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Brodsky On Gold, 'Credit Money', And Real Return Investing

Tyler Durden's picture




 

Macroeconomic issues currently playing out in Europe, Asia, and the United States may be linked by the same dynamic: over-leveraged banking systems concerned about repayment from public- and private-sector borrowers, and the implication that curtailment or non-payment would have on their balance sheets. Global banks are linked or segregated by the currencies in which they lend. Given the currencies in which their loan assets are denominated, market handicapping of the timing of relative bank vulnerability is directly impacting the relative value of currencies in the foreign exchange market, which makes it appear that the US dollar (and economy?) is, as Pimco notes, “the cleanest dirty shirt”. Is there a clean shirt anywhere – creased, pressed and folded?

 

QBAMCO's Paul Brodsky (in a deep dramatic voice-over) sets the scene: In a world where time series stand still... and real purchasing power value has no meaning... a few monetary bodies stand between economic death and destruction... between commercial hope and financial despair... between risk-free returns and return-free risk. Amid this set of conditions it seems entirely prudent to position purchasing power in vehicles that would benefit as the nominal stock of base money grows at a rate far in excess of the gold stock growth rate.

 

Full article below

QBAMCO - Real Return Investing

 

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Wed, 07/18/2012 - 18:04 | 2629968 SemperFord
SemperFord's picture

Makes me wish I had not lost all of my PMs on that boating trip! 

DAMN you Salazar, DAMN YOU!!!

http://www.youtube.com/watch?v=lu_r0mCuwa8

Wed, 07/18/2012 - 22:41 | 2630599 philipat
philipat's picture

"The market", whatever that means these days, seems to have linked Gold directly to QE, which probably isn't coming any time soon. This is probably a convenient way for the cartel to "Steer" Gold but, if not, how and when will Gold break free from this trap?

Thu, 07/19/2012 - 09:21 | 2631448 Lord Koos
Lord Koos's picture

No takers, funny because usually the wise guys on ZH have an answer for everything.

Wed, 07/18/2012 - 23:46 | 2630736 RockyRacoon
RockyRacoon's picture

@SemperFord

You read and digested that 16 page article within 11 minutes after it posted!  I'm impressed.

And such a thoughtful comment as well.

Thu, 07/19/2012 - 13:13 | 2632697 SemperFord
SemperFord's picture

RR, if you read enough of it, you will immediately catch some information which is very similar to other ZH articles on gold and it's actual "value". So I skim through paragraphs but yes I can not only read fast but trap the contents quite well if the material is interesting to me but you are welcome for the comments...I guess. Yes I get you are being sardonic.

Sat, 07/21/2012 - 11:03 | 2638740 RockyRacoon
RockyRacoon's picture

Why dintya just say so to start with?   Sardonic?  I'd say that is being kind.  I was being an evil prick.

Wed, 07/18/2012 - 18:08 | 2629978 New American Re...
New American Revolution's picture

Ding Ding Ding Ding Ding.... Give the Man a Qupee Doll.... haaeeerrrreeeee'ssss a winnah ladie's an gent'men.... step right this way please, right into the swirling blades mame', no, to the left dear.

Pay no attention to those screams Ladie's an gent'men...

Wed, 07/18/2012 - 18:12 | 2629985 WilliamShatner
WilliamShatner's picture

Gold or Quatloos...... tough choice.

 

NOT!

Wed, 07/18/2012 - 18:34 | 2630024 Long-John-Silver
Long-John-Silver's picture

You forgot about Gold Pressed Latinum (Known on earth as Gold Plated Tungsten).

Wed, 07/18/2012 - 20:45 | 2630311 ThreeWishes
ThreeWishes's picture

"eureka" Just like rotten eggs if it floats its not gold "Archimedes" 

Wed, 07/18/2012 - 18:12 | 2629986 FieldingMellish
FieldingMellish's picture

So the trade is short Treasuries, long the yellow brick road. Done.

Wed, 07/18/2012 - 18:13 | 2629989 fonzannoon
fonzannoon's picture

THis says it all to me.

