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Guest Post: Gold's Value Today

Tyler Durden's picture





 

Via John Aziz of Azizonomics,

 

Way back in 2009, I remember fielding all manner of questions from people wanting to invest in gold, having seen it spike from its turn-of-the-millennium slump, and worried about the state of the wider financial economy.

A whole swathe of those were from people wanting to invest in exchange traded funds (ETFs). I always and without exception slammed the notion of a gold ETF as being outstandingly awful, and solely for investors who didn’t really understand the modern case for gold — those who believed that gold was a “commodity” with the potential to “do well” in the coming years. People who wanted to push dollars in, and get more dollars out some years later.

2009 was the year when gold ETFs really broke into the mass consciousness:

Yet by 2011 the market had collapsed: people were buying much, much larger quantities of physical bullion and coins, but the popularity of ETFs had greatly slumped.

This is even clearer when the ETF market is expressed as a percentage of the physical market. While in 2009 ETFs looked poised to overtake the market in physical bullion and coins, by 2011 they constituted merely a tenth of the physical market:

So what does this say about gold?

I think it is shouting and screaming one thing: the people are slowly and subtly waking up to gold’s true role.

Gold is not just a store of value; it is not just a unit of account; and it is not just a medium of exchange. It is all of those things, but so are dollars, yen and renminbei.

Physical precious metals (but especially gold) are the only liquid assets with negligible counter-party risk.

What is counter-party risk?

As I wrote in December:

Counter-party risk is the external risk investments face. The counter-party risk to fiat currency is that the counter-party — in this case the government — will fail to deliver a system where that fiat money will be acceptable as payment for goods and services. The counter-party risk to a bond or a derivative or a swap is that the counter-party  will default on their obligations.

 

Gold — at least the physical form — has negligible counter-party risk. It’s been recognised as valuable for thousands of years.

 

Counter-party risk is a symptom of dependency. And the global financial system is a paradigm of interdependency: inter-connected leverage, soaring gross derivatives exposure, abstract securitisations.

 

When everyone in the system owes shedloads of money to everyone else the failure of one can often snowball into the failure of the many.

Or as Zhang Jianhua of the People’s Bank of China put it:

No asset is safe now. The only choice to hedge risks is to hold hard currency — gold.

So the key difference between physical metal and an ETF product is that an ETF product has counter-party risk. Its custodian could pull a Corzine and run off with your assets. They could be swallowed up by another shadow banking or derivatives collapse. And some ETFs are not even holding any gold at all; they may just be taking your money and buying futures. Unless you read all of the small-print, and then have the ability to comprehensively audit the custodian, you just don’t know.

With gold in your vault or your basement you know what you’re getting. There are other risks, of course — the largest being robbery, alongside the small danger of being sold fake (tungsten-lined) bullion. But the hyper-fragility of the modern banking system, the debt overhang, and the speculative and arbitrage bubbles don’t threaten to wipe you out.

Paper was only ever as good as the person making the promise. But increasingly in this hyper-connected world, paper is only ever as good as the people who owe money to the person making the promise. As we saw in 2008, the innovations of shadow banking and the derivatives system intermesh the balance sheets of companies to a never-before-seen extent. This often means that one failure (like that of Lehman brothers) can trigger a cascade that threatens the entire system. If you’re lucky you’ll get a government bailout, or a payout from a bankruptcy court, but there’s no guarantee of that.

Physical gold sits undaunted, solid as a rock, retaining its purchasing power, immune to counter-party risk.

I think more and more investors — as well as central banks, particularly the People’s Bank of China — are comprehending that reality and demanding the real deal.

 


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Sat, 04/28/2012 - 22:20 | Link to Comment fourchan
fourchan's picture

either you have it or you dont.

Sat, 04/28/2012 - 23:41 | Link to Comment Max Fischer
Max Fischer's picture

 

 

Fantastic comment!  So true... either I have it, or I don't.  Great insight.   

MF. 

Sat, 04/28/2012 - 23:51 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

If you have a lot of gold then your heirs may not turn to silver prematurely.

Sun, 04/29/2012 - 00:30 | Link to Comment Doña K
Doña K's picture

Sounds like confucious says

Sun, 04/29/2012 - 00:35 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

"Man who seek gold in woman also find out she good at gold digging too."

Neoconfucius

 

Sun, 04/29/2012 - 01:34 | Link to Comment The Peak Oil Poet
The Peak Oil Poet's picture

 

 

 

i surely do love silver
i surely do love gold
they'll be as they are trusted now
and since the days of old

they way they feel good in your hand
they way they gleam and shine
there's nothing quite so lovely
there's nothing that's so fine

and trust, that's something few have felt
in printed paper bills,
is what you can't help feeling when
your secret stash gold fills

when all is falling 'round our ears
and markets crash and burn
it's saftey that you cherish most
it's not a "sound return"

and so i'll love my metals
so precious and so fine
i'll hold them 'til i need them
in the coming long decline

'cause these are the true money
that always hold their worth
and if they are a "relic"
well, then so to is the earth

Sun, 04/29/2012 - 02:31 | Link to Comment The4thStooge
The4thStooge's picture

 

 

 

and if they try to take my gold

they've made the wrong descision

i some other metals

which I fire with precision

 

 

 

Sun, 04/29/2012 - 02:57 | Link to Comment CompassionateFascist
CompassionateFascist's picture

epic poetry. Post Ponzi-collapse, lead is indeed going to be the prime medium of "exchange" for some time to come.

Sun, 04/29/2012 - 04:32 | Link to Comment prole
prole's picture

He's a post-ponzi poet, and he didn't even know it.

When they come for your gold, give them free lead instead

Sun, 04/29/2012 - 09:09 | Link to Comment peekcrackers
peekcrackers's picture

I have never seen a gold Coin , bullion , or Round   that says .

