Rate Cuts Fuel Gold Speculation

January 29/2008

Elaine Meinel Supkis

The Federal Reserve was set up to support asset markets and protect speculators. Of course, the more they are protected, the more they do stupid things. Right now, in the last 7 years of fiscal recklessness of historic proportions, the US has also suffered through a Federal Reserve regime where interest rates are used to create first a Dot Com Bubble then a Housing Bubble and now a GOLD Bubble. Every time rates are cut by the Fed, the price of gold shoots up. Time to explain speculative bubbles and their many dangers.

Gold, platinum off record highs, eyes turn to Fed

Gold and platinum slipped on Wednesday as investors booked profits ahead of an interest rate decision by the U.S. Federal Reserve, which may determine the direction of the precious metals market.

-- Spot gold fell to $921.50/922.50 an ounce from $928.60/929.30 an ounce on Tuesday, when gold rallied to another record high of $933.10 an ounce on expectations of more rate cuts in the U.S. and fears about South African output.

There are three forces at work here.

1. The global supply of gold for sale.

2. The rate of global inflation and instability of currencies.

3. Cheap liquidity used as loans to support gold sales.

The gold sales now show every sign of being a bubble. Gold is not money. It is not even a replacement for money. It is an ASSET. It is no different from housing or stocks. Its value fluctuates with markets since it has to find buyers in order to be used. Money is in lieu of assets. You don't cart some gold to a store and then bargain with the seller over the relative value of the gold. If gold is used as coins, one can only haggle over the price of the thing being bought with the gold coin but the seller can't argue about the denomination of the coin. If a coin is stamped '$10' then it is ten dollars. Of course, prices do waver a lot depending on how many buyers are willing to put out money. For example, Super Bowl tickets to see the Patriots pound the Giants into midgets are now going for over $1,400 in scalper sales.

Why anyone wants to pay this baffles me. Either they are from Boston or masochists or New Jersey commuters who want to dig up Hoffa's corpse in the Meadowlands and heave it at the Patriots. Enough with sports! Back to money!

I have some $20 bills from 1927 that are 'Gold Certificates' put out by the Treasury, not the Federal Reserve. This supposedly gave my husband's grandaddy the right to get around 2/3rds an oz at Fort Knox. Only in 1933, this was terminated and so even though money was valuable back then and few people could find $1, much less, $20, this ancestor kept the money to prove to people, the government can't be trusted as far as you can kick them to the curb. It pays to remember this harsh lesson.

In today's case, gold has been rising rapidly as hedge funds, Evil Kerviel clones and assorted speculators rush to place orders for gold futures. They aren't doing this because gold is any better than the previous bubbles. They are doing this because they are getting access to nearly unlimited funds via cheap loans that are below the rate of inflation via the Federal Reserve and the Bank of Japan!

When there is a flood of 'free' money or in this case, two of the world's biggest banks are PAYING people to take money from them, the only question is, where can one park these loans where they can grow like magic mushrooms after a heavy rain of liquidity? Can't be properties, both residential and commercial are grossly over-done, worldwide. Countrywide is sinking like a rock and people are dumping their dumps that have huge debts.

Everyone who played the Dot Com market with loans have been destroyed and even though Google was bid up to the sky, it is now finished and can't rise one more inch no matter how much free money is floating by. Emerging markets are now falling along with the US markets. So piggy-backing on the rush of buy-ups we saw for three years is no longer a sure fire bet, either.

This leaves gold, the old standby and usually, the last bubble in all bubble economies. After gold and silver go blotto, someone will come along and stop the mad liquidity and we get a Volker high interest rate hike regime, people put their money into ordinary banks and bonds and are happy and all the people who want cheap or super-cheap money will go bankrupt. Gold is rapidly reaching a peak and if interest rates were going up even by only 2% in Japan and the US, gold would cease its relentless climb. Proof of this comes from India, the world's biggest buyer of gold:

Housewives cash in as India learns that even gold has its price

India's love affair with gold is waning as high prices deter casual buyers in the world's largest gold importer and savvy housewives try to sell their spare jewellery to capitalise on rocketing prices.

