Gold and Silver commentary at PP.com

Jim H
By Jim H on Fri, Sep 25, 2015 - 2:21pm

Some statements were made earlier today on this website by Chris and Adam's chosen PM commentator Davefairtex.  I want to point out how inane and misleading I think this particular commentary is.  My personal belief after much research is that any commentary that tries to substantiate the veracity of the current PM pricing mechanism as reflective of something real is either misinformed, or actually propaganda.   

Today, gold is not money.  Why is gold not money right now?  There is no peg.  No peg = gold is not money, and and the implication is, it will not behave as money during deflation.  Instead, it will behave like an asset.

Currently, the price of gold is well-correlated with other commodities.  It does better than most of them, but, because there is no peg, gold is not money.

Gold is money if it's still in demand as money.  Billions of people in China and India make the choice to exchange their fiat paper money for a better form of money.. a form that holds value long term.  The Western banking cabal would love for you to not consider Gold money.. which is why I find it so odd that DaveF is trying to convince you of same.  For the past few years, the Western banking cabal has used the price action to dissuade you from the idea of Gold as money... while simultaneously the Eastern countries have been treating Gold as money.. and hoarding it in a clear embodiment of Gresham's law in action;

     http://www.silverdoctors.com/economic-times-india-imported-138t-gold-in-...

Year to date India has imported 666 tonnes of gold, up 69 % year on year.  Annualized gold imports are set to reach 998 tonnes – the second highest amount on record and 35 % of this year’s world mining production.

China and India are now sucking down more than 100% of the newly mined Gold on a monthly basis.  As well, new data analysis clearly shows how the Gold is being drained out of London;

https://www.bullionstar.com/blogs/ronan-manly/central-bank-gold-at-the-b...

 

LBMA and BoE Holdings AU 01

The data is all there for anyone to see.  The Gold price is fraudulent.. it is not being discovered based on supply vs. demand.. it is a form of propaganda meant to keep you trapped in the Western central bank cabal's paper vortex.  

Occam's razor tells me this:  Gold is money and always has been... it is the best form of money because it cannot be printed.. it's rarity is strictly enforced based on nature.  It has no counterparty risk.  In an era of unprecedented levels of printing of unbacked fiat currency by various members of the Western banking cabal, the desirability of a more stable form of money for long term savings is quite understandable.  

But don't take it from me.. take if from Alan Greenspan, who said this in 2014 ;

  http://www.zerohedge.com/news/2014-11-07/greenspans-stunning-admission-g...

TETT: Do you think that gold is currently a good investment?

GREENSPAN: Yes... Remember what we're looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.

The idea that Gold is not money because there is no peg is insane.  Think about it?  Where we do have one currency pegged to another, i.e. the attempts to keep the Yuan pegged to the dollar, or the Swiss Franc pegged to the Euro... these things are generally thought of as unnatural and difficult to maintain.  Most real currencies float (relatively) freely against each other.. so why should not Gold float against all other currencies?  Why would allowing it to float make it not a currency?  Absurd.  Totally baseless argument made to sound somehow deeply technical and wise... but otherwise total bullshit to anyone with a brain.

Yes, Gold has had a history of being pegged.. because when a paper currency is pegged to Gold, it does enforce a certain discipline on those whose finger may otherwise be on the printing press.  The un-pegging makes the paper money less money-like, it does not make Gold less money-like.  You, fellow PP.com readers, and being propagandized to.  Wake up!      

2 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5062
what is money anyway?

Sorry Jim.  When gold freely floats against the buck, it can both rise in price, and fall.  That makes it an asset, not money.  Money is the stuff you use to pay your taxes, and to repay debt.  Its the national unit of account, the standard against which assets are measured.  It is one of those definitional things, not subject to modification because you happen to like gold.

I like single malt scotch - and it has performed very well since 2008.  That doesn't make it money.