"this NOTE  is leagle tender For all DEBITS public and Privet "

 

 

 

Sun, 04/29/2012 - 09:28 | Link to Comment flacon
flacon's picture

Yes that is interesting. Not even our zinc and steel (in Canada) coins talk about being a NOTE for DEBTS. Could it be that perhaps the metal itself is the asset to extinguish debts? Hmmm.... I wonder how many universities teach these concepts.... Does anyone know why Ben Bernanke, or Timmy Geithner doesn't suggest to the government that revaluing gold could extinguish the debts? Why on earth do they insist on squeezing a rock (us) to milk it of every drop before they just admit that the paper NOTES are worth less and less...

 

Oh... I get it... they are after the FRUITS OF OUR LABOUR! That's what they want, not gold, they want OUR PRODUCTIVE CAPACITY for themselves. 

 

 

Sun, 04/29/2012 - 09:45 | Link to Comment peekcrackers
peekcrackers's picture

Taxes on  our asses to create the slave masses

Mon, 04/30/2012 - 00:55 | Link to Comment engineertheeconomy
engineertheeconomy's picture

in gold we trust

Sun, 04/29/2012 - 10:46 | Link to Comment diesheepledie
diesheepledie's picture

Exactly. ^ Someone who actually gets it. That is precisely what FRNs and digital fiat are. They are units of your labor. And if you have them they can be used as "Hall Passes" to be exchanged for momentary freedom, or for others toiling on your behalf. Yes they are SLAVE DEEDS. Far more valuable than any shiny metal. 

Sun, 04/29/2012 - 11:51 | Link to Comment disabledvet
disabledvet's picture

Exactly WHOSE debts get extinguished numb nuts? Not yours that's fer shore! Now "go make an Army with all that gold you claim to have" you pathetic boob.

Sun, 04/29/2012 - 19:06 | Link to Comment prole
prole's picture

Poof! He's an army of one, sir.

 

 

Sun, 04/29/2012 - 16:20 | Link to Comment WhiteNight123129
WhiteNight123129's picture

A lot of Silver mines have lead as a by product.

 

Sun, 04/29/2012 - 17:47 | Link to Comment chirobliss
chirobliss's picture

Oh gawd, another guns'n gold circle jerker!

Sun, 04/29/2012 - 02:36 | Link to Comment jomama
jomama's picture

what happened to your 'mr. earth citizen represenative' sig?

Sun, 04/29/2012 - 04:30 | Link to Comment prole
prole's picture

He's decided to change it so:

Maxie Fischer

Pedanticus Imbecilus

Sun, 04/29/2012 - 05:09 | Link to Comment Praetor
Praetor's picture

I thought it was

Max Fischer

Fuckwittius Maximus

Sun, 04/29/2012 - 02:50 | Link to Comment TWSceptic
TWSceptic's picture

Still contains more value than the response you posted.

Sun, 04/29/2012 - 08:05 | Link to Comment BeetleBailey
BeetleBailey's picture

...and, you don't...have anything....

 

Sun, 04/29/2012 - 13:15 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Max Fischer, the only way not to be lost in uncessary convoluted intellectualism is to remember basic truth, immutable true statements. That what people in science do, they start with the obvious. We have an entire school of idiot economists that tell us that you can spend more than you earn and it is ok because there is a convoluted explanation that those who defend it fake to understand ( they rely on faith). The school of economics today ressemble the catholic church organizing lengthy debate to figure out how many angels could stand on the head of a pin. Empirical evidence show that excessive debt lead to ugly corrections and large debasement driven inflation, I urge you to get the data from Kenneth Rogoff, but you will tell us that this time is different I guess because you have a smart explanation? I know some unbelievably bright people in the scientific community, they have NO intellectual arrogance, the concept is foreign to them, they actually have a tendency to be a bit not very self confident. On the opposite I have seen many idiot arrogant lawyers and economists by training full of themselves. 

Sat, 04/28/2012 - 23:40 | Link to Comment xela2200
xela2200's picture

Also, you either get it or you don't.

Sun, 04/29/2012 - 01:52 | Link to Comment caconhma
caconhma's picture

It is of interest that for the last 40 years Nobel prizes in Peace and Economics had nothing to do with either science or truth. For all practical points of view, Nobel Prizes were just propaganda tools used to promote bogus "values" as well as fraudulent and baseless speculations.

The so called New World Order, with the Zionist Central Banking Mafia in control of mass media, political and economic institutions, has used either colonial slavery or wars to promote their agendas. They not only destroyed endless human live and inflicting endless human suffering but also destroyed endless countries and the Western civilization as we know it.

Their arrogance is out of control. It will not only destroy millions of innocent lives but also will destroy the Mafia.

Gold, as it has done for many thousands years, will survive them all!

Sun, 04/29/2012 - 10:06 | Link to Comment theTribster
theTribster's picture

Every organization that matters has been bought or stolen, that simple. Nothing can be believed that they say, nothing can be trusted that they do, these are the purest form of criminals.
When this finally falls apart it is these same people that will be hunted like animals, their money won't save them as the new politicians see that being with the people IS the way to go, this will happen after they realize that horrible death is their only other option - yeah, they'll be rich but also they'll be dead.
It is coming fast and they know it, by the end of the summer (or sooner) we'll be in a global revolution - no where for them to hired but Russia or China - if they'll have them....
A popular bumper sticker some years ago is very applicable: "Kill them all and let God sort them out"...

Sun, 04/29/2012 - 16:57 | Link to Comment dougngen
dougngen's picture

I have a question, you say "zionist central banking mafia" but I thought the center of all banking was in London.? can you explain, I'm really curious because I hear this phrase often but don't know the genesis of it.

Sun, 04/29/2012 - 03:13 | Link to Comment anonum
anonum's picture

"It's better to have some and not need it, than to need some and not have it."

Sat, 04/28/2012 - 22:22 | Link to Comment Likstane
Likstane's picture

I'd like to smack Ben in the head with a gold bar, and then ask him if it felt like money.