As gold, which traditionally is viewed as a safe haven in uncertain times, hovered close to record highs yesterday, Suresh Hundia, head of the Bombay Bullion Association (BBA), said that Indian consumers were deferring all but the most essential purchases. “Households are selling spare gold. There is zero demand at these prices in India,” he said.

In India's bazaars, prices have surged past 10,000 rupees (£128) per 10g, a key level for retail buyers. Yesterday, gold for February delivery was being quoted at 11,615 rupees per 10g on the Multi Commodity Exchange of India. According to the BBA, which tracks market activity, sellers of scrap gold in India are cashing in at prices only about 3 per cent below those quoted in the trading pits of London and New York.

About three quarters of the 800 to 900 tonnes of gold estimated to have been imported into India last year was used for jewellery.

Two years ago when I was crunching data, I was startled to see that India, not Japan or China, were the biggest buyers of gold. My parents have lived in India off and on for many years and I have Indian saris and scarves lined with gold thread that is real gold thread. These are for weddings and such. Life was very uncertain there many years ago and women wore their dowery in the form of gold jewelry which was fitted onto their bodies so it could not be easily removed. This was sacrosanct. If there was a terrible famine, the wife might sacrifice her gold to keep the family alive but it would be a desperate, last move. Note also that the value of things fluctuate according to circumstance. A loaf of bread can be worth its weight in gold.

The price of gold is now so high, the major market for real gold is closing down, indeed, is now running in reverse. Women are selling their gold to buy things that are now ridiculously 'cheap' in relation to gold! Without doing a thing, women who have been wearing gold bangles for 20 years, bought when it was less than $250 an ounce can now sell it and reap the profits. We know a bubble has burst when the main buyers turn into sellers. This is a very important indicator as to the status of this bubble.

The other huge player in this game is Russia. Russia can topple the gold markets easily since they produce a lot of gold and are huge holders of gold. On top of this, there is China. China also is a gold producer! Like Brazil and South Africa. They do not mind the US and Japan pouring out endless free loans so the price of this gold shoots up. They are beneficiaries of this bubble since they are the suppliers. The European and American banking manipulators have tried, in the last 2 years, to kill the gold bubble. They alternately talked down gold or sold gold hoards. But this only fed the bubble since more and more people are pouring in as more and more loans via the US and Japan flood into the accounts of all those offshore pirates and other speculators.

Just like the little speculators in currency markets, the small-time gold bugs also feed this bubble. But they can easily be swamped by any of the giant players and we must all remember, the world has only a few of these but they are HUGE. Right now, Russia and China are perfectly happy to see the US and Japan turn gold into a massive bubble. They will leverage this in various clever ways we won't understand until it it obvious. But they will do this. Both want the price of gold to NOT collapse so I expect them to keep feeding the system so it doesn't explode too rapidly, they have plans for the future and don't want things to happen before they are militarily ready. But the gold frenzy is definitely helping them both a great deal and they really appreciate this mania.

Americans like to pride ourselves for being oh-so-clever as we cheat everyone with our real estate/stock/bond sales. But we are not mining lots of gold. We are net losers here. If gold goes up or down, it doesn't matter in the end to Russia or China, gold's value is only if it advanced their military/financial standing and if this bubble pops, it probably will mean the end of all other bubbles for the US. In other words, they swim, we sink.

Here is an older story that references to the 1970's.2006: Silver prices expected to soar past $20 an ounce

Ray Jones dumps scrap silver into a bag at Indian Jewelry Supply Wednesday. Customers at the store can sell their scrap pieces of silver back to the store for store credit or cash. Some Wall Street experts predict silver's market price to approach $20 per ounce soon. Indian Jewelry Supply manager Ed Smith said last time silver prices skyrocketted in the 1970s he saw people selling family jewelry and silverware for scrap at his store. [Photo by John A. Bowersmith/Independent]

I remember when people were melting everything down so they could buy stuff. I remember when the Federal Government made it illegal to melt down all those silver dimes, quarters and dollars. The face value was far below the real value at that point. Then the bubble popped. As usual, there were murky deals behind it just like we see today in the various panics. The Hunt brothers of Texas got into legal trouble over trying to corner the silver market.

