Saturday Gold and Silver

341
Sat, Mar 2, 2013 - 12:47pm

It looks more and more like the next two weeks or so are going to be significant.

So, where do we start on this fine Saturday? How about with something from Friday? I posted these two charts into the comments section of yesterday's post. They show a classic short/theft tactic. Someone, either an HFT or a Cartel monkey, pulled the trigger on a sell order in silver at the very thin trading hour of 4:00 a.m., New York time. Since silver was sitting right on top of the previous week's lows, the effect was predictable. A host of sell-stops were "harvested" as price quickly fell about 50¢. Note then that price quickly recovered as liquidity returned with the opening of the Comex session.

Why did I start there today, you ask?

  1. Because now $28.40 is a very important level to watch early next week in silver, and,
  2. It is becoming increasingly likely that the same trick is going to get played out on a much larger scale in both gold and silver before a final bottom is put in and price permanently reverses.

Let's next visit our three friends...Crude, DrC and Sylvia. Do they have any clues for us? Why, yes, they do as a matter of fact. All three have come down dramatically and all three give the appearance of having a bit further to go. And if "commodities in general" show additional weakness over the next 7-10 days, you can probably imagine that selling pressure compounding our problems in gold and silver.

So let's start with silver. Running the stops yesterday has fortunately provided us with a very clear level to watch at $28.40. If silver slips below there again early next week, it would be a near certainty that we are going to take at least one trip down below $28. There has consistently been a lot of support there so taking it much lower is going to be a task for The Bad Guys.

That said, I'm beginning to sense that the ultimate goal of this entire event is to harvest the stops below $26. IF this happens...and currently I'd put the odds at about 25%...a quick drop to $25ish would be your final bottom. Price would quickly recover back above $26 and this deliberate beatdown would be over. How can I say that? More on that in a few minutes. First, two more charts:

And gold could very easily suffer the same fate. If The Cartel can engender enough additional spec selling, a veritable cornucopia of sell stops lay waiting for them sub-1530. And you can just imagine the reaction in the media: "GOLD IN BEAR MARKET!!" will be screamed as loudly as possible in the hopes of inspiring even more selling. Like silver, I only give this about 1 chance in 4 of happening but we must be on the lookout and prepare mentally. IF this occurs, you must be strong and BUY, not sell. The spike low will be The Bottom.

Now lets get back to why I am so confident that the selling has already been stretched to unsustainable levels and why, IF a spike low occurs, the metals would quickly recover. It's all in the CoT.

Yes I know that Santa claimed this week that the CoT is fudged and unreliable and yes I know that Santa has forgotten more about the metals markets that I know.....but....Unlce Ted believes in this stuff and so do I. Here's what Ted said in his mid-week newsletter:

"One of the reasons I think the data in the COT are accurate is that every contract has a long and short side. Therefore, to lie in the large trader reporting system that underlies the compilation of the COT, would require two lies; one by the big commercial lying and another by the counterparty holding the opposite side of the contract. I can see JPMorgan wanting to lie on its COMEX holdings, but I can’t see why a counterparty tech fund or speculator would assist in that lie. Please remember that lying on a large trader report is illegal and will be prosecuted by the CFTC (one of the few things they do well)."

With this in mind, here's a c&p of my CoT comments from yesterday:

For the Wed-Tue reporting week, gold was up $10 but total OI fell by 13,432. Silver fell by 17¢ and OI fell by 9,728.
The only interesting thing in the gold CoT was the divergence between LargeSpecs and SmallSpecs. The LargeSpecs went net long 13,000 contracts while the small specs went net short 7,400. This, my friends, is called leading the HFTs by their collective noses. On the bounce, the LargeSpecs covered shorts and went long to the tune of 13,000 contracts. Once fleeced, the "market" rolled back over and now all of those new longs (at 1600+) are under water.
Once again, the real interesting stuff is in silver. Both the Large and Small specs were adding to their shorts. The Large Specs sold a net 4,700 contracts and the Smalls sold a net 2,300. The commercials also sold 1,700 longs, dropping their gross long position back to a still-whopping 52,509. All of this selling allowed the naked short Cartel members to cover a massive 8,769 shorts or about 9% of their total gross short position! Now at 83,395, The Silver Cartel has been able to trim their short position by over 15,500 contracts, from 98,979 just two weeks ago. That's a drop of 16% in two weeks while price fell $2 from $31 to $29. I'm sure that's just good timing and good fortune...at least that's what Cueball and Thunderlips think.

