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In Advance Of A Gold Standard, A Look At Gold Stocks vs. Flows

Tyler Durden's picture


Submitted and copyright by Keith Weiner 

Stocks vs. Flows

Today, people who believe that gold is money think that one should hoard gold.  They seek to take possession personally.  Or when they have it stored professionally, they look for a private vault outside the banking system where they can (hopefully) trust their warehouse receipt.  And why shouldn’t they avoid the banking system?

Its corruption was always inevitable.  The advent of the central banks before World War I ensured it.  The theft (in the US) of the gold of the people in 1933 cemented it, along with the dollar devaluation.  The treaty at Bretton Woods in 1944, in which the world agreed to treat the US dollar as if it were gold nailed it in place.  The default on the US government’s gold obligations in 1971 by President Nixon set it in stone.  Today, we have a corrupt central bank that centrally plans money, credit, discount, and interest.

The regime of irredeemable paper money is going to collapse.  Anyone who understands it should want to get out of it, and not be a creditor to insolvent banks.   This is a rational personal response to an irrational system.

But it is not necessarily a vision for how the world ought to be run, or how a banking system should be designed.  Today, it is necessary to hunker down, trust no one, hide one’s gold, and take no unavoidable or unnecessary risk.  Today, one is concerned with one’s stocks of gold.  One has what one has, one tries to get a little more while one can, and then one hopes that after “it” happens, one will have enough.

But let’s assume we had the Rule of Law once again, reasonable expectation of enforcement of contracts, and the absolute right of property.  What kind of financial system would we have?  Would it be the product of fear and distrust wherein gold does not move, but is hidden and buried in vaults?

Many today propose that banks must back their reserves with 100% gold.  They envision a vaulting and payment processing system only.  But without realizing it (or in some cases deliberately), this policy rules out credit.  Perhaps it is based on this view, that detractors of the gold standard say that there is not enough gold for modern production and trade.

And they would be right!  Most businesses make a small margin.  They buy their inputs such as raw materials, labor, tooling and other consumables, and they sell their product for a little more.  In any competitive market, margins are thin.  Therefore most companies will never have the capital to buy their inputs for cash (and even for those few who could, this would be an inefficient use of capital).  And then what happens when technological change allows a new business to insert itself into the supply chain?  The supply of gold coins would have to expand, which is clearly not feasible.  Or else a new business could not be added to the supply chain.  This problem is intractable.  It does not go away when the economy grows larger, technology improves, production becomes more sophisticated, or markets interconnect globally.

The point of this essay is that if we are to have a dynamic economy with production, trade, invention, innovation, global markets, and growing efficiency then there must be a financial system in which gold flows.

One gold coin can do a lot of work in the economy if it is unshackled and thereby allowed to move to where it’s needed to pay creditors and extinguish debts.  Then it can move to the next and the next.  In a free market, both Real Bills and bonds (and probably other credit instruments) will arise.  The structure of credit, who owes whom and when each obligation is due, the amount of total credit, the terms and conditions of credit, and the business models of those who deal in credit will evolve based on the needs of the participants in the markets.

Credit will be limited only by the creativity of the entrepreneur, the inventor, the innovator, and others.  That is, gold will flow and men will prosper if there is no draconian rule that bank reserves must be 100% backed by static stocks of gold, no onerous restrictions on who may deal in trade credit, and no reactionary rules against lending based on ancient hatred of “usury”.

As we begin the earnest discussion of how best to go back to a gold standard, and what that gold standard should look like, I think it is important to keep in mind that gold must be free to move.


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Wed, 02/15/2012 - 22:14 | 2164485 SumSUN
SumSUN's picture

Those who don't know history are doomed to repeat it.

Wed, 02/15/2012 - 22:55 | 2164605 killallthefiat
killallthefiat's picture

Will gold buy some bitchez in the collapse?  Therefore "Gold, bitchez?"

Wed, 02/15/2012 - 23:22 | 2164668 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Gold buys bitchez now.

Wed, 02/15/2012 - 23:31 | 2164691 Central Bankster
Central Bankster's picture

There is plenty of gold, silver, platinum, palladium, and copper to use as money.  Most the plebs will use copper and silver.  Silver is the money of merchants and Gold is the money of Kings they say :)

Wed, 02/15/2012 - 23:43 | 2164725 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Plebs didn't use monie, they bartered, and lived day to day.  They had no wealth, and the wealth they had was stolen by the monachs.

Boy we've come a long way.

Wed, 02/15/2012 - 23:51 | 2164762 strannick
strannick's picture

At the moment 'gold being free to move' equals 'gold rotten with fraud'. For bankers, 'liquid gold' means they sell you paper instead of gold.

Through COMEX gold, unallocated gold, gold certificates, GLD, ect, gold demand is dilluted by these gold frauds, and its price is maintained artificially low.

Under a gold standard, of course there is enough gold to go around, just the price will be much much higher.

Thu, 02/16/2012 - 00:31 | 2164877 trav7777
trav7777's picture

sigh...load of crap

Thu, 02/16/2012 - 02:19 | 2165049 fourchan
fourchan's picture

i agree paper is a load of devaluating crap.

Thu, 02/16/2012 - 03:18 | 2165095 Pinto Currency
Pinto Currency's picture



Replacing fractional reserve fiat money with fractional reserve gold money will solve almost any problem.

Thu, 02/16/2012 - 08:59 | 2165325 Harlequin001
Harlequin001's picture

the article is pointless gibberish.

Thu, 02/16/2012 - 11:14 | 2165731 BigJim
BigJim's picture

What the author fails to understand is that cheap money (ie, fractionally created credit) doesn't make capital cheaper; it just expands the money supply at everyone else's expense, distorting prices for things usually bought on credit.

Thu, 02/16/2012 - 03:45 | 2165111 Bay of Pigs
Bay of Pigs's picture

Nice to see you batting a thousand on the votes Trav. Oops, O-fer...

Thu, 02/16/2012 - 09:06 | 2165351 disabledvet
disabledvet's picture

"you can buy all the gold you want" right now--it's "just the amount of money necessary" isn't it. The fact of the matter is there is NOTHING rational about a "gold standard"--it does rationalize PRICING however. of course the moment we go on a gold standard "you'll never see any of it" as the government and the banks will have it all. now since it is patently false that the dollar isn't "redeemable"--it is in fact "redeemable for anything--AT A PRICE" then "we have what we have." for the media its "you have no just but to obey." for the rest of us however "it's a problem solving excercise." and given the fact that the media has stuck every knife they have in the back of every person who either currently serves or who has ever served in the US Military (while pining for war i might add) then the reality of "a solution" which is coming will exterminate the bulk of them from their physical exsistence. "You will obey" indeed.

Thu, 02/16/2012 - 08:28 | 2165267 Bobbyrib
Bobbyrib's picture

"Under a gold standard, of course there is enough gold to go around, just the price will be much much higher."


Why do you guys continually ask that the same criminals who constantly cheat the citizens of our country now involve gold to back our currency? Any person who is not a fool would rather hold on to their gold than to trade it these cheats. The price of gold may be higher under a gold standard, but the minute you trade it in for credit/gold backed dollars it would wise of you to not expect to see gold for as long as you live. As someone else said "gold is the money of kings," in our society would you consider yourself a king if you gave up all your gold and gave it to a bunch of cheats/crooks? I certainly wouldn't. Fuck the gold standard, the citizens of our country are far too stupid to understand that if they elect the wrong person (like FDR or Nixon) the gold standard could become a rigged game much like the rest of the current US economy.

