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Balderdash. People accept IOUs for all sorts of reasons that are nothing to do with central banks, and have done throughout history.

 

Random examples from now and the past: babysitting tokens (eg swapping services), early bankers certificates (before fractional banking and central banks). I use Paypal because I trust it enough. You accept IOUs from Bullionvault and Goldmoney because you trust them. The key thing that makes IOUs or tokens work is trust. People (mostly) trust money that is government backed because they believe it is enforceable in a society that is too big to operate on the basis of local babysitting tokens or whatever.

Mind you, BV and GM do NOT issue IOUs but store your bullion for you - there is a legal difference in this and we had this discussion before.

 

Regarding your historic part, cash (i.e. GOLD) was certainly always preferred over the IOUs. Only later cash got the meaning of fiat cash, but even this is usually preferred over cash IOUs.

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Yes, but there is frequently an attempt to go beyond the obvious truth (fiat tends to decline over time) to unverifiable theories about gold (eg it always buys the same value of goods, or the supply always expands conveniently in such a way as to avoid constricted supply being a problem with a gold standard).

I think these long-term historical comparisons can help provide some sort of context, but admittedly only roughly.

 

Obviously the cost of things has fluctuated, but generally less in gold terms.

 

About the amount of gold being roughly constant per capita: only roughly and at times regionally it must have increased rapidly, e.g. when the the Black Death hit Europe. The amount of gold and silver per capita must have increased dramatically in just a year or two.

 

No wonder the cost of labour went up.

 

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That might be very approximately true historically, but it's a big logical leap from "the amount of gold per capita has remained more or less unchanged (at about half an ounce per person) since Roman times" to the much stronger "the amount of gold available grows at about the same rate as the population" - the latter implies it's a consistent growth (clearly untrue as there have been various surges such as gold rushes etc) and that there is something inevitable about it.

 

I suspect it's a notion that has been wheeled out in the course of some 'gold is money' debate, thus. Gold-sceptic points out that the gold standard can be problematic as it prevents expansion of the money supply with population. So goldbug comes up with "the amount of gold available grows at about the same rate as the population" to vindicate continued faith in gold's perfection as money.

 

Dodgy history, dodgy theory...

 

I think this is your worst post yet. I think you are confusing population growth with economic growth.

 

I don't know why you post on here. You obviously hate gold and gold bugs, and are so biased against it that everything you see that supports purchasing gold is wrong, biased, written by a gold bug idiot, and everything else, written by central banks, etc is right and truthful.

 

I am starting to find the number of posts from you annoying on here as it distracts me from what I am really interested in.

 

Maybe if you wish to continue this, you should start your own anti-gold thread ?

 

In fact I think that's a good idea. Then you could post all the facts you have to support your views.

 

---------------------

 

For everyone else, I think the recent interview with James Turk contains some very interesting stuff on mining stocks and why and how they work and affect the production of gold.

 

James Turk on Gold: The Ultimate Inflation and Catastrophe Hedge

May 21, 2008

http://seekingalpha.com/article/78214-jame...dge?source=feed

 

Let me divide stocks into two different categories to make sure we’ve got the definitions right. First you have the large and small producers—those that are actually mining gold. And on the other side you have the non-producers. These are the development companies that are bringing a deposit into production, and then you have the property plays, which are exploring for new deposits.

 

The producers have had some very, very strong headwinds over the past couple of years. They’ve had energy prices going up more rapidly than the gold price. Although it’s still within that historical 60-year band, we’re at the upper end of that band, which basically says that energy is high and gold is relatively cheap. What it means though, is that the margins of the mining companies have been earning with these high energy costs is smaller than it would otherwise be if gold was high relative to energy costs.

 

But inflation has also hurt companies in a number of other ways—the cost of steel, the cost of chemicals, and the cost of labor. Everything is going up. The reality is that the inflation rate of producing gold has gone up much, much higher than the government-reported inflation rates. And I think a lot of gold mining companies have been operating with inflation rates of 12% to 15% over the past couple of years, perhaps even higher in weak currency countries like the United States, as weak currency countries tend to have a higher inflation rate. But we’re even seeing the pressures on mining company margins in strong currency countries like Canada, because the gold price has not risen as much in Canadian dollar terms percentage-wise as it has in the U.S. dollar percentage-wise. So Canadian companies have felt the pressures on margins, too.

 

The reality is that the margin pressures on the major gold-mining companies are continuing, and until the gold price starts to begin rising at a rate outstripping the inflation rate, you’re going to continue to see these margin pressures. Now, because the margin pressures have hurt the producing gold companies, both the large producers and the small ones, they’ve underperformed, and that underperformance has taken a lot of the luster out of the whole mining sector.