On the bright side...

  • The total "commercial" long position in silver is actually up over the past two weeks while JPM et al have been covering. On 2/12/13, the gross comm long position was 52,182. As stated above, as of 2/26, it was still 52,509.
  • The Large Specs are racing to get short. On 2/5/13, the Large Specs were only short a record low 6,588 contracts. Three short weeks later, they're short a total 16,016, an increase of 143%!
  • The Large Specs are also feverishly dumping longs. Three weeks ago they were gross long 42,449. As f last Tuesday, that position had been whittled down to 37,753. That's a drop of 11%.
  • And the Large Spec net long ratio, which just 3 weeks ago was totally out of whack at 6.44:1, has fallen all the way back to 2.38:1. Remember, as a general rule, anything under 3 is somewhat bullish and anything over 4 is somewhat bearish. Anything under 2:1 is extremely bullish. For examples, see here: https://www.tfmetalsreport.com/blog/4492/strange-days-indeed
  • Also, all that Cartel short covering has further dropped the Cartel net short ratio. Last week it was 1.70:1 and this week it is 1.59:1. Again, historically, anything approaching 3:1 is very bad. Anything near 1.5:1 is very good.

I don't know if I can pound the table much harder. Could price be forced even lower, taking out $28 and heading toward $26? Yes, of course it can. But, if it does, the silver market will reach and surpass the exact same extremes that indicated bottoms in October of 2011, December of 2011 and August of 2012.

Again, please go back and looks at the "Strange Days Indeed" post from three weeks ago. ( https://www.tfmetalsreport.com/blog/4492/strange-days-indeed) The data is compelling and telling. Both metals, when measured by The Cartel net short ratio, have reached very bullish levels and stop-running spike lows would make them more extremely bullish than any other time that I can recall. Simply put, with CoT history as a guide, there is NO WAY that gold is going to $1200 and silver to $18 or even $22. Not from this CoT structure!

Moving on...Speaking of the CoT, one of your fellow Turdites has constructed a site to help everyone read and interpret the data. It can be found here: https://goldsilvercot.com/charts/cot/index.php

As you know, Santa's company TRX is an advertiser on this site. Someday soon, the miners will turn and I have great faith in Santa and his company for the long term. Last week, they held their annual shareholder meeting and the entire thing was recorded and posted. Here's a link. I think you'll enjoy watching it: https://standrewsclubav.ca/webcast/client_tanzanian/20130228/

And you've probably noticed that we've had to add a captcha to the registration and login process here. Sorry but it was necessary. If you've never run a site before, you simply wouldn't believe the amount and intensity of the spamming effort out there. They really slow site performance so it is hoped that the captcha will help us all in enjoying and learning from the site.

OK, that's it for now. Enjoy your weekend but please be aware of continued volatility next week and do not allow yourself to get all freaked out by the temporary price action. Keep your wits about you and remember the fundamentals. Stay strong and keep the faith. Continue to prepare accordingly.

TF

p.s. Adding these ZH links which were posted Saturday afternoon. Don't want you to miss this: https://www.zerohedge.com/news/2013-03-02/hedging-funds-and-physical-vs-paper-gold. AND YOU MUST READ THIS: https://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-vault-largest-world-located-next-new-york-fed

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  341 Comments

tmosley
Mar 4, 2013 - 10:42am

The basic theory of

The basic theory of Freegold is that gold will be "freed" from taxes and from a fixed exchange rate with paper currencies. As a result, people will save their money in gold, while transacting in paper currencies.

Where the system falls apart is the notion that the several functions of money can be separated without consequence, ie that you can place the entirety of the savings component into gold while having a transactional (paper) currency that remains convenient to use (ie doesn't have an exponentially increasing velocity). But this is impossible. If no-one wants to hold the transactional currency, it becomes hot money, and moves faster and faster through the system until it becomes worthless because the cost of dealing with it (ie rushing to the money changer to change it into gold, or rushing somewhere to spend it) becomes greater than the cost of simply accepting gold. Freegold is as such a transition state at best--an unstable system that collapses into a gold standard.

opticsguy
Mar 4, 2013 - 10:45am

Armored vehicles

Note that Obama contributor and Illinois employer Navistar is making those things. Pork and nothing else.