Each person who holds gold should hold onto it as long as possible. When the time comes trade amongst yourselves for goods and services you need. Keep the cheats out of your economy, they will only fuck/skew it up (that's all bankers and politicians know how to do). I believe that if a gold standard were made they would call in all the gold held by private citizens (afterall there would be a gold "shortage") then you would be at the mercy of the cheats all over again.

Thu, 02/16/2012 - 01:57 | 2165024 rocker
rocker's picture

Please don't forget the two ten year old wars financed by the China/Bush Charge Card. Just charge it. Bartering of the highest order.

I have always been amazed how stupid most Americans are when it comes to this.  Debt Slaves to the Fed.

How the hell do you go to war and give tax breaks and extra medicare benefits.  You charge it and don't count it against the deficit.

Sort of what the banks do. Off the books balance sheet. But the shame is "Most" Americans still do not understand how we borrowed from China.

And why is it only important now. Didn't someone once say, "Deficits Don't Matter".  So why now?

Two great investments, Precious Metals and Ron Paul.  Eh.

Thu, 02/16/2012 - 06:05 | 2165190 AE911Truth
AE911Truth's picture

"Americans still do not understand how we borrowed from China"

Speaking of borrowing from China....

Anybody have reliable info on the 1934 issued gold backed Federal Reserve Notes entered into evidence in the Keenan Complaint?

It seems the FED borrowed a lot of gold from China (documented by the FRNs) and they want it back.

Thu, 02/16/2012 - 07:51 | 2165233 Watauga
Watauga's picture

Before you respond along the lines of "George Bush is to blame for everything," keep in mind I was critical of Bush even before he was elected, believed he would not make a good President, and am comfortable saying that he was, in fact, a terrible President.  Now, that said, you do realize, do you not, that, as bad as Bush was, Obama has had the U.S. engaged in "the wars" nearly as long as Bush had us so engaged, that Obama has done more (stimulus, bailouts, deficits, debt) to destroy our economy than any President in history (after Lincoln, of course, who created, through his war against the sovereign C.S.A., the very possibility of Obama's tyranny), and that Obama's culture, race, and religious wars against the majority of Americans are the most evil acts committed by a President in our history?

Now, again, don't kneejerk into some spasm of "Bush did it" or "It's all Bush's fault" as Obama, himself does.  Obama as messiah is a fraud and a failure.

And yes, they all stink, from Boehner to Bush to Reid to Pelosi to Frank to McConnnell to Obama.  They stink to high heaven, as the onld saying goes.    

Wed, 02/15/2012 - 23:42 | 2164724 Harbanger
Harbanger's picture

So does a nice face and a story.  And she'll even give you some of her sugar daddys gold to boot.  Some things never change.

Thu, 02/16/2012 - 00:00 | 2164785 Central Bankster
Central Bankster's picture

No doubt, if you can talk and you look half decent- you get laid.  I'm not understanding the getting money from their sugar daddy part.  clarify?

Thu, 02/16/2012 - 00:17 | 2164841 Harbanger
Harbanger's picture

If she's got a sugar daddy, she knows she's a player.  Not a bad person, just circumstance and survival. She wants to be in love.  When a woman gives you her heart there's nothing she won't do.  Nothing.  It's a blessing that most men don't see.

Thu, 02/16/2012 - 02:59 | 2165085 BidnessMan
BidnessMan's picture

Can tell you are not married....

Thu, 02/16/2012 - 03:54 | 2165120 fijisailor
fijisailor's picture

can tell you have never been in love

Thu, 02/16/2012 - 08:23 | 2165262 SilverDOG
SilverDOG's picture


Takes endless perseverance to maintain sharing, in a PAPER relationship.

A paper marriage contract, ensures absolutely NOTHING.

Effort Does. Do It.

Wed, 02/15/2012 - 23:50 | 2164686 DoChenRollingBearing
DoChenRollingBearing's picture

@ killallthefiat

They'd probably be lined up all around the corner...

Thu, 02/16/2012 - 09:41 | 2165339 Chief KnocAHoma
Chief KnocAHoma's picture

Here is the short and simple version:

It was obvious in the late 1960's that our (the USA) economy and trade balance was about to swing wildly to the import side. So as the holder of the largest bullion reserve in the World it was in our interest not to exchange goods (oil) for gold.

It was better to have a bad ass military and tell the rest of the World "we will give you our paper for your oil and cheap shit made in asia."

Win win for everyone. The US gets your oil and keeps our gold here. You don't get blown off the face of the planet.

The only way a gold standard will ever be reintroduced in this country would be if we became net exporters again. No way will we ever unload a ship full of toxic sheet rock from China, then reload the boat with gold and watch it sail over the horizon.

These circumstances should tell you pretty well what the REAL money is.

Thu, 02/16/2012 - 10:31 | 2165619 Sweet Chicken
Sweet Chicken's picture

No way will we ever unload a ship full of toxic sheet rock from China, then reload the boat with gold and watch it sail over the horizon.

These circumstances should tell you pretty well what the REAL money is.


God that is such a horrific thought but the simplicity of your imagery is perfect. Well done! +1

Wed, 02/15/2012 - 23:05 | 2164624 vast-dom
vast-dom's picture


Wed, 02/15/2012 - 23:15 | 2164652 HoofHearted
HoofHearted's picture

And most of us reasonable people see that one needs to be able to lend out gold so that said gold can earn interest (or a dividend if someone wants to go to that area). Then maybe you can eat it. But this 100:1 fractional reserve garbage is just too much. And if the banksters have any way of playing around with our gold, then they are going to try it...unless we go back to the punishment for debasing the currency that the US originally had. Then maybe we wouldn't be dealing with the Bernank or Timmay.

Wed, 02/15/2012 - 22:16 | 2164486 madcuban
madcuban's picture

Money doesn't need to be backed 100% by gold.  That is an insane assumption and it has never been the case.  Gold being "free" to move is a function of Gresham's Law.  Bad money drives out good money.  If we do it right, gold will find its way back out into circulation.  This article is ridiculous and based on ill-conceived assumptions.  Credit has a place, but let's not get carried away.

Wed, 02/15/2012 - 22:26 | 2164516 ShoeShineBoy
ShoeShineBoy's picture

 while your sound bites come across AS IF you knew one thing or two, it does not help hiding how moron you are in your baseless arguments. Let's cut to the chase, while that said credit is someone's (hopefully a AAA debtor in your world) liability, gold is no one's liability. got it?

Wed, 02/15/2012 - 22:35 | 2164548 madcuban
madcuban's picture

have you ever listened to lew lerhman or read ron paul's book on the gold standard originally written for ronald reagan when he wanted to renew a gold standard and had ron commission a study??  go do those things and then come back and tell me i am wrong on that count.   and while your at it, go read shiff's book on how an economy works and why it fails.  moron.  and while you are it, shine my shoes.

Wed, 02/15/2012 - 22:44 | 2164576 ShoeShineBoy
ShoeShineBoy's picture

 ohh right, mr. suck my mad cuban, while you were polishing your useless arguments reading all those papers/books, i have been shining my PA trading all those unbacked  claims and debts you only hear from headlines, day in day out, listening bunch of technocrats talk their books. Oh, yeah, i don't have any drawdown year, if you wonder. And, i might have read more than you can possibly imagine. Now, go eff urself.

Wed, 02/15/2012 - 22:51 | 2164599 zerotohero
zerotohero's picture

I applaud your sense of self importance.

Wed, 02/15/2012 - 23:34 | 2164699 Stack Trace
Stack Trace's picture

We all suffer from self-importance. It is a form of ignorance that keeps this whole mass-delusion from unwinding.

If you aren't important to yourself then really ... Why bother?