 

And when the luster is taken out of the whole mining sector, the property plays and the development companies are also going to be impacted and underperform. But the development companies have also had another problem besides inflation, namely, start-up problems. We’ve had good examples of this with Gammon Gold and Alamos Gold in Mexico—their stocks have been hit because of start-up problems. Then, you had NovaGold—its joint venture partner decided not to construct the Galore Creek Mine simply because costs have risen so much.

 

All of these things have cumulatively hit the non-producing companies, and then at the end of food chain, of course, are the more speculative property plays. Give the overall state of gold stocks, the property plays are going to be hurt the most because there’s really very little liquidity there when little money is coming into the sector. And when people have to sell—because a lot of these things are played on margin— the prices of the property play stocks get decimated.

 

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Mind you, BV and GM do NOT issue IOUs but store your bullion for you - there is a legal difference in this and we had this discussion before.

 

No, this is a completely different point to that debate, in which I accept I was wrong. BV and GM are issuing a guarantee to give you your gold on demand. They store your gold, give you an IOU, promise, guarantee, whatever you want to call it. That's different to, say, a babysitting token, which is an unbacked token, same as fiat currency. But both share the fact that people voluntarily use a certificate or proof of ownership of some sort rather than directly exchanging goods. The first bank certificates were the equivalent of being able to transfer ownership of gold in a vault. They worked as currency because people trusted them.

 

You were asserting that an IOU or token only works because of central bank coercion, which is balderdash. It works because for one of a variety of people both parties to the transaction trust in it.

 

You don't actually have your gold. You have paper or electronic data that proves you are the owner. That system works because there is a cultural or political system that alows you to trust that promise, that you retain ownership. It is the system that allows people to trust in currency that matters, and it isn't necessary that it be coercive.

 

Regarding your historic part, cash (i.e. GOLD) was certainly always preferred over the IOUs. Only later cash got the meaning of fiat cash, but even this is usually preferred over cash IOUs.

 

Of course when gold was the currency, people preferred gold. Right now if I sold my lawnmower I'd prefer cash, as would 99.9% of the population. Paypal would do. Or a cheque with a guarantee card. I'd find gold a bit of a pain though as it would require me to make another transaction, selling it for cash, in order to use it as currency.

 

 

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...

You were asserting that an IOU or token only works because of central bank coercion, which is balderdash. It works because for one of a variety of people both parties to the transaction trust in it.

...

Fact is that basically all governments/central banks in the world discourage you from using gold currency by taxing you in case their own currency goes further down the toilet (which it unfortunately does most of the time).

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I think this is your worst post yet. I think you are confusing population growth with economic growth.

 

...I am starting to find the number of posts from you annoying on here as it distracts me from what I am really interested in.

 

Maybe if you wish to continue this, you should start your own anti-gold thread ?

 

In fact I think that's a good idea. Then you could post all the facts you have to support your views.

 

Fair enough I might duck out soon. Though I believe you can put me on ignore if I irritate you.

 

Either way I would defend that post . I'm not confusing population growth with economic growth at all. A common argument against the gold standard as a perfect system of money is the fact that it can become deflationary when population grows. You need monetary growth in that situation to avoid problematic deflations. (And in reverse, a rigid money supply combined with falling population can cause inflation as happened with the Black Death I believe).

 

So I'm presented with a historically very dubious statement that gold supply has always grown in line with population growth. I would analyse that as an argument that has been put forward by a goldbug to counter the very obvious point that a rigid money supply is a problem when combined with a growing population. Would you defend it as a good piece of historical analysis? Or claim that a rigid money supply is never problematic?

 

I don't know why you post on here. You obviously hate gold and gold bugs, and are so biased against it that everything you see that supports purchasing gold is wrong, biased, written by a gold bug idiot, and everything else, written by central banks, etc is right and truthful.

 

Not fair, I think. I don't hate gold or goldbugs in general and often agree with some of the points made. I think there are excellent reasons for buying gold now. I also agree with a fair bit of the goldbug analysis of what is wrong with the way that central banks are currently behaving. But I do think some utter nonsense is spouted in defence of gold and I think it is intellectually flabby to just claim I must hate gold if I point out weak arguments.

 

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Fact is that basically all governments/central banks in the world discourage you from using gold currency by taxing you in case their own currency goes further down the toilet (which it unfortunately does most of the time).

