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Gold And The Potential Dollar Endgame Part 1
Submitted by Joe Yasinski and Dan Flynn of Gold Bullion International,
Part 1 of 3: What supply and demand? It’s all stock to flow these days.
Reading our title has us convinced that somewhere our college economics professors are hanging their heads in shame with all of those x and y graphs scribbled to no avail. Economists the world over can take comfort that the laws of supply and demand still largely rule the marketplace. However, we believe there is a noted exception for a yellow, largely useless metal. A metal that just happens to have shaped the world’s monetary systems for the last several thousand years. Gold’s “supply” traditionally defined as global mining production is virtually meaningless in determining its’ price. How can this be? Analysts pontificate that global supply dynamics are integral in forecasting future metal prices. We can only attribute this to the fact that these analysts still myopically cling to the view of gold as a commodity.
Gold, even when viewed as a commodity, is unique in that it is not consumed. As there is little cost effective industrial application for the yellow metal, little to no “natural” industrial demand exists. Virtually every ounce ever mined from the earth is still above ground, either in a vault or a safe or an earring. An estimated 170,000 metric tons sits above ground, hoarded and unambiguously owned. Given that the annual supply of mined gold is approximately 2,500 metric tons, how is it gold not priced close to zero? After all, there is a 65 year overhang in supply! Despite all that we know of supply and demand dynamics and economic ‘law’, gold’s price is within striking distance of its’ all-time-high – in every currency on the planet.
A major contributing factor to gold’s price is that the vast majority of the stock of physical gold is held in very strong hands. It is largely held privately by very wealthy families or by governments and their central banks. This gold lies very still, some of it not changing owners or locations for decades, if not centuries. These giant holders have little need to ever sell, holding gold as a long term store of wealth or as a central banking reserve asset. Gold naturally appeals to these super-savers because of gold’s history as the ultimate store of value and lack of counterparty. Sure you can buy real estate, art, or classic cars- and the extremely wealthy do. But beyond illiquidity and subjective risk, these assets can become cost centers in themselves with maintenance, storage, insurance, etc. Gold is universally recognized as a wealth asset but is also infinitely divisible, portable, and highly liquid. Gold’s value has been established over a millennia and is ultimately the asset that denominates or values all others.
Rather than supply in the traditional sense, what drives the gold price is the percentage of the existing stock (170,000 tons) that is available for sale on any given day. The percentage of available inventory for purchase is the “flow.” Divide the flow into the stock and you get the STF ratio. A low STF ratio indicates a very high percentage of the existing physical stock is available for sale and a very high number means owners prefer to hoard physical metal rather than exchange it for dollars. So for example, if every ounce of gold was put up for sale tomorrow, the STF ratio would go to one and the price would plummet, likely to near zero. But, what if instead of everyone selling their gold tomorrow, all existing physical owners of gold decided to keep it instead? Could this even happen? Doesn’t conventional wisdom and ‘economic law’ tell us that as the price of gold goes up, there are fewer buyers able to purchase and more sellers willing to dishoard?
In our opinion, conventional wisdom simply doesn’t apply here. Gold, in our opinion is what is often referred to as a Giffen good. A Giffen good is one that actually sees a spike in demand as its price rises. Conversely, demand drops along with price. While the concept of a Giffen good is well known, the number of examples in the real world are slim and usually limited to localized commodity markets in extremis. A golden, glaring exception is the massive example playing out before our very eyes. In typical Giffen behavior, gold was scorned and dishoarded by individuals as well as central banks as the price hovered in the low 100’s. Fast forward to today and gold demand is at to or close to all time highs, even as the price sets new records in currencies around the world.
Many prominent members of the gold community insist that gold is going to appreciate massively because of a huge flood of investment dollars will flow into the metal over the next several years. They may very well be right, and we at GBI certainly hope so. But we can see things developing differently as well. We believe that a massive revaluation of gold denominated in dollars can happen quite suddenly, almost overnight. But not because of any sustained long term demand for gold, but simply because owners of metal simply withdraw it from sale, sending the stock to flow ratio to infinity. This is why understanding gold’s stock to flow ratio is so vital.
Can you imagine a manufacturer of automobiles (or any producer of a good with a declining marginal utility) deciding to just sit on his newly manufactured automobiles and let them stock up in perpetuity or would he offer them for sale, for as many dollars as he can get? Of course he would sell for dollars because he must monetize his production. As with almost every commodity, widget, or car – the suppy/demand dynamics are fairly straight forward. The manufacturer needs to exchange those automobiles for cash or they’re worth nothing to him. For a holder of gold, there is no need to exchange his stock for dollars, especially if there is an avalanche of dollars pursuing that stock of metal.
If the dollar avalanche comes, can you imagine a massive owner of gold - perhaps a central bank in a surplus nation or billionaire family, preferring to stockpile gold as a reserve eschewing the current offer of dollars? Or do you see these savvy economic actors dishoarding their store of value in exchange for quickly devaluing dollars (like the auto manufacturer)? Once you can see why one makes sense and another doesn’t, you’re on your way to understanding how gold is priced and how major pricing moves can have almost nothing to do with traditional supply/demand dynamics. There never needs to be a massive flow of dollars into gold for it to go unimaginably higher. Existing owners need only remove their stock from sale. And tying it back to Giffen, when physical gold goes into “hiding” the demand of people bidding with their dollars will increase in proportion to the increasing price.
It’s useful to understand the concept that dollars bid for assets. When dollars bid to buy a stock over and over (high velocity) the price goes up. If all dollars stopped bidding for AAPL the price goes to zero. In reality, dollars value Apple stock. Gold is a unique asset in that it denominates, or values currencies. Dollars don’t bid for gold. Gold bids for dollars. If you’re having a hard time with this idea, think of an extreme, like Weimar Germany or Zimbabwe. A gold owner accepts or rejects a sum of dollars as a suitable trade for their metal. When they reject this bid, it drives the STF ratio higher and higher. Why would gold holders cease to bid for dollars? For the same reasons we all hoard gold, as protection of real purchasing power from a failing fiat currency. Where will the flow come from? Central banks certainly aren’t selling anytime soon, ditto for our fine Asian friends. On a micro-level, we have seen recently in places like Greece and Spain that there is a finite quantity of gold that flows into the market when times get tough. What happens when the citizens run out of gold bangles to sell and everyone else starts hoarding? On a macro-level, what happens when surplus nations no longer save in US dollars and instead save in gold? What happens if the “flow” of gold slows to a trickle, or even stops all together? We can easily paint a multitude of scenarios that don’t require all that much imagination. Will dollars frantically chase after gold? Perhaps, but will the holders of gold bid for those dollars? What will that imply about the dollars purchasing power relative to others goods and services?
