August 5, 2011
The Case for Gold
I agree wholeheartedly with your final conclusions:
"The economy needs liquidity (i.e. an effective medium of exchange that keeps pace with productivity.) As long as this medium is created in the form of debt, the economy will be severely constrained.
We don't need bankers to create currency based on our government's credit. The government can do that itself.
We must unite and demand debt-free currency creation."
On the other hand, I do take exception to your assertion that "Gold and silver are just stones". The Hope Diamond may be just a stone, but gold and silver are pure metallic elements, with unique and valuable chemical properties. If, however, your intention was merely to reinforce the point that seeking a new gold standard would be foolish, and that something like social credit [1] would be infinitely more successful, then you're absolutely correct. As I like to say, there already is a gold standard: it's called gold. Any attempt to duplicate it seems kind of foolish.
Gold and silver have stumbled today for numerous reasons. Most obviously, both metals are either at or near record highs, and every trader on Wall Street has to sell sometime- it's called profit-taking. More importantly, however, you must understand that our gold and silver markets on Wall Street are mostly 'paper' markets- with less than one ounce of physical metal for every 100 that are traded. For this reason, the owners of most of these paper positions- namely, HSBC and JPMorgan Chase- know that they have no choice but to settle their gold and silver futures for cash, rather than physical delivery, simply to maintain the illusion of financial order. [2]
In the short term, this makes cash more valuable on Wall Street, as the U.S. Dollar is still (if just barely) the "Worldwide Reserve Currency". What is different this time, however, is that America is rapidly losing relevance in terms of the overall World Economy. We are witnessing a shift of global financial power from West to East, from the U.S. to China. This is why China recently recalled its gold reserves from London, for storage in Hong Kong, at their new metals exchange. [3] Moreover, the Chinese Yuan is now trading at an all time high to the U.S. Dollar. [4] What this means is that even though gold and silver are now dipping slightly in dollar terms, they are falling much more rapidly in Yuan terms. This gives Chinese investors additional purchasing power with which to buy even more gold and silver!
The market for gold today looks very similar to the period exactly three years ago, in 2008. Then, as now, the stock market was faltering, while the price of gold was soaring. In 2008, the price of gold lagged that of silver, and this is happening again today. My advice to those who seek to purchase gold and silver would be to not pay too much attention to the spot metals price. This number can be something of an abstraction, which has little to do with actual physical demand. If you try to time the bottom of this market, there won't be any physical inventory available for sale anywhere! This is exactly what happened in Autumn 2008, and I can guarantee it will happen again.
If you want to read the REAL news FIRST, check here:
http://superiorbullion.com/news.html
References:
1: http://www.citizensamericaparty.org/socialcredit.htm
2: http://www.silverbearcafe.com/private/silverheist.html
3: http://www.marketwatch.com/story/hkex-and-hong-kong-gold-exchange-to-launch-gold-trading
4: http://www.chinadaily.com.cn/business/2011-08/04/content_13048650.htm
I agree wholeheartedly with your final conclusions:
"The economy needs liquidity (i.e. an effective medium of exchange that keeps pace with productivity.) As long as this medium is created in the form of debt, the economy will be severely constrained.
We don't need bankers to create currency based on our government's credit. The government can do that itself.
We must unite and demand debt-free currency creation."
On the other hand, I do take exception to your assertion that "Gold and silver are just stones". The Hope Diamond may be just a stone, but gold and silver are pure metallic elements, with unique and valuable chemical properties. If, however, your intention was merely to reinforce the point that seeking a new gold standard would be foolish, and that something like social credit [1] would be infinitely more successful, then you're absolutely correct. As I like to say, there already is a gold standard: it's called gold. Any attempt to duplicate it seems kind of foolish.
Gold and silver have stumbled today for numerous reasons. Most obviously, both metals are either at or near record highs, and every trader on Wall Street has to sell sometime- it's called profit-taking. More importantly, however, you must understand that our gold and silver markets on Wall Street are mostly 'paper' markets- with less than one ounce of physical metal for every 100 that are traded. For this reason, the owners of most of these paper positions- namely, HSBC and JPMorgan Chase- know that they have no choice but to settle their gold and silver futures for cash, rather than physical delivery, simply to maintain the illusion of financial order. [2]
In the short term, this makes cash more valuable on Wall Street, as the U.S. Dollar is still (if just barely) the "Worldwide Reserve Currency". What is different this time, however, is that America is rapidly losing relevance in terms of the overall World Economy. We are witnessing a shift of global financial power from West to East, from the U.S. to China. This is why China recently recalled its gold reserves from London, for storage in Hong Kong, at their new metals exchange. [3] Moreover, the Chinese Yuan is now trading at an all time high to the U.S. Dollar. [4] What this means is that even though gold and silver are now dipping slightly in dollar terms, they are falling much more rapidly in Yuan terms. This gives Chinese investors additional purchasing power with which to buy even more gold and silver!
The market for gold today looks very similar to the period exactly three years ago, in 2008. Then, as now, the stock market was faltering, while the price of gold was soaring. In 2008, the price of gold lagged that of silver, and this is happening again today. My advice to those who seek to purchase gold and silver would be to not pay too much attention to the spot metals price. This number can be something of an abstraction, which has little to do with actual physical demand. If you try to time the bottom of this market, there won't be any physical inventory available for sale anywhere! This is exactly what happened in Autumn 2008, and I can guarantee it will happen again.
If you want to read the REAL news FIRST, check here:
http://superiorbullion.com/news.html
References:
1: http://www.citizensamericaparty.org/socialcredit.htm
2: http://www.silverbearcafe.com/private/silverheist.html
3: http://www.marketwatch.com/story/hkex-and-hong-kong-gold-exchange-to-launch-gold-trading
4: http://www.chinadaily.com.cn/business/2011-08/04/content_13048650.htm