But they couldn't, anyway. Once silver reached the 'melt all the money and jewelry' point, it was done. Jewelry has value-added labor and intrinsic beauty. When the raw material value grossly exceeds the hours of labor by goldsmiths, this is a bad sign and one that we should all note and learn from. Just as shacks in Stockton, California last year could not be worth more than my historic mansion I used to own in New Jersey which sold for $325,000 back in 1986, so it is here: overpriced beyond the most valuable thing on earth, human labor.

The Vultures Are Circling

The ratio of distressed debt soars to its highest level in five years.

It's beginning to look a lot like a recession. The U.S. distressed-debt ratio leaped by five percentage points to 11.1 percent in January, from 6.1 percent in December, according to a new report from Standard & Poor's.

The ratio is at its highest level since September 2003, and the increase from the previous month was the greatest since October 2002, according to the debt rater.

As of Jan. 15 distressed issues cumulatively affected debt worth $64.5 billion, nearly $30 billion higher than in December.

Speculators in other bubbles are being forced to sell. They desperately want 0% interest loans with no repayment schedules so they can play infinite games forever. But this is unrealistic. Hedge funds with tax-free funds that get cheaper by the minute thanks to all the major banks dropping rates rapidly, will use this windfall to buy out people to got too deep in the liquidity pool. Note how the number of distressed debts which is fancy talk for speculators using loans, unable to pay for losses, now defaulting on these loans, means fun times for anyone flush with money.

Lurking around all this is the fabulous beast they call 'Derivatives'. Here is a very good article trying to explain what this all is:

The Trillion Dollar Secret
By John Riley

The scariest part of derivatives is their leverage. Like exchange traded options, derivative contracts can control assets for only a fraction of the contract value. The banks take the leverage to an extreme and have very little in assets backing up their derivative portfolios. According to the Comptroller, the top 25 banks have assets that only amount to about 6% of the Notional Value of their derivatives. JP Morgan, the biggest player in derivatives, has assets backing up its portfolio of only 1.60%.

What happens if the value of the portfolio were to change by 2%, what happens to the banks' assets? And with all of the recent scandals in Real Estate and other "creative strategies" the banks have been employing recently, how do we even know if their asset numbers are correct? Is it possible that the $1.40 Trillion in assets JP Morgan claims is somewhat less, thanks to writeoffs and bad real estate?

Unlike the US, China has moved to force ratios upwards to over 15%. We already see that the whole bond insurance field is collapsing due to ridiculously low reserves. Indeed, the Federal Reserve has been careless and stupid since all our major trade and military rivals have amassed giant FOREX reserves while our own languishes at levels a third world nation would be embarrassed to hold. JP Morgan just hired Tony Blair, the fake 'Labour' leader of Britain infamously known as 'the Poodle'. Morgan is paying several million for Tony to tell us how great things are. But they can't afford him any more than I can afford this guy.

The whole topic of derivatives deserves more time but tonight, I am talking about gold. And this excellent article ends with the typical advice I see so often all over the place:

John Riley:

Investors need to have exposure to investments that can benefit from higher inflation. These would include gold and commodities. TIPs could also benefit from higher inflation.

It is a loud chorus. Aside from the history lessons that clearly show us that gold harbors its own dangers unique to itself, we also know how bubbles work and look. Everyone is now jumping aboard the golden wain and hoping this will be the SAFE bubble. The one that will never, ever pop.

