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Valuing Gold
Submitted by Alidair Macleod via GoldMoney.com,
There is only one way to value gold, and that is to quantify the expansion of the fiat currency in which it is priced.
That is the sole purpose of the Fiat Money Quantity (FMQ), which since I last wrote about it five months ago has increased by $375bn to $13.7 trillion. This is despite the end of quantitative easing, which had been tapered down before being abandoned altogether. The long-term chart of FMQ is shown below.
FMQ is the total instant-access cash and deposits in the commercial banks plus their reserves at the Fed and the temporary means by which those reserves are changed. Its purpose is to quantify the difference between sound money and fiat currency by including the steps by which gold has been progressively absorbed into the banking system from private ownership and into government vaults via the commercial banks and the Fed. A fuller description can be found here.
The pace of FMQ creation from 2008 continues well above the pre-Lehman crisis trend, and it is now $8,259bn higher than at that time, an increase of 152% in 78 months. Who would have thought that a temporary provision of money and credit to stabilise the financial system in the wake of the Lehman crisis would have developed such permanency?
As a measure of monetary inflation, FMQ differs from more conventional metrics by including liquid bank assets held on the Fed's balance sheet. By including money parked out of sight in this way a truer position is obtained. Critics of this approach say it is double-counting, because bank reserves recorded at the Fed are also recorded at the commercial banks as customer deposits. This is undoubtedly true, but the whole fractional reserve system involves multiple counting of the same underlying money, so it is hardly disqualified on these grounds.
The next chart shows how FMQ has deflated the price of gold, measured in constant 1934 dollars. This was the year that President Roosevelt devalued the dollar from $20.67 to $35 per ounce of gold.
The gold price is shown in nominal US dollars and also in constant 1934 dollars adjusted for the increase in FMQ; the disparity between these two prices has widened over the years to $1,211 and $3.91 respectively. The two previous times the adjusted gold price hit these low levels were in April 1971 at $3.31, four months before President Nixon was forced to suspend the Bretton Woods Agreement, and in October 2001 at the start of the last bull market when it got down to $3.45. This time, the higher rate of increase in FMQ suggests the price today is more undervalued than the two previous times on a forward-looking basis.
The last chart is of the gold price since the Lehman crisis and in July 2008 constant dollars, when FMQ accelerated above the long-term trend as shown in the first chart.
While the nominal price taken in February 2015 was $1211, the adjusted price was $480, representing a 45% fall from the $918 price in July 2008.
In summary, FMQ shows that gold is substantially under-priced in dollars on a long-term value basis. In the past this level of under-pricing has been followed by major price shocks to the upside on both occasions.
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By my kalkulations, we are off by at least two zeroes on the price of gold.
By my calculations , we are off by at least five zeroes on the price of bitcoin.
And to anyone with intellegence. Those thing will continue to be low as long as they are priced in fiat.
How much is gold worth? $1200 fiat. How much it bitcoing worth? $250 fiat.
It is never much is $1 US worth? It is worth this much gold or this much bitcoin.
You need to change the paradigm and so very few get that yet.
Look, there is no fucking competition between gold and Bitcoin. Bitcoin is the flavour of a new genration's fountain well. And if you can't accept that you might as well get fucked. Nobody is going back to payment methods from the 1800's and 1900's in a globalized economy. If you can't figure out that much, you're helpless...
MANIPULATION
Yup. Everyone knows there is manipualtion in the markets. The second chart is a form of manipualtion, however. It is decieving. Take a look at the y-axis. The intervals are not consistent and to scale.
That being said, I agree that one should protect their wealth with precious metals. I believe that silver is a much better buy with the current gold-to-silver ratio. I try to wake up my freinds and family up to the insanity of our monetary system. These cnadles with silver coins at least help them start their stash while learning the value of a silver coin: https://www.etsy.com/shop/ScentSavers
"Yup. Everyone knows there is manipualtion in the markets."
But the manipulation of gold & especially silver, is magnitudes above what goes on in the general stock market.
That's like saying Bush is magnitudes above Obama. Who cares? Both presidents suck and all markets are manioulated! I believe in free markets and believe that man is not intellegent enough to have total control over markets. Be patient....the manipualtion must end sometime.
Gold will rebalance the sum of all Fiat expansion
http://twoshortplanksunplugged.blogspot.com.au/2013/10/gold-will-rebalance-sum-of-all-fiat.html
"The global economy needs to drive the wealth and standard of living which was artificially created by way of Balance Sheet expansion, into the Vaulted Gold Reserves...Banks stand to gain by way of clearing their spread between reserves to assets/liabilities…overnight! This allows them to leverage back up all over again"
The global USD$80T spread between bank Reserves and Bank Assets/Liabilities needs to come down. Using a non-Industrial metal is the safest way. This is the only reset button I know of. I believe China has the balls to do such a thing, once they establish their alternate Banking System.
I did the math on this in 1998.......I was stunned.
Still am.