From Forbes: Ron Paul then noted that when Bernanke claims the Fed stands ready to support Europe and other geographies during times of financial and economic crisis, it’s actually the American tax payer that is shouldering the burden. The Fed Chairman responded by noting that it is Congress which delegated the responsibility to manage monetary policy to the Federal Reserve.

Wed, 07/18/2012 - 23:30 | 2630705 GOLDTEETHSILVER...
GOLDTEETHSILVERFILLINGS's picture

Have you noticed that congress can't manage their weight? Don't you expect them to help any of the people?

Wed, 07/18/2012 - 18:14 | 2629990 Beam Me Up Scotty
Beam Me Up Scotty's picture

I like.........GOOLLLDDDDD!!

Wed, 07/18/2012 - 20:47 | 2630316 ThreeWishes
ThreeWishes's picture

I love Au and Ag.

Wed, 07/18/2012 - 18:16 | 2629994 Zola
Zola's picture

The FED and the Banks have been busy bankrupting all PM holders , and especially PM stocks holders (can't have competition with SPX...)since last summer.

Wed, 07/18/2012 - 18:27 | 2630011 Whalley World
Whalley World's picture

I suppose what they do not consider is that the miners have fallen to levels where it does not make sense to sell.  My juniors are so low (and i have been in for ten years) that they are a non expiring option that you would have to tear away from my cold, dead hands.

In 2002 I debated all phyz or stocks and phyz.  Should have just bought the metal but who could have seen the massive shorting by the powers that be on my hapless juniors.

Wed, 07/18/2012 - 23:26 | 2630699 GOLDTEETHSILVER...
GOLDTEETHSILVERFILLINGS's picture

Follow the yellow brick road...

Wed, 07/18/2012 - 18:21 | 2630003 Beam Me Up Scotty
Beam Me Up Scotty's picture

Shadow gold price at $9961 based on US gold holdings of 8300 metric tons.  You mean 8300 metric tons of tungsten?  Lets see the 8300 tons of gold.  Lets all see it with our own eyes!!

Wed, 07/18/2012 - 18:23 | 2630008 FieldingMellish
FieldingMellish's picture

I'm sure its here somewhere... I just saw it yesterday... I'm sure it will turn up sooner or later.... Oh Blythe! You know that shiny yellow stuff that I've been lending you for twenty years? You haven't seen any of it have you?

Wed, 07/18/2012 - 18:37 | 2630033 Long-John-Silver
Long-John-Silver's picture

Oh it's there. The only problem is the 100 people that think they own each ounce of it. There's going to be a fight as all 100 owners of that ounce try to figure out which one of them gets it.

Thu, 07/19/2012 - 02:06 | 2630881 Stormdancer
Stormdancer's picture

I doubt there will be a fight.  The "one" that will get the metal has long been established.  If it's not already secreted in some untouchable private warehouse it will be before any fight can begin.  Any fight that develops afterward will be between lawyers and amount to much fury signifying nothing in the end.

I suspect all that gold will remain hidden until it's time to create a new monetary system which will most likely require some reference to gold to gain trust in the new system.  When it's time to make some new rules, you'll see who has the gold.

That gold is not even "there" for nations....much less individuals, funds or even banks.

And where is Banco de Mexico's gold?

Wed, 07/18/2012 - 18:22 | 2630004 Spacemoose
Spacemoose's picture

tomorrow i diversify.  i'm heading off to costco to buy everything i can, that i might reasonably eat in the next 12 months.  i bet my rate of return on the food beats the living shit out of the 56 cents i made on the $9K i have on deposit in the credit union over the last 2 months.  might even beat PM's over the next 12 months (although not over the long run). 

Wed, 07/18/2012 - 18:25 | 2630010 FieldingMellish
FieldingMellish's picture

It certainly will when one day you turn up at the credit union only to find the account is empty.... and it's GONE!

Wed, 07/18/2012 - 18:32 | 2630019 Spacemoose
Spacemoose's picture

ha! you might be right but i think odds are over overwhelming that the gov would print, print, print  in that scenario.  what really concerns me is what happens when it suddenly occurs to all the other mary and joseph six packs that that food provides a much better rate of return on their money than the local bank on their piddly savings accounts.  what happens when the middle class realizes that food is their only hedge?  and you can eat it!

