malco

All energy is "free". We pay the Earth nothing to suck oil and gas out of it, after all. The price comes from the human labour and skill required to get it out of the ground and make it into something useful. Same for gold really. There are no free lunches in the Universe. Those who look for them are wasting time. They would learn more by reading up Fritz Zwicky's morphological analysis of engines, if they really want to come up with something new that actually works: http://en.wikipedia.org/wiki/Fritz_Zwicky#Morphological_analysis

Dr B, don't you think that Fugro is a better bet than PICO as a water exposure? Figro are respected specialists, whereas PICO look more like dilettantes. http://www.fugro.com/ Schlumberger are pretty hard to beat, as they also have an interest in water - ties in with their oil & gas exploration expertise. I do wish the market would drop. I am getting impatient waiting for it!

I was not impressed enough to listen to more than about half of it. There were too many canards. The one suggesting that the US invaded Iraq to stop Saddam Hussein selling oil in Euros.... why do people keep repeating that? If SH did that it would be his loss because buyers would demand a discount to cover the cost of converting dollars to Euros. Iraq never sold enough oil to call the shots. Then the assertion about the gold standard preventing wars. Well, it did not prevent the Napoleonic Wars. Britain came off the gold standard to pay for the war and then struggled for years afterwards to get back on, eventually managing it for the rest of the century and on to 1914, when she came off to finance WW1. This time the Brits just could not get onto the gold standard again afterwards, and abandoned it I think in the early 1930s after defaulting on US debt repayments. Nuclear power stopped major wars, at least so far. Europe was at war repeatedly in the C19th.

I suggest you listen to this week's Financial Sense Big Picture (Part 2). I have never heard such absolutely clear, decisive and convinced advice to load up now while the stuff is on the table. Physical bullion is vanishing. This is not a gold collapse, it is an irrational dollar surge that is weird and unaccountable. Also read this paper at FS to get a better feel for what is actually going on: http://www.financialsense.com/fsu/editoria.../2008/0814.html Then relax....

SNAP! Do we need to distinguish between gold bullion used as cash, as against fully-backed noteage issued by an institution? For most of history, precious metals have been the form of exchange amongst the landed and merchant elites (along with slaves and livestock). So on that basis the answer to your question would appear to be potentially "yes". Except that the fossil era, and especially the drastic oil era since 1945, has been a unique period in commercial history during which productivity grew by a factor of about a hundred. This rate of growth, and the ever greater scale of wars that became possible through greater productivity, seems to have been the factor that rendered the Gold Standard impractical. The countries that won wars had the greatest capacity to issue debt and get away with it - these were coal rich or oil rich countries, since these resources can be seen as a sort of currency backing. One could argue that debt issued against oil in place is not real debt, but oil backed currency. Until your oil production peaks and goes into decline. Then debt is real debt and you areforced off the Gold Standard, as the US was soon after its oil production peaked. Is there a connection? I suspect so. We will watch Sterling as we descend the gloomy slopes from the Hubbert's Peak of the North Sea. In Niall Ferguson's The Cash Nexus he discusses Gold Standard versus Fiat, at no great length, despite the great length of this tome, but he does not come off the fence to conclude one is inately better than the other.

Nothing like a few bad days to bring out the jitterbugs... Bunch of old women. If you sold into this correction, shame on you....

It is a little unsettling to see gold drop >$30 in a day. A similar slump happened after the peak in Spring 2006, with the price falling briefly below the 200 day MA, as it has done again in the last few days. I think the slump is so deep this time because not only do you have seasonal demand low but also the fall in oil prices and people thinking that the worst is past. The POG should pick up again towards the end of the month.

