Jul 162012
 July 16, 2012  Posted by at 4:15 pm Finance


May 1936. “Bank that failed. Kansas.” Medium-format nitrate negative by Arthur Rothstein for the Resettlement Administration.

It seems to have been at least a month or two since the last time TAE ticked off more than a few gold bugs with an article, and that’s much too long if you ask me! My aim here, of course, is not really to tick anyone off, although that may very well be the result, but to present some balanced information about where the price of gold may be headed in the near-term. Claude B. Erb and Campbell R. Harvey from the National Bureau of Economic Research published a report last month entitled, “The Golden Dilemma”, in which they addressed many of the common arguments in favor of gold as an investment.

Given the length of the report, I am just going to present you with the excerpts and graphs that I feel are most relevant, as well as some very limited commentary of my own. There is a lot of data/information to process here, but the authors do a pretty good job of distilling it down to its most simple form. I am mostly interested in hearing what our readers think about the arguments made. There is a lot more data and analysis from the report than what will be presented here, and you can find it all by following the PDF link above.

#1 – Gold Provides an Inflation Hedge

Report: Exhibit 1 illustrates one literal version of the “gold as an inflation hedge” argument. Our initial sample starts in 1975 because for most of the history of the U.S., the price of gold was fixed by the government.8 Exhibit 1 shows the month-end value of the nearby gold futures contract versus the monthly reading for the U.S. Consumer Price Index (CPI), over the period January 1975 to March 2012. The red regression line shows that on average the higher the level of the CPI the higher the price of gold. This line roughly portrays the implied price of gold — if gold was driven by CPI. However, in Exhibit 1, the price of gold swings widely around the CPI. The inflation derived price of gold and the actual price of gold have rarely been equal. Given the most recent value for the CPI index, this version of the “gold as an inflation hedge” argument suggests that the price of gold should currently be around $780 an ounce.



Ashvin: One obvious criticism to this approach is that the official CPI numbers are under-estimated, and therefore gold has risen more commensuaretly with real inflation. However, I think this flaw is partially mitigated by their comparison of gold prices to CPI over the last 40 years, which includes periods before many CPI adjustment mechanisms were put in place. In addition, they compare gold prices to “unexpected inflation”, i.e. the change in the annual inflation rate. If the CPI is under-reporting inflation through various adjustments, then we would at least expect the magnitude of under-reporting to remain relatively constant over time.




Report: In “normal” times, gold does not seem to be a good hedge of realized or unexpected short-run inflation. Gold may very well be a long-run inflation hedge. However, the long-run may be longer than an investor’s investment time horizon or life span. In the short-run the real price of gold has been the dominant driver of the price of gold and the returns from gold. We will return to the inflation argument when we explore the “safe haven” argument where we explore hyperinflation.

#2 – Gold Serves as a Currency Hedge

Report: There are at least two ways to interpret the “gold as a currency hedge” argument. The first interpretation suggests that “gold is a foreign exchange currency hedge”. In this case, the expected return of gold should offset the expected decline in the value of one’s own currency. If, for instance, the U.S. dollar declines 10% against the Japanese yen then the “gold as a currency hedge” argument would suggest that the price of gold should rise by 10%. The net result of this hedge should be a return of zero (gold return + currency return = 0).

This perspective has the following problem. If the price of gold in a country is driven by its own inflation rate and if the exchange rate between two countries is driven by the difference in their inflation rates, then gold will only reliably be a hedge of the foreign exchange rate if one of the two countries always has an inflation rate equal to zero.

Exhibit 12 shows how the local currency real price of gold has fluctuated in a number of countries: Australia, Canada, Germany, Japan, New Zealand, Switzerland, the U.K. and the U.S. In each case the local currency price of gold is divided by a local inflation index19 and the resulting ratio is normalized to an initial value of 1.0. The message of Exhibit 12 is that since 1975 the real price of gold in these eight countries seems to have moved largely in tandem. The real price of gold reached a high level in 1980 amongst all eight countries. The real price of gold fell to a low level in each of the eight countries in the 1990s, and more recently the real price of gold has risen to very high levels in all eight countries. The historical evidence of a seemingly common local currency movement in the real price of gold does not lend itself to a convenient “gold as a currency hedge” explanation. In fact, the change in the real price of gold seems to be largely independent of the change in currency values. Furthermore, since the real price of gold seems to move in unison across currency perspectives, it is unlikely that currency movements help in explaining why the real price of gold fluctuates.



#3 – Gold is an Attractive Alternative to Assets with Low Real Returns

Report: The “gold as an alternative to other assets with low real returns” is a competing assets argument. The most frequent manifestation of this story is “the price of gold rose because nominal, or real, interest rates fell” argument.20

Exhibit 13 illustrates the historical relationship between the real price of gold in U.S. dollars (using the observations from Exhibit 2) and the real yield of a generic 10-year Treasury Inflation Protected Security (TIPS). Month-end observations from the inception of TIPS trading in 1997 to the present are used. The message of Exhibit 13 seems to be fairly obvious. When real interest rates are high, as they were during the late 1990s introduction of TIPS in the U.S., the real price of gold was low. Now that the real yield on a 10-year TIPS is low (close to zero) the real gold price is high. The correlation between ten year TIPS real yields and the real price of gold is -0.74. Is it possible to disagree with the view that low real yields caused the real price of gold to be high? Yes.



It is important to avoid the “correlation implies causation” trap. The negative TIPS real yield-gold real price correlation of -0.74 is a measure of the linear correlation of real yields with real gold prices. While it is possible to argue that low real yields “cause” high real gold prices, it is equally possible to argue that high real gold prices “cause” low real yields. Alternatively, it is possible that both low real yields and high real gold prices are driven by some other influence, such as an immeasurable fear of hyperinflation. This is a classic example of spurious correlation.

Does the competing assets argument “explain” the nominal price of gold? No. Does the competing assets argument “explain” the real price of gold? No.

#4 – Gold is a Safe Have in Times of Stress

Report: The safe haven/tail protect argument has already appeared three times. First, it is possible that gold does not hedge day-to-day inflation surprises but provides some protection in a hyperinflationary environment. Second, gold may not provide very effective hedging for currencies in usual circumstances but might provide some protection in situations of significant debasement – such as one associated with hyperinflations. Third, the negative correlation between real gold prices and real interest rates may be driven by the fear of a large negative macro event – such as hyperinflation.

