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Guest Post: The Rise And Fall Of US Confidence, Or Why The Fair Value Of Gold In Phase Space Is $6,000-$12,000
Submitted by The World Complex
The Rise And Fall Of US Confidence
Today we look at a graph of confidence in the US system. The US confidence ratio represents the ratio of outstanding US Federal debt to the dollar value of US gold holdings (as reported*). No corrections for inflation should be necessary, as both terms are valued in the same depreciating dollars. We use the term confidence as the ability of the US to stretch this ratio to (by our thinking) absurd multiples was a reflection of the world's confidence in the United States--which differs from the ability to actually repay debts.
For post-1971 I used the assumed holdings of 250 million ounces multiplied by the average annual price (from Kitco). There are those who suggest the true holdings are substantially less than 250 million ounces. That may be so, but the picture is already bad enough if we accept the official numbers.
Confidence level sank throughout the Depression up until the beginning of WWII, after which ascendant American power was reflected in a climbing confidence ratio up to the oil crisis in the early 1970s. Confidence sank as the US withdrew from Viet Nam and inflation rose until the price of gold rose sufficiently to restore confidence in American solvency.
From 1980 to 2001 was a golden age for the US. In this time, both stock and bond markets were strong, the US currency was strong, and the only credible opposition to US hegemony disintegrated. But every bubble meets its pin, and ever since the planes hit the towers, the US power and prestige has gone into decline. This decline is marked by a rapid decline in the confidence index. How low will it go?
There is a provocative looking left shoulder and head, suggesting a drop to the neckline somewhere around 2020, after which there may be something of a resurgence in American confidence. The anticipated completion of the bankruptcy head-and-shoulders formation promises to be a hair-raising event.
Actually, though, what appears to be happening is the blowing of bubbles. A bubble is blown, but can only expand so far before confidence fails and the bubble deflates. Then another, in this case larger, bubble is blown. If the bubble is able to deflate without society collapsing, perhaps it will be possible to blow another. Or perhaps we will be wise enough to act in ways that prevent the bubble from being blown in the first place.
At the World Complex we are of the opinion that bubbles are bad--but we recognize they can be a lot of fun. Sort of like going on a bender. The US has been on a bender since 1980. Soon the weekend will be over and it will have to be back at work. Although the new boss may be of the Asian persuasion.
For the bubble to deflate, the debt must disappear, or the gold price must rise. Assuming no change in debt levels, the gold price would have to rise about ten-fold for the confidence ratio to fall to historical values. Unfortunately, a considerable rise in US debt appears to be baked into the cake at this point, so we would foresee gold to eventually reach breathtaking prices.
The 2-d reconstructed phase space of the confidence ratio appears below:
On this chart we don't dare suggest anything other than a fall towards the origin of the graph. If the ratio falls to 10, then gold has to rise to about $6,000 per ounce at today's level of debt. If the ratio falls to 5 (the last low in 1980), then gold would have to be about $12,000 per ounce (again, only at the present debt level). The numbers could be quite astronomical once the deficits in Medicare and Social Security start being realized.
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Gold will utimately balance the external debt of the US, as the fiat Federal reserve system continues to crumble.
sell your gold (to me)! sell! sell! lol
here are two ridiculous hit pieces...
http://finance.yahoo.com/focus-retirement/article/113368/hidden-dangers-...
http://www.bloomberg.com/news/2011-08-28/gold-s-absurd-price-makes-stock...
Long term average of DJIA:AU 1:1. Price at peak of NASDAQ bubble 1:60. Price now 1:5. Now prices tend to overshoot. I will sell my gold at 1.5:1. That means at today's prices that should be something like $17,000 an ounce. Now the DJIA is still in a bubble. If we proportion the old ratio of gold to dollars from before 1971, all that fiat creation has led to a $9000:1oz/AU ratio. So the long term trend seems like we will end up at something like DJIA at 6,000, with AU at $9,000.
Just my two cents.
Gold will soon not be measured in fine linnen (dollars), but rather in purchasing power...
the problem with historical analysis, is that they depend on historical events.
In 2008 Western Capitalism ceased to exist. While it still has the facade of what once was, it no longer shares much in common with what came before.
The events that have occured, are occuring, and will occur, cannot be gauged from the past, because Capitalism has never collapsed before (since its inception). A new system will be formed, the peoploe in control now will try to shape it in their image, while those opposed to it will attempt to move the new system back towards "freedom".
