:49 | Link to Comment Amagnonx
Amagnonx's picture

Yes - leverage up so you can get Corzined by fiat sell storms.  I hold gold and dont care how much someone sells paper for - the profit time comes when all the paper assets start to track towards their true value, the 'cant ever be paid back' value.

 

Thats when value starts to flood into real assets, because there is a finite amount of 'stuff' and all the supposed value that is liquidating into the ether from which it was spawned is leaving behind residues of true value - the goods and real assets themselves, and the money agianst which their value is weighed - gold and silver.

 

If you leverage your gold, it means you dont have it in your hand - do you suppose that when the value of the paper accellerates towards zero - and you try and pay off your debt and recieve your gold, that the counter party will actually deliver it to you?

Wed, 05/01/2013 - 16:20 | Link to Comment daveO
daveO's picture

You could always borrow money, then buy physical. 

Wed, 05/01/2013 - 07:37 | Link to Comment Fuh Querada
Fuh Querada's picture

Some priceless quotes here, too numerous to mention, like
"It is possible to trade gold professionally, to make a profit measured in gold"
So do so, Mr MM and retire to your mansion in Tessin or Aspen. If your system is so good why would you even whisper about it, far less share it with us "students"?

The previous posts had more the effect of a cheap pork fried rice fart in a crowded elevator, this one is just plain bizarre.

Wed, 05/01/2013 - 07:39 | Link to Comment disabledvet
disabledvet's picture

Texas or Germany demanding their gold could be cause for the drop actually. They have TRILLIONS in liquidity issues. Just ask Venezuela. "this Wall Street thing is a Death Star" so just get over it and start expanding your RANGE of liquidity options...of which gold... while the perfect "capital base"...is not. "so the problem this time around will be solved with a raft of speculations." so are financial, others political. they all revolve around the same thing of course..."making money." but technically the term should be TAKING money...making money requires business acumen, judgement, an ethos, a belief...so many things...none of which is solved by simply "buying gold." in other words "get a job...go to work, start a business, create a plan." usually begins in College and a girl. otherwise the only person you're working for is the bank...."the rehypothecator" as it were...and while the constantly declaim "oceans of liquidity" and love to broadcast this to the world on Seeking Alpha...in fact the only liquidity provider right now is the economy itself. Every bank in the United States is still essentially bankrupt. "makes SOME realize how important an economy is"...but very few. there are maybe 10 or 12 of us who realize just how precarious the current situation actually is...and no..."gold is not the solution" either for your personal net worth nor the businesses nor the country's. indeed...what that solution is "still remains inchoate and elusive."

Wed, 05/01/2013 - 09:31 | Link to Comment rustymason
rustymason's picture

Here in Texas, we say that Rick Perry is all hat, no cattle. Don't expect the gold to go anywhere or for Texas to push the issue.

Wed, 05/01/2013 - 07:31 | Link to Comment Aaron Burr
Aaron Burr's picture

The Dollar as a "unit of account" means we put it's valuation on everything that can be owned, bought or sold. Anyone's currency is ultimately enforced by the fact that it is the only medium which will be accepted to balance accounts with the taxing authorities. Gold trades as the commodity that it is (why the hell do we need gold futures anyway? WTF? Isn't the barbarous relic absolutely useless?) subject to the buying and selling pressures created by basic supply and demand---albeit totally fucking manipulated by the bullshit paper version.

I have a (on paper until sold) profit in physical if the price goes up IF the price rise is greater/faster than the prices of everything else going up due to inflation-debasement.

BTFD 

Wed, 05/01/2013 - 08:05 | Link to Comment JOYFUL
JOYFUL's picture

Anyone's currency is ultimately enforced by the fact that it is the only medium which will be accepted to balance accounts with the taxing authorities...

and yet, constitutionally speaking....the taxing authorites were obliged to balance their accounts with silver\gold.

Till something got lost along the way....leading to your misconception of gold being a \commodity\....as in, not a Giffen good, and therefore... anti-inflationary in nature... a tru 'soul brother' in effect of our author!