If confidence in money collapses, then gold-the-asset looks really good.  It performs better than money.  If confidence in money is strong, then gold-the-asset doesn't look as good.  It performs worse than money.

I do agree, gold has no counterparty risk, and the time will come when that will matter a very great deal.  That time is not yet here, confidence in money remains, and that is why gold is not doing so well.  You may imagine manipulation everywhere, but its really the confidence in the dollar that is your enemy. 

You may imagine that I am personally responsible for maintaining confidence in the buck.  I wish I were that influential.  To me, I just think I'm just explaining why the confidence remains, and what drives the demand for dollars at this time.

The gold-religionists keep predicting that the buck will imminently explode in spite of strong evidence to the contrary.  They did not expect or predict deflation, their theories can't explain why the dollar is rising, they only view things domestically (except when China buys gold - they do admit China exists but only for that purpose), they imagine some grand manipulation rather than trying to understand capital flows and the issues of dollar-debt repayment - in short, I'm not impressed with their view of the world because it just hasn't explained recent events very well at all.

The US-as-core-economy?  Doesn't matter.  Dollar as safe haven parking spot for big money?  Doesn't matter.  Debt-deflation?  Doesn't matter.  Capital flows, reversal of the carry trades?  They don't matter either.  Dollar will explode into hyperinflation "next year for sure".  And if hyperinflation doesn't come, well, they just fall back on the old standby: manipulation.

Gold is a great asset to own.  The physical stuff has no counterparty risk.  The time will come when that will make a great deal of difference.

But that doesn't make it money.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
What is money?

In the US, I can't pay my taxes with Euros either.. but you do not seem to be arguing Dave that Euros are not money.  Oddly enough, If I were silly enough to do so, I could take one of my US Gold Buffalo's to the store and buy $50 worth of merchandise, or to the tax office and pay off $50 of my local tax bill, because it is in fact a piece of Gold designed to function as money.  The US Mint says Gold is money... you can argue with them, or with Alan Greenspan.  Or argue with Alasdair;

https://www.goldmoney.com/research/updates/gold-remains-money

We think we know that gold is no longer money, because Keynesians and monetarists insist it is so.

Furthermore, it has been replaced by government currencies, which we use to buy and sell, do our accounts and pay our taxes. While it is undoubtedly true that gold is no longer used for transactions in all but a few places in Asia, this common assumption has no basis in fact.

It is one thing for macroeconomists of all veins to theorise about the contents of the dustbin of history, but the choice people make is what really matters. Humanity has an infinite capacity for adapting and using what is either made available or forced upon them. But just because they have adapted and used government currencies as their circulating media, they have not always given up on gold as the money of choice to retain a store of value.

This article is written in the parochial confines of a welfare state that has advanced beyond regarding gold as money. The views of the people in Britain on this subject are probably similar to those in the other welfare states of Europe, North America and Japan. Those in the finance industries trained in macroeconomics and subscribing hook line and sinker to the relegation of gold to the rank of a plain commodity are relatively few: probably a few million world-wide at most. There are a greater number so dependent on the fiat money system that they would rather dismiss the issue instead of properly considering it, which to a lesser extent must also be true of the wider population which benefits from government welfare and spending.

The welfare system, based as it is on anything other than free markets, conflicts with the concept of sound money. People would rather not pay for everything through taxes, and money and credit inflation as a means of funding are a convenient cop-out. But it is plainly wrong to say the uncaring masses are anti-gold; it is more correct to describe them as not bothered one way or the other. Even most western gold-bugs, which in numbers probably balance the aforementioned macroeconomist establishment, vaguely regard gold as an insurance policy or speculative investment, rather than sound money only driven out of circulation by Gresham's law.

So the combined population of the welfare states is not anti-gold at all, and the argument that progress in economic thinking has reduced its status to a plain commodity is not true. Nor is it true in South and Central America, where the US dollar is regarded as the sound money alternative to local currencies, only because people have adapted to what is available to them. Nor is it true in sub-Saharan Africa, where the majority of the population has its roots in subsistence farming and tribal communities. However, in Asia, where civilisations have long histories, the story is very different.