First, let’s examine the safe haven with respect to financial stress. Exhibit 14 shows the joint distribution of U.S. stock and gold returns. How does gold hold up in Quadrant 3 (negative equity returns matched with negative gold returns)? The simple safe haven test states that there should be very few observations in Quadrant 3. In fact, 17% of the monthly stock and gold return observations fall in Quadrant 3. This suggests that gold may not be a reliable safe haven asset during periods of financial market stress.



For some proponents of gold investment, the hyperinflation of the Weimar Republic stands as an electrifying example of the risks of a fiat currency regime. The hyperinflation of the Weimar Republic during the years 1922 and 1923 is an example of a possible endgame for a country that spends much more than it earns. The German mark-U.S. (gold) dollar exchange rate rose from 430 in 1922 to about 433,000,000,000 by 1924. If such a hyperinflation unfolded in the U.S. today and if gold moved with the inflation rate, then the price of gold would exceed $163 trillion U.S. dollars

Largely unpredictable events with impossible to caluculate probabilities and far reaching and inestimable consequences live in Extremistan. Hyperinflation lives in Extremistan. Extremistan is populated with “I don’t know” events. For instance, if hyperinflation occurs it is likely that no one knows ahead of time how long the hyperinflation will last and how significant the magnitude of the hyperinflation will be. In Extremistan, it is impossible to tell how bad things might be so any example, such as how bad things were during the German inflation, is as good, and arbitrary, as any other possibility. In Extremistan the price of gold ten years in the future might be $72,092,964,539,007.

Exhibit 16 illustrates a simple “mixture model”, a way of thinking about financial market outcomes by looking at a combination of models that describe outcomes during “normal” times (Mediocristan) and during stressful times (Extremistan). Given the assumptions, a one-in-a-billion chance of ending up in Extremistan yields a 10 year in the future expected value for gold in excess of $72,000. A one-in-a-hundred chance of ending up in Extremistan yields an expected gold price in excess of $720 billion. The Mediocristan-Extremistan framework does not provide any insight into the probability of hyperinflation. In addition, the Mediocristan-Extemistan framework does not provide an explanation for the currently high real price of gold. Its main value is that it highlights the dilemma faced by investors: how even extraordinarily remote probabilities of hyperinflation could have a large impact on the possible future price of gold.




Ashvin: I suspect the probability that major fiat regimes will enter Taleb’s “Extremistan” in the future will easily exceed 4% as debt deflation progresses and central authorities respond. In fact, we could be well over a 50% probability another ten years from now. However, as the author’s of the report point out, it is called “Extremistan” for a reason – there is really no telling what the sociopolitical environment will look like once we get to that stage of the collapse. It is quite possible that gold technically valued at obscene amounts will actually not be that valuable to the person who possesses it, since they must protect it from central authorities and street-level thugs alike, and they must trade it for basic necessities in what could very well be a war-torn landscape.

#5 – We are Returning to a De Facto Gold Standard

Report: Why is no country on the gold standard? Some of the supposed possible benefits of a gold standard are: “life without inflation, an end to the business cycle, rational economic calculation in accounting and international trade, an encouragement to savings, and a dethroning of the government-connected financial elite” (see Rockwell, 2002). Others such as Delong (1996) highlight a belief that a gold standard would result in loss of “normal” monetary policy options (such as the possible Phillips curve trade-off between inflation and employment and impart a recessionary and deflationary bias to countries with balance of payments deficits). This line of thought focuses on the work of Eichengreen and Peter Temin (2010) who note that during the Great Depression those countries that abandoned the gold standard earliest suffered the least economic harm. One view of the “de facto gold standard” argument is that the gold standard is the worst form of currency except for all those other forms that have been tried from time to time.

If a gold standard exists then gold is money, but the “gold is money” argument does not require the existence of a gold standard. The “gold is money” argument is essentially another way of stating the “constant price when measured in gold” argument. For instance, investors Brodsky and Quaintance (2009) and hedge fund manager Dalio (2012) have argued that “gold is money” without arguing that the world is on a de facto gold standard. For Brodsky and Quaintance (2011), the “shadow price of gold”, the price they believe gold should trade for, is equal to the amount of the U.S. monetary base divided by the official gold holdings of the U.S. Given a monetary base of $2.7 trillion and official U.S. gold holdings of 8,300 metric tons this yields a “shadow gold price” of about $10,000 an ounce. Similarly, Dalio28 thinks that “the price of gold approximates the total amount of money in circulation divided by the size of the gold stock”.

The “shadow price of gold”, “gold is money”, argument is an intriguing concept. The “gold is money” argument is influenced by Friedman’s assertion that “inflation is always and everywhere a monetary phenomenon”. As a result the “gold is money” argument is essentially a restatement of the “gold as an inflation hedge” argument, and it should not be expected to more successfully explain the variation in the real price of gold. However, the “gold is money”, “shadow price of gold” argument yields a fairly specific prediction: a view of where the price of gold should be if the world actually accepted this specific view. From a U.S. standpoint, all that is needed to know where the price of gold is headed is a sense of the size of official U.S. gold holdings and the size of the U.S. “money supply”.

Exhibit 17 shows a time series of official U.S. gold holdings since 1870. Official gold holdings peaked at about 20,000 metric tons following implementation of President Roosevelt’s Executive Order 6102, which outlawed the private ownership of gold in the U.S. Official gold holdings entered a period of decline during the Eisenhower administration that continued until 1971, when President Nixon officially took the U.S. off the gold standard. Since that time, the official gold holdings of the U.S. have been slightly greater than 8,000 metric tons.



The “shadow price of gold” is simply the “money supply” divided by the official gold holdings of the U.S. There is, of course, some ambiguity as to which definition of the money supply to use. The Federal Reserve currently publishes three versions of the “money supply”: the monetary base, M1 and M2. Furthermore, the Federal Reserve once published an M3 money supply number, but M3 was discontinued in 2006. Using the monetary base as the money supply value with which to calculate the “shadow price of gold” yields a current gold price target of about $10,000 an ounce. Using M1 as the money supply value with which to calculate the “shadow price of gold” yields a current gold price target of about $8,000 an ounce. Using M2 as the money supply value with which to calculate the “shadow price of gold” yields a current gold price target of about $37,000 an ounce.

These “shadow prices of gold” may seem alarming since each of the “shadow prices” is much higher than the current price of gold. Additionally, part of the “shadow price of gold” argument is that the higher the “shadow price of gold” is relative to the market price of gold the greater the latent inflationary pressures faced by the U.S.