Sat, 04/28/2012 - 23:30 | Link to Comment Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

in other words, gold ETFs are converging to their fundamental value, zero

Sun, 04/29/2012 - 00:36 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

If you repeatedly hit his head with a gold bar it would resemble the Dome of the Rock.

Sun, 04/29/2012 - 00:03 | Link to Comment Shazam342
Shazam342's picture

Damn, that was funny!

Sun, 04/29/2012 - 01:03 | Link to Comment Vendetta
Vendetta's picture

One cannot knock sense into a brickhead.  Brickheads crush themselves under the weight of their own faulty thinking.   - V 2012 AD

Sun, 04/29/2012 - 01:49 | Link to Comment Manthong
Manthong's picture

How about this maneuver with golden gloves?

http://www.youtube.com/watch?v=X7PYIavU5T8

Sun, 04/29/2012 - 04:02 | Link to Comment noses
noses's picture

Whacking. You're oing it wrong.

 

You should use a similar sized wad of bills and hit him with them, too. And *THEN* ask him what fheels like the harder currency.

Sun, 04/29/2012 - 05:21 | Link to Comment spentCartridge
spentCartridge's picture

A smack in the mouth would be better.

Knock all of his fucking teeth out.

 

Sat, 04/28/2012 - 22:23 | Link to Comment Deo vindice
Deo vindice's picture

  either you have it or you dont.

And by far the most don't. Still being entertained into oblivion.

Sat, 04/28/2012 - 22:28 | Link to Comment fourchan
fourchan's picture

can you imagine the price if the .001% (or whatever tiny percentage)

 

of physical holders, increased to even 10 percent of the population?

Sat, 04/28/2012 - 23:52 | Link to Comment WP45
WP45's picture

Just 1% and I'd be in the 1%.

Sun, 04/29/2012 - 00:05 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

I knew a gal who thot she had gold between her legs.  She was right except it was 2' above that in the form of a sunken chest.

Sun, 04/29/2012 - 01:05 | Link to Comment Vendetta
Vendetta's picture

we didn't need that information, thanks for sharing anyways.

Sat, 04/28/2012 - 23:15 | Link to Comment Deo vindice
Deo vindice's picture

To those who down-arrowed me...

Are you saying that most people DO have gold?  Really?

And you disagree that most people are so tied to their entertainment(s) as to be oblivious to the reality of the situation?

Wow. Glad you are at least reading ZH. Maybe you'll learn something...

Sat, 04/28/2012 - 23:30 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

Oil is the real hard currency. And the US of A owns in it spades ... in the Middle East.

Sun, 04/29/2012 - 00:38 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

Gold can buy you a lot of things in life especially later in your golden years when you involuntarily pee your pants.

Sun, 04/29/2012 - 04:04 | Link to Comment noses
noses's picture

Your forgetting that the US is currently getting seriously pwned by China and India.

Sun, 04/29/2012 - 05:34 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

I didn't know China and India had "boots" on the ground and on Naval ships in the Gulf! I thought they just provided serfs in the ME. The oil flows only to the extent that the US/swappable currency countries allow. Period. Anything else would result in some unpleasantness for sure.

Sun, 04/29/2012 - 06:33 | Link to Comment sessinpo
sessinpo's picture

IBelieveInMagic                 2383115

Oil is the real hard currency. And the US of A owns in it spades ... in the Middle East.

 

Comment:

Comments like the one above are being proven to be idiotic much like man caused global warming.

Fact: The US imports more oil from Canada and Mexico, Canada being #1

Additionally, the leftist mantra that the US has only 2% (proven reserves) of the world's oil but uses 20% plus is currently under debate and if is premature to say where the US stands on oil reserves. However, it is clear, that the US has more oil then the 2% because of new technologies and discoveries such as oil shale. We also have an abundance of natural gas. Quite frankly, I have no problem using other countries resources that they are willing to sell to us. Later down the road, it is those same foriegn countries that may be energy dependent on the US.

 

Sun, 04/29/2012 - 16:09 | Link to Comment aphlaque_duck
aphlaque_duck's picture

I have no problem using other countries resources that they are willing to sell to us.

Except that they are NOT. We have a gun to their heads which says their oil sells in USD.

 

Sat, 04/28/2012 - 22:23 | Link to Comment Real Money Wins
Real Money Wins's picture

GOLD!  

Better than anything in your wallet or your portfolio!!

 

BTD

Sun, 04/29/2012 - 00:06 | Link to Comment fnord88
fnord88's picture

Maybe. I have high hopes for my gold. But when everyone finally realises what a scam Keynesian econ really is, i think the signed first edition first print copies of Hayek and Rothbard I have will be worth a lot more than my gold.

Sun, 04/29/2012 - 00:31 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

One thing I've noticed about Gold Bugs is that they don't squash easily.

Sun, 04/29/2012 - 02:34 | Link to Comment PaperWillBurn
PaperWillBurn's picture

I carry a 1oz AGE in my wallet.

Sun, 04/29/2012 - 05:28 | Link to Comment anonum
anonum's picture

Today's silver is tomorrow's gold.

Sun, 04/29/2012 - 10:13 | Link to Comment theTribster
theTribster's picture

Yes, like it...that is very accurate statement.

Mon, 04/30/2012 - 00:08 | Link to Comment Ag Tex
Ag Tex's picture

Soon you will need gold in order to afford silver.

Sat, 04/28/2012 - 22:24 | Link to Comment toady
toady's picture

Gold is great for rich people, but I can't afford more than an ounce or two a month. I have a lot of silver, but gold is just too much.

Sat, 04/28/2012 - 22:25 | Link to Comment fonzannoon
fonzannoon's picture

An ounce or two a month? Over a decent time period that seems pretty damn good to me.