In fact this sort of circular, specious, adhominem retort is getting stale as the promises made by Greece last week.

Not that I endorse the positions above. I just find your "self-important" hypocrisy a little to smarmy.

Thu, 02/16/2012 - 01:22 | 2164975 TheSilverJournal
TheSilverJournal's picture

Money does need to be backed by 100% gold because gold is money. Backing by less than 100% is counterfeitting. That's what the US did with Bretton Woods...exported counterfeit notes to the central banks of the world and now those notes are coming to be found out as the worthless counterfeit gold notes that they are.

This doesn't mean that there can't be fractional reserve banking. As long as the fraud that comes along with fraction reserve banking is removed and depositors are told that they may not be able to withdraw their deposits on demand, then there's no problem with it.

Thu, 02/16/2012 - 03:08 | 2165090 AgShaman
AgShaman's picture

It's not that the author's premise of a different paradigm of Flowing Gold can't exist and offer a more fruitful economic landscape.

It's more of a dynamic that the proletariat rejects these systems based on more historical monetary settings.

People enjoy using plastic....and buying on credit. It gives them a false sense of 'worth' and importance within the construct. They can enter into a fictitious world that they might not be allowed if they had to actually earn the full principle before gaining ownership in various trinkets or lifestyle sets.

They have been brainwashed into believing that a paper currency is equivalent to money. When the true lessons come to their doorsteps....the final phase of the bull market will be nearing the top and they will be entering the bubble at the top to perform their primary function of completing the bubble and offering the earlier participants an exit strategy.

The Govt. and FED are a symbiotic bubble building machine....with a mandate to keep the majority of serfs cluelessly locked into their stations and seperated from the few that reside closer to the controlling power base.

The fact that only 1% of the American populace is involved in physical PM's is proof positive of the disconnect in their knowledge of history and how it applies to MMT. If most of the people were not so distracted....then perhaps they wouldn't have missed out on the early and middle innings of this bull market....and 500%+ thus far.

You could ask them why the govt. values their gold holdings at $42.22....and the market sets the price at $1700....and they'd still not connect the dots. Like the Middle Ages....the unwashed masses are told what to believe by their slave masters and Lords. They will provide the same function they've been providing for millenia....and no internet age will account for their awakening.

Gold will return again as a component in some monetary construct when the Overlords are ready to roll it out for their own ends and agendas....definitely not until they've decided it's time

Thu, 02/16/2012 - 08:42 | 2165287 SWRichmond
SWRichmond's picture

They have been brainwashed into believing that a paper currency is equivalent to money. When the true lessons come to their doorsteps....the final phase of the bull market will be nearing the top and they will be entering the bubble at the top to perform their primary function of completing the bubble and offering the earlier participants an exit strategy.


Thu, 02/16/2012 - 13:29 | 2166306 zerotohero
zerotohero's picture

Oh you - now you sound full of yourself too.

Thu, 02/16/2012 - 07:21 | 2165216 madcuban
madcuban's picture

maybe you didn't hear me.  i said go get your shine box and shine my shoes.  i find it funny that your response, instead of being based in any facts whatsoever, is just a bunch of self important nonsense.  it is clear you are just an a$$ clown.  you might read many things, but none of it would seem to be even remotely intelligent.  this article points to the rule of law being the necessary basis of a flourishing economy, and that is correct.  pegging the dollar to gold (redeemable by a properly determined %-in all likelihood not 100%) would allow the market to trade freely.  but at the end of the day, gold would still be held as a store of value. 

Thu, 02/16/2012 - 08:40 | 2165284 SilverDOG
SilverDOG's picture




Careful with your paper trading gurus points of view upon gold's "place" in an economy. Schiff! BWaahahaha! He is losing his shirt currently. I removed my investments from EuroPac and have outperformed effortlessly.

No wonder Ronnie Raygun did not utilize his own written noose. He changed, in eight(8) years, the USA from #1 creditor to #1 debtor of the world.

A flurry of assumptions, by the multitudes equals -0-.

Thu, 02/16/2012 - 09:00 | 2165329 madcuban
madcuban's picture

I agree. Schiff seems to be wrong about things here and there. But his overall view on the price of gold and the error of government are spot on. I only referred in the above post to his book. How an economy grows and why it fails is still true and a basic read for anyone not properly educated in economics (austrian) and wants to start learning. As for Reagan, he wasn't perfect by any means, but a clear better choice than Obama, Romney, Gingrich, or Santorum.

Thu, 02/16/2012 - 09:03 | 2165344 madcuban
madcuban's picture

I agree. Schiff seems to be wrong about things here and there. But his overall view on the price of gold and the error of government are spot on. I only referred in the above post to his book. How an economy grows and why it fails is still true and a basic read for anyone not properly educated in economics (austrian) and wants to start learning. As for Reagan, he wasn't perfect by any means, but a clear better choice than Obama, Romney, Gingrich, or Santorum.

Wed, 02/15/2012 - 23:43 | 2164732 tmosley
tmosley's picture

how moron you are

lol, those who dwell in glass do well to refrain from throwing stones.

Physical gold is no-one's liability.  That makes it cash.  That doesn't mean that a person can't, with full and up front disclosure, deposit it in a fractional reserve bank which allows withdrawals on demand such that the bank has the right to refuse withdrawal for a certain period of time (with the requirement that it to pay a penalty to do so).  That is exactly how it works under free banking, and this system WORKED.  It worked so well that bank runs were incredibly rare.

Thu, 02/16/2012 - 03:10 | 2165089 Max Fischer
Max Fischer's picture



The only "successful" examples of free banking in the US were before the Civil War, and they were few and far between.  The Scottish free banking era ended in the mid 1800's.  

If anarcho-capitalists wish to taken seriously, you guys need to prove that your archaic ideologies are applicable to the modern, complex, multi-trillion dollar, intertwined economies of today, where hundreds of billions of dollars are moved around the planet in the blink of an eye.  Libertarians are infamous for making similar false analogies. Just because something worked 150 or 200 years ago in colonial America, doesn't mean that it's applicable today. There's a reason why Gunsmoke and Little House on the Prairie reruns aren't popular today.  

Max Fischer, Move Forward. 


Thu, 02/16/2012 - 07:31 | 2165223 madcuban
madcuban's picture

You are confused.  Banking was largely unnecessary before the civil war, this was despite the fact that many states had competing currencies.  Several times before that "central banking" was attempted several times with the aid of the federal government and much to the distress of states.  Each time, those central banks failed and created many problems for the fewer actual local banks.  The civil war actually made things worse as Lincoln actually needed a central bank in order to finance his war.  Lincoln was about as bad a president as it comes, as he purposely destroyed most state's currencies so he wouldnt have to repay what he borrowed from them to pay for his war on the south.  remember, the civil war started out largely as a trade war and an effort to stop the south from seceding.  Only later did he use slavery as his excuse for the civil war.  But i digress.  There were many successful banks, and there were NO successful central banks.  We have proof, it's called history.  read up on it.

Thu, 02/16/2012 - 08:52 | 2165315 SilverDOG
SilverDOG's picture

How these derived digressions are formulated is outstanding. 

The spectrum limits exhibited remind me of special education 8th grade history we had to hear in the hall next to study.

Amusing shotgun approach, keep shooting, you missed.

Thu, 02/16/2012 - 10:14 | 2165569 madcuban
madcuban's picture

Derived?  Oh, you probably meant contrived.  English.  Learn it. Use it. Speak it.

Thu, 02/16/2012 - 23:54 | 2168349 SilverDOG
SilverDOG's picture



Use the dictionary when you do not understand. Not your proverbial mouth. 

