GOLD

[Magpie]

But what you've described is natural readjustment to changing circumstances. The disruption to the economy led to hardship, not the amount of silver per capita.

 

Yes, there's an element of truth in that. The relative adjustment would have happened anyway. However in deflationary situations, economic behaviour is strongly affected, creating a feedback mechanism, so the changes that happen are not restricted to ones that would have happened anyway. If the value of money is rising, people refuse to spend now, expecting to be able to buy more later. So economies can grind into a malaise for no reason other than the inflexibility of the money supply. Which is one account of what happen in the 1870s and 1880s in the British economy.

 

[wren]

Yes, there's an element of truth in that. The relative adjustment would have happened anyway. However in deflationary situations, economic behaviour is strongly affected, creating a feedback mechanism, so the changes that happen are not restricted to ones that would have happened anyway. If the value of money is rising, people refuse to spend now, expecting to be able to buy more later. So economies can grind into a malaise for no reason other than the inflexibility of the money supply. Which is one account of what happen in the 1870s and 1880s in the British economy.

I've increasingly been getting the impression that you are enamoured of paper money systems. I don't deny that a systemic deflation could have negative effects, but do people stop buying food when the price is dropping?

 

If you are really so worried about deflation, how about a metal-based monetary system? (and I mean real metal, not paper metal - i.e. any paper IOUs would be 100% backed). Under such a system, a significant reduction in the money supply is then rather unlikely, isn't it? (even if now and again a shipload of bullion sinks in the ocean, gold and silver inflation aren't zero after all).

 

You've also mentioned worries about the possibility of slight price deflation, if the money tokens don't increase in line with the population increase. Is that such an awful thing?

 

Computers are much cheaper today than a few years ago. I don't see any computer price protests. Is a bit of price deflation so awful? Is the computer market slumping due to people "holding back" on their computer purchases. Are computer manufacturers screaming blue murder because they can't make a living?

 

Does the acreage of farmland, for example, increase in line with the increasing population?

 

Of course, not. Now that's a phenomenon which in due course will be a truly awful thing.

 

But the great thing about paper money (or more precisely, numbers in accounts as most of it isn't actually printed) is that there's no limit to how much can be created. Even the Mogambo Guru could have got his trillions into his pocket calculator by using the exponent function.

 

You can inflate willy-nilly, you can create artificial booms and busts, you can blow and pop bubbles, you can pay for wars even when you're broke, you can even devise hidden forms of private taxation. And if you are wealthy and know what's going on you can use all this to make yourself wealthier and the average person poorer, maybe even a debt-slave.

 

Good innit?

[Armchair]

Hi all.

 

Long time lurker, here and at HPC. Just thought I'd say thanks to all for your analysis and efforts to inform.

 

Also, I'd like you all to fill in your own set of noxious expletives here to represent my lack of satisfaction with the Gold price itself. It seems to me that virtually all broader economic trends predicted by some (cgnao's impressive prognostication stands out perhaps - frighteningly) are coming true, but Gold isn't reacting the way one would assume.

 

I'm not a bear on Gold, and not looking to get flamed, and I still expect a significant upwards move (otherwise I wouldn't own any!) but a summer of lateral only moving will test my nerves!

 

Thanks again to all, but particularly the long time posters here, and the refugees from HPC.

[wren]

Hi all.

Welcome, Armchair.

 

Be patient with the gold bull. It isn't a get-rich-quick scheme. For some it might be more of a not-get-poor scheme.

 

[Magpie]

I've increasingly been getting the impression that you are enamoured of paper money systems. I don't deny that a systemic deflation could have negative effects, but do people stop buying food when the price is dropping?

 

If you are really so worried about deflation, how about a metal-based monetary system? (and I mean real metal, not paper metal - i.e. any paper IOUs would be 100% backed). Under such a system, a significant reduction in the money supply is then rather unlikely, isn't it? (even if now and again a shipload of bullion sinks in the ocean, gold and silver inflation aren't zero after all).

 

You've also mentioned worries about the possibility of slight price deflation, if the money tokens don't increase in line with the population increase. Is that such an awful thing?

 

I'm not enamoured of fiat. I think all monetary systems have problems. I think this system is in trouble and the attempt to either reform it or replace it will be hampered by sloppy thinking, like the assumption that gold and free markets solve all problems.