We don't need a foreign enemy to enrich the MIC.

opticsguy
Mar 4, 2013 - 10:47am

Armored vehicles

Note that Obama contributor and Illinois employer Navistar is making those things. Pork and nothing else.

We don't need a foreign enemy to enrich the MIC.

Stack'em High
Mar 4, 2013 - 10:56am

Name calling and insults...

result from the lack of having an intelligent response.

ClinkinKY achmachat
Mar 4, 2013 - 10:58am

@ achmachat----confused

I've never had this problem. Could it be an issue with which browser (Firefox here) people are using? Sincere question.

opticsguy
Mar 4, 2013 - 11:18am

Armored vehicles

Note that Obama contributor and Illinois employer Navistar is making those things. Pork and nothing else.

We don't need a foreign enemy to enrich the MIC.


Mar 4, 2013 - 11:47am

new thread

and I could use a double, or maybe even a triple, and it's not even noon. Better go with a double double.

edit: no, the fool has a broken mouse, and he won't fix it.

Motley Fool
Mar 4, 2013 - 12:50pm

@tmosely

Not that I haven't discussed this to death, but what percentage of your income is used for transaction, and what percentage for savings. What about society as a whole? How about businesses? How about governments?

A transactional currency derives it's value from two components, one usage of said currency and two debts owed to be repaid in said currency.

Contemplate again, if you will, if a dynamic equilibrium is possible.

There are always losses inherent in conversion from one medium to another. Most of society wants to hold mostly currency most of the time....because that is what they use to buy bread, etc, and two conversions to meet the same ends (bread) is a losing endeavour. Because it has no inherant value fiat serves well as transactional currency. That is not to say that value is not derived from what it can and will be able to buy.

Lol...probably wasting my breath...again. :)

Motley Fool
Mar 4, 2013 - 12:53pm

@dryo

double

I will give you my paypal address if you are serious. I figure I can get another cheap mouse that will last me a few years for hmm 6 or 7 dollars...lol. Living in a third world country is tough, a mouse that clicks a few too many times is not on my priority list.

tmosley Motley Fool
Mar 4, 2013 - 1:16pm

Yes, you are, though the

Yes, you are, though the discussion is a good one, so I will also waste mine.

Debt is only a temporary sink for money. You can lend out money and hope to get more of that same type of money back later, but you won't be willing to do that when the velocity of the transactional currency is running wild. The only way to slow the velocity of a currency is for people to save in it, or for interest rates to be reliably higher than inflation. Freegold prevents both from happening, as savings goes into gold, and interest rates can't keep up with inflation.

It collapses just like all paper currencies. There is no getting around it. If there were, we would already have it, because central bankers LOVE being able to have their cake and eat it too. If there was a way to do that permanently, then they would have tried it.

There is nothing new under the sun. At least not when it comes to paper schemes.

Motley Fool
Mar 4, 2013 - 1:31pm

@tmosely

"There is nothing new under the sun."

This is one of the great Untruths. I wont get in to it but simply disprove by example : the Internet.

'You can lend out money and hope to get more of that same type of money back later, but you won't be willing to do that when the velocity of the transactional currency is running wild."

Agreed , so one would need to estimate the velocity of money under this scenario and look at factors impacting it.

Would you agree that as an aggregate very little of income derived by society goes towards savings? In fact, under the current messed up system, as an aggregate the total savings rate is negative globally.

I know you don't have too, and I know you won't like it but can I create a premise just so the rest of the conversation is easier. Can we assume that under freegold the savings rate will be better than present, but even so not very high, perhaps 10% of society's income?

Working with that, on a continuing basis people would 'save' an aggregate of 90% of their savings in fiat in aggregate. Yes, it would not be on a continual basis for every individual, but taking society as a whole, can you see that if most of our income goes towards expenses, no matter what type of entity you are, and given that fiat is the most efficient way to incur said expenses, that society as a whole would save most of their value in fiat most of the time?

That already would be a factor impacting the velocity of currency.

Furthermore the velocity can be managed by central banks ( just put aside your distaste for both central banks and their meddling - which I share fwiw - for a moment) by use of gold. Anything can be overvalued or undervalued, even gold. If gold is overvalued central banks could sell or buy it and influence velocity, and similarly for if it were undervalued. In essence they could create artificial interest rates for gold by managing people's affinity for either gold or fiat.