Look it up, Tard.

Thu, 02/16/2012 - 11:23 | 2165758 BigJim
BigJim's picture

  If anarcho-capitalists wish to taken seriously,

You can advocate the return of a gold standard without being an anarcho-capitalist. In fact, anarcho-capitalists are more likely to advocate free-banking, as 'the gold standard' requires government intervention in the money supply via legal tender laws. guys need to prove that your archaic ideologies are applicable to the modern, complex, multi-trillion dollar, intertwined economies of today, where hundreds of billions of dollars are moved around the planet in the blink of an eye. 

Most of these "hundreds of billions of dollars" moving around the planet in the blink of an eye are i) fractionally-created unbacked promises, and ii) the result of FX trades, which wouldn't exist under a gold standard, because gold would be money.

...Libertarians are infamous for making similar false analogies. Just because something worked 150 or 200 years ago in colonial America, doesn't mean that it's applicable today. There's a reason why Gunsmoke and Little House on the Prairie reruns aren't popular today.

Does that specious analogy make you a libertarian, then?

Thu, 02/16/2012 - 04:18 | 2165140 Motley Fool
Motley Fool's picture

glass houses :P


"Physical gold is no-one's liability." True.

" That makes it cash. " Define cash.

" this system WORKED." It worked until it didn't, every time. Just like a fiat system. :P



Wed, 02/15/2012 - 22:25 | 2164517 AUD
AUD's picture

Money doesn't need to be backed 100% by gold

That's basically what he is saying. It does need to be as good as gold though.

Wed, 02/15/2012 - 22:27 | 2164522 SumSUN
SumSUN's picture

Damn, I really wanted to up your comment.

Wed, 02/15/2012 - 22:47 | 2164586 AUD
AUD's picture

You have no idea what he is trying to say, yet here you are making snide comments.

He is merely saying that for a healthy economy, gold must circulate rather than being hoarded. When gold moves freely, credit does not have to be '100% backed' by gold.

The freely moving gold will regulate the quality of credit.

Wed, 02/15/2012 - 23:13 | 2164649 AL_SWEARENGEN

Gold alone isn't all that's needed.  Silver is a CRUCIAL prerequisite for a ballanced monetary system.  DON'T FOR GET ABOUT THE CROSS OF GOLD SPEECH.


Interesting to note is that the arguement back then to monetize Silver was out of a desire FOR inflation.  Also check out free silver and The Silver Republican Party

Wed, 02/15/2012 - 23:55 | 2164775 Archon7
Archon7's picture

Dunno about silver - I read elsewhere that silver may be on the verge of "extinction".  In theory, a single wealthy buyer could buy up all the remaining silver, there's so little of it left by comparison to other metals.

Thu, 02/16/2012 - 00:42 | 2164906 AL_SWEARENGEN

Less supply means higher prices.  Silver is in massive demand, industrially & investment.  There is far les above ground refinded Silver today than Gold.  I'd rather own the rarer of them.

Thu, 02/16/2012 - 01:26 | 2164978 TheSilverJournal
TheSilverJournal's picture

There's more above gound silver than gold, it's just hat there's more IVESTMENTS GRADE silver than gold. Still, silver is a much better investment and should outperform gold X 5 with fiat collapse.

Thu, 02/16/2012 - 08:33 | 2165274 ParkAveFlasher
ParkAveFlasher's picture

Assuming JP Morgan's influence evaporates.  Until then, casino time.

Thu, 02/16/2012 - 11:32 | 2165784 BigJim
BigJim's picture

...Dunno about silver - I read elsewhere that silver may be on the verge of "extinction".  In theory, a single wealthy buyer could buy up all the remaining silver, there's so little of it left by comparison to other metals.

If silver were used as money, it would be impossible to usefully 'buy up all the remaining silver' because as it became more scarce, its price would become asymptotic. And what would you use to buy it up? Unless you were the government, you would be obliged to exchange something of value for the silver. To buy up all the silver via voluntary exchange, you would essentially have to have all the non-monetary wealth in the world.

In a free-banking system, other monies (gold, platinum, what-have-you) would be used in preference as the supply of silver vanished, and the would-be silver monopolist would be left holding a vast quantity of metal that would decline in value in proportion to the amount he tried to sell.

The Hunts only (almost) managed to do it because of the rigged paper market. This is why they were crushed - because the various paper shorters who supplied them (and who were also on the board of the CFTC who changed the rules mid-game) would have been bankrupted if they'd had to deliver.

Wed, 02/15/2012 - 23:42 | 2164718 Stack Trace
Stack Trace's picture

Let me see if I understand. Because gold is allowed to both act as collateral for credit and for extinguishing debt because it itself is not debt but real money then people will trust the system.

Right now we have a bunch of gold hoarders because gold isn't legal tender and we use debt instruments to collateralize credit and debt instruments to extinguish debt. The gold remains frozen out and the only reason to trust the "value" of money is to trust the people, banks, and government behind it.

Gold doesn't evaporate as quickly as trust in a crisis.

Thu, 02/16/2012 - 01:36 | 2164990 AUD
AUD's picture

Right, except that debt instruments cannot extinguish debt, so the debt is perpetual & its quality continually declines, its value not regulated by freely circulating gold.

You also don't need to 'trust' gold, it doesn't need 'legal tender' status to circulate. Gold just is - the only thing on this earth whose quality does not decline - it is an inert metal.

Wed, 02/15/2012 - 23:56 | 2164782 tmosley
tmosley's picture

He liked your comment, but can't uprate it because the first line is italicized, which causes a bug in the ratings system.

Thu, 02/16/2012 - 01:33 | 2164997 AUD
AUD's picture

If that's the case, I rescind my accusation.

Thu, 02/16/2012 - 11:35 | 2165799 BigJim
BigJim's picture

The trick is to start one's italicized comment with a space or dot before applying the italicization.

Thu, 02/16/2012 - 08:53 | 2165204 AE911Truth
AE911Truth's picture

Study FOFOA. FreeGold needs fiat. FreeGold does not back fiat. FreeGold re-balances trade imbalances. This causes the relative value of fiats to adjust to the counter-balancing movement of Gold. Debt and Credit are fine under a FreeGold system. Just do not use debt as a store of wealth like we do with bonds today. Use Gold to preserve wealth. Use fiat to pay off debt. Ron Paul's Competing Currency Act is a step in the right direction by enabling tax free preservation of wealth in Gold. As fiats devalue, debts become easier to repay.

Thu, 02/16/2012 - 09:32 | 2165432 DVDBeaver
DVDBeaver's picture

"This article is ridiculous and based on ill-conceived assumptions.  Credit has a place, but let's not get carried away."

You, as many before you, have an impractical view of human understanding. Credit, if unchecked by Gold, will ALWAYS be abused. In some Utopian dream will it be otherwise. This is the way it has always been. Every living organism strives to live beyond its means. We are no different. If you don't set the rules - (and even if you do) they will be abused. This is how we flourish and propogate. Gold is the ultimate rule to eliminate the unedning abuse of credit.

Thu, 02/16/2012 - 11:50 | 2165867 maximin thrax
maximin thrax's picture

Isn't the monetization of debt the terminal abuse? Even with a 12 to 1 capital-to-loan ratio, available credit is finite.  If interest rates were set by the individual bank to make the bank money, rates taking into consideration risk, demand and inflation, that would sufficiently curtail the abuse of credit. The bank would have to select the best borrowers to lend its finite cash. It is the Fed's need for debt to be monetized in order to expand credit almost without limit, defeating the market by setting interest rates artificially low, and propping up insolvent banks (for doing its bidding) that has led to terminal malinvestment.