 

Deflation hasn't been such a problem in the fiat era, other than a few isolated examples like Japan, so people forget how corrosive it can be. it's not just about a few prices falling, it's about the whole economy seizing up as people, investors, companies, choose to retain cash rather than to trade. Inflation is corrosive in a different way, one that we are all much more familiar with. The only way you could eliminate either would be with an incredibly well-run flexible money supply, which simply isn't going to happen, so whatever system we have is going to have to deal with one or both problems.

 

I actually think one of the worst problems of the fiat era, following on from the industrial era, is the idea of perpetual growth that is built into all the economic models. That is accentuated by the "mild inflation" preference of most modern governments - exponential growth of monetary value doesn't matter at all, but exponential growth in use of resources is impossible. I think that is a bigger problem with the current assumptions of political elites, and one reason why a shift back to a commodity-backed system might be a positive thing.

 

[marceau]

Gold breaking through $894 there has greatly lessened the risks to the downside. At least now if we do drop back we're not set up for a large fall.

 

If it can cross $900 again today gold will be well set up for a break out and rally.

 

I'm tempted to go long again.

 

Edit: I haven't gone long, I'll wait and see before entering any position.

[alexreeve]

Gold breaking through $894 there has greatly lessened the risks to the downside. At least now if we do drop back we're not set up for a large fall.

 

If it can cross $900 again today gold will be well set up for a break out and rally.

 

I'm tempted to go long again.

 

Edit: I haven't gone long, I'll wait and see before entering any position.

Bounced off 898 twice, don't think we'll see 900 today.

 

Edit to say: Aug 08 contract price, not spot.

[wren]

I'm not enamoured of fiat. I think all monetary systems have problems. I think this system is in trouble and the attempt to either reform it or replace it will be hampered by sloppy thinking, like the assumption that gold and free markets solve all problems.

 

Deflation hasn't been such a problem in the fiat era, other than a few isolated examples like Japan, so people forget how corrosive it can be. it's not just about a few prices falling, it's about the whole economy seizing up as people, investors, companies, choose to retain cash rather than to trade. Inflation is corrosive in a different way, one that we are all much more familiar with. The only way you could eliminate either would be with an incredibly well-run flexible money supply, which simply isn't going to happen, so whatever system we have is going to have to deal with one or both problems.

Well okay, but if you want keep on about how bad deflation is, please provide the evidence (I mean post it - I can't be bothered to google). And I'm talking monetary systems here, not just economic woes which might arise anyway. Maybe the "what should money be?" thread is the place for that.

 

You've now near enough convinced me that the threat of "deflation" is a bogey man used by banksters to trick people. Yes, it sounds like a threat used by the banksters and their politician paeons to frighten people into accepting their fraudulent schemes.

I actually think one of the worst problems of the fiat era, following on from the industrial era, is the idea of perpetual growth that is built into all the economic models. That is accentuated by the "mild inflation" preference of most modern governments - exponential growth of monetary value doesn't matter at all, but exponential growth in use of resources is impossible. I think that is a bigger problem with the current assumptions of political elites, and one reason why a shift back to a commodity-backed system might be a positive thing.

The "need" for perpetual growth is built into the interest-yielding, debt-based system of paper money.

 

Monetary inflation has not been mild in recent years, but it went into things like property. Now it's moving elsewhere.

 

Oh, and about Japan: I've heard that life for Japanese society is still on the whole very good. They seem to be surviving their deflation "bogey man".

[Magpie]

Well okay, but if you want keep on about how bad deflation is, please provide the evidence

 

On deflation it's worth reading the history of the Farmers Alliance and Populist Movement in the US in the 1880s and 1890s. This was also the period when the Great Sag in the UK (a long deflation) was causing a lot of unemployment and bankruptcy.

 

http://www.answers.com/topic/populist-party-united-states

 

The really interesting thing is to see how, in a period when the gold standard was in place, a lot of people were blaming it for all the woes of the world, including credit crunches, falling prices, bankruptcies etc. They thought the gold standard was an evil banker's plot, and demanded a looser monetary system.

 

It's an interesting counterpoint to the current situation, if nothing else.

[wren]

On deflation it's worth reading the history of the Farmers Alliance and Populist Movement in the US in the 1880s and 1890s. This was also the period when the Great Sag in the UK (a long deflation) was causing a lot of unemployment and bankruptcy.