Sat, 04/28/2012 - 22:27 | Link to Comment Deo vindice
Deo vindice's picture

He's setting you up. Some people like to boast by appearing they aren't.

Sat, 04/28/2012 - 22:33 | Link to Comment Aziz
Aziz's picture

Putting away an ounce or two a YEAR will give you the purchasing power to feed your family for a few months. Could be invaluable.

Sat, 04/28/2012 - 22:53 | Link to Comment toady
toady's picture

That's why I do it!

I'm a little worried about the other side with gold too... who is going to buy it when its SUPER expensive and I need to sell? I guess I just need to never 'need' to sell...

That's why I still buy more silver than gold. The numbers are much more manageable.

Keep stacking compadres!

Sat, 04/28/2012 - 23:10 | Link to Comment jimmyjames
jimmyjames's picture

who is going to buy it when its SUPER expensive and I need to sell?

************

You will likely be selling it at high prices to the same people who sold it to you cheap-

Central banks and Governments that will be desperate for gold to back their crashing currencies-

Sun, 04/29/2012 - 13:31 | Link to Comment Diogenes
Diogenes's picture

The price of gold does not change. The price of paper changes.

 

In 1870 gold was $20 an ounce and $20 would buy you a good suit of clothes. 20 ounces ($400) would buy you a horse and buggy and 200 ounces ( $4000) would buy a farm.

In 1940 gold was $35 an ounce and $35 would buy you a good suit of clothes. 20 ounces ($700) would buy a new Chevrolet and 200 ounces ($7000) would buy a farm.

In 2012 gold is $1600 an ounce and $1600 will buy you a good suit of clothes. 20 ounces ($32000) will buy you a new Chevrolet and 200 ounces ($320,000) will buy a farm.

100 years from now who knows how many "dollars" an ounce of gold will be "worth" or if we will even be using dollars. But I bet an ounce of gold will still buy a good suit of clothes, 20 ounces will buy a new car, or possibly a jet propelled space ship, and 200 ounces will buy a farm.

Sun, 04/29/2012 - 14:31 | Link to Comment smiler03
smiler03's picture

Interesting. Could you post again using the years 1980 and 2008, that would be even more interesting.

 

Sun, 04/29/2012 - 14:52 | Link to Comment akak
akak's picture

I see you are still disingenuously trying to beat that 1980 gold price spike dead horse.

Isn't it rather pulpy by now?

Yes, it is true that, contrary to the poster's claim above, the value of gold DOES change over time --- but that is largely a reflection of the changing perceptions of the value of our government-controlled fiat currencies, and the ever-changing levels of trust in our corrupt and failing financial and monetary systems, rather than anything inherent in gold itself.  Was not a seat in a lifeboat on the Titanic worth vastly more after the ship hit the iceberg, rather than before?

Nevertheless, it is specious and outright dishonest to try to denigrate the worth of holding gold based on a one-time and BRIEF price spike over 30 years ago.  The simple fact is, vanishingly few ever bought gold at or anywhere near that transient price spike, so your argument is nothing but cherry-picking taken to the ultimate, and disingenuous, extreme.  For that I spit on you.

Sun, 04/29/2012 - 15:33 | Link to Comment Diogenes
Diogenes's picture

I just told you the price of gold does not change. The price of dollars changes. There are times when the gold/dollar relationship gets out of whack. Just like there are times when stocks are overpriced/underpriced in relation to value. But there is an equilibrium point and over time the market has a strong tendency to correct.

To put it another way, 1980 and 2008 tell you more about the value of paper and the state of the economy than the value of gold. Get used to looking at value in terms of gold, not paper, and a lot of things become clear.

This also means if you are looking forward to the day when gold is worth $1,000,000 an ounce so you can buy a mansion for one ounce of gold you are bound to be disappointed.

Gold may well be worth $1,000,000 an ounce some day. But when that day comes, a good suit will cost $1,000,000, a new car $20,000,000 and a farm $200,000,000. And someone who put away an ounce of gold in 2012 will be better off than someone who put away $1600 in cash.

Mon, 04/30/2012 - 00:26 | Link to Comment The.Oracle
The.Oracle's picture

Yup exactly. Check out Mike Maloney or youtube channel: http://www.youtube.com/wealthcycles . Learned a lot from that man.

Sat, 04/28/2012 - 23:16 | Link to Comment Harbanger
Harbanger's picture

"who is going to buy it when its SUPER expensive and I need to sell?"

It would be super expensive because the buyers (locally/globaly) would be lined up and ready to pay that cash price.  You'll have no problem converting pm's to fiat.

Sun, 04/29/2012 - 04:08 | Link to Comment noses
noses's picture

"You'll have no problem converting pm's to fiat."

 

Except where it will be forbidden. 8-)

Sun, 04/29/2012 - 05:00 | Link to Comment Zgangsta
Zgangsta's picture

That's where black markets fill the need.

Sun, 04/29/2012 - 05:17 | Link to Comment Praetor
Praetor's picture

But at that stage with a high fiat price will be indicative the currency is dead, so there would be little point exchanging your gold at that time. It would be better to exchange your gold directly for hard assets during the chaos (skip the fiat swap in case fiat goes to zero) or wait to see a new currency formed and then convert some of your gold holdings.

Sat, 04/28/2012 - 23:42 | Link to Comment A Nanny Moose
A Nanny Moose's picture

Everybody has a price. Price discovery works at the transaction level too. What if nobody wants FRNs....at any price?

Sun, 04/29/2012 - 00:12 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

The only problem I see with someday transacting in gold for everyday practical shit.............................

"Excuse me, but you would you happen to have change for a 4 lb bar of gold by any chance?"

"Yeah, wait here a second while I retrieve a 45 lb box of silver dollars, two chickens, 4 prime ribs, and a ruby earring."

Sun, 04/29/2012 - 01:42 | Link to Comment Manthong
Manthong's picture

You probably won't need to give up the prime ribs on that trade.

