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"Gold is the trade of the weary"

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Grant still likes the Gold trade, and thinks Buffett is wrong

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"Gold is the trade of the weary"

Weary or wary?

 

Mind you, I'm getting weary of the short term trading discussion on the long term thread.

 

All for the trading discussion, but why not put it where it belongs? You'll have a much more successful forum if it observes the discipline of separate threads for separate topics.

 

You must be getting weary of my repeating this.

Not to worry, I won't bother repeating much of anything if the threads can't get sorted out.

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AT THE REQUEST of 2-3 of our regular posts, whose opinion I have requested...

 

I am moving this thread BACK TO THE MAIN BOARD, and pinning it.

 

 

= =

 

 

If there are nearly all constructive posts on this and the other "new" Gold thread,

then I will merger them, probably at the end of this week.

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See important post, above

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Okay...

 

The following was posted on the OLd Gold thread

 

AT THE REQUEST of 2-3 of our regular posts, whose opinion I have requested...

 

I am moving this thread BACK TO THE MAIN BOARD, and pinning it.

 

 

= =

 

 

If there are nearly all constructive posts on this and the other "new" Gold thread,

then I will merger them, probably at the end of this week.

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Turk - Physical Gold Buyers Won the Day, Shorts to Retreat

 

With gold and silver holding firm, despite bearish news, today King World News interviewed James Turk out of Spain. Turk told King World News the critical levels to look for in both gold and silver. But first, here is what Turk had to say about today’s action: “The precious metals ended last week on the ropes, Eric. The news at the open this morning here in Europe was bleak because the Indian government announced a doubling of the import tax on gold. Given that India is world's the largest purchaser of gold, this news was bearish.”

 

 

 

Read more at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/19_Turk_-_Physical_Gold_Buyers_Won_the_Day%2C_Shorts_to_Retreat.html

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So my question is now what do we use to measure real value?

1] 'Real' value, in monetary terms, is utterly arbitary and contingent. There is no absolute benchmark, it's all relative. Then think of a balancing see-saw. At times of monetary/ credit expansion, asset prices inflate/ appreciate. Then when the reaction sets in, in times of monetary contraction, the currency in turn inflates/ appreciates. Nothing is fixed, and the dynamic, one way or the other, determines what will relatively increase or decrease in monetary value.

 

2] With currencies themselves caught up in a global economy in flux, where currencies themselves are playthings of international investors, gold enters the frame as the strongest/ heaviest symbolic form of money [currency]. In this global context, the monetary worth of both assets and currencies should be determined relative to the primal currency of gold. In this sense we are not quite so rational and scientific as we like to think. Watch how the world plays the actual game not how it thinks.

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1] 'Real' value, in monetary terms, is utterly arbitary and contingent. There is no absolute benchmark, it's all relative. Then think of a balancing see-saw. At times of monetary/ credit expansion, asset prices inflate/ appreciate. Then when the reaction sets in, in times of monetary contraction, the currency in turn inflates/ appreciates. Nothing is fixed, and the dynamic, one way or the other, determines what will relatively increase or decrease in monetary value.

 

2] With currencies themselves caught up in a global economy in flux, where currencies themselves are playthings of international investors, gold enters the frame as the strongest/ heaviest symbolic form of money [currency]. In this global context, the monetary worth of both assets and currencies should be determined relative to the primal currency of gold. In this sense we are not quite so rational and scientific as we like to think. Watch how the world plays the actual game not how it thinks.

Not disagreeing with the above, but is not gold's value measured against currency? If paper currency were to collapse as some suggest, how would you measure gold's value? And furthermore, will there still be a buyer?

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Not disagreeing with the above, but is not gold's value measured against currency?

Yes and no.

 

No, not if gold has [effectively] become the 'bedrock' of monetary value. Think of it having the highest/ strongest symbolic function [serving a practical function] in the imagination of the species... as opposed to being the 'only natural form of money'.

 

Yes, but only in the sense that you can say currencies are appreciating or depreciating relative to it. Everything moves.

 

If paper currency were to collapse as some suggest, how would you measure gold's value? And furthermore, will there still be a buyer?

Can't see paper currencies collapsing simply because they don't really consist of 'paper' but outstanding debt. With debt deflation, the 'shorts' on the currency effectively enter a period of 'covering', which sees it appreciate relative to assets.

 

If paper did collapse, government would then have no choice but to somehow resort to gold as a monetary measure. But once again this only shows that gold is not 'being valued', but is that which does the valuing. Gold, and currencies then fixed to it, or some version of fractional reserve, would then price things. What prices would be, would then no doubt rely on the quantity of money available, and how high the liquidity preference remained.

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If paper did collapse, government would then have no choice but to somehow resort to gold as a monetary measure. But once again this only shows that gold is not 'being valued', but is that which does the valuing. Gold, and currencies then fixed to it, or some version of fractional reserve, would then price things. What prices would be, would then no doubt rely on the quantity of money available, and how high the liquidity preference remained.

In the case of Argentina (when it defaulted some years back), did not the government of the day re-issued a new paper currency and pegged it equal to the then USD?

 

If then as you said regarding paper collapsing, gold would have to be pinned to a fixed value, and be void from speculation.

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In the case of Argentina (when it defaulted some years back), did not the government of the day re-issued a new paper currency and pegged it equal to the then USD?

 

If then as you said regarding paper collapsing, gold would have to be pinned to a fixed value, and be void from speculation.

Yes, some kind of fixing would be involved. It would be the end of a free global market in currencies. The fixing of a currency is quite a delicate thing. If the currency is fixed at too high a rate it will only continue to deflate the economy. Besides Argentina this was the problem when Churchill decided to go back on gold after the war... he went back to the pre-war rate, radically appreciating the pound over night.