Gold and Silver have always existed as stores of values, while other systems come and go. The end game in the current system, is DOW 0 and Gold Infinity. Something else will replace both the dollar, and the monetary system before these asymptotes are reached.
Look at the value of Gold and Silver historically relative to the value of farm land. That is about as universal and true a relationship that one could find. In the new system, it is that ratio that should return to normal, and everything else relative to it as well.
+1
Well said. Sad but true. It has happened for thousands of years.
"Gold will soon not be measured in fine linnen (dollars), but rather in purchasing power"
Agree. If gold continues to climb, there will come a point that it is meaningless to price it in dollars.
double post
"I will sell my gold at 1.5:1. That means at today's prices that should be something like $17,000 an ounce"
Sprial_eyes
Will you really sell your Gold (after it having gone up x8) and buy stocks even if HFT and a corrupt SEC are still in place? A bought off Congress and puppet president still in place?
Why not wait until after freegold arrives, and sell it for $60,000 / oz?
Although I may chicken out some and sell a LITTLE bit for $5000 and maybe a LITTLE bit more at $17,000. Hey, does a Bearing know the future?
But, for now, BUY while physical gold is still available!
As an old fox once told me: "Buy all the way down and sell all the way up".
Or was it the other way around? I can never remember.
A good time to trade your gold for the DJIA might be when the companies in the index start to do significant business in PM backed currencies.
exactly so many people are saying this based on the previous 2 bull markets - but what if the dollar actually collapses this time?? and gold ends up being worth about $50,000 easily in todays money??
the ends of previous bull markets were market by raised interest rates + sound fiscal policy + deficits that were a fraction of todays
for me the Dow gld ratio is certainly not my major indicator of when to sell
I'll put it into farmland, industrials (companies, not stocks), productive assets, real estate, energy infrastructure, groundwater. Then wait for the next Kardsahev wave to begin. Gonzalo Lira's post-hyperinflationary recipe is something he really nails.
Who Carez what the Yahoo and Bloomberg hack scribblers have to say? Unlike the 1970´s, when gold demand was primarily driven by the US, the rest of the world is gladly buying up AU whilst boobius americanus is relying on the Dow to reflate and restore their 401k´s. Only problem is that the resulting pensions streams will pay out on dollars that will buy much less.
why dont these retards ever talk about how many times US treasuries could buy the DOW ?
The fed has a trillion, china has 3 and japan has a trillion. Thats 4 trillion, double the value of all the gold in the world
+ $1830 and a green Spitzer.
True, but it's like robbing a bank with a toy gun. Once you really have to use it, the game is up.
It's a literal paper dragon (or, these days, an electronic computer-game dragon). Once the average man groks the fact that paper trillions are bidding for their physical stuff, he'll clamp on tightly and use fiat only for daily necessities.
This is already happening. +1
+1 for that metaphor!
A small point, however, valid none the less.
Simile: Figure of speach that dirrectly compares two things using "like" or "as".
Metaphor: A direct comparison of two different things without using the words like or as.
I suppose this would be a direct comparison between the level of education attained and the 'grade' that was awarded to such attainment! In other words, how the great American educational system has failed.
sell gold nahh!!! we rather stick to the tradition.
Negative JPM:SILVER watch - unless TPTB hit silver for $5 today, enjoy Day 30.
Suck on THAT, Blythe.
"Americans Choose Gold As Best Long Term Investment"
This Gallup Poll, conducted Aug 25, this year, speaks for itself. In addition to the questions asked by the poll there should have been one more, worded in this manner: 'Do you own any gold?'... How many of those polled actually own gold? How many like the 'idea' of owning gold?
Interesting survey results; breakdown by age, party preference, sex, etc...
http://www.gallup.com/poll/149195/Americans-Choose-Gold-Best-Long-Term-Investment.aspx
Looks like a graph of my hormones.......
It is inevitable that gold will go up over time, the question is are you liquid enough to survive the indefinite pullbacks from the manipulating banksters and their cronies in government?
Hold physical, don't buy on margin, bought with savings and not operating funds would pretty much guarantee sufficient liquidity for nearly a lifetime. The bigger issue is if it's a long stretch of manipulation, being around to enjoy the profits.