 ...IF the price rise is greater/faster than the prices of everything else going up due to inflation-debasement...

guess you're a prime "Marc" for Keith's programme...since you wholly missed the point of what you downticked!

btw...Care to let us in on choosing the avatar of a man famously quoted as saying

"a lie well stuck to is good as the truth"???
Wed, 05/01/2013 - 08:37 | Link to Comment Aaron Burr
Aaron Burr's picture

and yet, constitutionally speaking....the taxing authorites were obliged to balance their accounts with silver\gold.

Yeah--thanx for the Constitutional reference--we don't live there anymore if you haven't noticed--on so many levels.

 ...IF the price rise is greater/faster than the prices of everything else going up due to inflation-debasement...

Kinda applies to ANY investment you think?

I think somebody missed the whole point of my post if they think I am at all related to this gentleman.

I like the qoute.

Wed, 05/01/2013 - 08:58 | Link to Comment JOYFUL
JOYFUL's picture

IF the price rise is greater/faster than the prices of everything else going up due to inflation-debasement...Kinda applies to ANY investment you think?

I do not...ergo my response.

Perhaps, like DR Keith, you may have a misapphrension of the term 'price' vs cost...

Keith is clearly contemptuous of the idea that precious metals are under suppression...a regime wherein it is costing me much less to buy them than if that market were allowed to find true 'price' discovery...

when this current artificial situation ends, my cost of getting ownership (via gold\silver) of several varieties of essential goods is going to plunge...irregardless of inflation...debasement...or any other 'monetary' theory applicable to the world of commodities...and fiat. And actually, I've noticed that, on quite a few levels, people live on the level of the reality that they choose to stand for...

Wed, 05/01/2013 - 07:16 | Link to Comment digalert
digalert's picture

Very good, I'll have to look into utilizing the arbitrage and forget 'buy and hold'. Count your ounces, not your dollars.


 

Wed, 05/01/2013 - 07:02 | Link to Comment q99x2
q99x2's picture

Lost me on the "hope" part.

Wed, 05/01/2013 - 05:48 | Link to Comment JOYFUL
JOYFUL's picture

Now then, where were we?

Aaah yes....after sum 7 or so rounds of George "MonetaryMan" Foreman pummeling the precious metalz peeple to an apparent pulp, the bell has rung to announce the 8th...for whom will da bell toll?

After a clever attempt to lure us into the usual complacency with a partial pology for previous peccadillos, and a fleeting trail of bread crumbs of apparently useful info for once(the pricedingold.com site) the Champ returns to the offensive...

as in sarc references to dark cabals n such! Boom! Another gut bustin jab!But wait! Seems the challenger may be stirrin from their slumber! What's this...could the Louisville Lip(s) still have a fightin chance>>?????

a strategy of buying and holding gold for the long term does not produce wealth.

Semantically speaking...that sentence may hold a hint of veracity...but who is talkin about 'producing wealth' with gold??? We are not miners! No...we are those who wish to 'reclaim' our stolen wealth...stolen via a variety of vicious vectors of -inflation...taxation...militarization...and...monetariztion of the peeples wealth - the program of the past 100 years of which it appears MRMON|TARD wants NO part in identifying nor criticizing...

for that would not fit in will his thesis that 'theres a Mark born every Minute from whom to fleece a bit of fiat!' We ain't the Marks you were lookin for MarctoMonetaryMetallhead Sir! For we do not need to 'speculate' nor 'produce a yield' pon gold -"the reason why Monetary Metals was formed"[italics n bold gleefully added!]

The whole deal is extremely simple...requires no registration, initiation, paypal nor visa, nor Parts 2 or 3!

As can be calculated from the handy charts provided by our champ...in the pricedingold site ....after the artificial suppression of golds' historical buying power is released ....the price of things costed in gold will go down tremendously* ...those of us lucky enough to have anticipated this development will....unlike all our CAMPFEMA pre-registrant buddies...be returned to our natural state of well-bein....

not 'wealthy' ....well-bein... and able n willin to get on with bizness of livin... Large.////////////////DING!~~

End of round!

*the cost of my coffee...food...clothing etc., etc. As in living expenses! Careful readers will note that this does not apply to investments in real estate, as shown in his charts! That is for reasons not possible to bring into the focus of the discussion of the moment....but I look forward to the day when we can begin to discuss the nature of land and it's value...and begin to roll back the tide of b.s.  about land value and it's taxation!.....VIVA EL Henry George, y los sabios del movimiento populista Mericano del siglo 19th!

