GOLD

[Gatesy]

Dead cat bounce. Last of the 9 lives here, surely.

 

(Of course this is against poor prior month figures)

 

Retail sales rise at record pace

 

The warm weather tempted shoppers back to the High Street

The spell of warm weather in May helped to trigger a record jump in UK retail sales, official figures have shown.

 

Overall sales rose by 3.5% during May, the strongest monthly growth in sales since the series began in January 1986.

 

http://news.bbc.co.uk/1/hi/business/7462945.stm

[Magpie]

I have not proposed a gold standard.

 

I have proposed monetary anarchism.

 

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

 

Incidentally, looking into it further I made an interesting mistake.

 

The money supply did indeed fall at the start of the deflationary period, because the previous system of silver and gold was changed by an 1873 act which demonetized silver (The "Crime of 73"). As a result, a lot of people lost out directly, and deflation ensued as the money supply was cut in half.

 

Also, this was widely seen (possibly correctly) as a conspiracy (by bankers who were in cahoots with London financiers who had most of the gold).

 

So you could see the whole affair as proof that bankers try to fix things in their own interests and that monetary anarchy would be preferable to a centrally imposed standard. It's an interesting period to look at either way though as it gives a different perspective on things. You also had the Greenbackers arguing that paper money was better for the poor, and that mineral standards were only there to protect the wealth of the rich, in the same period.

 

(For nerds like me, it's also interesting to note that the Wizard of Oz is widely claimed to be political allegory for bimetallism, in which the silver shoes end up defeating the yellow brick road which symbolized gold).

[UpTheKhyber]

Incidentally, looking into it further I made an interesting mistake.

 

The money supply did indeed fall at the start of the deflationary period, because the previous system of silver and gold was changed by an 1873 act which demonetized silver (The "Crime of 73"). As a result, a lot of people lost out directly, and deflation ensued as the money supply was cut in half.

 

Also, this was widely seen (possibly correctly) as a conspiracy (by bankers who were in cahoots with London financiers who had most of the gold).

 

So you could see the whole affair as proof that bankers try to fix things in their own interests and that monetary anarchy would be preferable to a centrally imposed standard. It's an interesting period to look at either way though as it gives a different perspective on things. You also had the Greenbackers arguing that paper money was better for the poor, and that mineral standards were only there to protect the wealth of the rich, in the same period.

 

(For nerds like me, it's also interesting to note that the Wizard of Oz is widely claimed to be political allegory for bimetallism, in which the silver shoes end up defeating the yellow brick road which symbolized gold).

My understanding is that during that period land prices increased dramatically due to access by railroad construction. Financing this were the banks who lent money (through fractional reserve banking). The boom then inevitably collapsed, demand for farm producd reduced and the farmers were crippled by mortgages they couldn't afford to repay. Sound familiar?

[alexreeve]

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.

I'm still holding out for 850 too, had a largish order to open sitting there for awhile.

[wheelybin]

(For nerds like me, it's also interesting to note that the Wizard of Oz is widely claimed to be political allegory for bimetallism, in which the silver shoes end up defeating the yellow brick road which symbolized gold).

 

They were ruby slippers weren't they, Magpie?

 

http://www.wetcircuit.com/wp-content/myfot...rd_of_Oz_00.jpg

 

[Magpie]

They were ruby slippers weren't they, Magpie?

 

http://www.wetcircuit.com/wp-content/myfot...rd_of_Oz_00.jpg

 

Well spotted, but they were silver in the book, and changed to ruby for the film.

[Magpie]

My understanding is that during that period land prices increased dramatically due to access by railroad construction. Financing this were the banks who lent money (through fractional reserve banking). The boom then inevitably collapsed, demand for farm producd reduced and the farmers were crippled by mortgages they couldn't afford to repay. Sound familiar?

 

That's about right, the pre-73 railroad bubble was one of the causes of the panic of 73 which then turned into the deflation after silver was demonetized, and then there was a secondary railroad bubble in the 1880s, which to some degree alleviated the deflation that followed the "crime of 73". Then it peaked and ended with the panic of 93 which caused a severe depression.

 

Also this was a period of global deflation, so some of the domestic causes may be overstated.

 

But the first phase of farmers being crippled by mortgages followed the 1873 deflation. There was a further problem in the 1890s when property prices slumped, and many middle class people in the cities as well as farmers in the West lost their homes through not being able to afford the mortgages.

 

Certainly, this is all part of the boom-bust cycle which is encouraged by fractional banking and usury. As I've mentioned before, we could abolish that but it would involve rolling back a millennium of monetary history. My point here was merely about how a restricted money supply and resulting deflation can be a problem as well as inflation.

[wheelybin]

Ah-ha! I stand corrected! Those Hollywood art directors exercising their creative licence.

