This page has been archived and commenting is disabled.

Guest Post: A Few Thoughts On Gold, Part 1 – Gold As An Investment

Tyler Durden's picture


Via Pater Tenebrarum of Acting-Man blog,

Satyajit Das on Gold

Well known market observer and commentator Satyajit Das has written an article on gold which has been published at Naked Capitalism. As is usually his wont, he is adopting a very neutral tone of voice, with the occasional barb thrown in almost imperceptibly. Both detractors and fans of gold are ribbed a little bit, while Das enumerates their lines of argument seemingly without passing judgment.

Still, we see the publication of this actually quite non-controversial article as an opportunity to add a few comments. Quite early on in his article, Das relates an anecdote from post war Germany that one would do well to keep in mind. He writes:

“As a banker asked an old woman in 1918: “where is the State which guaranteed these securities to you? It is dead.”

Every discussion of the ‘political metal’ gold should probably be prefaced with an anecdote of this sort so as to make clear what the main difference between a market chosen money like gold and government-imposed legal tender actually is: the latter depends on  promises that are rarely kept.

What we would like to comment on are a few of the observations Das makes regarding gold’s investment merits as well as his presentation of the lines of argument forwarded by supporters and detractors of a gold standard. In this article we will discuss the 'gold as an investment' portion of his article. 


Gold as an Investment

Das begins by enumerating the various avenues open to people that want to invest in gold today, listing their advantages and disadvantages as well as the associated risk factors. This is an excellent overview that highlights all the important points one should be aware of, but most of these things are probably well known to our readers anyway.

Then he segues into the topic of how tricky gold can be as an investment. Below are a few excerpts with our comments interspersed.

“The investment case for gold is mixed. Gold’s tactical value over specific periods is significant.”

Of course the case for every investment asset is ‘mixed’, and every investment asset has ‘significant tactical value over specific time periods’. It is well known that various investment classes are subject to long term cycles. However, this is nevertheless an important point, see also further below. He continues:

“The period from 1999 to 2001 is referred to the “Brown Bottom” of a 20-year bear market during which gold prices declined. The reference is to the ill-fated decision by Gordon Brown, then UK Chancellor of the Exchequer and subsequent Prime Minister, to sell half of the UK’s gold reserves via auction over 1999 and 2002. At the time, the UK’s gold reserves were worth US$ 6.5 billion, constituting around half of the UK’s foreign currency reserves.




Any investor who purchased the gold sold by the financial astute UK Chancellor would have made a substantial profit.”

Believe it or not, there were actually a number of investors that said so in real time and acted on the recognition that yet another sale of British gold was like a bell ringing. After all, there was a historical precedent: the last time before Brown's sale Britain sold a large amount of gold was in the late 1960's, when it dumped 800 tons at the princely price of $42/oz. – only to watch gold's price soar by 2,400% over the next decade. That was actually a much larger loss for UK tax payers than Gordon Brown's gold sale, especially in real terms (of course, Brown may well still catch up; we fully expect him to). Of course the 'number' of such investors was really very small. It is characteristic of major lows that they occur amid a dearth of interest. Das continues:

“But gold is not itself a great store of value, at least over long time periods.


Gold bugs excitedly speculate about gold prices reaching $2,300. But even at that price gold would merely match its January 1980 peak price after adjusting for inflation; in other words, the holder had earned nothing on the investment over almost 30 years!”

Now, this is something we have to take exception to. For one thing, allow us to point out that anyone who bought stocks at the market peak of 1929 had also gained precisely nothing in real terms by the time the low of 1982 arrived. That's a cool 53 years of earning nothing, and although dividends are obviously not included in this calculation, the 'survivor bias' of indexes isn't reflected in them either. Countless companies that were listed in 1929 were long bankrupt when 1982 came around, so a passive approach would have done considerably worse than earning nothing.

Moreover, one must ask here, how are 'real terms' even defined? Presumably Das refers to values deflated by the government's official CPI data.  If we apply a different metric to calculating gold's real value, such as e.g. the Austrian money supply measure TMS-2, then we arrive at a 1980 high equivalent of roughly $3,000 today, not $2,300 ($2,300 is incidentally the very conservative gold price target of our friend Ronald Stoeferle, who writes the excellent annual gold report for Erstegroup).

Furthermore, Das adopts here, whether consciously or not, a method always trotted out be assorted gold bears when they try to denigrate gold's investment merits. This is to say, they mention the 1980 peak as the relevant yardstick by which to measure gold's performance, a price that lasted for all but a second and was attained after several days of frantic panic buying when news of the Soviet invasion of Afghanistan hit. Gold went from about $550 to $850 within three weeks, was at that price for one second and then collapsed immediately again. How many people actually invested at that peak?

What these gold bears usually gloss over is that only four years earlier, in August of 1976, gold could be bought for $108/oz., and that another six years earlier, in 1970, it could be bought at prices ranging from $35 to $42/oz. Why not mention the returns that have accrued to investors in gold since then? Could it be the fact that it turns out that gold actually beat the pants off the stock market?

Besides, it should be pointed out here that gold is actually not an 'investment' in the conventional sense. Obviously it pays no dividend, but why should it? It is money after all.

Don't get us wrong: gold is certainly not money at the moment per the correct definition of money as the general medium of exchange. And yet, the market treats gold as though it were money: while it does not currently fulfill the role of a medium of exchange, it still retains all the characteristics that flow from a commodity that has become a medium of exchange, such as its function as a store of value. The reason for this is simple: although gold has been 'demonetized' by legal tender laws, the markets know that it would be our money in the absence of such laws. It is the market-chosen money commodity that would be used as money in a truly free market. It is also noteworthy in this context that central banks continue to hold some 32,000 tons of gold, obviously for monetary reasons.

Given though that gold is currently not a medium of exchange, we may concede that it has become an 'investment asset'. Only, in gold's case one might say: monetary demand equals investment demand. After all, the fundamental backdrop most conducive to rising gold prices is a desire by economic actors to increase their cash balances and savings on account of regime uncertainty, declining economic confidence, coupled with a growing conviction that the fiscal and monetary authorities are about to devalue their liabilities at break-neck speed in a vain and misguided attempt to cover up their previous mistakes by adding fresh mistakes atop them, only on an even greater scale than before.

So we should then after all perhaps hearken back to the first sentence of Das' ruminations about gold as an investment mentioned above: there are times when it makes sense to invest in gold and times when it doesn't make sense and one will do better with other types of investments. Obviously, since about the year 2000, it would have been best to have held a very low weighting in equities and a very large weighting in gold.

Das continues:

“The gold price adjusted for inflation is the same as the price in the middle ages. Dylan Grice of Société Générale summed up the case for gold as a store of value in the following terms: “A 15th century gold bug who’d stored all his wealth in bullion, bequeathed it to his children and required them to do the same would be more than a little miffed when gazing down from his celestial place of rest to see the real wealth of his lineage decline by nearly 90 per cent over the next 500 years.

First of all, we think it is nigh impossible to make such an estimate. How would we actually know what the 'real price of gold' was in the 15th century? Here is a chart that has been published in the late 1990's that contains such an estimate (note that the 'real values' depicted on the chart all refer to 1999 dollars – today the numbers would all be considerably higher):


An estimate of the 'real price of gold' over 600 years published in 1999; some of the data seem questionable to us (for instance, we miss the Mississippi and South Seas bubble spikes, as well as the post-revolutionary French hyperinflation  episode in this chart).

We do of course know that gold was subject to considerable inflation in the 16th century when Spain's conquistadors flooded the old world with gold they had discovered in the new world. At the time, these additions  due to a higher mine supply actually still made a big difference to the purchasing power of gold, as they were of very large size relative to the then existing stock of gold. So it is credible that there was a big decline in gold's purchasing power during the 16th century.

This is no longer the case; today the mine supply has become largely irrelevant, as we have discussed on several previous occasions. However, one must ask, how much stock should one put in such an estimate anyway? We think it's a good bet that if anyone still has a 15th century gold hoard at home, that it has actually preserved value through the centuries far better than any other type of investment would have (for one thing, the likelihood of still possessing that original store of gold is a good deal better than possessing anything else that one might have invested in during medieval times; also, well preserved medieval gold coins trade at well above their bullion value).

One thing is certain though: against all other forms of money, i.e., state sponsored fiat monies and the debts denominated in them, it is really no contest: a large percentage of the currencies that existed a century ago has been repudiated, some of them more than just once. The promises of the State eventually always wither on the vine. Gold just stays gold.

One should not make the mistake of believing that the current paper money standard is likely to fare any better. Longer-lived though it may be than many of its predecessors, it is still beset by the same flaws. It is a system that was destined for an eventual conflagration on the day it was  born. 

