Gold (1983-2003)

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gravenewworld's picture
gravenewworld
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Posts: 6
Gold (1983-2003)

Hi,

I'm still new here and still learning, so was hoping someone would help me clear this up.

A lot of talk on gold on this site (and many other sites.)  I have some gold myself (GLD lol), and the temptaion to fall in love is there.  It's almost a religious experience, something of a mathematical law of nature applied to economics.

But is it really?  How does one explain the gold price from the period of 1983-2003?  I don't have the chart in front of me, but it traded around a band of $300-$500 for this 20 year period.  Are you kidding me?  There was definitely inflation during this time, lots of it.  And the time scale is large (20 years.)  With inflation factored in, you would have lost big time during this period.

One can probably argue that the price of gold is manipulated, etc.  It may be.  But I have a different opinion.

No one wanted it!  And don't call me crazy because Warren Buffet would probably agree.  It's a passive, non-income generating investment.  Is it real money?  That can be debated, yes it was real throughout history up until 1971, but after that?

It would seem more likely that gold is purely a safe-haven investment, not an inflation protection mechanism. Therefore during times of crisis, due to its safe-haven status, it will take the opportunity to correct itself and price itself fairly in terms of dollars.  Not because of inflation, but because of investment demand and renewed focus.  How else do you explain the current run up alongside a rising dollar?

So like I said, I'm in gold/silver, but it's a trade for me, not a long term investment.  Gold will rise to its fair repricing, and it will rise further due to a public frenzy.  At that point I am out.  I am not in love.

Please refute me!!!!

Kelly Graves

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Re: Gold (1983-2003)

Kelly,

If you own GLD, you may not own actual gold.  Read the prospectus very carefully.  For short term trading (meaning days, weeks, or even months), it's OK (but not necessarily the safest).  For longer term (i.e. longer term, not eternally), I would hold physical gold.  You may wind up being Madoffed if you're holding GLD.  Ask around.   

Secondly, every investment has its day ... none is eternal in its positive returns ... each reverts to the mean, sooner or later.  Why would you want to own gold from 1983 to 2003 when owning equities over that period of time gave you a much better rate of return?

But for the present time, given the many unique characteristics of gold, its dual function as both a currency of last resort and a scarce commodity, the economic and political uncertainties of the times, the dangers of fiat currencies, etc., gold seems to be the wise choice to me.  I loaded up on it back in 2001 when the spot price briefly dropped below the production price and I've never regretted it.  I will continue to hold onto it until economic circumstances change.  I will sell off much of it when the price is right but I will always hold some.  You just never, never know what can happen.  A little lesson a grandfather who lived through the Weimar Republic hyperinflation taught me.

Brian 

  

 

 

 

 

sunson's picture
sunson
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Posts: 42
Re: Gold (1983-2003)

Hi grave new world (your nick is funny and creative!)

Firstly, Gold is traded as a commodity. It is 'traded' - it is not the currency in itself. Warren Buffett's remarks can be equally applied to any other form of currency and I believe, the reason why we still do the funny thing (that warren jokes about) is simply because gold was our currency until a very recent past, atleast at the level of transactions between nations... like how we buy a safety locker, nations build Fort Knox.

Secondly, all the recent news indicates gold is seeing its own bubble. Maybe the collective humanity thinks its 'needed' - but there is also a lot of mad rush for it. Out here in India, Gold prices have risen 30% in 1 week. The herd mentality is going to artificially drive prices up and I'm damn sure it will 'readjust' sometime when the bubble bursts.  So just for this reason, I personally have decided to only focus on all my other 'action items' than converting my money into gold right now.

Instead, I feel its better to let the (current, inflating, paper) money turn into sources of resources - land, cows, goats... and maybe even machinery (lathes, solar panels, etc.,?) that might become difficult to invest into in the future and might just give oneself the edge. Simply put: We know for sure, a cow is valuable for the period of life its alive and even after it dies (leather, meat, bones(?)). PLUS it can give you another cow (or ox) - gold or money cannot do this. Which is why, I feel, investing in sensible 'life forms' is better. Similarly with machines used effectively.