 

http://www.answers.com/topic/populist-party-united-states

 

The really interesting thing is to see how, in a period when the gold standard was in place, a lot of people were blaming it for all the woes of the world, including credit crunches, falling prices, bankruptcies etc.

 

It's an interesting counterpoint to the current situation, if nothing else.

So how much smaller was the gold and silver getting under this "deflation"? I guess the pixies must have been very active.

 

Decide on your history one way or another. Was it a real "gold standard" or not?

 

By real I mean real, not fractional fraudulent paper.

 

Not long ago you were saying (to some extent correctly, I believe) that we'd have to go back a millenium for a full precious-metal system of money to apply.

 

And rather than simply post a link (which I haven't yet looked at), how about providing a cogent explanation?

 

[Magpie]

Also check out the Cross of Gold speech, very amusing:

 

"Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold. "

 

http://www.answers.com/topic/cross-of-gold-speech

[Magpie]

So how much smaller was the gold and silver getting under this "deflation"? I guess the pixies must have been very active.

 

It wasn't getting smaller, the fixed supply of money was causing deflation. They were mostly actually calling for the use of silver because that would allow a far looser monetary supply, though some were calling for paper money - part of this whole thing goes back to the greenbacks and the debate that engendered.

 

I'm not saying the Farmers Alliance was right incidentally, it's just extremely interesting to see how they reacted to their particular set of economic woes by blaming evil bankers for the gold standard.

 

Decide on your history one way or another. Was it a real "gold standard" or not?

 

Fair question, it was the fractional system. I've already mentioned that it would be a bit tricky to return to the pre-fractional system, but it may be that they were right to blame bankers, just not quite understanding the real issues.

 

And rather than simply post a link (which I haven't yet looked at), how about providing a cogent explanation?

 

It would take up pointless space to post it, just follow the link and see what you think, if you're interested. It's a fairly short article, I promise.

[Steve Netwriter]

Hi all.

 

Long time lurker, here and at HPC. Just thought I'd say thanks to all for your analysis and efforts to inform.

 

Also, I'd like you all to fill in your own set of noxious expletives here to represent my lack of satisfaction with the Gold price itself. It seems to me that virtually all broader economic trends predicted by some (cgnao's impressive prognostication stands out perhaps - frighteningly) are coming true, but Gold isn't reacting the way one would assume.

 

I'm not a bear on Gold, and not looking to get flamed, and I still expect a significant upwards move (otherwise I wouldn't own any!) but a summer of lateral only moving will test my nerves!

 

Thanks again to all, but particularly the long time posters here, and the refugees from HPC.

 

Welcome

 

As Wren said, it's all about patience, and a recognition of the cycles in the bull trend.

 

I think this is a good one, and puts things into context.

Remember this time in 6 to 12 months time when gold is $1200+.

 

A great chart in this one.

 

Gold Wedged Between Support and Resistance

Commodities / Gold & Silver Jun 18, 2008 - 01:29 PM

By: Mike_Paulenoff

 

http://www.marketoracle.org/Article5128.html

[electroweak]

Strange.... Gold just flopped $4 down in like a nanosecond..according to BV.

Edit: usagold and kitco still showing 894 / 893.6

[wren]

It wasn't getting smaller, the fixed supply of money was causing deflation. They actually were calling for the use of silver because that would allow a far looser monetary supply, so they weren't going as far as calling for paper - although part of this whole thing goes back to the greenbacks and the debate that engendered.

 

I'm not saying the Farmers Alliance was right incidentally, it's just extremely interesting to see how they reacted to their particular set of economic woes by blaming evil bankers for the gold standard.

I have not proposed a gold standard.

 

I have proposed monetary anarchism.

 

Thanks for the links. I'll check them when I find time.

 

[azazel]

Strange.... Gold just flopped $4 down in like a nanosecond..according to BV.

Edit: usagold and kitco still showing 894 / 893.6

 

I thought it very odd too. Then it almost flat lined. Bullion desk showing $887

[G0ldfinger]

I still think the next move could be massive. This is the old chart. Below it is a newer version that shows that the coiling pattern has just continued since then.

 

 

The next move in the ratio could be massive.

 

 

This here is also very bullish in my opinion. All the action we saw after the plunge down from $1,000 was basically centered around $900. IMO it could have easily been centered around $800, and it still would have been no sign of the end of the bull market.