@ RU_GAY2
I have tried now on numerous occasions to inform you, as well as fonestar (God rest his soul) of the insurmountable problem that affects bitcoin, as well as your pervasive loyalty to it. It goes like this:
Bitcoin, as well as an infinite number of alt coins are indistinguishable from one another but by name. All run on the same hash algorithm and are exact in every aspect. That is like having many colors of gold (not only many colors, but spotted and striped versions as well, all having the identical properties) and claiming that only yellow gold shall be of high value and all others to be inferior. You see, by having an endless supply, there is no "scarcity". I know, I know, you will say, "but there is scarcity. There are only so many bitcoins available." Do please try and keep up. The problem with the bicoin dilution is its believers fail to grasp the concept of substitution. Substitution applies to everything, even gold. But with bitcoin, there is always another alt coin to choose from that has every single characteristic as bitcoin. Think for a moment, in the bitcoin Utopian world you invision, assumes the dollar no longer exists; a bitcoin is worth a small childs life (or you fill in any insurmountable value you choose). why would anyone pay such a lofty price when they could simply transact in a currency that had not undergone an unrealistic parabolic move that they were not party to? No, substitution is your friend, as well as the lesson to it. I'm trying to help. Take heed.
You have done a terrific job of comparing bitcoin and eCurrencies to fiat money, not gold, and the economic competition for dominance. The difference is that eCurrencies are not defined by national borders.
I think there needs to be some context here with regard to risk. Bitcoin like all electronic currencies has a couple of big issues. Firstly, if you lose your wallet it is very difficult to recover your funds unless a very good backup exists, if you save your Bitcoins on the block chain server then there is a real possibility of theft as we have seen already. The biggest threat that is rarely discussed is a potential loss of internet or internet connectivity due to any number of natural or more likely intentional causes. If you can't spend your Bitcoins then they're useless. Then again, when the big banks fail how safe is your cash?
One other aspect of risk is who or what controls the creation of these currencies, because virtually anyone can setup a server farm to mine bitcoins that means any nefarious .gov or other group can take control... think HFT as a similar idea.
Make no mistake, central bankers fear eCurrencies because they cannot create them, tax them, apply additional charges or interest against them, nor can they monitor YOUR every purchase. Bitcoin enables people to trade directly without government intervention, a very liberating idea. As businesses like Microsoft and local and state governments continue to approve bitcoin transactions the trend to increased adoption will continue.
My first post, and certainly not an exhaustive analysis, but I hope it broadens the discussion. BTW I do not use Bitcoin. Yet.
First of all , all bitcoins are held on the blockchain , all your wallet holds are private keys which give you access to the bitcoins registered to that wallet which allows you to move them to a different wallet. The blockchain is not held on one server , it is held on thousands of servers distributed across the globe. They are all a mirror image of each other making the network impossible to attack , even by multiple EMP's , grid failure or anything else the Cave Dwellers and Flat Earth Society on ZH can dream up in their limited little imaginations..
Perhaps I should have used the term Bitcoin Exchange, Mt. Gox for instance, and others, where many people lost their Bitcoins due to theft/hack/whatever, when the Bitcoin Echange failed, the result was the same, 0 Bitcoins for those who did not control their wallets.
Bitcoin network architecture may be global but one can't seriously believe that it's invulnerable to hack, DDOS attack, or the firewalls and various tools that regulators and governments can employ to deny access to servers and websites. If you can't access your Bitcoins they are of little value. The emp is unlikely except for a solar flare like 1859 Carrington event. There's no evidence that 70 years of surface testing ever caused any power grid problems, there's very good analysis of this online, and credible evidence of tactical nukes being used around the world, including NY City 9-11, where a 3 day quarentine was imposed on the site. The 3 days is the important info here. It certainly didn't take long for first-responders to begin displaying cancer symptoms. No grid problems even though 2 massive buildings were pulverized into powder. What else could reasonably do that?
There may be only one public Internet, but the odds are pretty good that other private networks, and not just intranets, exist for government continuity purposes since governments control the Internet backbone. They can shut down the public Internet and and all our connected devices and it would still be business as usual for them. That's the greatest danger to electronic currencies as I see it - loss of access to your 'money'.
@funthea
Ever heard of Network Effect ? It's the reason we only have one Internet , technically we could have thousands of internet's but now we have just one. The same with bitcoin , the Alt's are just a playground for experimentation. None of them have brought anything new to the table. As soon as an Alt comes up with something that bitcoin cannot do (which mysteriously none of them have done yet) it would be integrated into the bitcoin protocol.
It's just a matter of time that bitcoin will be on top of this completely. Thousands of Alt-Coins have already bitten the dust.
Cleanest dirty shirt.
How many countries will "they" allow to suffer this fate before US ?
The markets can remain irrational longer than you can remain solvent.
All bets are off. If you are betting in the fiat casino then you will ultimately lose. The edge is to the house.
If you purchased Gold and Silevr for gain in terms of fiat then you are a fool.
I really hope that FOFOA is correct and the price of Gold collapses to ZERO. Of course you will lose everything in terms of Fiat.
But if you bought Gold and Silver to SHELTER YOUR WEALTH as an insurance policy against currency collapse then why even care what the price of it is in Fiat?
It is not for sale AT ANY PRICE until after the Currency Market Bubble pops.
It will become useful after the reset. And you will not lose anything if you still own it when that happens.
The current paradigm is doomed to fail and the US Dollar is currently in a Blow Off Top, in the last gasps for life, and will die an ignomious death and be swept into the dustbin of history as another failed experiment.
The second chart is logarithmic, not linear.
The second chart is a form of manipualtion, however. It is decieving. Take a look at the y-axis. The intervals are not consistent and to scale.
IT IS NOT DECEIVING.
The Graph is LABELED, "Gold in 1934 USD (Log Scale)". It cannot be more plain!!!
The Log Graph is STANDARD in Finance, Economics and Physical and Natural Sciences as well as in the application thereof.