This is impossible. There is no magic metal any more than magic money, that will always be 'valuable' forever. Gold does maintain it position as King of the Metals. But it can be dethroned temporarily by any number of other things including Super Bowl tickets. Right now, I would say, gold and these tickets are running neck to neck. But next week, they both can lose value. Just remember: there is no totally safe haven that keeps piling on value faster than all other things. This never happens. All things go up or down in value. This is why I say, I want higher interest rates and traditional banking. No one can get rich all that quick but no one plunges into poverty instantly, either. I like some predictability in life.

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Comments

[Tommy Two Tone]

This article explains everything about the ABX mess:

http://www.alternet.org/story/74510/

If the CFTC were able to regulate these contracts, there wouldve been too much accountability for Wall St.
If the insurance industry had been allowed to regulate these contracts (Credit Default Swaps truly are more like insurance than anything else) then this would have been a massive insurance fraud case. But the slicksters made sure that Alan Gspot and Congrffs were able to circumvent the law. Thus the largest legalized fraud case in American History to the power of ten!

[Dr Evil]

So, aside from watching for rising interest rates and the melt value of jewelry exceeding its aesthetic value, how else do I know when it is time to sell my gold?

[pulse]

Gold is not money??? Ugggh!

5000 years of history says you are wrong. As you will see, when debts are unpayable, when gov'ts have gone mad, when merit and character have vanished - people will DEMAND honest money. black market or otherwise.

If you do not study gold, you cannot gain the proper understanding of the times in front of us. The world has never had a fiat currency last - NEVER! The US dollar has had a nice run, but the horrible Federal Reserve has destroyed this.

I beg you to understand: Gold is no one's liability. It is a pure asset. It is now asserting its critical role.

Start here : http://www.thelongwaveanalyst.ca/downloads/Inverted_Pyramid%20_Exter.doc

I can assure you that gold is not in a bubble, it is no longer a commodity, it is not a bangle, it is HONEST money.

If freedom is to survive the Trotsky/Lenin onslaught we are living with, GOLD is needed to restore the Republic for The United States of America.

Also - China is now the world's largest gold producer. Understand?

[EEngineer]

Short answer: Sell gold when interest rates start to rise. Long answer: The recent rise in the price of gold isn't due to any change in the nature of gold itself, it's a result of the devaluation, and the expected future devaluation, of the dollar. When fiscal and monetary sanity return to the US, people will feel safe holding dollars again and sell things like gold that they took refuge in during the present chaos. That would also be about the time to start shopping for a house. Rising interest rates will kill RE prices since so much of the cost financed.

[OC]

Like in 30 years' time - remember 1929 - 1960s ???

That's when u should dump gold and switch back to fiat currencies (with high interest rates of course).

[Karmaisking]

You've lost me. Gold is not money? Tell that to the Central Banks of the world.

The millisecond a reincarnated Volker is appointed as the new Chairman of the Fed and real interest rates start heading towards 10%, I'm out of gold and into cash.

Until then, Snow White, it's gold all the way.

(Oh, by the way, did you know that all the gold ever discovered would fit into a cube a little smaller than the size of a tennis court? And that big gold finds are a thing of the past? If you can find a better store of value, please tell me. You and I could make lots of sweet $$$s together.)

[OC]

What I meant was we are entering a period whereby USD is going to lose the reserve currency status. In the mean time, EU, China, Japan and any other interested parties are going duke it out for that status while other countries will fall back on gold as money. It'll probably take 10 years for all that 'debt' to come out, another 10-15 before that stuff be cleared and another 5 for all other nations to accept the new reserve currency and relax their grip on gold.

[OC]

For those who look to gold as safe haven, this is the article for u:

2008 Outlook: Thrill Ride, Part 3

http://www.financialsense.com/fsu/editorials/andros/2008/0129.html

"The dollar will increasingly become a FUNDING currency for the CARRY trade, just as the Yen and Swiss Franc are now, creating a steady new stream of DOLLAR SELLERS to fund the trade. Since we can see that no real reform is taking place in regards to the policies of wealth creation in the G7, you can expect steady erosion in the value of their currencies in terms of purchasing power. People who run from the dollar to the Euro or Pound don’t understand they are just running from one titanic deck chair to another. All are sinking!

