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Old July 14th, 2009 #1
Alex Linder
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Why Gold's Price Rose in the Great Depression

by Gary North

I keep coming back to this theme because the non-Keynesian, hard-money deflationists keep pitching the same old deliberately deceptive statement: "Gold's price rose in the Great Depression." They tell their readers to buy gold.

If there is price deflation, gold's price will fall, unless there is a war or a non-monetary crisis.

These people never respond to my arguments. They pretend that I have not raised this issue. I have. Repeatedly. Examples:

* http://www.lewrockwell.com/north/north497.html
* http://www.garynorth.com/public/5115.cfm

There comes a point when readers who cannot make up their minds about who is right had better say to themselves: "I think I had better pay no attention to the guys who refuse to respond to North's argument."

Here is my argument.

THE STORY OF A GOVERNMENT-RIGGED COMMODITY

The United States government guaranteed the dollar-price of gold from the end of World War I until August 15, 1971. On that Sunday, Richard Nixon announced a new policy. The United States government would no longer redeem dollars for gold at $35/ounce when presented with dollars by foreign governments and central banks.

Until then, the world's gold price had a floor: $35/ounce. Gold was a rigged commodity. It was not a free market commodity. Nobody sold gold below $35/ounce because the United States Treasury would buy gold at this price. The United States Treasury guaranteed a market for gold. It was not a free market.

This is always the meaning and effect of a government-guaranteed gold standard. For as long as the investing public believes that the government will not break its contract, gold's price will not rise above or fall below the fixed price in the nation's currency, except for transportation costs, which are very low in relation to the price of gold.

Under these circumstances, gold's performance will be the same as money's performance.

The reason why gold's price did not fall during the price deflation of 193033 in the United States is because gold functioned as money, meaning paper money. Paper money held outside of banks appreciated. This is the meaning of price deflation: money appreciates. This is why there were bank runs, 193033. Depositors recognized that currency held outside of banks was safer than deposit receipts from banks, which were uninsured until 1934. They withdrew their money. Over 6,000 banks went under but no New York City multinational bank. The Federal Reserve made sure of that.

There was a time, earlier than the nineteenth century, when government money was money only because the government redeemed money at a fixed price for gold. Gold supported the value of the government's money.

After World War I and especially after World War II, gold was no longer money. It was merely a government-rigged commodity because it could be sold at a fixed price to the U.S. Treasury for money. It was illegal for Americans to own gold bullion, from 1933 to December 31, 1974.

There is no government-fixed price for gold today. Therefore, any argument based on the price of gold during the Great Depression, when gold coins were still money, is not just ill-informed; it's deliberately deceptive. The editors who keep repeating this argument know what I have argued, but they prefer to keep their readers from examining my argument. They do not answer me. That is because they cannot answer me without departing from the logic of free market economics: supply and demand.

Gold was not a free market commodity from 1844, when the notes of the Bank of England were made legal tender and redeemable in gold, until August 15, 1971, when Nixon ended gold's legal redeemability for foreign governments and central banks. Gold had a price support from the American government after the end of World War I: $20 an ounce through 1933; $35 after.

Roosevelt announced in 1933 that it was illegal for Americans to own gold bullion. He forced law-abiding Americans to turn in their gold to the government at $20 per ounce. Then, when the gold came in, he raised its price by 75%, to $35. The government pocketed the difference.

This was a devaluation of the dollar. The dollar's gold content was reduced by 40%.

The Great Depression was an era of monetary deflation. Ours is not. The Great Depression was an era of systemic price deflation, 193033. Ours is not. The Great Depression was an era of a government-guaranteed floor price for gold. Ours is not.

Gold's price did not rise until the United States government ceased selling gold at $35 per ounce to foreign governments and central banks. Nixon announced that policy on August 15, 1971.

Gold's price bottomed in 2001 at $257. Gold was a rotten investment, 19802001: $850 to $257. Silver was worse: $50 to $4. Yet consumer prices rose by about 100%.

Fact: gold did terribly in a time of steady monetary inflation and steady price inflation. The precious metals bubble of 1979 popped in January 1980 in response to the FED's tighter-money policy. Gold has never come back to its January 1980 peak: $2,100 in 1980 dollars.

WHO ARE THE DEFLATIONISTS?

With the exception of old-line deflationists Martin Weiss and Robert Prechter, today's deflationists did not show up until a few years ago. The deflationist argument disappeared in the two decades of declining gold prices, 19802001.

