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Credit Deflation & Gold
Submitted by Alasdair Macelod via GoldMoney.com,
There is a common view in financial markets that credit deflation is bad for gold prices, because gold nowadays is regarded as an asset to be sold in the scramble for cash when people are forced to pay down their debts.
When asked by Congressman Ron Paul his opinion on gold four years ago, Ben Bernanke replied it was not money, just another asset, appearing to confirm this view.
Doubtless Bernanke's view is shared by nearly all other central bankers in the advanced economies and by executives in the banks which have profited handsomely from monetary and credit inflation. But it is not shared by the majority of ordinary savers around the world who see it still as the ultimate store of value at a time of fiat currency inflation. For them, gold is the money to save, driven out of circulation by inferior currencies. We know this to be true throughout Asia where the bulk of the world's population lives; but even millions of ordinary Americans continue to accumulate silver eagles because they still recognise the monetary attributes of precious metals.
Crucially, the assumption in capital markets that gold is no longer money but just an asset or commodity has all but destroyed our understanding of its monetary relationships. Financial analysts fail to appreciate the difference in behaviour of sound money compared with that of unsound money during a contraction of bank credit. This can be empirically established by looking at the relationship between gold and the US dollar in the great depression, when bank credit contracted substantially after the Wall Street crash, and gold was then revalued upwards by 69% to $35 in 1935. The whole point of unsound money is that it can be devalued relative to sound money, as it was at that time, in order to stabilise prices that would otherwise fall; a policy option that is not available to central banks adhering to a gold standard.
In the days of a gold - or more correctly - a gold exchange standard, the collapse of excessive bank credit was always sudden, and vicious in proportion to the previous expansion. Since credit was expanded out of thin air by banks without underlying stocks of gold to cover it, inevitably slumping prices became associated with bank failures, and central banks were set up to insulate commercial banks from this brutal reality. Saving over-extended banks always requires the artificial lowering of interest rates and the expansion of the money quantity to restrain the currency's purchasing power from rising against declining commodities. Gold therefore remains a store of value for savers because it cannot be devalued in this way by a central bank.
This is becoming relevant again given that the escalating credit problems in China appear to be leading towards a 1929-style stock market crash, which if it follows the well-established playbook, will be followed by an economic slump. Today China is the largest commercial consumer of commodities, just as America was in the late 1920s, and her slowing economy is putting downward pressure on commodity prices, pushing up the purchasing power of money of the other major currencies. Put another way, falling energy and commodity prices in yuan are forcing deflation upon the rest of us. So even though investors in gold have seen its dollar price trade broadly sideways for the last three years, its purchasing power measured against most commodities has actually been rising. More recently, gold has also been an effective store of value against weaker currencies, notably the euro and yen.
Now that China's credit deflation is beginning to be exported to the US through lower commodity prices, there is a growing assumption that the dollar will strengthen further. This has encouraged hedge funds to sell gold futures to capture the dollar's rise. In terms of purchasing power it is certainly true that the currency has a deflationary element in it. However, if the Federal Reserve refused to expand the quantity of dollars in circulation, abandoning commercial banks to face the full force of a credit contraction, the purchasing power of the dollar would rise as if it were sound money. But the Fed was set up to do the exact opposite, so it has a clear duty to weaken its currency in this event. Therefore, when the balance of risk swings towards a credit contraction in the US, gold will rise against the dollar because the Fed through its monetary policy is certain to ensure it does so.
This will also surprise market traders who think that a continuing collapse in Chinese stock markets will force liquidation of gold holdings by the Chinese public. There is little doubt that distressed speculators will come under pressure to sell gold if they own it, but this argument ignores the certainty that during a credit contraction government-issued currencies always weaken against gold. So having acquired substantial quantities of gold for itself and having also ensured it is widely held by its public, the Chinese government is arguably in a more compelling position to encourage a gold revaluation as a means of stabilising her economy in a credit crisis than America was eighty years ago. It will be China's only option, and if the government doesn't go for it, China's middle classes certainly will.
We are already seeing the People's Bank of China engaging in reflationary policies to contain the stock market crash. This is a normal central bank response. Doubtless it will maintain the managed peg against the US dollar, partly because China is committed to building confidence in her own currency as a replacement for the dollar in international settlements, and partly because currency devaluation would be seen in the markets as a failure of economic policy. Furthermore, China can reasonably expect US monetary policy to do some of its reflationary work for it.
Therefore, instead of devaluing against the dollar, a rise in the yuan gold price is almost certain to occur. Of course, whether or not China revalues her gold reserves remains to be seen, but allowing the price to rise fits in with the logic of the relationship between sound and unsound money when a credit contraction threatens to become a serious issue.
This simple fact could override all the geostrategic considerations upon which China-watchers have tended to focus. A gold revaluation would be presented to the world as bound up with China's domestic economic problems, instead of an act aimed at undermining the dollar's reserve status: a solution that is less confrontational than outright disagreement with Western central banks over gold's role in the international monetary order.
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Gold bitchez
It has been a widely reported fact that most all of the gold in the world has been flowing from the west to the east...even in the mainstream media. Since Russia, India, and China have been importing more than the world production of gold for the past 5 years, it is also a well known fact that gold has been flowing from western central banks to cover this shortfall. It's been widely believed that once China is unable to import any more gold at the western supressed prices, it will be game over. The COMEX will be exposed as a complete fraud controlled by the western bankers. China will then reset the price of gold to how ever high they want it.
the Chinese government is arguably in a more compelling position to encourage a gold revaluation as a means of stabilising her economy
wishful thinking
indeed - last weeks drop to below support around $1135 shows full well that the West remains prepared to haemmorhage yet more gold to the East
If these dickheads dont pull their head out of their assess, they will put China in a position to rule for a thousand years
You goldtards are desperate.
Tip: it's going to go a lot lower, cut your losses short.
Tip2: The Chinese are the foremost promoter/master of paper and paper printing. They invented the game and they will put the West to shame.
You are absolutely correct, gold is going a lot lower, then much higher, then a crash, and yet higher again, etc. It has been doing this for THOUSANDS of years, so what is your point? Please produce some paper
currency used in ancient Greece, or Rome, or Xanadu that can still be used today, and that will serve to validate your point, whereas the lack thereof will validate mine.