There are a few obvious challenges with this line of reasoning. First, in the U.S. there has been an abundance of research that finds little evidence of a link between money supply growth rates and inflation rates.29 Second, why just focus on the U.S.? The U.S. official holdings are only about 5% of the world gold supply. In summary, the shadow price of gold is an engaging concept but, because it relies upon a vague model (the theory of exchange) and poorly defined monetary aggregates, it does not help us understand the underlying dynamics of the gold price.

#6 – Gold is “underowned”

Report: Of the six arguments to own gold, the “gold is underowned” argument offers probably the best way to understand why the real price of gold might vary. In order to explore the nuances of the “gold is underowned” argument, it is important to address a number of subsidiary issues: how much gold exists, who owns the gold, and have demand trends changed over time. Of course the “gold is underowned” argument is somewhat ambiguous since all of the gold in the world is currently owned by someone. 30 In its simplest version, the “gold is underowned” argument asserts that not enough people own gold, that maybe everyone should own some gold and the move towards universal gold ownership should cause the nominal and real prices of gold to skyrocket.

How much gold is there? Gold exists both above and below the ground. Above ground gold is gold that has already been mined. Below ground gold is gold ore that has yet to be mined. No one knows exactly how much above ground gold exists. The World Gold Council (2012) estimates that 171,300 metric ton of gold have been mined since the beginning of civilization. The World Gold Council estimate provides a convenient anchor for measuring the number of tons of gold but given the Herculean task of enumerating gold holdings “since the beginning of civilization” the actual, unknown, number could be much lower or higher. Buffett (2011) points out that 171,300 metric tons of gold would create a cube measuring 67 feet on each side. The U.S. Geological Survey (USGS, 2011) suggests that there might be 51,000 metric tons of “below ground” gold reserves that could be mined in the future. If the USGS estimate is correct then over 76% of the world’s actual and potential gold has already been mined. This balance of already-mined-gold relative to yet-to-be-mined-gold once prompted the CEO of Barrick Gold to speculate about the possibility of entering a period of “peak gold”.

Exhibit 20 plots investment demand, jewelry demand and technology demand relative to the U.S. dollar price of gold over the time period 2001 to 2011. The investment demand for gold seems to rise with the price of gold. This upward sloping investment demand is striking. While it is possible that the upward sloping investment demand for gold is an example of a Giffen good or a Veblen good, there are two other explanations that might be more plausible: the impact of momentum-based investors and “too much” demand, totally divorced from a momentum motive, chasing “too little” supply.




Exhibit 21 displays the trajectory of the real price of gold and the physical gold holdings of the world’s largest gold exchange traded fund, the SPDR Gold Trust. The SPDR Gold Trust, ticker symbol GLD, was launched in 2004. Since then its holdings of physical gold (stored in vaults in London) have grown from nothing to over 1,000 metric tons. GLD currently holds a little less than 1% of the world’s known supply of above ground gold. GLD’s purchases of gold represent about 15% of the total investment demand for gold since 2004. As we will soon see, this ETF has more gold that the official holdings of China. Exhibit 21 illustrates a rising amount of gold investment as the price of gold rises, which is consistent with an upward sloping demand curve for gold. While momentum investing is consistent with an upward sloping demand curve from traditional financial investors, in which a rising price leads to rising demand, it is also possible that there has been too much “non-traditional momentum” gold demand, relative to supply, and that excess demand has driven the real price of gold to historical high levels.




Have the Chinese been buying gold? Exhibit 23 shows World Gold Council estimates of the central bank gold holdings for Brazil, Russia, India and China, the BRIC countries. China’s estimated central bank gold holdings are currently over 1,000 metric tons. There is no reason to believe that Chinese central bank gold holdings are more accurately reported than any other Chinese government statistic. Even though China’s gold holdings have risen sharply over the last few years, as just noted, China holds less gold than the SPDR ETF. China’s gold holdings may still be rising.

Exhibit 25 profiles the entities that have either purchased or disposed of the largest gold holdings since 2000. China, Russia and Saudi Arabia have been enthusiastic purchasers of gold and the Netherlands, France and Switzerland lightened up on their gold holdings. For many years the central banks of the Western countries viewed gold as a “barbarous relic” that cluttered up their balance sheets. Some Western central banks sought to lighten up on their gold holdings but the lack of liquidity in the gold market forced them into a series of Central Bank Gold Agreements (CBGA). The essence of the CBGAs was that the central banks that wished to sell gold collectively agreed that they would not sell more than some set amount of gold in any one year. Depending upon the terms of the specific CBGA, the typical amount of sales was limited to 400 or 500 metric tons per year. The motive for limiting the number of tons of gold sold in any one year was a belief that the gold market could not absorb more gold sales without the price of gold falling significantly.



The “gold is underowned” argument has probably been an important driver of the increase in the real price of gold. A rising level of gold investment by emerging market central banks in an illiquid gold market could lead to a rising real price of gold. The rising real price of gold could act as a signal to momentum based investors to allocate capital to gold. As long as some central banks are insensitive to the price they pay for gold the possible move into gold could drive the real price of gold much higher.

Ashvin: And so the report ends on a much more positive note for all the gold bugs out there, but many questions remain. Can we really expect “investment demand” to continue its upward sloping trajectory of the last decade? Do we really think the emerging market countries will continue to emerge and diversify into more and more gold holdings? I suspect that these trends are unlikely to persist in the near-term. And I also suspect that too much gold demand has come from momentum investment in the paper products offered by vehicles such as GLD, and things could get ugly when people lose confidence in the ability of such vehicles to actually produce the gold they claim to have allocated. As always, time will tell the tale.

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    May 1936. “Bank that failed. Kansas.” Medium-format nitrate negative by Arthur Rothstein for the Resettlement Administration. It seems to have been at
    [See the full post at: Report: The Golden Dilemma]


    Armstrong has argument #7 for why to own gold: it’s a hedge against government repression during core-economy Sovereign Debt Crises.

    As the sovereign debt crisis gets worse, governments will increasingly act to clamp down on the underground economy by restricting the use of cash in transactions. Additionally, in order to prevent capital flight, capital controls will be put in place. In this environment, gold will be the best portable, currency-independent store of wealth that will allow (wealthy) people to flee said repression.

    This feature will cause the price of gold to rise. This will only happen when confidence in the existing system snaps, which it hasn’t yet. The fact that we have a global marketplace, no currency controls, and (more or less) free trade says we’re still engaging in business as usual.

    He also largely agrees with many of the points made in the article you posted.