 

[electroweak]

I thought it very odd too. Then it almost flat lined. Bullion desk showing $887

back up now.. wierd. BV: 894.21

[G0ldfinger]

The Dow is now threatening to go left of the bottom-left to top-right line. The next upsurge in gold will then move us into the "target" area, or very close to it.

 

 

Edit: Here is the newest version of this chart. The Dow has not yet left the triangle. But is very close to.

 

[G0ldfinger]

Sorry, don't wanna spam here. But here's more:

 

Dear Subscriber

 

The Scotsman, once the forefront of property ramping in

Edinburgh, is finally giving in (to reality). It seems

as if the house price cash has not stopped at Hadrian's

Wall. What an utter, totally unexpected and outright shocking

surprise!

 

--QUOTE--

"We had a bit of interest when it first went on the market and we expected

things to pick up over the last few months, but, if anything, it has dried

up completely."

...

The family's difficulty in selling their house is a clear sign of problems

in the upper end of the Edinburgh property market, which, had previously

been seen as immune to the UK slump.

 

The credit crunch has reduced the average value of homes in Scotland to just

over £150,000 . down from more than £160,000 when the market peaked last

year.

--END QUOTE--

http://business.scotsman.com/mortgageandpr...-and.4191416.jp

 

This crash is just getting started. It will make history.

It will shape the lives of those who

- will lose their jobs (EAs),

- will lose their retirement nest egg (BTLs),

- won't be able to move (locked in),

- will be squeezed in 1-bedroom flats for much of their adult lives,

- won't be able to have (more) children because of it.

 

It will be catastropic.

 

 

 

[romans holiday]

T

[Steve Netwriter]

Britain's lonely monetarists fear Bank of England may trigger severe crunch

 

By Ambrose Evans-Pritchard, International Business Editor

Last Updated: 11:45pm BST 17/06/2008

http://www.telegraph.co.uk/money/main.jhtm...C-mostviewedbox

 

An abstruse and little-understood measure of the money supply - "adjusted M4" - is flashing serious warning signals of distress over coming months, replicating a pattern that led to a vicious slump in the early 1980s.

 

Simon Ward, New Star's chief economist, says the growth rate of M4 holdings of corporations (excluding banks) has plummeted from 16.1pc a year ago to 1pc in April. Past falls of this kind have heralded economic contraction. It is the speed of the decline that matters most, rather than the absolute level.

 

"This slowdown is contributing to a dangerous liquidity squeeze on companies. We're not in a recession yet, but it is approaching rapidly," he said.

 

"It would be disastrous if the Monetary Policy Committee tried to over-compensate for their errors in 2006 and 2007 by tightening too hard now," he said.

.....

It is less clear whether the MPC fully agrees with him. Economists are deeply split over the balance of risks in the world as the commodity boom and imported inflation from the emerging world collide with an economic downturn in the West.

 

Hawks fear that Britain is on the cusp of a 1970s wage price spiral: doves fear a deflationary crunch that may lie beyond as the triple effects of the lending squeeze, the housing slump, and the global slowdown all combine to send prices into a sharp fall.

[Justin Thyme]

This may be remembered as the first of many . . .

 

http://www.telegraph.co.uk/news/newstopics...discontent.html

 

"This really is going to sound some alarm bells in Downing Street," one said on Wednesday night. "It is going to make settling public sector claims difficult."

[woody]

In P&F terms we've broken through the long-standing down-trend and set a price-objective of $970. A high above $900 today gives a double-top buy signal and we're away. It was looking a bit dodgy late last week but we're now in a pattern of rising highs and lows and critically from a P&F perspective, longer columns of X than O. If the push above $900 fails, it looks like we've built good support at $885 and $875 now.

 

 

 

 

[marceau]

In P&F terms we've broken through the long-standing down-trend and set a price-objective of $970. A high above $900 today gives a double-top buy signal and we're away. It was looking a bit dodgy late last week but we're now in a pattern of rising highs and lows and critically from a P&F perspective, longer columns of X than O. If the push above $900 fails, it looks like we've built good support at $885 and $875 now.

 

 

 

I'm pretty much in agreement here. If it pulls back I will add at $885, $880 and buy big at $875. I think we're at least going to get a test of $910 over the next week.

 

I'll still be keeping half of my trading fund as dry powder though, just in case we do get down to $850 again.