That said, one look at the 5-year chart shows they've lost control of the market in the longer term, their manipuations seem to be fixated on OpEx days now.
Oh, BTW, powers that be, thanks for being so predictable on the OpEx plunges. I held my latest purchase off until the OpEx pullback last week, and as a result purchase was up by several K before it was delivered today. Keep up the good work!
I find it hard to understand what you could possibly mean by reading your words. A human being is neither liquid nor illiquid. I can make sense of it if I substitute "sufficiently capitalized" for "liquid enough".
Got physical?
what happens, if it is discovered, that there is no gold in fort knox. none, zero.
discovered? perhaps you mean confirmed?
Bad shit... Really bad shit.
Gold price to the moon and heads will fall off
Fort Knox should be audited by the congress to verify and confirmed. If it happens that indeed there's no gold. Heads will roll via Guillotine.
Past and present serving congress critters and senators should be rounded up and like German menfolk around Dachau after the liberation, paraded through the vault, if it is shown to be empty. There should be no mystery left for anyone involved, as to the anger that will be displayed towards them on Explanation Day.
At a manipulated 1800/oz with a debt of +14trillion, that gold might pay the bills for a few days at these prices.
I guess if nobody cares now, why then?
/sarc/
The real question is this: of the gold that may or may not be there, how much is still ours and not liened to another party (or 100 parties as the case may be, and prob is)
Doh! Now that's something a war might start over, eh?
Gold at $6000 would put the cost of a loaf of bread at...$25? (theoretically)
I feel a drinking binge coming on....
Better do it soon because a shot will soon be $75.
fine spirits might be a better investment than gold. Just something to think about.
bottles brake
As do people ... for those looking to diversify.
You can eat broken bottles and they don't pay a dividend. ;-)
You turn that into Street Entertainment and sure as hell it WILL pay a dividend.
They already are..... cost of Macallan 18 yr old has increased from $89 to $129 in the last 3 years, a higher return than any USD deposit.
buy and hold - there's no capital gains tax on perishable items
There's no capital gains tax on secretly held PMs either!
passwordis,
Not until YOU SELL.
You're kidding, right? I'm talking about holding physical.
Well then those fifteen bottles of Crown I bought last week should come in handy! Come on down to my Black Swan Saloon!
I grow my own bread, you should too.
Does it come up in wrappers?
Yes, and the strain I grow comes up thick-sliced.
Thank you, Monsanto!
No. That should be $6000 Gold at current bread prices. Gold is undervalued in real terms.
More to the point, gas at $10/gal.
My girlfriend insists I should find a way to trap and burn my own gas...frrrrrap!
With a ferment buble inside the loaf?... priceless!
I'm waiting for this realization to become widespread. then there are some things I will need.
1 gram, 1 hollow point, 1 gram, 1 hollow point, 1 gram, 1 hollow point..........................
if 1:1, then either you have a lot of gold or not nearly enough bullets!
I read a story a while back, where a secretary, who worked for a rockefeller,reported that her boss was removing gold from fort knox, illegally. shortly after that, she fell to her death, from a highrise window. (link anyone?)
She wasn't resuscitated by cats was she?
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5354546&mesg_id=5354637
There? another source for this too. I think it was same source I read about Bush and Rockefeller stealing Geronimo´s skull for their secret society at Yale. Too long ago to look it up but they did mention these scumbags stealing the gold.
Confidence is measured relative to the set of alternatives. All it would take is for China to implode and it would make confidence in the US reflate. It takes less energy to knock someone else down than build yourself up.
QEx could break the peg, which I'm thinking would be quite disruptive to Chinas plan's for world domination.
InconvenientCou, it is quite possible that a basket of currencies could emerge, undermining the US reserve status. Also, a flight to real assets, out of paper, will likely occur so even if the US retains reserve status among fiat currencies. As is already the case, gold and certain commodities are rising in price relative to all currencies.
Jim Rickards talks a lot about this over in his many interviews on King World News. I think he has four potential scenarios:
I am more or less of the opinion that all debts that can't be paid won't be. The question is whether they are cleared via hyper inflation or cleared by deflationary default.
I still don't really grasps the ins and outs of how any of these scenarios will play out, although it doesn't stop me from reading/thinkinga bout it.
Going to be a shit show!
Regards,
Cooter
Rickards is da man. Last week he tweeted 'my 7k gold call is not a prediction, it's a warning. When it happens, the world will be a different place.'. Notice that he says 'when' , not 'if' it happens....
