Horrific gold ‘dump’?
if you can find it
If I can’t consume gold, use it as fuel, or at least sell gold to obtain these things, then I have no "faith" in gold. We’ve been riding on markets for so long, and now with the instability of the markets and its affect on the gold market, I don’t want to continue on this roller coaster. I’d rather spend my time, energy, and money on things that will keep me alive. Betting in the gold market is a bumpy ride right now, which may stable in the near future, but that is money that I cannot afford to lose.
There is a problem with a precious metal backed currency in today’s style financial systems. At any given moment there would be a fixed amount of gold/silver in the system. As with the fiat system, if someone lends out x ounces of pm at a specific interest rate, then theoretically the amount of bullion available must increase to cover the interest at repayment.
In a properly run banking system, demand deposits are not lent out at any time even though only about 10-20% of the demand deposits are in circulation at any given time. (This is why banks used to have fractional reserves, so that there would be enough for normal business and the bank could lend the rest without the depositor’s permission as is currently the case). When the bank loaned money, it would lend money in savings accounts. A depositor with a savings account agrees to give up the use of the money for a specific amount of time for a specified rate of interest.
I know that when pm backed money systems were in use, there was some kind of mechanism for both the principal and interest to be paid without having to increase the money supply but I am not sure how it worked unless there was so much money in circulation that the problem did not arise or the lender was paid the interest in some other way. Does anyone know how that mechanism worked?
Suppose Sam wanted to go to the auction and buy two antique lamps, currently valued at $50 each. So he went to his bank and deposited the $100 so he could write checks to the auction. Then Joe heard him talking about that and thought he would like a lamp too, but didn’t have any money. So he goes to Sam’s bank and asks to borrow some money and the banker says "Sam was just here and deposited $100, so I can lend you $80 because I have to keep $20 in reserve." Joe goes to his bank and deposits the $80, and Jerry wants to go to the auction too so he goes to Joe’s bank and borrows $64. Mike then borrows $51, Henry $41 and so on. Now all these people show up at the auction and at the theoretical limit, the entire $1000 at the auction is Sam’s original $100. This is how inflation occurs in a fractional reserve system, and of course Sam only got one lamp instead of two because he had to bid $81 to get his first lamp. This is why lending of demand deposits and fractional reserve systems should be illegal.
[quote=caroline_culbert]If I can’t consume gold, use it as fuel, or at least sell gold to obtain these things, then I have no "faith" in gold. We’ve been riding on markets for so long, and now with the instability of the markets and its affect on the gold market, I don’t want to continue on this roller coaster. I’d rather spend my time, energy, and money on things that will keep me alive. Betting in the gold market is a bumpy ride right now, which may stable in the near future, but that is money that I cannot afford to lose. [/quote]
I think the rationale here is that if we do not wish to revert to a pure barter system, then there must be some medium of exchange that most agree on. Gold has traditionally served that purpose, and, I suppose, the hope is that it will again when all else goes to hell. In the meantime, the USD is riding high, so you’re likely to get good value in return in purchasing "things that will keep me alive." At least, that’s the logic I’m operating on at the moment.
We’re also looking for fast cash. It seems like everyone is these days. I think the most important thing to learn from the drop in the price of gold is that the faster you want to make a buck, the more risk you take. Of course this is not the case with everything and is certainly dependent on the volume of people making these decisions. But I realized, for example, had I purchased the more expensive car in October (when my other lease was up) and if I had put down $500 non-returnable deposit for a Prius, I would have made a very expensive mistake. I must’ve made a dozen calls around my area and went to a dozen car lots searching for a high mileage, relatively cheap, vehicle that was unavailable due to the gas price frenzy. I now look back to see how desperate I was to get a Prius now. I wasn’t willing to wait six months for the back order of Prius’ to come in. I ended up with something that provided less, in terms of gas mileage, but was cheaper. After a few months ride, along this downward spiral of gas prices, I now see that my frenzy was just that- a frenzy. Applying this example to the gold market is something new to me. I have always wanted to make a quick buck if I could. I guess I have become wise (not necessarily smart) when it comes to the consumer market. The more patient you are, the cheaper the products tend to become (speaking of mostly technology). If you wait long enough you probably wont buy one at all. You’ll finally realize that it was just another fantasy in the consumer world. So hang tight on the gold if you’re short on cash. If you have money to spare then gold is not a bad idea to invest in (for the long term).
You can buy all the you want! But not at paper fraud prices. The premium of physical gold reflects the true price of ownership. The large discrepancy, going on now for months, between physical gold price and paper gold price reveals the fine art of fraud perfected by the Eastern Establishment. The same players who suckered the Hunt Brothers. Paper is the domain of elitist bankers. The elites changed the rules for margin and sales thereby crushing the Hunt’s folly at monopoly of silver. The Hunts, after a year of buying physical silver succumbed to the temptation of finishing off the monopoly plan by buying silver futures on MARGIN. The bankers trap worked perfectly. Once the Hunts were deep in the Comex; the Comex changed the margin rules and walked away with the Hunts cash and accumulated physical silver. The Comex and ETF’s are the house game of the Eastern Establishment bankers. The cornering of the precious metals market started several generations ago. The laws written, in President Woodrow Wilson’s term, assured an eventual monopoly by bankers of precious metals and fiat money. However the chaotic events we are witnessing now in the global financial/precious metals world is the comeuppance of their evil intent. God has stirred their cup. They are losing market control. It is only a matter of time and the lid will blow and the innocent of the world will suffer profoundly. The elites will be found by Mussolini mobs. And maybe sometime I will share the rest of the story, but some people reading this, may not yet bear with hearing it. For some hearing what is coming causes rabid gnashing of teeth.
If there’s a big gold sale coming on Dec. 10th, somebody forgot to
tell the gold market about it. Today the old yellow dog is bounding
around the greyhound track so fast, he done tore the dirt off of it.
Bernanke-san slashes his policy rate to ZERO, it’s going to create an
even bigger Bubble than Greenspan’s legendary, nutball ‘One Percent
Forever Blowout Rate Sale.’ Forget the yen carry trade; 2009 is the
year of the dollar carry trade. Borrow at zero percent, buy the yellow
dog to catch the inflationary wave, pay off your margin loan in
depreciated confetti currency. Instead of dead presidents, it should
feature cartoon characters. Popeye opening up a can of whup-ass spinach
would powerfully symbolize our world-renowned ‘strong dollar policy.’
The more you borrow, the more you make. As your Realtor has been saying for all these years … ‘Buy now, before prices go up.’
GOLD TO THE GOOGOLPLEX
you do not post enough.
My bad, joe. Howdy from a former Arkansan.
So, how ’bout that
yeller dawg … thirty-five dollahs one day, twenty-five the next, and
pretty soon the stuff’s getting damned expensive. At least if you’re
counting in sloppily-printed, multicolored confetti currency.
How do you spell Depression relief?
‘DEATH TO THE DOLLAR’