Digging up and then re-vaulting gold isn't a very smart human endeavour. It yields no interest, its only yield is capital appreciation, and its massive capital appreciation has been in terms of that depreciating asset the US dollar.
Gold has no significant monetary use any longer, it is over-priced in terms of industrial and of decorative use;higher incomes bring better taste in modes of expressing wealth, let alone the chavvier aspects of wearing golden chains.
Further, malleabiity and durability lose importance with increasing wealth and sophisticated alternative investment instruments.
A year ago unsophisticated demand assured continued gold appreciation, but it's all over. The psychological $1000 an ounce threshold can easily be crossed when dollars are worth less and less. But in terms of purchasing power parities the price of gold cannot be sustained. Gold belongs in stone age economics and cheap cultures.
Gold was the place to be. Normally it isn't, and it isn't now for those awake to economic realities.
Golden slumbers kiss your eyes,
Smiles awake you when you rise;
Sleep, pretty wantons, do not cry,
And I will sing a lullaby.
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'I saw the angel in the marble and carved until I set him free'
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14 comments:
controversy eh, HG ? Can't go with you there. Gold has appreciated strongly against every currency, not just the sickly $
and it's worth what people will pay for it !
if you don't like derivatives (your funny paper?) surely you must warm to the oh-so-tangible preciousss ?
gonna carry that weight ! ... (I only send you my invitation)
A brave stand, but to be correct, everything paper, and the associated debt from uncontrolled issuance, will have to make a comeback for gold to go back into the shadows.
This will of course happen, but why now? Just as the full size of the fiat crisis is only now being exposed?
Gold has appreciated strongly against every currency, but nowhere near as much as it seems to have when you use poorly dollars as the (shrinking)measuring rod.
And it is true, but a lapalissian tautology that: "gold is worth what people will pay for it". This is precisely the point. Should people consider cashing in their ingots at the current enormously inflated price rather than unreasonably hope for the continued real appreciation of the noble metal. All that gold isn't glistening.
And true, I don't like the frightening systemic fragility of the derivatives casino, but I would be perfectly happy to bet on the continued appreciation not of gold but of a multi-commodity basket - the kind my latest hero Nicholas Kaldor wanted to have replace gold as a monetary asset.
(It must have been so exciting to be in Cambridge in the fifties.)
At last some economics I can agree with. Nicky Kaldor was alive and well in Cambridge in the late 1970s and his disciples such as John Eatwell are very much alive and kicking
If you are looking for controlled issuance of paper, why not go for a link to the euro, rather than a link to gold? What can be controlled more than the euro-currency, with its straightjacket of the Maastricht and Growth and Stability Pacts, to both government deficits and debt, and no monetary financing of either? The euro does not partake of the "fiat crisis". Indeed its strength is too much of a good thing for eurozone citizens.
And if you prefer a commodity, the monetisation of a basket of primary products à la Kaldor (and Mendès France, admittedly) has three major advantages with respect to gold:
1) it would benefit many less developed countries and not just South Africa and Russia;
2) it would stabilise the world price of commodities;
3) its yearly output is a multiple of existing stocks and it can adjust very fast, unlike gold where output is a fraction of the existing stock and adjustment is low.
As with gold, production of the monetary asset also generates income and boosts demand and employment.
Ghost, academics who are alive and kicking often choose to speak for themselves.
Politicians and kickings are another matter - they offer themselves.
This is too clever for me, I should have done economics at school. I agree that (I feel that) getting into gold now is a speculation rather than an investment - a hope that someone will buy it off you for even more. But it's also a "none of the above" vote against paper money, magic debt and reckless economic management.
I guess gold will (a) drop a bit fairly soon, then (b) rise higher than before, then when our leaders finally clean house, (c) fall back to its long term trend. I think gold investment now is for the fast hands.
Gold is individual sovereignty. Its value is dependent upon the market; not on the state.
You need to ponder the Truck Act 1831; after contemplation of such, ask yourself whether or not we are stuck in the midst of one huge Truck system.
Fiat currency means stealth taxation, inflation and the means by which war is funded.
It reassures me,S, that you wonder too now whether gold hasn't peaked for the moment.
There are more interesting commodities to monetise than gold.
kwoAnon:
“Gold is individual sovereignty”. There is nothing individual, or sovereign, about the social process that determines what should be used as money. “Its value is dependent upon the market; not on the state.” Not so with most of the world gold in the hands of central banks.
“… the Truck Act 1831” forbade bartering labour for goods, nothing to do with monetising gold or using paper money. Are we “stuck in the midst of one huge Truck system”? How can we be, nobody is bartering anything anymore.
“Fiat currency means stealth taxation, inflation and the means by which war is funded.” But even with gold money any prince collects seigniorage, and taxation can be in kind; fiat currency is neither necessary nor sufficient for inflation; and war – like any other form of government expenditure - can be funded in all sort of ways.
Back to the drawing board, Anon, and good luck.
HG: More interesting commodities...
Rice, dried pasta, canned food...
Caronte - your analysis of the Truck System isn't quite right. You say, "forbade bartering labour for goods". The Truck Act 1831 interferred with the Freedom of Contract between employer and employee. Before the Act a potential employee would turn up at the dark satanic mill asking for work; the work would be offered in return, not for cash wages, but appropriately marked slips of paper. The slips of paper could only be redeemed for goods in the company shop. The rate of exchange for the goods in the company shop was set by the company. The Truck Act 1831 interferred with the freedom to contract such that an artisan/labourer (I forget the precise quote) must be paid in cash.
Your ignorance is misleading you.
As for your seignorage comment. This is only possible in a national currency system: when left to the free market the seignorage is reduced almost to zero with mints that clip coins quickly going out of business.
Anon:
there is no difference between bartering labour with goods or with pieces of paper convertible into goods at a rate fixed by the paper&goods supplier
and seigniorage has nothing to do with clipping coins.
Caronte, our difference is one of value.
In the Truck sysem the value of the worker's labour is represented by the piece of paper. The problem comes when the goods which are exchanged for the paper do not correspond with the value of the labour that the paper suposedly represents. If the manipulator of the Truck system puts up prices at the end of the month, how is the labourer supposed to redeem the value of his labour?
If the piece of paper, by fiat, cannot redeem the value that was put into it; then this is equivalent to 'clipping'. The only difference is that 'clipping' is done physically.
The commonality is the theft of the value that is inherent in the object, whether the object is a gold coin and the theft is effected by clipping; or, whether the object is a piece of paper in a Truck system and the theft is effected by manipulating the prices of the goods redeemable for the piece of paper such that the value of the labour is not realised.
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