I still see a rising trendline in the graph.
The chinese may be the "boss" someday, but they are too green to be the boss yet.
We are the champions in the financial world, still, and we will outsmart them for the next round also.
gh
Why assume a head-and-shoulders formation? Decline is traditionally more rapid than the climb up. Just sayin'.
agree - premature - only one shoulder
The World Complex is very cool blog, just checked it out re: stock markets. Very true. A mentor stockbroker that I once knew once said that the market is not science but 'Art mixed with time. Find that pattern and you should do ok'...something like that. Anyway great post
You mean... doing god's work??? As if Oracle of Omaha was not enough.
To be complete (i.e., useful), this analysis would have to include all hard assets owned by the US government, not just gold. For a short list, it would have to include all of the marketable real estate (national parks, government buildings, military installations), all of the marketable materiel (tanks, planes, aircraft carriers, postal trucks, SUVs, black helicopters), all of the art and artifacts in all of the museums, blah, blah, blah, you get the picture.
Actually, more to the point, given that we have what is ostensibly a representative democracy cum plutocracy, the US government is technically the voters and taxpayers. Why not include all of their marketable assets, too?
I'm long gold and gold miners in size, but this seems to be one of the sillier arguments for higher gold prices.
FischerBlack, the problem with most of the hard assets owned by the US government is their illiquidity, valuation and risk of forfeiture should the US gov´t decide to abrogate title held by a foreign entity. Unencumbered gold, held outside of the US and international banking systems is far safer and easier to value.
Parenthetically, I find the world complex arguments to be interesting but not compelling, since there are many better reasons to hold gold and gold miners.
Don't forget the shitload of plutonium.
FicherBlack,
For that to be pertinent, one would have to assume anyone would want to purchase them,( land yes, always) why the American public ever stood for the Feds taking land from them is beyond my comprehension, and two, anything held by the Fed Gvt will not be sold unless their is no Fed Gvt.
They just CONSUME,spend and waste money,they do not give back................only to the slothful, and wastrels of society.
Producers, and savers, are penalized.
%**%
but but but , richard berntein said this morning on squawk box that we have a fiscal problem and there is nothing more the FED can do........huh?????
IMO our .gov spending is an even bigger problem than the Banksters. Whether the Fed can do much about that (no), it does not affect the coming very high prices of gold.
you guys have it all wrong gold will be 1,000,000 dollars an ounce, maybe a billion. , at least.
It already is, in zimbabwean dollars :´)
After independence the new $ZIm was worth $US 1.47.
After lopping off 3 zeros and revaluing $Zim100 TRILLION (that's 12 zeroes) to $NEWZim 1, Zimbabwe'd paper money is worthless. That's some accomplishment for what is one of Africa's riches nations (in terms of natural resources).
People living in a former exporter of food are starving - panning for flecks of gold to pay for food.
Fools in this country, mostly TV watching morons and welfare parasites, voted in Mugabe 2 in 2008.
$1 quadrillion / 10B toz == $100k max...lay off that crack.
Actually snowball, that $100k / oz is about FOFOA's upper limit too.
The number of ounces of gold that exist that I have seen the most is approx. 6 billion oz. There may be more that the Rothschilds secretly have, but that 6 bn should be approximately right.
My Trail Guide FOFOA sez that we currently have approx. 100 paper claims on each physical ounce, and that we should expect a 40 x or so upward re-adjustment in price. Most likely very quickly when someone fails to deliver physical (wouldn't it be funny if it was Chavez who brought about freegold?). 40 * $1800 = +/- $70,000.
FOFOA sez further that these would be non-hyperinflated numbers, if we get HI, then the price of gold would that much higher.
People will still have to use SOMETHING as currency. It will probably still be US$, maybe with more zeros attached.
I don't see the point in having an upper limit before they quit printing. Don't forget the paper mark:gold mark chart.
http://en.wikipedia.org/wiki/File:GermanyHyperChart.jpg
No, FOFOA makes clear that he means today's $50K of purchasing power; the fiat measure is simply for convenience. Once the lid blows off and no one will exchange metal for paper, then the number becomes meaningless.
I know that FOFOA's stuff is vast, verbose, and has no index or table of contents, but it's worth the wade.
