• Sprott Money
    05/26/2016 - 05:58
    How many “emergency” “secret” meetings do the central planners around the world need to have before the citizens of the respective countries begin to fully understand and take notice that something...

Guest Post: Macro Commentary - The Cost of Fiat Money and Gold

Tyler Durden's picture

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 08/10/2011 - 13:45 | 1547310 Long-John-Silver
Long-John-Silver's picture

$56,000 Gold

GATA’s Douglas Makes a Case for $56,000 Gold and $936 Silver


Wed, 08/10/2011 - 13:51 | 1547346 dlmaniac
dlmaniac's picture

Sell target? When 3 OZ gold is equal to 4 times DowJones30 I take profit.

Wed, 08/10/2011 - 14:20 | 1547444 Boston
Boston's picture

Too bad you can't go back far enough (only 12 years) to determine the low end of the long-term range for IYR/gold, like you can with Dow/gold.

It would be nice to get a hard target for the near-cash valuations in RE (vs. gold).

Wed, 08/10/2011 - 14:07 | 1547392 mayhem_korner
mayhem_korner's picture

Implies the current 44:1 Au-to-Ag ratio expands to 60:1.  I think silver has proportionately more upside once the paper market and physical shorts are cleared.  Gold is not as supressed now because so many CBs are holding and hoarding.  Ag on the other hand is being held down in desperation by the big shorts at the Morgue and Crimex.

Also, if Au rises to $56K, the dollar-denominated price will no longer be relevant.  I like to think in terms of how many acres of land, barrels oil, etc. an oz buys.

My two cents.

Wed, 08/10/2011 - 14:55 | 1547591 TheGoodDoctor
TheGoodDoctor's picture

There will be parity with silver and gold at some point. And a 60 to 1 ratio is ridiculous. More like 10 to 1 then parity.

Wed, 08/10/2011 - 13:47 | 1547325 Chief KnocAHoma
Wed, 08/10/2011 - 14:12 | 1547410 pops
pops's picture

What will prevent "them" from simply taxing it away from you?

Wed, 08/10/2011 - 14:15 | 1547418 Long-John-Silver
Long-John-Silver's picture

You have hit on one of many reasons Real Estate values are plunging.

Wed, 08/10/2011 - 14:44 | 1547555 Chief KnocAHoma
Chief KnocAHoma's picture

Tax rates in GA and rural counties are low. Very few dependants to support, and land will be the next to last thing to go. First will be dollars on Wall Street or in 401k. Next will be bank deposits. Property taxes are collected at state and local levels, so they also have to overcome exiisting laws.

It ain't fool proof, but taxing land in GA by the Feds will not be easy. Did this answer your question?

I am The Chief

Wed, 08/10/2011 - 15:10 | 1547629 Pegasus Muse
Pegasus Muse's picture

What will prevent "them" from simply taxing it away from you?

If Au gets to $56K/oz there might not be any of "them" left to levy taxes.

Wed, 08/10/2011 - 15:09 | 1547641 Scisco
Scisco's picture

If the US begins to heavily tax gold then it will likely go underground and paper will burn. Furthermore, the price of gold will likely adjust to accommodate the tax. Either way, it will likely reek of desperation and may undermine the full faith and credit backing of fiat.

Wed, 08/10/2011 - 16:12 | 1547967 laomei
laomei's picture

i live in a country where capital gains taxes are for businesses only?

Wed, 08/10/2011 - 16:13 | 1547977 kumquatsunite
kumquatsunite's picture

Aren't they already? With a 35% capital gain tax you first have to Gain 35% before you can even call it "break even"? And don't forget the "risk factor" that tells us you may not (tee hee) always be right...so if you've bet the wrong way...bye bye money...

Wed, 08/10/2011 - 18:19 | 1548739 Sgt.Sausage
Sgt.Sausage's picture


Just no.

I can't even believe someone with the brains to follow ZH just made such an ignorant and stupid comment.