But like CM says, it will have its own peculiar implications - I imagine the obvious side-effect being most people will probably tend to their needs themselves because paying someone else to do that job means losing your limited amount of gold... Unless of course you're sure you're going to get more 'others' gold by spending now. Obviously, 'growth' cannot happen and definitely need not be at a stipulated 'rate'.

I might be wrong or maybe looking at this from a very narrow view point, I'm no expert (and I hate being one) - feel free to poke around and criticize my thoughts :) Because I seriously wanted to know what you all think too!

 

Thomas Hedin's picture
Thomas Hedin
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Posts: 815
Re: Gold (1983-2003)

I made a three part series on whether we can use gold as a money supply.

 

 part 1

 part 2

 part 3

Could you be so kind as to give me your opinion of my video?

gyrogearloose's picture
gyrogearloose
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Posts: 549
Re: Gold (1983-2003)
gravenewworld wrote:

It would seem more likely that gold is purely a safe-haven investment, not an inflation protection mechanism. Therefore during times of crisis, due to its safe-haven status, it will take the opportunity to correct itself and price itself fairly in terms of dollars.  Not because of inflation, but because of investment demand and renewed focus.  How else do you explain the current run up alongside a rising dollar?

Please refute me!!!!

Kelly Graves

   NO

 

 I won't....

From 1991

http://the-moneychanger.com/articles_files/mmm_files/economy/exter.phtml

"EXTER The most important one is this flight to currency. It is bigger than anything I expected right now. We are still having troubles with banks, thrifts, insurance companies, & others, which will cause more people to move down to Treasury bills & currency. At some point they will go to gold. We're at the threshold of that point. When they go to gold instead of currency or Treasury bills, the price of gold will take off. It will be a bandwagon everyone will want to get on. Then even those who have bought currency will see how foolish they were & that gold is far better to hold than currency, that it is the best store of value money man has ever found. It's stupid for people to hold currency. The Fed can simply print all they want at very low cost. Paper money is as abundant as leaves on trees."

 

Cheers Hamish

 

gyrogearloose's picture
gyrogearloose
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 549
Re: Gold (1983-2003)
Thomas Hedin wrote:

I made a three part series on whether we can use gold as a money supply.

Slightly confused. You made the series, and it's title is "... interview with Byron Dale" but you have your name set as Thomas Hedin. Is that you in the video, or are you interviewing him, or is it just a series you saw and posted here ?

Well.......

Byron Dale sounds like a Keynesian, unable to reason logically ......Wink

Where to begin.....

"If you had many hundreds of dollars of gold in your pocket, I would guarantee those pockets would get pretty heavy, and most people I know wouldn't want to lug that around"

Two ways to take this

The dollar as in the 1 oz gold coin of old he talked about earlier

Or the amount of gold that many hundred US$ would buy

Well if it is the first, many hundred 1 oz dollar coins, and we assume "many" is say seven hundred, that comes in at  US$670,000, who caries that much cash around ?

If the second it is about 0.7 oz of gold...... what a burden !

Cheers Hamish

fujisan's picture
fujisan
Status: Gold Member (Offline)
Joined: Nov 5 2008
Posts: 296
Re: Gold (1983-2003)
Thomas Hedin wrote:

Could you be so kind as to give me your opinion of my video?

Already done 

 Re: Owning Gold Still Illegal? #4

TheRemnant's picture
TheRemnant
Status: Silver Member (Offline)
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Posts: 141
Re: Gold (1983-2003)

The original poster is correct, but missing the point of money.