So far as I am aware, it is only in the last 40 years that we have gone to an all Fiat money system. Prior to that, currencies were either directly or indirectly held in a gold-based framework. Britain was on the Gold Standard until the First World War. Thus, during most of the hectic phase of industrialisation, gold was the cuurency, not Fiat. I am not making a value judgement here, just a matter of observation. Your graph puts the start of industrialisation as 1600. I think that is a mite early. The real breakthrough came with the first steam engines, at the turn of the C18th, which were used to draw water from mines and allowed deeper mining. Industrialism is basically about the invention and application of fossil-fired mechanical power. This encourages scale, which in turn encourages specialisation, leading to greater efficiency, provided you have the financial and transport system to concentrate raw materials at factories and then distribute them widely and cheaply to Customers. Add in a few other fundamentals like mass production (Marc Brunel and the block factory in the Napoleonic wars) and the thread-cutting lathe (Henry Maudesley, again in the Napoleonic Wars) and you have the basis of magnifying output by many orders of magnitude. All this happen under the Gold Standard.

QUOTE: Let's say that the dollar is debased by 50% from here and Gold doubles in price (in dollars.) You make 100%, right? Wrong - you are subject to a 28% collectables tax on the appreciation, so you in fact lose compared to inflation. Congratulations - you lost real purchasing power! That isn't so good. Well, what could you do if you believe that the government will "hyperinflate" that would stay ahead of it? In a hyperinflation paradigm where the rest of the world "does better than we do" stock markets will do a moonshot as foreign money comes in to buy all the "cheap" assets. The Dow will likely double if the dollar gets cut in half. But let's say it doesn't double - it only goes up by 30%, to 20,000 by the end of the year in 2008. Why would you not buy Index CALLs instead of Gold? A LEAP January 2009 DIA $160 CALL was selling for $2.00 Friday (Bid x Ask at $1.94/$2.10). Let's say you buy 100 of those contracts for $20,000 (each contract is 100 shares, so 100 x 100 x $2.00 = $20,000, plus commission of course) If the Dow goes to 20,000 by the end of next year, your CALLs are worth $40 each! That is a 20x profit on your original investment; that $20,000 turns into $400,000! END OF QUOTE It is this kind of "reasoning" that hardens my convictions that there is little real argument against gold as a strong store of wealth. He forgets that in UK if you get Sovereigns or Britannias you pay no Capital Gains Tax because these coins are legal tender. His logic also fails because if I have $100 and an equivalent value of gold at T1, then time passes and at T2 the dollar has slumped by 50%, my $100 bill only buys half the real value it did, while mygold still buys 72% even if I choose to sell it, which of course I don't have to. So I do win over inflation. Then he makes a specious argument that you are better getting Index calls. Yes, we all know that you can make a pile through leveraging.... if it was that cut and dried everyone would be doing it. He forgets that there is a little word "if" and within that little word there is implied the concept of RISK. And oh, how many discover that too late! I could equally argue that we were all idiots not to buy molybdenum because it went up by a factor of 20. If I buy gold and it goes to $5000 because the banking system is putting four hoofs skywards then that shows how smart I am and how dumb he turned out to be. Oh, and if the DOW did go to 20,000, that might imply inflation to take out much of his 20x profit.

I was just over at goldline and was impressed to notice how much or their range is Out of Stock. That is something new. Even a couple of years back when gold bubbled over 700 for the first time there was no shortage of physical metal. So it looks like we are into new territory. Personally, I am hoping it misses 1000 this time and falls back into the 800s for the summer so that I can do some loading up, and goldline can fill their empty shelves. It must be good times for the Baird family after decades in the twilight zone of the investment world. By comparison, Chards don't even bother to keep updated prices on their web page and I assume you still have to ring up to get a quote rather than just order on line. You'd think they'd upgrade their service at a time like this. Maybe they all used to work for British Leyland...

I had never thought of HPC as being big business. It has a membership of about 10,000, max users ever 1,100, which is quite small for an internet forum. The white supremacist site Stormfront.org has 126,000, max users ever 5,000, whilst the bestiality forum Beastforum.com has 464,000 members, most users ever 2,300 (most users too busy off chasing the fauna one assumes). Not that I share the passions of either, you understand, I just love to explore the Internet for its myriad planes of human perversity. What are the financials of a site like HPC? What does it really cost to run? How do you "own" a site? What advertising revenue do they bring in? You suggest "millions" but I would be surprised if they got more than a few grand in practice. Like I said, it's a pretty small site in the run of things (Maybe they should introduce some sheepshagging to get the numbers up!). Dr Bubb has so far kept the advertising quite low-key on this site. In fact until you goldbug rabble turned up it was quite peaceful! Welcome in.