Gold is on a one way street, and that is down for the next decade at least.
I'll throw you a bone: http://finviz.com/futures_charts.ashx?t=GC&p=m1
You are probably right, and thanks for the bone; I'll use it to make a broth that I'll can, pantry for a decade, take out and receive sustenance from when the chips are down; hell, I might make you a bowl and enjoy your
company, while you regale me with stories of how big a dumb ass I am q:B
https://www.colourbox.com/image/gilt-two-funny-women-with-paintbrush-fut...
gold bitches?
Burn the banks and gold will climb.
Until the Fed or CB of Japan loses control of their debt markets, the gold market does not matter. Its a waste of time even going there. I don't care if the PBOC reported 60 tons or 6000 tons.
If indeed China's, and other sovereigns' goal is to accumulate, then the foot stamping on the price works for them like it works for Yellen et al. and gold could stay depressed in paper terms for a long, long time I am using 'Yellen' as a euphemism for the interested parties or TPTB, in the same way I use 'Obama'; we know they are water-bearers. With all the commodity shares I have in my accounts, this is distressing. Price action could bankrupt many. Look at what is happening with coal and with the shale sector. Got to face up to it. What fun awaits the coming week? And a sinking crude price hurts Russia and Venezuela and Iran - all of the U.S.S.A.'s avowed enemies. I have a substantial OGZPY position and am likewise grossed out. Value plays did not pan out this last five years.
The key benefit to buying gold in secret is in flooding the market with your currency to keep the exchange rate down.
Do you think you will have time to react when the Fed or Japan come even close to losing control?
I'm just about as thick as they come but if and when the CB's lose control it will be a sudden impact, I don't think I want to be scrounging around looking to accumulate silver or gold at that moment. Hell, I save coinage of all types (quarters, nickels pennies) because I see something issued by the U.S. Mint as something seperate from the Fed issued crypto currency and printed cotton. What the fuck do I care what form it is in if it is all going to zero (and it ain't), saving it in multiple forms is better than one.
I'd say Fort Knox gold was smuggled into China years ago and with the help of overstating domestic production who would know.
"Of course, whether or not China revalues her gold reserves remains to be seen..."
China has declared some 1600+ tons when their actual reserves are almost certainly greater than US gold holdings. They will 'rock the boat' on their own timeline and not before.
There hasn't been enough gold mined or sold for China to have exceeded US holdings. The US has over 8,000 tonnes. Annual mining adds 2,500 tonnes a year, and that's easily accounted for.
So, where did 7,000 tonnes of gold come from, that you claim China has accumulated?
From the 170,000 ton stockpile of gold which has been amassed since before the dawn of history.
When you break down that stockpile, there isn't 7,000 tonnes that's not accounted for. Or has China gone around to all countries around the world buying up their scrap gold? Are all the "Cash for Gold" outfits acutally run by the Chinese? And all that gold sent to China?
When you break down that stockpile, there isn't 7,000 tonnes that's not accounted for.
Show me your accounting of the location of all the gold in the world.
Show me where the Chinese got the 7,000 tonnes IN THE PAST 10 YEARS, as claimed in the first post.
Their "reserves" are IN GROUND, not in bullion.
So when you said, "When you break down that stockpile, there isn't 7,000 tonnes that's not accounted for," you were speaking hypothetically because you now find it impossible to "break down that stockpile." Do you have any fact based arguments?
Ano...have you ever dconsidered that theres more than 170,000 tons.
Maybe golds not as rare as you think....but Silver...its rare.
RIPS
Read koos jansen, he goes into it in GREAT detail.
alisdair has stated earlier this year, that the swiss refineries were running 24/7 to keep up with chinese gold demand.
the refiners were receiving lbma good delivery bars (western standard) and re-casting them into kilo-bars (chinese standard).
none of the chinese kilobars have been seen for sale, which means they are hoarding them, not letting any of them go.
all of china's domestic mining output is likewise stockpiled, not for sale.
the usa in the meantime, is very unlikely to have the 8000 tons it claims; the federal government constantly lies, with regard to CPI, unemployment rate, GDP, etc, etc. - why should their statements about gold be any more credible?
the usa is a broke, deadbeat nation, that can't satisfy germany's gold repatriation request - this is gold that germany owns that the usa is dragging its feet on delivering, because it can't! the usa is busy invading other countries where it has no business being, to steal their gold...libya, ukraine, etc. did you read the reports how the central bank of ukraine was plundered by the americans, like common theives they loaded all the gold on a cargo plane in the middle of the night at borispol airport and shipped it all to new york?
The US claims to have the gold. It also refuses to allow an audit of it, and there's literally no telling how much has been loaned to bullion banks or rehypothecated.
The gold China accumulated could have easily come from the US, or Germany, or the UK. The fact that the limited amount of gold the Fed has returned to Germany had to be re-processed was a huge tell that the Fed didn't deliver the original bars the Germans deposited.
There is nowhere near the amount of transparency in the market needed to support your statements.
http://tocqueville.com/insights/tocqueville-gold-strategy-2Q15-partII
"The US has over 8,000 tonnes."
Show me the real money!
Fort Knox was last audited in 1953!
Tuco
"The US has over 8,000 tonnes."
Really! Then why don't they allow an audit?
...and speaking of audits, what's the status of those sovereign gold redemptions (germany, holland, et al.)?
It's been awhile, so can we presume that the Fed has begun moving the real stuff back to it's owners?
China is full of crap on their gold holding report. They are trying to tell the market what it wants to hear to stave off more selling. You deserve what you get if you believe any of their numbers
and who the fuck scrambles to repay their debts ? Default. Thats the best way to repay your debts.
Gold is simply an asset, and a non-performing one at that. It's value is ONLY based on public preception and DESIRE. There is little industrial use (320 tonnes/yr out of 2,700 tonnes mined), so industry use doesn't drive it's value.
Mining costs don't drive it's value either, because annual production only adds about 2% to the existing worldwide stockpile.
People always use the (faulty) reasoning that gold is what previous rulers stored, so it must be valuable. The reality is the rulers kept the currency of their day. And in history that was generally metals, gold, silver, copper. But that's not the case today.
