Gold Over $800 Per Ounce

Off Topic Politics & World Issues
22

[quote]Mick28 wrote:
Headhunter wrote:
In 1971, an ounce of gold was $35 and oil was $2 a barrel.

The dollar is a currency undergoing a serious debasement. I don’t know if the conspiracy theorists are correct or if its just a mad process, but this country is in for one gigantic long-term shitstorm.

Our country will be a radically different place 20 years from now.

No it won’t. This is nothing more than an economic cycle which plays itself out on a regular basis.

The sky is not falling, stop looking for it.[/quote]

I certainly hope you’re correct.

Inflation, debasement of a currency, exists because a government issuing the fiat currency wishes to spend more than it earns. It runs up huge debts and prints paper money to pay on those debts. This is a hidden form of taxation.

What bothers me is the irrationality of wishing to spend more than is earned. That means that the system itself has an irrational premise. Societies founded upon irrationality either collapse or become rational. The latter is rarely, if ever, chosen as an option.

23

[quote]LIFTICVSMAXIMVS wrote:

Every devaluation of the dollar makes production more expensive which drives production down. They make a killing because prices go up overseas…eventually they come back down once production goes back up. This is called the business cycle and it is caused by credit expansion. This is bad because it hurts the average American’s ability to purchase goods disproportionately among marginal wage earners. Credit expansion is stealing.
[/quote]

If it’s part of the business cycle, why are you so excited about it?

You say it is bad - it can’t be if, as you say, it is part of a cycle.

Too many people trying to be the smartest kid in class.

24

How much was a pocket calculator? How much was an iPod?

Hopefully the commodities run up is a combination of worldwide demand and the dollar devaluation, with more weight toward the demand causation.

Don’t get me wrong though - I dislike the dollar devaluation, and particularly dislike higher prices for consumers. The Fed needs to keep rates steady now, and let the banks take the hit on their bad investments.

25

[quote]BostonBarrister wrote:

Headhunter wrote:
In 1971, an ounce of gold was $35 and oil was $2 a barrel.

How much was a pocket calculator? How much was an iPod?

Hopefully the commodities run up is a combination of worldwide demand and the dollar devaluation, with more weight toward the demand causation.

Don’t get me wrong though - I dislike the dollar devaluation, and particularly dislike higher prices for consumers. The Fed needs to keep rates steady now, and let the banks take the hit on their bad investments.[/quote]

Inflation at this point is the least of our worries. If the fed does not continue to ease we are going to be pushed into recession. The weaker dollar is the primary reason our 3Q gdp was up to 3.9%, jobs report was 166k as opposed to forecasted 80k or so on top of a 25 basis point cut and the market did not respond well on Friday, that is a frigthening thing. However there has been a positive correction today. Furthermore the US regained the position as #1 most competitive country in the world.

The bottom line, the media is touting the dollar’s weakness as if it is plunging into oblivion, this is not the case, the dollar is weak, and is barely so.

26

[quote]sovereign wrote:
The bottom line, the media is touting the dollar’s weakness as if it is plunging into oblivion, this is not the case, the dollar is weak, and is barely so.
[/quote]

How much you wanna bet that, if a liberal gets into the whitehouse in a year, you don’t hear another peep about a sinking dollar?

Seems to be the way of things in the last few presidential elections. Bush I was to blame for the recession in 92. It was the “worst thing” since the great depression. Magically, the recession lifted mere days after Clinton was elected. Then you didn’t hear another word about it for 8 years.

Then in 2004 - all of a sudden the economy was front and center again. Remember the “jobs numbers”? Remember the press saying that if Bush didn’t pull in ‘x’ thousand new jobs, he could kiss the election good bye?

Now it’s 2007, and the media is getting a running start at running down the economy.

27

Our policy makers are trapped this time — if they decrease interest rates, the flight from the dollar accelerates. If they leave them alone, the housing market and all the rest spirals down and out of control (see below). If they raise rates to defend the dollar, housing crashes even more so.

I read an estimate of how much the banks and companies that insure mortgages may lose. The estimate, which I think is in the Financial Times of London, is one trillion dollars. That’s if we leave rates alone.

Under any scenario, its bad.

Oh, and gold hit $840 in London today. The flight continues out of the dollar. We’re staring at a recession, if we’re LUCKY.

28

Of course we are looking at a recession, we are due for one!

Fuck the housing market and banks. Houses were overbuilt and banks lended too much money. Anyone that didn’t see this coming wasn’t paying attention.