It is up to the reader to decide which of the two following turn of events is more likely. Is it more likely that the human superorganism will come to the realization that their dollars are being debased and gradually steer more and more of their assets into gold or is it more likely that existing owners of gold, who long ago came to the same conclusion and likely purchased gold to hedge that very outcome, will first choose to remove theirs from sale?
The answer lies in this question, who values gold higher? The new incremental buyer, or the existing owner? Sure, we could get to astronomical gold prices through a flood of new buyers, but we could have an even more dramatic move overnight if existing gold owners cease bidding for dollars with their gold. Or, maybe, some combination of the two. The only problem for a new investor is one of those scenarios can play out over years while the other can happen virtually overnight.
What happens to the “price” of gold when it ceases bidding for dollars? Zero. Or infinity. Take your pick.
We have some ideas about why this hasn’t happened to date, and how you may be able to identify a S-T-F ratio to infinity unfolding before our very eyes.
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Stop posting so many stories. I have things to do.
LOL +1
Shut up and drink.
I'll drink to that. However I do like this article and I look forward to the next installment. I hope I'm sober enough to understand it.
Yes, sir!
OK. Got my drink and a couple cigs. That does feel better. So much for my chores.
What the fuck. You've earned it. Go re-read a few chapters of Atlas Shrugged and tell yourself that you are an intellectual who gets it.
Get high......then go and buy some gold and silver
Nothing else matters...
http://www.youtube.com/watch?v=TDkhl-CgETg&feature=related
Al Qaeda = The Base
Phase 2 of the 3 step process has begun.
Go after the perpetrates and banksters involved, and bring them to justice.
9/11 BUILDING 7- The Undeniable Truth
http://www.youtube.com/watch?feature=player_detailpage&v=ONoIOJ8UrKI
Gameplan:
Step 1.
l2 futures/equities trade
Step 2.
Get working method and trade it
Step 3.
Take profits and buy:
Buy fresh water filtration system, non-electric.
Buy emergency food
Buy organic seed.
Buy emergency shit, medical etc.
Buy physical assets + guns.
Buy necesary goods (tp & floss, toopaste, soap)
(optional: buy farmland not in US, and not in socialist country
Also, consider leaving US...)
-----------SHTF-------------
Once PM pandemic hits retards, begin selling half metals and buy more guns, cars, houses. farmland.
Expect gold to double in 3-7 years. Retard phase to begin 5-10.
I liked the headline except the word "potential"
Barry introduces new level of shtf-ism. Guy seems to really hate human life. So that timeline is more flexible under barry,
but you shouldn't over-react until barry goes full retard.
good list above
was thinking of adding this
http://www.bountifulgardens.org/prodinfo.asp?number=SOI-9418
It's not going to be as bad as people think it will be.
Follow the Iceland model. Why reinvent the wheel?
I've come to conclusion that I should drink more more often.
red betty, ufo raspberry hefeweizen. or angry orchard ;D np.
Palladium is currently undervalued at 50% off it's all time high of $1100
Palladium is currently undervalued at 50% off it's all time high of $1100
Yeah, and what was it 5yrs ago?, I remember it when I THOUGHT about purchasing some at $256.00.
All the PM's/Semi Pm's are UP.
i did get some at $250 ish, but its still sitting in my e-gold account awaiting the fed gov to release the funds. :(
thing with Pd , is really is a consumable metal for industrial use, if industry is going down the shit hole,. no amount of inflation will increase its demand,.
so if you see good times coming before even darker times. get some. i should have traded my gold to silver back then, it was only $6, but then i thought silver was dead.
Drinking more, more often, seems to help.
On the dollar crashing (as the sheeple demand more free shit thrown their way) I'm reminded of the old story of the man who fell out of the window of a skyscaper...as he plummeted past the 20th floor he was heard to remark, so far so good ;-)
perfect analogy but I would add that as he looked over, the skyscraper was falling faster than him
lol...yes...perception is reality, till its not ;-)
nice phrase, a palindrome really
Yes, and I figured out that I've enough money now to drink myself to death. But why don't I?
I marvel at the 'skid row' alchoholics. These are a rare breed that can carry this addiction to its bitter end. Superstars in their own right and we don't even see it. I kneel before thee....
You must have just woke up... Or called it quits after l2 fed reserve. See there's this thing, its called brainpower. No one in US has any. Iceland fucked up, they made mistake, but they learned. = brainpower. US are retards. giant conglomerate of video game addicts, heroin junkies, 1950s fantasy land muppets, and general retards. See iceland has this thing they like to do, like limit who gets into their country. Dumb ppl, are not on list. America = melting pot, remember?
It only takes 2 weeks for simpering liberal progressers dumpster diving for their dinner, for them to come around.
Don't sweat it.
Your indictment, which I also found humorous, reminded me of a theory for calculating group intelligence. We all know the adage, "individuals are smart, but groups are dumb"; obviously, though, that is a gross generalization, even in the face of so much circumstantial evidence. Because certainly, some groups are smart, and some individuals are also dumb. So the idea goes like this: calculate a best estimate total intelligence score (a composite of IQ, EQ, and any other scores deemed relevant) for each individual, scored on a scale like IQ. When estimating the intelligence of a group, multiply each individual's score together with a score of 100 = 1.00, a score of 110 = 1.10, a score of 90 = 0.90, etc. So if a group consisted of any number of average intelligence individuals (all with individual scores of 100), then the group itself would have an intelligence score of 100, but if a single person of 90 intelligence joins the group, the multiplier brings the whole group's score down to 90, and the group collectively could be anticipated to act in a less intelligent manner. Similarly, two people together who each have individual scores of 90 would collectively function with only an intelligence of 81; it would take an individual with an intelligence of 125 teamed together with these two to produce of group of people that could act with an average intelligence. That said, smart people acting collectively, then, can produce feats of intelligence greater than an individual would have capably conceived. By this logic, joining a mensa or TED Talks seminar (silently, perhaps, so as not to dilute the intelligence of the group), one might become more intelligent, at least temporarily. Just a general theory, for sure, but at least a vague attempt to quantify so much circumstantial evidence.
http://cantrip.org/stupidity.html?seenIEPage=1
Hilarious. :-)
Optimistic.
