Report: The Golden Dilemma
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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.”
https://armstrongeconomics.com/693-2/2012-2/the-truth-about-gold-why-you-should-buy-it/
He makes the most sense of the people I read, even though he tends to ramble a bit.
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 carefulsnuffy
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.
However:
–“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.
https://dailyreckoning.com/the-path-to-10000-an-ounce-gold
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
https://dailyreckoning.com/the-governments-plan-to-steal-your-money
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.
https://en.wikipedia.org/wiki/Victorian_gold_rush
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):
https://www.feasta.org/2012/06/17/trade-off-financial-system-supply-chain-cross-contagion-a-study-in-global-systemic-collapse/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.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.
alfbell,
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”
https://en.wikipedia.org/wiki/Tax_farmer
In British India, they were called Zamindars – Persian for “landlord”
https://en.wikipedia.org/wiki/Zamindar
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.
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.
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.
davefairtex:
“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 RussiaLook 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!
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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