I also hear about people saying that the value of fiat will go to zero. And that's true. But money isn't an asset, it's a medium of exchange. You DON'T STORE IT. It's simply an intermediary. If someone simply sticks cash under their matress, then they deserve to find it worthless in a few decades. That's NOT the intention of cash or currency.
Just like Bitcoin is not a store of value but a medium of exchange. A fact many BTC lovers don't grok.
OK. So, I shouldn't save my dollars. Got it. I should spend the dollars now and take out loans later when I need the dollars. Got it. What should I save for a rainy day then?
Save your dollars short term and you won't lose. It's the accepted medium of exchange. But you can also make your dollars work for you, earning returns on investment. Don't just stuff them in a mattress.
Gold on the other hand just sits there. But it is shiny...
you can also make your dollars work for you
No, you have to work to get a few of the dollars which the banks create by the trillions out of nothing and then deploy for their own benefit and the benefit of their associates. Then you can try to compete with those bankers and banker cronies by "investing" your meager wages in markets rigged through the use of the trillions of free dollars available to bankers and their friends.
Operate your own business. Sell fat people weight reduction pills.
I do operate my own business but I've scaled it way back. I've shrugged as they say. I'd like to start up something new but there's no way I'll leave semi-retirement in order to try to scrape up a few bucks in the current economy while also facing the regulatory hurdles of gay wedding cakes and the "fight for fifteen."
That's not what some of those young fellers here tell us boomers! They say we should have saved,,, so which is it? Confused.
If I had purchased gold with the money confiscated by FICA over the past 60 years I would not have to worry.
“If I had purchased gold with the money confiscated by FICA over the past 60 years I would not have to worry.”
I disagree. Your money would be spent elsewhere. Your parents and elder relatives would not be getting /or received S.S. Same for the town handicapper, a chip in to keep them going. The orphan kids would be robbing you.
The world would be an entirely different place if you (we) never paid into SS.
I disagree. Your money would be spent elsewhere. Your parents and elder relatives would not be getting /or received S.S.
Bjut suppose that your parents saved in bullion as well. Then they could support themselves. Intergenerational responsibility and the education of the young in good habits works wonders when the government doesn't make it a crime.
Touché most did, that’s how they got here.
Our parents – grand, great or whatever - couldn’t keep their gold. The U.S. government snatched it all.
This country we live in today would look completely different.
IF you had purchaced $1,000 worth of gold in 1970 it would be $32,000 today. If you bought $1,000 of Berkshire Hathaway in 1970, it would be worth $5.5 million.
Bullion has been a store of wealth since the dawn of history and so it''s an easy call to make. Choosing the one stock out of thousands of others which will produce phenomenal yields over the next 45 years is a very difficult call to make. If BH was an easy call then far more people would have bought BH in 1970, as a result the 1970 price would have been much higher and the eventual appreciation would not be nearly as dramatic.
Those without an incredible degree of economic, political and fiscal insight plus a whole lot of luck would do better to develop long term savings in the security which bullion represents. It's called being "responsible."
It's value is ONLY based on public preception and DESIRE.
And what asset isn't?
China needs to come clean on its 'True' gold holdings before a revaluation will be taken seriously by the Chinese people.
It's value is ONLY based on public preception and DESIRE.
Of course - and that desire is quenched by paper gold -as much as is needed for the moment...
There is little industrial use (320 tonnes/yr out of 2,700 tonnes mined), so industry use doesn't drive it's value.
Yes, the very fact that gold has little practical use is one of the reasons it is money.
Have YOU ever tried to use bullion as "money"? Why not?
Millions of Americans have used bullion as money. It used to be called a "dollar." But legal tender laws favoring fiat currency, the depreciation of that currency through fiscal irresponsibility and Gresham's Law put an end to that.
But in a free market the use of sound money is not only possible but beneficial as it gives the working man a way to save for the future without being forced to seek minimal yields by gambling in rigged markets.
TODAY, not past tense.
Your arguments are correct in a historical sense, but not valid TODAY. Precious metals are no longer used as money, any more than sea shells or beads.
Historical sense doesn't apply when government uses repression and manipulation as they do today.
So, you are saying that before today, government has never used repression and manipulation?
Hahahhahaha
Have fun in the rigged ponzi casino. Just dont be surprised when one day you wake up to go gamble and the doors are bolted shut..with your "money". Just about that time i may offer you an ouce of silver for your car...you would be smart to take it...you cant afford fuel anyways.
RIPS
Your arguments are correct in a historical sense, but not valid TODAY.
As I explained, sound money is not widely used as currency today because as Gresham's Law states, people prefer to divest themselves of the less valuable fiat currency while holding onto the more valuable bullion. Apparently your point is that sound money is bad because people value it more highly than pieces of paper and they can employ it to save for their old age rather than being forced to risk their limited capital on schemes involving various degrees counter party risk
Hey look, a new ZH gold troll!
Welcome to jungle fuckhead.
i have used gold as money.
one of my big vendors, chinese by the way, is happy to accept payment in gold, which i hate to do, but i will do it when i'm running low on cash. then later on when my cash level recovers, i buy more gold.
i would be perfectly happy to use gold and silver as money, because they ARE money.
money has the properties as clasically defined by aristotle of:
the only reason gold and silver are not widely used as a medium of exchange is that real money is villified and deprecated by the banking system with their debt ponzi schemes, as well as by their lackeys in the government.
You're a complete imbicile. You have either zero knowlegde of how assets are secured, bought, and sold, or you're only objective here is to derail people from owning gold.
You should stop posting, for all to see, your incredible ignorance.
When you resort to calling names, you've lost the argument.
When you break down in a fit of hysterically typed laughter rather than make a statement based on evidence and logical analysis you've lost the argument. And you had been so professional up to that point.
Anopheles
Vote up!
0Vote down!
-1So, you are saying that before today, government has never used repression and manipulation?
Hahahhahaha
Anus Fleas worships government as god and thinks ponzis are natural..and thinks because things have been gamed to steal life from people for printed paper ..its right and it should stay that way. There are many of us who disagree with you..but we have our money on the table too. May your bet bring you mountains of paper...and may there be a bigger sucker that takes debt as value created forever. Mathmatically theres infinate fiat...and finite resources. Prepare accordingly..