 

[drminky]

Incidentally, looking into it further I made an interesting mistake.

 

The money supply did indeed fall at the start of the deflationary period, because the previous system of silver and gold was changed by an 1873 act which demonetized silver (The "Crime of 73"). As a result, a lot of people lost out directly, and deflation ensued as the money supply was cut in half.

 

Also, this was widely seen (possibly correctly) as a conspiracy (by bankers who were in cahoots with London financiers who had most of the gold).

 

So you could see the whole affair as proof that bankers try to fix things in their own interests and that monetary anarchy would be preferable to a centrally imposed standard. It's an interesting period to look at either way though as it gives a different perspective on things. You also had the Greenbackers arguing that paper money was better for the poor, and that mineral standards were only there to protect the wealth of the rich, in the same period.

 

(For nerds like me, it's also interesting to note that the Wizard of Oz is widely claimed to be political allegory for bimetallism, in which the silver shoes end up defeating the yellow brick road which symbolized gold).

 

Yes, the US populace historically had a distrust for gold, especially in the 19th century, which they suspected was too controlled and manipulated by powerful european banks and families. There was a distinct preference for using silver as money in the US compare to europe, as supply was more abundant, therefore harder to control by a 'cartel'..(sound familiar?) Also, because of greater supply, it had a slightly more inflationary bias than gold did, which is why farmers were generally for the bi-metallic standard (hence the wizard of oz), to give support to their produce prices, and help them manage their debts..

 

The argument of the Greenbackers is essentially the same Keynsian argument that inflation benefits the poor and punishes the rich 'coupon clippers' (bondholders). In recent history, since the US had come off the gold standard, income disparity has grown markedly, and average wages have collapsed to 1/3 of their real value, which doesn't support this case. Explains why it now takes two incomes, not one to support a family. In fact, one could argue that inflation hits the poor hardest, as the asset rich are able to benefit from asset price appreciation more than the asset poor, and thereby protect themselves. Those on a fixed income (wage earners, pensioners etc) will fare the worst in an inflation..

 

I would argue that the problem of the 'coupon clippers', in which the rich put their capital into non-productive tax-free government bonds instead of deploying that capital productively in factories etc (esp during the great depression), has more to do with short-sighted punitive tax laws than with the monetary standard. Capital will always flow to where the highest returns are to be had, gold standard or not. Governments in their well-meaning attempts to 'income redistribute', and in their less well-meaning attempts to grab money for themselves, inevitably end up rewarding the unproductive at the expense of the productive, and distort the capital flow accordingly. Of course, they don't see the effects of their interventions for what they are, and always look for the next person to blame for the economic woes they cause..

 

 

[UpTheKhyber]

That's about right, the pre-73 railroad bubble was one of the causes of the panic of 73 which then turned into the deflation after silver was demonetized....

 

...Certainly, this is all part of the boom-bust cycle which is encouraged by fractional banking and usury..... My point here was merely about how a restricted money supply and resulting deflation can be a problem as well as inflation.

Interesting. Removing silver as a medium of exchange thus halving liquidity pretty overnight is going to result in a pretty bad credit crunch for sure. Seems more like another example bad/corrupt government policy to me than anything else though.

 

As I've mentioned before, we could abolish <fractional banking> but it would involve rolling back a millennium of monetary history.

I don't buy that. There are many possible monetary systems. 'Full reserve metal with 0 credit' and 'fractional reserve with shed-loads of credit' are two extreme opposites. There is plenty of space to explore in the middle. One thing I would however require of a replacement system is that bankers are not treated any differently than any other business with regards to fraud. It would also be extremely nice if such an alternative could be phased in in an orderly manner. I'd be interested in your thoughts on Fekete's proposal for example.... http://www.gold-eagle.com/editorials_05/hultberg020105.html, although maybe the what is money thread is a more appropriate place to continue such a discussion.

 

[Magpie]

Interesting. Removing silver as a medium of exchange thus halving liquidity pretty overnight is going to result in a pretty bad credit crunch for sure. Seems more like another example bad/corrupt government policy to me than anything else though.

 

Yes, that's a reason to think it's evidence for monetary anarchy, as Wren suggested, rather than an argument against the gold standard.

 

I don't buy that. There are many possible monetary systems. 'Full reserve metal with 0 credit' and 'fractional reserve with shed-loads of credit' are two extreme opposites. There is plenty of space to explore in the middle.

 

Well yes, I agree absolutely that the infinite credit model (as practised lately is nuts). But something in between would still be fractional, and therefore still wrong according to many here.

 

I'll answer the other point on the money thread...

 

 

 

[Pixel8r]

Dead cat bounce. Last of the 9 lives here, surely.