Sun, 04/29/2012 - 02:01 | Link to Comment Deo vindice
Deo vindice's picture

Depends on how hungry you are.

They might be the only thing of value at that moment.

Sun, 04/29/2012 - 04:48 | Link to Comment prole
prole's picture

When the Fiat Ponzi collapses, only those with gold eat, and those with food only accept gold in payment.

http://www.youtube.com/watch?v=7ubJp6rmUYM

Now I am just guessing here that there will be other things they accept, like one's daughters, but when one has  gold it won't get to that

Confederate Currency not going to cut it, sadly

Fri, 06/15/2012 - 20:40 | Link to Comment Overfed
Overfed's picture

Silver is for small purchases.

Sun, 04/29/2012 - 06:38 | Link to Comment sessinpo
sessinpo's picture

toady                         2383069

I'm a little worried about the other side with gold too... who is going to buy it when its SUPER expensive and I need to sell? I guess I just need to never 'need' to sell...

 

Comment:

Actually, you may be using your PM as a currency itself. For example, I need some work done, I have some american eagles that I will trade you for your services. I need food, will you take my silver eagle in exchange for this amount of food. etc.

Sat, 04/28/2012 - 23:57 | Link to Comment in4mayshun
in4mayshun's picture

Oh freaking get real! When people are using gold to try to buy food were all royally f#!?$d.

Sun, 04/29/2012 - 00:05 | Link to Comment Seer
Seer's picture

I'll agree that things would be pretty bad at that point, BUT... it's going to get bad any way that you look at it.

If there's a surplus of food available then yes, one could use gold to obtain it.  Price is likely going to be very high for many, and the REAL protection is to be able to grow your own food (to some degree): this is the case in ALL of human history; our modern area is a complete distortion.

Sun, 04/29/2012 - 00:47 | Link to Comment Matt
Matt's picture

In Zimbabwe, people had to go into the hills and dig or pan for gold and diamonds to buy food during the end, after people stopped accepting $5 trillion bills and Germany wouldn't sell any more paper or ink for printing higher denominations.

Sun, 04/29/2012 - 02:34 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

It works in a limited way. But, not when it is planet wide situation. Sorry, Gold is an archaic metal and will not revert to it's exalted position as this time it is truly different.

Sun, 04/29/2012 - 05:22 | Link to Comment DutchR
DutchR's picture

Gold For Bread - Zimbabwe

http://www.youtube.com/watch?v=7ubJp6rmUYM

 

 

Sat, 04/28/2012 - 22:33 | Link to Comment fonzannoon
fonzannoon's picture

Oh...well fk him then.

 

Sat, 04/28/2012 - 22:44 | Link to Comment SilverRhino
SilverRhino's picture

If you are actually able to put away an ounce or two a month then you ARE one of the rich people in the eyes of at least half of the population of the United States and most of the rest of the world.   

Sat, 04/28/2012 - 23:11 | Link to Comment lunaticfringe
lunaticfringe's picture

Dude's full of shit. Hardly worth the words here.

Sat, 04/28/2012 - 23:43 | Link to Comment Mamzer Ben Zonah
Mamzer Ben Zonah's picture

An ounce or two a month is not much, quite a lot of people can do that without a problem. Good if you can stick to the discipline.

Sun, 04/29/2012 - 00:44 | Link to Comment toady
toady's picture

I do have problems with comsistemcy... last month I had to get some dental work done and could only get 20 oz pf silver, and months when property taxes are due I generally can't afford anything. At least two or three more months a year I get hammered woth unexpected bills.

But I'm trying!

Sun, 04/29/2012 - 13:15 | Link to Comment gdogus erectus
gdogus erectus's picture

For sure, brother. I try to peel off an extra $3700 a month from my wages to buy gold too. If more people were disciplined like us, they would actually have some real savings.

Sun, 04/29/2012 - 16:07 | Link to Comment Prometheus418
Prometheus418's picture

That'd be an awesome amount of disicipline, considering that's my entire take-home pay, and I have to support a family of five with it.  

It's not always about disicipline- and don't give me any crap about being lazy or picking the wrong trade, I'm an aerospace engineer.  Being younger and living in a less populated area should not be an automatic sentance.

Those of us in my position get to ride the devil's metal, but at least we've got that- I'm just tired of the gold bugs looking down thier noses at the silver bugs.  It's like arguing over vanilla and chocolate- either way, we're all eating ice cream.  Better than storing wealth in commemorative Budweiser and Nascar mirrors, which seems to be the most common strategy in my neck of the woods.

Sun, 04/29/2012 - 00:08 | Link to Comment Seer
Seer's picture

2/3 of the world's population lives on $3/day or LESS!

Sun, 04/29/2012 - 04:12 | Link to Comment noses
noses's picture

For a planet that is specified to be able to support a population of less than 1 billion people (without getting damaged in the process) that's quite some achievement.

Sun, 04/29/2012 - 14:35 | Link to Comment smiler03
smiler03's picture

For a planet that is specified???

Have you got the Earth's Owners Manual? Dork.

Sun, 04/29/2012 - 15:44 | Link to Comment Likstane
Likstane's picture

Have you addressed AKAK or Diogenes response to your ignorant comments regarding the value of gold in any time period or are you going to ignore your fallacious remarks as if they weren't made?  Either tap out by admitting your error or continue fighting.  This is fight club, not run away club. 

Sun, 04/29/2012 - 07:18 | Link to Comment scatterbrains
scatterbrains's picture

How many meals does that translate into when an ounce of silver jumps 10 fold and those hunger stats of yours move stateside?

Sat, 04/28/2012 - 22:49 | Link to Comment Uchtdorf
Uchtdorf's picture

Toady, think of it this way: Gold is not "just too much." FRNs are just too little. Alternatively, think of it as, "they're giving away perfectly good gold coins for perfectly worthless FRNs.