Maybe you have some secret value you create with digital or paper unbacked fiat..i dont know.
Maybe you are part of the tribe anopheles are parasites and steal blood. Literally.
RIPS
Read up on the Liberty Dollar to see how far government will go to demonize and kill real money. Von Nothaus was actually called a monetary terrorist.
The error he made was thinking real money advocates and web sites were behind him. They deserted him like trash on the road.
Sure, I can buy any currency in any country at any time - gold is always accepted.
Yes I did all the time with silver money before 1964
Gold bullion - this is money: monetary gold.
A gold coin - is not money. Gold coins - is first of all currencies, that have a currency advantage (currency value), appointed by decree. Gold in gold coins is the only carrier of the currencies value, which was appointed by decree.
The law requires all market participants to use gold coins only as the value of the currency, which was appointed by decree. You have no right to use gold coins as money (gold by weight) for tax purposes. When taxes and trade, you have to use gold coins only in accordance with their "currency value", which was appointed by decree.
But, gold by weight in the composition of gold coins - it is money.
https://tinyurl.com/olobph7
Have you ever tried to buy gas with YEN or CDN dollars in NY?
They won't accept it but that doesn't mean it's not money.
hey dude, how are you doing? Not seen you in 24knews for sometime, nor on GEI.
I'm tired of chasing the gold rainbow. If it happens it happens but the gold 'industry' has been promising this kind of thing for two decades on the internet and they have hurt a lot of people
Gold is money, nothing else. JP MORGAN
If gold is money, what is money? And would one want to save their money in, money or income producing assets?
Real estate on every bust cycle as it starts to go back up.
what is money?
Money: Its Importance, Origins, and Operationsby Murray Rothbard
Which commodities are picked as money on the market? Which commodities will be subject to a spiral of use as a medium? Clearly, it will be those commodities most useful as money in any given society. Through the centuries, many commodities have been selected as money on the market. Fish on the Atlantic seacoast of colonial North America, beaver in the Old Northwest, and tobacco in the Southern colonies were chosen as money. In other cultures, salt, sugar, cattle, iron hoes, tea, cowrie shells, and many other commodities have been chosen on the market. Many banks display money museums which exhibit various forms of money over the centuries.
Amid this variety of moneys, it is possible to analyze the qualities which led the market to choose that particular commodity as money. In the first place, individuals do not pick the medium of exchange out of thin air. They will overcome the double coincidence of wants of barter by picking a commodity which is already in widespread use for its own sake. In short, they will pick a commodity in heavy demand, which shoemakers and others will be likely to accept in exchange from the very start of the money-choosing process. Second, they will pick a commodity which is highly divisible, so that small chunks of other goods can be bought, and size of purchases can be flexible. For this they need a commodity which technologically does not lose its quotal value when divided into small pieces. For that reason a house or a tractor, being highly indivisible, is not likely to be chosen as money, whereas butter, for example, is highly divisible and at least scores heavily as a money for this particular quality.
Demand and divisibility are not the only criteria. It is also important for people to be able to carry the money commodity around in order to facilitate purchases. To be easily portable, then, a commodity must have high value per unit weight. To have high value per unit weight, however, requires a good which is not only in great demand but also relatively scarce, since an intense demand combined with a relatively scarce supply will yield a high price, or high value per unit weight.
Finally, the money commodity should be highly durable, so that it can serve as a store of value for a long time. The holder of money should not only be assured of being able to purchase other products right now, but also indefinitely into the future. Therefore, butter, fish, eggs, and so on fail on the question of durability.
https://mises.org/library/money-its-importance-origins-and-operations
If gold is money, what is money? And would one want to save their money in, money or income producing assets?
-----
Energy begets life -> Life gives birth to reason -> Reason generates goods -> Goods entail commodity exchange -> Commodity exchange generates money -> Money begets currencies
Money is primarily a commodity. Moreover, it`s a universal commodity. All participators of commodity exchange agree to accept it as a payment for their goods.
http://www.kdggold.com/en/content/zakon-greshema-eto-nelepaya-oshibka-il...
Gold is money, nothing else. JP MORGAN
I'm willing to cut my dollar losses for gold in hand now.
Only people that purchased gold expecting a enormous return in more devalued dollars. Anyone doing that should play the paper game.
Gold will be here a hundred years from now,,, the dollar not... at least in it's present form.
Yes, I won't be here a hundred years from now but,,, my childrens, children will. - assuming -
I keep hearing that faulty reasoning.
If you bought $1,000 worth of gold in 1970, you would have $33,000 today. But if you bought $1,000 of Berkshire Hathaway, you would have $5.5 million, and be able to buy a WHOLE LOT more gold today.
Yes, I know that's an exception, but there are LOTS of investments that far outstip gold in the long run.
Look at ten year charts of gold in many different currencies and you'll see 200%, 300%, 400% gains in gold. Not to mention the people in Cyprus, Greece and the Ukraine who would all have been far better served holding some gold rather than trusting their banks.
Cherry picking aside, you clearly don't know shit about gold.
Look at the 40 year charts of gold. That's not cherry picking.
And I know more about gold than you ever will.
IS that because youre a blood sucking parasite as you monkier suggests? Or is it because you write hit pieces on WSJ for a living.
Fiat is infinate....resources are not. Prepare accordingly.
RIPS
It is absolutely cherry-picking. By pricing it in dollars over the last 40 years, you are comparing gold vs the currency of a country that becomes the lone world super-power and reserve currency issuer. That will happen once and can only reverse.
A fair comparison would involve the average price appreciation/depreciation against all currencies over the last 40.
that's a fair point.
however, there are times in history when the stock market provides better returns, and there are times you should be out of the market and holding a stable asset and store of value like gold.
now is one of those times that gold is more attractive than stocks.
it is likely that the gold to dow jones ratio will revert to parity, or close to it, like it often does:
http://www.undervaluedequity.com/images/Chart-Dow-Jones-Industrial-Avera...
But if you bought $1,000 of Berkshire Hathaway, you would have $5.5 million, and be able to buy a WHOLE LOT more gold today.
-----
But if you bought $1,000 of Fannie Mae and Lehman Brothers, you would have $0.0 million, and be able to buy a ZERO gold today.