As long as we don’t do anything stupid it will straighten itself out in short order.

29

[quote]Zap Branigan wrote:
Of course we are looking at a recession, we are due for one!

Fuck the housing market and banks. Houses were overbuilt and banks lended too much money. Anyone that didn’t see this coming wasn’t paying attention.

As long as we don’t do anything stupid it will straighten itself out in short order.
[/quote]

I agree. I have no sympathy for those that over borrowed, and those that over lended.

You won’t hear any more about this after election day 2008 - unless a republican wins.

30

How does banking work? Its a pyramid scheme. Smaller banks put deposits in larger ones. If a large one goes down, like Citibank may do, it drags a lot with it. That’s why the Federal Reserve was invented, to prevent that from happening.

But now the trouble: if the Fed rescues banks, they do so by increasing the money supply. Overseas investors and governments see this and flee from the dollar. How do they do that? By withdrawing funds from …<guess who?>…

All of this is happening now. Its not a tidal wave YET. I hope it doesn’t become one.

31

[quote]Zap Branigan wrote:
Of course we are looking at a recession, we are due for one!

Fuck the housing market and banks. Houses were overbuilt and banks lended too much money. Anyone that didn’t see this coming wasn’t paying attention.

As long as we don’t do anything stupid it will straighten itself out in short order.
[/quote]

You discount the influence of national banks, the Federal Bank won’t let them go belly up and if they did, you would get fucked along with the rest of the world.

If this was as clear as you make it out to be, we wouldn’t be in the situation. This is largely a product of Greenspan’s credit push from '02-'06.

The Chinese are posturing as if they are planning to get out of the dollar, well if they do, they are sustaining gargantuan losses themselves. They won’t do it. Just like the Chinese are posturing with Dry Bulk Shippers, the Chinese act as if they have some gigantic inventory of iron ore. When the reality is that their inventory doesn’t exceed 4 weeks. The United States may not be a ‘center’ that it was years ago, but make no mistake, the vacuum the US makes if it falters in a big way will be felt in a corresponding manner in the rest of the world.

32

[quote]rainjack wrote:
If it’s part of the business cycle, why are you so excited about it?

You say it is bad - it can’t be if, as you say, it is part of a cycle.

Too many people trying to be the smartest kid in class.
[/quote]
Business cycles do not have to happen. They are a result of intervention. The value of of the dollar was relatively stable over the hundred years before we went to a centralized banking system in 1913. In fact on a hard commodity system the value of money is reflected in the values of that commodity. Actually, there were a two other times before the Fed that we had a centralized system which were fraught with inflation.

Every time the fed interferes with the money supply – either by adjusting rates or expanding the supply – there are direct and indirect consequences. Every time the Fed interferes it is a reaction to one of the unforeseen, unintended consequences of a previous action. Inflation is a direct result of credit expansion and is not a natural phenomenon.

Available credit should be a reflection of total savings and not how much the Fed can print. Ideally in a completely free market when people save too much interest rates will come down to motivate spending. The reverse will happen when there isn’t enough savings. People will be motivated to save when interest rates are higher and thus a new credit supply will become available.

33

[quote]sovereign wrote:
Zap Branigan wrote:
Of course we are looking at a recession, we are due for one!

Fuck the housing market and banks. Houses were overbuilt and banks lended too much money. Anyone that didn’t see this coming wasn’t paying attention.

As long as we don’t do anything stupid it will straighten itself out in short order.

You discount the influence of national banks, the Federal Bank won’t let them go belly up and if they did, you would get fucked along with the rest of the world.
[/quote]

I don’t think they will go belly up but they might have some lean times and restructuring ahead.

I agree.

[quote]

The Chinese are posturing as if they are planning to get out of the dollar, well if they do, they are sustaining gargantuan losses themselves. They won’t do it. Just like the Chinese are posturing with Dry Bulk Shippers, the Chinese act as if they have some gigantic inventory of iron ore. When the reality is that their inventory doesn’t exceed 4 weeks. The United States may not be a ‘center’ that it was years ago, but make no mistake, the vacuum the US makes if it falters in a big way will be felt in a corresponding manner in the rest of the world. [/quote]

Agree here too.

35

[quote]Mick28 wrote:
LIFTICVSMAXIMVS wrote:

Business cycles do not have to happen

Wow, what an incredibly naive statement.

[/quote]

Business cycles are made much worse by government interventions that are mostly acts of stealing.

Less naive?