Let me help you out: if you make one dollar in gain, at 35%, you keep 65 cents, UncleSugar gets 35. You're 65 cents ahead, even thou you made less than a single percent gain.

Here's your clue: It's a tax on your GAIN, Not on your cost.

Moron, bitches.

Thu, 08/11/2011 - 00:46 | 1549876 laomei
laomei's picture

yea, but over here if i scalp gold and make one dollar, i keep 100% of it.  no taxes, no questions asked.  and fuck me if im going to "self-report" any of this to the us.

Wed, 08/10/2011 - 13:47 | 1547327 KeyserSoze
KeyserSoze's picture

An Ode to Gold.

#Thank you for coming home
I'm sorry that the chairs are all worn
I left them here I could have sworn
These are my salad days
Slowly being eaten away
Just another play for today
Oh but I'm proud of you, but I'm proud of you
There's nothing left to make me feel small
Luck has left me standing so tall
Always believe in your soul
You've got the power to know
You're indestructible
Always believe in, because you are
Glad that you're bound to return
There's something I could have learned
You're indestructible, always believe in#



Wed, 08/10/2011 - 13:51 | 1547348 JollyRoger
JollyRoger's picture

Inflation should kick up a notch once the Treasury begins to drastically increase the proportion 20y and 30y long dong bonds it sells.  Then we'll see some serious moveement in PM's IMHO

Wed, 08/10/2011 - 14:02 | 1547379 Taku
Taku's picture

Mexico offering 100 year bonds.

Wed, 08/10/2011 - 14:19 | 1547439 JollyRoger
JollyRoger's picture

I'll sell anyone who wants one, a 1000 year bond.  My great great great great great great great great grandkids are good for it.....I promise :)

Wed, 08/10/2011 - 14:40 | 1547528 cynicalskeptic
cynicalskeptic's picture

I've got GOLD BACKED Imperial Russian bonds bought a hundred years back by great great grandparents......   how much safer could you get?

Wed, 08/10/2011 - 15:02 | 1547610 slackrabbit
slackrabbit's picture

Tis a pity his dad's student loan will bankrupt him before he can pay it off

Wed, 08/10/2011 - 13:53 | 1547354 lookma
lookma's picture

who will be the George Soros that breaks the US Fed?

The ECB, China, Russia, India, etc.. Its not about breaking the FED per se, the game is to let the US economy suffer from its own bloated expansion by moving slowly away from supporting foreign dollar settlement with CB storage.  

I wonder what these other nations are gonna use in lieu of the dollar as a reserve/reference point?

That would be Gold.


Wed, 08/10/2011 - 13:54 | 1547357 SilverRhino
SilverRhino's picture

3 ounces of gold for a house ... That's a monetary colllapse ... timing is a bitch.

Wed, 08/10/2011 - 14:03 | 1547383 Sudden Debt
Sudden Debt's picture





never mind....



Wed, 08/10/2011 - 13:56 | 1547367 narnia
narnia's picture

Gold is not a bubble against quickly depreciating fiat currency, but it is a bubble vs. other assets with future value you can currently get for $1,800.  if you think you are going to be able to acquire those same assets for an ounce of gold when the system implodes, you are kidding yourself.

the gold & siver hysteria is starting to get out of control.  inflation hedgers need some new opportunities.

Wed, 08/10/2011 - 14:13 | 1547412 Snidley Whipsnae
Snidley Whipsnae's picture

"if you think you are going to be able to acquire those same assets for an ounce of gold when the system implodes, you are kidding yourself."

Yes, I think exactly that. If you don't believe it can happen then you are a poor student of history.

What do you think will happen to the fiat dollar price of gold when all the billions of FRNs that Benny has printed come rushing out of bank vaults into circulation?

If you want to know read what happened during the Weimar Germany hyperinflation?


Wed, 08/10/2011 - 14:28 | 1547465 narnia
narnia's picture

I'm certain you are not going to be able to purchase 75 cases of good beer (which would be 175 cases without the taxation effect which will be eliminated) for an ounce of gold after reset.