There are more factors impacting velocity, such as trust, etc, but the above mentioned is the main tools that could be used in that environment to manage velocity so as to manage the rate of decay of the value of fiat, and all of them impact on the matter of trust.

tmosley Motley Fool
Mar 4, 2013 - 2:03pm

In what way does Freegold

In what way does Freegold rely on the internet? It doesn't. Stay on task. Nothing to do with Freegold couldn't have been implemented two thousand years ago.

You are making a huge assumption that people would save 90% of their money in fiat. Further, I thought the point of Freegold was that people saved in gold. Is this not the case? It seems to me that you are warping Freegold into something else in order to sidestep my criticism. If the people don't save in gold under Freegold, then there is no difference between it and the current system, and there is no point talking about it--it won't save the world because it hasn't.

Further, fiat is in no way inherently more convenient than a gold standard. One can write checks against gold in a bank. If one can write checks, then one can certainly use a debit card. There is no difference in this regard. We just have a highly regulated anti-gold banking system.

Gold can not be overvalued or undervalued. It is the denominator. Fiat currencies can be misvalued, as can goods and services. But there is one constant, and that is gold. This is because of convenience. It is difficult to produce enough gold to significantly effect the market, and there is such a large stock of it that it is hard for prices to rise (ie for the price of goods, services, and fiat) to fall.

Central banks can do nothing to staunch the demand for gold if gold is used for savings. There is simply too much economic output, and the central banks own too little gold compared to what exists in private hands. The private market will swallow anything they can throw at it. This is why price controls NEVER WORK. The banks can try for a while, until they run out, and they have find themselves penniless, and then they collapse. This has happened numerous times throughout all of history.

Trust won't save your system, because no-one trusts the US. They are creeping for the exits as is. China would buy every ounce of gold the US threw at the market, nevermind the Chinese and Indians (people, not the government).

People tend to be arrogant in their thinking regarding the past. Thing is, every financial trick that exists today could have been and WAS worked out numerous times throughout history. The differences we see are superficial. If it has happened, then it can and will happen here. The best we can do is delay it by knowing about it, and making the comparisons to history.

Motley Fool
Mar 4, 2013 - 2:39pm

more to this point

"Gold can not be overvalued or undervalued."

I assume we at least agree that today the gold markets are manipulated to supress gold's true value?

So we both think that the price at present is wrong, and that it will go up to reflect gold's true value once the manipulations collapse, which we both think they will (I think at least we agree here).

So. Err. Yeah. Which is it, can gold be underValued or not?

Motley Fool
Mar 4, 2013 - 2:41pm

"In what way does Freegold

"In what way does Freegold rely on the internet? It doesn't. Stay on task."

What? I was simply pointing out that there are always new things.

"Nothing to do with Freegold couldn't have been implemented two thousand years ago."

Interestingly we find that the perception of gold in ancient mesopotamia is closer to what it will be in freegold, a thing of wealth. Technically I would point out that fiat did not exist 2000 years ago.

"You are making a huge assumption that people would save 90% of their money in fiat. Further, I thought the point of Freegold was that people saved in gold. Is this not the case? It seems to me that you are warping Freegold into something else in order to sidestep my criticism. If the people don't save in gold under Freegold, then there is no difference between it and the current system, and there is no point talking about it--it won't save the world because it hasn't."

Err. There is a differnce between income spent and income saved. I have been pointing this out every time we had this conversation. I have warped nothing, but perhaps I have managed to more clearly convey the concept, which would be nice I suppose.

"Further, fiat is in no way inherently more convenient than a gold standard."

Ok, let me agree that today with instant global communication gold could be made as convenient a transactional currency as fiat. Fine. That is not the reason it shouldn't be used as such though.

"Gold can not be overvalued or undervalued."

Really? :) I offer you $100 dollars for every ounce you own...and you can buy all of mine at $10,000 per ounce.

"It is the denominator."

Big piece of baggage. Tbh it took me a long time to get past that one.

"But there is one constant, and that is gold."

Nope. Sorry, untrue. It would be nice if there were something constant in this world in this regard, but the value of gold is not one of those. Here I suggest you pay really close attention to the subhective value of gold versus real goods, and the level of advancement of society when considering the sweep of history. The facts bear out the change in the value of gold.