Gold and commodities are increasingly being recognized as what they used to be: REAL MONEY, and they are all on new highs in whatever currency you choose, emerging world or G7."

[Elaine Supkis]

Many things are assets that are valuable. This is why I pointed out the bubble in Super Bowl tickets. If you want PROFIT, buying up Super Bowl tickets is better than gold if you resell them. Once the Bowl is played, the tickets are worthless.

ALL things are like that. 'Money' isn't gold. 'Money' is ANYTHING. Including paper. Money is an agreed object that stands in for other objects that aren't easily portable. Like 'labor'. Sea shells have been 'money', for example. We even call 'money' after this ancient form of wealth transfer: 'Wampum'.

Gold is going up in value because it is always DEAD LAST in the chain of bubbles. In the Great Depression, right before it, there was...hold onto your hats....A RUN ON ALL THE GOLD ON EARTH.

Britain was so badly hammered by this, they ceased their gold connection to currency in 1931. The storm for gold continued so the US ceased it in 1933. To keep everyone from still hoarding and trading gold in lieu of other forms of trade, the US froze the value of gold at $36 an ounce where it sat via fiat until 1972 when the dollar began to collapse. Before that, the US reopened the gold window after WWII. It was slammed shut with no warning just before the currency crisis.

When people began trading gold for money like crazy, it went out of control and became a huge bubble which Volker ended with realistic interest rate hikes. He knew these were temporary but necessary. It pissed off everyone and destroyed Carter's Presidency.

Gold cannot be used as a currency easily because no one would know its true purity unless someone could guarantee it somehow and guess who that is?

The government. As I keep pointing out, history shows us that gold is the last bubble before a depression/collapse. The Reagan exception is no exception at all: he and all the others since him, cynically lied to us about our bankruptcy. As our debts now pile up, we are drowning in red ink. This red ink is the worst of all bubbles: a debt bubble.

I am for using gold as a basis for calculating potential debt values. But only via a government. It is emergency money during wars for people but trust me, in war time it is useful only as bribes. Cigarettes and booze are the true currencies. Ask any soldier or survivor of WWII.

[pulse]

Lenin was surely right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. -- John Maynard Keynes

If one is interested in a little derivatives lesson, go to http://www.jsmineset.com/ and scroll to

"BIS Notes $516 Trillion In OTC Derivatives As Notional Value In Effort To Depreciate Number"

WARNING: this action of educating yourself equates to taking the Red Pill. You will never look at the D.C. and Wall St. Gang of Thieves the same.

[Elaine Supkis]

Also, deeper news: India buys the actual gold. It is by far, #1. So they are the 'set point' for gold sales.

Most US gold bugs seeking shelter from other bubbles bursting are usually buying gold FUTURES or CERTIFICATES. Not the actual gold. I bet most don't have much any physical gold at all.

Gold that is based on certificates or paper future documents are as prone to being swindled as nearly anyone else on this planet. This is why the Indians like to hold the actual gold. Of course, they are also prone to robbery. All people who hold gold have to have some sort of security system. And it can get stolen, of course.

Especially if it is valuable! I remember when gold and silver shot up. I used to wear it all the time, both metals. Robberies of women in NYC wearing both were shooting up in the seventies. So I stopped wearing the actual metals and wore substitutes.

[pulse]

Elaine;

I am so pleased to be able to assist you in the deprogramming.

Gold was outlawed by the King of All Thieves via confiscation. It's price was promptly 'readjusted' UP 70% from $20.67 to $35.00 per oz. - or more accurately the 'dollar' was debased 70%.

The Honest Weight and Measure was still 1 ounce and remains that today.

I will return to address the other distortions, if you wish.

[Elaine Supkis]

Correct, Pulse.

Derivatives operate in the gold bubble market, too. There is no escape from excessive SPECULATIONS when there is an excess of FREE MONEY. And we are seeing lots and lots of free money. It will try to create other bubbles.

When it can't create anymore bubbles including a gold bubble, it simply crashes the currency and we get the ultimate bubble pop: war.