Well let us know which one we should be holding now for the next short term of 10 yrs.?
How much did you spend on various insurance policies and what are they worth now?
Billy already gave you a very good answer to this particular gold vs Berkshire Hathaway argument.
There are literally hundreds of stocks that a person could have bought in 1970 that today are worth... NADA.
So you are talking about making a very lucky investment choice. And if you are banking on luck, why stop at $5.5 million?
Why not imagine if you had taken your $1000 in 1970 and bought a winning lottery ticket once year, every year. That 1970s New Jersey lottery was just a cool million, but the payoffs got bigger every year. Hell, you could be a billionaire today!
I wasn't alive in 1970, but maybe it was easier to predict the future back then. If not, I'd definitly go with the gold.
"the gold 'industry' has been promising this kind of thing"
And so, you're blaming the gold industry for the manipulation of fiat ponzi masters trying keeping their listing ship afloat?
CORRECT - the gold price is global.
It is no longer possible for any one market to dominate this price. And it is no longer possible for any price suppression scheme, or large hedging positions by miners, to weigh heavily on the global price. The price will be set more by Asian demand - and by lack of Asian confidence in the Western banking system.
If the Western futures market (paper market) does not respond to this soon, then one of two things will happen ...
1. People will run arbitrages between the markets, until someone wakes up. But no paper arbitrage - this requires arbitrage with real physical gold.
2. OR the world will call "Bullsh*t" to the spot price being called on the US and British markets, and China will become the new clearinghouse for real precious metals prices. Which also means, real physical metal will flow to the EAST. Any surprise about this? It's a near-term reality. The Western system is screwing itself royally, with the persistence of jived markets and dishonest trading. If China wasn't also doing some really idiotic things (banning the selling of stocks), then they would become the epicenter of trading much faster.
Interesting angle to a complex issue with sound reasoning, but of course speculative.
If this happened. I wonder how long the financial MSM would be smirking about the crazy Chinese going back to the Gold standard before they realized the full picture of such a move.
I don't think that it's necessary for the Chinese to go to a full "gold standard". All they need to do is to establish a global gold market, operating out of their country (e.g. Hong Kong), and maintain free and fair prices. That's all. In other words, their own gold market needs to have prices dominated by TRADES in REAL physical metal. That's it. Real physical metal cannot be overcome by leveraged trades in the Futures market, if the price action is tied to physical metal. If the Chinese do this, then people will buy/sell physical gold through them. and their traders will make the commissions from the sales. it's a wide open opportunity for them. the challenge for China - they need to wake up to what a "free and fair market" actually is.
Again Govts set up corporate monopolies so that they can take revenues, bribes, fees, the Vig, the Concessions and the parking.
So both Govt & Private Banks are richly rewarded by the use of their Fiat. They aint gonna wanna change. I assume even Chinese Bankers are well paid and govts always need more money.
The people have little to no representation, however they have the ability to protest and cause mass unrest ...but in an odd way China seems to react more decisively to Chinese People.
" the Chinese government is arguably in a more compelling position to encourage a gold revaluation as a means of stabilizing her economy in a credit crisis than America was eighty years ago."
China's Govt owns the banks and seems it literally doesn't have to pay back loans. So it is segmented capitalism.
Might be exciting and maybe the phiz market will open up.
Just on the face of Total US Debt at $58 Trillion USD, that is over 300% of US GDP.
http://www.zerohedge.com/news/2015-07-19/portugal%E2%80%99s-debts-are-al...
Every country should have a War Chest, War Reserve, Stockpiles of metals, manufacturing resources, oil, gasoline/diesel, other gases, chemicals, lumber, steel, cement, food, ships, airplanes, trains, highways, waterways, railways, ports, ship yards...
Why would you store PMs for other countries in the event that they were Invaded without storing your own gold & silver and other metals.
When the yuan devalues against gold, the chinese will want more gold as they see it as rising. Then even more Chinese will pile in... more more more gold please. Then as real gold gets scarce people will go nuts!!
no supply, yet low price thanks to the USA.
That won't last long.
Gold is a store of value. Nothing else.
It goes up and down like everything else.....A 1955 Mercedes Gullwing is a store of value.....
Really? I purchased beachfront property up in Maine about 7 months ago. The buyer wanted gold and/or silver for the property. I paid him a 55 gold coins and 30 silver coins for the property. Seemed to work like money to me.
Now go and buy food and see how far you get.
An anonymous sample of one on a website is supposed to convince who?
I wonder at what percentage china can back it's currency in gold.. there is so much of it?
3%?
of will they simply use gold as a % of a bond backing for commerical paper?
Gold is 1.6% of Chinese FOREX reserves.
Chinese money supply (M2) is 133337 billion Yuan. That's 21.5 trillion dollars. They have $60 billion in gold. So they could back 0.27% of their currency in gold.
Which is exactly why gold will have to be revalued multiples higher to cover the endless printing of fiat and massive debt.
Got it now blockhead?
how do you know the chinese have $60b worth of gold?
are you taking their claims at face value?
others claim the actual number is closer to 20,000 tons
and the market price of that stockpile will be much greater once gold is re-valued, just like it was re-valued upwards by 60% by roosvelt in 1933, when the USD was the new reserve currency on the block. now it's the chinese turn, only they will be revaluing it 600% higher.
Chinese have 35k tons, redo your math
Is Tyler and the rest of you sheeple Rothschilds puppets? Everybody knows they control the gold and with it all the transaction fees. This is how they play their game. If you think gold is going to save you its just another piece of their puzzle. You are playing right into their game
At the time being the last government not controlled by a central bank and gold is North Korea (Cuba and Iran just fell at the hands of Obama). NK got busted for hacking Sony? What does it matter why the hell would North Korea give a shit about Sony? They are not giving up.
So next time when Ben Bernanke, Greenspan or anybody else from the Fed tell you gold is not money its just another one of their little tricks to make you think they don't have total control over it and it is something for "free people".
last time I checked there were fees on everything, not just gold.
Correct. However there is no free or almost free brokers out there. Robinhood, Weatherfront. Will they get shut down. Probably not, Wall Street doesn't care about fees anymore they rip you off on manipulated frontrunning and stock prices.