+1 LTER. You're a hell of a guy.
Same to you, cultmaster.
Your disdain for Rand demonstrates more cultist sociopathy, than that which you claim exists in all of her books, and newsletters combined.
Being a perpetual dick demonstrates that you've long since lost the battle of ideas, and must resort to personal attacks.
don't owwry about that idiot. he either stopped learning years ago, or is incapable of it.
Every sentence in this article is copied from FOFOA without attributing any original reference to FOFOA.
ZH would have directed GBI to avoid any reference, what a bunch of sore losers thse two.
FOFOA spreading the word :) Soon everybody will understand what gold really is. Inflation protection? Sure, if you understand that hyperinflation of the dollar has already happend.
If you can wait a month or maybe a cpl of years there is no better "investment" When it's price go trough the roof everybody will buy it as a store of value.
50K+ gold coming to a town near you soon!
FOFOA is wrong about silver, period. I could not care less what his anonymous deep throat shamans intimated. You really think people will want grains of $50k gold, but oz of silver will crash as it "forgets" its American monetary history? Unadulterated bullshit.
FOFOA cultists should go back to slaughtering chickens and reading the entrails or entering a trance from the vapors of my gym socks.
Drink and listen to Mossad blow up trucks on 9/11
Hahaha Stupid Goyim, it's a Jew World Order, and you're useful idiots!
https://www.youtube.com/watch?v=WTpYCcDDH6U
Please stop being anti-semitic please or I will rerport you to the ADL, SPLC, ACLU and the FED.
"You forgot Poland." -- G W Bush
I do apologize, I temporarily awoke from my white guilt holohoax programming.
I will sacrifice a Palestinian baby in honor of our Talmudic rulers, and file two tax returns this year.
Long Live King Bibi! Bomb, bomb, bomb... bomb, bomb Iran!
Ditto on the next installment. What's "sober" mean? After all, to quote Robin Williams, "Reality is just a crutch for people who can't cope with drugs!"
infantilization of populace with hot bitches, sans stoner teddy bears:
http://www.youtube.com/watch?feature=player_embedded&v=hWsBIQicYtE
You are a complete fucking idiot.
Enough said.
I thought that was funny.
Correct in a free market, which we don't have. The Fed, via the Bullion Banks, can and will continue to cap the price of PM's via the selling of Crimex (aka Comex) naked paper shorts, which the CFTC will ignore (The Government has a block exemption). They want to do this because they do not want the Fiat game exposed for the Ponzi that it is should Gold go through the roof. ("Currency Stability" being one of the Fed's mandates).
The London Gold Pool failed and its "privatized" offspring will fail.
I honestly believe you should all shut the fuck up, and thank the lord that the markets keep metals from exploding upward. You got all this time to acquire metals. Illuminati giving you golden ticket b/c u brave enough to face reality, and u complaining shit isn't crashing fast enough? R U HIGH?
It's like you don't have any brains at all. I'm fucking astonished.
Your construction of strawmen is obscuring your own view of your surroundings, or perhaps it's the blinders of arrogance. Regardless,
on an individual level, the current functioning of the gold market does allow those individuals with the financial resources to participate additional opportunity to profit- by postponing an appreciation of the gold price (or a severe dislocation of the price of debt fiat).
Greed, however, also has its costs, for every thousand ounces that is bought, and comes out of the market only to be lost in boating accidents or locked away by central banks, how many of those of ounces were pried away from savers who were forced into the market by economic desperation?
On a societal level, the costs are astronomically higher, wars are financed and economic suffering is exported globally with inflation in order to postpone the realization of an ever increasing cost of mean reversion.
When there was an Evil Empire, these costs would be justified by the liberation of the oppressed through victory. Now, however, the SNAP status quo is justified by the oppression of the masses and the erosion of civil liberties.
The nominal monetary price of gold does not reflect the actual costs of the long term institutional manipulation of that price to individuals and society.
That works until people see paper gold is worthless and start taking possession of physical gold. Those buyers typically have strong hands. What happens when Germany decides it wants all of it's gold at home? Or what happens when China decides it would rather spend our dollars for gold instead of treasuries?
They will be declared rogue states, have sanctions imposed on them - which won`t work, and finally war. Thats why they have not done it yet and probably won`t.
War is waged with oil and money(gold). When you no longer have a pot to piss in, then you piss off. War will no longer be waged using starbucks coupons. Ya feel me?
They will be declared rogue states, have sanctions imposed on them - which won`t work, and finally war. Thats why they have not done it yet and probably won`t.
Who you talking about?,/ the several (soon to be many more)states that are practicing Nullification as of NOW, or Louisianans who has requested permission to leave the union?.
I like it when there are interesting articles posted about gold. This is another one. It makes you think: At what point does gold become hard to find? And when that time occurs, how much will gold be worth? I think we can all answer the second question: A LOT more than the current price.
I've been a gold bug since 1991, when I began investing in gold. I'm still amazed that so few have figured out what I did way back then: gold is the ONLY safe investment for the long term.
The article points out why gold is the only safe long term investment: It is hoarded. But more importantly it is liquid. Those two qualities make it a very unique asset. This is something that the anti-gold antagonists, such as Warren Buffet, fail to understand (or perhaps that understand it so well they are scared of gold).
I want gold for those two reasons. But I also want it for other reasons. Let’s talk about those and why more and more people are going to hoard gold in the coming years.