All this is very peculiar and difficult but also easy to understand. There is no such thing as any real 'money' in this world, there is only relative value. And nothing is more valuable than one's life.

Labor has been steadily debased for the last 30 years. This is the key item that causes depressions. It isn't gold, paper or oil. It is the devaluation of LABOR. If labor is cheap and everything else is hard to buy by laborers, we get a depressed ECONOMY. Gold doesn't make a vibrant economy, labor does.

When labor is worthless and everyone wants to be a speculator in various bubbles, we get depressions. Labor is finally debased in the form of conscription for war.

[OC]

Elaine,

Absolutely agree with u on this. Gold is not be all and end all.

It is useful in certain circumstances but not all.

One shouldn't just rely only on gold or silver as money. Check out articles by Dmitry Orlov and Lessons from Argentine's Economic Collapse have mentioned other useful alternative to gold as money.

[Elaine Supkis]

I just highlighted the '3/4 of all gold sold in India are for jewelry' part. India is the biggest gold market on earth, bar none. If women are not buying gold for jewelry, this is very significant news.

On top of this, the rupee is strong, not weak like the dollar. So there is double incentive to not buy gold. Gold futures will climb on the expectation things will remain on the present course.

But as I keep pointing out, the FLOW of any money or asset value matters. When the FLOW changes, a host of other flows MUST change.

When liquidity 'dried up,' this was due to China changing the flow of loan values and currency destinations. So we must always understand that the flow is much more important than the denominated asset value. If you want to see into the future, that is.

But then, no one really listens to me. I am proud I called the change in currency flows in the past correctly. I also located the peak of the housing bubble correctly [it was in November, 2005, not in 2006].

So believe me or not, I have no desire to push gold like the gold bug sites. They can hate me if they wish but in the future, they will feel regret and claim, 'No one could foresee this.'

Gold futures will go up for a while. But the change in direction of flow is now in motion.

[Bokonon]

Elaine,

Statistic to make you smile, according to Wikipedia, China's gold holding is 600 tons.

[OC]

Elaine,

What direction is the flow going to and who change it??

[CK]

In the 1790's one could buy a very good suit of clothes for one ounce of gold.
In the 1890's on could buy a very good suit for an ounce of gold.
In the 1930's likewise
In the 1980's likewise
In 2008 one can buy a very good suit for an ounce of gold.
With the exception of a few ounces of the stuff that has been shot into space as parts of satellites, all the gold there ever was on earth is still on earth in a useable form or a storage form.
As money, gold is inconvenient for everyday purposes, as a store of value against the depredations of democracy, governments, and lemminghuman behaviour it is non pareil.
After all the depreciations, devaluations, currency dethronings, depressions and empire readjustments are settled ( 2016 is my best guess ), no matter what the currency in use is or what the price level is, an ounce of gold will still buy you a good suit. That is gold's purpose, it keeps one even over the long haul. That is all it is supposed to do. Gold maintains one's purchasing power.

[pulse]

Elaine,

The focus on labour is excellent. If a man cannot know the value of his time due to all the inflations of a fiat/taxing system, he turns to other endeavours like gambling in an effort to relieve the inevitable shortfall.

The precision of your logic to identify the FLOW is also important. Please note that BANKS function to control the flow of a river. Please consider the results when the BANKS are overrun. Hello, Noah!

From my soapbox, I observe that the U.S.A. overtook the blood thirsty empires of European 'Royalty' and 'Religion' in about a century and a half. A man's labour was easily gauged and represented in a manner everyone understood - a System of Honest Weight and Measures.

It is not a coincidence that, in 1913, at the Winter Solstice, The Federal Reserve was created followed by the IRS - the European 'Banking' families in partnership with the ignorant and traitorous had conquered the power of Truth. Immediately thereafter commenced the First World War.

The abandonment of the Gold Standard allowed all governments the ability to rob their populations of all wealth by the indescriminate creation of fiat debt to fund the War machine - to destroy their populations by Death and Debt.