For centuries ordinary people from all walks of life are painfully aware that government money is ephemeral, and true money is gold. When the cumulative debasement of a currency leads to its replacement by another debasing currency, you continue to dump the government stuff for gold. This is the experience of the Turks, who faced a million-to-one consolidation of the lira in 2005. According to Wikipedia one gold lira coin could be sold for 154,400,000 old paper lira towards the end, and the new lira is still going down. Indian farmers and traders put their savings into gold, a wisdom borne out by the rupee's continual devaluation over the years. Even the Chinese, after decades of communism and the brain-washing of the cultural revolution still persist in accumulating gold as the only sound money to tuck away for a rainy day.

To understand why the belief persists that gold is the ultimate money, you have to look back in time to appreciate its value before it was used as money. Anyone who has not been to Cairo and seen the 3,300 year old gold mask of Tutankhamen, and is unable to understand the feeling of awe that overcomes one's emotions in its presence, must be devoid of all imagination. Not only has it endured an extraordinary length of time, it is in itself timeless, and unchanged from when it was fashioned: that's some store of value.

Max Keiser of the eponymous show on RT told me of an occasion when he joined a debate on BBC Television about this very subject. He argued the case for gold, while an economist representing the prestigious Economist weekly journal argued against. Off-camera after the debate, the young economist was just as eager as anyone else in the studio to touch and feel the gold bar that had been brought into the studio as a prop.

That is the point: despite the theorising of macroeconomists and what governments with a vested interest force us to believe, gold has an enduring fascination for and a value to humanity. The majority of above-ground stocks are still wrought in the form of jewellery and the highest classification of ornaments. Gold's durability and fungibility makes this unique material eminently suitable as the only sound money available to the human race.

The welfare states' denial of this simple fact, and their insistence that their own inflating currencies are superior, is leading them towards economic disaster. They have committed themselves to the destruction of a basic human value, which they will never supress. Asian governments, many of which would undoubtedly like to take this route are forced by their people to be more realistic. Even government officials privately acknowledge the superiority of gold, and in the case of China they have actually encouraged their population to accumulate it.

This matters to us all, because the process of wealth creation is declining in the west, and accelerating in Asia. Furthermore, there are four billion Asians, the majority of which are either directly or indirectly involved in the economic union of the Shanghai Cooperation Organisation, and who have overwhelmingly become the world's savers and wealth creators.

Government currencies come and go while human values endure. The adaptability of the human race will allow it to continue to use whatever is most convenient for day-to-day transactions. But the days of ordinary people in the welfare states blindly accepting fiat currencies as valid for storing the product of their labour, however temporary, are probably drawing to a close. The impossibility of our debt obligations, including the net present value of future welfare commitments, is catching up with us, and the requirement to debase these obligations is becoming paramount.

When this becomes obvious to growing numbers of the public in the welfare states, as it is bound to do, they will switch from no opinion on gold to having one. The derisory term for gold-bugs will disappear as their prescience emerges, and the price of physical metal measured in government currencies will reflect more properly its unique monetary quality.

 

  The whole money argument is really a distraction... the real issue is this;

  The gold-religionists keep predicting that the buck will imminently explode in spite of strong evidence to the contrary.  They did not expect or predict deflation, their theories can't explain why the dollar is rising, they only view things domestically (except when China buys gold - they do admit China exists but only for that purpose), they imagine some grand manipulation rather than trying to understand capital flows and the issues of dollar-debt repayment - in short, I'm not impressed with their view of the world because it just hasn't explained recent events very well at all.

The early hyperinflationists were wrong.. your point is well taken Dave.  Certainly a large part of the dollar's ongoing "strength" has to do with it's continuing (but demonstrably decreasing) role as the world's reserve currency.  But really, there is something else at work.. something I will talk about in my next post to this string.         

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