Wed, 07/18/2012 - 19:27 | 2630104 Al Gorerhythm
Al Gorerhythm's picture

In that scenario, which has been played out in the US with MFG and PFGBest, the "government" did sweet fuck all except support their colleagues in "the business". They are as one, Spacemoose.

You are onto something there buying food but it won't be too long after the fall that you will be labeled a "hoarder". I wonder if by hoarding dollars in bank account, that you could be construed as a hoarder as well? Shouldn't you be compelled to withdraw your savings and spend them into circulation? Why are you hoarding dollars, SM? Can't you see that it is good for the nation to just spend so that everyone is able to hold some? Those poor banks haven't enough to spread around, fractional reserve policies 'n all.

Thu, 07/19/2012 - 08:59 | 2631328 GeezerGeek
GeezerGeek's picture

All TPTB have to do is send interest rates on checking and savings accounts into negative territory. Use it or lose it.

Wed, 07/18/2012 - 18:31 | 2630012 Rainman
Rainman's picture

cool idea, I hear honey never goes bad.

Wed, 07/18/2012 - 18:32 | 2630020 blunderdog
blunderdog's picture

Gotta keep it away from babies, tho, the trace botulism toxin will fuck 'em up.

Wed, 07/18/2012 - 18:35 | 2630028 Spacemoose
Spacemoose's picture

the important thing is to buy what you use.  i've got 50 pounds of beans that i know are never gonna get eaten.  but tuna, pasta, rice, and canned tomatoes are consumed in large quantities in my home (2 teenagers).

Wed, 07/18/2012 - 19:13 | 2630085 SemperFord
SemperFord's picture

Mix some bacon and strips of steak with a pot of beans and your teenagers will it them, believe me!

Thu, 07/19/2012 - 09:24 | 2631458 Lord Koos
Lord Koos's picture

Yep, learn to cook!  Black bean soup, red beans & rice, etc, good stuff.

Wed, 07/18/2012 - 19:00 | 2630065 johny2
johny2's picture

the way bees are dropping off, that may be the best idea around.

Thu, 07/19/2012 - 06:35 | 2631014 petolo
petolo's picture

Honey futures, anyone? Don,t tell Jamie.

Wed, 07/18/2012 - 20:03 | 2630185 Miss Expectations
Miss Expectations's picture

But it must be stored in a glass jar, not plastic.

Thu, 07/19/2012 - 06:57 | 2630386 blueRidgeBoy
blueRidgeBoy's picture

As long as it's stored in an air-tight and moisture-proof container, honey will keep forever, even if that container is plastic.  Now, we can debate the health effects of plastic food containers, but that doesn't affect the storage life.  The reason honey keeps so well is because it contains natural anti-microbial and anti-bacterial compounds (edit: hydrogen peroxide, mostly).  Honey has also been used as a topical wound treatment and a preservative for other foods.

 

edit: liquid gold, bitchez!   (couldn't resist)

Wed, 07/18/2012 - 22:44 | 2630602 holdbuysell
holdbuysell's picture

Costco used to carry these in-store. But you can still buy online:

http://www.costco.com/Browse/Product.aspx?Prodid=11747940

Another site:

http://store.honeyvillegrain.com/


Wed, 07/18/2012 - 23:09 | 2630655 q99x2
q99x2's picture

Watch out for the glowing fin tuna.

Thu, 07/19/2012 - 08:51 | 2631273 GeezerGeek
GeezerGeek's picture

But if it glows, you'll be able to find it when the lights go out.

Thu, 07/19/2012 - 07:09 | 2631053 _underscore
_underscore's picture

Yes, good idea. I've personally 'sterilised' my requirement for all household pretroleuem based products by buying (on discount/special offer) all the washing/cleaning products I'll ever need (based on my expecatations of my life expectancy..!) My return, so far like yours, has been greatly in excess of any meagre return on deposit accounts. Any non-degradable consumable products, I beleive, will  also bear the same or greater return (as opposed to cash savings)  - toilet/kitchen tissue, oils, rice  etc.