At the same time, people who were interested in buying gold disappeared. So did the hard-money newsletter market. A lot of the gold bugs died. They left their gold coins or gold mining shares to heirs, who sold them.

The handful of companies that sold gold coins in the great precious metals boom, 1976 to January 1980, went out of business or shrank. There were never many of these firms, probably under a dozen with significant retail sales: Investment Rarities, Blanchard & Co., Camino Coins, and Don McAlvany.

Because gold did so poorly, 1980 to 2001, the number of people who had heard the story of gold in 2001 was tiny. Those who knew anything about it thought correctly "popped bubble."

Then the monetary inflation of Greenspan's Federal Reserve drove up the price of gold, beginning in the second half of 2001. I began promoting gold once again in October 2001.

The readers of the deflationist sites are newcomers. They were not investors in gold from 19802001, let along in 1970. They have no knowledge of the history of gold. They have almost no understanding of basic economic theory, whether Keynesian, Friedmanian, or Misesian. They are babes in the woods. Lambs to the slaughter. They are the blind who the equally blind are leading into the ditch.

They will buy gold because their deflationist guru told them to. This is good. Why? Because their deflationist guru is wrong. There will be price inflation. Their gold will appreciate.

MONETARY CRANKS

Recently, I wrote a long article on the primary monetary crank of the modern world: John Maynard Keynes. It is titled "Keynes, Crackpots, and Deflation." I showed how he got his economic ideas from two men who were universally regarded as monetary cranks in Keynes' era. Keynes even acknowledged that they were regarded as cranks. Still, he praised them. One was an engineer, C. H. Douglas. He founded a movement called Social Credit. The other was Silvio Gesell. He served in the government of the one-week Bavarian Soviet Republic in 1919.

What is a monetary crank? Here is what I wrote in my article:

I define a monetary crank as someone who proposes a system of causation for money different from causation for other market phenomena. Ludwig von Mises subsumed monetary theory under the same logic that governs all market processes: Theory of Money and Credit. In contrast, a monetary crank tells us that private property, entrepreneurship, and the forces of supply and demand explain causation in the overall economy, but then insists that money is different, that government-created and government-planned money is required to balance supply and demand for all other goods and services. He abandons his theory of economic causation when he gets to money.

A monetary crank argues for supply and demand in the general economy. Then he exempts monetary theory from this analysis.

The supreme monetary crank of the twentieth century was Yale professor Irving Fisher. He was a contemporary of Mises. He wanted pure fiat money. He hated the gold standard. His influence is greater today in the realm of monetary theory than anyone else. That is because of the influence of his chief disciple, Milton Friedman.

Keynes tried to move economic theory away from strictly free market explanations of pricing, supply and demand, and employment. In other words, he was less of a monetary crank than Fisher. Keynes did not believe in either the pure free market or the gold standard. Fisher believed in the free market and fiat money. He was schizophrenic intellectually.

Fisher lost his personal fortune in the Great Depression. He was the inventor of the Rolodex. He lost at least $6 million and maybe $10 million. As John Kenneth Galbraith quipped: "This was a sizable sum, even for an economics professor." He also lost his sister-in-law's fortune. He became famous for this statement in September 1929. "Stock prices have reached what looks like a permanently high plateau."

He did not understand monetary theory. He did not understand capital markets. He did not understand gold. But he is still widely regarded as the number-one expert in monetary theory.

In 1933, after he had lost his money, which the academic world knew, he persuaded a high-level academic journal to publish his essay that explained it all retroactively which he had failed to see coming. This article is still widely quoted and highly regarded by academic economists. It was re-posted on the site of the Federal Bank of St. Louis. Its title: "The Debt-Deflation Theory of Great Depressions."

Non-hard money economists who worry about price deflation still quote it. Examples:

* http://tinyurl.com/nu8h3w
* http://tinyurl.com/ntcs5g

But by far the most relevant reference to Fisher's theory was Ben Bernanke's famous 2002 "helicopter" speech. He cited Milton Friedman on the helicopter filled with currency. But Friedman got the idea of Fisher's 1933 article. Bernanke wrote this.