Wed, 05/01/2013 - 15:38 | Link to Comment silvermail
silvermail's picture

I do not want to upset you, but you are confused between the two concepts:
"The production of wealth" and "The value growth of wealth."
The canvas of Picasso did not produce any wealth in the past 100 years. But its value in those 100 years, has become much higher. This means, that the owner of this painting, has become much richer - "The value growth of wealth."

I hope I was able to explain what is the fallacy of your argument.

Wed, 05/01/2013 - 10:56 | Link to Comment tip e. canoe
tip e. canoe's picture

"look forward to the day when we can begin to discuss the nature of land and it's value...VIVA EL Henry George, y los sabios del movimiento populista Mericano del siglo 19th!"

si si senor

Wed, 05/01/2013 - 11:01 | Link to Comment JOYFUL
JOYFUL's picture

Let's make it so!

Wed, 05/01/2013 - 09:43 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

a strategy of buying and holding gold for the long term does not produce wealth.

He is actually right an ounce of gold now is still an ounce of gold later. It is savings not investment when you take pricing it in dollars out of the equation. The only real wealth production is productive assets i.e. your hands, brains, things like farmland etc or services like being a whore (there is reason they call it the oldest profession). Things that produce something of tangible value or a service which has a marketable value. There really only is 2 types of true money in the world because gold and dollars for their value produce nothing without an outside factor to apply the work to make it productive. Those 2 types of money are analog, i.e. you and me, animals etc., 2 mechanical, things like machines and computers than can operate without human intervention. If it requires human intervention it is tool not money.

Wed, 05/01/2013 - 11:00 | Link to Comment JOYFUL
JOYFUL's picture

As I previously pointed out, he is 'semantically correct' in the statement...

but it is a strawman argument. Perhaps it is because this point is so simple it escapes many peoples' reasoning -or conditioning...

so...on behalf of the many of us here who are not looking to trade ...speculate...arbitrate... or 'produce wealth' through holding gold - here it is - as plain as I can make it -

the value which gold\silver have had in relation to essential goods over many centuries has been artificially suppressed by market monopolists using the leverage of debt-based fiat currencies to decouple the natural relationship between them. WHEN that suppression ends...the cost of acquiring many goods and services will dramatically decrease for metal holders...at an inverse rate to the relationship of those same items to fiat currency holders...this is not 'producing wealth'...it is 'regaining stolen wealth' - which, in relative terms, can and will make the long term thinkers amongst us 'well-off'...not 'wealthy'...nor poor.

It's beyond me why all of these Middle-men believe that we require their 'services' to survive and thrive in tough times...just hold your gold and wait for the end of the era of metals suppression...no 'registration' required.

p.s....I'm patiently waiting for those whose only known facility is toggling the vote meter to assemble the wit to rebut with logic any argument I have made here... failure to do so will be taken as implicit acknowledgement of their essential correctness /lol!

Wed, 05/01/2013 - 16:47 | Link to Comment daveO
daveO's picture

I don't even have to look at centuries. Just look at 1971 to the present. Gold $35 to 1450. Up 41 times. US Debt up from $380 Billion to $16,500 Trillion, or 43 times. Gold is still your best bet for preserving your savings. Silver has only moved from $1.55 to 23.5, or 15 times. 

Wed, 05/01/2013 - 05:26 | Link to Comment dark pools of soros
dark pools of soros's picture

Truth is often read yet rarely spoken

Wed, 05/01/2013 - 07:47 | Link to Comment disabledvet
disabledvet's picture

indeed.

Wed, 05/01/2013 - 11:56 | Link to Comment Fuh Querada
Fuh Querada's picture

WTF?

Wed, 05/01/2013 - 04:26 | Link to Comment JOYFUL
JOYFUL's picture

Gratefully, at last, it's out in the open, and we can go head to head with MRMONEtardMAN. No more sparrin, or spinnin from the concussion of too many mind-numbing jabs of jargon laced with hooks of hilarious disregard for common sense. The beast be unleashed at last...