Thu, 02/16/2012 - 20:26 | 2167813 Death and Gravity
Death and Gravity's picture

Sadly, many a gold standard backer doesn't actually understand the gold standard. For the same reason, the response you get is so profane...

Wed, 02/15/2012 - 22:16 | 2164490 Schmuck Raker
Schmuck Raker's picture

"Free your gold and your ass will follow."

Wed, 02/15/2012 - 22:16 | 2164493 fonzannoon
fonzannoon's picture

This was touching. I am renting a skiff immediately and heading to the approximate coordinates of my boating accident to look for my stash. EGAD I lost the coordinates!

Wed, 02/15/2012 - 22:30 | 2164530 yabyum
yabyum's picture

I have rowed small rafts (<16 ft) down huge rapids. ( Grand canyon, Middle fork Salmon. Colorado et al) I have been flipped in some bad rapids.. fished out at the bottom by friends....the boatmen of the hedge are among the worst on the river!!!!!!!:)))

Wed, 02/15/2012 - 23:19 | 2164658 UP Forester
UP Forester's picture

Not all of us are on the river.

Lake Superior is a vicious bitch, ask Capt. Jesse Cooper of the Arthur M. Anderson:

Wed, 02/15/2012 - 23:36 | 2164708 DoChenRollingBearing
DoChenRollingBearing's picture

A reader of my blog (from the upper Midwest actually) lost his gold and silver in a tragic accident while ice fishing.  He had a beer, and mayne another dozen or so.  He was fighting a fish, down the hole his PMs went!  He did bring in a nice walleye though, so his day was not a total bust.

I sent along my sincere condolences.

PMs and water just don't mix!

Thu, 02/16/2012 - 11:37 | 2165808 BigJim
BigJim's picture

It was only once I'd lost all my PMs fishing that I stopped using them as sinkers.

Wed, 02/15/2012 - 23:34 | 2164701 Likstane
Likstane's picture

I was piloting my Coleman fiberglass 11 footer with my stash secured (I thought). While paddling along the West coast in a non-specific locale(protecting a possible recovery effort), a rogue wave swamped my craft not hardly 20 yards from shore.  While my first thought was for the metal, my instinct to preserve temperature and avoid rehypothecating core cooling took over, making a dash for the rocks.  While preserving my life functions, my childrens college money and vacation cottage funds were lost in the surf.  If ever my stash is built up again, my hiding place will be accesible by pedestrian means.   

Wed, 02/15/2012 - 23:38 | 2164715 DoChenRollingBearing
DoChenRollingBearing's picture

What a tale of woe!  Please accept my sincere condolences.

Oldest story in the book, losing your PMs in boating accidents.

Thu, 02/16/2012 - 03:35 | 2165106 eaglefalcon
eaglefalcon's picture

On my way to the woods to bury my hoard, I was abducted by 5 aliens from the Mullacenolla Nebulae.  They took the gold but set me loose.  I was glad to return unharmed.  A little upset that I was considered worthless as the credit cards, debit cards and FRNs in my wallet, which they didn't even bother to look at

Thu, 02/16/2012 - 05:33 | 2165178 vato poco
vato poco's picture

What about anal probes? Did they do anal probing on you? Sometimes they do anal probes. I've heard they do the anal probes on a lot of people. I know this guy they did anal probing on, and he said they were really *cold*, which sucks! (I suppose. *I* certainly wouldn't know.)

What? Oh, no reason....just asking is all.

Thu, 02/16/2012 - 10:58 | 2165683 eaglefalcon
eaglefalcon's picture

They were unfortunate enough to encounter aliens that probed their rectum.  The ones I saw were all female.  It appeared that these wretched beings reproduce unisexually which isn't uncommon in the animal kingdom.  Either that or they are sort of like angler fishes.  You know male angler fish is 100 times smaller than the female.  It bites a hole on the female body, fuses with the female and atrophied into a sperm gland.  I was lucky enough to return and can care less about their reproductive process.


Anyways, this is why my stash cannot be found.  And cursed be anyone who attempt to locate it, let him be probed anally for a thousand times with a 30 inch long, 5 inch diameter Mexican cactus

Thu, 02/16/2012 - 03:53 | 2165119 AUD
AUD's picture

I lost a very nice Seiko watch whilst I was being pounded into the sand at my one time local surf break. My leg-rope ripped it right off of my wrist.

The waves were always rogue there, stand up barrels in 3-4 foot waves, six feet & you were risking your life.

Thu, 02/16/2012 - 04:04 | 2165130 mick_richfield
mick_richfield's picture

I think your gold was lost around here somewhere:  37.883186,-85.965275

Of course, that was a long time ago.

Thu, 02/16/2012 - 20:32 | 2167825 Likstane
Likstane's picture

You must be insane, or speaking about a Canadian.. that's 320 miles SE of Halifax.  There's no way I would take my Coleman out that far in the Atlantic, even if being chased by anal-probing Mucellodian aliens.  My accident occured on the West coast, far from Bermuda.

Thu, 02/16/2012 - 09:28 | 2165416 Raging Debate
Raging Debate's picture

Friggin Bermuda Triangle again! Always rewrites those dang SPG coordinates!

Wed, 02/15/2012 - 22:17 | 2164495 Poor Grogman
Poor Grogman's picture

If TPTB are still in charge the gold standard will be short lived.

Fist things first

Return to the constitutiuonal  rule of law, then the gold standard can follow unnasisted.

Wed, 02/15/2012 - 22:18 | 2164496 Silvergood
Silvergood's picture

Don't forget silver.  Still discounted.  Protect yourself now!

Wed, 02/15/2012 - 22:28 | 2164502 delacroix
delacroix's picture

what a stinking piece of crap. who wrote it and why?( oh look, it's copyrighted, how impressive.  I'll bet your mom is so proud.)

Wed, 02/15/2012 - 22:44 | 2164572 CH1
CH1's picture

Don't be an ass.

Tell the man how to improve it if you can.

Wed, 02/15/2012 - 23:47 | 2164638 delacroix
delacroix's picture

let's assume ?  let's not base our decisions on assumptions.  onerous restrictions on trade credit    WHERE?    not enough gold to support monetary system ?    not at the current price.  what kind of pretentious prick, copyrights an opinion piece.  I may be an ass sometimes, but I don't masturbate in public.    ( can we get some background on the author? )

Thu, 02/16/2012 - 03:01 | 2165088 TN Jed
TN Jed's picture

I.C. Weiner.  I think.  How many Keith Weiner gold bugs could there be?

Wed, 02/15/2012 - 22:25 | 2164510 ebworthen
ebworthen's picture

Not enough gold for modern production and trade?

I disagree, there is plenty of gold, the problem is it's value is much too low.

Our bubbles point to this very problem.

The point of backing currency and paper with gold is that it is in limited supply.  It is heavy.  It is easily tested.  It is immutable.

Millisecond flashes of "paper" or "currency" from network node to network node in limitless binary units means that it is limitless, which is another way of saying "worthless".

Promises must be exchangeable for something tangible, immutable, and of universal value -  period.


Wed, 02/15/2012 - 22:27 | 2164520 UP Forester
UP Forester's picture

A money supply that can't inflate?

That would lead to deflation, and the Bernank says that would be bad!

We can't go back to barbarous relics, because you can't eat it!


Oh, yeah, /s.

Wed, 02/15/2012 - 22:38 | 2164557 Papasmurf
Papasmurf's picture

The supply can increase as quickly as you dig it up.