Wed, 08/10/2011 - 14:40 | 1547536 Snidley Whipsnae
Snidley Whipsnae's picture

Don't get out much, do you? I have known the owner of a local liquor store for over 30 years and if I walk in there and plunk down a monetary metal for a beer/liquor purchase there will be only one question asked... How much is gold/silver going for today?

If you think gold/silver are'nt money already then you are traveling in the wrong circles.

Wed, 08/10/2011 - 17:07 | 1548427 narnia
narnia's picture

so, because i don't agree with your valuation of gold & silver, then i don't believe gold & silver are money?  you must have pulled that out of the comeback edition of barak obama's community organizing manual.

one ounce of a barely useful symbolic substance traded as money is not as valuable as a farmer's time, intellectual capital, land & maintenance cost in growing the inputs, the transportation of those imputs, the energy, intellectual capital & materials going into making great beer, the transfer of those materials into 75-175 cases of bottles and packaging, and the delivery of all that to you fresh.  if you think it does, you're caught into a hysterical version of reality.

Wed, 08/10/2011 - 17:31 | 1548548 Reptil
Reptil's picture

Gold is behaving like money at this moment. If you didn't see that you've not been paying attention.

Wed, 08/10/2011 - 18:28 | 1548789 narnia
narnia's picture

of course it is.  that's exactly why i've called it money in my posts.  

Wed, 08/10/2011 - 21:55 | 1549565 ATM
ATM's picture

So let me get this straight narnia. Your thesis is that gold valuation is far too high currently when measured in terms of real goods?

If that's right then the uestion I have is how can you determine the proper valuation if not by common usage? The old roman guide that an ounce of gold would buy a good mans suit still seems to apply right now. $1800 will buy a nice suit, not Saville Row nice but good enough that it's tough to tell the difference.

Wed, 08/10/2011 - 23:19 | 1549741 narnia
narnia's picture

my thesis is that in the great reset, assets that maintain or improve the quality of life for people will have value.  those assets that are neutral (like finance, especially) to quality of life or those constructed simply of or to support the state will have no value.  

gold and silver will be used as a medium of exchange.  what an ounce of gold will get you is largely determined by how scarce the assets with value are, how much demand will exist for them, how successful cheap labor credit becomes, and how successful barter and other alternative means of currency (like my great example of beer) become.  a quality suit will be as valuable to you as it is to someone in africa right now.  

Wed, 08/10/2011 - 14:03 | 1547381 monkeys.pick.bottoms
monkeys.pick.bottoms's picture

Gold price in fiat is irrelevant. Speculation only betrays our addiction to seeing the world in dollars or euro (me guilty as well...too often). The purchasing power of real money (Ag, Au) may very well be greater than the purchasing power of 56K of today's dollars.

Wed, 08/10/2011 - 14:16 | 1547421 MoneyWise
MoneyWise's picture

Gold price right now is in PANIC BUY mode
Later action in Gold has to be viewed
same as VIX * Value
Those who piled up at the end here, will
be burned as usual, Long investors going to be just fine, but those housewife's jumping around screen
on daily bases, going to get hurt..

Wed, 08/10/2011 - 17:33 | 1548554 Reptil
Reptil's picture

Yeah... well what'd you expect. Picture you yourself Tim Geithner and Olli Rehn in a menage a trois.

Wed, 08/10/2011 - 14:05 | 1547387 Snidley Whipsnae
Snidley Whipsnae's picture

Brian, excellent comments and article.

You and I think along the same lines. My plan is to purchase more commercial RE with current long term renters and treat them right. I like small shops that actually perform services, ie; industrial motor rewinding, honest auto repair shops, air cond companies, bakers, etc. I have some businesses that have been with me a long time. However, I will never sell all gold, even if a new currency is issued and seems to have sound commodity or PM backing. I don't trust bankers or pols and we are witness what they can do to a formerly sound economy. It's a tragedy in the making. 