 

But I don't see it playing out like this. The potential problem facing the major currencies today, and on a global stage, is not their depreciation but their appreciation against financial assets [even if real consumables simultaneously become more expensive]. A forseeable disaster for markets and economies is capital flight out of assets into currencies, and then further and increasingly out of currencies into gold; gold being the prime form of liquidity.

 

In this situation government would be forced to step in and fix the currency to gold/ gold to currency. This may even see gold capped at where the market has taken it. If government didn't intervene, the free market could see economies implode with mass unemployment.

 

One can be 'for' or 'against' a gold standard in the abstract. There probably is no realizable monetary ideal [arguably a good thing], but the practical strength of a gold standard lies in its ability to provide stability in a time of flux.

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A jeweller has been ordered by his local council to hand over gold dust swept up from his workshop floor so that it can be disposed of as commerical waste

 

 

 

http://maxkeiser.com/2012/03/20/a-jeweller-has-been-ordered-by-his-local-council-to-hand-over-gold-dust-swept-up-from-his-workshop-floor-so-that-it-can-be-disposed-of-as-commerical-waste/

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In the world of KWN there never is any downside for the PM's.

Seemingly 99% of King's interviewees are permabulls. One important exception is Louise Yamada; I wish she were on there more often.

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But I don't see it playing out like this. The potential problem facing the major currencies today, and on a global stage, is not their depreciation but their appreciation against financial assets [even if real consumables simultaneously become more expensive]. A forseeable disaster for markets and economies is capital flight out of assets into currencies, and then further and increasingly out of currencies into gold; gold being the prime form of liquidity.

 

In this situation government would be forced to step in and fix the currency to gold/ gold to currency. This may even see gold capped at where the market has taken it. If government didn't intervene, the free market could see economies implode with mass unemployment.

I pondered for a time thinking about what you said, and was considering whether there would be a unified cooperation on a global stage? But I feel this would have a real negative impact on various currencies and economies. Gold would be better used as some sort of wealth erosion insurance protection rather than using the old gold standard regime. Once confidence returns to paper currencies, the rush into gold will evaporate. What is needed is something completely new. Not a re-visit to a system that also failed.

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I pondered for a time thinking about what you said, and was considering whether there would be a unified cooperation on a global stage? But I feel this would have a real negative impact on various currencies and economies. Gold would be better used as some sort of wealth erosion insurance protection rather than using the old gold standard regime. Once confidence returns to paper currencies, the rush into gold will evaporate. What is needed is something completely new. Not a re-visit to a system that also failed.

Actually, the argument for a recourse to gold is based primarily on instability at the international level. As I've argued earlier, gold is the strongest symbol of money which cuts across the various cultures of developed economies. I think 'something new' or novel will be rejected simply because the attempt at a purely scientific currency [Friedmanism] would have been seen to fail by then. With the failure of theory, it's likely that economists will also be discredited. Government, in that situation, will look pragmatically for something which can work and function relatively well in the face of increasing instability.

 

The other thing with a proper gold standard, an international one, is the practical balancing mechanism it can provide for trade. Resorting to gold's balancing mechanism is an obvious choice for governments when you consider that it was the massive build up of trade imbalance which has endangered the global economy in the first place.

 

 

Here's a good solid British empiricist on the subject:

 

http://en.wikipedia.org/wiki/Price_specie_flow_mechanism

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Actually, the argument for a recourse to gold is based primarily on instability at the international level. As I've argued earlier, gold is the strongest symbol of money which cuts across the various cultures of developed economies. I think 'something new' or novel will be rejected simply because the attempt at a purely scientific currency [Friedmanism] would have been seen to fail by then. With the failure of theory, it's likely that economists will also be discredited. Government, in that situation, will look pragmatically for something which can work and function relatively well in the face of increasing instability.

 

The other thing with a proper gold standard, an international one, is the practical balancing mechanism it can provide for trade. Resorting to gold's balancing mechanism is an obvious choice for governments when you consider that it was the massive build up of trade imbalance which has endangered the global economy in the first place.

 

 

Here's a good solid British empiricist on the subject:

 

http://en.wikipedia.org/wiki/Price_specie_flow_mechanism

So really its better to play with the devil you know than the one you do not. I can see your point has merit regarding instability at the international level. But is there enough gold in existence considering the current spot price to be able to support such an attempt for a recourse back to a gold standard internationally? At this point I have no idea and is beyond my understanding. Thanks again for your response.

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So really its better to play with the devil you know than the one you do not. I can see your point has merit regarding instability at the international level. But is there enough gold in existence considering the current spot price to be able to support such an attempt for a recourse back to a gold standard internationally? At this point I have no idea and is beyond my understanding. Thanks again for your response.

The amount of gold doesn't really matter. Because the rate at which currencies are fixed to it [the price] is completely arbitrary. I doubt a gold standard would halt a grinding deflation in asset prices, but it would halt monetary chaos and economic implosion. What's important is the rate at which currencies are fixed to each-other. International trade can then be stabilized on stable currencies and exchange rates.

 

The price of gold could be capped/ fixed where the market takes it over the next decade. At 20 odd % a year compounding that's quite a lot higher from here. I think government would step in before the 'manic phase'. Also, I don't see why governments wouldn't keep some form of fractional reserve even with a standard. If it all came to this, banks most probably will have become more regulated. Mind you, debt might have become a dirty word for a generation, which would see asset prices grind down. If the baby boomers finally panicked and started selling, there would be the property crash.

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