(A linear graph of that would have taken up quite some space.)
Just because you are uneducated, and you cannot read a log graph, does not mean that the rest of us are.
I am sorry that you cannot think exponentially and lack an understanding of rudimentary logarithms, that which is taught in Second Year HIGH SCHOOL ALGEBRA, and which you should know. This is a FINANCIAL WEBSITE and it is not meant for the INNUMERATE.
Instead of labeling the 'Y' Axis with the numerals 0, 1, 2, and 3, he labeled them with the powers of 10.
The divisions are the number 1 (which is 100), 10 ( which is 101), 100 (which is 102) and 1000 (which is 103) to make it EASIER for you to read.
Learn some MATH to avoid offering unjustified criticism.
Cut him a break, he's a candle salesman...
I know a guy up in the Spokane area with a $25,000,000 plant....you know what he manufactures?
Bitcoins.
Really....Bitcoins.
And he is expanding.
Yea but Tony Beets could kick that guy's ass.
Who contracted him to make them ?
Or does he plan on selling them to the rubes that have more fear than sense ?
Is his wife the one that makes $8000 per month working from home on her computer for only a few hours a day?
When SHTF do you really think an old gamer is going to take your "goldcoin" for a PCI-Express Nvidia card or an ATX power supply when yours dies? He's going to laugh at you in a snide way and snicker with his friends about you when you leave his shop. Then they will drink some more Jolt Cola and get their game on.
Yea, the oligarchs are going to step aside and bow down to the new kids and their crypto kingdoms. They are way ahead of you jr.
Yeah we all up in der kindoms and shit and we like, yo we take over your queen and yer castle you old baggaho.
Somewhere, a millennial just wet his pants, after reading their 2 favorite words in one post. Bitcoin and fuck.
I guess this poster doesn't know that gold was warehoused at banks, in the old days. It wasn't actually shipped continuously around the world. I'd say that, with all the current Chinese purchases, there's more gold moving around the world now than ever before.
Who cares, as long as you get to say bitcoin and fuck.
Bitcoin fuck.
Most Bitcoiners are not millenials, they're brilliant and highly flammable guys like we in their 20's, 30's and 40's.
Fuck gold, buy Bitcoin.
Please make your own choices and leave others to make theirs without your offensive ramming of your own zealous beliefs.
Now fuck off.
....oh you mean kind of like this blog's zealous belief that everyone will be forced to use gold because there are no alternatives? Well too bad because there are alternatives. Working alternatives that are fully functional and in use in April 2015. We know, we know... having another variable in the equation just throws your tiny brains for a loop doesn't it? It also kind of jeporadizes your notion that your "good guys" are going to get a chance to salvage the dollar and tie it to gold doesn't it?
Can they hit a target with a .357 @ 25 yards? If they can't, they will be dead.
Yes of course, most Bitcoiners are highly accomplished marksmen and are trained in improvised explosives as well.
Look son, a FUCKEN retard.
where?
Go to your bathroom.
Look into your mirror.
A fetus isn't a life.
Corporations are people.
You can be whatever sex you "feel" like.
Dollars get stronger the more you create. (from nothing)
The imaginary currency, Bitcoin, has ANY value at all.
......I'm getting old.
How is Bitcoin "imaginary"? Is the Windows software you are using on your computer "imaginary" as well?
What a bunch of stupid dopes on this site....
Windows? Who the fuck still uses Windows?
Hmmm. Yet China, India, Russia and other centraol banks are buying gold, not bitcoin. Oh what do they know anyways...?
Look Gay, I understand where you're coming from, but bitcoin will need to stand the test of time.... period. Take 2 simple 1964 silver dimes. I could buy a gallon of gas for those 2 dimes in 1964, and 50 years later, I can still buy a gallon of gas. That, boy, is called the-test-of-time. Still holding value, after 50 years. When bitcoin is 50 years old, we shall see.
Ok how about we price everything in M&M's. In 1960 I bought a bag for 5 cents which now costs $.79. Should have filled my mattress with them....melt in your mouth not in your mattress.
That's sort of the point. Almost anything that can be stored will increase in value in terms of a fiat currency like the dollar. Gold and silver are better choices, however, becuase they last forever.
But I thought you can store bitcoins on a flash drive? r2d2 homo dude claims he does, and flash drive lasts long time right?
so long as you have the internet , electricity, and the same social culture to plug it into. gonna look pretty dumb with a usb stick after a global economic collapse. gold still looks pretty whatever happens to the global economy, usb sticks? well...just hope nothing bad happens to the world huh. bitcoin should be fine. yea.
so long as you have the internet , electricity, and the same social culture to plug it into. gonna look pretty dumb with a usb stick after a global economic collapse. gold still looks pretty whatever happens to the global economy, usb sticks? well...just hope nothing bad happens to the world huh. bitcoin should be fine. yea.
Digital currency is coming, like it or not.
In fact it's already here.
Todays currencies are nothing but ones and zero's anyway. At least a global digital currency with a finite number of shares would be an improvement. One global digital currency or don't even bother.
If there were truly a finite number of shares and there truly were no print button, it would accomplish the same thing as gold.
Finite gold = Finite shares.
Land is also finite and can be used to feed people and create more wealth.
If society breaks down, I'll take bullets and land over gold.
There can never be a finite number of an imaginary commodity. Rules can be changed by fiat. Why are PMs superior? Because you both own them and control them. A transaction with someone like minded is private. Your little dream is actually an electronic prison, not some decentralized nirvana.