The article above has been the best overall summary of why it's sensible to buy 'treasure' that I've read here (and I'd also include the more mundane 'treasure' you can buy from CostCo in the list above - or treasure for the common person) .

I do believe I'm slipping into Prepperdom.

 

Wed, 07/18/2012 - 18:32 | 2630023 blunderdog
blunderdog's picture

That's truly one of the strangest investment reports I've read.

Wed, 07/18/2012 - 18:34 | 2630025 vincent
vincent's picture

"over-leveraged banking systems concerned about repayment from public- and private-sector borrowers"


and with reality now setting in, realize that the Fat Lady is warming up.

 

Fixed it.

Wed, 07/18/2012 - 18:40 | 2630037 Spitzer
Spitzer's picture

US dollar (and economy?) is, as Pimco notes, “the cleanest dirty shirt”. Is there a clean shirt anywhere –

That is the biggest bubble/myth out there. First the Euro, then the creditor Yen, then the dollar.

Wed, 07/18/2012 - 19:07 | 2630074 fonzannoon
fonzannoon's picture

Spitzer why the Yen before the dollar? Would they dump all their treasuries on our head first?

Wed, 07/18/2012 - 19:31 | 2630108 Al Gorerhythm
Al Gorerhythm's picture

Whilst they still hold some perception of value, you bet your ass they will.

Wed, 07/18/2012 - 18:51 | 2630051 Zola
Zola's picture

This report is a keeper Tyler. However, this analysis was made in 2009/2010 by smart investors and the market action has been illogical and absurd ever since. Indeed with record negative real interest rates, the ratio of Shadow Gold Price to Gold price should have moved strongly towards 1. There is a high likelyhood there is global rigging of the Gold price.

Wed, 07/18/2012 - 18:57 | 2630062 Snidley Whipsnae
Snidley Whipsnae's picture

Ya think?... "There is a high likelyhood there is global rigging of the Gold price."

How many Fed Govs have to say as much before you will be convinced?

Wed, 07/18/2012 - 19:06 | 2630072 buzzsaw99
buzzsaw99's picture

I don't think OPEC would be too happy with one ounce of gold per hundred barrels of oil.

Wed, 07/18/2012 - 19:08 | 2630077 OsirisIsABlackGod
OsirisIsABlackGod's picture

I'm just gonna leave this here

http://mises.org/daily/4546

Wed, 07/18/2012 - 19:17 | 2630090 Downtoolong
Downtoolong's picture

Anything but paper, that's my new motto.

Wed, 07/18/2012 - 19:45 | 2630130 Al Gorerhythm
Al Gorerhythm's picture

The first page is the most nauseating. It spells out in acute succinctness the malaise that has infected the integrity of a unit of account, no matter in which country you reside. The process of undermining the labor of the productive is laid out right there. If it is too concise, try reading The Creature From Jekyll Island. It's about 500 pages but punches you conscious, eventually.

Wed, 07/18/2012 - 20:44 | 2630308 TwoShortPlanks
TwoShortPlanks's picture

Love that book...even if it makes me mad.

Thu, 07/19/2012 - 04:19 | 2630949 DutchR
Thu, 07/19/2012 - 09:28 | 2631473 Lord Koos
Lord Koos's picture

You don't have to read the book, the author has vids on youtube.

Wed, 07/18/2012 - 19:47 | 2630142 Peter Pan
Peter Pan's picture

Fiat currencies slishing around is one thing but the ever growing total of world paper debt is what we all need to keep our eye on. The gold price can fall a lot more but its fall will ultimately not match the collapse of debt.

Wed, 07/18/2012 - 20:22 | 2630243 Hallpass2012
Hallpass2012's picture

just buy the dam yellow metal & you can hedge it in the futures markets...