Second, the Fed should take most seriously as of course it does its responsibility to ensure financial stability in the economy. Irving Fisher (1933) was perhaps the first economist to emphasize the potential connections between violent financial crises, which lead to "fire sales" of assets and falling asset prices, with general declines in aggregate demand and the price level. A healthy, well capitalized banking system and smoothly functioning capital markets are an important line of defense against deflationary shocks. The Fed should and does use its regulatory and supervisory powers to ensure that the financial system will remain resilient if financial conditions change rapidly. And at times of extreme threat to financial stability, the Federal Reserve stands ready to use the discount window and other tools to protect the financial system, as it did during the 1987 stock market crash and the September 11, 2001, terrorist attacks.

Beginning in October 2008, the FED has reacted just as he said it would. Hard-money deflationists say the FED cannot reverse price deflation. Bernanke said they are wrong.

But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. . . .

Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

I agree with him. This is why I think gold is a good long-term investment. That is because I think the FED can and will inflate. It can and will force commercial banks to lend, if only to the U.S. Treasury. Anyone who says there are no solvent borrowers for banks to lend to is out of touch with reality: a $11.5 trillion Federal debt, which is growing by a trillion dollars a year. The Treasury must roll over $250 billion each month. No borrower?

CONCLUSION

The argument that gold's price increased in the Great Depression and therefore will appreciate in the coming deflation is the single most misleading argument in the deflationist camp. Do not pay any attention to this argument. I suggest that you pay no attention to anyone who uses it, except as a convenient source of links to other people's articles.

In short, the guy is either incredibly ignorant about economic theory a monetary crank or else he is being paid to sell gold.

July 15, 2009

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

http://www.lewrockwell.com/north/north734.html
 
Old July 15th, 2009 #2
Rick Ronsavelle
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". . .So now we know why the site exists. He wants to spread the word about Christian Reconstructionism. Not a bad thing in itself, until you dig a little deeper and get closer to the roots of North's beliefs. In this quote he talks about religious freedom, which is the entire basis for the existence of this country. His words are shocking and horrifying to me, and, I think, to any US citizen.

[So let us be blunt: we must use the doctrine of religious liberty to gain independence for Christian schools until we train up a generation of people who know that there is no religious neutrality, no neutral law, no neutral education, and no neutral civil government. Then they will get busy in constructing a Bible-based social, political and religious order which finally denies the religious liberties of the enemies of God.]

--Gary North, quoted in Albert J. Menendez, Visions of Reality: What Fundamentalist Schools Teach (Prometheus Books, 1993)

North wants to gain power for the Christian Reconstructionists, then wipe out the liberties of anyone else who disagrees with their beliefs. This is one scary dude, and I shudder to think where, or in whom, he's investing his substantial monies. He's a man with a plan, and if the reconstruction goes his way, it's going to be worse for 95% of us than all the fan-hitting manure he's predicting for Y2K. . ."

http://www.sweetliberty.org/garynorth.htm

Doctor North has also claimed that adulterers and non-believers should be stoned to death.
 
Old July 15th, 2009 #3
Alex Linder
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Originally Posted by Rick Ronsavelle View Post
". . .So now we know why the site exists. He wants to spread the word about Christian Reconstructionism. Not a bad thing in itself, until you dig a little deeper and get closer to the roots of North's beliefs. In this quote he talks about religious freedom, which is the entire basis for the existence of this country. His words are shocking and horrifying to me, and, I think, to any US citizen.

[So let us be blunt: we must use the doctrine of religious liberty to gain independence for Christian schools until we train up a generation of people who know that there is no religious neutrality, no neutral law, no neutral education, and no neutral civil government. Then they will get busy in constructing a Bible-based social, political and religious order which finally denies the religious liberties of the enemies of God.]

--Gary North, quoted in Albert J. Menendez, Visions of Reality: What Fundamentalist Schools Teach (Prometheus Books, 1993)

North wants to gain power for the Christian Reconstructionists, then wipe out the liberties of anyone else who disagrees with their beliefs. This is one scary dude, and I shudder to think where, or in whom, he's investing his substantial monies. He's a man with a plan, and if the reconstruction goes his way, it's going to be worse for 95% of us than all the fan-hitting manure he's predicting for Y2K. . ."

http://www.sweetliberty.org/garynorth.htm

Doctor North has also claimed that adulterers and non-believers should be stoned to death.
He's a mixed bag, to be sure. But much of what he writes about gold and money is true and useful.
 