 

They tax you on all sorts of things, including stuff like buying and selling fine wine and art. I don't really agree that taxing gold is a specific attempt to discourage gold, I'd suggest that argument only makes sense to someone coming at the question from a goldbug point of view. I can understand why it irritates you, but I don't think I agree with the government coercion part of the argument.

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They tax you on all sorts of things, including stuff like buying and selling fine wine and art. I don't really agree that taxing gold is a specific attempt to discourage gold, I'd suggest that argument only makes sense to someone coming at the question from a goldbug point of view. I can understand why it irritates you, but I don't think I agree with the government coercion part of the argument.

Well, gold had always been money, and suddenly they started prohibiting it or taxing it. I would say that this is discouraging.

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...

But I do think some utter nonsense is spouted in defence of gold and I think it is intellectually flabby to just claim I must hate gold if I point out weak arguments.

(1) Gold is real money.

(2) There is no reason why the world shouldn't be on a gold standard today, other than the greed and the military power of the West (aka The American Empire).

(3) Gold has proven over and over again that it is a very good long term inflation hedge.

(4) Nowadays, gold is the investment of choice in a commodities boom/systematic banking crisis.

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(1) Gold is real money.

(2) There is no reason why the world shouldn't be on a gold standard today, other than the greed and the military power of the West (aka The American Empire).

(3) Gold has proven over and over again that it is a very good long term inflation hedge.

(4) Nowadays, gold is the investment of choice in a commodities boom/systematic banking crisis.

 

1) Disagree for metaphysical reasons - money is a convention, not a natural quality - but we know we disagree on that one...

2) Half agree - we could be on a gold standard, but I think it would simply substitute a different set of problems, including more deflationary periods. I don't think we are only on fiat because of the American Empire and War Machine, but I do think they have taken advantage of fiat's weaknesses, and have been the biggest abuser and underminer of fiat.

3) Disagree. It spent a long time as currency, which means it simply held its value, more or less (given fluctuations in relative values of other goods). Since the 1970s it has a patchy record at best as an inflation hedge. Sometimes good, sometimes bad. Useless for this purpose in the 1980s and most of the 1990s, for one example.

4) Agree - it's a sensible option given the banking crisis and the danger of it getting worse. Someone here described it as "insurance" - I think that's a very sensible way of seeing it in the current instability.

 

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On a 100 year horizon, I would expect oil to play a much less important role than today. The world will be on nuclear, wind, water, hydrogen fuel. However, there will still be gold in central bank vaults. Or, if central banks don't exist anymore because of the Great Depression of 2007-2027 that was caused by too much paper money, gold will be the world currency of choice.

 

I agree, gold will remain the only lasting global currency. I am more thinking of events in my lifetime, another fifty years if I'm lucky ;)

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On a 100 year horizon, I would expect oil to play a much less important role than today. The world will be on nuclear, wind, water, hydrogen fuel. However, there will still be gold in central bank vaults. Or, if central banks don't exist anymore because of the Great Depression of 2007-2027 that was caused by too much paper money, gold will be the world currency of choice.

 

Hmmm.

Do you think we can get to such a position (oil less important) without a massive change in our "living arrangements"?

I doubt it.

 

As Member 100 pointed out on another thread, a huge part of US mortgage defaults is due "bad location" where what looked like

affordable homes, require a massive daily commute. Now with oil prices soaring, no on wants to own them

 

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Fair enough I might duck out soon. Though I believe you can put me on ignore if I irritate you.

 

Either way I would defend that post . I'm not confusing population growth with economic growth at all. A common argument against the gold standard as a perfect system of money is the fact that it can become deflationary when population grows. You need monetary growth in that situation to avoid problematic deflations. (And in reverse, a rigid money supply combined with falling population can cause inflation as happened with the Black Death I believe).

 

So I'm presented with a historically very dubious statement that gold supply has always grown in line with population growth. I would analyse that as an argument that has been put forward by a goldbug to counter the very obvious point that a rigid money supply is a problem when combined with a growing population. Would you defend it as a good piece of historical analysis? Or claim that a rigid money supply is never problematic?

 

 

 

Not fair, I think. I don't hate gold or goldbugs in general and often agree with some of the points made. I think there are excellent reasons for buying gold now. I also agree with a fair bit of the goldbug analysis of what is wrong with the way that central banks are currently behaving. But I do think some utter nonsense is spouted in defence of gold and I think it is intellectually flabby to just claim I must hate gold if I point out weak arguments.

 

No offence meant. It's just that when I look at this thread it is to see what people have posted about gold. News items, their views on the current state of the gold market.

There's nothing wrong with discussions about things, but it's just that on this thread I find it fills too many posts. Your post, the replies, your replies.......and finally I get to what I'm looking for.