Wed, 02/15/2012 - 23:22 | 2164669 UP Forester
UP Forester's picture

Does it still take $5/oz to get it out of the ground?

Where's the asshat that claimed that?

Wed, 02/15/2012 - 23:39 | 2164716 DoChenRollingBearing
DoChenRollingBearing's picture

Still in college...

Wed, 02/15/2012 - 23:41 | 2164722 Archon7
Archon7's picture

Depends on how far underground it is, I suppose.

Wed, 02/15/2012 - 22:46 | 2164584 CH1
CH1's picture

Not enough gold for modern production and trade?

No problem! Put some silver in a warehouse and issue certificates. Or niickel, or stainless, or glass, or plywood, or anything of value.

So long as it is redeamable, valuable and responsibly stored, it can be monetized.

Wed, 02/15/2012 - 23:00 | 2164618 FeralSerf
FeralSerf's picture

A major problem is most of the gold is in the possession of the Bad Guys. And that doesn't even include Yamashita's gold that the CIA probably has privately.

Thu, 02/16/2012 - 07:22 | 2165215 Optimusprime
Optimusprime's picture

Indeed!  I can't believe people otherwise astute keep overlooking this.  The Daily Bell has made some efforts at addressing this issue, but with little success, IMHO.


Still waiting for Dave Henderson to present his take on matters, including his appreciation/critique of FOFOA.  He is onto something he calls "vector gold", if I recall, but damned if I can figure out where he is going with it.  


Can't have a vector without inputs to figure.

Wed, 02/15/2012 - 22:25 | 2164515 The Watchman
The Watchman's picture

a gold standard won't fix the western world's ills - money is money whether is is paper or gold or whatever - the problem is money that is out of balance with productive output - gold won't fix that as the per unit figure for gold can be rigged just as easy as paper - the problem is debt money that is created faster than productive output is made - we've pulled ahead so much demand with new debt that we will never catch it with output - destruction of fake wealth is the only recourse

Wed, 02/15/2012 - 22:31 | 2164537 ShoeShineBoy
ShoeShineBoy's picture

 are you guys paid to write these moronic comments? guess what sane people would do while that said "fake wealth" is being destructed? any clue? how about dumping those unbacked, trashy claims to rush to the golden arms of gold???

Wed, 02/15/2012 - 23:07 | 2164633 zerotohero
zerotohero's picture

yer better than everyone here - yer my new hero

Thu, 02/16/2012 - 00:17 | 2164839 Central Bankster
Central Bankster's picture

No he is right.  If you know your history, many societies have had successful monetary systems that were not gold/silver.  The problem is when the currency growth rate outpaces economic production (usually highly correlated to population growth).  However gold is a particularly good currency because of its physical properties (doesn't tarnish, easily recognizable, divisible, relatively hard to counterfeit, rarity -hard to rapidly grow the total supply of the commodity etc).

Thu, 02/16/2012 - 00:44 | 2164912 UP Forester
UP Forester's picture

And, unlike a tally-stick or sea-shells or tulips, will not totally disappear in a fire.

Wed, 02/15/2012 - 22:34 | 2164545 ebworthen
ebworthen's picture

You slipped on the banana peel right about here:

"...the problem is money that is out of balance with productive output."


Thu, 02/16/2012 - 01:36 | 2165003 GoldenTool
GoldenTool's picture

He is dead nutz right.  The money is out of balance with productive output.  The people that make a mil a year have little productive output.  People making minimun wage don't make enough to make it worth while to work.  It is called broken.  

Thu, 02/16/2012 - 01:55 | 2165005 ebworthen
ebworthen's picture

True, but when the currency is further debased by fiat schemes it makes the injustice all the greater.

The money/production imbalance is a symptom of the fiat/usury/monetization see-saw disease.

Want a loan?  I'll (the Kleptoligarchy) make certain I front-load it, jigger the % rate, and make certain your wage is so low and other costs so high (thanks to fiat credit) that you'll never pay it off.  Oh yeah, and if you do manage to save anything, I'll take all that money you've paid in and any savings and make it more and more worthless as I make more and more money speculating on the capital you provided (or the FED did to me at 0.01%). 


Thank God there is no gold standard anymore or I might be required to mark to reality versus fantasy! (say the bankers/Kleptoligarchy).

Thu, 02/16/2012 - 03:59 | 2165125 TN Jed
TN Jed's picture

You just talked yourself into why you should buy gold.  People like myself may say publicly that gold is the solution but the truth is there is no fixing this.  (We only admit this during our bunker roundtable meetings.)  So just continue with your line of thought and skip to the end.  What will retain value when the "destruction of fake wealth" comes to pass as you yourself said?  Then you'll naturally think of what you need to protect it.  And shit, if it's really that bad I'll probably need some food.  One fine day you'll look into your spare bedroom/bunker and think, "shit!  I'm one of them now.  How the fuck did this happen?"  that's what happened to me anyway.  It turns dispair and anger into action and strength.  Don't fight it man.  You already know.  Sometimes you feel like a nut.  Sometimes you don't.

Thu, 02/16/2012 - 09:47 | 2165471 Raging Debate
Raging Debate's picture

I liked your comment TN, especially the end. Much can still be learned from the animal kingdom when it comes time to be ready for the worst. Many animals store supplies for winter when nothing grows. Ask yourself what would happen if the supply chains stopped in the middle of winter for any reason. Have three months food and water to survive a winter without a supply chain. Be a good squirrel and feel like a nut.

Part of my supplies was sugar, 100 lbs. I had older, broke relatives I gave pounds away to for holiday baking this year. The holidays sure were very yummy this year. And it made me smile knowing I bought it a couple of years ago at half the price. The real value isn't a ton, it is the peace of mind such supplies bring. I would daresay that I have plenty of items that will be in demand, how about cigarettes for that gold? But I like having some PM's too.

My relatives from Hungary bought pounds of silver dollars decades ago. Forward looking folks.

As Ben Frankin once said: "It is better to have it and not need it then need it and not have it."

Wed, 02/15/2012 - 22:42 | 2164519 Bansters-in-my-...
Bansters-in-my- feces's picture

pssstt...our gold is not money...

It's a commodity.

Only the Banksters can own "Monetary Gold"

Fucking Joksters as well.

Ps.....Fuck you's Central bankers and your minnions.

Thu, 02/16/2012 - 00:38 | 2164894 Prometheus418
Prometheus418's picture

And that's a lovely thing.

Seeing as how our silver and gold is a commodity, trading them for other commodities is a like-kind exchange, and not subject to taxation or capital gains.

At least, that is how I read it.  If you do that, I would keep it quiet, and only pull that argument as a defense if you had to- if, for example, you were standing in front of a judge because of black/gray market trading.

That's what I would do, provided, of course, that I could ever learn my lesson and stop taking my metals with me on the river.  Boating sure is expensive that way.

Wed, 02/15/2012 - 22:27 | 2164521 dumpster
dumpster's picture

hoard cash lol

just for heaven sakes do not hoard gold//

Wed, 02/15/2012 - 23:54 | 2164773 DoChenRollingBearing
DoChenRollingBearing's picture

I would keep some cash around...  3 - 6 months worth in a SHTF.

Wed, 02/15/2012 - 22:29 | 2164533 Long-John-Silver
Long-John-Silver's picture

So the world was wrong about Gold for 5,000 years and we only figured out a better way in 1933 which was perfected in 1971. Looking around at the financial state of the entire world tells me that anything other than a Gold (and Silver) standard used to prevent governments from devaluing it's fiat currencies is not working out very well.  

Thu, 02/16/2012 - 07:36 | 2165226 wandstrasse
wandstrasse's picture

The fiat system worked out EXTREMELY well for those who installed it. It was/is a tremendous success story for them.