Old July 15th, 2009 #4
Alex Linder
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[by Don Stott at coloradogold.com]

Trust
May 28, 2009


Life is full of things we trust. We trust our mates, kids, banks, cars, structures, forecasts, investments, religious beliefs, and of course ourselves. A new Vanity Fair article examines Bernie Madoff's scam in detail. It was written by his long time secretary, and it is very interesting. Here was total trust in this man by thousands of true believers. They thrust their dollars on him, and got a check every month in interest or return on supposed investments. Or so they thought. It all came crashing down when, as all Ponzi schemes must, the new recruits' input, can't equal the expected payouts of the already captured investors' dollars. Madoff had an expensive life style, offices and a trading room manned by a staff of traders, but the secretary didn't know what they were 'trading.' Madoff was 'Mr. Personality' personified. He became famous for his returns on investments, even though for years, experts had warned that the whole thing was a ripoff and Ponzi scheme. $60 billion went down the drain. Trust misplaced, even though it appeared sound and trustworthy.


In the stock market or 'dot com' crash, it is estimated that $7 trillion was lost. Stock buyers figured that the boom would go on forever. When something is working well, the thought of failure never even enters the mind, a-la Madoff. Trust. When you are driving your car down the road and it is just humming along beautifully, the thought of a blowout, overheating, or mechanical failure is the furthest from your mind. Trust. I am currently reading a very long book on Andrew Carnegie. In 1873 there was a huge depression. Everyone was getting laid off, wages cut, businesses were failing, and all progress had come to a shuddering halt. Bankruptcies were everywhere as well as failures of previously well thought of businesses, railroads, and iron mills. Carnegie himself had to sell most of his stocks and holdings to keep from going under himself. Throughout history, there have been waves of prosperity as well as corrections. Depressions are nothing new. In 1873, that depression solved itself, as ours would, if there were no government interference or 'help,' which prolongs recovery and makes it more difficult. In 1873, salaries were cut, expansion halted, and everyone buckled down.


In 1929, fortunes were lost, because millions put their trust in stocks, which many thought were so strong that a new age had dawned, and eternal prosperity was at hand. A few sages warned that it was a bubble, and sold everything they had. Since 'those who won't learn from history are doomed to repeat it,' what in the world can one put their trust it today, as an example? Real estate? Millions bought homes, lied about their incomes, and took out mortgages on homes which everyone knew would continue to go up. People were buying homes and flipping them at unheard of profits. Appraisers and mortgage brokers were lying through their teeth to get deals consummated, and all looked so rosy, that life indeed was going to continue on with unabashed happiness. Trust us. Oh sure.


Maybe it would be considered a truism if I said that, 'when things seem too good to be true, they mostly aren't.' Trust is an extremely important part of life, and if you can't trust a thing or person, life can be extremely sad. Lots of people put trust in what I consider to be so silly that I can't understand their trust in the first place. Remember the Jim Jones sect and those characters who thought they were going to heaven or outer space on the Halley comet? I think they got what they had coming to them.


The thing we all need to trust in is our method of staying alive. Be it health or money, both are necessary to continue living. We need what money buys, such as food, housing, and transport. We need health to continue life, and good health will make our lives last longer and with greater pleasure. That's why I take a lot of vitamins and minerals, don't smoke, have never done drugs, and have a bit of alcohol a few times a week. My health at 75, is virtually perfect. As far as economics are concerned, trust is paramount. I have few dollars, and lots of gold and silver. I must admit that buying gold and silver in 1979 and early 1980, was similar to buying stocks at the peak of the 'dot com' boom, or in early 1929. They were a classic bubble, waiting to burst.


Gold and silver a 'bubble?' Absolutely, and I was doing then, what I am doing now. I was making people really angry by telling them that I thought things were out of hand, and I was advising not to buy. "You're supposed to be selling gold and silver and you're telling me not to buy it?" "No, I am merely saying that I think the prices are too high, and there may be a huge correction. Gold has gone from $40 and silver from $4.50 to $750 and $45 pretty fast, that's all." Most bought anyway. Why was there a bubble in gold and silver? We had the hostages in Iraq, Jimmy Carter was President, we were giving away the Panama Canal, the prime rate was 13% and mortgages were 21% interest. Everyone was scared and turning to gold and silver for safety. Couldn't blame them! Then in November, Ronnie Reagan got elected and things began to turn around. When he took office, they really turned around, and prices corrected. The bubble had burst, and prices have been going up practically ever since.