Gold has broken away from trading in relationship to: the dollar, equities, the bond market and
other commodities. Gold will soon break away from trading in relationship to paper gold.
That means that the manipulated paper gold trade will not affect the price of physical gold.
That is why paper gold and silver needs to be converted into physical gold and silver very soon.
To many of us, it feels like it has been a long time coming, but when it arrives, it will go down
fast and some will be caught off-guard. Make your moves now and avoid the rush, that way
you are less likely to pay a premium.
The banksters are sniffing the end. They are buying en masse and take it with their yachts in St. Barts. Someone should call the SEC. Yea right!
Hell....they're MAKING yachts out of gold now
http://www.businessinsider.com/most-expensive-yacht-2011-7
That is one of the most retarded hoaxes ever.
For the confidence to go back up in the US, Americans need to stop being sheeple. They need to re-discover freedom, what it means and how much it costs in blood and sacrifice.
It also needs to clean itself of the scum that is infesting it (war criminals, bankers, everything will be alright the government will take care of everything type of people, the MSM)... it needs THE RULE OF LAW back...
If that doesn't happen, forget it, it'll continue to go down down down.
As long as they watch TV - Any TV - they Are serfs. Until they pull the plug enmasse - then the elites will know the sheep have no clue.
If you are so confident gold is undervalued five-fold, I wonder what keeps you from focusing all your efforts in raising all money possible and keep buying cheap gold, instead of writing and letting everybody else get it before you and raise your present gold value, reducing your benefit.
Everybody? While ZH does have about 3.5 million monthly readers, that does unfortunately leave out about 5,996,500,000 people...
http://www.merriam-webster.com/dictionary/everybody
I'll let you sink in the definition.
You need to update your 1999 Almanac, current world population is almost 7 billion.
douchebag
Unfortunate indeed. But slowly we are spreading the word out there. I just hope it goes parabolic so more people will be educated.
great freaking nick
"Tyler built his army.
To what purpose, might one ask?
Well, one might ask, if not for the
first rule of Project Mayhem.
In Tyler We Trust."
This *is* Fight Club, isn't it?
...and where IS Project Mayhem lately?
One thing I do like here is you get so much less BS. I foolishly went to the WSJ?barrons a a few days ago. I wrote them off a long time ago. They were fawning over Buffett and his BS. The whole thing was sickening along with people responding. They were probably Hope & Change govt workers in the Ministry of Propaganda.
Some of us here (many) actually ARE buying gold as fast as we can. I buy when I have extra fiats come in. I don't like debt, so I buy only when I have free and clear cash.
So much money will be made by holders of gold that there is plenty of time and consideration for us fans of gold to alert everyone to the benefits of holding the best wealth protection asset in town.
Chumbawamba, last I heard, actually DID what you suggested. He maxed out his credit cards and bought gold. He's leveraged, put his money where his mouth was. Looks like he made a GREAT bet. Chumba, correct me on anything I may be wrong about.
Great chart... been waiting years for the 'diving red hampster' chart pattern. Hampsters like cheese, cheese is yellow, gold is yellow, it is a good omen.
1980 to 2001 was a 'golden age'? What the fuck kinds of drugs are you using?
someone has been snorting the internet dawwwwg.
1980 to 2001 was the CREDIT AGE... the beginning of the bubble.
When was the US golden age... the 1920s? The 1950-60-70s? After the revolution?? In the expansion of the west??
Hell if there was some new continent, like America was back in the 1600s, I would move there... RIGHT NOW. Screw the ``old world`` full of parasites.
I think that if you include ALL paper claims including unfunded mandates and derivatives the number will turn out to be more like $60,000 / oz.
Chart looks like a fetal pig with a woody to me, but then I always drove the shrinks out of the room in a daze after the Rorschach tests.
Yeah, Manthong, I remember in grade 12 when a psychologist showed me an inkblot and asked me what I saw. When I told him that it looked like a mans brain blown against a wall by a Magnum 44, he was singularly unimpressed. Neiher was the Principal, when I told him I was just screwing with the shrinks head...
+ $1830 and green
FOFOA predicts a number between $55,000 - $100,000 based on similar criteria, mainly paper claims on physical ounces, which works out to be pretty much the same as your presentation.
What's at the centerpiece of Galt's Gultch? A big,golden dollar shaped icon. What was on the rare cigarette? They know what real money is.