That money is not yours. It is Rothschilds. JFK got murdered for this. The point is simple - don't be a president unless you are a Bush or a Washington.
What is the alternative? Bitcoin? No - it is a false ponzi scheme even though it is close and may or may not spawn something stronger there is nothing backing it - no trust - easy for dishonest people to rip each other off on. The alternative cannot be enacted unless people choose not to use currency (backed by gold or not) and to trust each other with another form of currency. This is legal. Do you pay taxes if you trade somebody something? If I trade you a 12 ounce pack of soda for a pound of chicken do I have to pay taxes? No. That is the only way. However this is impossible because the means of production are owned by big business. There is no other way to trade up. If everybody had to rely on a trading system no wealth would be concentrated to a select few - if the means of production were not controlled by the state (aka communism) but by the people. The only way to solve the problem is to remove the deception and cheating. This is an impossible task. Good luck. So therefore most people just say fuck it and buy dope, sex, religion or entertainment.
But why is it this way? Why are we just like a bunch of animals with tools and words? Why are the dumbest closer to chimps and the smartest closer to humans and why are their so few of them? Why was the pyramids built in exactly the center of the Earth Cairo?
you don't know what you're talking about when you call bitcoin a ponzi scheme.
look up the definition of ponzi scheme, educate yourself.
in a ponzi scheme, previous "investors" are paid returns from the proceeds of new investors.
bitcoin does not pay out any returns, nor does it promise any.
bitcoin is merely a network of currency.
bitcoin does have a few drawbacks, and you can certainly point those out, but you should have a clue what you're talking about if you want to criticize bitcoin.
"the last government not controlled by a central bank and gold is North Korea (Cuba and Iran just fell at the hands of Obama"
Nonsense.
Iran has no Rothschild controlled Central Bank, nor does NK or Cuba.
And nothing happens at the hands of Obama or any other figurehead- you need to look much higher, to the Billionaire and Trillionaire Globalists that get the likes of Clinton, Bush, Obama, etc "elected."
Not yet. But they will by very soon. You are right. Nixon was of no use to the bankers (guess who broke the story?) Two reporters from a paper the Rothschilds owned (the Washington Post). Why is it that Putin, Bush, and Clinton keep on getting into top office? Coincidence? Making fiat currency can quickly lead you to the top (and make people cattle for war).
Especially if you tap into the biggest source of money around - governments. They have the ability to create their own money. And making them pay up is easy. Play both sides with them with war and you'll always win. Why do you think Hitler was such a problem for them. He didn't play their stupid fucking game and went right for the jugular. But they still prevailed. Why? Mr USA puppet and the banking giants. Pearl Harbor was a deal between Japan and JP Morgan. Seriously you think the people at the top give a fuck about their people?
They become paranoid and will do anything to save themselves and it distorts the hell out of their mind. Good example. The Twilight Zone episode with the Fidel Castro type figure. I call it weakness. And Hitler exploited their weakness. They had no way to fight - only money.
What do you think happened to Iraq and Afghanistan before and after 9/11? What planet are you from?
"Not yet. But they will by very soon."
Your crystal ball is broken.
Iran will never have a Rothschild controlled Central Bank- mark my words.
Why not? Iraq does?
Obama says Iran deal 'will make world safer' as Republicans plot opposition.
This nuclear accord is the beginning of the end for Iran. Once you take away their ability to fight you take away their ability to control their money.
Iran is not Iraq.
WW3 looms.
Iran and allies win.
The Rothschild Central Bank System, and the USA and allies lose.
It was prophesied thousands of years ago.
"It was prophesied thousands of years ago."
Of course, it certainly was not - but we have a real problem with tens of millions of brainwashed theists who think some book has magic powers...
and though they can't seem to agree on the simplest matter of interpretation, nor see the fundamental ethical divide between old and new testament... many surely are able to fit every event into some vague text regarding storms, or earthquakes, or upheaval, or wars - i.e. things which have been unremitting since the Stone Age...
And as they cling to their myths, they may collectively self-fulfill all sorts of nasty things.
http://youarenotsosmart.com/2010/06/23/confirmation-bias/
If the bible **must** have magick, predictive powers, and if that premise is itself not subject to examination, then given the language of Daniel, Isaiah, Revelation - take your pick, and the fact an entire group of people who have a religion lightly related to the ancient Israelites [and very related to the revisions of the Pharisees] then wars are *unavoidable* - and of course, anyone {for most of these bible-idolizers} "Israel" opposes is evil, etc...
---
the bible, torah/talmud and koran thumpers are our misfortune.
Like I said- mark my words.
"But you, beloved, ought to remember the words that were spoken beforehand by the apostles of our Lord Jesus Christ, that they were saying to you, "In the last time there will be mockers, following after their own ungodly lusts." These are the ones who cause divisions, worldly-minded, devoid of the Spirit" - Jude 1:17-19
"For by your words you will be acquitted, and by your words you will be condemned." - Matthew 12:37
Money by far is the biggest problem of our time. Not oil, gas, food. Money will control your life. It will make you do things you do not want to do and should not do. And in the end it won't even matter how much or little of it you ever had. Look at what it made the Rothschilds do. Create a paranoid inbred family. Scary and sick.
But a major point you also neglect, is that our current, exceptionally high standard of living is directly because of money, the expanding money supply, and the debts that have been created.
Say, if we were on a true gold standard, there would be a fixed amount of "money" in the system. If you wanted to build or buy something major, you would have to save for years, decades, or centuries to get enough money to buy/build that thing, becasue there would be very little money available to lend/borrow.
If you have a true gold standard, then there would be no proportional reserve, and issuing of "gold certificates". Our entire system would grind to a halt.
Don't criticize our system too much. It has created all the technological and industrial wonders we enjoy today, from infrastructure to technology, to our homes.
I am not criticizing the financial system. Capitalism was the correct solution to advance the world. In an imperfect world I suppose it is a good as we can get it.
As for bitcoin, I most certainly know what I am talking about. The actual bitcoin is a ponzi scheme. If I get in first I pay nothing and get one bitcoin get $1200 dollars out of it. Underlying technology might be useful though.
@Anopheles : "Their "reserves" are IN GROUND, not in bullion."
