Replies to post #124443 on Zeev's Turnips Patch-No Politics (ZEEV)

[lee kramer]

charlie: Forgive my intrusion, but I'm an intruder. My parents were intruders, their parents were intruders. But you are right, gold HAS outlasted all currencies. You are also right that it can't be printed. Are you right-handed? Anyway, gold, while it can't be printed, can be counterfeited. I have a friend who counterfeits gold rather well. And gold has had some lovely runs; perhaps you recall the jump from $60 to $875? But that was subsequent to a 15 year massive inflation. Now the Fed is inflating the money supply pretty good at the moment. But prices seem not to be rising terribly much. I suspect gold will, once again, move sharply higher. But it might take a while. I'd keep an eye on the General Level of Prices for a clue to when gold may run. Right now gold doesn't look all that good.

[Zeev Hed]

Duplicate

Zeev

[Zeev Hed]

Charlie, the nice thing about paper currencies is that you can print it to accommodate world economic growth that is greater than the rate of growth in gold mining. Look at gold as a "monetary base" and make the ridiculous assumption that all gold will be used for nothing else. You have a base of 120,000 tons, production of 2500 tonnes yearly, a growth rate in the monetary system of 2%, that a sodom bed that would prevent the world economic growth to no more than that value. Of course, gold is used for many other things and thus relying on gold for monetary growth will doom the world to one of two economic scenarios, permanent inflation or a permanent state of sub par economic growth (we call that a recession or even depression), which one would you like? Apparently, that impossibility was recognized long ago, and at Breton Woods the world bankers have engaged in a slow process of weaning the world from the curse of gold. That process is now complete and CB's are gradually reducing their own hoard of gold.

Of course, if politicians start and "play" with their currencies for various reasons (such as Chinese refusing to give up their commercial advantage and not revaluing their currency), dislocations and fluctuations between currencies will occur, and pricing of gold in strong currencies will decline while pricing of gold in weak currencies (like for now the US dollar) increase. But gold is becoming more and more a simple commodity and there is no escaping the fact that under this scenario (post Brenton Woods) there is a declining demand for gold and an increasing supply of it, not a scenario for a major bull market.

Ask the logical Vulcans if they use gold as a currency. For the last 6000 thousand year, gold was enough, but Vulcans, having been around for a good 100,000 years already know it is just a yellow metal, too soft by itself to make any useful tools and has some good electrical and thermal properties, which are not better than that of copper...yes, it does not oxidizes as easily as copper, but that can taken care of easily.

Zeev