Sat, 04/28/2012 - 22:59 | Link to Comment toady
toady's picture

That's my thinking.

About once a month I take every extra frn (except a few thousand slush fund) to the coin store and load up.

Sat, 04/28/2012 - 23:14 | Link to Comment cristo
cristo's picture

if you can afford an ounce or two a month you're the rich people

Sun, 04/29/2012 - 00:51 | Link to Comment Matt
Matt's picture

I wouldn't say having $50K per year in disposable income is really rich, but certainly better off than the vast majority.

Sat, 04/28/2012 - 22:25 | Link to Comment cbaba
cbaba's picture

You have to add one more thing, Fiat Currency has a flag behind, the central bank of the country where it is printed, so you have to trust this country. But Gold has no Flag, it is accepted as a currency in all countries.

 

Sat, 04/28/2012 - 22:32 | Link to Comment Aziz
Aziz's picture

Correct. The counter-party involved with holding fiat currency is... the issuer. The issuer goes kaput, your investment goes kaput.

Sat, 04/28/2012 - 23:36 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

I think we are missing the point. The USD has oil behind it. As long as other countries are unwilling or unable to break the USD hegemony of oil, the USD is safe. And the only way to break that hegemony would be war -- at that point, nothing matters. Keep stacking but it won't do you any good -- if the system is going down, the PTB has no choice but to take down everything... Instead just enjoy life ! 

Sun, 04/29/2012 - 06:43 | Link to Comment sessinpo
sessinpo's picture

IBelieveInMagic               2383122

As long as other countries are unwilling or unable to break the USD hegemony of oil, the USD is safe.

 

CommentL:

And that ZH's is why Iran really has sanctions against it - because they are trying to exchange their oil for goods and currencies not in US dollars. Oh yea, other nations are making similar deals, China with Russia anyone? Been done. Right now, the trouble with Euroland is what is helping to keep the dollar as the reserve. But all roads come to an end.

Sat, 04/28/2012 - 22:26 | Link to Comment Hulk
Hulk's picture

Don't get MF Globaled Bitchez! If it ain't in your hands, you don't own it...

Sat, 04/28/2012 - 22:28 | Link to Comment Yen Cross
Yen Cross's picture

 I clearly stated last week/ go long aud/everything!  Those weirdo Canadian bugs make me laugh! Is the Canadian dollar pegged to U.S. equity markets? Oh I get it.  QE makes the usd/cad trade go parabolic, when all the cash goes to emerging markets!

 Canada, the 51st state!

Sat, 04/28/2012 - 22:31 | Link to Comment fourchan
fourchan's picture

best state in the union. canada, americas hat.

Sat, 04/28/2012 - 23:00 | Link to Comment Yen Cross
Yen Cross's picture

 You clearly missed my sarcasm!  Have you checked the " tightening on crude spreads"? Not that it matters.

  U.S. gdp @ 2.2%?

Sat, 04/28/2012 - 23:13 | Link to Comment Likstane
Likstane's picture

gotta add the sarc tag, dude!

Sat, 04/28/2012 - 23:47 | Link to Comment Yen Cross
Yen Cross's picture

 I'll try harder next time. Thanks for your patience.

Sat, 04/28/2012 - 22:36 | Link to Comment long-shorty
long-shorty's picture

very confused by these alleged statistics. the # of shares outstanding in the GLD (the largest ETF) are actually UP since 2009, so unless there is suddenly seven times more physical gold above ground (which there is most certainly not), it is non-sensical to say that the "% of the market" represented by ETFs has dropped from 75% to 10%. the market for PM ETFs has most certainly not "collapsed."

not sure why it is a good thing if all of a sudden people are flipping/trading their physical gold more often, which seems to be the only statistic this article is based on.

Sat, 04/28/2012 - 22:43 | Link to Comment junkyardjack
junkyardjack's picture

Its a game of hot potatoe, who is going to be left holding the worthless metal not backed by anything?

Sun, 04/29/2012 - 02:55 | Link to Comment TWSceptic
TWSceptic's picture

Something with intrinsic value doesn't have to be backed by anything. That's the whole point of money. And it's the reason that fiat currency is a stupid idea.

Sun, 04/29/2012 - 10:02 | Link to Comment WAMO556
WAMO556's picture

For Real?? Gold backs up gold. Gold backs up paper. You had a interesting post and needed a quick dose of reality! Just saying.

Sat, 04/28/2012 - 23:00 | Link to Comment GMadScientist
GMadScientist's picture

Fuck paper.

Sat, 04/28/2012 - 23:59 | Link to Comment shuckster
shuckster's picture

I'll take your paper - just wire it to my account no questions asked!

Sun, 04/29/2012 - 00:10 | Link to Comment Seer
Seer's picture

"no questions asked!"

Except by Homeland Security...

Sun, 04/29/2012 - 01:49 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Dupe post

Sun, 04/29/2012 - 01:21 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

@ GMad

+ 1  Physical in your own possession is what will save you!

Sat, 04/28/2012 - 22:42 | Link to Comment DavidPierre
DavidPierre's picture

 

 

"Deals" ahead of "revaluation".

First and maybe most important, China announced that they will purchase oil from Iran and will pay in Gold.

This follows the same type of arrangement announced by India a couple of weeks ago. THIS is a very big "in your face" to the western world's SWIFT transfer and settlement system. No matter how you look at it, this is Dollar negative and further proof that Dollar demand will drop as the world distances itself from the use of Dollars.

Economic numbers out of Euroland have turned decidedly weak as Britain looks toward the double dip abyss and Spain is rapidly "sliding" down the Greece'd totem pole towards bailouts.  Spain however is no Greece by a long shot, they are "Greece squared" or maybe cubed because they are so much bigger and their banks are suffocating on home loans where the collateral has collapsed.  The European sovereigns are doing the exact same things as are the Fed and Treasury, whatever you want to call it, the bottom line is plain and simple monetization. The Fed already is the largest buyers of Treasury bonds, it is only a matter of time before they become the ONLY buyer.