Possible indeed :
Quote
China buying Gold Mines Instead of Gold Bullion
A top industry offical from the China Gold Association told The China daily back in February that the chinese purchase of IMF bullion would cause market speculation and volatility. Instead, China is continuing to buy gold not directly from the market but through acquiring gold mines…abroad!
UnQuote
http://minelistings.com/mining-news/china-buying-gold-mines-instead-of-g...
Here in Thailand the women love gold. You buy a hot girl a copper ring and I offer a gold ring and let's see who gets the girl.....
Next time you down vote me roll over your fat cunt wife and kiss her ass because if not she'll call a jew lawyer and throw you pussy ass out on the street....
Is that why you left the states?
One of the reasons yes. I had a pre-nup so I did'nt get screwed. Here I live cheap and have women that still respect men. And I'm not stressed by the bullshit in the USA.
My daughters say it best...
"Dad's want's to be a grandad...but not have to deal with a granny"
I bought her a AK and 1000 rounds of amo after that joke!
The period from 1914 to 1919 was Gold Inflation in America. It poured into the country as Europeans paid for war materials. Plant and Equipment were already running at capacity, so this caused inflation; and a corresponding decrease in the value of money. (Money properly defined is general purchasing power that fluxes in proportion to goods and services, hence it is a legal and scientific device for settling trade.)
From June 1914 to April 1917 the money stock increased 46% and wholesale prices increased 65%. From April 1917 to May 1920, the money stock rose another 49% and wholesale prices and additional 55%.
Gold coins thus lost over 75% of their value against commodity wholesale prices during the first six years of the FED rule.
If one is hard money “Gold Bug” then maybe this period of monetary history should be instructive. The world was on a Gold Standard, albeit with credit riding on top of the gold in a 10:1 ratio.
After WW1, the U.S. held much of Europe’s gold, thus disallowing Europe from trading goods:
In 1920 U.S. Government expenditures were 8% of the national income. In 1929, these expenditures were down to 4% of national income. In 1920 the U.S. debt stood at $24.3B. In 1929 , Gov’t debt dropped to $16.9B.
Clearly, it was not U.S. Treasury money, or U.S. Gov’t programs that fueled the monetary expansion of the roaring twenties. Actually, the Government did the opposite, by contracting.
In the 1920’s credit issuing banks abandoned the “real bills doctrine.” Real Bills are financing goods production. A real bill is issued and later is discounted once the goods are produced. In this way, there is a relation between actual production and credit formation. It is a form of credit, but it is a credit that allows time to be spanned, hence the lag between goods formation and goods becoming prices in the marketplace is met.
Wall Street entered into financialization in this period why? During WW1, the British pound had been heavily inflated, with over 5 Billion pounds of new debt created. The British Cost of living index almost tripled between 1914 and 1920. But, in 1925 the BOE made the pound convertible to gold at pre war parity, and paid out gold for paper at the old rate. This was perverse.
The Federal Reserve System supported this action by Keeping INTEREST RATES LOW, in America, thus encouraging the export of Gold back to England and Europe.
By keeping bank credit rates low, this encouraged bubble formation. From 1922 to 1929 bank loan ratio of securities/total loans advanced from 25% to 43%. New York Banks alone had $7B loaned to New York Stock Exchange. This would be credit money chasing after securities, inflating securities in a positive feedback bubble.
In 1926 a group of bankers, English, French, and German (Yes it was Schacht), met in a Washington Hotel. They colluded with the FED to keep credit rates low. They knew that the low rates would encourage speculation, but it was the price that must be paid for Europe to get their gold back. In other words, screw American labor, and make sure the Gold gets back.
This all came out in the Congressional Stabilization hearings of 1928, especially the testimony of Federal Reserve Board Governor, Adolph Miller.
This whole affair showed that the “automatic gold standard” was a myth, and the true Federal Reserve power is really the New York Fed. The assembly of private bankers spent a week at the NY FED and not even ONE day in Washington D.C.
Gold coins thus lost over 75% of their value against commodity wholesale prices during the first six years of the FED rule.
Sorry, but I am not an economics major, so I need to clarify. Because fiat and gold were on a fixed relationship, but nevertheless a 10 to 1 ratio, that ratio allowed for inflation. Gold was overpowered-but only for a while, and by 1933 was revalued upwards to $35 /oz.?
So you have gold. Say you have 10,000 tonnes. Now what? Back 20% of the fiat currency supply with gold?
So, if you have a finite amount of gold, say 10,000 tonnes, and you have fixed the price of gold at 2,000 an oz, but you have reached the limit of central bank fiat that can be created. What to do?
Now to make it simpler.
Gold backed currency at 20% gold reserve. 100 oz of gold total supply. An oz is fixed at $1. How much fiat can be created? If 100% reserve ratio it would be $100. So for 20% gold reserve ratio, it would be $500.
Now what. How do you expand fiat supply if need be? Easy. Reduce reserve ratio, or increase dollar value of gold. So, at 20% gold reserve ratio, 100 oz total gold supply, and at $10 an oz, how much fiat can exist?
Answer. $5000.
So if you hold $5 in cash when an oz of gold is $1 and gold reserve ratio is 20%, and you wake up the next day and the price of an oz is now $10, then your claim to gold is now?
You cash has lost value. Your claim to an oz of gold is now 1/2 an ounce. If there was a sudden urge to redeem fiat for gold, and the people lost faith in their currency, then the price of gold could be elevated to essentially deflate the value of cash. Happy days.
Okay, so gold (and, by extension, silver) is money. Fine. How much less is your "money" going to be worth (in purchasing power, or in terms of how many FRNs the coin shop dude will give you for it) 48 hours from right now? That's what I want to know, not what dug-up buried treasure might be worth years or decades from now.
Yeah, sure, these guys are gonna be rich in the year 2510. What about us poor slobs that have to pay bills in the year 2015?
http://www.straightdope.com/images/art/2007/071005.gif
Upcoming SDR system is likely to be a basket of currencies with Gold as part of the mix. China is not going to give up its Yuan emitting State Banks.
If the basket to value SDR’s is limited to commodities and Gold, then those who hold Gold now, will be in a favorable position to engage in export/import.