Lastly, even if gold's 'real value' in 1350 a.d. was estimated to be $2,400/oz. (or even higher in 2012 dollars), what could actually be bought with that gold back then? One sure couldn't buy an iPad in the year 1350 to name an example. In fact, there existed no mass-produced consumer goods at all. Choices were extremely limited even for the select few that actually possessed gold at the time. So how can one say the 'real value' was a number 'X'? It really doesn't seem to make much sense to make such an assertion. The only thing that is certain is what we have already noted above: as far as money goes, gold has almost always managed to preserve the purchasing power of savings – the gold inflation of the 16th century represents a notable one-time exception to this rule. State-produced and administered legal tender money never did and never will.

Das continues:

“The gold price can also be very volatile. In late 2011, after reaching record levels, the gold price fell nearly 20% very quickly.


Warren Buffet observed that if stock investors are driven by optimism about prospects then “what motivates most gold purchasers is their belief that the ranks of the fearful will grow.”

Let us rephrase that: “equities can also be very volatile. Shortly after having reached record levels in late 2007, they collapsed by 58% into early 2009, with most of the decline happening very quickly indeed.”

It is really a non-sequitur. Gold is volatile? Even if it were, why should one be particularly worried about it? As it is, it is actually a lot less volatile than most other commodities and investment assets. A brief look at the bull market from 2000 to date shows this remarkable lack of volatility. It simply makes no sense to even mention gold's volatility unless one wants to specifically stress that it exhibits a distinct lack of it so far:


The recent gold bull market: so far it is one of the least volatile bull markets of all, if not the least volatile one. To complain about gold's 'volatility' strikes us as rather strange – click for better resolution.

Regarding Warren Buffett's observations on gold, generally they are not worth much. Buffett doesn't like gold, we get it, but then he regularly betrays his utter ignorance about it, so why would one even bother to mention his gold-related bon-mots? The specific quote Das has picked has been well chosen though: when economic confidence is strengthening and the social mood is optimistic, then it is usually better to be invested in stocks than in gold. Gold investors obviously do expect the 'ranks of the fearful to grow', and for very good reasons. The problem is that economic confidence has been on a roller-coaster with a very negative bias since the flaming out of the great stock mania in the year 2000, which is why it was  better to be invested in gold since then, something that continues to hold true in our opinion.


It must be pointed out that gold is certainly no longer the bargain it was at the lows over a decade ago (at which time Warren Buffett undoubtedly hated it just as much as today). This is by no means akin to saying that there is no longer a bull market in force though. The bull market can of course take a breather, even an extended one, at any time. That is something we obviously cannot know for certain – market perceptions are notoriously fickle in the short term.

What seems however extremely unlikely to us is that the long term bull market is anywhere near to being over. After all, the people in charge of  fiscal and monetary policy all over the globe are applying their 'tried and true' recipe to the perceived economic ills of the world in ever bigger gobs of 'more of the same'. Until that changes – and we feel pretty sure that the only thing that can usher in profound change on that score is a crisis of such proportions that the ability of said authorities to keep things under control by employing this recipe is simply overwhelmed – there is no reason not to hold gold in order to insure oneself against their depredations.

As a result of these policies, real interest rates are either negative or minuscule, the money supply is inflated at astonishing speed and the economy is undermined structurally at every turn. It is precisely the environment in which it makes sense to hold gold.

Few holders of gold bullion are likely to be worried over the short to medium term fluctuations in the price of gold, since their motives for holding it are as a rule not comparable to those of short term speculators. Futures traders and gold stock investors obviously must apply a more active approach to managing their exposure. Especially the latter have had very little joy of late, a topic we also plan to discuss again in more detail shortly.   

Lastly, every long term bull market of course ends at some point. However, most of the time the final phases of a long term bull market exhibit certain characteristics that can be observed in a wide variety of markets over and over again. Bull markets don't die with a whimper. They end with major blow-off moves that often occur at a time when the fundamental backdrop is already clearly shifting from bullish to bearish. This is something that has yet to happen in the current gold bull market.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 12/10/2012 - 21:01 | 3050424 unrulian
unrulian's picture

Gold bitchez


.....Just wanted to be the first

Mon, 12/10/2012 - 21:26 | 3050493 AldousHuxley
AldousHuxley's picture

there is a reason why Saddam Hussein's toilet was made in gold.



Mon, 12/10/2012 - 21:41 | 3050518 MillionDollarBogus_
MillionDollarBogus_'s picture

If Satyajit Das bought Naked Capitalism, he could rename it - Das Capitalism...

Mon, 12/10/2012 - 22:01 | 3050532 Supernova Born
Supernova Born's picture

They are going to confiscate/ban sale of gold in the US again, IMO.

Too much power at stake to let "the fairest in the land" live. Best go hide it in the woods like Snow White if you want your gold stash to survive the coming confiscation.

Tue, 12/11/2012 - 05:37 | 3051327 strannick
strannick's picture

Das enumerates their lines of argument seemingly without passing judgment.

Spare us the po-co insipid blather. ''Without passing judgment?''. Is this from the Dalai Lamas school of logic and reason? Is everything all good, all the time? Namaste? Unsurprizingly, the article goes on to say nothing of consequence.

''Tolerance is the last remaining virtue of the man whose lost all his principles'' -GC.

Mon, 12/10/2012 - 22:10 | 3050592 AldousHuxley
AldousHuxley's picture

confiscation and bans are so last century


they are going to just tax gold "collectibles" more...let's say 100%?

Mon, 12/10/2012 - 23:23 | 3050815 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Gold tax lol k sure uh huh....

You know Aldus was a grand propagandist and you are doing a swell job living up to his name.

Tue, 12/11/2012 - 03:18 | 3051260 lemonobrien
lemonobrien's picture

if you sell your gold; then pay the tax, you miss the point of owning gold.


or what gold stand for.

Mon, 12/10/2012 - 22:17 | 3050602 akak
akak's picture

Can we please drive a stake through the heart of this idiotic and/or disingenuous talk of "confiscation" of gold once and for all?

The fact is that virtually NO country throughout history has ever "confiscated" gold from its citizens, the USA included.  Yes, criminal and sociopathic governments can attempt to suppress the use and ownership of gold by making said ownership illegal, but that hardly constitutes "confiscation".  Nobody to my knowledge, in 1933 USA or anywhere else, has ever conducted door-to-door searches looking for privately-held gold.

Should the USA, or any other government, attempt to illegalize gold once again, the logical response to such a totalitarian tactic is to merely shut up and sit tight --- such measures will probably be indicative of the last gasps of a kleptocratic regime, and could most likely simply be waited out until (hopefully) sanity and justice finally prevail.

Mon, 12/10/2012 - 22:29 | 3050639 fonzannoon
fonzannoon's picture

why go through the trouble of confiscation when everyone is already going broke and coughing up their assets anyway.

Mon, 12/10/2012 - 22:31 | 3050644 akak
akak's picture

"WE BUY GOLD" (for the government?)

Mon, 12/10/2012 - 23:38 | 3050878 DoChenRollingBearing
DoChenRollingBearing's picture

¨Compro Oro¨

@ akak, especially for you.  Comimos ¨olloquito¨ anoche...!  Yum...  Y, por la primera vez yo, cui!

Mon, 12/10/2012 - 23:49 | 3050897 akak
akak's picture

Oye DoChen!

Finalmente has comido el cuy por la primera vez?!  Enbuenahora!  Como te gusta?

En verdad, solomente lo he comido una sola vez yo mismo.  Pero me gustaba mucho.

No conozco el "olloquito".

Mon, 12/10/2012 - 23:58 | 3050939 DoChenRollingBearing
DoChenRollingBearing's picture

Sí, akak, la primera vez comer cuy!

Pero, MONTONES de veces el olloquito, TAN RICO es...!


Olloquito, perhaps Peru`s tastiest, yet idiosyncratic dish.  Try it everyone when you come to Peru.

Oh, and Peru is No. 5 or No. 6 in gold production, you  know, just to stay on topic...  :)

Tue, 12/11/2012 - 06:53 | 3051368 Acet
Acet's picture

Far too many bones in cuy. Tried eating it once when in Peru.

Not much meat in a guinea pig (it's little more than an oversized hamster).

Now rabbit, on the other hand, is delicious.


Tue, 12/11/2012 - 10:22 | 3051639 Acet
Acet's picture



Tue, 12/11/2012 - 00:22 | 3050980 TrillionDollarBoner
TrillionDollarBoner's picture

Cuy al horno. Una Cuzquena bien fria. Yum indeed. 

[though tiraditos and ceviche in Lima win hands down] 

Tue, 12/11/2012 - 08:41 | 3051468 rodocostarica
rodocostarica's picture

Do Chen, that would be CUY. But yes not bad to eat unless you have to watch them kill the little critters first.

Tue, 12/11/2012 - 10:28 | 3051657 Overflow-admin
Overflow-admin's picture

"VENDEZ VOTRE OR" (yes, ads are pretty the same anywhere)

Tue, 12/11/2012 - 02:41 | 3051227 SAT 800
SAT 800's picture

Or you could avoid the drama and use silver as your savings vehicle. also it will appreciate more in purchasing price. It is a precious monetary metal; well established in the world un-conscious mind; but it does not occupy the same central role in the warfare that will be taking place between various power centers and Banks; they are programmed to fight over gold; and of course, steal it, if it becomes convenient; I believe Silver will slip by their programs.