Those zero's aren't worth much, but put a one in front of them and it means business.
or a decimal point.
$.0025444?
There is only one way to value gold and that is the highest price someone is willing to pay at the time you wish to sell.
A good reason to have and hold physical gold;
From Michael J. Kosares of USA Gold
Let the seller beware! The German citizen/investor who put away a few rolls of 20 mark gold coins in 1918 would have done so at 119 marks per ounce. By early 1920 the previous rapid inflation had suddenly given way to deflation. Had that gold owner decided to cash in on gold's significant gains thinking runaway inflation was over, a 100,000 mark investment would have made him or her a millionaire.
The glow, however, would have quickly worn off.
By late 1921 the runaway inflation had resurfaced but now with a vengeance. Gold shot to 4,000 marks per ounce. By mid-1922 gold reached 10,000 marks per ounce and the wholesale price index went from 13 to 70. By late 1922, the roof caved in. Gold traded at 134,000 marks per ounce. In January, 1923, it cracked 1,000,000 marks per ounce. By midyear, it broke the 100 million marks per ounce barrier and at the peak of the hyperinflationary breakdown, it sold for over 100 billion marks per ounce.
The individual who thought he or she had the cat by the tail and cashed-in his or her golden chips during the 1920's deflation became a millionaire. In short order though, that millionaire became a pauper as wave after wave of hyperinflation washed over the German economy. One moral from this somewhat frightening tale is that becoming a millionaire or even a billionaire on one's gold holdings was inconsequential. Another is not to give up one's hedge until there is ample evidence that it is no longer needed.
Momentary nominal profits can be illusory.
I upvoted that namely because of historical performance as a value store. I pose a philosophical question though (despite my previous sentence) what REAL intrinsic value gold or silver? Or just a stronger perception thing? Note I am not a hater and firmly believe commodity money would have helped prevent the quick destruction of the American republic.
I'll respond, as I enjoy philosophical discussions grounded in Wisdom.
The way I see it is: There is no intrinsic value in any "thing", it is all in our minds, and we project it onto things. Give an ape or a koala a gold coin, it may perhaps play with it for a while from curiousity and the attractiveness of the shine, but it can just as easily drop it and move on as it does a banana peel. It sees no value, since it projects no value on it.
That being said, we are sentient, intelligence beings... and put our life's energy, time and Wisdom to play the role of creators, whether we create music, art, grow food, or invent something... the drive is creative for the purpose of self-gratification by expressing the Love and beauty that drives us. So naturally, we cherish our time and efforts laid to tasks, and we need something in the material world to represent our payment for our labor, this something must be fair, honest and dependable. Nothing has been that more than gold on the material plane. Certainly you cannot take it with you after the body is layed to rest, but neither can you take your body with you... but you still use it. The principles governing our decisions in the material world, when grounded in solid science, logic and truth, result in a harmonious effect on ourselves, our accomplishments and others. Gold, God, Good!
your implication is there is some meaning to life or a reason for it. the construct of human life is ridiculous when compared to every other life form. every other life form has a defined purpose in the grand scheme of things, the trite circle of life. humans do not fit anywhere in that scheme as a sentient being. humans don't really fit as animals either even as the apex predator.
think about how ridiculous your existence is just to feed cloth and shelter yourself. humans are clearly the most stupid animals on earth.
Nihilist on deck.
as opposed to some self important delusionist.
Quite the contrary, your mantle of nihilist philosopher makes you the one exhibiting self importance. Shouldn't you be on the top of a mountain?
or dung heap?
your definition of self importance needs some help. what makes sense about my being self important when it is your school that thinks humans have some individual purpose in life aside from the usual animal instincts and reflexive behavior.
You are right, from your perspective. However, from my experience, meaning of life depends on the meaning you give it, and you certainly don't have to, as Life itself asks for no meaning, like Gold doesn't ask for you to value it, or like I didn't ask for your opinion, but you give it. So just as you believe, so you will experience a self-fulfilling prophecy of your own make and will live a ridiculous human life that doesn't fit in anywhere. However, this doesn't apply to everyone, as not all will agree with this belief. If you didn't fit in, you would not be here, the very fact you evolved and are sustained on this planet proves you fit in. Now if you were to jump into a lake with hungry phirannas, perhaps you would not fit in and you'd know it for sure, but as of now, the only hungry Phiranna is your mind.
in other words you have the power of your mind to create whatever delusion you choose to live with. that means the human life is dependent upon self delusion for survival. a monkey has a better grip on life, eat, sleep, fornicate, repeat. if there weren't so many girls who have deluded themselves with "values" and "morals" my life would be complete and much more in tune with the nature of things.
When the Phirannas get 7" screens in the back of their Escalade's I'm checking out!
Beautifully put. I'd still argue that the real value to a human is the act of doing i.e. "to live is to do" especially in the vicarious world that the masters have tried to sell us :-) I do like the fact that you mention the concept of self-gratification and the idea of humans creating things - I believe this is what we were, in part, created for, and that imitation (through our own creations) is often a sincere form of flattery, just that we are not to dwell on it. But no, you can;t take it with you, and regrettably many evil creations abound. So, yah, gold a good value store at need.
PS - I have my suspicions that apes and koalas are far more intelligent than we give them credit for.
Yup, in a way you're right, that's why apes and koalas don't fret over gold prices and the morrow. :)
"That being said, we are sentient, intelligence beings..."