You know Galt's Gultch, the place the privileged have set aside for themselves to ride out the storm while the plebes monkey knife- fight each other for food. Then, after we beg their forgiveness and plead for them to save us from ourselves, they'll auger in the final phase. With complete sanction from the lemmings.
the great society,how is that working out
Terrible analysis... You could drive an armoured car full of bullion through most of the authors assumptions.
H&S pattern? What a joke. I hope this author doesn't get guested again.
Auch.
For those who get it, this article makes perfect sense. This is how affairs of state have been conducted for millenia. We're lucky in this day and age as 'average citizens' to have a window on it. ZH has been a huge part of that which enables citizens to observe, learn, discuss and participate.
We should take stock of this for a moment: you no longer need to be of noble descent, or a Borgia, Rockefeller, Morgan, Rothschild etc...to have access to and participate in global macro-based investing.
Gold was always there, lying latent behind the scenes conferring power to the dominant economy in every era. In times of turmoil and transition it's value has a premium because, yes, it is the ultimate fungible monetary asset in the world. Universally recognized. Whether 'rational' or not (what in this world really is when you come down to it).
I'll drink to that...
Things to consider:
1) Absolutely no way will the US ever repay the debt. $15 trillion and climbing rapidly. Hell, they can't even slow the rate of growth.
2) Gold and silver have always been a store of value since man became upright.
3) Politicians will never do the right thing. Only revolution and riots in the streets of Peoria will wake up the politicos. Even then, they will lie, cheat, and steal from future generations to get votes.
Conclusion:
There is no theoretical high in gold or silver. In old Zimbabwe dollars, what is the current bid/offer in gold?
10 years from now, $12,000 will look dirt cheap.
Ten years from now a loaf of bread will cost $10,000.
THAT is how you pay off trillions in debt without defaulting. You devalue your currency by inflation to the point of worthlessness. Same thing happened with Continental Dollars - that is why the Constitution prohibited states from printing paper money and limited the Federal government to coining gold and silver.
I did my calculation and ten years from now, loaf of bread will cost $20.
Today the Russia state news post a commentary that gold may drop to 1400 after QE implodes along with any insolvent banks ? http://en.rian.ru/columnists/20110830/166296661.html
Will most banks allow debts to be settled in gold ? I think most will issue a l/c backed by Au ?
I have not seen the inflation from QE at the rate anticipated and I am thinking maybe this is the scrooge effect ? whereby the wealthy and the banks horde the cash thereby increasing the value of the dollars that are liquid and circulating ? .... Could someone please explain to me the process whereby M3 may be converted to M2 and on to M1 ? Isn't that conversion is what is required before we see any inflation at the consumer level ?
Inflation has not kicked in because:
1. Money is parked at banks.
2. Money that is parked has zero velocity.
3. There is an enourmous black hole: instead of letting creditors take the losses... the losses are socialized. There is permanent indebtness, no clearing of the bad loans. Liquidity is still used to pay interests and none of the principal.
4. Rotten assets such as real estate at banks are being lifted artificially, not marked to market. Prices nevertheless need to come down. This is antiinflationary.
1. Money is parked at banks.
It's parked there because the Fed pays interest on all those excess reserves. This is 'bank recapitalization':
1. Banker borrows at 0% from Fed, parks money at same Fed.
2. Fed pays banker some rate greater than 0%
3. Banker puts feet on desk and smokes a fine cigar. Nice work if you can get it.
The lid comes off when this changes.
In a deflation, where fiat credit is destroyed, gold may decline in nominal dollars but in real terms will increase in value. During a deflation, the value of most bank assets decline, calling into question their viability. Hence, holding cash or near cash in a bank becomes more risky than holding gold outside of the banking system.
Russia and China talk the price down - and buy the dips. Look at what they do, not what they say.
Russia sold off some gold a little while back - very publicly. In a few months they'll probably reveal that they bought far more over the following months.
China's reserves have shown astounding - an previously unreported - jumps when they do finally make numbers public.
If gold goes back to $1400, US gasoline will be $1.50 not $3.80/gallon because deflation would rage.