Mon, 12/10/2012 - 22:37 | 3050665 Jendrzejczyk
Jendrzejczyk's picture

These words will prove prophetic soon....

"such measures will probably be indicative of the last gasps of a kleptocratic regime, and could most likely simply be waited out until (hopefully) sanity and justice finally prevail."

They're gonna try it Akak. Be prepared.

Tue, 12/11/2012 - 00:24 | 3051001 gnomon
gnomon's picture

Unlawful searches for any goods will be met with force.  There.  That keeps it simple.  At that point what does any of us have to lose?  If they can tramp through your house overturning things to search for formerly legal stuff that you have legally paid for whether it be food, firearms, or pms you might as well let it rip.   I can't think of a better way to exit this increasingly rotten situation.   Ex Post Facto does not cut it with me.  That is one of my red lines. 

No one lives forever, nor should they want to.

Mon, 12/10/2012 - 23:12 | 3050761 Alpo for Granny
Alpo for Granny's picture

I want to warn all of you young people about the dangers of boating with your shiny coins.

Why, just the other day I was taking the dingy over to the mainland to trade some coins for some money to buy a case of prime cuts in gravy and a few Matlock VHS tapes.. and dang nabbit ..a coffee can full of the silver coins with eagles on them that Earl (god rest his soul) had in the basement just bounced right out of the boat. I was terribly upset about it.  The nice young man, Jonathan Cor...Cor..something oh I can't remember his last name at the moment...Anyway he is always galavanting around the tiki bar by the dock with girls and drinking drinks with umbrellas in them and he was kind enough to give me a whole dollar for each of them. Oh i'd say I have sold that fine young man a few thousand of those bulky coins so has kept me afloat after Earl (god rest his soul) lost a bunch of our retirement egg investing with a company...Mf Glo Mf Glo something. Sigh...oh there goes my memory again. Anyways young Johnny at the dock said he wanted to buy all of the coins that I had and would give me TWO DOLLARS for every one of the Kruger...Kruger.. Oh I don't know..some Swedish sounding name for the gold coins that Earl (god rest his soul)used to collect. They are all over the house and I just hate dusting around them.  He also offered to hold them for me so I would not lose them in another nautical mishap. Such a thoughful young lad he is.  So let this be a lesson to all of careful with your boats and always be thankful for the angels among us that are so thoughtful to look out for us elderly folks.

Tue, 12/11/2012 - 01:22 | 3051126 StychoKiller
StychoKiller's picture

I'll trade ya $4 per Kruggerand -- I'll even help ya dust'em!

Tue, 12/11/2012 - 01:43 | 3051151 Alpo for Granny
Alpo for Granny's picture

Why that is very kind of you Stychokiller. So many nice young people nowadays.

Mon, 12/10/2012 - 23:17 | 3050795 crossover
crossover's picture

akak, in Nazi Germany, USSR, and Communist China all valuables were taken including gold. Don't underestimate a tyrrany. 

Tue, 12/11/2012 - 02:07 | 3051187 Ragnar Danneskjold
Ragnar Danneskjold's picture

How many German, Chinese, and Russian citizens owned a Glock 23 and a WASR 10 back then?

Tue, 12/11/2012 - 02:47 | 3051231 Nassim
Nassim's picture

In communist countries, not so long ago, they would send you with your family on a one-way trip to the gulags - for a lot less than owning one gold coin.

Tue, 12/11/2012 - 00:08 | 3050967 rogerjarema
rogerjarema's picture

In 1932, gold was linked to the USD. Every $20 was directly exchangeable to 1oz of gold. So effectively every citizen has large portions of their wealth in gold, if they store cash, that cash is supposedly as good as gold. When they wanted to devalue the gold from $20 to $35/oz, what do they have to do? Confiscation, of course...

Compare that to now: no gold link to USD & less than 2% of the general populations' wealth is in gold. If they want to go with confiscation, they'd get more by confiscating real estates, pension funds, etc.  

Tue, 12/11/2012 - 01:27 | 3051121 Supernova Born
Supernova Born's picture

Making it illegal to openly buy and sell gold would have little impact on the price of gold.


They won't have to ban buying/selling if TPTB can continue their manipulation. However, if the manipulation fails, and gold begins to rise to its true "value", .gov will confiscate.

So own a manipulated asset that will go no higher than .gov permits, or have it confiscated when it does. You are free to choose.

Tue, 12/11/2012 - 01:26 | 3051131 akak
akak's picture

Yeah, alcohol was MUCH cheaper during Prohibition, and illegalization has done wonders for reducing the price of cocaine and marijuana.

It's like shooting fish in a barrel ...

Tue, 12/11/2012 - 01:34 | 3051139 Alpo for Granny
Alpo for Granny's picture

Lol..yup..with a hand grenade.

Tue, 12/11/2012 - 01:43 | 3051145 Supernova Born
Supernova Born's picture

Fine analogy.

Grenade in a barrel? Fish goo, grenade fisherman shredded.

Like gold holders. You will never be permitted to win.

And yes, you'll need permission or a second passport with no intent to return.

Tue, 12/11/2012 - 01:37 | 3051144 Supernova Born
Supernova Born's picture

Enjoy the repeated smack-downs.

The pimp hand has you slapped silly with self-congratulatory non-parallel analogies.

Tue, 12/11/2012 - 01:33 | 3051137 Midas
Midas's picture

If the US government can outlaw the buying/selling of gold throughout the world it might work. Is that likely?

Tue, 12/11/2012 - 02:48 | 3051232 SAT 800
SAT 800's picture

No it isn't likely; and clearly it is impossible; it's physically un-enforceable.

Tue, 12/11/2012 - 02:46 | 3051230 SAT 800
SAT 800's picture

They're going to confisticate my Silver Bullion in a vault in Switzerland? What an interesting idea. Not expecially likely, however.

Tue, 12/11/2012 - 01:45 | 3051155 AgShaman
AgShaman's picture

It was a confiscation, under a threat of force. 10k fine and 10 years in prison. Not exactly a slap on the wrist.

Confiscation can be cloaked in many forms. A Hefty tax on the sale of collectibles works just the same.

A Black Market may need to develop.

No Presidential Edict (EO) is beyond their imagination at this point

Tue, 12/11/2012 - 04:25 | 3051299 Oldrepublic
Oldrepublic's picture

FDR's order #6102 had some strong teeth behind it, used the 1917

Trading with the Enemy Act with a fine of $10,000, worth $180,000 in todays money




Tue, 12/11/2012 - 05:34 | 3051326 Supernova Born
Supernova Born's picture

Such attempts to "illegalize" gold will be met with guffaws of laughter and derision by those who understand those sanctions certainly do not amount to "confiscation".

A decade in federal prison and a 175K+ fine/per count do not even jangle their golden balls.

Tue, 12/11/2012 - 05:46 | 3051330 akak
akak's picture

Supernova, I am curious, why do you seem determined to continue spreading this seemingly pro-establishment fearmongering regarding gold ownership and the (non-existent) threat of gold confiscation?

Tue, 12/11/2012 - 02:52 | 3051238 SAT 800
SAT 800's picture

Yes this is a very reasonable analysis. I think the IRA holders might find out their holdings had been converted to "patriot bonds" one particular Sunday Afternoon. The public doesn't really have enough gold to make it an interesting target.

Tue, 12/11/2012 - 05:06 | 3051314 Supernova Born
Supernova Born's picture

Gold is a "Giffen Good".

When it really starts moving up when the inevitable inflation arrives? The Fed will try to slow it, but they won't be able to stop the rise with the tools of manipulation they've been using.

But I have to admit I've been reassured by the implication of some of these comments. They seem to indicate that .gov will sit there and watch gold go up regardless. The dollar may collapse in value, but your gold is sacrosanct. Those who hold gold will be richer than they ever expected and they can kick back and watch the food riots on cable.

President Obama respects private property rights. I mean you earned it. You should and will enjoy the fruits of your wisdom.

Tue, 12/11/2012 - 06:03 | 3051337 Anasteus
Anasteus's picture

I agree, in contrast to 1933 a confiscation would make no sense today. That time, when some sort of gold standard was still effective, the amount of gold spread among people was considerably high by definition; gold was perceived and treated as money. Also keep in mind that jewelry was not confiscated only coins and investment bars (if any). But this is not the case anymore; the decades of anti-gold propaganda have steered suspicion toward gold possession and money has been completely decoupled. Very few people own a remarkable amount of gold, and that's still nothing in comparison to hedge funds or banks. In case of confiscation the political and social risk would far exceed the literally zero effect of such a measure. I wouldn't fear too much of happening that.

Tue, 12/11/2012 - 06:06 | 3051344 akak
akak's picture

Anasteus, while I fundamentally agree with you, just to play Devil's advocate one could imagine a scenario in which the US dollar (and maybe all other fiat currencies) collapse, and the US government decides, or is forced, to move back to a gold-backed currency.  In such a case, I find it HIGHLY unlikely that they would allow their citizens free gold convertibility, as was prevalent in the pre-WWI era, as this would place power over the money supply in the hands of the people --- central banksters can't have that!  So instead, I could see them trying to institute a reformulated Bretton Woods-type arrangement, in which the dollar is convertible into gold ONLY for foreign governments, with the citizens themselves forbidden from holding monetary gold.