ROFL! Thanks for the belly laugh! Still have tears in my eyes...
The value of some thing has a direct relationship to the amount of labor and thought went into producing it. By that measure a ton of clean sand or an oz. of gold will always have value. Currently the break-even on gold is about $1200/oz which leaves nothing for the effort of those that found and financed it to production. It's much easier to lug around an ounce of gold than its equivalent in sand.
Ask a monkey what has more value: a bananna or a warehouse full of gold bullion.
All value is subjective , as beheld in the mind of the observer.
A consensus price is reached by the market , creating a group hallucination of value and price.
Silver is used in all kinds of tech gadgets, solar panels, etc. Gold is pretty. Does that help?
Pretty sells for more than functional on this planet. Ask the Kardashians.
The Kardashians are neither.
True. So why(tf) do people keep buying them?
Nobody ever went broke underestimating the taste of the American public.
H. L. Mencken
Gold is a store of value. Like the old goldminers once said,"The high price of gold represents the thousands of man hours necessary to acquire it." A hundred men panning in a river for ten hours; how much does that cost? Our 'currencies' are supposed to represent labor exacted, but our public servants are instigating the counterfeiting of them. In essence, a tax; or fraud. Not possible with precious metals. They are the means by which all other goods should be valued.
I have a barrel in my warehouse (55 gal variety), full of SOIC chips. About 600 lbs. worth. Their street value right now is about $75/lb. That's $45k. 1 miscellaneous barrel. An IC - like thousands of others, manufactured by the Gajillion. 1 warehouse. There are ~Thousands~ if not ~Millions~ of these same barrels of chips in warehouses around the world. Would you like to know what makes a single lb. of these little plastic, nothing-looking chips so valuable? Hint: It's 'pretty'... And guess what? It's not even the most valuable chip made, based upon the amount of 'pretty' inside.
SOIC ?
http://en.wikipedia.org/wiki/Small_Outline_Integrated_Circuit
Here is a good video to watch about money vs. currency-
https://www.youtube.com/watch?v=DyV0OfU3-FU
That is why I'd price gold's Currency value only in the context of what OTHER REAL & VALUABLE ASSETS it can buy, when converted to Currency.
E.g. If its value were to go "through the roof", I'd still look to first buy up valuable Real Estate (cause you can do a LOT more with land than shiny metal), or pay off the mortgage.
Having learned the hard way that one should not hold more than 5-10% of one's total wealth in gold, I now treat it as a pure Hedge (insurance policy).
I'd argue that you can make more money and friends in troubled times from... Alcohol, Ammo and Personal/Feminine Hygiene products than from shiny coins.
p.s. If Gold were to go to $1900-2000, I guarantee you that a lot of people would be cashing in, and buying other stuff or paying off bills. As it is, I'll wager that most here bought it at higher prices than $1200 and are licking their wounds, waiting to get out when they get to break even.
From typical nomenclature:
"It's as good as gold"
"The gold standard"
"Gold plated..."
"Fools gold isn't real gold"
Gold trophies (world cup, nba, etc)
"Our dollars are backed by gold"
There's an inherent human psychi giving gold it's value. Just ask any motherfucker on the street.
And until recently, black gold.
but nobody really understands why. the electric crackling in my fingertips doesnt lie when its the pure stuff in my hand. nobody understands the significance of that either, or why the capstones on the pyramids were gold, either.
Gold is money, why would you sell money? -i did the downvote, because if the dollar crashes gold and silver coins will be your money... there will be no fiat to sell them for, or why would you want to sell your gold for devalued fiat? only because you can get more of it than before? lol...
Exactly. Son, you gonna be alllright.
http://www.youtube.com/watch?v=YTHL0y6xvLE
Gold is money, why would you sell money? -i did the downvote, because if the dollar crashes gold and silver coins will be your money... there will be no fiat to sell them for, or why would you want to sell your gold for devalued fiat? only because you can get more of it than before? lol...
Gold is money, why would you sell money? -i did the downvote, because if the dollar crashes gold and silver coins will be your money... there will be no fiat to sell them for, or why would you want to sell your gold for devalued fiat? only because you can get more of it than before? lol...
stupid laggy internet...
The quantity theory of money is a bad measure of price as the gold price is effectively set in the futures market and the amount of paper gold contracts is in supply with the amount of fiat so no price increase. without velocity the qtm is castrated and not a good price indicator. We should price our gold versus the fiat nominated debt. I think that would be a better measure of value of physical.. but still the best measure is the gold basis the difference in spot price between the futures market and the spot price in the physical market which is in backwardatioN... And I'm just a self-studied student. Bitches...
Sashko
your 'best measure' is flawed because it doesnt take into account the rehypothecation of the underlying assett. You stick to a rule of one claimant per ounce, sure, I'll second your view then
I'm just a student :( good point tho, I will research:)
Sashko
k then, for the purposes of your reaearch appreciate that the comex has enabled over 100 contracts - at one point it peaked at 110 - per ounce of physical gold. This is only possible because most traders buy, then sell the contracts without ever taking delivery of the physical gold. If there were a sudden shift in attitude or behavior and a large majority of the owners of those contracts wanted to take delivery, there would be only 1 ounce per 100 claimants.
Ponder, then, how this rehypothecation dilutes the apparent scarcity of gold - and how the price of physical would be affected when people realise their paper contracts cant be honored. Lehman bros and Bear sterns were leveraged around 35:1 when they collapsed. Sustaining a leverage of 100:1 is , over the long term, spinning plates.
