Gold - The RWNJ currency

[kytwell 179]

Of course gold has value, the same way any money has value... in relation to what people are willing to trade for it. Like all value, it is relative and fluctuates. What good is gold; what is its inherent value? The highest use of gold is as MONEY. Find out what money is (hint, not paper), and it becomes obvious why gold is the best form of money. The 40-year blip of global fiat currency is nothing in the grand scheme of things. Use a wider horizon to find the true value of gold. On the low end, you can value it by what it costs to get it out of the ground, which puts the floor around $700 right now. On the high end, there is virtually no ceiling when everyone holding worthless fiat paper decides they want real money. $50,000 is not unreasonable in a panic. It will eventually settle around the point of what $20 could buy in 1913, when the average income was $1300/year, a car cost $450, and gasoline was 12 cents/gal. I.e. somewhere around $800 in today's dollars. But that's in the long run, after the panic, and after mining companies have been pulling it out of the ground for awhile to get the supplies up to meet demand. We would have a massive parabolic bubble before then, which will entice the hardest skeptic to get in. In this scenario, it's still early yet.

But if you want to know it's @ value today:

M2/8=P

It's really quite simple. At present, M2 is 9.5 trillion. 8 is really 8 billion(all the troy ounces of gold in the world) and P is the price gold should be. Simply put 9555/8=1194. So, increase M2 and gold goes up; find gold on Mars, and gold goes down.

[Captain Oates 911]

As a currency, it is doing well against other currencies. Probably because it's hard to print more gold.

It would be less useful if it wasn't for the global epidemic of monetary inflation.

Inflation ?

Have you seen house prices compared to 2007 ? Car prices ? Sales and promotions everywhere.

We have massive deflation and its getting stronger all the time. That's why businesses are going broke - they cant put their prices up because of lack of demand. Ask the house builders.

If I kept my cash in a bank it would yield 0.2%. That is a very high REAL interest rate in that it buys a house for 25% to 40% less than it did 3 years ago.

The US dollar - this fiat currency, devalued, worthless, according to the RWNJ political agenda, actually buys 30% or 40% more houses than it did 3 years ago ! That shows that this so called worthless fiat paper money has performed better than real assets such as houses and land as a store of value

Edited November 22, 2011 by Ashud Cocoa

[Dakine10 5,452]

Inflation ?

Have you seen house prices compared to 2007 ? Car prices ? Sales and promotions everywhere.

We have massive deflation and its getting stronger all the time. That's why businesses are going broke - they cant put their prices up because of lack of demand. Ask the house builders.

If I kept my cash in a bank it would yield 0.2%. That is a very high REAL interest rate in that it buys a house for 25% to 40% less than it did 3 years ago.

The US dollar - this fiat currency, devalued, worthless, according to the RWNJ political agenda, actually buys 30% or 40% more houses than it did 3 years ago ! That shows that this so called worthless fiat paper money has performed better than real assets such as houses and land as a store of value

Have you seen house prices compared to 1985? 1975? What's the point of choosing 2007 to start measuring inflation. You would pay 2000% more for a house in 2011 than in 1932. That's inflation. Try to find a historical precendent over a 100 year period. You can't.

Besides that, houses are being affected not only by monetary inflation, but also by "credit deflation" if you will. There's trillions more in circulation now than in 2007 (or hundreds of billions at least). There's not as much credit available now as in 2007.

If you look at things that are traditionally bought with cash, there has definitely been inflation. Prices have gone down in things that are normally purchased with credit.

[Captain Oates 911]

Have you seen house prices compared to 1985? 1975? What's the point of choosing 2007 to start measuring inflation. You would pay 2000% more for a house in 2011 than in 1932. That's inflation. Try to find a historical precendent over a 100 year period. You can't.

Besides that, houses are being affected not only by monetary inflation, but also by "credit deflation" if you will. There's trillions more in circulation now than in 2007 (or hundreds of billions at least). There's not as much credit available now as in 2007.

If you look at things that are traditionally bought with cash, there has definitely been inflation. Prices have gone down in things that are normally purchased with credit.

The reason I pick 2007 is because after that is when the conservatives say this Kenyan half black guy started wrecking the currency by printing billions. I say that the currency is worth 40% more than hard assets like land, and paper cash has been an extraordinarily good investment over the last 3 years..

I bought my house with 100% cash in May 2008. If I had kept that cash as it morphed into Obama cash, and bought the house now, that Obama cash would have been the best asset that I ever had.

The markets are selling everything - gold, stocks, land, houses and turning into cash. Obama cash.

This so called horrible worthless devalued Obama paper dollar cash, is the most desired asset on the entire planet as at today, right now, and people will sell any hard asset to get it

Obviously the conservatives are painting a picture of the US dollar paper money, that is as false as the rest of their dogma

[mawilson 2,133]

Obviously the conservatives are painting a picture of the US dollar paper money, that is as false as the rest of their dogma

It's not false. We haven't seen any inflation YET because QE1/QE2 were essentially asset swaps (bonds for dollars printed out of thin air.)

[Captain Oates 911]

It's not false. We haven't seen any inflation YET because QE1/QE2 were essentially asset swaps (bonds for dollars printed out of thin air.)

They needed to print money to replace the mega trillions that were destroyed in the crash

Inflation remains a prediction at this point whereas the incredible increase the value of the paper dollar fiat currency against hard assets is a reality right now

Predictions are just that - in the 1980's we were told that our populations would be halved by now through AIDS

A year ago, Sarah was a cert to be the next Presidentesse

A year ago, Ron Paul was seen as a dotty old geezer who would never be president and Rick Perry would never be outed as a gay by Ashud Cocoa

I am not a fan of predictions and I don't buy gold or inflation protected bonds.