Will there be another bubble in gold and silver like there was in real estate and stocks? Maybe, if certain things are present, which are similar to early 1980. I'll let you know, but certainly not now. Remember, gold and silver have been true money for thousands of years, through all governments, dictatorships, monarchies, wars, ruination, floods, fires, earthquakes, and myriad disasters. Gold and silver, throughout all these historic happenings, and even in the 1980's, had a ratio of 16 to 1. Now it is 64 to 1, and I know of no earthly reason not to expect it to return to 16 to 1 eventually. If the ratio were 16 to 1 today, silver would be $60 an ounce, not $15. Trust me. That ratio will eventually resume.


Another item of trust: I think that if you look through history, the majority have always been wrong. Literally. Now what does the majority put their trust in today? Stocks, bonds and dollars. The dollar has lost 98% of its value, stocks are still a third of their former bubble glory and I think will go far lower. Bond holders are in such bad shape, that nothing need be said about them here. Stop following the majority who are placing their trust in all the wrong things. Be a smart minority and place your trust in historic money.


Gold and silver are not dependent on a political party, government, laws, rules, promises, paperwork, or anything to give them value, any more than does any tangible thing, such as a piece of steel, tree in the woods, or a dozen eggs. Tangible things stand alone in their value, regardless of which party is in power. While their prices will invariably go up as the currency which they are bought with goes down in value due to inflation, the eggs, steel, tree, and gold and silver remain exactly the same. Only their prices go up as money loses value due to endless printing of it. So does it make more sense to store surplus assets in tangible things, or what is used to buy them? Eggs will spoil, steel will rust, etc, but gold and silver are the most easily bought, stored, and sold of any tangible, and besides they are absolutely beautiful! I guess it all boils down to get out of dollars, which are a shrinking measurement. They don't rust either!

One other thing. Since the election of Obama; guns, bullets, gold, and silver have been in great demand, and rightfully so. This has brought on a wave of TV commercials with pitchmen urging buying gold from this outfit or that one, none of which are of good character. Ask yourself: Who pays for all these commercials, which certainly aren't cheap? The answer obviously, is those who do business with these nocturnal airlines, which phrase can be translated into: 'fly by night.' Make one phone call to them, and you're on their list and you'll never get rid of their incessant telephone harassments. Just a word to the wise. When someone calls you, they're trying to sell you something on which they'll make a lot of money or commission. When you call someone such as us, you want something, and we are delighted to serve you, and we will never, ever call or bother you.

http://www.coloradogold.com/archive/Trust-863.html
 
Old July 15th, 2009 #5
Rick Ronsavelle
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I didn't want to detract from North's article, but I have known for a very long time that Gary wants theocracy. I wonder if the folks at Rockwell know of North's hatred for freedom.
 
Old July 16th, 2009 #6
Rick Ronsavelle
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Old July 19th, 2009 #7
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I dont know if I agree with this. What I think is that people choose to believe what works for them. If you dont have any gold or silver and you cant afford to buy it, you want to believe that those of us who did are going to lose out. It is that simple. I bought silver as a way to preserve wealth but mostly as a way to have something to trade in should the dollar and the banks fail. I do like the Mad Max fantasy of course, but things are going pretty well for me now and so it is just nice to feel safe and have some bases covered.
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Old July 21st, 2009 #8
Alex Linder
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Originally Posted by April View Post
I dont know if I agree with this. What I think is that people choose to believe what works for them. If you dont have any gold or silver and you cant afford to buy it, you want to believe that those of us who did are going to lose out. It is that simple. I bought silver as a way to preserve wealth but mostly as a way to have something to trade in should the dollar and the banks fail. I do like the Mad Max fantasy of course, but things are going pretty well for me now and so it is just nice to feel safe and have some bases covered.
It's hard to know what is real. My bottom belief is that the value of paper money can fall to zero, but gold and silver will always be worth something.

I just think gold and silver bugs are funny. We hear all the time now about gold and silver being out of whack, that the traditional price ratio has been 16:1, and with gold near 1000 and silver around 15, silver is sure to go up. My question is, why isn't it just as likely that silver will stay where it is an gold will fall?

Last edited by Alex Linder; July 21st, 2009 at 08:35 PM.
 