    “So gold has been around a long time. It has been an object of desire. Beyond that, there are no special qualities that render it as money nor does it present any exception to the ups and downs in value as anything else in society. Gold is in plain and simple terms, a commodity. Why some people have to use it as a mystical object that would solve all the problems of the world, who knows. But gold will never change. It is a valuable commodity that should be part of any portfolio. Its advantage over real estate or equities is its movability – you can take it with you when it is time to flee.”


    He makes the most sense of the people I read, even though he tends to ramble a bit.


    If not gold now, then what?


    A dilemma for sure, if any of us has spare money after paying our debts we are better off than most. In any case a friendly neighbourhood, a big pile of manure, seeds, water tanks, and home brew. A good sense of humor will not go astray.


    I have heard/reviewed the arguments about gold for a good while,and I had a large investment at one time…but I have also heard many many stories of trades made during times of duress that caused me to lean to seed,beans and tools…and a quiet place to live.I do not believe gold would be the best way to make your way through hazardous times,as there is always encounters with thieves, official,and otherwise,and loss by other means.Best,to me,is a mix of possibilities.The more options you have,the better chance to succeed

    Bee good,or
    Bee careful



    Thanks for returning to this, Ash. The perpetual return to gold analyses underlines what a paradox gold presents for us. On the one hand, gold price over the past decade exhibits the disturbingly familiar growth curve of every other asset class–it is EXPONENTIAL! We all know that these curves “always” end the same way, right? Nothing is really “different this time”, or so we should believe. But of course, something is a wee bit different. At least compared to the past 90 years. The system is headed for some form of re-set, and we don’t know what it will look like. Therein lies the paradox. Can that exponential curve really defy the inevitable histories of all such other curves?

    In the near-term (the next 5 to 10 years), I’m reasonably convinced that it cannot defy the history of such exponential curves. They scream “bubble” for a reason. I believe we’ll look back at that exponential growth only to see it follow the same trajectory down we’ve seen in all such exponential climbs. The true re-set that will finally indicate that “this time is ACTUALLY different” is still a ways off and it will take longer to arrive than gold’s current price can withstand. Note that a systemic financial catastrophe is not the re-set. It’s the catalyst to a re-set. The re-set will be a process that evolves as a result of such systemic collapse. Gold’s role in such re-set is anyone’s guess.

    A short-term run-up in gold is not out of the question, but I see it as a last-gasp scramble of remaining credit liquidity. If all that credit-money gets scared out of property and then stocks and then bonds, a lot of return-seekers will happily rush into the next “market” in play. But note that it is CREDIT-money that is making this play. My bet is still on the fact that the gold price continues to be driven by credit (speculative purchasing on margin). Take away credit, and what are we left with?

    I mean, what is really driving gold price? Watch the stock market and gold seems to follow its ups and downs in perfect lockstep. We already saw this in 2008 when gold plummeted along with everything else, and despite the financial system’s current fragility, gold continues to bounce along in this dance with stock prices. This is a very strong indication to me that gold price is being set by speculation and margin.

    As leverage is chased out of one asset class to the next, I don’t doubt a last run-up in gold. Maybe even north of $2500. But unlike the gold bugs who will see this as confirmation of the re-set and a “permanently high plateau” for gold (as FOFOA postulates), I see this as just the final parking spot of leveraged speculative returns before the credit backing these holdings is wiped out for good. Even this run-up is not a sure thing in my mind, however, as the credit implosion may out-run the speculators before gold can rocket up any further. But given the current system’s desperate need for returns, no matter what the risk, considerable credit-money will chase any bubble it can find in a desperate attempt to survive. Ultimately, I believe the credit implosion will force a massive liquidation in gold for all the reasons that Stoneleigh and other deflationists have argued. I am not going to play this possible run-up in gold at the moment, for the same reason I won’t play a run-up in Apple stock–I just don’t think it’s sustainable, and its reversal will probably out-smart me.

    Ultimately, if you take speculators out of the gold market, the buy-and-hold-until-doomsday players become very few and far between. They will not be able to support gold and current prices. And they themselves will probably be surprised that they will not be able to hold their own gold until doomsday after all. They’ll need the cash to live on, plain and simple. The corner grocer won’t take gold for his tomatoes. It’s too difficult to move. It’s too small a market. In contrast, there is a massive, built-in market for cash that has been ingrained in us for a hundred years and it’s not vanishing overnight. I do not think there’s much point in holding or acquiring very much gold at the moment, as far too many variables still have to resolve themselves, most of which will push gold DOWN in price significantly.

    Just look at Greece as a crystal ball to our own future: the business that is booming there is CASH FOR GOLD not gold for cash–in other words, everyone is SELLING what gold they have to survive. Wedding rings, coins, nuggets, anything gold that can be sold is being sold. And then the Cash-For-Gold merchants sell that gold for a profit onto the rest of the world not yet in the same dire straits as the Greeks.

    We’ll get there though, and we’ll be selling our wedding rings too.


    Gold is just another placeholder for real wealth, not inherently different from the shell beads used as money by the residents of the Pacific Northwest before we “civilized” them. You can’t eat it and it makes lousy arrow points.

    –“Civilized” societies have been using it for money for 5,000 years.
    –After TSHTF it is more likely to be accepted as money than pieces of paper with pictures of dead presidents printed on them.
    –If you had invested $100,000.00 with “the world’s greatest investor”, Warren Buffet ten years ago it would now be worth $182,668.00. (July 1, 2002-2012)
    –If you had bought $100,000.00 in gold ten years ago and put it under the mattress, it would now be worth $510,897.00.

    Charts with pictures and arrows are all very nice, but history is nicer if you were a gold bug!


    And of course the price of gold is actively suppressed by the FED using its member banks like JPM and GS, supplied with unlimited credit. Maintaining the USD as the world reserve currency for the pricing and purchase of oil is after all a matter of national survival.


    There are at least two entirely separate gold markets – paper and physical. The paper market is very much bigger than the physical market and all the big Wall Street banks, plus the Bank of England and so on are keen to keep the price on that market low. Speculators get hit regularly by huge amounts of paper flooding the market at critical points. The other market is in the Far East and that involves many individuals and states loading up on gold. China is the biggest gold miner in the world and yet they bought, through Hong Kong, about same amount of gold as _all_ the UK’s gold reserves during this month of June. In fact, they have surpassed India in their frenzy to acquire gold – the stuff you can touch and feel. Iran is selling its oil for gold to Turkey and India – they deal in Yuan with the Chinese since their trade is two-way.