This hypothetical scenario seems unlikely to me --- but what do others here think?

Tue, 12/11/2012 - 06:40 | 3051362 Supernova Born
Supernova Born's picture

...unintelligible thoughts putting soon to be regretted thoughts in stasis.

Tue, 12/11/2012 - 06:45 | 3051364 akak
akak's picture

Can you say that in a way that might make some sense?

Supernova, you seem to have a bug up your ass regarding me, or gold, or both, but I have yet to figure out why, or exactly just what it is about.

Tue, 12/11/2012 - 07:07 | 3051376 Anasteus
Anasteus's picture

Firstly, if the dollar were to collapse the government would be facing much higher distress by coping with basic societal problems such as avoiding consequent riots, managing food distribution, keeping the state at least basically operational, etc. There would be neither time nor resources for anything else let alone for dealing with gold-oriented measures. Secondly, avoiding possible free gold convertibility doesn't mean gold confiscation. It would be somewhat illogical to reestablish a gold standard, which means an attempt to revive overall trust in the newly created monetary system, while at the same time to put serious doubts on that trust by confiscating something that embodies it, that is, gold. Furthermore, the Bretton Woods arrangement was a historical failure exactly because of its incapability to keep an effective gold standard system running. I doubt any future arrangement would ever reconsider it without substantial changes. A total dollar (as a world currency) collapse would be an epic disaster definitely burying any trust and hopes toward fiat money as a whole. This wouldn't be recoverable by any sort of cosmetic amendments. I would see the Devil's advocate play highly ineffective here.

Tue, 12/11/2012 - 08:20 | 3051437 Alpo for Granny
Alpo for Granny's picture

It would be much easier and profitable for TPTB to suspect centerfuge parts and yellow cake uranium are hidden among the evildoers in India.

Tue, 12/11/2012 - 12:02 | 3051974 Diogenes
Diogenes's picture

Gold is a non issue to the PTB. They took care of the gold problem in the thirties. Now there is nothing to stop their printing presses, or electronic accounts. Gold and its fans are so marginalized they have little or no effect on the big game.

Mon, 12/10/2012 - 23:21 | 3050824 Mr. Magoo
Mr. Magoo's picture

I have one thought, "BUY MORE"

Mon, 12/10/2012 - 23:42 | 3050891 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1  My wife says I have a similar one thought mind. 

Well, two: buy bearingz too, bitchez!

Tue, 12/11/2012 - 04:44 | 3051311 Snidley Whipsnae
Snidley Whipsnae's picture

Here are the definitions of investments in both economic and financial terms (notice that gold qualifies as an investment under both definitions) :

"An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price."

Read more:

It helps to define the word investment. Notice that nominal nor inflation adjusted are NOT used in the definition.

Gold is definitely an investment under these definitions.

After all, since Bernanke said that gold is not money but an asset, how could gold not be an investment even under Bernanke's definition of gold? I believe we can all agree that gold is an asset... right?

Gold has been money in the past and is rapidly reverting to the role of money once again... but this is a different conversation.

Tue, 12/11/2012 - 09:23 | 3051510 WhiteNight123129
WhiteNight123129's picture

This article is simplistic. Buffet knows very well what Gold standard means. It means the recurrent inflation deflation period. The current system is permanent inflation.


That being demonstrated, it means that at certain points of time, if your insurance float is denominated in Gold convertible currency and you have large deflation to wack the excess bad debts for years and that would hurt Bershire enormously. The population would be forcing the dumping of bad debt by calling their Gold against redeemable currency when interest rates are low. (the Hoarding has to do with lack of positive interest, so you are better off in the monetary standard than the currency because there is no interest anyway, the same happens today believe it or not, it is a run on Gold because interest rates are negative, it has always been the rule Fullarton 1844)

That would force the banks to reach for Gold and they would have to sell their bad debt to procure Gold and flush bad credit. This process means massive plunge in price and hard hard currency. Mr Buffet permanent carry of using other people money of insurance float which is constantly debased to invest into equities gets HORRIBLY SQUEEZED under that scenario, because the float becomes very expensive to repay when equities plunge, commodities plunge. 5 Years of price decreases would kill Buffet s business model because the permanent carry trade guaranteed by fiat would now work in reverse. Evidently he likes printing and hates Gold because a Gold Standard would ruin him.

With Fiat the float never gets horrible expensive to repay, always easy to repay. Buffet is LBO to the power of 1000.Evidently he wants to permanently benefit from the robbing of people holding USD currency. And then he plays the nice guy democrat with the little people. Disgusting.



Mon, 12/10/2012 - 21:18 | 3050454 BLOTTO
BLOTTO's picture

(TOP) Gold Holding in Oz's by country:

USA, Germany, IMF...

Italy, France, Russia...

China, Switzerland, Japan...

Netherland, India, Euro...


(actual numbers if wrong, is not the point of course)


Seems to me that those who rule the world also own the most gold...coincidence? I think not. Especially if you look at the 10,000 year ruling nations/empires/dynasty's...bloodlines.



Mon, 12/10/2012 - 22:00 | 3050556 wee-weed up
wee-weed up's picture

... subject to audit

Mon, 12/10/2012 - 22:08 | 3050588 AldousHuxley
AldousHuxley's picture

physical holdings located in US



Mon, 12/10/2012 - 23:02 | 3050747 Snidley Whipsnae
Snidley Whipsnae's picture

Blotto... I don't know where your list came from but the world's largest gold holdings are the property of the Indian citizens... estimated at 20,000 tons. This does not include gold held by the Indian central bank or gold belonging to various religious factions.

BTW, what other asset would Das recommend when the world economy is being driven to collapse by crooked bankers, regulators and politicians?

Mon, 12/10/2012 - 21:16 | 3050457 JohnnyBriefcase
JohnnyBriefcase's picture

What goes up...


(Just kidding, I'm assuming this last chart is in US dollars which are going down in value)

Mon, 12/10/2012 - 21:15 | 3050463 Its_the_economy...
Its_the_economy_stupid's picture

Dow:Gold Ratio

Still the only way to keep score.

Anything else is a moving goalpost.

Mon, 12/10/2012 - 21:19 | 3050473 Its_the_economy...
Its_the_economy_stupid's picture

And "they" even try to move that goalpost.

Mon, 12/10/2012 - 21:22 | 3050478 unrulian
unrulian's picture

hijack....surprise surprise....Nexen deal not done...USA gets last surprise

Mon, 12/10/2012 - 21:25 | 3050486 fukidontknow
fukidontknow's picture

Talking about gold and Brown's bottom a document from the IMF recently published by GATA reveals just how unlucky the lucky country was at the hands of a couple of Goldman plants.

Mon, 12/10/2012 - 21:25 | 3050489 A Lunatic
A Lunatic's picture

In other words, it's all relative, bitchez..............

Mon, 12/10/2012 - 21:30 | 3050499 caimen garou
caimen garou's picture

yes, at times stocks WERE better than gold. I don't know about anyone else, the paper days are long gone for me and it looks like the cycles are screwed up. all bull markets end at some point, what bull market?

Mon, 12/10/2012 - 21:37 | 3050507 DavosSherman
DavosSherman's picture

"gold is certainly no longer the bargain it was at the lows over a decade ago (at which time Warren Buffett undoubtedly hated it just as much as today)."


You have to fucking wrap your mind around this: The country is broke.  Totally fucking insolvent.  When the currency fails, and fail it will, just like all 3,800 other Fiats that on average lasted 39 years (we're 41 since Dick(head) Nixon slammed the gold window, people will lose faith and flock to metal.

Add up ALL the fucking debt, and divide it out to what Bernanke claims we have on hand.  If he's lucky he won't get caught explaining leases that were purchased.

If they fuck everything up (think Lehman) and don't own up to needing to revalue it, gold will hit the trillions not $76,000 an ounce.

I've never seen so much fucked up crap, junk, shit, bullshit, idiocy on gold in my life.

And, if you don't like gold, good, don't buy it.  I'm not wasting another day talking to morons.  You'll learn the hard way when you fucking starve to death and lose everything.

Mon, 12/10/2012 - 21:43 | 3050519 quasimodo
quasimodo's picture

Trillions? Sorry Davos, I am pretty much an optimist, but were it to go that high? 

Things would be FUBAR

Mon, 12/10/2012 - 22:01 | 3050531 DavosSherman
DavosSherman's picture

I gave you a thumbs up, but you really, really, really want to have look at history.  It'll prove you wrong.

I once thought that too.  I figured if we hit $5K/$10K/$12K it would be incredible.

The problem you'll see, when you look at all the past currency crisis is the dickheads, the Ben Moron Bernanke's all lied about the situation.  Rather than say, "Look, Congress has overspent, we've over loaned and over printed and we need to correct it," they call printing QE, they say they are steralizing, they talk about pulling out and reducing the balance sheet.