"Central banks can do nothing to staunch the demand for gold if gold is used for savings. There is simply too much economic output, and the central banks own too little gold compared to what exists in private hands. The private market will swallow anything they can throw at it. "

Also untrue. Consider the value of the gold held by central banks if priced at $50k ish per ounce. Also consider that they control the volume of currency they put out. Also consider that they do value gold. Also consider that if they keep printing like mad they will have to bleed more and more gold....result, they sell some gold into the demand and lower the amount of currency to stop the bleeding.

"Trust won't save your system, because no-one trusts the US. They are creeping for the exits as is."

Absolutely.

"China would buy every ounce of gold the US threw at the market, nevermind the Chinese and Indians (people, not the government)."

Yes, but it is not all for sale for current prices despite the bankers propoganda and faking that this is the case.

You know in the late 1970's the US actually said they were going to auction off some gold. Demand was so overwhelming they immediately withdrew the offer. They never sold an ounce. The FED also knows the value of gold, even though they try to fake that is is worthless to try and retain some confidence in their confetti paper. I know you won't believe me, but I am certain they are keeping their stockpile as an ace in the hole when their currency finally collapses, as even they know it will ( take into account all the resent preperations and legislation the US has passed to prepare for the collapse of the dollar).

"If it has happened, then it can and will happen here."

Freegold has never happened. It is a evolutionary response in the worldwide economic system that took centuries to come to fruition. Feel free to call that arrogance if you like, but I am a student of history, and I can assure you there has never been anything like it.

Tabberto
Mar 4, 2013 - 3:52pm

Seriously though

Motley you are driving us all nuts with the relentless Freegold droning. It reminds me of the bad old days of watching Gary Kirsten bat for hours and hours with no obvious attempt to entertain....the fact you look like him is a coincidence of course!

Surely a little diversion into alternative subject matter might help you dilute the irritation factor....

Motley Fool
Mar 4, 2013 - 4:04pm

@tabberto

Hmm, well responding to so many people and fending off constant attacks is tiring, so yeah I think I should step back again.

I created this 'identity' to explore my interests in economic concepts. I use others to explore other topics that interest me. I'm sorry that the modular nature of conversation frustrates you.

This is a blog about such things though isn't it. Why would I need to go off topic.

But allright.

Since I like difficult topics, how about another topic that is currently of interest to me :

Fempocalypse!!
Motley Fool
Mar 4, 2013 - 4:12pm

@tabberto

I didnt take it to be one. I took it to be intended as helpful advice. :P

I tend to be serious about serious things, and have my fun with fun things.

I know this isn't completely unrelated to econ stuff, but hey, an attempt at least. ^^

Tabberto Motley Fool
Mar 4, 2013 - 4:13pm

to be clear

that wasnt meant to be an 'attack' per se, i hoped youd see the funny side of my comment!

I do mean it though, its the overly serious approach you take that leads people to jump on you....lighten up, even if you do believe 100% in freegold conceptually (always a mistake to go all in anyway) its always worth taking a few hoiks over cow corner and risking your wicket....fempocalypse sounds scary, will investigate!

Edit: Ive watched a few minutes and she takes herself so seriously i'm nodding off already....back to my latest book, sorry but rather more edifying, although I applaud your attempts to branch out:

https://www.amazon.co.uk/Gladio-NATOs-Dagger-Heart-Europe/dp/1615776877

Motley Fool
Mar 4, 2013 - 4:13pm

@tabberto

I really should buy a new mouse, but damnit i'd rather buy more ammo. :P

Tabberto
Mar 4, 2013 - 4:19pm

interestingly

i think this chat we've had gets to the heart of the motley v turdville issue, which is that we here (am in danger stating 'we' I know but hey ho) have a very strong anarchic and humorous streak which probably doesnt lend itself overly well to really deep economic thinking. You are clearly highly focused and as you say serious about serious things - but I for one am very happy with that looser approach as I fear that any 'certainty' about these matters will 'certainly' become deconstructed and disproven in time anyway. I think being irreverent tends to allow the bigger picture and the interconnectedness of various threads of the overall control grid to emerge more easily - see my book recommendation as an example.