This means that a strategy of buying and holding gold for the long term does not produce wealth. It protects wealth, because gold does not fall. To get richer, you must either invest to receive a yield in gold, or speculate on an asset with a rising gold price. Producing a yield on gold is the reason why Monetary Metals was formed.

I'm low on battery power of the moment, but the scene is set, and I'll be back soon...as I sense it's Round Eight, at last...and time to come offa the ropes and finish this rumble in the jungle of Motubo-like mumbo-jumbo fo'ever!

Wed, 05/01/2013 - 09:00 | Link to Comment SafelyGraze
SafelyGraze's picture

"The second example uses 499:1 leverage. You buy 500 lottery tickets at $1 per ticket, or $500 worth of SuperJackpot, but you only need $1 because the bulk of the capital, $499, is credit. When you win (which is practically guaranteed, since: Five Hundred Tickets!!!!), you pay off the loan and pocket the profits."

There is a lot of truth to this article!

I know a lady who bought a SuperJackpot ticket at the convenience store I go to when I buy my MuscleBuilderPro (I used to buy EnergyMaster 5000 there, but I found a place the sells it cheaper and so I usually buy it there because a bargain is a bargain) and she said she knew somebody who got thousands of dollars when he picked the winning numbers and it was written about in the News Papers and so that is why a lot of people borrow money or sell their scrap and unwanted gold because then you can go and buy more of the lottery tickets and when you win, which is practically guaranteed, then you can pocket the profits and that is how leverage works and you generate wealth, only in the article the author is talking about using the gold instead of the lottery tickets which is an even better idea because you can't really sell scrap and unwanted lottery tickets as much as you can with gold, if you are following what I'm saying.

and also in some places the lottery it even goes to help with the cost of education, which is another way you generate wealth.

maybe they will start doing hospitals with it too, or maybe to help children who are in need.

 

Wed, 05/01/2013 - 14:05 | Link to Comment akak
akak's picture

You are so wise, I think you should run for political office.

Wed, 05/01/2013 - 08:32 | Link to Comment silvermail
silvermail's picture

The author does not understand that he too is under hypnosis pseudoscience Keynesianism.
For this reason, author argues in his discussion of one standard childish delusion about gold: "This means that a strategy of buying and holding gold for the long term does not produce wealth."

Dear author, world population grows by 200 million people every year. And each of them need gold, at least for a wedding - it's at a minimum. But this is not the most important thing. Each of them need food, clothing and services. Thus, the total weight of goods, works and services in the world, growing at a rapid pace. Mining is not growing at a rapid pace.
In addition, there are new products and services, which have never been before. But the growth of gold in the world, does is unable to for the proportional increase in the volume of goods, works, services, and population growth.

This means that the long-term ownership of gold makes all of us more richer.

No need to blindly believe in propaganda slogans Keynesianism and no need try to prove this false propaganda.

Wed, 05/01/2013 - 08:49 | Link to Comment silvermail
silvermail's picture

The basic principle of Keynesianism - this expansion of the monetary base in proportion to the growing economy. Okay, but what if the monetary base will not grow? A: The money will become more expensive against all goods, works and services. For one the same volume of money, we will be able to buy more goods, works, services in the future, than we can buy right now.

This is exactly what we observe in the situation with gold.
I hope that in this example, I was able to explain why the long-term ownership of gold not only keeps our buying power, but also makes us realy more and more richer.

Wed, 05/01/2013 - 14:38 | Link to Comment Solon the Destroyer
Solon the Destroyer's picture

Agreed, it is the inherent nature of economies for prices to drop.  Price increases are artificially created by central banks, working as they do against constantly improving technology and greater economies of scale and increasing demand for currency.

But I am pretty sure Weiner knows that. You're making a semantical argument about the nature of "Wealth" and how it is defined.

Wed, 05/01/2013 - 11:22 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

Yes, the answer is leverage.  NOT.

If you want to get f*cked by the cartel the answer is leverage.   If you want to be forced to sell your position at the worst possible time, use leverage.  If you believe in your ability to call an absolute bottom which will never be repeated, absolutely, use leverage. 

Otherwise,you should probably just convert your savings into silver and gold at the appropriate times, like most here do. 

Leverage is a double-edged sword, boys and girls, so be careful with sharp objects.

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