    When that factor is combined with the fact that governments in the West are running out of money and are talking openly of reinstating capital-controls


    It would seem pretty short-sighted in my opinion not to keep a decent portion of your savings in gold and silver. The other advantage is that it will help bring down Wall Street and the City of London a lot sooner. This has nothing to do with making a quick profit and a lot to do with keeping your options open and knowing who your real enemies are.

    As regards these charts showing the price of gold growing exponentially versus the cost of living, I would like to point out one simple fact. Here, in Victoria, Australia, the world’s largest alluvial gold deposits are to be found. However, there are only a handful of mines operating and they are not making much money. The reason is simply that labour is too expensive and the planning rules too restrictive. If the real price of gold reflected properly the real costs of living, there would be a minor gold rush out here.


    There are plenty of articles in the financial press which claim that the price of gold mining companies is not keeping up with the price of gold. The reason for this is that investors don’t want to tie up their money in a mine – which can be taxed or expropriated – they want real metal and now. If these people had confidence in the future, it would make much more sense to invest in shares in a mine.


    Hi Ash,
    Saw this courtesy of ZH (https://www.zerohedge.com/news/trade-study-global-systemic-collapse), thought you might want to take a look/share. Paper by Korowitz, et al of The Foundation for the Economics of Sustainability (FEASTA): “Trade-Off: Financial System Supply Chain Cross Contagion, a Study in Global Systemic Collapse.”

    Many echos of what TAE (particularly Nicole?) has been saying relative to the high vulnerability of an incredibly complex, just in time (JIT) global supply chain to catastrophic, irreparable disruption from any number of initiating events/phenomena.

    In addition to a thorough analysis, they also include a detailed, day-by-day concrete example of what it would look like, in this case where a European financial system panic cascades into irreversible global economic collapse/transformation. It takes one to three weeks…

    Here’s the link (then open the PDF):


    Here is the conclusion

    VI. Conclusion

    We are locked into an unimaginably complex predicament and a system of dependency whose future seems at growing risk. To avoid catastrophe we must prepare for failure.

    We are entering a time of great challenge and uncertainty, when the systems, ideas and stories that framed our lives in one world are torn apart, but before new stories and dependencies have had time to evolve. Our challenge is to let go, and go forth.

    Our immediate concern is crisis and shock planning. It should now be clear that this is far more extensive than merely focussing on the financial system. It includes how we might move forward if a reversion to current conditions proves impossible. That is we also need
    transition planning and preparation. Even while subject to lock-in and the reflexivity trap, this will be most effective if it works from bottom-up as well as top-down.

    Finally, neither wealth nor geography is a protection. Our evolved co-dependencies mean that we are all in this together.


    Most salient observations to my way of thinking: 1) it’s not legal tender and even if it was, at current valuations it would not be as practical to use as a pre-1965 silver coin; 2) it’s been stolen before, legally by governments and illegally by less legitimate thieves; 3) it’s not a “rational” market, but a highly rigged one (to up and down sides) and potentially highly illiquid and volatile in the short term; 4) taxes are going UP, UP and away and it is hard to hide your gains, as dealers must report purchases => $10,000; and 5) a couple of contrarian indicators a) central banks are buying…this even bothers Doug Casey, and b) I am seeing in my little South Central Texas town small time gold “dealers” on EVERY corner…and some only buy and some only sell and all are in it only for their commissions.
    Surely gold should only be purchased as an insurance policy, and only by people with quite a bit of excess capital, and even then 5% or so maximum net capital at risk and not all invested at one time. Soap, toilet tissue, hard liquor, portable water purification systems, bullets, pre-1965 silver coins, dried foods, networks of local reliable and trustworthy friends with a variety of skills are a better way to diversify wealth for most of us. Those of us who are true believers in deflation will diversify into liquid cash and sit on it until the implosion ends. The time to buy gold was 2000.

    Golden Oxen

    Ho Hum, Another article entitled the Golden dilemma which, as usual, is about everything except Gold.
    What it is.
    Why history informed all of us that it was money.
    Why all other forms of money are poor corrupt derivatives of it.
    Why it has been in a bull market against all paper money for about 4,000 years
    Why it is honest money of integrity.
    Why it represents labor, toil and sweat.
    Why it is impervious to the elements.
    Why it cannot be counterfeited.
    Why it is inert, dense, and constant.
    Why banksters, governments, politicians, and fools degrade it.
    Why it cannot be printed.
    Why our Constitution states explicitly our money is to be made of it, and it’s less noble relative, silver.
    Why it can never be discussed in plain and simple terms by it’s detractors.
    Why all the central banks of the world hoard some
    Why it is quoted throughout the entire world 24/7 in every currency known.
    Why the winner of an Olympic contest is given a gold coin instead of a piece of parchment.
    Why the expression, “It’s a Gold Mine” exist in common usage,
    Sorry if I bored you, the list is endless, it goes back 4000 years and I obviously think Gold and the CPI, and Gold and S&P500, are silly little tricks the fiat paper devil is playing on the dim sheeple. Don’t be one of them, gold is very simple, honest, and straightforward. Tell the Paper Lucifer to go back to Hell.


    Yes, Golden Oxen, I think we’d all agree with you that gold holds some special properties. It will never be worth zero. It’s just that in 2 or 3 years it will be worth less than it is now. Guess what–so will real estate. You might as well also buy land from this point of view (most of which will be worth less in 2 to 3 years too). Except at least with land you can “eat it”.

    I feel like many gold bugs forget the final step in the gold equation. If it’s money, it’s used to BUY OTHER THINGS. Like food and gasoline. It’s currently too far a stretch of the imagination to see everyone in town using gold coins to conduct such transactions in the near future. There will have to be some intermediate form of currency, whether it’s paper money or the barter-able items themselves (e.g., 10 oz gold for 100 crates of coffee, which coffee you then trade for carrots, milk, gasoline, antibiotics, vodka and cigarettes). Given that there is a bigger market for food items, and it’s more “liquid”, the fiat collapse you paint would probably entail most people rejecting gold in favour of items of intrinsic value as the currency.

    Certainly, you can’t buy more gold with gold.

    How do such exchange systems work when almost no one except you has these gold coins? You’d be an impossibly rich gazillionaire and we’d all just sit on our cows and chickens and carrots staring at you in wonder as we’re forced to continue exchanging “something else” between ourselves.


    skipbreakfast –

    Just look at Greece as a crystal ball to our own future: the business that is booming there is CASH FOR GOLD not gold for cash–in other words, everyone is SELLING what gold they have to survive. Wedding rings, coins, nuggets, anything gold that can be sold is being sold. And then the Cash-For-Gold merchants sell that gold for a profit onto the rest of the world not yet in the same dire straits as the Greeks.