But in today's system the cries of "DO SOMETHING!" will be sooo loud, no deflation in USD will EVER, EVER be allowed to take hold.
http://dailybail.com/storage/chart-gold-1.png
(How do you get images to insert? This chart shows up under preview, but not in the post)
first there will be a shortage of paper currency, driving up the purchasing power. then the digital dollar excess reserves, will purchase real assets, at bargain prices.much of the digital dollars, will hit the economy, just in time to meet a new abundance of paper currency, destroying its value. win/win, if you're in the club.
http://www.iamthewitness.com/DarylBradfordSmith_Bankers.htm
Money changers are thrown out many times you need to check this list out . I believe they will be thrown out one more time very soon.
http://www.simpletoremember.com/articles/a/HistoryJewishPersecution/
WARNING: If you read this...YOUR HEAD WILL EXPLODE:
Congress Giving Millions of Foreclosed Homes To Wall Street
http://wonkette.com/451867/congress-giving-millions-of-foreclosed-homes-...
I think I'm gonna puke now....
The remake of 'The A Team" isplaying in the background on cable....godawful movei but the plot is intriguing. The CIA is worried about terrorists who captured the 'Iranian Mint (sic - a 'mint' makes coins)' using presses to print 'Billions in unbacked US currency'
by those standards, the Fed is one hell of a 'terrorist organization'.
And BTW - for reral - in the 1980's there were counterfeit $100 notes so good they passed through currency processing equipment. Whether prduced on the Intaglio Presses we sold to Iran (the printing presses used for engraved currency production) or printed by the North Koreans, these notes were good. The Colombians were pretty good in printiong on bleached $! notes (real US banknote paper) - whihc is why they started wqith the security threads. But strangely the $US 100 is the LAST - and still unreleased - note to have been redesigned with litho printing and other serious security features. Rumor has it the print job was so bad they can't inspect and replace the errors fast enough to be cost effective. But I suspect that the US is reluctant to make all those existing $US 100 'obsolete'. Despite the billions in counterfeit $US100's throughout the world - very bad in many cases - esp in Africa, the REAL $US100 notes stuffed in mattersses and safes all over the world represent interest-free, indefinite duration T-Bills.... 'loans' the US doesn't have to pay interest on. But the smart ones are trading their US dollars for more 'tangible' assets of late. Holding paper$US is a money losing proposition lately - no matter where you are.
This is an old trick. The Germans made such good counterfeit pound notes for its spies that they Bank of England certified some specimens as genuine.
There's a lot of US paper all over the world. I once went to a bank in a village (4000 people) to buy a $100 bill for a graduation present. The cashier pulled out a stack of hundreds 3 or 4 inches high and asked me how much I needed. In such circumstances, how likely is it that high-quality fake FRNs would be detected?
Once the devaluation is in full swing, a lot of those FRNs, real and fake, will head back to where they came from as the world tries to salvage something physical while it still can.
The A Team plot also had the CIA and Army wanting the plates to print their own money (of course, they were rogue elements). Back to reality. So what happens if they change the $100 bill and all these people learn their CIA money was counterfitted by the CIA? Of the 7 billion notes out there, what happens when there are 11 billion redemption requests? So I would conclude that the CIA has sabotaged the $100 because they needed to by time to upgrade their presses and processes so they can print and exchange the money they have handed out. That would of made a more realistic plot. Let's face it, the US is the biggest counterfitter of US currency (that's why the $100 bills are so good)
As for me, Jessica Biel covered up many of the issues with the movie that I can't remember the name of becuase i thnkgin..jessica...mmmm
I think they realized, tim geitner's signature, on the dollar, would accelerate the loss of confidence.
"Gold at $6000 would put the cost of a loaf of bread at...$25? (theoretically)
I feel a drinking binge coming on...."
Totally fallacious implication or "theory". I bought gold at half the price it is now and a Mars bar was $1.25 and a loaf of my favorite artisan spelt bread was $5.95. They're still $1.25 and $5.95...
You're right. there is no inflation. let us all celebrate with a fresh round of QE.
All kinds of numbers, we are slowly moving forward. Like to see gold rest for a week or so. 1,800, less, more. No big deal. Then $2,000 possible. One step at time. This is going to take years guys, not months.
"You're right. there is no inflation. let us all celebrate with a fresh round of QE."
I didn't say there was no inflation, only that $6K gold does not necessarily mean $25/loaf bread, or $20/gallon gas, or...
A fresh round of QE? Did it ever stop in one incarnation or another?