1. Debt. This is becoming more and more obvious to the masses. We have a huge amount of debt to service and roll-over annually. At some point the balloon is going to pop. Who’s debt pop’s first? Japan, Europe, or the USA? Place your bets.
2. High Oil Prices. People love to deny peak oil, but trust me high oil prices are not going away and are strangling economic growth. Once we get to $150 oil, the global depression will be in full swing.
3. High Taxes and Regulations. How can America and Europe grow their economies with high taxes and a multitude of regulations? The average small business must literally cheat to make a buck, and it is getting worse.
4. The decline of the US Dollar as the international reserve currency. This might take a few years to unfold. But the trend will not help the US economy, nor the global economy.
5. The decline of the bond market. This is inevitable. Again, it might take a few years to play out. But once interest rates rise, we will likely have a run to gold.
That’s enough for now. Note that gold's little sister - silver - will come along for the ride. And she has even less inventory than her big brother.
www.goldsilverdata.com (for gold and silver mining stocks)
Look, I agree that buying gold is a responsible thing to do and there is no counterparty risk. That said, this article is CRAP because there are plenty of other risks that do apply.
For example, you cannot have a meaningful discussion of gold without discussing interest rates. Why? Because interest rates set the opportunity cost of holding gold, which has no yield. Since it has no yield, when interest rates rise, it looks less attractive - and vice versa.
This has important implications in a low-rate (ZIRP/NIRP) environment like we have now. Why? Because if interest rates revert to the mean and increase, we would expect the price of gold to decline accordingly. In other words, there is a risk to owning gold. Now, could this decrease be offset by a lot of destruction of credit that increases gold's relative purchasing power? Sure, it could. But the bottom line is we don't know which force is of greater magnitude, so like Hugh Hendry says, we should remain agnostic and structure our investments accordingly.
Moreover, I think it's assinine to suggest that Gold is a Giffen good. Do YOU buy more of it when the price of gold increases? I sure as hell don't. I buy more when price declines. Now, it's true that fear increases and desire for gold as a hedge against calamity increases, but desire alone isn't demand. Demand means both willingness and ability to pay has increased. That doesn't happen with gold. Or at least this: nobody has made a convincing argument that gold is a Giffen Good. If anything, Gold is perhaps a Veblen good. But that's another conversation.
Lastly, I disagree with you that Silver has all of the same positive factors going for it that gold has. Don't get me wrong, I like both gold and silver. But one is the ideal money, and the other is a substitute good. One can regain it's "monetization premium" without the other gaining a similar premium. One is not consumed as a production good, the other is. Silver Bugs think that the upside to silver is that it can regain its money premium while at the same time its scarcity can result in a short squeeze. These are two mutually exclusive outcomes, in my view.
I think metals are great, but I think a lot of PM bugs haven't thought through their attributes completely, especially concerning their interactions with interest rates. In summary, piling into metals is not riskless.
@Thisson:
you are absolutly right. interest rates are the key. But not only to the price of gold. That does apply to every asset. It's part of the discounting-equation.
On the long-run equities are doing better then gold. At least for the last 150 years or so. In case the US-dollar looses his reserve-currency status things might change - at least for a while.
However, what do you think, when are interest rates going to rise again? To me it looks like central banks and politics are not going to allow that to happen. Western Goverments are broke, companies and people are stuck in debt up to the nose.
Inflation - Deflation. Gold is going to have another few good years.
Stay careful and diversify. Don't pay to much attention to ZH guest posts - those guys are just selling their book.
I saw gold' s little sister silver the other day. She was wearing thigh high stockings and some super high heels. Wow she was hot!
I bid one ounce for $10,000.00. Who's got 10 G to swap?
Astute article.
My elegant summation is as follows...REMEMBER THIS.
I can ALWAYS trade my Gold for Fiat Currency. However there will come a day...in the very near future when...I will not be able to trade my Fiat Currency for Gold.
Take heed to this as the day doth approacheth rapidly.
Not necessarily at favourable exchange rates though ... government can arbitrarily impose a VAT on gold sales if it wants, you can try to avoid that on the black market but the black market imposes it's own surcharge for risk.
So the price goes up?? Even the black market has to have suppy, doesn't it?
The price to buy goes up (compared to free market prices) but the price to sell goes down ...
The black market needs supply, but it creams more off the top than your friendly legal coin shop. A price you pay for access to their distribution network ... trying to connect directly to street level buyers is of course possible too, but then you shoulder a bigger part of the risk.
And what happens to a holder of UST in the USA who exchanges those UST for fiat on Dec 31 vs.Jan 1?
Every risk that exists with gold also exists with other "stores" of wealth, however, the inverse of that is not also true.
This post by GBI? You all know who are they are? Take a peak:
http://www.bullioninternational.com/aboutgbi/our_team
Some highlights:
Prior to Eaton Vance Mr. Yasinski was Vice President for Salomon Brothers Asset Management covering Manhattan where he was wholesaler of the year in 2003 as the highest grossing salesman in the firm. Mr. Yasinski holds a Bachelor of Arts degree in Finance from The University of Arizona.
and
In 2008 Mr. Provencher's team was awarded Money Management Institute's (MMI) "Marketing Campaign of the Year" for its work with clients during the Lehman Brothers bankruptcy. In 2011 his team was again recognized by MMI as “Manager of the Year”.
and
Prior to Salient, Mr. McCarthy was a Director and derivative product specialist for Merrill Lynch. His key roles included: engineering market-linked notes, hedging and monetizing concentrated stock positions, and managing the derivative overlay strategies platform. Mr. McCarthy's prior experience also includes: heading the U.S. Corporate Equity Derivatives Group for Calyon Corporate and Investment Bank, and heading the Fixed Income Sales team at Sumitomo Bank Securities.
and
Before joining, he spent 18 years at Merrill Lynch most recently as First Vice President (FVP) of services responsible for service delivery for ML’s Banking and Brokerage business. Prior to that he was FVP of operations in ML’s proprietary asset management division responsible for retail operations and services of its Mutual Funds,
and
Prior to Chilton, Mr. Singh was at Morgan Stanley in the investment banking division where he worked on large financial sponsor and strategic company transactions.
and
Steven Feldman, Chief Executive Officer/Co-Founder Mr. Feldman was a partner at Goldman Sachs where he was the founder and head of the global infrastructure fund with over $10B under management and served on numerous corporate boards.