Wed, 07/18/2012 - 20:49 | 2630298 TwoShortPlanks
TwoShortPlanks's picture

'Economic Vertigo'

The more I read articles and listen to podcasts claiming that the markets and economies are no longer predictable, stable, rational, and that they're either centrally manipulated or Pavlovianized to the whir of the printing press, the more I stick to asking the same simple questions and let them tell me what to think and do;
As a general overview
1. Is it likely the global economy will, A. Recover, B. Collapse, C. Slow decline, D. Slowly recover or E. Stabilize here?
2. Are the largest economies, A. Stable, B. Declining or, C. Inclining?
3. Can the debt burden be managed?
4. Is the debt burden increasing and if so how does this relate to #2 over the years?
5. Is employment in the largest economies, A. Stable, B. Declining or, C. Inclining?
6. In the largest economies, over the long term, is monetization likely to continue?
7. Is the advertised data cooked, if so, which way and to what degree (perceived)?
8. Is the next generation financially, mentally and emotionally ready to take up the reins in the next decade or two?

I don't care about prices, seasonally adjusted data, politics and political promises, power plays, opinions of the press or economists, I only care about those 8 simple questions. The answers I'm getting tell me to buy some metal every payday because this mess is going to continue for a lot longer than what people may think, and that those who choose to listen to the short term noise will become market deaf, and suffer economic vertigo (self-doubt, loss of faith and loss of direction...I bet many of you feel a little like that right now, yeah?).

IMHO the Devil can no longer be found hiding in the details, the Devil now resides in the bigger picture...meaning your understanding, beliefs and decisions which determine your wealth generation must now be long term.

Wed, 07/18/2012 - 21:05 | 2630353 dolph9
dolph9's picture

Interesting article, but, as usual, a child of 6 could tell you these things.

It shows you just how far we've fallen that the obvious is treated like some sort of new discovery.

Wed, 07/18/2012 - 21:29 | 2630415 Umh
Umh's picture

The emperor has no clothes. Perhaps more straight forward people have no faith in their own opinions. It seems like almost everyone is waiting for a savior to tell them what to think.

Thu, 07/19/2012 - 01:36 | 2630843 Bastiat009
Bastiat009's picture

I have gold for sale at the shadow price. Who wants it?

I want to buy a house at real-life today's market price. In the shadow world, subprime lending worked.

Thu, 07/19/2012 - 01:24 | 2630850 Neethgie
Neethgie's picture

This article is absolutely idiotic at best. I'm totally fed up of reading ZH seeing load's of silly comments about gold and silver being some kind of wonderfull thing, better yet people keep putting "stackin silver" yet they are the same people who keep sarcastically posting stuff like "BTFD" or "Investing to infinity" surely they can't see the immense stupidity of it all, if you bought and held silver at almost any point after jan 2011 you'd be sat on a loss, surely you can see the irony of a site decrying financial stupidity promoting yet more private insanity, goldman blow's up its client's article's like this blow up reader's.

Also the shadow value of gold? it doesnt mean shit at all, the fact is mr black bought that painting with dollar's and he will sell it for dollar's imagine asking him, do you want 75,000 oz for your picture mr black, the answer is no he's gonna want usd. The shadow value of gold which might i add is calculated a little dubiously, is completely irrelevant because nobody damn trades in gold, at all infact the whole article is fraudulent if you bought gold a year ago, its value has only risen against currencies, their is no shaddow market where it is magically made more valuable even with inflation factored in. So stop buying gold thinking that you will somehow be any richer tommorow, because if you bought gold last year at its high, with the usd equivalent of a ferrari, guess what? when you swap that gold back for dollars you can now no longer afford a ferrari, where is this amazing shadow market where i can buy ten ferrari's?

Gold is illiquid, it doesnt move easily (we use paper for a reason) you cannot eat gold in a collapse situation it wont be that sought after, people wont instantly use it as a method of transaction, it isnt gonna become something that give's the reader's of zh awesome status. How the hell can this article be taken seriously anyway, it looks like it was wrote by a ten year old.