Now there were some "moderate ones" Russia, Mexico I recall.  But what you also want to take into account is what Egon von Greyerz stresses: This is the very first time in world history that all cureencies are circling the drain together!

Also, you want to really have another read on Sprott's work on what the CB's really have in gold v. what they've let out the door.

The average revaluations are... well here, see the chart on this page, and this is just a few...

Wish you all the best Quasimodo.

Angola 1991-1999 1 New Kwanza = 1,000,000,000 1991 Kwanzas (kids starved to death)

Belarus 1994-2002 50,000 = 100,000,000 2000 Rublei

Bulgaria 1991-1997 Defaulted on its debt, food shortages, reduced the number of zeros that were added to its currency.

Brazil 1986-1994 1 Real = 2,700,000,000,000,000,000 1930 Reis

Bosnia-Herzegovina 1993 Massive hyperinflation

Chile 1971-1973 500%+ Inflation military overthrew the democracy.

China 1939-1950 1937 3.4 Yuan traded $1.00 USD. By May 1949, $1.00 USD = 23,280,000 Yuan

Ecuador 2000 Pegged to USD after 70-80% drop in its dollar

England 1100s 1455-1485 1543-1551 1100s silver in coins fell. Coins were clipped. Henry VIII debased the coins to raise money

Greece 1944-1953 1 1953 Drachma = 50,000,000,000,000 1944 Drachmai

France 1789-1797 Death sentence on anyone selling the notes at a discount to gold and silver livres. 1795 a new currency was issued, the mandat, which promptly lost 97% of its value. 1797, both paper currencies recalled new monetary system backed by gold.

Georgia 1995 1 new lari = 1,000,000 laris. 

Germany 1923-1924 1945-1948 See chart above. New R was 1 billion and gold hit 87 trillion an ounce up from 2,000 marks 1-2 years earlier...

Hungary 1944-1946 Forint 400,000,000,000,000,000,000,000,000,000 = 4 × 1029 Pengõ

Israel 1979-1985 Price freezes

Japan 1944-1948 5,000%++ Inflation. Issued military currency, anyone caught with Honk Kong currency was tortured.

Krajina 1993 Country folded became part of Croatia.

Madagascar 2004 1 Ariary = Madagascan Francs - Riots persisted.

Mexico 1993-1994 Defaulted 1982. 1 Nuevo Peso = 1,000 Old Pesos.

Nicaragua 1987-1990 1 Gold Cordoba = 5,000,000,000 1987 Cordobas.

Peru 1984-1990 1 Nuevo Sol = 1,000,000,000 1985 Soles de Oro.

Poland 1990-1993 1 new Zloty.10,000 old Zlotych

Romania 2000-2005 1 new Leu = 10,000 old Lei

AncientRome 270AD +/- Took the Romans 300 years to do what the Fed did in 84 years - debase the currency by 95%. The Roman empire fell, they welcomed the Barbarians.

Russia 1992-1994 100 Rubels = 1 USD 1991 30,000 Rubels = 1 USD 1999.

Taiwan 1940-1950 1 New Taiwan Dollar = 40,000 old Taiwan yuan.

Turkey 1990-2005 1 New Turkish Lira;= 1,000,000 old Lira.

Ukraine 1993-1995 1 Hryvnya =100,000 Karbovantsivi

United States 1812-1814 Continental Currency - Failed

United States 1861-1865 Confederation Notes - Failed

Vietnam 1981-1988 Gold trading was outlawed.

Yugoslavia 1989-1994 1 Novi Dinar = 1,300,000,000,000,000,000,000,000,000Dinars.

Zimbabwe 1999 - 2010 Ongoing mess.






Mon, 12/10/2012 - 22:02 | 3050568 kliguy38
kliguy38's picture

Yup.......and when things get "really hairy" and the realization of just how foched up the fiat is NOBODY wants to part with their gold then as opposed to some now that are weak leaves...........NOBODY sells........only buyers then.......

Mon, 12/10/2012 - 22:06 | 3050579 DavosSherman
DavosSherman's picture

+1 Kliguy38

Not to mention 1 percent are in deep now and there is a cube of gold above ground the size of a 7 storey commercial real estate building and the CB's have most of that (maybe).

Plus, when I look at the EU, what 9 fucking countries trying to agree with fatshit Mercle and they can't even agree to disagree....what the fuck is going to happen when 185 countries sort this thing out.

Fucked up prolonged fooooood fight.

Mon, 12/10/2012 - 22:14 | 3050596 DavosSherman
DavosSherman's picture

View form 35,000'


$16 trillion SS.

$84 trillion Medicare.

$21 trillion Prescription Drugs (the real cost to win the election in FL without the SC ruling for you when you are 50,000 votes short)

$16++ trillion National Debt

$6 trillion GSE crap hidden away not on the debt clock. (Fannie and Freddie's mess)


View From Up close/Down Low


We take in $2.3 trillion.  $2.03 trillion goes out in Social Security, Medicare, Tarp, student loans, unemployment....

$230 billion goes out in interest.

That is almost the total of the $2.3 trillion we take in.

Then another $1.3 trillion goes out on 3 wars and everythin you and I think of when we see or hear the word government.


Think revenue is going to get better? Think again.


From Jim Quinn's fine blog The Burning Platform some great Charles Hugh Smith work.

38 million earn less than $10,000 per year.

50 million earn less that $15,000.

61 million earn less than $20,000 annually.

Simply put: 100 million wage earners, or 2/3 the entire workforce, earn less than $40,000 per year.

There are roughly 127 million people dependent on government transfers: 61 million recipients of Social Security and Medicare.

Medicaid for the 11 million people drawing lifetime SSI Social Security disability.

66 million people receiving welfare (SNAP food stamps, housing credits, Medicaid, etc.):


Thank the Fed and Dickhead Haahvad Summers in large part for Globalization and giving our jobs away:


DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject: GEP

'Dirty' Industries: Just between you and me, shouldn't the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]? I can think of three reasons:

1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I've always though that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.

3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.


FOMC circa 2005 minutes


Rob the consumer of good wages then toss them under the globalization tire and laugh about it: “Everyone I’ve talked to continues to try to figure out ways to exploit globalization. Each of them, from the IT [information technology] guys to the big box retailers to the specialty chemical firms to the service firms, wants to have offshore supply. One of the CEOs said, “We have a long way to go in exploiting China.” We’ve heard that forever. And one of my favorites was the comment, “China, India, and Indonesia can make Italian ceramics better than Italians can now or could 200 years ago.”[Laughter FOMC is laughing at us!]








Mon, 12/10/2012 - 23:50 | 3050910 DoChenRollingBearing
DoChenRollingBearing's picture

Great dialogue kliguy38 and DavosSherman, + $100,000 to you both.

Yes!  FOFOA says the real fun starts when the owners of physical gold decide NOT to sell anymore of it.  For example: me, will I be selling MINE when our country is in economic distress?  No way...

Tue, 12/11/2012 - 00:11 | 3050975 DavosSherman
DavosSherman's picture

Silver too, barring any new energy or new non-silver-solar will make gold look like a shit stock.  Silver will be worth more than gold is my "hunch."

But I've been wrong before, I'd thougth we'd be watching people with pitchforks and torches and instread the suicide rate this depression is 10/100,000 in the first Depression it was 22/100,000.

Tue, 12/11/2012 - 03:08 | 3051256 SAT 800
SAT 800's picture

Silver will appreciate more from it's present "price" which is ludicrous, than will gold; and it will avoid being on the front lines in the battles between central banks and dictators, and etc. Silver coinage is quite practical; and there are very businesslike places that store silver bars for you; and will put them into the market in "new dollars" or world trade credits" or whatever the bullshit of the day is.

Tue, 12/11/2012 - 08:20 | 3051443 DavosSherman
DavosSherman's picture

"it will avoid being on the front lines in the battles between central banks and dictators''

I agree with your other points.

China needs a lot of water.  If you bother to look closely you'll see they import water by importing food.  Therefore it needs energy from sources without water.  Solar is the only one I can think of that has no water need.

1 Photovoltaic panel has 1 troy ounce of silver.

Barring some new energy, some new way to make electric from a better type of PV cell --- silver is going on a moon launch.

Governments will make owning it illegal!

Mon, 12/10/2012 - 23:13 | 3050784 bronzie
bronzie's picture

inre German inflation in the 1920s:

from the book "When Money Dies" by Adam Fergusson

"In dealing with the stupenduous figures with which Germany wrestled the book maintains the same numerical designations as were used then and as appeared on her banknotes. That is to say, when a milliard meant one thousand million, when a billion was still a million times a million, when the term billiard was coined to indicate a thousand times more, and a trillion was 1,000,000 cubed. To have converted these words to the more modern usage, when a billion boasts only nine noughts and a trillion a mere twelve, might, I fancy, have added to what a German minister of the 1920s justly called 'the delirium of milliards'."

quote from the 'Note to the 2010 edition' in the preface of the book


there are at least two fascinating facts in this juicy tidbit:

1. the Germans had to invent new words to deal with the magnitude of inflation they experienced: milliard and billiard

2. the word 'billion' in 1923 Germany meant a '1' followed by 12 '0's - today the word is commonly defined as a '1' followed by 9 '0's



Mon, 12/10/2012 - 23:27 | 3050844 quasimodo
quasimodo's picture

Thanks for the info Davos, appreciate it. The hardest part is trying to wrap one's head around the ability to disconnect paper price from true value. Naturally, when you throw out the trillions figure, I'm guessing there was more than just a few that mumbled "this guy is fucking crazy" but looking at those figures, not as much. 