Haole,@ 00:22,
According to Shadow Stats .com, Mr.John Williams, REAL inflation ( Not the CPI crap), includes FOOD & FUEL.
And it's sitting at 11.2%,your earning maybe 1.5% on cash at a bank, and losing 30% on the dollars purchasing power over the past 3rs.
Bernanke has said we leave rates at basiclly ZERO for a min of 2yrs.
Where you putting you fiat?.
The only thing I have made GOOD profits on, is PM's...................
All else is shite.
It was all so predictable , and many called it right here on ZH.
QE3 put off until the banksters threw their toys out of the pram....
The crucial thing to remember is that this level of debt has never been paid off by any means other than inflating the debt away.
Prepare accordingly.
It's the FLOW or velocity of gold changing hands that matters, not the aboslute amount in existence. This is true of all currencies. But the velocity of dollars is set to explode as they seek a place to hide from the collapse of the world's monetary system.
The funny thing about gold is that as the price rises, physical gold available for purchase starts to hide. There is anecdotal evidence of this from local precious metal dealers if you ask around. Fewer and fewer people bring in older gold coins to sell as the price rises. So the absolute physical supply available at a given price is declining due to increased risk of a monetary/financial/banking dislocation. Once this concept is understood, it's obvious that gold is headed for an exponential, parabolic increase in price. My gold, buried in the backyard or wherever as insurance, is not going to help the millionaires and billionaires of the world who suddenly and frantically start trying to buy every physical available on the open market. My physical gold and many others with physical will not be offering an ASK, no matter how high the BID goes. The shenanigans have to end, and gold is going to mop up and absorb all the phoney wealth in the corrupt system.
Lately fiats avoid collapse just by re-issing a new fiat currency.
I find many interesting observations in this video, specially after 14:00 min.
http://www.ted.com/talks/geoffrey_west_the_surprising_math_of_cities_and_corporations.html
First, I'd like to see gold clear the inflation adjusted high of $2400. I'll count the rest after it happens.
Nothing like a 40 year anticipation of a right shoulder (not to mention completed head).
Hey, do these guys do finger painting too?
So, if Gold is currently greatly undervalued against the greenback, doesn't that imply that it has actually been piss poor as a store of wealth up to this point?
THE one great flaw in all the arguments put forward by all the Goldbugs.
Don't get me wrong. I can't see many things that might successfully navigate the upcoming financial meltdown, but this is the one irritating, obvious question that appears to be glossed over.
As for the 'head and shoulders' comment...what a load of claptrap! If the chart went back 1000 years (impossible for obvious reasons) it just might be a valid interpretation. What a joke!
seems more like massive manipulation & no legitimate basis of supply and demand/price discovery to me.
Gold is massively undervalued against all paper assets and currencies, not just the dollar. Look at the expansion of debt, stock values, world GDP, and even population in the past 50 years. Look how high they had to raise interest rates to deflate the last gold "bubble". Continued 0% interest rates means the US dollar is no longer interested in being a world reserve currency, so something must replace it. It's obvious the world is choosing gold as that replacement, as there are no viable alternatives with enough credibility. The price level of goods in the US is restrained from going up due to supply and demand and the fact that dollars are still accepted for oil and other valuable imports. Demand is weak though, and there's a glut of excess productive capacity in the world that was built to service the demand of a perpetually rising debt bubble. But that could all change if there's a disorderly collapse in the value of the dollar versus other currencies. It's a race to the bottom for all fiats worldwide, and the dollar is just determined to win that race.
The Chinese seem to want to go down with the dollar by continuing to peg their currency to our own. They will regret that foolish and shortsighted mistake. Once gold is required to import oil, you will see a very drastic change in the dollar as a store of wealth. Gold is and will be the one world currency and again required for trade between nations. No longer will the savers of the world be held hostage to the actions of central banks that tinker with interest rates and money supply. If savers disapprove of monetary policy (as they do today), they will simply buy gold (as their vote of no confidence). The economy will then suffer from the rise in gold and the corresponding higher fiat price of oil and other imports. But until gold reclaims it's role as the world reserve currency, our US dollar gives us a certain amount of protection from the mistakes of our central bank's monetary policy. Central banks would be wise to target a stable fiat price of gold in the future once the system clenses itself of debts that cannot be repaid and the USD is no longer accepted for international trade.
Interesting. One arrives at similar conclusions when looking at the Fed's balance sheet size.