    I’m a really big fan of this argument. I think as long as the Greeks stay within the eurozone, and the eurozone remains intact, your analysis is exactly right, and austerity in the zone will likely herald a drawdown in the price of gold as private deflation sucks the leverage out of the commodity complex. In addition, the fear of default will continue to encourage capital to flow from the defaulting periphery to the core economy – meaning German bonds and the US Dollar. And since gold is priced in USD, that will likely hammer the price of gold further.

    But play forward the situation six months. Assume Greece leaves the eurozone and returns to the Drachma. Assume a certain amount of repression – say a Bundesbank desire to reduce its (extensive) Target2 liabilities cause it to reverse ex post facto all savings accounts transfers from Greece within the past 12 months. Greece slaps on capital controls, and perhaps even makes cash transactions in euros illegal. Then they default, and devalue by at least 50%. And Swiss banks in order to maintain exchange rates start charging money for deposits. Heck, the eurozone could even do a “cash recall”, forcing everyone to turn in their old bills for new ones, in order to attack the underground economy.

    Given that scenario, what happens in Spain when they see this go down? German savings accounts are no longer a safe haven. Swiss accounts charge money. Cash is not a safe haven. Where do the rich Spaniards go to avoid the feared 50% devaluation and currency repression? Likely that will drive them to US dollar deposits and gold. But once the sovereign defaults burn out in europe and a form of stability returns, threat of a default will come to the US. And where does that leave rich people here?

    I totally agree that in the upcoming difficulty, a citizen should focus first on “real things” and debt paydowns. That’s equivalent to the very sound advice – “before investing, pay off your credit card debt.” However for people who have savings over and above that, gold makes a savings vehicle that cannot be defaulted upon or devalued by a government, and more importantly, is mobile wealth unlike real estate or stocks, giving a rich person the option to leave WITH a portion of their wealth if they want to. Gold will likely be a part of the underground economy. Such economies always have an element of risk to them, but this was always so. And it is better to have a dangerous option than to have no option at all.

    As default and repression drive capital into gold, that will likely drive the price higher – perhaps not to the heights FOFOA suggests, but certainly higher than it is today. Its just a supply and demand thing, and with the other alternatives closed out by repression and the core economy defaulting on its currency and sovereign debt, gold will be the only international/portable wealth storage vehicle left standing.

    In the defaulting core economies, real estate will be taxed to death. Stocks too. Any traceable wealth within the system will be “mined” by the government desperate for revenue to avoid default. Even cash will be marked and traced electronically to fight “the war on drugs” or “the war on terror” (pick your excuse). I think you’re right, gold won’t be used by normal people for normal purchases, but if you want to flee the jurisdiction with some of your wealth intact, gold will be a handy vehicle to do this.

    And ultimately, rich people’s actions drive the prices for the rest of us. Their desire to retain the option to flee will ensure there is a decent (underground) market price for the half-dozen gold coins that a regular guy has some of his savings in.


    I agree with most all of the arguments against gold in this thread. The pro-gold or gold bugs don’t want to listen to these points. They are fixed in their ideas because they have committed themselves and now they have no flexibility.

    Just look at history. When we have our big implosion, the next “FDR” will come along and do one or all of the following: tax it even more, devalue it, confiscate it.

    Gold isn’t even an inflation hedge any longer evidenced by the fact that it doesn’t move like it used to in relation to inflation. It is moving in tandem with the stock market now.

    Gold has always been touted as the oldest money or wealth. That is wrong. The oldest wealth is food, water, shelter, land, and tools or service facilities for one’s business or trade.

    THAT is what should be invested in and what will make one “wealthy” when times become difficult due to the perfect storm on the horizon due to economy, energy, weather and demographic crises.

    Let’s get down to basic logic: regarding gold and silver… you can’t eat it, can’t drink it, can’t live in it, and can’t fix your automobile with it.



    Your comment “The pro-gold or gold bugs don’t want to listen to these points. They are fixed in their ideas because they have committed themselves and now they have no flexibility.” made me smile. I have posted a “thank you” against your message. I liked it a lot.

    I would like to see you, or anyone else here, eating their farmland or putting it in their pocket and moving to another neighbourhood.

    All these farms are just sitting there and waiting for the return of “tax farmers”


    In British India, they were called Zamindars – Persian for “landlord”


    Some people have no clue about what it is like to live in a repressive police-state. These guys won’t just take people’s crops, they will take their daughters as well.


    davefairtex post=4329 wrote: play forward the situation six months. Assume Greece leaves the eurozone and returns to the Drachma. Assume a certain amount of repression – say a Bundesbank desire to reduce its (extensive) Target2 liabilities cause it to reverse ex post facto all savings accounts transfers from Greece within the past 12 months. Greece slaps on capital controls, and perhaps even makes cash transactions in euros illegal. Then they default, and devalue by at least 50%. […] As default and repression drive capital into gold, that will likely drive the price higher – perhaps not to the heights FOFOA suggests, but certainly higher than it is today.

    I think you’re right in respect of gold holding pretty good value against a reissued drachma (barring extreme gold controls). But I think we should keep in mind that we could similarly argue gold will always increase in value against SOMETHING TOTALLY WORTHLESS. Going forward, gold will probably hold its value very well in terms of Research In Motion stock. Or in terms of Zimbabwe trillion dollar notes. Or in terms of over-inflated cliff-side houses in New Zealand with a view of the ocean and a soaker tub but no room to grow a garden and one slip away from a broken neck or your entire house falling into the sea.

    If you must choose between new drachmas and gold or RIM stock and gold, then maybe you’re wise to be over-weighted in gold. But if you have the choice to diversify into some other cash currency that is stable, I think gold will seriously under-perform in terms of these currencies. If I were Greek, I’d be buying US dollars. They’re currently a bargain, given the appalling state of the Eurozone. And keep in mind that there is a lot of recent history to show that US dollars serve as extremely effective black market currency in the face of capital controls. Nearly without fail. Gold…not so much.

    But I’m glad you mention the Bundesbank. Because they’re on record saying that they are able to cover their astronomical exposure to peripheral Euro debts BY SELLING THEIR GIANT GOLD HOLDINGS. When countries start selling gold, the gold price is in serious trouble. And maybe you could argue they’ll refuse to sell their gold even while their citizens are starving to death…but they certainly won’t be in a position to buy any more of it!


    skipbreakfast –

    we could similarly argue gold will always increase in value against SOMETHING TOTALLY WORTHLESS …. But if you have the choice to diversify into some other cash currency that is stable, I think gold will seriously under-perform in terms of these currencies…. there is a lot of recent history to show that US dollars serve as extremely effective black market currency in the face of capital controls.