I found this comment especially good: " So the Fed faces problems on a number of fronts. They have to be seen as actively trying to do something so they continue to manipulate the price of money to artificial levels which only serves to send misleading signals throughout the economy."

Now the Fed has another potential problem; ie, ANOTHER US downgrade. So, with that in mind along with all the other 'painting ourselves into a tiny corner' past actions, they have more than they can possibly handle on their plates.

Wed, 08/10/2011 - 14:08 | 1547395 vocational tainee
vocational tainee's picture

we have experienced this kind of thing here in europe about 65 years ago. It may happen soon in western countrys all over...

Wed, 08/10/2011 - 14:16 | 1547419 cpnscarlet
cpnscarlet's picture

Narnia is highly ignorant or deluded.

Until there is mass participation in the gold trrade, there is no bubble or hysteria. Those of us financially aware during 1978-1980 know this all too well.

Wed, 08/10/2011 - 18:26 | 1548775 narnia
narnia's picture

imagine how pets.com would have IPO'd had central banks throughout the world embraced its stock as currency.  it might have even done better than it did.


Wed, 08/10/2011 - 14:21 | 1547447 LetThemEatCake
LetThemEatCake's picture

Excellent commentary.

Wed, 08/10/2011 - 14:41 | 1547544 inkarri9
inkarri9's picture

I am familiar with GLD and IAU but does anyone know of any other ETF that may not be subject to counter-party risk or might be a safer way to play gold aside from GLD, IAU and holding actual bullion?  Thank you.

Wed, 08/10/2011 - 15:28 | 1547701 Pegasus Muse
Pegasus Muse's picture

Not an ETF, but the best way to hold physical bullion outside the US, is James Turk's www.GoldMoney.com . 

Good physical bullion trusts are: PHYS, PSLV, GTU, CEF (all Canadian). 

Avoid GLD & SLV like the plague. 

The only way to avoid counter-party risk is to buy the physical and hold it yourself.

Wed, 08/10/2011 - 18:05 | 1548681 Ratscam
Ratscam's picture

switzerland SWX traded JBGOCA or for silver JBSICA
it is physical and it is USD/CHF hedged, henca double whammy!
lots of my assets there except from the physical in hand in the vault of a building guarded by dogs in a country on mars.

Wed, 08/10/2011 - 15:03 | 1547619 bbq on whitehou...
bbq on whitehouse lawn's picture

Cash on the barral head economy? Its been that way for most of the pass; but today?

The chaos this auther so casually writes is shocking, if not horrific.  Its not like you can walk or talk so casualy about people begging and starving in the street. Huddled outside of every big box food store with gaunt eyed children begging for food.

Thats the also the reality in many countries. So what, you want to bring that here?

Being the fattest man in the company of the starving is not my idea of a good thing.

Moving from gold into other assets is ideal if the world wasn't the stupid it is. It may become that any movement from gold into other assets is an instant loser..what then?

Humans need things gold needs nothing. It is without input. That is a powerful asset. No, input for an appreciating asset. For your entire life....What will you do. The less you spend the more you make economy.

I dont even want to think of that now. ill just be happen in the warm sun, cool wind and beautiful day. Rocks in a safe. Pointless... to the tree and the little gekco on my porch.

I was danceing in the street with a big stupid grin when gold passed 10% on yoy return. Now at 40%+ that grin is gone. Replaced with dispndance.




Wed, 08/10/2011 - 15:13 | 1547655 slackrabbit
slackrabbit's picture

If history is a lession, when the us / german banks crashed, real estate tanked big time. Eg in deppression, cash sales were executed at 60 to in some cases 90% discounts as those desparate to sell wether either for food or to save their businesses. When no one has money to litterally 'do trade' cash prices are set by those who had liquidity. 

in any case, i'll keep hoarding, it either that or put it in the bank. And that sums it up. Even sitting on the sidelines can be dangerous unless you have physical. 