I suggest to you that War is very unlikely with adherence to a Gold Standard. The physical properties of Gold lend it to be the ideal medium, nothing more.

It is simple to see that the love for 'money' results in War - The unbridled greed to obtain 'something for nothing.' The Hermetic Alchemist, if you wish. It is this connection to death which you so brilliantly connect.

'They' have created a system of ever expanding debt - a negation of an honest day's work for an honest day's pay. We enslave ourselves.

Alas, the oroborous is running out of meals.

[JOHN MCGILVRAY]

COST ME ONE OUNCE OF SILVER FOR THE PRICE OF A LARGE PIZZA. GO FIGURE

[JOHN MCGILVRAY]

COST ME ONE OUNCE OF SILVER FOR THE PRICE OF A LARGE PIZZA. GO FIGURE

[Elaine Supkis]

Gold feeds wars. England wanted South Africa's gold. The US started a war with Mexico for California, Remember the closeness of the gold rushes to wars!

The Indian wars with the Plains Indians always coincided with the discovery of gold.

Gold has fueled many a war! Going back in time to the Egyptians!

Gold gets taken out of the ground and then reburied over and over again. We are still digging up gold hoards from thousands of years ago.

The Spanish invaded the New World for its gold and silver! When the English came to the North American shores, they all went prospecting for gold immediately. Nearly starved to death because no one wanted to work, they wanted gold!

The belief that gold is a nostrum is just plain insane. Trust me on this. Maybe I should write a history about this.

Note that gold IS valuable! It is 'pure' and doesn't degrade over time. This is why it has value. And it is rare compared to iron. But what won the world? Iron or gold?

It is indisputably iron. Iron coupled with labor=world domination. And what has the US lost?

Its iron works! Gads. My elitist family side's name is 'Steele' for crying out loud! Due to them using it to kill people.

[Elaine Supkis]

If I were given the choice between owning all the world's gold or all the world's steel works, I would without hesitation, choose the steel works.

The BIGGEST fight over control of something on earth in the financial markets has been the battle over smelters and producers of the hard metals used by world industries. The BPN battle rose to over $40 billion. Amazing. And the Chinese were the bigger bidders. They know what matters.

And note they are also producing gold. They have the three elements: Labor, steel and gold. Gads. And we have debts.

[Richard]

You relate: "people put their money into ordinary banks and bonds and are happy and all the people who want cheap or super-cheap money will go bankrupt".

Well, no, they will not be happy if they invest in bonds as interest rates rise, bonds fall in value.

[Elaine Supkis]

I have lived through this. Interest rates climb. Eventually, bonds do too. Anyone smart who bought Triborough Bridge Bonds in NY back in 1979 got a huge, tax-free return at over 11% per annum when inflation during the late 1980s was running around 3-4%.

Indeed, when the state forced us to cough up the remaining 10 years of these bonds, we were pissed as hell.

So when talking long-range bonds, there is no one story here. There are just as many permutations and squeeze plays as all other choices.

What bugs me about the gold-is-the-solution sites is, they are not honestly talking about the RISKS any more than all the other 'you can get rich' sites.

I have made money doing all sorts of curious things. Except highway robbery and drug dealing. Heh. Piracy, too, was not attempted.

But the thing here is flexibility: all systems fluctuate. They all have weaknesses. Understanding these things is the key to being SAFE, not super-rich, safe. Note my nasty stories about people near me who went for 'get richer quicker' often have a bad ending.

This is why I am anxious to protect real savers and real savings and collective well-being is much more important to me than singular wealth. I want all of the world's people to prosper carefully and sanely, not go on wild binges and crazy schemes doomed to collapse.

[stevo]

It is amazing how many advocates for a return to the gold standard fail to study how such a standard actually worked in practice. Because of its inflexibility, this standard resulted in alternating inflations and deflations which alternatively flooded nations with liquidity or sucked the cupboards dry. Most people never actually held much gold at all because everyday cash was either in the form of circulating silver or scrip. A gold standard was neither intended nor operated to promote the welfare of the common person. Financial history details quite clearly that the average wage earner would sooner or later be financially devastated by a return to the gold standard. Such a return would only benefit those who currently hold the bulk of the world's gold supply, ie, the megarich and uberpowerful.