These guys are also offering their keen support to Fofoa (draw your own conclusions) and selling a service related to electronic dealing/storage of gold (they sing the praises of buying physical gold rather than an ETF, including the benefits of no counterparty risk). They also say:
Sterling Trust is a non-bank trust company. Since 1984, Sterling Trust has specialized in providing quality non-discretionary custodial services on self-directed IRAs, business retirement plans, and personal custodial accounts as well as escrow and paying agent services. From its corporate offices in Waco, Texas, Sterling Trust services individual and business retirement accounts in all 50 states.
Since Sterling Trust's only business is the administration of self-directed accounts, it has become a leader in providing specialized services designed to maximize your ability to control and manage your account assets.
Gold Bullion International serves as an agent to Sterling Trust. Precious metals are acquired by Gold Bullion International, but accounts are in the care of Sterling Trust, the custodian for precious metals IRAs.
On the day ZH posts about Germany and its gold, perhaps readers should consider all of the above points, it's a funny old world.
US Dollar key to confirming markets' directions, in spite of rising markets and rising dollar today.
http://bullandbearmash.com/chart/dollar-daily-today/
You never answered the question earlier today. other than the euro, what is the dollar rising against?
The index is trading normally against a basket of currencies. The US Dollar trades in many different currecy pairs though. Take a pick.
And about to see a major ramp against the Japanese yen...
Did I mention major?
MAY-Juhrr.
Don't bother coming to Switzerland with your US dollars.
so YCS Orly?
It's an immeasurable equation, as you suggest. It has no yardstick, no watermark, no numeraire and has a depreciation component built into it at creation. It's like bobbing for turds.; you just don't want to play the game.
The other part of the sick banker's creation is that they charge workers a wealth-stripping fee in order to use it, thereby transfering the collective wealth of nations from the workers to the bankers. The government is wilfully in collusion with the bankers, the enablers, firmly attached to the hind teat of the monetary/wealth pig-syphon, taxing the wealth of workers through the currency system. They, bureaucrats, need it to survive.
Give us our money back. Give us our wealth back. Give us our liberty back. Fuck them, let's take it back.
This is an overly simplistic argument. It is two step.
The USD strips wealth from the rest of the world (due to to reserve status enforced militarily) and the bankers in turn get a bigger share of what is stripped. Hence, we are all benefiting to some extent but we resent others getting a bigger slice of the pie (No, I am not in the financial industry).
Well before gold becomes supreme, we will come to blows and at that time, gold wealth will be moot (given the destructive weapons that is owned all around). MAD is what is keeping everyone participating in keeping this status quo going.
All major powers tend to externalize their problems to hold internal core and the US will not be any different. Before we descend into civil war conditions, we will be led into war with other nations. This is standard playbook for TPTB.
So I would argue, we should be hoping we can keep the status quo going for our relative well being...
What blathering nonsense. You keep believing in that hope and magic stuff you're smokin'. The mathematics of the situation with regards to the bankruptedness of debt based money to settlement accounts is irrefutable. You could refute it but your argument will be found lacking. Fiat currency is global and simply credit,an IOU as payment but not settlement. It's FIAT, dummy. No intention to settle. Period.
Internationally, bankers are priveleged the right to print money, not create wealth. They print money credits and charge interest to use it, that's how credit extension works. Governments legislate it into existence by issuing bonds against spending bills and tax workers to perpetuate the scam, thereby getting their cut. Your venerated status quo is a scam; a con. You state that there is a beneficial outcome via relative well being, well, relative to what? Surly not a gold standard or commodity standard (for something second rate). Just ask a Greek or Spaniard how well the scam has worked out for them. Just because it hasn't hit you yet, doesn't mean it won't. You need a huge toke on some Austrian smelling salts.
Saw that one earlier Al.
I thought this offered a window into the commenters soul...
"So I would argue, we should be hoping we can keep the status quo going for our relative well being..."
The old "Yes, we know its a corrupting, unethical, immoral and ultimately destructive scheme to everyone in our society but lets keep doing it because the consequences of stopping it are unthinkable" defense...lol.
God help us.
Yup. It's the old "I'm all right, Jack" attitude. It's not a head in the sand issue, it's a head up the ass perspective. He brushes off the obvious with ("Simplistic") derision when it is just plain simple. Morally bankrupt world wide. It's OK to strip the world of its wealth just as long as we get to benefit from their theft. Fuck me! What a prick.
It's just my observation. You think we are in the ME and elsewhere for nothing (humans are amoral, might is right). Unfortunately, a gold based system would drastically reduce our ability to consume and our consumption based economy would collapse resulting in civil war like conditions.
The bottom line is that the current system is to our advantage as a nation (gold investors may not see it that way) -- else we would have attempted to dismantle this long back. You are in denial if you are not recognizing the fact that, for example, a hair dresser in this country can tool around in a Hummer on her income only due to this fiat-credit arrangement (for at least 40+ years) which, as someone upstream rightly observed, will never be repaid.
You may be leading a pious self sufficient life (growing your own food, manning your machine gun from across your moat around your castle, etc.) but not everyone in this nation can be accomodated if they wished to adopt similar life style -- our economy works only by each of us consuming others' services/goods (mostly frivolous junk) until resources run out and can't be secured. Thereafter, we will be forced to adopt to changes but don't expect TPTB to voluntarily make changes on their watch given the fact that no one has a crystal ball of how the future plays out. Hence, they strive to perpetuate the status quo.
I know this may not fit in with your world view but no need to get your knickers in a twist over it.
"It's just my observation. You think we are in the ME and elsewhere for nothing (humans are amoral, might is right). Unfortunately, a gold based system would drastically reduce our ability to consume and our consumption based economy would collapse resulting in civil war like conditions. "
It wasn't just an observation; you condone it only in order to maintain your entitlements. Might is right, eh? Say no more.
If you want to UNDERSTAND stuff, you need to be able to separate your personal values from the OBSERVATION process. Take a look at what's happening and pretend to be a space-alien with no moral considerations for a minute.
