PM Weekly Market Commentary – 03/26/2021
I have meticulously saved 4 of my 8-track tapes from my high school years. They are about 48 years old today, but I’m going to give them to my grandchildren in 2023. They are rare and no one’s making anymore of them. I expect they will be highly valuable to my granddaughters two years from now.
Now if I could just get my ‘57 Chevy back with the 48 year old 8-track tape player in the dash!
I appreciate that some of you guys are willing to play along with my saga!
Seems gold and silver is the best bet. It absolutely does not have to go through an international banking settlement system as has been proven by the fact that gold existed as wealth long before there ever was such a thing as an international banking system. It can be traded directly.
This is true if the distances are small. I can just hand a gold coin directly to you.
What if your daughter, who is vacationing in Greece, calls you as you are having dinner in Chicago and reports that her purse was stolen and she doesn’t even have enough money for a hotel room tonight. You have extra wealth about stored as gold coins and in fact you remove one from your pocket and hold a 1 ounce gold coin in your left hand as she speaks. You tell your daughter: “Don’t worry, I’ve got a gold coin in my hand! I’ll send it to you right away.”
Now, what are the logistics of getting that gold coin from your hand in Chicago to your daughter vacationing in Greece?
This is the problem of transmissibility across space (distance). Gold has a number of awesome qualities recommending it as “the best money,” but transmissibility across space (distance) is not one of them! On this valuation scale, gold totally sucks.
A picture of gold that failed transmission between continents. Taken by salvage divers 100+ years later.
Value in “money” is symbolic.
The value of money is not in its physical form. Value is a concept. Ken Wilbur would say the “value of money concept” lives in the “consensus reality mind space,” our shared beliefs.
A well known picture of a German citizen with a wheel barrow of hyper-inflated Deutsch Marks during the Weimar Hyperinflation period.
The physical form of the bank notes remain. But the symbolic quality of its value has been lost..
The physical form of the money has been divorced from the idea of its “value.”
Closely related to the criticism “You can’t eat gold!”
True, you can’t eat gold. It is not intended as an item of value in itself, but is a store of the symbolic quality of “value” which can be used as a means of exchange. Gold can be exchanged for food, or shingles, or a new carburetor.
The “value” is not physically in the gold or the bank note. Value lives in the minds of people.
I like gold. But a lot of people aren’t aware of what happened in the United States in the 1930’s.
Gold was confiscated by the government. Everyone in the country was required to sell their gold to the government.
Well, you got paid for it.
Okay, that sounds fair, right?
The Federal Government paid $20.67 per ounce for the gold. That was the supposed fair market value. But after the Feds acquired all the nation’s gold, they immediately revalued the gold at $35 dollars an ounce. That meant that the citizens – who had been paid in paper money – were cheated out of the real value of the gold that they had held. The paper money that they had been paid with immediately lost 41% of its value when gold was revalued by the government.
My grandmother grew up with us and was an Ayn Rand type of individual. She instilled her values in me. I still owe her.
She showed me a stash of coins she had. A $10, $5, and $1 dollar gold coin. As a young guy, I asked her why she didn’t turn them in the the government? Never forget it – “we didn’t trust the bastards then, and we don’t trust them now”.
What’s that famous Mark Twain quote?
I know, Nate, I have a hard time feeling totally comfortable about investing in gold coins given the US Govt’s past history confiscating gold.
One alternative is gold in jewelry form. Mike Mahoney’s site, Goldsilver.com (among others) sells 22K (91.6%, same as a US Gold Eagle) and 24K (99.9%) gold jewelry. https://goldsilver.com/buy-online/gold/gold-without-borders-jewelry/ . The “pros” are that it is “Exempt from 1099B Brokerage reporting requirements”, and it is portable. And I don’t believe gold jewelry was confiscated in the past. Oh, and Mike’s site will buy the jewelry back from you if you want to sell it (but for quite a bit less than you paid for it; it looks like around the cost of the gold content without the mark-up paid at purchase).
The “con” is that there’s a significant mark-up in cost compared to gold coins.
One of Kunstler’s themes in TLE is life will become more local. Moving money (gold or whatever) across the planet won’t happen. PM’s, in MHO, are to be used as local currencies to circumvent local restrictions. PM’s are anti-Great Reset and anti-Schwab.
Key point – PM’s are transition elements. It’s how you go through the eye of the hurricane and come out OK on the other side.
Farmland in a red state. Real good idea.
Another site I like is Mene.com for gold jewelry. Pure gold, and they clearly disclose the gold value vs “Mene fee” (fabrication, markup etc) for each piece of jewelry.
It’s kind of nice to say “Oh I’m paying $100 to make that necklace, and getting $400 worth of gold for my $500”
The fee used to be a fixed 20%, but that seems to have been quietly phased out and has crept up. Now it seems to vary between 20% and 30%.
“This is the problem of transmissibility across space (distance). Gold has a number of awesome qualities recommending it as “the best money,” but transmissibility across space (distance) is not one of them! On this valuation scale, gold totally sucks.”
The problem you are describing is the fundamental limitation of existence in physical reality. In other words, anything that exists can only exist in one place at one time. The only way to overcome this is through nonexistence. To exist strictly as a concept [ i.e Bitcoin ], the fundamental flaw of non-physical existence is that it depends upon some infrastructure [ internet, bitcoin database, accounting systems ] to prove and account for its existence, otherwise it disappears.
We all have to agree that bitcoin exists and has value….. and there has to be a fairly complex digital system in place to account for it. The problem I see is none of those things are within your power to control or maintain. You are dependent on all of that to breathe life into your bitcoin.
Gold does not depend on the existence of a complex artificial reality in order to exist. It exists in the real world, which is self-evident and self sustaining. You may debate the value of gold as a concept [ same as with bitcoin ], but you cannot debate its existence. Gold’s existence does not need artificial “support”.
As far as gold’s value…it has a 5000 year track record of maintaining its value over time. So although all value is subjective and conceptual to some degree, gold has the best track record of anything I can think of.
The USD was backed by gold then. It was nearly equal to the money supply. Today? Not so much. They’ll take the 401ks first.
SP: Value lives in the minds of people.
Sorry SP, I’m not trying to hijack your saga (I’m quite enjoying the mental exercise) but the above statement is the key problem.
How can the grandpa know what will be valued by the people in the age of his unborn granddaughter?
Ok. So here is a related thought that has the potential to really piss off some people here. I do not intend it that way, it’s just my opinion.
Man, really doesn’t have freewill. Your consciousness is controlled by your genes. Love, hate, war, peace, crime, culture, religion, science, economics, biology, etc. They all exist to serve one goal, the perpetuation of genetic lineage.
In a sense, the grandpa is looking to buy his way into Heaven. The afterlife, as defined in most religions, is not really about the continuation of individual consciousness, but about the continuation of your gene pool. Simply put, most religions offer their advocates an evolutionary advantage.
So if the grandpa is seeking to give his unborn granddaughter an evolutionary advantage, the most valuable gift would be the knowledge gained from his life experiences. Of equal value, from that perspective, would be her biological needs.
Give her land with an established ecosystem on it. Teach her how to maintain, protect, and live within that ecosystem, and to do the same with her social ecosystem, and maybe the grandpa has really given her something of value.
Trying to guess what people will value (socially) in 50 years is tough. It could be bitcoin. It could be Tulips (again).