Old July 21st, 2009 #9
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Originally Posted by April View Post
I dont know if I agree with this. What I think is that people choose to believe what works for them. If you dont have any gold or silver and you cant afford to buy it, you want to believe that those of us who did are going to lose out. It is that simple. I bought silver as a way to preserve wealth but mostly as a way to have something to trade in should the dollar and the banks fail. I do like the Mad Max fantasy of course, but things are going pretty well for me now and so it is just nice to feel safe and have some bases covered.
Sorry to tell you but in a "Mad Max" scenario the silver that you have accumulated to help "preserve wealth" is going to be near worthless cuz the stuff is everywhere. In fact mining company's deliberately try not to mine silver because if they did the price would plummet. Silver is a byproduct of their real mining operations which are iron ore and copper. What I mean is the price of silver is heavily manipulated by the mining company's and speculators(who are usually the same people) so much so that they control the market.

It's the same with diamonds. Those things wash up on the beach on some afreekan shores. The reason they cost so much is because the entire diamond market is controlled by a company called DeBeers. Yeah, they're jews. And as everybody knows, if you control the market you control the price.

If/when the the shit hits the fan no one will want your silver, that you paid 10-20 dollars an ounce for. I mean srsly, for example, what good would your 10 pounds of silver do(that you paid 1600 bucks for at 10 dollars and ounce) if there were people whose first priority would be getting food?

Gold on the other hand is a different story. It's valuable, there ain't much of it, it looks purty and you don't have to lug around hundreds of pounds of the stuff to buy or barter what you need.
 
Old July 21st, 2009 #10
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... is going to be near worthless cuz the stuff is everywhere....
The supply of both silver and gold so exceeds the demand as industrial metals or even jewelry, that the "free market" price can't even be guessed. I've made guesses that the price of gold could drop to $360 an oz. and silver to under $4.00 an oz. Even these prices more reflect emotion than supply and demand.

Emotion, mythology, and pure manipulation set the price of silver and gold. Maybe they will go up, maybe they will go down. Just know if you decide to buy metals that you are investing in people's emotion.

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Old July 21st, 2009 #11
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The supply of both silver and gold so exceeds the demand as industrial metals or even jewelry, that the "free market" price can't even be guessed. I've made guesses that the price of gold could drop to $360 an oz. and silver to under $4.00 an oz. Even these prices more reflect emotion than supply and demand.
Yep, if there was a total breakdown of society that lasted any length of time the so called "precious metals" could quickly lose their luster. Because they don't do anything but sit there. Food on the other hand does stuff. Guns do stuff, transportation and fuel do stuff, women do stuff. Silver don't do stuff and it's value is determined by the guy who is thinking about buying it, then transporting it, then hiding it. And all the while it's just sitting there and he can't eat it and he can't fuck it. You might as well have 200 pounds of lead as the silver. It would be cheaper and more useful.
 
Old July 22nd, 2009 #12
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This is always the meaning and effect of a government-guaranteed gold standard. For as long as the investing public believes that the government will not break its contract, gold's price will not rise above or fall below the fixed price in the nation's currency...
Maybe in theory, but not in practice. There were lots of moments between 1945 (Bretton Woods) and 1971 when the dollar deviated from its gold peg, sometimes dramatically so.

Quote:
Gold has never come back to its January 1980 peak: $2,100 in 1980 dollars.
What were 1980 dollars worth? Wasn't that a period of near hyperinflation?
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Old July 22nd, 2009 #13
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Silver don't do stuff and it's value is determined by the guy who is thinking about buying it, then transporting it, then hiding it.
Silver has more practical/industrial uses than gold, and it isn't getting easier to find as the years go by. These metals are precious because they're rare.

Sure, buy food, buy guns, buy whatever you need to survive. Buy soap, nails, cartons of cigarettes, and bottles of whiskey to trade with people when the SHTF. But what do you do with your money after you've covered the basics? I'd trust gold or silver bullion over just about any paper currency on the planet at the moment. If 5 years ago you had invested in the stock market, you'd have just lost a shitload of money. If you had bought bullion, your "investment" would've doubled.
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Old July 22nd, 2009 #14
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The supply of both silver and gold so exceeds the demand as industrial metals or even jewelry, that the "free market" price can't even be guessed. I've made guesses that the price of gold could drop to $360 an oz. and silver to under $4.00 an oz. Even these prices more reflect emotion than supply and demand.