Some folks can't separate their emotional responses from their perceptions. If this is a challenge you face, you may be better off just trying to understand the work of those folks who do it naturally.
(Personally I don't quite agree with the presented argument about "keeping things going," but the overall conception looks about right. As I see it, the plan is just to "keep things going" until one other major player falls apart--then muscle into place a new arrangement.)
You mean I have to adopt an immoral, cold, calculating, antipathetic, sociopathic mindset to establish a considered observation? No thanks. I'd rather respond to stimuli as I experience them and respond accordingly. In this instance, anger, mixed with a high percentage of outrage, is a measured response on my part. I can be just as cold and calculating as the next guy, but it's what to be calculating about that's important.
When it's time to hang a banker, those perpetrators of war, the thieves of wealth, the occupiers of our national public institutions (how many Goldman Sachs plants hold public office), then just ask. When it is time to try the treasonous government employees who enable the crimes against the constitution and the republic, call me. It will be an emotionless act on my part. After due process, that is.
You mean I have to adopt an immoral, cold, calculating, antipathetic, sociopathic mindset to establish a considered observation?
ONLY if you're trying to *understand* the world. If you're happier in ignorance, by all means: keep behaving like a mindless nerve twitching in a vat if you prefer emotional reaction to knowing why things are as they are.
Understanding isn't for everyone. Look at the average crackhead.
Bullshit. I can read the tea leaves. I see the world's problems as emanating from the minds and machinations of cold and calculating sociopaths. We aren't in this mess because of the moral behaviour espoused by caring and honest men. This is a world that I can't support. You live in it if you like but I intend, with every fibre in my being, to change it as much as I can. I realize that I am not persuasive over very many but I will do my bit, in a calculated but very pissed off frame of mind.
Mazel tov! We all do what we can.
Did you guys see this....100% Disaster..
Share this one Tyler..
http://theeconomiccollapseblog.com/archives/share-this-massive-list-of-p...
Layoffs are good for the equity bulls.
Not really. Only because Bernanke kept kick saving the markets with QE has it been good.
What's the big deal? All you have to do is take the total number of layoffs, wait three days and revise it down to an acceptable number................
Same crap happens every day. Give it a rest. The OTHER asshole won.
Take a look at the post-election car crash fatality numbers. Apparently 240 people realized they couldn't stand 4 More Years and went out and crashed their car.
from the link,
zomg - if only the other guy had won, the economy would be saved!!! we would have hired, and people would be buying new houses, and cars, and having more babies, and going shopping!!!! but now we're all going out of business - 48 hours, end of the world!!
seriously, I realise some of the reasoning, but these stories read as temper tantrums - either you were going to the wall last week, but had your fingers crossed you could successfully do some cuts and stay open - or you're not a very astute business owner in the first place. . .
while I understand campaign promises *cough fiction* once they're installed, there is NOT that much difference between figureheads.
it's a false hope thing Cath....we were so close...if we could only remove this one guy........if I only still had hair
Exactly. Government itself is the problem.
and that we're all bald
but we keep shaving
I'm not bald. I'm balding.
I thought the whole key to aging was to deny the present progressive
One of my best friends who runs a company near Rat-lanta told me how O's big re-election caused over 40 of his 100+ workers to call in sick the next day. three of them quit - stating how Barry would pay for them. I'm available for work and he won't hire me in part because I won't move to the hellhole he has to deal with.
it started long b4 08.
http://www.usaprogressive.com/2012/07/since-reagan-china-has-been-killin...
blame him all you want. this was the plan of both parties. agenda 21. micro living on soylent green.
I sincerely hope Obama can get a third term in office.
No problem, during his second term he'll make SCOTUS appointments who will declare drones to not only be persons (Drones United), but also give them the right to vote...which will give him a drone army to pack Congress and the State legislatures with his minions, who will in turn repeal the 22nd Amendment!
But they only planned, what, 30,000 drones to be patrolling American skies in the next decade or so. That's insignificant electorally.
Uncle Sam Prepares To Unleash Up To 30,000 Drones Over America For "Public Safety"http://www.zerohedge.com/news/2012-10-09/uncle-sam-prepares-unleash-3000...
I feel much safer knowing that. Is there any lock the locksmith who made it can't open? Not. Drones, human or othewise are just that, drones. They're always confused.
Tell that to the families of their victims.
I sincerely hope Obama gets a life term. And I don't mean in the White House.
Double post.
"But not because of any sustained long term demand for gold, but simply because owners of metal simply withdraw it from sale, sending the stock to flow ratio to infinity"
Maybe the deflation policey in the Eurozone is all about releasing gold from not so strong hands.
They don't withdraw because they can't - they must release it to pay for goods and services.
The evidence is in - Europe does not have any national credit that could be used for productive purposes - it has a collection of gamers called private central banks pretending to be part of their host countries.
They pump and dump & pump dump & pump & dump until all capital is exhausted.
Some scary insight there, Corker.
Look at Portugal. All of the gold in the 'weak hands' of Jose Blow and millions of compatriots has been scooped up by the Cash 4 Gold centers. And it's a fair guess that the Cash 4 Gold guys have some deep international pockets that look like private or central banks.
Same story in Italy, the volumes crossing the Swiss border to be refined are insane.
I own 3 "cash for gold" locations in Canada.
The only reason I sell gold is to be able to buy more.
Gold is the profit, not the fiat.
120 tons in 2011
150 tons in 2012 (est)
That a lot gold to be parting with considering how bad the economy in Italy is.
"I moved here from Canada and they think I'm slow.. ay'
http://www.youtube.com/watch?v=5FEW5mh7iAI
We made Luongo cry.
http://www.youtube.com/watch?v=lQDTMROL_vg
Gold is golden.
Peabody, one would fancy you to doh an inventory ohn physical gold holdings and recheck our ledgah to IOU obligations. We need these numbers immediately. Hoh soohhn can you, one's old bean, compile this? Peabody replies, this meay be ah difficult task one's lord; we have splashed out all these yeaaars covering any trace leading beck to us.
this guy does not seem to account for the bazillions of dollars of paper gold bought and sold every day. or did i miss something?