The only prediction I make is that poor people will be voting for their rich masters in the next election, like it was in their interests so to do

[Dakine10 5,452]

The reason I pick 2007 is because after that is when the conservatives say this Kenyan half black guy started wrecking the currency by printing billions. I say that the currency is worth 40% more than hard assets like land, and paper cash has been an extraordinarily good investment over the last 3 years..

Ah, OK, I see what you're doing.

I bought my house with 100% cash in May 2008. If I had kept that cash as it morphed into Obama cash, and bought the house now, that Obama cash would have been the best asset that I ever had.

The markets are selling everything - gold, stocks, land, houses and turning into cash. Obama cash.

That's great. If you can buy a house with cash, you have the best of both worlds. You are buying undervalued property with overvalued currency.

This so called horrible worthless devalued Obama paper dollar cash, is the most desired asset on the entire planet as at today, right now, and people will sell any hard asset to get it

Obviously the conservatives are painting a picture of the US dollar paper money, that is as false as the rest of their dogma

The future of the US dollar doesn't look good really, but I agree it's nonsense to try and blame that on Obama. It's been US policy for ages now.

[lostinblue 1,989]

When we look at the average relationship between gold and housing since gold was legalized in the United States on December 31, 1974, in gold terms we can now buy housing for about 33% of the long-term average.

http://danielamerman.com/articles/2011/GHRatioB.html

[Captain Oates 911]

When we look at the average relationship between gold and housing since gold was legalized in the United States on December 31, 1974, in gold terms we can now buy housing for about 33% of the long-term average.

http://danielamerman.com/articles/2011/GHRatioB.html

Good statistic - but

paper currency changes its value quite slowly in open markets whereas gold is experiencing a bubble and can crash 40% in a few days

So therefore I consider not only the future for paper as compared to gold, but the rate at which it can suddenly lose its value - so paper is safer in that I have plenty of time to get out of it

Update: as at this moment 7.45am pacific, turkeyday-1, gold is down 1% and the whole stock market continues its crash.

So this morning right now, gold, stock and our houses are all worth less - and the only asset that hasn't lost value is paper currency

Given that the response to this unfolding recession/slump will be lower prices on everything, paper is the only appreciating asset this morning

As a fund manager said in 2008, I only have two positions - cash and foetal

[mawilson 2,133]

So this morning right now, gold, stock and our houses are all worth less - and the only asset that hasn't lost value is paper currency

Gold is not worth less. It's worth the same - in gold terms

Don't knock gold as a wealth preservation mechanism. Countries and governments have risen and fallen, but gold has survived through it all.

In ancient Rome, an ounce of gold bought you a nice toga, a leather belt and a pair of sandals. Today, an ounce of gold buys you a nice suit, a leather belt and a pair of shoes.

Not bad for a bit of shiny metal. Guess how much your paper money will be worth in 2,000 years.

gold is experiencing a bubble and can crash 40% in a few days

Don't count on it.

[Captain Oates 911]

Warren Buffet is the worlds most successful investor - nobody has ever come close

He wont touch gold - he says it is non-productive. He would rather have something productive - like farm land

He also believes in universal health care so I reckon I am in good company with my ideas on gold and politics

Amazing that I should share my investing and political outlook with him - it's nice

I own BP stock and it will rise much more than gold in the next 20 years because its is productive - people are working hard in the arctic to make a return

Stocks are an earning asset and they will ride the wave of inflation if the long predicted inflation ever comes - and more importantly, earn on top of that

Stocks will trounce gold over any long period and I would rather own them and the fruits of the labor of the oil men in the arctic, than sit at home wishing failure on the government and fondling my ingots

[mawilson 2,133]

I own BP stock and it will rise much more than gold in the next 20 years because its is productive - people are working hard in the arctic to make a return

Sure - or it might go to zero, as many companies have. A lot can change in 20 years.

Diversification is key. Own some BP stock and some gold. Don't put all your eggs in one basket (stocks).

Buffett did make a small fortune trading silver in the late '90s.

[mawilson 2,133]

Don't think of gold as an investment. Think of it as money, a store of value, a de-facto global reserve currency.

Gold is not unlike USD or GBP. Just like other currencies, its value may fluctuate, but the upside is that central banks can't print gold.

In the race to the bottom (as governments are printing money to keep their countries' currencies cheap and competitive), gold is not a bad alternative.

[Captain Oates 911]

Sure - or it might go to zero, as many companies have. A lot can change in 20 years.

Diversification is key. Own some BP stock and some gold. Don't put all your eggs in one basket (stocks).

Buffett did make a small fortune trading silver in the late '90s.

I occasionally make a quick speculation in gold but I don't believe in it - so its just a quick 2 week deal buying the dips and selling the peaks

I will be out buying stocks this morning (very selective) as the market is down 7% in a week

I might buy some gold too - but I will be out of it if it goes back 5% next week

The decision has to be purely financial and I fear that people are expressing themselves politically by buying gold as some sort of vote of no confidence in President Obama. It is no coincidence that the right wing radio jocks are pushing it.

That makes me uneasy - like when Cramer pushes a stock because it is a "Fine American Company" and he does that very often

Gordon Gecko would never buy stock or gold or anything on patriotic or political grounds.

ps I drive a Toyota - made in Kentucky

[mawilson 2,133]

The decision has to be purely financial

I agree. One should never get sentimental with an investment.