Huh, looks like the peace we once enjoyed here is a thing of the past if we're getting riff-raff and rabble from HPC/GHPC. Magpie, I am amazed at what you say about being banned. The one person I would definitely have banned was an obnoxious @rse called MarkG, although he in fact is still posting there and might be a moderator by now for all I know (it would not surprise me). Anyway, while you are here, don't you think TPTB will let gold slip over the grand and then hammer it like hell to drive out any newbies that might have thought gold was the coming thing? Like you Goldfinger, I am looking at the time when you can get a house outright for 70-100oz. I never discuss this with anyone though. What is the point trying to talk to sheep? They haven't a clue. With the Peak Oil slant to this, I think we might see houses falling to lower than we expect in gold terms, within five years.

The Tesla will have the same problems of any electric car, lack of endurance. You can achieve electric performance via over-kill. At the end of WW2 Germany developed a revolutionary submarine called the Type 21, which was about twice as fast submerged as typical designs had been (top speed of 17 knots versus 8-9 knots). But this was not through any techically radical breakthrough, it was just with bigger motors and a huge battery. What surprises me is that the military diesel/electric submarines being built today are still heavily related to the Type 21. The real innovation would be in submarines, not cars. The fact that it has not happened is to my mind the strongest evidence that the various permutations we are now seeing are just variations on a theme, rather than real progress. Likewise with the Tesla. It has a big motor and a big battery - and it still has all the problems, including the letterbox view of a sports car. I can think of else to do with fifty grand, like get a decent turbo-diesel Merc.

I would not say that they are exactly horribly ungreen. As these cars show, electric cars tend to be much lighter and less wasteful than IC cars. Their exhaust is far away at the power station rather than in schoolkids' faces. The process of manufacturing, recycling and disposing of the batteries does deserve more attantion than it gets, in terms of heavy metals pollution and the CO2 produced by the sophisticated processes required to produce batteries. I have never seen a study that takes this into account. I don't think people are all that enthusiastic about electric cars, they are just more enthusiastic about them than push-bikes. There is a big difference between petrol and diesel engine efficiency, especially in the urban cycle. Petrol engines have to be throttled, because you can't alter the air-fuel ratio much or it causes combustion problems. The throttling causes very poor efficiency if the engine is driven at low loads a lot, as it is in town. I suspect that electric cars do give petrol engines a run for their money in town driving, other things being equal, despite transmission losses for electric cars. For diesels it is a different story, because they have a fuel rack rather than a throttle. This is because it does not matter if the air-fuel ratio varies over a wide range (in which respect diesels are rather like gas turbines). The whole set-up is much stronger, runs at much higher thermodynamic conditions and is much heavier, but efficiency is far higher in town. Biodiesels would be just great if you could make the stuff in quantity without sending up grain prices and causing starvation in the Third World, and if you could grow it without large inputs of fossil fuels in various forms. Apparently there are algae that have a large oil content and can in theory yield large amounts of biodiesel from solar energy. It is just that nobody has actually demonstrated the technology at any scale. It may hold great potential. We shall just have to see.

Actually, I would have said the USA has done quite well. Read this: www.caer.uky.edu/energeia/PDF/vol8-3.pdf Much of it is quite technical, but it gives a concise, excellent account of how our situation today has developed. You can understand why Dan Yergin maintains "we've been here before". There was a lot of interest in liquefaction in the USA after WW2, as it was realised that US and Venezuelan oil would not supply the world for many years more. Then came the discoveries in the Middle East and the imperative relaxed. Likewise we discovered new oil after 1973. It must be said though that we are not discovering much new oil now. It is clear that there has been long term interest in the issue in the US, under the radar of general awareness. Wise minds have thought decades ahead of the thoughtless herd and have been working on technology that will soon be vital. The article indicates the liquefaction becomes viable at about $40/barrel. Despite this there does not appear to be all that much interest in liquefaction. Perhaps in reality the overall costs n scaling are higher?