China has now set up gold exchanges and futures exchanges that are delivery-only. Meaning they effectively promise not to rehypothecate. Watch over the coming months how there likely becomes a premium on shanghai gold compared to comex. Then watch it become a stampede as comex players realise they can take delivery of physical, sell it to the chinese for a premium. Watch then as comex has to tell its clients it cant honor their contracts. Paper prioce will go to zero becaue they are worthless. Physical price, however... will likely become some multiples of what it currently is
Well I just want to point out that, that is exactly what the gold basis and backwardation goes to prove... Eventually the price of all paper gold contracts will go to zero, but the physical will display its true price and I think that price would be based on the amount of fiat nomitated debt.. as gold is the only true extinguisher of all debt and the bansketrs know this. Am I right?
-Sashko
1971, US debt was $390 Billion. Gold was $35/oz.
Now, US debt $18.175 Trillion, up 46.6 X's, not counting $5 Trillion used to bail out GSE's. 46.6 X 35= $1631/oz. Count the GSE's and it's $2080/oz. The all time high of gold split the difference at a little over $1900/oz. It's currently on sale.
On a GAAP basis the debt is closer to 200 trillion dollars. That makes 200 trillion/390 billion = 513. 513*35= $17,955.
Looks like a pretty consistent bear market in real terms for gold since 1934. Will the long term trend change?
There is only one way to value gold and that is when the Chinese, and perhaps others, take control of the price discovery mechanism and tell the rest of the world what an ounce is worth.
When they can no longer get delivery at the paper price, that happens.
Rob Kirby is saying large purchases are at a 50% premium to spot.
Ah, the yellow dog. The most disrespected asset on CNBC for the past 12 years. Where is mogambo when i need him (321gold). Watched it back in 1999 pre Y2k when it was at $299 (and had my preps ready to the wifes chagrin) attempted to shout from the mountain tops to my sis and mother in law to no avail and to think they would be five times wealtheir today. Ouy vey...
For those who have been watching its done its thing for the past three years, but appears to be STUCK in a zone. Why? You can call it manipulation which I wont refute. When it drops below $1200 i read those stalwarts that write, "Load up". Im one of those that write, "you cant eat gold with the recognition that if/when the SHTF only food, survival preps will matter. Reason being the majority of my fellow citizens dont own it. If the ATM's are down, bank holiday everything stops economically.Who the fuck am i going to trade my gold with? My landlord, the grocery store? Puuuuuleeeze...Seems if we bust and reset survival and the basic necissties will be supreme. Booze, food, Barter, skills, neighbors. Im stuck in the middle with no thought of where we go from here.
Side note on this Easter weekend. I didnt have money for rent a couple months ago. Rent $1350. My brother out of NOWHERE sent me a 1oz gold coin. God is Good. Praise the Lord oh my soul.
when TSHTF there will be a period in which only physical food will be tradeable and folks may not care for gold/silver. But how long do you think that will last? I think 3 months at tops. Short of nuclear war, some semblance of civilization and trade will re-emerge.
Gold and silver will be precious again
I appreciate your response and ability to surmise the landscape when/if TSHTF.
To address your question: "How long do i thnk that will last"? Well, since most dont own PM's I dont really know, not too sure of your 3month time frame. Seems it all is dependent upon how bad and severe things break down. Its too big for me to get my brain around.
Is it mad max or just a blip..? dunno..Given the nose bleed levels of stupidity, debt, amorality (see pizza shop threats) and given my comfy life style. I dont want to shit in a five gallon bucket and be shooting suburban squirrels for dinner with the lights out and gun shots going off from innner city thugs looking for food.
I think rural squirrels are going to be more wholesome. "Gopher Everett?" :-)
Your location will dictate. Are you around civilized folks or apes?
When the SHTF there will be sheer and utter chaos and while barter for necessities might be the way to go it also presumes you will be able to match up buyer and seller as well. This is why gold may be the preferred option for anyone who has excess stuff to "sell" without ending up with a heap of unwanted stuff.
To make matters worse, supermarket shelves are emptied every couple of days so I don't know what we will be exchanging with each other in the big cities apart from bullets from guns aimed at each other.
“FMQ is the total instant-access cash and deposits in the commercial banks plus their reserves at the Fed and the temporary means by which those reserves are changed.”
Ah, you have omitted quit a lot of co-called “cash equivalents” spawned by consequences of governments’ attempts to guarantee bank deposits.
By these guarantees, when a bank failed, or was seized by the government, all deposits over $250,000, for example, would be protected; all amounts over that limit would be lost.
This immediately created massive problems for depositors with accounts larger than the limit (wealthy individuals, companies and corporations).
It would, for example, be a disaster for a corporation with a “cash” position of $500,000,000 to be caught in such a bank failure. (By “cash”a “bank account” is meant.)
This policy of guarantee set in motion mad scrambles by large depositors to protect their “cash”. It led to the creation of so-called zero-balance accounts (which go by many names). By these accounts, positive balances in large checking accounts were swept into US Treasuries at end of each day. Thus, if the bank failed/was-seized after closing that day, the account holder had nothing to lose.
But there was a limit to this remedy: very quickly, there were not enough Treasuries to satisfy demand. This gave rise to the demand for Mortgage Backed Securities (MBS) as a substitute for Treasuries. This demand was world-wide. Now, there are probably $6 to $15 trillion MBS serving as so-called “cash equivalents” on corporate balance sheets world-wide. (Beginning about 15 years ago, corporations began replacing the term “cash” on their asset statements with “cash equivalents”.)