 

IMO, and just mine, it would be better on a separate thread.

 

Who mentioned the gold standard ?!

I thought there was a simple statement about the amount of gold mined in total versus population.

 

In fact I don't remember reading ANY article from any 'goldbug' suggesting a return to the gold standard. That doesn't mean there aren't any, just that I haven't read any.

 

My view is very simple. I look at the current situation and decide what I think is best to invest in. At the moment that includes gold/silver.

In say 5 years time I'll probably be writing about why gold/silver are not the thing to invest in, and that XYZ looks like a good idea.

 

Where we seem to disagree is that you seem to start by poo-pooing most if not all goldbug articles. I read them and make up my own mind, starting with a healthy cynicism of everything written by those with a vested interest in banking and politics.

I'd rather listen to David Morgan, Jim Sinclair, James Turk etc etc for truth than Ben Bernanke :D

 

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I'd rather listen to David Morgan, Jim Sinclair, James Turk etc etc for truth than Ben Bernanke :D

 

To some extent, BB sees his job to "support confidence" where there is genuine reason to be

worried. And JT, DM, JS et al. point out the reasons we should be worried.

 

Which side is involved in a Con Game?

 

Magpie, feel free to start a new thread on the topic

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QUOTE (Steve Netwriter @ May 22 2008, 09:47 PM)

I don't know why you post on here. You obviously hate gold and gold bugs, and are so biased against it that everything you see that supports purchasing gold is wrong, biased, written by a gold bug idiot, and everything else, written by central banks, etc is right and truthful.

 

 

Not fair, I think. I don't hate gold or goldbugs in general and often agree with some of the points made. I think there are excellent reasons for buying gold now. I also agree with a fair bit of the goldbug analysis of what is wrong with the way that central banks are currently behaving. But I do think some utter nonsense is spouted in defence of gold and I think it is intellectually flabby to just claim I must hate gold if I point out weak arguments.

yep i dont think thats fair either - i dont think you hate gold either and so what if you did

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One from the excellent Jim Willie:

 

Gold and Silver Breakout on the Failure of US Brand of Capitalism

Commodities / Gold & Silver May 22, 2008 - 03:38 PM

 

By: Jim_Willie_CB

 

http://www.marketoracle.co.uk/Article4804.html

 

The gold and silver prices have broken out on the upside, not to register new highs but rather to emerge from a clear bullish wedge pattern in their daily charts. The stage is set for assaults on the 1000 gold high and the 21 silver high. Furthermore, and more boldly stated, the stage was set last January for tremendous moves in gold toward 2000 and silver toward 50 in the next 18 to 24 months, give or take. The crude oil price surged past 100. Next the gold price will surge through 1000, as in SURGE. The key commercial commodity is crude oil. The key financial commodity is gold (silver also). Unprecedented monetary inflation invites unprecedented reaction in the crude oil and precious metal prices, where justice still is enforced. This key cause and effect is sorely missed by slick Wall Street conmen and carnival barkers. They invest privately in secrecy, while they promote publicly with deception, fraud, and influence of public media networks. They invest in the energy futures markets, while talking about speculation as the blame factor. They have yet to read and absorb the Peak Oil phenomenon on billboards. Oil supply reliability and disruption is a key story behind crude oil prices right now, not speculation. Permit me a rant that rambles from one important topic to another, but does conclude with the gold & silver prices, charts, with breakouts evident, and targets claimed.

 

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yep i dont think thats fair either - i dont think you hate gold either and so what if you did

 

Maybe not.

But there is a fine line between being a self-confessed sceptic, and something more.

Sorry, maybe it's just me, but some expressions irk me.

 

But I guess that was those old meanies at the cartel manipulating the price, it wasn't that the gold shills were wrong, right?

 

Mainly the immediate dismissal of people who are on the goldbug 'side'.

There is sceptism and bias.

Maybe use of some expressions just annoy me and remind me of deniers of the usefulness of gold.

 

I'm OK with debate of the facts. Debate of the economics. Personally I find some expressions about people who I think are honourable irking.

 

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Hmmm.

Do you think we can get to such a position (oil less important) without a massive change in our "living arrangements"?

I doubt it.

 

As Member 100 pointed out on another thread, a huge part of US mortgage defaults is due "bad location" where what looked like

affordable homes, require a massive daily commute. Now with oil prices soaring, no on wants to own them

Maybe, over time, the US will find a solution for this problem, e.g. little hybrid cars that can be plugged in and use solar energy as well. However, the change will take decades, and so long the 'bad location' will keep falling in value.

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