Infact it's kinda sickening too see stacey herber and keiser talk about how great gold and silver are, then they actually have the nerve to talk about GS killing muppet's when they do the exact same thing. I think that the really sad thing is that the whole buy gold thing is given as a way for the little man to beat the big corporation's with sound money, but really just buying a shiny rock, that wont ever be used as a currency, it's an asset so is boron. I read michael maloney's book on gold and silver and it just reeked of his own personal interest as a person who sell's gold. oh well keep stackin' n dont forget that shadow market when you have to sell it to your broker for half the usd you paid for it.

 

 

Thu, 07/19/2012 - 03:35 | 2630926 Peter Pan
Peter Pan's picture

Neethgie,

You had some truths to what you were writing until this....

"Gold is illiquid, it doesnt move easily (we use paper for a reason) you cannot eat gold in a collapse situation it wont be that sought after,.."

You obviously did not live in a city during waqr torn Europe or in Vietnam when all hell broke loose. If you put your house on the market right now and I put my gold up for sale, guess which one would sell faster and at market price.

Thu, 07/19/2012 - 04:24 | 2630950 Bastiat009
Bastiat009's picture

Gold is money and it is "liquid" but try to carry a gold bar through TSA. You can always ship it if you have the guts.

The edible argument is always annoying because money (currency) can never be eaten.

Thu, 07/19/2012 - 06:57 | 2631037 Bobbyrib
Bobbyrib's picture

Yeah, it sucks if you move countries and have to fly you basically have to liquidate then buy gold again. It's wonderful to know the minute you get on the line for airport security, the US constitution goes out the window and your rights are gone. The last sentence is sarcasm of course.

Thu, 07/19/2012 - 06:55 | 2631036 Bobbyrib
Bobbyrib's picture

Are you trolling, or do you not understand what will eventually happen to the US dollar?

Mr. Black can keep his painting if he doesn't want gold. When TSHTF Mr. Black is going to accept gold from you for his now devalued painting and add a BJ on top of that. What people on this site are talking about is attaining NECESSITIES with gold and silver after the dollar collapses, not Ferraris and paintings (you are pathetic if that is what you're after). In the short term, yes gold can depreciate in value while the dollar appreciates, but in the long term the dollar (at most 5-10 years) will be history.

You also show that you have no understanding that gold has been a currency for thousands of years. Hell, the US currency used to be made out of gold and silver. If you don't want to buy gold or silver, then don't. It will save everyone the aggrevation of dealing with you when the economy eventually completely collapses.

The bankers can't cheat the system forever. They've cheated too many parties and got too greedy. People will eventually stop participating in their rigged system (look at the retail investor and the stock market). If you can't understand these concepts, then it is your lose.

Thu, 07/19/2012 - 07:44 | 2631090 _underscore
_underscore's picture

Yep Neethgie, I've been through the angry denial phase too - and I don't mean that sarcastically either. I see you've been registered for a week or so - just step back a bit & read more articles, don't judge too quickly.

After all, you won't lose anything (in your terms that is - as I  assume you're not buying PMs..) just by absorbing the whole 0Hedge vibe & see if the logic sinks in. I know I was initially very cynical about 'gold pluggers' & talking-their-book types (there are still some articles like that still) - but look at the broader picture, ask the simple fundamental questions: how do indebted actually pay back their debts? (answer: they can't without assuming unimaginable growth rates), so how can those debts be NOMINALLY amortised? Yep, right: money debasement - all the columns of debts vs. assets vs. growth can then match nicely.

As for the opportunity cost of owning treasure (for arguments sake, PMs in our case) - how does my negative real cash deposit return currently (e.g. my cash deoposits 'earn' 3-5% abs. max. , when real inflation is nearer 10%)  & highly likely well into the future, work better?

As for stock/equity - yep, I hold some, maybe one or two will pay (real) dividends, or maybe gain SP wise, but overall the average punter is mere fodder without insider/privileged information, over the long term.

So yes, get angry (I did) then ask yourself those questions.

 

Thu, 07/19/2012 - 11:57 | 2632268 Lord Koos
Lord Koos's picture

"...imagine asking him, do you want 75,000 oz for your picture mr black, the answer is no he's gonna want usd".