Emotion, mythology, and pure manipulation set the price of silver and gold. Maybe they will go up, maybe they will go down. Just know if you decide to buy metals that you are investing in people's emotion.
True, gold in particular doesn't have many practical uses, but it does have a long track record of retaining its value, which is something no fiat currency can boast.
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Old July 22nd, 2009 #15
Igor Alexander
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I dont know if I agree with this. What I think is that people choose to believe what works for them. If you dont have any gold or silver and you cant afford to buy it, you want to believe that those of us who did are going to lose out.
Anyone can afford to buy silver. If I was flipping burgers at McDonald's for minimum wage, I'd probably be buying a few silver coins every month as a way to save money.
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Old July 22nd, 2009 #16
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They will buy gold because their deflationist guru told them to. This is good. Why? Because their deflationist guru is wrong. There will be price inflation. Their gold will appreciate.
Is it just me or does this paragraph not make sense? If the guru is wrong, why is he telling them to buy gold?

I found this article a little schizoid. At first it seems like he's arguing against gold, then midway through, he argues in favor of it. Or am I reading it wrong?

It's not clear what he's responding to. I guess he's just pissed that certain gold dealers are predicting deflation, when he feels they should be predicting inflation?
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Old July 22nd, 2009 #17
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My question is, why isn't it just as likely that silver will stay where it is an gold will fall?
Several weeks ago, I saw the price of gold spike down by about $25 in the space of 2 or 3 minutes for no obvious reason, then it flatlined for the rest of the day. I've seen this happen several times since then.

I'm convinced that the price of gold is being artificially held down by the "plunge protection team" or whatever. It's especially obvious whenever the price is about to go above $1000.
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Old July 22nd, 2009 #18
Igor Alexander
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Originally Posted by Steve B View Post
Sorry to tell you but in a "Mad Max" scenario the silver that you have accumulated to help "preserve wealth" is going to be near worthless cuz the stuff is everywhere. In fact mining company's deliberately try not to mine silver because if they did the price would plummet. Silver is a byproduct of their real mining operations which are iron ore and copper. What I mean is the price of silver is heavily manipulated by the mining company's and speculators(who are usually the same people) so much so that they control the market.
Do you have any evidence for this?

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It's the same with diamonds. Those things wash up on the beach on some afreekan shores. The reason they cost so much is because the entire diamond market is controlled by a company called DeBeers. Yeah, they're jews. And as everybody knows, if you control the market you control the price.
I agree that diamonds aren't a good investment. Diamonds have been hyped up a lot by the DeBeers' fellow tribesmen in Hymiewood; "diamonds are a girl's best friend" and all that.

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If/when the the shit hits the fan no one will want your silver, that you paid 10-20 dollars an ounce for. I mean srsly, for example, what good would your 10 pounds of silver do(that you paid 1600 bucks for at 10 dollars and ounce) if there were people whose first priority would be getting food?
I'm pretty sure I could find grocery stores in my area that would take silver over worthless dollars.

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Gold on the other hand is a different story. It's valuable, there ain't much of it, it looks purty and you don't have to lug around hundreds of pounds of the stuff to buy or barter what you need.
Yeah, silver is a pain in the ass weight-wise. If you have a lot of money to invest in precious metals and you want to be able to travel with it, gold is a better choice. OTOH, gold isn't ideal to buy a couple of bags of groceries in a SHTF scenario. Junk silver would be much better for that.
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Old July 22nd, 2009 #19
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Originally Posted by Igor Alexander View Post
Several weeks ago, I saw the price of gold spike down by about $25 in the space of 2 or 3 minutes for no obvious reason, then it flatlined for the rest of the day. I've seen this happen several times since then.

I'm convinced that the price of gold is being artificially held down by the "plunge protection team" or whatever. It's especially obvious whenever the price is about to go above $1000.
Interesting. I don't follow either all that closely, just read the coloradogold.com guy's column and look at the prices. Thing about silver is, as Steve mentioned, you don't need much of it to have something that is a pain in the ass to lug around. I think gold is a better investment than silver, not least for weight.
 
Old July 22nd, 2009 #20
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Interesting. I don't follow either all that closely, just read the coloradogold.com guy's column and look at the prices. Thing about silver is, as Steve mentioned, you don't need much of it to have something that is a pain in the ass to lug around. I think gold is a better investment than silver, not least for weight.
I read somewhere that the Chinese were the first to print paper money. The reason, apparently, was because they were tired of having to lug around all that silver (using servants, and armed escorts) for large transactions.
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