And now all these “cash equivalents” are collateralized by US Treasuries (directly or indirectly).
Other “cash equivalents” include all US Treasuries; dollar instruments owned by foreign private or central banks; all MBS owned by the Federal Reserve; all currency issued by the Federal Reserve (the scrip we carry in our pockets); and a whole plethora of fruit-cake debt (such as defaulted-SBA loans, defaulted-car-lot loans, defaulted-student loans, defaulted-credit-card debt et cetera).
When we trace all these “cash equivalents” to their collateral, we arrive at the gold that may or may not be at “Fort Knox.”
It makes us wonder, ‘What is the dollar-price of gold needed to collateralize all monetary instruments for which it is the collateral?’ and ‘How did idiots and thieves gain control of the Federal Reserve?’
They lead to the conclusion that the dollar has already been destroyed… it’s just that no one has issued a press release yet.
And, if you need a press release to verify this conclusion, you’ve been watching too much television.
Directly from the office of Q99X2 via fact sheet number--@#%%! this article is true. There is a 1 to 1 relationship between the fiat money graph and the value of gold despite what the artificial market price is.
I have bought gold under 300.00 an OZ. Just keep in mind where the bottom is when it falls And like everything sooner or later it too will fall.
Like a stock buy low sell high. Buy high sell higher never really works unless you have boat loads of money to throw at it.
Time to BTFMiners.
Gold is primarily a long term store of value. It is worth what you can purchase with it. For example, I have a British gold sovereign dated 1893 from the reign of Queen Victoria. Back when it was minted it would buy a ton of coal or roast beef sandwiches and beer for twenty people.
I looked up the price of coal today. Voila! $300 - bagged and delivered. A Roast beef sandwich and beer- $15 (x 20 = $300). Price of a gold sovereign at APMEX today: $304!
What more do you need to know?
Yea, you went over 100 years and didn't progress much.
Gold doesn't pay interest. It also doesn't create credit bubbles, then pops, like banksters do with their 'apple on a string'.
Yea, you went over 100 years and didn't progress much.
But I concede to your point, you stored your value. You just didn't use it very well to increase it over a century. It's kind of like the billionaire that leaves his fortune to his kids. Then the kids don't do shit with it and the fortune is gone after the next generation. They just bought beer and roast beef.
Is the problem a missing vegetable side dish or do you just dislike beer and roast beef? :-)
Edit/Add: On a more serious note (Mandelbot) - probably need to factor in productivity/efficiency gains realized in the past century. Someone in a post below said, for some reason not given, "multiply by 10" - which may be close? i.e. 10 tons coal, 10x more perfectly normal roast beast sandwiches, etc..
Its just one coin, how do you know what his ancestors did with the rest of their wealth assuming they had more than this one coin? and atleast it didn't degrade much like fiat...
Bravo....I dont think any of us disagree on the value of Gold in NORMAL economic times as a store of value. But when the lights go out and i got no food, water, ammo where am I now with my gold. Seems there is a disconnect between normal economic times and a mad max world.
I would prefer to address mad max....since my gut tells me thats where we are.
I suggest that when the lights go out trade a little gold for resupplies of fresh food, water and ammo as needed.
To who chief? my next door neighbors who dont have a fucking clue..The $10 an hour grocer? surely you jest...most dont even have a clue about money, fiat...
you speak truth, in a SHTF scenario, those who will seek trade with bullion will hopefully be able to find it from larger producers than the regular family homestead types - I hope they'll succeed and that silver in .999 fine oz form, at least, would re-emerge as a largely unregulated trading medium (screw "bitcoin"). If this happens and property rights are still respected (by virtue of firearm ownership perhaps) then some small liberty can be held, and the possibility of restoring a limited republic (ideally untethered to the UN) becomes at least plausible. Note that there are extremely powerful forces seeking the destruction of a large percentage of humanity. Somehow those guys need to chill out, nature will seek equilibrium without engineered genocide.
Appreciate your response...and agree.
I would guess that those that understand the value of being prepared and have excess food, water, ammo, etc., will also be willing to trade for gold or silver. It becomes the currency, only one that cannot be counterfeited.
...'nature will seek equilibrium without engineered genocide'. No truer words... There are millions of feeders who are kept alive just for their Democrat vote at every election. They will be the first to go. Their leftist owners, who have spent decades vilifying Hitler, will make Adolf look like a boy scout, in comparison.
sure...me to next door neighbor...hey charlie i need some toilet paper and food..i got gold...lmao,,,oh, that works... oh wait and shall i bite a bit of au off for my neighbor...unreal idiocy
You worry about luxuries in days ahead!
More neighbors will be sharing the same toilet.
What more do you need to know?
How many people could have come to your party in August of 2011 when gold was at $1900/oz?
About 30.
I'm not saying that gold always has precisely the same purchasing power. Just that it really is a store of value. Compare that to a pound note (One Pound Sterling same nominal value as a sovereign) printed in 1968. That wouldn't buy you even one roast beef sandwich nowadays.
Mandle Bot:
About 30.
I'm not saying that gold always has precisely the same purchasing power. Just that it really is a store of value. Compare that to a pound note (One Pound Sterling same nominal value as a sovereign) printed in 1968. That wouldn't buy you even one roast beef sandwich nowadays.