36

This is a pretty decent article:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCs.keWwNdiY&refer=home

The key worry is inflation. Keep an eye on those T-bond yields.

37

[quote]Mick28 wrote:
LIFTICVSMAXIMVS wrote:

Business cycles do not have to happen

Wow, what an incredibly naive statement.

[/quote]

Sorry that should have been stated, "Business cycles do not necessarily have to happen.

Now, do you care to explain what you mean or are you just going to pretend to have an educated opinion and reply with vague one sentence responses?

The business cycle was explained by Mises and Hayek as a result of intervention in the market. If you have anything to refute their ideas please provide and explain.

http://www.mises.org/story/1558

38

Credit Suisse warns of quantum rise in gold price
Gill Montia
Credit Suisse is warning that supply and demand factors �??could trigger a quantum upward change in the gold price�??.

David Davis, a research analyst at the bank, has reported that �??Our studies indicate that the dynamics surrounding the gold supply and demand have begun to change inexorably towards a diminishing supply of gold and increasing investment demand, which will ultimately impact the gold price.�??

The prediction is based on the assumption that �??long term global gold production will begin to decline as the diminishing number of new reserves fail to compensate for dying mines�??.

The report also takes into account the impact of cost increases on marginal mines, asserting that these could cause premature closure.

Mr Davis believes that the decline in the gold supply could be accelerated �??should the gold mining industry continue to incur significant year-on-year inflation rates which are not offset by similar or significantly higher gold price increases year-on-year�??.

39

[quote]Headhunter wrote:
Credit Suisse warns of quantum rise in gold price
Gill Montia
Credit Suisse is warning that supply and demand factors �??could trigger a quantum upward change in the gold price�??.

David Davis, a research analyst at the bank, has reported that �??Our studies indicate that the dynamics surrounding the gold supply and demand have begun to change inexorably towards a diminishing supply of gold and increasing investment demand, which will ultimately impact the gold price.�??

The prediction is based on the assumption that �??long term global gold production will begin to decline as the diminishing number of new reserves fail to compensate for dying mines�??.

The report also takes into account the impact of cost increases on marginal mines, asserting that these could cause premature closure.

Mr Davis believes that the decline in the gold supply could be accelerated �??should the gold mining industry continue to incur significant year-on-year inflation rates which are not offset by similar or significantly higher gold price increases year-on-year�??.

[/quote]

This is a very interesting thread. I’m no swiss bank researcher but it seams the rise on gold price is driven by both increased safe haven investing and speculation. Worldwide currencies are being diverted from buying dollars into buying gold, as a safe haven against volatility. Demand for dollars is down, causing lower values relative to other currencies.

Since the dollar is decoupled from the gold standard, a rise in gold prices is not necessarily an indication of inflation or a precursor to recession. As the price of gold goes up, the speculation money will begin to dry up and the price will stabilize or begin to go down.

As far as the supply of gold dwindling, i ensure you that if gold prices keep going up there are some very smart people who will figure out how to extract more gold from existing mines or start new mines. Industrial users, jewelers, and consumers will begin putting downward pressure on gold.

As prices begin to drop, the safe haven investors and speculators will start bailing out of gold. I’d be willing to bet that gold will be back down to near $350 -$400 within 12 months.

BTW, before today, the previous high for gold was $825.50, set Jan. 21, 1980, or $2,128.09, adjusted for inflation

40

[quote]Razorslim wrote:

This is a very interesting thread. I’m no swiss bank researcher but it seams the rise on gold price is driven by both increased safe haven investing and speculation. Worldwide currencies are being diverted from buying dollars into buying gold, as a safe haven against volatility. Demand for dollars is down, causing lower values relative to other currencies.

Since the dollar is decoupled from the gold standard, a rise in gold prices is not necessarily an indication of inflation or a precursor to recession. As the price of gold goes up, the speculation money will begin to dry up and the price will stabilize or begin to go down.

As far as the supply of gold dwindling, i ensure you that if gold prices keep going up there are some very smart people who will figure out how to extract more gold from existing mines or start new mines. Industrial users, jewelers, and consumers will begin putting downward pressure on gold.

As prices begin to drop, the safe haven investors and speculators will start bailing out of gold. I’d be willing to bet that gold will be back down to near $350 -$400 within 12 months.

BTW, before today, the previous high for gold was $825.50, set Jan. 21, 1980, or $2,128.09, adjusted for inflation[/quote]

Excellent post - there is nothing magical about this yellow metal.