Same story in Europe where the ESM, EFSF and other "programs" (funded also in a big way by out wonderful Federal Reserve providing "currency swaps") provide "liquidity" to the banks who in turn buy sovereign debt. It is one big merry go round of Ponzi laid upon Ponzi that is already obvious. It is just a matter of time before it becomes "obvious enough" for Jane and John Doe to see, realize and understand.

A week ago several announcements from the IMF, BIS and World Bank regarding levels of and use of Gold as "money" (maybe Ben Bernanke read these?), preparations are being made.  Russia and China are doing cross border deals that exclude the Dollar.  Both India and China are doing deals directly with Iran for oil.  Asian nations have made multiple trade deals amongst themselves.  Germany has made individual deals with Russia over natural gas, again without using Dollars.  While all this is happening, the U.S. in it's ultimate wisdom has continued to push the ignorance that "SWIFT" isolation is some sort of punishment through isolation.  When all is said and done, the only one "isolated" will be the U.S. and with a currency that will no longer "spend".

Yes, these preparations are being made across the globe for their own protection and so that the Western IMF and World Bank can say "we told you so" or "you were warned".  Since 2008 the mathematics to this equation are what?  Jim Sinclair warns that "Gold could gap up to $3,000" which is another way of saying that FIAT Dollars would be "devalued" by roughly 50 %.  Whether he is correct and we first get a "mini devaluation" or whether it is the big enchilada where a "0" or two gets added to Gold's fiat price no one knows.  Jim has not been an "alarmist" in the past and Mother Nature is screaming revaluation at the top of her lungs.

Devaluation plans behind the scenes are  being discussed and probably better than 50/50 already decided on. 

Remember, a "bank holiday" is the same thing as the music stopping in a game of musical chairs.  Once the music stops you will not be afforded the chance to re-position yourself in any way shape or form.

It will be the beginnings of a very different world.

http://www.lemetropolecafe.com

 

Sun, 04/29/2012 - 00:30 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

Is this Gold-for-Oil deal allegedly struck by China and India confirmed? I think it is all posturing and geopolitical negotiations. I would be more worried about Food-for-Oil barter deals. What is the use of a useless metal to Iran?

If Gold was such a great asset, India should be the richest country instead a being a dump. The truth is that food-energy-defence security are the real determinants of countries wealth and well-being -- on these three dimensions, USA is still the king.

Sun, 04/29/2012 - 01:37 | Link to Comment Non Passaran
Non Passaran's picture

I don't want to waste time on your ignorant post except to say that in India it is residents that have gold, not the state.

Sun, 04/29/2012 - 02:25 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

Ah, so gold in hand of the goverment is somehow wealth and in the hands of individuals, Shit! So, why are you collecting Shit?

Sun, 04/29/2012 - 05:00 | Link to Comment prole
prole's picture

I do not know sir. Why are you eating it and posting it on this chat board Trav?

Sun, 04/29/2012 - 16:20 | Link to Comment Prometheus418
Prometheus418's picture

Why not?  It's a valid argument.  

Truth is, gold is in a severe PR slump- we're all looking at fundimentals and saying it's vastly undervalued.  The thing is, even though the nominal price has increased dramatically, that still doesn't mean that it's magic all by itself.  When the Western countries start screaming for gold, then India might get a taste if they're willing to sell it for tangible goods- but as long as it sits idle, it doesn't matter what it's worth, you're still dependant on your infrastructure.

Right now, if you were to go sell your gold and silver you'd feel like an Indian too, when the coin shop gives you 85% of the spot price, or the jeweler gives you 60%.  Metal isn't winning until it's a widely accepted currency again- until then, most of the retail outlets for selling it are little better than pawn shops.

** I'm going to add the exception here for selling to some of the more reputable dealers like APMEX and Gainesville, who actually do offer something at or above spot much of the time- still less then their premium, but relatively fair.

 

Sun, 04/29/2012 - 20:37 | Link to Comment DosZap
DosZap's picture

Non Pasaaran,

I don't want to waste time on your ignorant post except to say that in India it is residents that have gold, not the state.

Excuse me but their Banks damn sure do.

Sun, 04/29/2012 - 02:34 | Link to Comment jomama
jomama's picture

the caste system is why it is still so segregated in india.

Sun, 04/29/2012 - 02:37 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

It is estimated that 1/3rd (or something like that) of excavated world wide Gold is in the hands of individuals in India. It still does not do anything for that economy. 

Sun, 04/29/2012 - 05:03 | Link to Comment prole
prole's picture

Since the defecation of Trav Beavis and MathMan, we need a new Paper-Bug anti PM troll. Would you be willing to step up and be the resident retard of the board? You will need to make alarmist pro-ponzi posts about gold's imminent "collapse."

Sun, 04/29/2012 - 04:19 | Link to Comment noses
noses's picture

Idiot. India has more millionaires per capita than the USA. It just has a different distribution of wealth. And face it: The USA is quite richt of dumps, too.

Sun, 04/29/2012 - 04:26 | Link to Comment dognamedabu
dognamedabu's picture

Not like it matters to me who has more millionaires since I ainèt one of them.. But there is no way India has more millionaires per capita than the US. 

 

http://blogs.wsj.com/wealth/2011/06/22/asia-tops-europe-in-millionaires/

 

 

Sun, 04/29/2012 - 09:34 | Link to Comment Jam Akin
Jam Akin's picture

No way what you say is true, unless one ignores the $/rupee exchange rate!

Sun, 04/29/2012 - 20:16 | Link to Comment DosZap
DosZap's picture

If Gold was such a great asset, India should be the richest country instead a being a dump

Right, and if it wasn't for customs over centuries they could be.Its a symbol of wealth and prosperity there,always has been always will be.