T

Motley Fool
Mar 4, 2013 - 4:26pm

@tabberto

Don't get me wrong, I like quite a lot of the funny images and jokes posted on here. Many make me smile or laugh, such as the advert posted by TF on the other thread. My minds wanders all over, I just don't let that reflect in my posts here, since I can be very focussed when I want to be, as you have no doubt noticed. Lmao.

I simply...idk, time is so precious, I try to make some to smile about the good and funny thing in life, but also as it continually slips away I try and waste as little as possible.

I saw your book recommendation. All I can say is wow. A few years ago I was also in that dark dark place, where TPTB are out to get us. Nowadays not so much. FG helped with changing this (sorry I know, I know). Deeper perspective leads to a more fullfilling life I have found, so I seek truth wherever it may be found.

Tabberto
Mar 4, 2013 - 4:34pm

Truth is found everywhere MF

and that book has nothing to do with TPTB being out to get us - that has always been the case back to Babylon and beyond, it just happens to be a treasure trove of detail on how and who, helps join the dots. FWIW my view is that being awake and aware of how things truly work brings light rather than what you describe as a 'dark dark place'. This book (am only 2/3rds of the way through) led me to watch the film 'Il Divo' yesterday evening which was simply fantastic, both as a piece of art and as commentary on political machinations, i give it a 5* recommendation

tmosley Motley Fool
Mar 4, 2013 - 5:11pm

There are always new things,

There are always new things, but the things people use for money never change from a few potential systems.

Yes, there was fiat 2000 years ago. It just wasn't made out of paper. The Spartans used iron. The Chinese used bronze. Others used other things. The governments that issued such money tried to keep the purchasing power of that money higher than the scrap value, and universally failed.

Yes, there is a difference between spending and saving income. What does this have to do with what I said? Does Freegold require savings in gold or doesn't it? If it doesn't, then what is the difference between that and any fiat system? Just that capital gains on gold are not taxed?

Gold can't be over or undervalued. Your bid of $100 for an ounce of gold overvalues your fiat, while your offer of $10,000 for an ounce of gold undervalues the market price of fiat. You can try to trade things for gold on unreasonable terms, but the unreasonable terms are on the price of what you are trading for the gold, not the gold itself. This is simply something done for the sake of convenience, and it works. There is no reason to allow children with Harvard Econ PhDs to subvert this thinking.

The march of technological advance has decreased the price of goods in terms of gold. There has been no effect on the price of gold, as gold is priced in terms of itself. Perhaps one day we will be able to replicate gold with minimal energy input, changing the nature of the universe such that gold is no longer the most convenient denominator, but that hasn't happened, and likely won't for a very long time.

You assume that central bankers believe in real economic laws. They do not. They could do what you suggest now--stop printing money, but they won't, for political reasons. Those same reasons would cause them to drain the treasury of gold under both your Freegold and a federally imposed gold standard. The only thing that could stop it would be public outcry, which can be easily averted with more public spending until the gold runs out and everything blows up. This is what has happened throughout history.

Yes, if there has never been anything like it, and there is no technological barrier that might be overcome in the future to enable it, then it will never happen. I don't think you realize just how long history is. It is littered with every imaginable scheme to try to enable the creation of purchasing power from nothing, and every time it has blown up in the faces of those who tried them. The longest lasting empires lasted for one reason, and one reason only--they had the freest gold standards, which were characterized by circulating specie of defined purity. That is Byzantium, which lasted for 1200 years in the East. 1500 if you count the time they were in Rome. The dismantling of the gold standard or exhaustion of the national treasury preceded the fall of each as well.

tmosley Motley Fool
Mar 4, 2013 - 5:15pm

For your second reply--fiat

For your second reply--fiat is overvalued. As a result, labor is also significantly overvalued. This approaches a tautology, given high unemployment.


Mar 4, 2013 - 5:51pm

Oui, we

You certainly speak for me when you praise irreverence and talk of fearing 'certainty'.

Karankawa
Mar 5, 2013 - 2:41am

Just an update to what I think is a disussion

https://www.youtube.com/watch?feature=player_embedded&v=BS3H6Cakwpw#

Regardless whether it fit on not. It a sign of change that has been happening for a long time.

The rights of Katie to have her goats are the rights we must all stand up for.

Karankawa
Mar 5, 2013 - 3:30am

What happened to XTY's post

I read it and was going to reply, but I've searched the threads and it's gone ...