Having only followed this fucking clown show closely since around late '07, there are still some things I have a hard time coming to terms with...however with each passing day....

Tue, 12/11/2012 - 00:07 | 3050965 DavosSherman
DavosSherman's picture

You are most welcome Quasimodo.

I got so fucking pissed off when Edwin Trueman (he's a heavy weight amongst the Treasury people and carries a lot of clout on the Hill.)  Anyway the fucking dickless asshole did a story in FT (which I recall being owned by the Rokafellers) advocating that the USA should sell its gold and pay down some of its debt.  

I emailed the shithead the article and told him I was awarding him with the Nobel Prize in Darwin Econmics.  He graciously accepted the award.

In that article or maybe the one before was this chart I did on Weimar's gold from 1919 to 1923.

It blew me away.  Timing is everything.  Edwin is someone they'd listen to and follow and selling too early we'd be effed.

Then I started digging into all the countries that had gone tango uniform (tits-up) and how BKs were done on a country basis.  Some of that is done with economic hit men from the IMF and WB, but the final outcome is they revalue, and they are always a day late causing these bonfires of the currencies.

There is a lot of noise.  I've boiled it down to 5 Gs (gold n silver, guns, grub, government will fuck it up, first G is religious, doesn't belong here.)

David Walker said our biggest deficit is our leadership deficit.  IMHO that doesn't cut it, not blunt enough, we have megamorons and psychopaths fucking this shit up, it's going to be a disaster of biblical proportions.


Tue, 12/11/2012 - 03:04 | 3051250 Sandoz
Sandoz's picture

Sounds like you're really attached to your investment thesis. Good luck with that. 

Tue, 12/11/2012 - 00:53 | 3051062 Magnum
Magnum's picture

Great post Davos.  I had a personal lesson in this once in the late 1980s when I took a bus from Bangkok with a group of Thai tourists.  They dressed me up in a bamboo hat and told me to keep my head down as I walked down the dirt road into Cambodia.  The police watching the checkpoint noticed me but let me in anyway.  

The market: lots of people with one leg (mine victims), lots of dried fish for sale, and vendors had stacks and stacks of gorgeous currency notes on modern paper, with an elegantly detailed picture of a Cambodian waterbuffalo.  I still have some of those notes.  All of it had been printed in Europe and would be perfectly legitimate, as it seemed much too hard to counterfeit especially in Cambodia.  But it was ALL WORTH NOTHING.  I paid something like $2.10 for a 1/2" stack of big notes.  None of it could be used for anything in Cambodia.  Failed currency.  Big lesson!  I know something most Americans don't, and that's what a stack of failed paper currency looks like.

Later I was in Vietnam, and at that time (not sure if it's the same today) you had to carry around a sack full of paper money notes to pay for stuff.  $20 would get you like 3 inche stack of paper notes. It was way too big for pockets.  Go out to dinner with friends and after you get the bill, it would take a good 5 minutes to count the money, then another 5 minutes for the water to count that he got the correct amount.  FAIL!

It can and will happen in USA because of everything the fed is doing now.  I am only surprised that all of the immigrants in America, you know the immigrants who basically come and take jobs away from people already here, why don't they do us a favor for a change and start screaming about this!  They know better!  Everytime I see a Vietnamese or Cambodian I despise them a little bit because they've SEEN IT BEFORE.  Why don't they say anything, because Joe Sixpack hasn't a clue.  When the currency collapses I say we all raid whatever monies are owned by Cambodians and Vietnamese first, for staying so dang quiet as our country finances have been destroyed.

Tue, 12/11/2012 - 08:25 | 3051452 DavosSherman
DavosSherman's picture

Good read Magnum.  The mines was sad.  One thing I hate about gold, that and the fact it isn't off doing something productive.  Our leaders have failed us, as have our schools.

Tue, 12/11/2012 - 03:00 | 3051246 SAT 800
SAT 800's picture

Yes. good for you. it;s not really a market for gold; gold is not really a commodity. the "price" is a statement of confidence in the currency unit. The end point is always the same; infinity plus or minus a nickel. When no one wants the paper; a few gold coins you can carry in your pants pocket will buy a small farm with a livable house. or the entire years crop. It's always been this way in fiat money systems; it never changes; this time will not be different. We just don;t want to believe it; but it will come to pass.

Tue, 12/11/2012 - 10:34 | 3051675 Overflow-admin
Overflow-admin's picture

Argentina 2012 - Ongoing Gold and silver sale ban.

Mon, 12/10/2012 - 22:22 | 3050621 DavosSherman
DavosSherman's picture

PS I also used to call myself an optomist, then I really thought about it and asked if I was being a "delusionalist" and now would consider myself a realist, though the message can make one sound as being a pessamist.

Mon, 12/10/2012 - 23:48 | 3050905 hawk nation
hawk nation's picture

Gold at $5000.00 will also be a fubar environment

Tue, 12/11/2012 - 03:38 | 3051271 SAT 800
SAT 800's picture

Nah, that'll be business as usual, the TV will still be on. at$25,000/oz. things will be a little unusual.

Tue, 12/11/2012 - 05:57 | 3051323 Supernova Born
Supernova Born's picture

No need for worry:

Here are the FACTS:

"NO country throughout history has ever "confiscated" gold from its citizens, the USA included. Yes, criminal and sociopathic governments can attempt to suppress the use and ownership of gold by making said ownership illegal, but that hardly constitutes "confiscation". Nobody to my knowledge, in 1933 USA or anywhere else, has ever conducted door-to-door searches looking for privately-held gold.

Should the USA, or any other government, attempt to illegalize gold once again, the logical response to such a totalitarian tactic is to merely shut up and sit tight --- such measures will probably be indicative of the last gasps of a kleptocratic regime, and could most likely simply be waited out until (hopefully) sanity and justice finally prevail."

Just saw this:

Tue, 12/11/2012 - 06:10 | 3051348 akak
akak's picture

If you are going to copy an entire post verbatim, an attribution to the original poster would be polite.

Tue, 12/11/2012 - 12:36 | 3052110 Diogenes
Diogenes's picture

In 1933 the US govt sent out agents to shake down private citizens for their gold. They even searched out gypsy encampments.

Joseph Mitchell interviewed "King" Johnny Nikanov in 1942 for a piece that appeared in the New Yorker. Nikanov described how government agents visited their camp and forced them to exchange their gold for paper. I have seen other accounts of shakedowns of citizens who were believed to have large amounts of gold. Backed up by the threat of jail time.

Mon, 12/10/2012 - 21:51 | 3050533 A Lunatic
A Lunatic's picture

I can't fucking help it.........   You can't eat Gold

Mon, 12/10/2012 - 22:00 | 3050560 kliguy38
kliguy38's picture

Try eating a dirty fochin' $20 aint much good either even with mustard on it

Tue, 12/11/2012 - 03:02 | 3051247 laosuwan
laosuwan's picture

actually, you can (colloidal gold)

Tue, 12/11/2012 - 12:36 | 3052112 Diogenes
Diogenes's picture

You can't eat paper either, but you can wipe your ass with it.

Mon, 12/10/2012 - 21:58 | 3050549 seek
seek's picture

Unfortunately it's clear they don't plan to learn the hard way. When the time comes, they'll want what you have and try to scheme a way to get it.

Own gold, but hide it well, if you haven't lost it to a nearby lake like so many of us already have.

Tue, 12/11/2012 - 00:43 | 3051050 jimmyjames
jimmyjames's picture


Of course gold at 250 was a better buy than today-

I dont think the writer was saying gold today is a bad buy-he mentioned Buffet had the same view at 250 as he does today-

I read this guy a lot and he's very much pro gold-


Mon, 12/10/2012 - 21:50 | 3050530 Pareto
Pareto's picture

For me, gold is a currency hedge and not so much of an investment.  If the argument that gold is the ultimate store of value is true, then aside from some arbitrage and a couple standard deviations from the mean, here and there, then 1 oz of gold should buy me the same "stuff" at $500, as it does at $1700.  I don't get paid to wait holding it, it doesn't pay dividends, and it doesn't grow.  I hold it to hedge against uncertainty in the future as I observe fucked up governments, careless monetary policy (price fixing of interest rates), and batshit crazy central bankers with an afinity for endless printing of increasingly worthless fiat.  Thats all.  Its like " this shit is worthless.....ok well i got some of this other shiny heavy interested in that instead?"