When gold is widely distributed throughout the population it is sooner or later confiscated, and gold hoarders are executed. How many families do you KNOW who have protected their wealth across generations via their holdings in precious metals?

I personally feel that a fiat system, non-debt-based, such as that recommended by Franklin and Lincoln would be the most equitable for the most people. It worked very well for many years before it was forbidden by Parliament. The debt-based system we presently have was a vile trick of the powerful against the powerless -- a confirmation of subserviance via debt slavery.

Anyway, any discussion of exchange standards should be preceded by the following statement: ALL CURRENCY SYSTEMS WHICH HAVE EVER EXISTED HAVE FAILED -- EXCEPTING FOR THE ONE PRESENTLY IN EFFECT.

Since currency and exchange are always matters for the sovereign anywhere and everywhere, these matters will always be decided by sovereign expediency and the political process.

[DeVaul]

Well said, Stevo.

The gold-bugs rarely delve into the actual history of the common person and how the gold standard affected him. For the most part, the common person had no gold and was never allowed to have any because the rich either hoarded it or stole it from them via taxes, confiscation, war or whatever.

[Elaine Supkis]

The Wizard of Oz is a good opening to learning about how gold can backfire.

Actually, there is NO system that works...forever. All are subject to human interventions which warp all systems. See how non-gold Japan has strapped the working class into the straight jacket of depression even while flooding the world with liquidity!

[pulse]

Elaine & Ostriches

There are none so blind as those that will not see. You are trapped in the hypnotic spell of Keynesian herecy.

Study the advance of your country, then study its decline. You completely avoid the Federal Reserve. Why?

If you believe in peace, you will choose a specie backed currency - or a Real Bills Doctrine.

If you believe in self determination, or an honest day's work you will again decide that honest weight and measure is key to this exchange.

However, if you are determined to pursue something for nothing - I can assure you others are very eager to replace your entitled attitude.

TIC TALK.

If you wish to understand how we have been and continue to be manipulated:

Government the Destroyer - http://www.lewrockwell.com/rockwell/broken-window.html

Pursue Truth and You will Discover Hope.

[norcalkid]

Looking at the world from the bottom up: I am investing in steel, the kind that is found on grocery store shelves. There is something comforting about having non-perishable food around. The only other metal I may need is lead.

Elaine- love your essays.

[Elaine Supkis]

My reading of history ranges far and wide. I am a great cynic as well as a fundamentally conservative person who is also a liberal. Which is a very queer mix indeed.

There is no perfect system. No system has been devised of any sort that avoids human greed and follies. NONE. It is impossible for the simple reason, humans are hardwired to be what we are.

So I like systems that work, more or less. There will always be the Hegelian swing between inflation and depression. the more we try to avoid this, the more this happens. This is called 'a conundrum.' Or 'the horns of dilemma'.

Always, there will be magicians who tell you,'If you do this, you will never suffer.' This is a lie.

Suffering is what makes us strong. On the other hand, avoiding obvious painful pitfalls is important which is why I write these articles.

[Elaine Supkis]

Hahaha, Norcalkid. You would love the hunting here. I just shooed off 12 does and their yearlings grazing in Sparky's upper west pastures.

Good eating.

[Nathan]

Great article! Gold coins had a very long period as a primary form of money. And also good form of investing. You gave a outstanding note on gold coin values. I thanking a lot for your information.

www.valueofuscoins.com

[Buy Gold - Scrap Gold Prices - Legitimate Part-Time Business - Make Money FAST]

We know that the Australian national team has been called the Telstra Dolphins for quite some time, but when did the United States pick up the eagle logo? I guess it is just a matter of time before Team USA becomes the Mutual of Omaha Eagles.