Fonz do you ever read FOFOA ? He talks a lot about freegold. It can be a challenging read sometimes, I don't recommend it if you've been drinking.
Hey Doc I actually meant to ask you about that. I saw you mention FOFOA a while back and you said it was heavy reading. I will take a crack at it at some point. It is worth the look?
Sure , the guy knows what he is talking about but I disagree with much of it........................
He is not a gold standard Ron Paul type thats for sure.
But I believe a Fiat system is much more powerful then some gold bugs imagine.
I have spoken to several people since O scored a Victory. They all laugh and say "Hey I remember you talking about Gold, now that O won I guess I really gotta buy some eh! Hearty belly laugh. We are not even in the 2nd inning of this thing. Scratch that this is still batting practice.
If you read FOFOA, start from the beginning (August 2008), it will make more sense....
+ 1
fofoa.blogspot.com
it's the fundamental simplicity of FOFOA that makes it challenging and enlightening. It's like a good philosophy class
Hey Fonz. I think he is worth reading. The Dork is right I don't agree with everything, he is a Euro backer, but he has some great thoughts to ponder on.
Dr. E
to call fofoa a Euro backer is not correct, I have not ever seen him 'back' anything...he does not advocate...just cals it as he thinks it is.
I would say he admires the archetecture of the Euro and the way it uses gold campared to the way the Fed uses (or does not use) gold.
I'd also say he sees it surviving. I'll bet personally he does not care much one way or the other though. According to him we get freegold by default with or without the Euro.
You are more accurate in you description. I should have chosen my words better.
Well done, lasvegas, + 1
He also explains things like stock-to-flow, strong hands, etc.
This post by GBI? You all know who are they are? Take a peak:
http://www.bullioninternational.com/aboutgbi/our_team
Some highlights:
Prior to Eaton Vance Mr. Yasinski was Vice President for Salomon Brothers Asset Management covering Manhattan where he was wholesaler of the year in 2003 as the highest grossing salesman in the firm. Mr. Yasinski holds a Bachelor of Arts degree in Finance from The University of Arizona.
and
In 2008 Mr. Provencher's team was awarded Money Management Institute's (MMI) "Marketing Campaign of the Year" for its work with clients during the Lehman Brothers bankruptcy. In 2011 his team was again recognized by MMI as “Manager of the Year”.
and
Prior to Salient, Mr. McCarthy was a Director and derivative product specialist for Merrill Lynch. His key roles included: engineering market-linked notes, hedging and monetizing concentrated stock positions, and managing the derivative overlay strategies platform. Mr. McCarthy's prior experience also includes: heading the U.S. Corporate Equity Derivatives Group for Calyon Corporate and Investment Bank, and heading the Fixed Income Sales team at Sumitomo Bank Securities.
and
Before joining, he spent 18 years at Merrill Lynch most recently as First Vice President (FVP) of services responsible for service delivery for ML’s Banking and Brokerage business. Prior to that he was FVP of operations in ML’s proprietary asset management division responsible for retail operations and services of its Mutual Funds,
and
Prior to Chilton, Mr. Singh was at Morgan Stanley in the investment banking division where he worked on large financial sponsor and strategic company transactions.
and
Steven Feldman, Chief Executive Officer/Co-Founder Mr. Feldman was a partner at Goldman Sachs where he was the founder and head of the global infrastructure fund with over $10B under management and served on numerous corporate boards.
These guys are also offering their keen support to Fofoa (draw your own conclusions) and selling a service related to electronic dealing/storage of gold (they sing the praises of buying physical gold rather than an ETF, including the benefits of no counterparty risk). They also say:
Sterling Trust is a non-bank trust company. Since 1984, Sterling Trust has specialized in providing quality non-discretionary custodial services on self-directed IRAs, business retirement plans, and personal custodial accounts as well as escrow and paying agent services. From its corporate offices in Waco, Texas, Sterling Trust services individual and business retirement accounts in all 50 states.
Since Sterling Trust's only business is the administration of self-directed accounts, it has become a leader in providing specialized services designed to maximize your ability to control and manage your account assets.
Gold Bullion International serves as an agent to Sterling Trust. Precious metals are acquired by Gold Bullion International, but accounts are in the care of Sterling Trust, the custodian for precious metals IRAs.
On the day ZH posts about Germany and its gold, perhaps readers should consider all of the above points, it's a funny old world.
With all the games being played, the Euro may be backed by gold that doesn't exist...
Derivative transactions are all net-zero, thus irrelevant. Hee hee.
"What happens to the “price” of gold when it ceases bidding for dollars? Zero. Or infinity. Take your pick."
Really? I can choose infinity? I mean really-really?
I'm gonna start drinkin' now.
As your attorney, I advise you to take a hit out of the little brown bottle in my shaving kit.
https://www.youtube.com/watch?v=m6kFCNsnQpQ
When gold reaches infinity I will rush out to buy the whole world with my single dry 1 oz. Not that I'd know what to do with it, of course, but it would be cool, for a moment, to own the whole thing.
Economists the world over can take comfort that the laws of supply and demand still largely rule the marketplace. However, we believe there is a noted exception for a yellow, largely useless metal. A metal that just happens to have shaped the world’s monetary systems for the last several thousand years.
This drives a lot of people nuts. But this is what human beings have settled on as a universal store of value. Deal with it.
When we discover a way to permanently bank electricity that will replace gold in this regard but until then...
Did you hit the B key instead of T key?
No.
People would be happy to receive payment in the form of electricity in exchange for good or services if they could store or "bank" it indefinitely without loss (or with very little loss). It would be even better if you could transport it easilly without loss too. Electricity has universal utility and therefore universal value. Therefore it would be an even better store of value than gold.
But such a thing is not possible and almost certainly never will be.
Energy is power, Bitchez!
Do you remember how the UN Oil for Food Scandal worked out? Rejuvenating carbon tax credits for [insert consumer reward point system plan] will end in the same fashion. CCX & GCX exchanges were already beta tested. How did it work out? {crickets}
Bank on repeating the same mistakes and hoping for a new outcome! BTW, offering a new Green Energy/Carbon credit card is under discussion. The new hair brain idea is to visit businesses to purchase environmentally safe products and receive a 'Super-Sized Point Reward'. Essentially, the same business model disguised under a new agenda.