Mon, 12/10/2012 - 22:24 | 3050629 Bohm Squad
Bohm Squad's picture

Mises pointed out that gold's store of value function is a happy coincidence.  Its primary function is as a medium of exchange.


In his words...


The world needs money and gold works the best.

Mon, 12/10/2012 - 22:01 | 3050557 The Swedish Chef
The Swedish Chef's picture

"But gold is not itself a great store of value, at least over long time periods...the holder had earned nothing on the investment over almost 30 years!"


Isn´t this the very definition of "strore of value"? You put paper in one end and out the other comes the same purchasing power?

Mon, 12/10/2012 - 22:26 | 3050632 NoDebt
NoDebt's picture

Agree completely.  And it works wonders in more extreme situations like this, too (from the article):

"the only thing that can usher in profound change on that score is a crisis of such proportions that the ability of said authorities to keep things under control by employing this recipe is simply overwhelmed"

Yeah..... that.

I was never a "gold bug".  Really, I'm still not.  But you bet your ass I got some stashed away now.  I call it "diversification", which sounds a lot more grown-up than "scared".


Tue, 12/11/2012 - 02:00 | 3051177 AgShaman
AgShaman's picture

safe haven = insurance policy

gold doesn't become an investment until you allocate more than 10-25% of net worth, depending on your personal theory about how to backstop your other assets and liabilities on a fractional basis.

Tue, 12/11/2012 - 03:22 | 3051261 SAT 800
SAT 800's picture

Correct. the alternative, dividends, or clipping coupons, works during the boom; which might last for a human life time; or for twenty years; but the great wisdom amongst real wealthy speculators is "don't chase interest rates"; the more the pay out rate the more the risk. A zero increase corresponds ideally to a zero risk; hence; metal. At one time the National Bank of Mexico was paying something like 89% interest on one year time deposits; but what this means, is they already know they're going to default. Essentially they're fishing for fools; they caught them too; thousands of them; little fat TV watchers in America. Right now we're in the biggest bubble of all; the us dollar bond bubble; it dwarves the housing bubble and the stock market is a tiny thing compared to it; but the day is coming when they will offer the bond; and no one will raise their hand. This will happen; and you will live to see it, unless you are very old. This is the time when it all falls apart and within a month; at the most; maybe a week; the question what is the price of gold? will be meaningless. It will be up to you to work it out with the bar owner, or the farmer, or the ship-owner. but no one will give you any gold for dollars.

Mon, 12/10/2012 - 22:04 | 3050575 Its_the_economy...
Its_the_economy_stupid's picture

And yet since 1976 we know the above to not be the case. Gold at 1700 buys coonsiderably more than gold at 50. The only real question is where hence? yet, no matter the vehicle that is always the question. We are left therefore only to speculate on tomorrow, yesterday has shown conclsively that the world backs gold,  not fiat.

Mon, 12/10/2012 - 22:18 | 3050606 Dr. Gonzo
Dr. Gonzo's picture

I wonder how much a million dollars of U.S. Fed notes will buy in 400 years. People hoarding gold would be glad to let it come out of hiding if their weren't so many bankrupt govenmtnets, insolvent and untrustworthy banks and lying cheating politicians. Makes more sense to hunker down at the moment. If we saw criminal bankers and politians being prosecuted for their crimes gold will come out of hiding. 

Tue, 12/11/2012 - 02:53 | 3051237 laosuwan
laosuwan's picture

a dollar today buys what ten cents bought in 1913. this may help answer your question about what a dollar will be worth in the future.

Tue, 12/11/2012 - 03:06 | 3051255 akak
akak's picture

Actually, a dollar today buys what four cents bought in 1913 --- except for all the i-crap; that shit wasn't around back then (lucky them).

Mon, 12/10/2012 - 22:24 | 3050628 Gohn Galt
Gohn Galt's picture

nice gold graph.  started off the last time the venicians had all of the metals out europe and began the 100 yrs war (only between England and France of course).  their mongol brothers burned crops all throughout europe and introduced the black plague into the water supplies. 

don't be afraid, don't loose your head.  do train and become adapt at real skills such as purifying water, growing your own food, creating your own power and going inside throuhg your heart for answers. 

i love this board, i haven't been on for a while, be well.

Mon, 12/10/2012 - 22:47 | 3050687 Quinvarius
Quinvarius's picture

Well.  Regardless of your current target, there is no way this fiat way of money is going to last in its present form.  Best to have some timeless money for the conversion.  What you are using now is going to be retired or converted into something else.  And right before it happens, all the insiders will run gold up to the moon so you can't get any.

Tue, 12/11/2012 - 03:26 | 3051264 SAT 800
SAT 800's picture

Yes it's okay to be "too early"; it's not okay to be "too late". In particular the Silver Price now is completely crazy. It's like it was in 2001, 4.25$/ now is $33; but should be $60. Very, very, good opportunity.

Mon, 12/10/2012 - 22:49 | 3050699 Bansters-in-my-...
Bansters-in-my- feces's picture

Gold is NOT...."VOLITILE".


Ever hear of the USA Exchange Stabilization Fund...???

I will let you in on a little secret.....

It aint us who the fuckers are making things "stable" for with this corrupt fund.

Ps.....Fuck you little Weasel Timmy G.

Tue, 12/11/2012 - 01:48 | 3051161 Supernova Born
Supernova Born's picture

Very successfully manipulated, BTW.

Gold-owning bitches. Bernanke's mighty pimp hand keeps you in your place.

Tue, 12/11/2012 - 01:53 | 3051168 akak
akak's picture

If you have any intelligible points to make in your gratuitous badmouthing of gold owners, or gold itself, I have yet to read any of them.

Tue, 12/11/2012 - 02:27 | 3051210 bankerbackbacon
bankerbackbacon's picture

Nuff said:


Das gold bitchez


Now when do we take the printing presses back from the terrorists?

Mon, 12/10/2012 - 23:01 | 3050741 americanspirit
americanspirit's picture

I will say it again - you can be certain that the Feds are watching every blog comments section for indicators of who holds gold and silver. If you make any comments that would indicate that you do, you are on the list. For the record, I think that owning gold and silver is stupid and I would never trade in my perfectly good paper money for that kind of shit.

Mon, 12/10/2012 - 23:06 | 3050755 Snidley Whipsnae
Snidley Whipsnae's picture

ZH has attracted an incredible number of former PM owners that have had tragic boating accidents, causing the loss of their PMs... I thought all that post here knew that!

Mon, 12/10/2012 - 23:53 | 3050922 backhandtopspin...
backhandtopspinslicer's picture

I am with you on that brother! When I get a crisp new 100 hundred dollar bill from my friendly local Bank of Amerika I just jump for joy I really do!!! These goofy proof silver eagles I see in the nearby window of a coin shop just seem way to cumbersome to bother with!!!!!

Tue, 12/11/2012 - 00:09 | 3050966 Roosting Chicken
Roosting Chicken's picture

Not to mention coins are worthless...for snorting coke with.

Tue, 12/11/2012 - 03:00 | 3051243 laosuwan
laosuwan's picture

THAT comment will surely attract no attention from the authorities (lol)

Mon, 12/10/2012 - 23:27 | 3050841 steve from virginia
steve from virginia's picture


Far more sensible argument for gold here:


No mention of governments, hyperinflation, or currency demise ... does talk mostly about PEAK OIL.

Mon, 12/10/2012 - 23:41 | 3050890 PUD
PUD's picture

Gold is not an "investment" it is a bet. Please let's be clear on this. If you buy a chunk hunk or slice of gold and put it on your table it will do exactly nothing. It will not produce anything, improve anything, cultivate anything. It will just sit there. Now of course your hope is that someone like yourself will come along and give you more $$ for your hunk, chunk or slice sometime in the future but that is a bet not an investment. If you give your cousin some $$ to open a pizza shop and you receive a % of the profit, that is an investment. If you buy a ton of flour and hope to sell it later at a higher price, that is a bet. This distinction is important

Mon, 12/10/2012 - 23:50 | 3050907 akak
akak's picture

And if you put dollars into a bank account, or into government bonds, hoping to save their present value into the future, that is also making a bet. 
A sucker's bet.

Tue, 12/11/2012 - 00:05 | 3050941 backhandtopspin...
backhandtopspinslicer's picture

I bet master obama be raising taxes on your so called investments -- I bet your so called pizza shop will fail belly up -- I bet I could take my chunk of metal and trade someone for a nice bike and do wheely's and burn rubber in the parking lot of your cousin Vinny's failed pizza pie parking lot, wanna bet? GOLD IS MONEY and obama is a radical who will make it harder to have successful investments

Tue, 12/11/2012 - 02:41 | 3051214 bankerbackbacon
bankerbackbacon's picture

"It will just sit there. Now of course your hope is that someone like yourself will come along and give you more $$ for your hunk, chunk or slice sometime in the future but that is a bet not an investment."


How foolish of me, I'll sell my gold and get some equities, or a bag of flour. Or maybe a pizza shop? I hear the margins are high, and the competition isn't too bad.