Hate to break the news to you, but in real life, private transactions like that happen all the time.

 

"it looks like it was wrote by a ten year old."

 

Uh huh...

Thu, 07/19/2012 - 01:59 | 2630872 XXL66
XXL66's picture

I bought gold in 2008 (take a look at the 5 year gold chart in euro's), i'll buy real estate here in EU when nobody wants it (1 kg for a home, happened multiple times in history).

If you have a better alternative for gold, please tell me ...

btw: you CAN eat gold.

Ferrari's huh, you a banker ?

 

Thu, 07/19/2012 - 02:17 | 2630886 Neethgie
Neethgie's picture

Mongolian tugrik  has done better vs euro's than gold this year, just because you bought an asset that appreciated doesnt mean it has some mythical world value about it, real estate is falling so you might get a house for 1kg although it would be a pretty poor house if we are honest. AAPL has done even better than gold, except for in this mythical shadow market where gold has outperformed everything ever in existance, yet is strangely never reflected in the price. Read the article look how amateurish it's put together, how insultingly childish it is and finally how it uses the confidence trick's of "appreciating" "risk free", now look at yourself and ask if you had a few more 0's on your net worth would you be one of goldman's muppet's.

Thu, 07/19/2012 - 03:42 | 2630928 Peter Pan
Peter Pan's picture

Neethgie, you really miss the point. The article may be half baked but to compare gold to the Mongolian Tugrik puts you in a worse light than the writer of the article.

Anyway, one man's meat is another man's poison so if its Mongolian Tugriks you prefer let's talk again in 12 months time, 24 months and so on when the Tugrik starts to approach gold's 5000 year history.

Gold's "price" may vary throughout history but it has NEVER been worthless. Not so sure about Tugriks, dollars and drachmas.

Thu, 07/19/2012 - 02:12 | 2630884 doug79
doug79's picture

If all of this base money is going to be printed.  When the central banks of the world print all of this currency they should divide it equally amongst the residents of their countries and give it to them.  With the provision that they must first pay down whatever debts that they may have.  It would deleverage people and the banks. 

 

But no what they will do is give the money directly to the banks so that they can lend it to the governments and increase the problem.

Thu, 07/19/2012 - 03:47 | 2630930 Peter Pan
Peter Pan's picture

Dear Dou79, your offering is idelaistic and I know where you are coming from. But unfortunately, it won't work. For starters, it is unlikely that those with debt will receive enough to pay that much of their debt off and those with too much wealth will simply have more.

Thu, 07/19/2012 - 07:01 | 2631043 Bobbyrib
Bobbyrib's picture

Also, Doug79's scenario is not the best way the bankers game the system. If you print money and give it to them for free and the average person still owes them money, they get free money and the borrower still holds the obligation to pay them (win, win). They would rather cheat the whole country than get their money back.

Thu, 07/19/2012 - 12:00 | 2632288 Lord Koos
Lord Koos's picture

That can't happen because giving the money to regular people would be SOCIALISM.  Giving the money to banks is CAPITALISM.

Thu, 07/19/2012 - 04:42 | 2630957 EmileLargo
EmileLargo's picture

I think the "shadow" price is about a quarter of what he says it is. Historically, gold backed currencies were pegged at a gold price that effectively made the country's official gold holdings valued at a quarter of the total monetary base (currency + bank reserves). This is how it was done in England. I don't think the entire Base Money supply was ever kept gold backed during any of the "gold standard" experiments.

Therefore, in the current environment, the realistic shadow price is around $2500 an ounce. That means gold is a bargain currently at $1580 and is around 35 percent underpriced. Of course, if there is a panic out of paper currency then gold will rise a lot more than a quarter of the official gold holdings of the country.

It may be that the shadow price is the wrong way to look at it. A much better way would be to say that official US sovereign debt is around $16 Trillion. What percentage of that today would need to be gold backed in order to prevent a panic out of US debt (assuming there was one)?

Thu, 07/19/2012 - 07:48 | 2631099 Ted Baker
Ted Baker's picture

BEST OF ALL - A MUST READ

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