    I agree with you. As long as the US core economy retains global confidence, the USD will be the go-to place for the vast bulk of global capital. Gold, not so much, again as you say – because of its price volatility; it is riskier (over the short term) to hold than US dollars.

    But note the “necessary” condition for this statement to be true. If and when confidence in the ability of the US to meet its debt obligations fades, there will be no place large enough for the international capital to flow. It certainly won’t run off to Vietnam, or Russia. If the US is doing poorly and confidence in its ability to repay snaps, the peripheral countries won’t be looking good – they’ll be even riskier by comparison. In other words, there will be no stable currency of any size that will accomodate the vast horde of money seeking a safe place to hide. The world’s money cannot all hide in the Swiss Franc.

    When the USD is perceived as riskier to hold than gold because of the threat of a US sovereign default, it is at that moment that gold will become a true safe haven, by the actions of individual rich people looking to hide their wealth somewhere portable, not subject to government regulation or default.

    Note: even paper currency can be “defaulted upon” by way of a “recall”. The US has never done it, but it happens in Europe more regularly. And it was proposed back in the 80s in order to remove all that “drug money” from the system. Old bills are required to be exchanged for new bills at a time certain, after which the old bills won’t be worth anything. And presumably with a cash recall, you’d have to prove to a skeptical IRS agent where your cash came from if the amounts were over a certain size.

    So bottom line – I think your worldview is entirely accurate, right up until the confidence in the USD snaps. Likely, a bunch of other sovereign defaults will be needed to cause that break in confidence. But after that happens, gold wins.


    There can never be default as long as their are printing presses.


    I believe the ECB has a printing press. And I also believe that Greece defaulted.


    I agree there might come a time when there is a total loss of faith in the US dollar. But we’re not there yet. A lot of things have to happen first. Which means we’re in a fiat world in the meantime. And a credit-driven fiat world at that. So while many super-gold arguments are persuasive, they all imagine an end to the current system and then gold filling the void at that end. The problem is that financial collapse doesn’t mean the end of the fiat system right away. A lot of banks can go bust without fiat ending. Fiat’s end is an unpredictable process, and I don’t think all the gold bugs will outlast that evolution. I don’t think I could, anyhow.

    Robert Precther on gold:


    I don’t think I’d predict fiat’s end. FOFOA suggests fiat as a medium of exchange and gold as a store of value can peacefully coexist. This makes sense to me. And you’re right – banks (and sovereigns) can most definitely go bust without fiat currency ending. Weimar Hyperinflation happened and clearly we still use paper money.

    As I see it, gold will exhibit that ever-claimed-by-goldbugs safe haven attribute once governments take enough repressive steps to make fiat money less attractive to real people. Enough defaults, devaluations, capital controls, and ATM withdrawl limits and even J6P will wake up and start to look for an alternate store of value. Houses, boxes of whiskey, artwork, and gold bars will all qualify. And as you say, this too will be a process.

    But I don’t think it will require any “hyperinflation” for this to happen. Just a lot of repression and various forms of default.

    What will be the final straw breaking the USD’s confidence? Who can say. And even after that tipping point, people will still buy daily goods with dollars. Most likely using electronic transactions.

    steve from virginia

    Hmmm …

    Maybe the gold-as-money arguments are tired, maybe they are ahead of their time. Who knows?

    There are good reasons why gold will cost $50 per ounce and equally good reasons for $15,000 per ounce.

    One thing to keep in mind is all matters of worth follow predictable pathways: the idea => the acceptance of the idea among a few => the success of these few => widespread acceptance (fad) and great demand for the idea and its lesser variations => the opinion that the idea represents a permanent change of affairs (it’s different this time) => absence of a new ‘market’ for the idea (everyone able to has ‘bought in’) => spurning the idea as a ‘fake’ (it was from the beginning) => race for the exits and ‘market panic’. In the end the idea is obsolete, “What were we thinking?”

    The original few with the idea sell their positions and exit during the period of great demand. They move onto something else.

    The foregoing is a very well-known market dynamic. Due to the amount of resources available, the idea that represents ‘the worth of modernity’ (and modernity itself) is still expanding. While there are doubts creeping in at the corners, persons not enjoying the chance at modernity’s material blessings are counting the days until their ship comes in (and they can hustle down to the dealership and each buy a shiny new car and drive it on a freeway built at ‘somebody elses’ expense, as seen on TV).

    Gold doesn’t fit into this dynamic, it’s a fetish object (currently unemployed). The acceptance of the ‘gold idea’ by the human race has been widespread across almost all cultures: ours is no different. There are golden fetishes found in ancient Egyptian tombs, tombs in hinterlands of Russia, in tombs in Gallic England/Ireland: tons of gold fetishes found then stolen from temples and hoards in the Western Hemisphere, in China, across Europe and into the pre-modern.

    Currently we’ve been at a loss to find fetish use for gold which is why the current discussion is taking place. Automobiles have taken gold’s place in the pantheon/hierarchy of (useless, counterproductive) items. Our currency isn’t on a gold standard it is on a BMW or Acura standard. In practical terms our currency and the efforts of policy makers is undermined by the operation of hundreds of millions of cars and the need to fill these monsters with fuel. Right now, the contests is between money representing the fetish or money representing what the fetish needs to operate. This is not a good place for money to be: on one hand money is frivolous, on the other it is too valuable to use.

    The ‘idea’ of gold has been around, it has withstood the test of time, it has proven its lack of utility (the idea of gold and the gold itself) over and over. Gold fetishes did not protect the Aztecs and Andean tribal culture from the Spanish or from their diseases. Gold-as-money cannot do any better, it cannot ameliorate the ongoing collapse any more than Ben Bernanke can.

    What gold can do better than many other objects is to be a medium of exchange. Humans are loathe to part with it except under stringent circumstances, gold will not be traded for recreational purposes. It is a portable form of energy conservation.

    As consumption-recreation vanishes from this world money will become more serious and ‘responsible’. There is a place for gold as there is a place for Picassos: you trade yours for an office building or a drydock.

    Gold-to-debt ratios are not as useful as the gold-to-actual-human ratio. There are too many humans, not enough gold, institutions hog most of it. Most humans will do without (and have to). Those without gold can offer their talents in exchange for sustenance or they can offer to behave themselves … for the same thing.