Oh it's much worse than that. Harold Raines, the CEO who drove Fanie Mae into the ground and skipped town after a huge payday, owns the patent for the hoped for exchange on which carbon credits will be traded. I shit you not. The world needed a genius like him to come up with the idea because how else would buyers and sellers ever figure out how to exchange something of value on their own? He was all tee-d up last time around to sit his fat, rent-seeking ass in the middle of this river of money when the idea got shot down but there will likely be another attempt at that whole project in term II.
http://a4cgr.wordpress.com/2010/06/19/01-384/
Franklin D. Raines
http://www.patentstorm.us/inventors-patents/Franklin_D__Raines/2417338/1.html
http://www.google.com/patents/US20050154669
Amazon to offer eco-friendly shipping, carbon credits?
http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=7,813,970.PN.&OS=PN/7,813,970&RS=PN/7,813,970
Someone is going to get carpet burns over this same fuck up. Does dragging an employee over the office carpet constitute a carbon tax revenue?
Tesla knew how to harness infinite energy, and distribute it without wires. Funding pulled. Infinite supply meeting any demand is worthless to TPTB, especially when the copper and petroleum it controls are taken out of the equation.
This is why many of us still sit in the dark and cold after 2 weeks.
Um...no that never happened.
You fantasy wrecker you...
I disagree with your assumption that the capture of energy is scarce.
Start by researching Nikola Tesla.
OK, if you brush up on the laws of thermodynamics, entropy and the history of perpetual motion machines.
My apologies for the terse tone in my above reply...long week.
I'm with you on the perpetual motion machine point: they belong with unicorns and fairies.
I'm suggesting that, based on Tesla's and others' works, we do know how to access energy in ways that very well may be capable of making the oil paradigm irrelevant, and thus the petrodollar along with it. Much of this has been buried due to national security issues.
Below are some specs and a WIPO patent application of a device that was reduced to practice. I saw this working in a video. Is it a hoax? Maybe, but then it sure was an elaborate one, especially after reading the patent application (this device is buildable but requires skill to do so) and noting the device specs.
Clearly, this device would wear out over time and require repair.
Definitely would welcome your thoughts in the space.
Closed Path Homopolar Machine
http://www.freepatentsonline.com/WO1982002126A1.html
Summary of Machine Parameters:
Rotor o.d: 14.0 inches
Rotor Length: 9.25 inches
Internal Rotor Diameter: 6 inches
Shaft Diameter (at widest point): 2 inches
Speed: 7200 rpm
Field: 15,000 gauss @ 150 watts field input
Voltage Output: 2.9 volts C @ 15,000 amperes
Drive Motor (DC) input (no load): 1.8 - 1.9 hp (1340-1470 watts) windage & friction
Drive Motor input (loaded): 10.8 Kw, 14.5 hp
Machine Internal Resistance: 6-10 micro-ohms
Output Power: 43.7 Kw (maximum achieved 45.8 kw)
Power gain of Machine: 45.8 / 9.3 (drag due to current withdrawal) = 4.92
In the above figure the 150 watts consumed in exciting the magnet is a negligible factor.
As long as gold is priced in dollars it's true value cannot be known. Gold is to the economy as 2nd amendment rights are to the Constitution and my guess is the percentages of those prepared to excercise either remedy are about three to five percent of the population. The more things change, the more they stay the same, bitchez.
Appears to be a long night for many re-education centers. Buyer’s remorse tingles from their pocketbook, panic ensues..
Nixon Ends Bretton Woods International Monetary System
Recycling Petrodollars
http://www.newyorkfed.org/research/current_issues/ci12-9/ci12-9.html
All the glory has filled the media pipelines.. Let’s take a look.
who values gold higher? The new incremental buyer, or the existing owner?
It's called "The Goldbug's Paradox."
Great post.
Hey, I love gold but before getting a woodie about the collapse of the dollar, it will be telegraphed by the price of oil....
The sudden fall of Saudi Arabia is the "predictable black swan" for the USD.....
Good thought, but don't worry, we'll turn SA into a US protectorate in about 2 hours if comes right down to it.
good point with the possible correction that we'll try to turn SA into a US protectorate. This game can only go on so long
I'm not sure about gold being a Giffen good though; particularly in respect to it's being an inferior substitute for something else.
If anything it's a superior substitute in situations where the inferior stuff won't work or no longer works. I'm not sure what that's called in economics but, for instance, for many tasks a plastic knife (or plastic whatever) works just fine but for more serious tasks/situations you want the real thing.
If you live and work in San Diego maybe you can get around to work/errands/recreation just fine in a cheap but serviceable, semi-disposable golf cart - a toy basically. But if the roads go to hell and it's suddenly cold and rainy all the time or dangerous or you need to travel long distances to do important things - then that expensive but well made and sturdy ATV in your crazy friend's garage is looking pretty nice.
Gold's not a Giffen good at all, but they're trying to map some economic concepts onto a model that's currently falling apart. Like many things, it's useful to think through their concept, even though it's technically "wrong."
" I'm not sure what that's called in economics"
Inelastic Utility.
Of course...right, thanks! The strong steel knife and the sturdy truck have greater utility than the plastic knife and the golf cart but it makes less sense (for other reasons) to use them for more mundane or simple tasks.
So, what I'm getting at is that: although gold can be used to buy pretty much anything there are lots of reasons you wouldn't want to use it to pay bills or buy a sandwich. In fact, Fiat money works fine in "nice" conditions when everything is running smoothly and everyone is comfortable with the situation. When those conditions change you want the superior substitute.
The big problem is that there are incredibly obvious reasons for why "transaction tokens" SHOULD be divorced completely from "media used to store value."
No one wants to carry their "store of value" around everywhere, but it's when they're walking around that they most often want to engage in transactions. THIS is why the gold-standard is always abandoned, and also why most people don't care about returning to it.
I suspect it'll come back (in some form) briefly in the future, but it's not like it's a solution. It's just a transition to a different set of problems for awhile.