Remember, this whole WW3 thing started when the U.S. especially would not agree to let China have more power at IMF and World Bank, a power in alignment with China’s economic status. China’s private banks have dollars in their reserve loops to help their capital positon. (China has a mix of private and state banks.)
Having a credit money system, with Gold at its base is perverse, as it allows leverage and credit creation not in alignment with goods and services. Even on a gold standard, private bankers find ways as evidenced from history. See my above posting.
Marking trade only with Gold is reasonable, as it forces countries into balance. More advanced theory is a Bancor system though. All money is law. All trade is only barter. In this case, gold would flux in relation to goods exchange, and hence wouldn’t be general purchasing power – it would be confined.
Continuing to call money as metal is a form of hypnotism, as metal has nothing to do with money’s true nature. All money is law, and not admitting to that is leading man into continual bad choices.
Within a country, using Gold is a bad idea as it cannot flux to the S shaped curve inherent in any economy, especially one that has seasonal food production.
The most advanced money system is sovereign money; and of course it gets no press. The hypnotists that shill for their money systems want to take rents; they have no honor.
A sovereign system returns the money power to the people, where it rightfully belongs. It creates money, not credit. This money is low friction and low cost, so people can trade their output fairly.
A truly advanced Sovereign system will spend into the base of the population first, especially families, thus they get first seigniorage.
Banks should be banned from creating credit and holding debt instruments on humanity; it creates a creditor-master over debtor-slave relationship. This relation is one of usury, and usury was banned by our ancestors as murderous sin. Gold and Silver metal were the vehicles that money masters rode through history to then invent their rent seeking credit schemes.
Some credit in money supply is OK (maybe 30 percent), especially as a drain knob to prevent inflation, or counter spend. But, even credit as money is law, and credit means should be applied using good monetary science.
www.sovereignmoney.eu
I detest the idea of banks creating credit out of thin air by loaning it into existence by creative accounting. They got into the business of credit creation. Not their job!
So, if banks can't create credit, and can only loan from the stock they have been entrusted to (financial intermediation), then how is the new currency to enter circulation. This is the part that I am dubious of, as I am dubious of all humans.
I understand the banks would lend, and they would set interest rates. They could not however create credit. They can go bust, they can lose the funds they have invested, but keep the checking account funds available, and is not in jeopardy at any time.
So, if the government du jour requires a sudden increase in funds, and it is not willing to increase taxes, it must request this from the institution that creates the credit.
The government can alter fiscal policy, the other institution creates credit.
What does "revaluation of gold reserves" mean?
i'm a plumber i did a little side job last weekend about 8 hrs work.. i took payment in two 1/4 oz gold american eagles.. that works for me..
A couple of comments about GOLD.
Fist the "gold industry" - the large number of prognosticators and finanacial advisors for gold - hat cliche hasn't really been all that honest over the years. They keep preaching the same story, but it's not a balanced story. A good example was the plunge in the gold price around 2008. Not a single advisor for gold funds predicted that price move, including all of the "luminaries" who publish monthy newsletters. So while gold advisors love to poke fun at the honesty of the monetary system, their own claims and predictions often miss the truth as well.
GOLD has value because it cannot be printed or counterfeited. End of story. It is a durable material with a bright shiny appearance, and is relatively scarce. Threfore, it is a very useful "alternate currency". But mostly - no-one today can create gold atoms in their garage, or anywhere else (except infinitesimal amounts in nuclear experiments). It cannot be faked. And this largely explains the abhorrence of gold to Wall Street firms and Central Banks. You own it, or you don't.
Some people believe that gold will not achieve great value, until the US economy tanks (i.e. the US debt markets lose legitimacy). Actually, gold does well in a variety of crises, and Europe seems to be stumbling towards a crisis. The Middle East is also playing with the idea of another major war. A variety of crises lie ahead of us, and not just the US debt markets.
I was recently overseas. It was interesting to me to observe - how much the rest of the world is "bypassing" the USA system. Many people in the world do not care that much about America these days. Every day, business people in many countries are bypassing the US economic system altogether. America's days as a "dominant superpower" are dwindling very rapidly. The USA can preach "bonds and T-Bills" all it wants. But people out there are losing interest.
How gold will fit into the new system - is anybodys guess. But it's price will not be set by New York or London, if they don't accuratly reflect demand and supply for real physical metal.
Sorry, but I am not an economics major, so I need to clarify. Because fiat and gold were on a fixed relationship, but nevertheless a 10 to 1 ratio, that ratio allowed for inflation. Gold was overpowered-but only for a while, and by 1933 was revalued upwards to $35 /oz.Gold coins thus lost over 75% of their value against commodity wholesale prices during the first six years of the ?
Bank Credit was supposed to be limited in volume to 10x that of Gold. The system didn't actually operate that way.
What really matters is what money can buy. And, what money buys is related to goods and services. Goods and services production include time. The best system can hold the purchasing medium relative to current goods and services, and also can deal with the time problem.
Gold as money cannot do the job.
One big problem is that people tend to hoard it during times of stress, which causes a deflation.
What most bugs want, and what they cannot articulate, is a currency system. Currency is a circulating medium that spins in the supply and doesn't disappear. 2500 years of coin history showed man how to do a currency system.
But, a currency system (not a debt system) is really a law system, and independent of the material.
Gold coins were stamped, and hence they got some sort of Law. So, there is no magick in the metal.
Sorry. The main thing that most people should do, is demand that they have a law system, and that the volume of the circulating medium is controlled. The controllers should be disinterested bureacrats who cannot profit, and if they find some way of taking rents, they are immediately jailed.
A for profit bank system, by its nature, means that the issuer of our transaction medium is self interested in gaming the system for his gain.
In the past, the gold men invented paper to ride on top of the gold; this to take rents and steal life force from the commons. The paper then got a bad rap, when actually it was goods and services being stolen through a money master rent scheme.
Money is not metal, it is an abstract tool breathed into life by law. Saying it is metal is like saying math is metal. It is an absurdity.
Money is also not debt. Debt is something owed, or something due. Debt as money circulates in the supply and pretends to be money. In the very beginnig, Gold would pay for debts. Treasury money would pay for debts. Bank debt money, if returned would pay for only the debt issued by THAT BANK. Banks then hooked up their reserve loops, and here we are. People now think that BANK DEBT is money. It is not.