How about some good ideas?

Here's one, or four.


Don't pay your taxes.

Give some pizza or broccoli to a homeless man

And for the love of Jesus don't join the army and submit your will to psychopaths.




Tue, 12/11/2012 - 02:50 | 3051234 laosuwan
laosuwan's picture

is that not exactly the same as for currency? It does notthing but sit there, you hope it will buy as much in the future as today.

Tue, 12/11/2012 - 04:04 | 3051293 SAT 800
SAT 800's picture

Yes, but this "hope" is based on facts. on knowledge. on reality. It is impossible that currency will have the same purchasing power even next year; never mind in five years; completely out of the question. On the other hand; it is very, very difficult to understand how it could be that more people will not start paying attention to this fact and changing their savings over to gold and silver; this changing over is called demand and it is what drives "price". Intelligent study of facts really can predict, at least in broad outline, future outcomes. Currency continually increases in supply; but gold and silver increase in demand; the market forces are opposite.

Wed, 12/12/2012 - 23:31 | 3058307 laosuwan
laosuwan's picture

but to use gold as money you have to sell it. In which case you no longer own it, or as much. And that sale could be taxed. Is this not a fatal flaw in the argument for gold?

Wed, 12/12/2012 - 23:43 | 3058330 akak
akak's picture

Your argument could equally apply to ANY investment or savings vehicle, in which case you could a) bite the bullet and pay the tax, or b) go black market and evade the tax, or c) bow to the futility of life and shoot your brains out this evening.  Your choice.

Tue, 12/11/2012 - 03:46 | 3051277 SAT 800
SAT 800's picture

Sometime you might see a horse race where the horses are all lined up at the start; but they all have a bandage on one leg, or two legs, and they limp; except for one horse. You could call this a bet, I suppose; I would call it common sense.

Tue, 12/11/2012 - 04:26 | 3051300 Snidley Whipsnae
Snidley Whipsnae's picture

Pud said... "If you give your cousin some $$ to open a pizza shop and you receive a % of the profit, that is an investment."

This is incorrect. If you 'give' your cousin $$ for any reason it is a GIFT, not an investment. Unless you receive some collateral for your $$ gift then your action would not qualify as an investment because you are receiving nothing. Or, as Kyle Bass would say: "How many of your relatives would you go joint and several with ?"

Your gift to your cousin is almost as hazardous as cosigning on a loan for your cousin to buy an auto, home or any other purchase where YOU are at risk if your cousin fails to pay. If your cousin posted no collateral YOU are at risk.

IMO a loan isn't a loan unless collateral is posted.

Here are the generally accepted definitions of investments; An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

NOTICE that gold qualifies as an INVESTMENT under both the financial and economic definitions of investment.

IOWs... you are dead wrong because the definitions do not specify nominal or inflation adjusted dollars plus both definitions contain the phrase 'appreciate and be sold at a higher price' in the future.

Tue, 12/11/2012 - 20:04 | 3053737 bronzie
bronzie's picture

hi snidely - I mostly agree with your definition of 'investment' - where I take exception is on the verbiage "purchased with the hope"

by that definition there was a whole bunch of residential real estate purchased as 'investments' in the runup to 2006 - how are those 'investments' doing today?

I would suggest that 'hoping' is consistent with 'speculating' and not with 'investing'

when I am attempting to clarify the difference between 'speculating' and 'investing' I ask this question:

Do you sign the monthly check on the front or the back?

If you are signing the front of a check every month (like a mortgage payment) THAT IS NOT AN INVESTMENT!!!!!

If you are signing the back of a check every month that MIGHT be an investment

A simpler way of thinking about it: if it don't cashflow it ain't an investment


Tue, 12/11/2012 - 09:29 | 3051532 Athenian
Athenian's picture

Gold is simply a different type of investment. I started work in 1991, and from my first month, I put $500 a month into a balanced equities investment fund and a further $500 into buying physical gold and silver. I never took the dividends from the shares, I simply reinvested them into more shares.  I bought the metals and started stacking in the safe.  After the most monstrous equities run from 1991 to 2007, I cashed in my equities.  I cashed in less than $120k from the equities.  Do the maths - all I did was put a bunch of funds manager's kids through private school and college.  Imagine if I'd cashed out in 2008.  Do the maths on the metals - I've just turned 45 and will be retiring next year. I've rented a villa on a Greek island, have already built the safe for the shiny stuff, and now I'm just waiting for the Euro to impode, the drachma to be reintroduced, and then I'll buy the villa with a few bars.

I like the pizza shop idea; but I think I prefer my bars.


Tue, 12/11/2012 - 17:07 | 3053091 R_J
R_J's picture

oki´s a place to prosper...and Please report back...

I Mean Numerous people Dumping Their "BETS"   So...go to  -


and BTW , your such a n00b actually trying to fight REAL MONEY and What Money IS.


IF..i had Gold, its not for selling at a higher Price, but to have SOMETHING to use as PAYMENT when thy Shite FIAT is a dead and gone.

Wed, 12/12/2012 - 14:41 | 3056670 e-recep
e-recep's picture

thats why the central bankers are hoarding them in hundreds even thousands of tonnes and keeping them for decades, right?

Tue, 12/11/2012 - 00:26 | 3051009 JKearney3153
JKearney3153's picture

would you define gold as an "investment" or as "protection" against ensuing Shit-Hitting-The-Fan (awesome graphic)

Tue, 12/11/2012 - 03:27 | 3051265 SAT 800
SAT 800's picture

It is an investment. definitely. it cannot be insurance; since the failure of the present monetary system is 100% guaranteed.

Tue, 12/11/2012 - 01:25 | 3051129 StychoKiller
StychoKiller's picture

Oh, to be so wealthy that I might view Gold as an "investment!"

Tue, 12/11/2012 - 03:28 | 3051266 SAT 800
SAT 800's picture

Silver coins.

Tue, 12/11/2012 - 01:54 | 3051166 laosuwan
laosuwan's picture

If the market treats gold as though it were money then how does it make sense to talk about gold in terms of bull or bear markets? How can there be a bull market in money? This makes no sense to me. The price just fluctuates in response to changing conditions elsewhere. What am I missing?

Tue, 12/11/2012 - 03:33 | 3051269 SAT 800
SAT 800's picture

Look at it upside down; which is really right side up. Gold tells the value of currency; not the other way around. also; there are bull and bear markets in currencies. But this is just words. As more and more people suspect that they will not be properly paid back with official currency units, because they won't buy enough; they will switchover to metals; this switching over is called demand and it is what changes the "price"; whcih is really, as I say a measurement of faith in the currency.

Tue, 12/11/2012 - 02:18 | 3051194 bankerbackbacon
bankerbackbacon's picture

These arguments against metals never take into account one thing.

That there is a goal of many powerful people to rebuild the worlds financial system under one central bank and one currency. In order for that to happen there needs to be the destruction of the old system.

Now why wouldn't silver, gold, food, water and energy generation be tops with the above mentioned considered?


The system was taken over 100 years ago, the power to print is the power to rule.


Mr. Das should google Rothschild, and room full of gold. It motivates the Queen to Cortez, to do unthinkable things to fellow humans.






Tue, 12/11/2012 - 02:37 | 3051223 fukidontknow
fukidontknow's picture

Talking about gold and Brown's bottom a document from the IMF recently published by GATA reveals just how unlucky the lucky country was at the hands of a couple of Goldman plants.

Tue, 12/11/2012 - 05:52 | 3051336 JPMorgan
JPMorgan's picture

But Goldman says the party is over...

I'd like to see the internal GM emails flying around on that call lol.

Tue, 12/11/2012 - 06:01 | 3051342 Supernova Born
Supernova Born's picture

Muppet Treasure Island.

Real movie from 1996.

Gold muppets. Here and now.

Tue, 12/11/2012 - 06:32 | 3051361 Mark Wilson
Mark Wilson's picture

Hahaah! Love that movie. Muppets at their finest. :)

Tue, 12/11/2012 - 07:16 | 3051382 Supernova Born
Supernova Born's picture

Gold bugs are pretty much hosed if .gov decrees.

Dig deep (it won't make any difference, but at least they'll get some exercise).

Tue, 12/11/2012 - 07:29 | 3051390 akak
akak's picture

Supernova, why are you determined to keep spreading this implicitly pro-establishment fearmongering regarding gold ownership and the supposed inevitability of ostensible gold confiscation by the government?  Your every post today is along the same lines --- what gives?

Tue, 12/11/2012 - 08:19 | 3051442 Supernova Born
Supernova Born's picture


Tue, 12/11/2012 - 10:50 | 3051721 midtowng
midtowng's picture

Gold went from about $550 to $850 within three weeks, was at that price for one second and then collapsed immediately again. How many people actually invested at that peak?


Finally! Someone else noticed that too.

Tue, 12/11/2012 - 11:15 | 3051802 MFLTucson
MFLTucson's picture

Naming Warren Buffett to any article dettracts from its credibility.  That man is a phony con man who made most of his money off the backs of taxpayer bailouts.

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