Their gvt, and banks have over 18,000 metric tons.That is equal to EVERY other nations holdings on the planet,( at the printing of last stats) now add the populations jewelry, and stashes....................likely nearly as much...............

So my $ is on India having close to 40 thousand metric tons of gold (not counting silver).

Sat, 04/28/2012 - 22:50 | Link to Comment Peter Pan
Peter Pan's picture

The time will come when serious transactions are carried out in gold and the daily ones in silver.

The problem we have though is that the bulk of the people don't understand gold unless it's part of a pirate story.

Fiat still has the allure of greazy take out with two litres of soft drink. Tastes good, feels good, it's convenient etc etc but in the long run clogs your arteries.

Then one morning people will wake up and realise that fiat is just pink slime.

Sat, 04/28/2012 - 23:01 | Link to Comment Marco
Marco's picture

Then the banks will offer them interest and they will settle for gold certificates and we can go around the merry go round once again.

Sun, 04/29/2012 - 00:19 | Link to Comment Seer
Seer's picture

"The problem we have though is that the bulk of the people don't understand gold unless it's part of a pirate story."

This is one of the subtle layers of propaganda.  This is how it all works..  Why have TPTB programmed this story?  I have a theory on how this goes down:

Confiscation (ouch!) occurs.  Individuals known to have physical will be pressured by the programmed masses to turn it over (narc on your neighbor- he/she is the one who is responsible for your "poverty" by "hording" PMs).  The big holders, however, the banks, will gladly do as they are part of the scheme and they know that they will get the gold back (it's only on loan in order to help reset everything).  Masses conditioned to help TPTB maintain their power, same as it ever was, same as it ever was...

Sun, 04/29/2012 - 01:45 | Link to Comment Seer
Seer's picture

Obviously someone doesn't understand this...  I'm the fucking messenger, I'm NOT advocating confiscation!  Ask yourself this: if you were TPTB what do you think that you would do?  They have NO choice other than to control PMs, otherwise they lose control of EVERYTHING.  Of course, whether a given strategy can derive the desired results is a whole nother story.

Again, who are TPTB going to turn to?  THEY are incapable of doing for themselves.  People like here on ZH ain't going to help them.  So... again, it's not all that hard to see what they see as being their only POSSIBLE (not saying probable) way out.

Sun, 04/29/2012 - 02:07 | Link to Comment Deo vindice
Deo vindice's picture

Seer - I think there's someone who just gets high on clicking red arrows.

Sun, 04/29/2012 - 13:36 | Link to Comment akak
akak's picture

 

The problem we have though is that the bulk of the people don't understand gold unless it's part of a pirate story.

Avast, Matey, so what is there being wrong with pirates, ahhhrrr!

Sat, 04/28/2012 - 22:57 | Link to Comment Yen Cross
Yen Cross's picture

 No offence to the Canadians.  French or English.

Sun, 04/29/2012 - 02:09 | Link to Comment Deo vindice
Deo vindice's picture

There are some folks who would say the French are an offence to the Canadians. ;-)

(Of course there are more than a few French who think they are the ones offended - so it all equals out, I guess)

Sat, 04/28/2012 - 23:05 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Pssst..Azinomics...

The dollar is NOT a store of value as you state.

Niether is the yen or renminbei.

Both allow your wealth to be stolen through increase in money supply by hitting CTRL Print....

Shame on you for that statement.

Sat, 04/28/2012 - 23:10 | Link to Comment Yen Cross
Yen Cross's picture

 Who talked about " wealth storage"? I don't recall anyone discussing wealth storage?

  We were discussing " Grocery Store" politics!  The real world" INFLATION" , paper note politics!

 I'm not in the mood for a bantering session. I understand your comment.

Sat, 04/28/2012 - 23:22 | Link to Comment Aziz
Aziz's picture

In a technical sense, all currencies are a "store of value". They may not be a very good store of value (i.e. they may lose you most of your value).

Ron Paul is right. Gold is money, but so too is the dollar, the yen, the Euro, etc. The point is that some monies are more equal than others, and no fiat monopoly can change that.

Sat, 04/28/2012 - 23:43 | Link to Comment Yen Cross
Yen Cross's picture

 Yea " Aziz" you are " XAu" and " XAg" correct.

 Fiat exists, because the world has other "Tangible assets"! 

Sun, 04/29/2012 - 03:20 | Link to Comment TWSceptic
TWSceptic's picture

No, fiat currency is not storing value, only representing value. Storing value means that the material itself has to have enough perceived value. Printed paper bills have no value, they are only representing whatever number is printed on them. If the system collapses, all value represented is lost. So not storage there.

 

People need to understand that the meaning of money is completely different from the meaning of fiat currency. Currency is never money, only a government approved representation of value.

Sun, 04/29/2012 - 07:27 | Link to Comment _underscore
_underscore's picture

I'm not even sure they even represent 'value' - they represent confidence - each note is a vote of confidence (or otherwise) in the issuing body (govt.)

My confidence that the cabal that control our politico-economic system have my best interests at heart is in an inverse realtionship to my PM holdings - had they not fallen out of my boat, fishing, recently, that is.

Sun, 04/29/2012 - 08:02 | Link to Comment Winston Churchill
Winston Churchill's picture

Gold is money.Everything else is credit.

J.P.Morgan

Sat, 04/28/2012 - 23:34 | Link to Comment buzzardsluck
buzzardsluck's picture

'No asset is safe now. The only choice to hedge risks is to hold hard currency — guns & ammo'

 

p.s.  i love PMs (guns/ammo too) but lost them all in a boating accident while traversing Lake Baikal.  

Sun, 04/29/2012 - 00:01 | Link to Comment owensdrillin
owensdrillin's picture

I invested everything into SCUBA gear and have increased my silver/gold holdings by a shitpile over the past year.

Keep floating those PM's around boys.

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