Wed, 08/10/2011 - 15:52 | 1547812 bbq on whitehou...
bbq on whitehouse lawn's picture

"When no one has money(accepted currency) to trade.

When its the "reserve currency" that is no longer the "accepted currency". 

I will not, turn away hungry children. Scam or not. I just cant do that.

It's harder to do if you've been there your self.

If things get so bad you are fearful of traveling, or markets need security to bypass the hungery children begging at the door..

Dont lose what makes you human. Do for your own first, but dont be the one who seeks out security for the sake of seeing or being bothered by the hungery. They have a right to ask, as we will have the right to refuse.

India... Here.

Broken, starving children. Broken by adults, to beg for change in the street or to sweep up rice in the markets.

NEVER. We must never allow that here.


Wed, 08/10/2011 - 16:05 | 1547849 Pegasus Muse
Pegasus Muse's picture

Humanity may be as precious a commodity as PMs, food, water & ammo when TSHTF.


The Pianist (2002)

A brilliant pianist, a Polish Jew, witnesses the restrictions Nazis place on Jews in the Polish capital, from restricted access to the building of the Warsaw ghetto. As his family is rounded up to be shipped off to the Nazi labor camps, he escapes deportation and eludes capture by living in the ruins of Warsaw. Written by Anonymous

The true story of Wladyslaw Szpilman who, in the 1930s, was known as the most accomplished piano player in all of Poland, if not Europe. At the outbreak of the Second World War, however, Szpilman becomes subject to the anti-Jewish laws imposed by the conquering Germans. By the start of the 1940s, Szpilman has seen his world go from piano concert halls to the Jewish Ghetto of Warsaw and then must suffer the tragedy of his family deported to a German concentration camps, while Szpilman is conscripted into a forced German Labor Compound. At last deciding to escape, Szpilman goes into hiding as a Jewish refugee where he is witness to the Warsaw Ghetto Uprising (April 19, 1943 - May 16, 1943) and the Warsaw Uprising (1 August to 2 October 1944)


Look here:  'Jews living outside of the prescribed area will have to move to the Jewish district by 1st of October'
They won't get all of us, we'll...   it's too small... there's four hundred thousand of us in Warsaw!
No. Three hundred and sixty thousand, so it'll be easy.
Mama! Mama, what is it?

Twenty zlotys.
That's all we have left! Twenty zlotys!!

What can I buy with twenty zlotys?
I'm sick of cooking potatoes, potatoes, potatoes.


Dealer: That's the price. And my advice is to accept. You won't get more from anyone else.
Pianist:  But ..... but it's a Bechstein, Mr. Lipa. Two thousand.
D:  My advice is to take it.  What are you going to do when you're hungry? Eat the piano?

P: You're a thieving bastard, get out! We'd rather give it away!

D: Hey! Hey! What's the matter with you? You people are crazy!  I'm doing you a favor, two thousand, and I'm paying for the removal, I'm not even charging for the removal. 

You haven't eaten today, you're crazy .... you're crazy.


Wed, 08/10/2011 - 16:15 | 1547995 bbq on whitehou...
bbq on whitehouse lawn's picture

Every culture and "race" has their brutes, kings and servents.

All we can do is.. do what humanity we can during the time we have lent to us.

Its not about what is right, its about what gifts you have that you can lend to other who chose not your path but another.

Am i better then a minimum wage floor cleaner...No im worse at cleaning floors. Takes me longer and i do a worse job.

Does that mean im not a good person because im not as fast or strong or experienced as another?

The piano?

Unless you have been without food for 4 weeks, if not longer; you have no idea what that story says.

So end your stupid. The only one here who has any experience in understanding this me.

And i dont want to hear you spouting off stupid you dont even understand. Untill you experience what this means.





Wed, 08/10/2011 - 16:27 | 1548061 bbq on whitehou...
bbq on whitehouse lawn's picture




Do NOT follow this link or you will be banned from the site!