    The idea is emerging that those that don’t behave (bankers and politicians) will be led to the chopping block where heads will be separated from their necks. Here is the idea => the acceptance of the idea among a few => the success of these few => widespread acceptance (fad) and great demand for the idea and its lesser variations … etc.

    Go for gold and samurai swords.


    Collapse of the USD’s fiat hegemon probably isn’t going to threaten any time soon. If it does, we will fall back to the MILITARY side of the m-i complex. Objects will be dropped from the skies, but they won’t be crates of $100 bills. The basics of human nature will come to the forefront and we all know that won’t be fun to experience. Hoarded gold as protector will be just another utopian fantasy that ends up for most in the trash bin.


    “I believe the ECB has a printing press. And I also believe that Greece defaulted.”

    Apples and oranges my friend. Greece is in a monetary union and does not have individual control over monetary policy. If they had printing presses they’d be using them with wild abandon.

    On the other hand, the USA can and will print to prevent a deflationary depression or default. The Fed will oblige, don’t worry about that.

    Matter of fact to prevent depression or default on a global level you can even bet that the major central banks of the world will unite and print in an attempt to stave off disaster. They are all Neo-Keynesians now and don’t know anything else.


    alfbell –

    You originally stated “there can never be default as long as their are printing presses.”

    2002 Argentina
    1998 Russia

    Look at this link and you will see many, many more cases of this:



    Again, comparing apples and oranges. Argentina versus the US? The false super power of the USSR versus the US? Don’t think so.

    This is a very very different animal. The US is the world super power and the USD is the world reserve currency. They can’t default. Only print.


    There isn’t enough gold on this planet for it ever to play a role as money ever again. Maybe in Spain 400 years ago but no more. It is a relic now of ancient times and is in no way a solution to our problems. It might be part of a basket of commodities or resources that is formed to back up a currency, altho the chances of that are also slim in a Keynesian fiat money world, soon to be purely and electronic money world.

    The USD is the world’s reserve currency and will remain so for many years to come. There is no other currency on the planet that has the volume to take it’s place. Swiss francs? Singapore dollars? Yen? Yuan? Fuhgettaboutit. The currencies of the resource based countries like Canada, Australia, Brazil? No way either. Not large enough and they will all be hurt as the demand for raw materials and commodities diminish due to the global recession/depression.

    This whole gold thing coupled with survivalist doom and gloom is reminiscent of the 70’s or 80’s with books by Howard Ruff and the like warning of an imminent collapse and that we need to hole up in our tents with our gold coins, guns and ammo and water purification equipment.

    Let’s be realistic and not fall under the spell of alarmists. With all of the pretend and extend and unusual “solutions” that our governments are still capable of, and with the slow motion of time that it takes for governments and empires to fully collapse with resultant economic turmoil, there is no imminent disaster to prepare for. There is still a lot of wealth, resources and momentum within Western countries. It’s not like it’s gonna be “lights out” and back into the dark ages in the next 10 years or some such.

    If you have marketable skills and abilities that you can deliver for an exchange or barter with you’ll be fine. If you want peace of mind and a feeling of security then ensure that you have access to a little bit of land to grow some vegetables and keep some chickens and you will be fine no matter what happens.


    I am getting a bit weary of all this intellectual speculation about what gold is and what is it good for, what is going to happen or not happen. This site is supposed to be in part about hands on what to do for survival, right? So let’s say you have followed the guidelines presented here at TAE and have gotten completely out of debt and are holding cash and cash equivalents and have made the decision to hold some precious metals (I am thinking of silver) as well. You are no longer interested in rhetoric you want to know what to do. Are there things one should look for and things one should one beware of in purchasing. If you have never purchased precious metals it would be really helpful to hear the experience of those who have rather than try to sift through all the promotional sales information on commercial websites.


    alfbell –

    Again, comparing apples and oranges. Argentina versus the US? The false super power of the USSR versus the US? Don’t think so.

    You have selected the It Can’t Possibly Happen Here defense, similar to the also popular It’s Different This Time.

    I don’t find them particularly compelling arguments. Reserve currency status will make it so the US defaults last, but it won’t let us ignore the laws of physics.

    Printing vs Default is simply a choice of picking the losers. Printing means holders of dollars lose, debtors win, and imports become dramatically more expensive. Default means only the holders of treasurys lose.

    That’s why nations default even when they could print if they wanted to. Its often better to stiff just the debtholders rather than making all those voters pay via massive inflation.


    Vulcanelli post=4350 wrote: I am getting a bit weary of all this intellectual speculation about what gold is and what is it good for, what is going to happen or not happen. This site is supposed to be in part about hands on what to do for survival, right? So let’s say you have followed the guidelines presented here at TAE and have gotten completely out of debt and are holding cash and cash equivalents and have made the decision to hold some precious metals (I am thinking of silver) as well. You are no longer interested in rhetoric you want to know what to do. Are there things one should look for and things one should one beware of in purchasing. If you have never purchased precious metals it would be really helpful to hear the experience of those who have rather than try to sift through all the promotional sales information on commercial websites.

    You know, you might have a point here actually. Keep in mind though that finance will continue to be the Achilles heel for the majority of people in the near-term (i.e., no one is completely self-sufficient, and having something of value to pay for necessities can be the difference between life and death).

    Now with regard to your point about preparation, I just discovered this smart, interesting woman on the internet who goes by the name Patriot Nurse. She covers some very practical advice about preparing for your own health care in a systemic collapse. Excellent advice.

    Not meaning to hijack the thread. Further discussion about health care should go under a new thread–I just wanted to respond to Vulcanelli’s point. In the video below, Patriot Nurse talks about antibiotics. And I suppose it might even be relevant to this thread, since it really makes you realise how medicine can quickly become much more valuable than gold!


    John Dunn

    Thank you Steve from Virginia. I understood your comment in every detail, which is more than I can say about the original article above ‘The Golden Dilemma’.
    I am not an unintelligent person, and if something is explained clearly and in some detail, I usually ‘get it’. I’m afraid that I find many articles here on TAE either :
    ~ Poorly explained or
    ~ Written to deceive.
    When you re-read the article above, each paragraph appears logical, but as it moves on the next paragraph, I feel as if some convoluted mental shell game is being performed.
    If I am wrong,… MAKE IT SIMPLE so that even I, can understand.
    If your argument is correct it must surely be explainable in a simple way for all to follow.
    Again thanks to Steve from Virginia, who did explain his position very well. And I think your take on Gold is the one to take away from this.

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