Hmmm. I'm then forced to disbelieve my own experience.
In 2011 I could buy a rib eye at my grocery store at $3.50 per pound. Today I can't buy it at $9.00 per pound. (up 57%)
In 2011 I could buy gold at $1900 per ounce. Today I can buy it at $1,200 per ounce (down 37%).
In 2011 1oz of gold buys 543 pounds of rib eyes. Today it can buy 133 pounds of rib eyes (down 75%)
In 2011 you could feed 30 people with your gold. Today you can feed 25? (down 20%)
In 2011 you claim to be able to serve 18 pounds of rib eyes per person where now you can serve less than 6 pounds (down 60%)
So, what stored more value? My one ounce of gold or my 1,900 pieces of USA paper. Obviously my paper brings me more pounds of rib eyes today than my ounce of gold. So, if gold is "really a store of value" what do you call my paper that stores three times as much value over that period?
Must be a math error some place.
And while we're talking about God...
Gold is the analogy of the divine. Evil men are trying to replace God/Gold with their own fiat (Let. there be...). As the world tries to do away with Gold to be an absolute measure of value, they try to do away with God as an absolute measure of reality.
Both stories will end the same way. Man's fiat will be shown to be powerless and the CB "party" of creating something out of nothing will be over. And the other story - the Owner of the vineyard will return and the "party" is over.
Pizza anyone?
Happy Easter, Bitchez.
God as an absolute measure of reality.
Now that is rich!
Reality is god and will trump in the end.
Thank you Ayn, you're comments are noted.
??? The owner of the vineyard will return, and the worshippers of mammon will be destroyed. Gold means nothing to God. Life, Love and integrity are the ticket.
"Gold means nothing to God."
Maybe, maybe not. Does the Bible not mention the streets in heaven are paved with Gold? I'm not much of a thumper so maybe I am confusing it with some other story. But yes, I would assume the Creator could care less about a mere metal.
We all worship something. Might just as well be God, whatever flavor you choose.
I've thumped on here before, but no need really. Most of us know what's right in our hearts, and continue to struggle against actions (our own ,or others) that would hurt people. I've read that book several times and dispensed stuff that doesn't make sense. Then I have to go back and reconsider things because so much of what is written there is actually meant to be symbolic / figurative, and to understand that requires study that many simply haven't the time for. I'd rather be poor and have some decent books, than rich and no time for reading - figure I'm a minority there though. I still tend to find nature and music more interesting than books written by men, inspired or not. I may have to take a hit for that from the Man, hopefully not.
90% of the Bible is prophecy and was not meant to make sense to man. It was never meant to be easy finding truth...it was meant to be confusing to separate the sheep from the goats.
Matthew 24 is as easy as it gets for us mere cervids .
Somewhat out of context and short-sighted. Part of living in integrity is supporting honest money. If gold and money mean nothing to God, why is it mentioned so much in the Bible?
Not when you change money. When you change money, you change everythng, including the tenure of life, love, and integrity. You need only to look around and see those three elements you speak of, have been compromised and road rough shod over.
SDR IMF ClapTrap.
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Gold IS the standard by which everything else must be measured. People have been brainwashed into thinking the opposite. It seems to me that attempting to determine the value of gold by the value of debt instruments is ass backwards......
whats your point if there is a true reset of all things political, social, economical?
A true reset would involve a return to foundational principles and pure standards (absolutes) of measurement; socially, monetarily, morally, and politically. Which is why it will never happen......
"The evidence of gold price manipulation is clear"
Germany and france is preparing to ditch the unipolar system backed by NATO and the U.S. in favor of joining the BRICS nations, and that this is why the NSA was caught spying on Angela Merkel and other German leaders. Despite previously characterizing the idea that it was planning on moving gold out of the New York Fed as an “irrational fear,” the German Bundesbank is set to announce a huge repatriation of its bullion this week, with France also being emptied of German gold in a sign that trust between central banks has hit rock bottom.From an Interview last fall with Russian economist Mikhail Khazin (via Jesse's Cafe Americain):
FDR was a bankster crony and a crook; I can't stand all the adulation for him from the statists.
Just multiply the current Dollar valuation of Gold by 10X and you'll get close to true valuation.
isn't your definition of fiat money a bit loose?. shouldn't it be base money + credit?. once the credit is extinguished even gold at 100dollars/ounce will be a fortune!
Trying to quantify the price of gold versus fiat during a fiat regime is nonsense as long as there is confidence in the fiat regime.
You buy gold as a hedge against the collapse of the current fiat regime because historically every previous attempt at full retard has failed.
Different this time?
I thought any value of anything is determined by how much the buyer is willing to pay... but thats just me.
Currently the buyers are effectively paying nothing. They print the fiat and purchase commodities/productivity with it, while at the same time manipulating the prices......
I thought any value of anything is determined by how much the buyer is willing to pay
If you're in Zimbabwe......we only take gold.......for everything.
https://www.youtube.com/watch?v=7ubJp6rmUYM
Welcome to the mind screw....preacher man.
Gold is not priced against the quantity of fiat, but rather the confidence in that fiat.
The confidence of said fiat (price of gold) is, at present, set at market by the manufacturers of fiat. Which is what everyone is bitching about I reckon.
It's priced against the quantity of debt(same as fiat). Confidence degrades over time as the amount of debt increases (inflation). Total loss of confidence = hyperinflation, crack up boom.
But we're not measuring the value of "gold" here, are we? We're measuring PAPER GOLD.