Wed, 02/15/2012 - 22:35 | 2164547 earleflorida
earleflorida's picture


Pick any value between $10k - $50k, and you win at minimum $10,001.00

thanks tyler

Wed, 02/15/2012 - 22:36 | 2164551 dumpster
dumpster's picture

who wrote that missive on gold .. and this guy is barking up a fig leaf .

gold is valued as a backing for trade and commerce.. it does not need to flow.  it just sets ..  what flows is the bills of exchange, the promise of payment that has not been inflated,

a check on the powers of bankers.. those that abuse that power just shoot them .

plenty of gold just value it at the exchangre rate for all circulating medium. 

the medium can be exchanged for gold .. but no need . if the amount of script is backed by the same amount of gold . ie bills of exhange, letters of credit, yadda

guys that write these  gold articles are probably setting in a kiddy pool with the diapers on.



Wed, 02/15/2012 - 23:43 | 2164726 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Great seeing you around dumpster, I hope all is well for you and yours.  Haven't seen Bravo or Meth Man around lately...

Wed, 02/15/2012 - 22:37 | 2164554 AC_Doctor
AC_Doctor's picture

US should go back to 90% silver coinage and a gold back dollar.  Too bad there is no gold left except for the gold of other countries that is stored here.  A 1964 quarter will still buy you a gallon of gas so all of you PM naysayers can go pound sand!

Wed, 02/15/2012 - 22:56 | 2164608 FeralSerf
FeralSerf's picture

There is not enough silver to do that.  Not even remotely.  There's less available silver than gold.

Wed, 02/15/2012 - 23:28 | 2164684 seek
seek's picture

Oh, I think they could pull it off, but they'd need to re-index to the current value of a dime, etc.

Maybe clear plastic with a visible silver flake in the center, as current money is so devalued the appropriate amount of silver to be worth a dime is measured in milligrams.

Thu, 02/16/2012 - 00:44 | 2164911 Prometheus418
Prometheus418's picture

Just use silver coin in place of bills, and use nickel/copper alloy for smaller change- or even leave the current zinc sandwiches in play.

I see no reason why a Mercury dime couldn't be re-envisioned as a ten-dollar coin, and silver dollar as a hundred, or whatever metric is appropriate to meet demand.

I do think there is still far more silver coin out there than is accounted for.  There are old-timers all over who have coffee cans and milk jugs full of pre-64 change.


Thu, 02/16/2012 - 01:32 | 2164995 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

And when you see 'em bring the cans into the coin dealer you know the top could be in.  Could be anyway....

Wed, 02/15/2012 - 23:31 | 2164692 UP Forester
UP Forester's picture

Hmmm.....  Ought we not go to a silver standard, then?

I'll buy that for a taler....

Thu, 02/16/2012 - 00:45 | 2164693 UP Forester
UP Forester's picture

I need a new mouse.

Wed, 02/15/2012 - 23:34 | 2164700 Archon7
Archon7's picture

... but the gold would have to be redeemable for and euqal quantity of tungsten.  If we can only find a way to jack the price of tungsten to $1700 an ounce, we'd be all set.

Wed, 02/15/2012 - 22:38 | 2164559 Yen Cross
Yen Cross's picture

 Are you inferring that XAU is in reverse " CONTANGO"?

Wed, 02/15/2012 - 22:41 | 2164566 Harbanger
Harbanger's picture

PM's are are hedge for your "savings" against irresponsible Govts. inflating their way out of debt.  Truth eventually returns and if you don't trade your pm's when opportunity opens for productive assets, you'll at best just be holding on to the same old savings.  That's better than having lost, but it's even better to move forward.

Wed, 02/15/2012 - 22:45 | 2164579 nmewn
nmewn's picture

It has always been our duty and obligation to relieve the elites of as much gold and silver with our labor as possible, as they have never been known to be trusted with it.

When a fiat note buys the twisty tie that closes a bread bag and two gold coins buys the entire bakery then we'll talk.

Not a moment sooner.

Wed, 02/15/2012 - 23:45 | 2164737 DoChenRollingBearing
DoChenRollingBearing's picture

+ $55,000

Wed, 02/15/2012 - 23:53 | 2164771 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Gold bitchez

Wed, 02/15/2012 - 23:55 | 2164779 DoChenRollingBearing
DoChenRollingBearing's picture

Plata, platino y paladio, putaz!

Thu, 02/16/2012 - 00:10 | 2164815 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Si, senor!

Wed, 02/15/2012 - 22:46 | 2164582 Atomizer
Atomizer's picture



Tulips of Stone written in 2004 

Tulips of Stone Part II written in 2006


Not much more Atomizer can say, you’re living in a crime that was premeditated. Our new Obama thought crime [DHS] agency should be all over this, unfortunately they work for the people who caused this mishap.   

Goodnight ZH members, tomorrow is just another crime fighting day. Cheers.

Wed, 02/15/2012 - 23:19 | 2164661 Mr Lennon Hendrix
Mr Lennon Hendrix's picture


Wed, 02/15/2012 - 23:45 | 2164740 DoChenRollingBearing
DoChenRollingBearing's picture


Wed, 02/15/2012 - 22:48 | 2164588 bag holder
bag holder's picture

I am not sure the author understands velocity, or as you may remember it from high school calculus, the time derivative of position. The entrepreneur needs an increase in the supply of gold coins, not the quantity of gold coins. 

Wed, 02/15/2012 - 22:50 | 2164594 Chaffinch
Chaffinch's picture

When TSHTF are we gonna be satisfied with a paper promise from a bank, even if it is 100% backed by gold? If there is an option to use gold (and silver) coins as money I would rather do the latter. I don't want to give the banks the opportunity to start up their games again.
If I see an opportunity to invest some of my gold coins in a venture I think will be profitable then I might risk doing that. I don't see any problem with 'not enough gold'.
It might be hard for governments to raise enough gold to fight wars - but that would be another advantage...

Wed, 02/15/2012 - 22:54 | 2164603 cranky-old-geezer
cranky-old-geezer's picture



In Advance Of A Gold Standard

Nope, no gold standard coming, forget it, not gonna happen.

Wed, 02/15/2012 - 23:18 | 2164657 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

That's right, we are going to start using puka shells.

Thu, 02/16/2012 - 00:10 | 2164813 Manthong
Manthong's picture

I've got a chocker necklace from my surf bum days that will pay off the last little ZIRP re-fi mortgage after Ben finishes up the next few "policy" actions.  

Thu, 02/16/2012 - 00:11 | 2164822 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

surf's up dude!

Wed, 02/15/2012 - 22:56 | 2164610 A Lunatic
A Lunatic's picture

It's not a money issue, it's a greedy and ignorant civilization issue.

Wed, 02/15/2012 - 23:06 | 2164631 Hedgetard55
Hedgetard55's picture



Unfortunately, you are right on.

Wed, 02/15/2012 - 23:12 | 2164648 oldman
oldman's picture

thanks, a lunatic

the only sensible post here                    om

Wed, 02/15/2012 - 22:59 | 2164617 CapitalistRock
CapitalistRock's picture

This article is nearly nonsense. Gold reserves should be around 20%. We can debate all day if the right number is 10% or 30%, but I am unaware of any serious talk of a 100% gold reserve. It's not necessary. The only requirement is to fix dollars to gold and make dollars redeemable for gold. That puts a hard limit on credit expansion (but still allows for credit expansion).

The fraction of gold reserves is a secondary issue. That ratio needs to be high enough to earn trust in the gold backed currency. That is in fact its only purpose.