Motley Fool
Mar 5, 2013 - 6:50am

@tmosley

I will need to wrap up this discussion fairly soon, which I think will make sense when you see the comment I intend to put up later in main discussion. I will continue this discussion publicly, since it may be of some benefit to others.

Right. So.

"Yes, there is a difference between spending and saving income. What does this have to do with what I said?"

I think for the purpose of this discussion it might be of use for me to define saving in a manner you may not be familiar with. I think doing so may assist in resolving differences.

Hmm.

Saving : The act of storing value in a medium for a specfic amount of time with the intent to reclaim said value later in usage.

This definition lends itself well to any type of medium, gold, silver, canned spam, fiat currency, anything really.

Now I know that not all mediums are equal stores of value, and some have value leakage, but let's disregard that aspect to stick to my point.

There is a point to all this preamble of course.

Consider the travels of a single currency note. I buy bread from a baker, he uses it to pay his supplier, who uses it to pay a company that installed a oven for him, that I happen to work for and that pays me a salary. A salary I use to buy bread. At all points in time that note is held by someone, who is for a period, storing value in it.

This is what I meant that in aggregate, value is stored in currency, even when used only for expenditures, if by different entities at differnt times.

Surely you agree that for most of us entities, the bulk of our incomes go towards expenses. Again such storage is not flawless, but it is fairly functional, as evidenced by society today, where despite vastly complex production processes, everyone is able to buy pretty much whatever he likes, whenever he likes.

"For your second reply--fiat is overvalued."

Value does not exist in a vacuum. It is judged by the person who does the valuing and in comparison to other things. If you say fiat is overvalued (relative to gold) I do not disagree, but would note it is a comparison simply of the relative values of the two. As such saying one is undervalued or the other is overvalued is simply a matter of prespective. It means the same thing about the direction the ratio of the two is likely to take, ceteris paribus.

"Does Freegold require savings in gold or doesn't it?" Require...no? But expects it to happen because it will make a hell of a lot of sense, sure. But require...idk that sounds like 'force' to me. Freegold would not force you not to be stupid and save in idk day old bread. You are free to be stupid, and pay the consequences.

"There has been no effect on the price of gold, as gold is priced in terms of itself."

You cannot price gold in itself. Value is a comparison made by active intelligence between two different things. Valuing gold in itself is self-referential and thus meaningless. That would be the same as saying 'a gram is a gram', it tells you nothing about what a gram is, or it's relation to anything else. It is simply a tautology with no meaning or purpose.

"They could do what you suggest now--stop printing money, but they won't, for political reasons."

Quite correct, and this also is why freegold will happen, because they will have no choice, for political reasons.

" Those same reasons would cause them to drain the treasury of gold under both your Freegold and a federally imposed gold standard."

I disagree, but am not going to get into that here. A question though...did they drain their gold reserves in 1971, they certainly threatened to defend the dollar to the last bar, but look at their actions. Yes there is political will at play here, but it may not be what you think.

" I don't think you realize just how long history is."

Another thing I don't really want to get in too. Sure it is hard to imagine the span of history, just like it is the size of the universe, and there have been almost inumerable hare-brained schemes. Yet, I have looked at the use of gold in human affairs since man first discovered it, based on the available information, and the reasons for that success is why I think freegold is so great. It will likely outlast that 1500 year span, barring we don't destroy ourselves in the meantime, and what a glorious meritocracy it will be - smiles wistfully-.Someone will always think up new things. (For a paper based example relating to economics, since you didn't like the internet, how about derivatives...absolute stupidity manifest for 20 or so years, never been seen before. ;) )


Mar 5, 2013 - 12:22pm

velocity of paper is a problem

It isn't gold that you will need to force people to own, it is fiat that will be like a hot potato.

Motley Fool
Mar 5, 2013 - 1:38pm

Nope

We discussed velocity and the factors impacting it earlier.

The answer is not really, due to the way in which people functionally logically use their incomes.

Let us say at some volume of currency X and some volume of GDP Y the velocity is some multiple Z which is deemed too low. Then by adjusting the currency base, and gold base that velocity can be altered.

Let's assume a functiona equilibrium is reached...at that point is is simply a matter of keeping the currency base in line with the needs thereof and the growth in the economy and the flow of capital goods inclusing of gold, gold of course being the final and ultimate form of such capital goods moving.

The problem is tractable, as evidenced by it being functional today in a much less stable system.

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