Gold and silver evolved into money as it had a large number of desirable characteristics:

  • Durable.  Drop a gold bar into the bottom of the ocean, and it will still be there in a thousand years provided no erosion.  Fish sucks as money - it rots.
  • Portable. You can't take real estate with you.  Barrels of Oil also suck this way. High value can be transported easily.
  • Fungible. An ounce of gold with a given purity has identically the same worth as another ounce of gold, provided that they are the same purity and there is no numismatic - collector - value on one piece over the other.
  • Divisible. An ounce of gold and silver melted in half have exactly half the value of the original ounce + a small manufacturing - seniorage - fee.  This is why diamonds suck as money  - cut one in half and the two pieces don't add up to the original piece in terms of value.  You can't make change for a piece of land you own.
  • Attractive. It helps that gold and silver are pretty and have been cherished by humans since days of yore.
  • Intrinsic.  An ounce of gold is an ounce of gold.  It is tangible.  Dollars, Marks, Pesos used to represent a specific weight of gold or silver, but the State severed those ties years ago, the last being the United States in 1971.
  • Scarce.  If money were plentiful and grew on trees, it wouldn't be valuable, would it?

Actors in the economic market gave value to gold and silver, recognizing that (a) it was the best form of money for the characteristics I specified above, and (b) barter was incredibly inefficient as it is a coincidence wants - i.e. two people have to have items the other wanted at precisely the same point in time, assuming the even had what the other wanted.

In the past, the State had large egos but small treasuries.  If they wanted to, say, wage war in 3 different countries at the same time, how would this be paid for?  Well, the State raised money by (a) stealing it - taxation - from its constituents, (b) borrowing it.   If they taxed too much, a large amount of State resources would need to be deployed to protect the State from the Serfs bringing out the torches and pitchforks to lynch the State.  Borrowing leads to the same problem eventually - it has to be repaid, and since the State does not produce wealth, it taxes the citizens eventually.

So the State had a brilliant evil idea.  Why don't we (c) print the money!  They took a relatively cheap commodity, like wood or paper, and put special markings on it.  In England, they created "tally sticks" where they split a stick in half, put a serial number on it, and kept one half in the Treasury, and spent the other into circulation.  At tax time, when a serf paid his taxes, he would go to the Treasury and present his stick.  The Treasury would go into the vault, find the other half, and put them together to see if all the notches and patterns lined up.  Woe to those who presented a counterfeit stick!   Laughable?  It was in use for 800+ years!  Since the State couldn't resist printing money, inflation was present everywhere.

The State monopolized the minting of money and implemented legal tender rules, ensuring all other forms of money were outlawed.    They created a central bank so that they could borrow money into existance to spend on whatever debacles of the day required.  In otherwords, the central bank broke the State's accountability to the people as they no longer had to go to the Serfs and tax them to pay for everything.  The Serfs paid the inflation tax, an insidious tax that not 1 in 100,000 people understand how it works.

The deeper question you have to ask yourself is, what gives value to fiat
money (i.e. Federal Reserve Points)?  Why did we even accept the idea
that a monopoly on violence - the State - could print paper with pretty
designs on the same piece of paper or wood, different designs and lengths indicating
different denominations.  I read somewhere that it currently costs 8
cents to print a Bank of Canada Point.  8 cents to print a 5 dollar
bill.  8 cents to print a 50 dollar bill.  8 cents to print a 100
dollar bill.

If I opened, "The Remnant's Money Printing Shop" and tried to get people to use my money, no traction would be gained from this.  People would laugh and ignore it.  However, if I had a really big gun and created a monopoly on violence to extort taxes from people, I could force them to use my money, couldn't I?

The reason that we HAD to use these pretty pieces of
paper was simple.  The State created an artificial demand for it by
demanding it in taxes.  Fail to pay your taxes...well you know what
would happen next.  In otherwords, what gives value to paper (fiat)
money is the threat of violence if you don't use it.  Sometimes,
counterfeiters sprang up, were caught, and received VERY SERIOUS
punishment - sometimes death - by the State.  Only the State and their connected insiders - the fractional reserve banking industry - may
counterfeit money and devalue it through inflation.

Free market money represents freedom.  Fiat or debt-based money represent slavery.  That is the key difference.

Agorism is the correct solution.

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