Wed, 02/15/2012 - 23:38 | 2164659 ChacoFunFact
ChacoFunFact's picture

what about legal tender that's not backed by debt, simply issued by the U.S. government?  think it isn't possible?  think it hasn't worked successfully in the past?  what is it that the bank of north dakota does?  we could turn the federal reserve bank offices into museums.  look up bill still on you tube and watch the money masters but that will require 3 hours and 35 minutes of your time.  is the arab spring just a means to ensure the resulting governments will have central banks reporting to the IMF and the world bank?

Thu, 02/16/2012 - 00:14 | 2164675 cranky-old-geezer
cranky-old-geezer's picture



That ratio needs to be high enough to earn trust in the gold backed currency. That is in fact its only purpose.

Completely wrong.

The purpose of gold backing isn't to build trust in a paper currency.  (Once that trust is established, the central bank can violate that trust by turning on the presses, print more of that paper currency, and give it to insiders.)

It's the other way around.  Paper currency is a more convenient way of paying with gold (or silver, or some other intrinsic value commodity).  But ONLY if said currency is redeemable on demand for a fixed amount of said commodity, and the amount is printed on the currency.

Then it becomes a claim check.  A claim check for a specific amount of a commodity with an intrinsic value, and the amount cannot be changed at government's whim because it's printed on the currency.

Going to a true gold-redeemable currency will never happen again because it would shut down Fed's ability to run the presses.  Then the US government would implode (no more borrowing from the Fed).  And all the TBTF banks would implode (no more bailouts from the Fed).  And no more USD-EUR currency swaps.  And no more IMF contributions.

No, trust in a paper currency is NOT what you want.  Trust in a paper currency is HOW we got where we are now.

You want NO trust in a paper currency. 

The only trust is in the commodity it's redeemable for.

A "partially backed" currency is just as worthless as a completely unbacked currency because it's NOT REDEEMABLE for anything with intrinsic value, allowing the Fed to print that currency down to worthlessness

...exactly what's happening to the US dollar.

In 2002 Bernanke himself said US dollars keep their value only when they're in limited supply like gold, and yes he said "like gold".

He also said printing more US dollars dilutes the value of each one.

So yes, he's fully aware how it works.  He knows he's stealing wealth from everybody when he prints more US dollars and lets them get into the money supply they do when Fed prints dollars and buy's Treasuries for example.

Another reason USA will never go back to a gold-redeemable currency is US government has so little unemcumbered gold it's not even worth talking about.  Same for silver.

The only people who could issue a gold-redeemable currency are people with lots of unencumbered gold (no other claims on it).   But it wouldn't be the US government, nor the Fed.

And that's the point.  It doesn't have to be the US governmnt nor the Fed.

But then the Fed would lose its ability to run the presses, steal wealth from everybody, and give it to crony insider friends (Fed's true purpose).

Thu, 02/16/2012 - 07:29 | 2165219 _underscore
_underscore's picture

>> But it wouldn't be the US government, nor the Fed.


This is the nux of it, in my view. The US (and Euro) govts. have had their day in the sun - we've forward consumed with out credit/debt money & can't pay it back without assuming unlimited natural resources & people to make real stuff to boost our GDPs to repay it.

 Normalcy bias flip-flop coming.

The Chinese & Russians (and to some extent India, Canada, S.America & parts of Africa) now hold most of the resource in terms of natural & human 'raw material' to make stuff & grow stuff. Most (sensible) countries are divesting themselves of USTs & other dollar denominated assets & increasingly finding/enacting ways to trade without the US$ as the reserve - look at the myriad rumours about direct exchanges between countries which exclude reserve $ involvement, alternate exchanges (notably PAGE), many more countries' CBs accumulating gold etc.  The Russians & Chinese can't simply drop the US$ - they'd suffer huge losses & destroy the very countries they're exporting to, too quickly. They need to divest themselves slowly, don't want to spook the markets/consumers etc.

Most western govts. must know this, deep down. So what can they do? Well, nothing really - let's say a managed retreat.  Just gently (slyly & stealthily) devalue our savings, our standard of living, our expectations, our will.

 The Fed, ECB & BoE are fighting a rearguard action -  they can threaten creditors with the destruction in value of that debt before it can be redeemed & spent on something of equal value - maybe commodity resereves, forests, land, production capacity, gold etc.  That the true Ponzi scheme currently beong played out as western govts. desperately rob Peter to pay Paul by buying up their own debts with the newly created money.

 This death of a thousand cuts suits the creditors & debtors (who know the game is up for their populations - but not them, of course..) it allows the polarity reversal in power to happen in tiny steps which, they hope, will allow for an orderly containment of dissent & social unrest. Think of the frog slowly being bolied without noticing it.

The Chinese know about the perils of paper currency & fractious fractional reserve practices - they knew about this 500 years ago. I can't see them repeating it. And I know they're accumulating gold & opening their own gold exchange, and encouraging the populace to accumulate it too.

The Russians who have vast,vast reserves of just about everything, including minable gold have divested themselves of ~50% of their USTs over the past year or so & are increasingly meshing in trade & barter agreements with China (who are furiously buying up as much overseas resource with their US$ reserves as possible, simultaneously)

No, I don't see a US dollar backed by gold - it's too late for that.


Thu, 02/16/2012 - 08:22 | 2165260 cranky-old-geezer
cranky-old-geezer's picture



The Fed, ECB & BoE are fighting a rearguard action -  they can threaten creditors with the destruction in value of that debt before it can be redeemed & spent on something of equal value - maybe commodity resereves, forests, land, production capacity, gold etc. 

I doubt default would happen.  It can, but I suspect your later scenario, printing more currency to buy up debt being unloaded by China, Japan, etc, is the way they would go.

I suspect Fed will end up owning nearly all of the $15 trillion US govt debt eventually.  They'll have to print about $13 trillion more dollars to buy it all, expanding the money supply 500% - 600%.  That's hyperinflation.  It'll destroy the US dollar.

I don't have a feel for what ECB might do.  I do suspect Germany will leave the EU, and the Euro will collapse at that point, because much of the debt held by ECB is guaranteed by Germany.

The Chinese know about the perils of paper currency & fractious fractional reserve practices - they knew about this 500 years ago. I can't see them repeating it.

People like to badmouth China for expanding their currency, the very same thing USA is doing. But China has a far more productive enconomy, a huge trade surplus, and isn't issuing much government debt.   It's why their currency is strengthening against the USD, and might become the next world reserve currency, defacto if not dejure.

Russia is doing the same thing.  Focusing on production and export,  keeping government debt low.  So the Russian currency is also strengthening against USD.

Only America and EU governments are living on borrowed money, except Germany, and Germany is being pressured to guarantee all the borrowing of other EU governments.  I believe Germany will get fed up with it eventually, leave the EU, and go back to the DM.  That''s when the Euro will collapse and the EU will collapse.

Thu, 02/16/2012 - 08:38 | 2165277 Ghordius
Ghordius's picture

good reasoning - there is a problem, though. the German economy is best described as a much larger version of the Swiss, minus the banking.

both countries are enmeshed in the eurozone. IF the Germans would leave the eurozone (which is not the same as leaving the EU), they would have to peg immediately their DM to the EUR or to the Dollar or both. and the Global Banking Cartel would organize immediately a run on the peg.

look at any turbine blade or electrical component coming from Switzerland: priced in EUR, just in case.

no - the logic of the eurozone still holds, it's all about how to have a functioning competitive economy in a world with a declining reserve currency. it's industrialists against bankers.

Sovereign Debt? Well, it's not as if it was in gold, is it?

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