 

(Of course this is against poor prior month figures)

 

 

 

http://news.bbc.co.uk/1/hi/business/7462945.stm

 

Could it just be that people are spending more in the shops because everything is more expensive. I was shocked yesterday on doing the weekly supermarket run.

[Magpie]

The argument of the Greenbackers is essentially the same Keynsian argument that inflation benefits the poor and punishes the rich 'coupon clippers' (bondholders). In recent history, since the US had come off the gold standard, income disparity has grown markedly, and average wages have collapsed to 1/3 of their real value, which doesn't support this case. Explains why it now takes two incomes, not one to support a family. In fact, one could argue that inflation hits the poor hardest, as the asset rich are able to benefit from asset price appreciation more than the asset poor, and thereby protect themselves. Those on a fixed income (wage earners, pensioners etc) will fare the worst in an inflation..

 

I agree the Greenbackers were making that case, and that it is a bit flawed. Not convinced by the real wage stats there. I saw the figures at WorkingLife and they aren't great - I wonder how European countries compare. The US had pretty weak unions historically and maybe fell behind in the 1970s, plus globalisation has done a lot to restrain wages since then. I think you 1/3 is a bit offbeam though. I'd suggest that if that's what the ShadowStats inflation figures give you it's an argument that their figures are a bit absurd. The two-income problem is surely more about house prices than anything else.

 

But yes, inflation is no panacea for the poor and can make them worse off, contra the Greenbackers.

 

I would argue that the problem of the 'coupon clippers', in which the rich put their capital into non-productive tax-free government bonds instead of deploying that capital productively in factories etc (esp during the great depression), has more to do with short-sighted punitive tax laws than with the monetary standard. Capital will always flow to where the highest returns are to be had, gold standard or not. Governments in their well-meaning attempts to 'income redistribute', and in their less well-meaning attempts to grab money for themselves, inevitably end up rewarding the unproductive at the expense of the productive, and distort the capital flow accordingly. Of course, they don't see the effects of their interventions for what they are, and always look for the next person to blame for the economic woes they cause..

 

But wouldn't changing the tax laws to discourage the rich doing that with their capital equally be a government intervention? Not all interventions are bad in my book, but I do believe that governments get addicted to the idea of intervention and take it too far more often than not.

 

 

[Magpie]

In recent history, since the US had come off the gold standard, income disparity has grown markedly, and average wages have collapsed to 1/3 of their real value, which doesn't support this case.

 

I looked up UK average earnings - up 60% or so since the 1970s according to this site.

 

I don't claim it's perfect, and I'm not arguing it's inflation that caused the growth. If American wages are really down over that period, maybe America needs a bit more social democracy and a bit less free markets.

 

Edit: Forgot the link http://www.measuringworth.org/ukearncpi/

[wheelybin]

back over $900!

[romans holiday]

Gold through 900. Reckon it will not go far and back to 890. Hope so anyway, cos want to buy more.

[marceau]

Good move by gold there, just broke through $900, silver looks set up for a big rally. If gold can get past $910 this correction is dead.

 

Edit: I broke with my normal rules and bought the breakout there, lets hope it doesn't come back and bite me.

[wheelybin]

Seems to be on a bit of a tear at the moment... at this rate, it'll be over $910 in about 15 minutes.

[romans holiday]

Looks like oil has gone up with it.... or gold has followed oil.

Just imagine where gold goes if oil takes off.

[marceau]

Great move in silver, looks set to test $18 today.

[woody]

Great move in silver, looks set to test $18 today.

 

Well my intra-day theory worked! Little profit on the London short, and running a great position on the NY long. Just need to time closing that and opening the NY/Asian short now although looks like we're in for a strong day!

 

 

[marceau]

Well my intra-day theory worked! Little profit on the London short, and running a great position on the NY long. Just need to time closing that and opening the NY/Asian short now although looks like we're in for a strong day!

 

 

Good work. I've covered all of my longs now for some very good profits. I'll look to re-enter below $905 and $17.65, but again only with small positions. Until we have broken $910 spot then it's still too early to be counting any chickens.

[kernull]

now tne big question is: do we sell at 950 area or 1000 ?

[marceau]

Just re-entered silver at $17.623 for a speculative short term punt. I'll wait until gold has come closer to $900 again before trying any more longs for the time being.

[kernull]

Good work. I've covered all of my longs now for some very good profits. I'll look to re-enter below $905 and $17.65, but again only with small positions. Until we have broken $910 spot then it's still too early to be counting any chickens.

 

I am going to load heavily at 900 line once it is retested, the reasons that move gold right now (in my opinion) are agricultural commodities and base metals which are not going to go low and people are allready aware of this, so risks for going lower are temporary and that may happend on fed decision day. oil growth is more stable now, thats a good thing, no more false break ins in oil.