Gold...$300?

[cottonpicken]

more short history



http://charts3.barchart.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym= DXH9&data=H&code=BSTK&evnt=adv

http://charts3.barchart.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym= GCG9&data=H&code=BSTK&evnt=adv

Take the graph out a hundred years and you would really puke.

[TOM4CWB]

C.P.;

The changes in value, needed to have monetary 'liquidity' replace lost value.

Real estate worth $1M on Jan 1/07... became worth $500K on June 1/08.

1/2 the investment is gone.

Banks normally are required to have their 'balance statement' balance... to remain 'solvent'.

If a bank lost funds... that came from the fed... and it is forgiven and just counted as a retraction in monetary supply... that is one thing.

It is quite another issue when Wall Street investment banks created the currency... with investors as the back stop.

When the investment bank... looses 1/2 the value through deflation and losses in the real estate market... and then the investor asks for their money back from wall street investment banks...

Bingo... half of their money is missing... and the investment bank is bankrupt.

The 'TARP' and fed loans... are just trying to balance banks balance sheets... so they can remain solvent.

The money supply available to the general public has shrunk by 90% in some cases in reports I saw.

Canada is VERY different.

In our own farms case... we doubled our credit lines over this past spring and summer. If this credit had not been available... we would have either had to stop doing business... or liquidate assets. In the normal case of business... our loans are all paid back... and the Bank of Canada... gets the monetary supply back... or it goes to another business that needs the credit.

If there is no credit... we are up the creek. In the US... that is the problem... the banks need the bailout money to balance the losses caused in the real estate markets... to maintain solvency.

C.P.;

I really think the monetary supply will be sopped back up (by the fed)... when confidence returns to the financial system... and real estate markets stabilise.

Money is simply a fluid tool... to lubricate the economy... if there is no lubrication... when it is required... it seizes up!

C.P.; If all your credit lines were pulled... and you couldn't borrow any money (even though you had $10M of assets)... would your business continue to function if you needed $500K to put the crop in 2009?

What is actually wrong with creating the $500K to allow you to put the crop in this spring?

In turn... why should this cause Gold to be worth $2000 instead of $300?

[cottonpicken]

Good points.

But the value of a house does not change money supply.Somebody paid a million and that million is in the system.

The fed ultimatley does not want to soak up that money.The system needs to be continually inflated or it will completely collapse.

The real "problem"is that it needs ever increasing rates of inflation.It is geometrical growth.

Einstein even said the most powerful force in the universe was compound interest.

Now we come to the prediction part,what will happen?
Do we implode now with deflation?
Or a little while from now with inflation?

[classicalliberal]

I know that gold has been used as a currency standard in the past but why has it? Isn't it just an arbitrary commodity like coal or wheat (tell that to the CWB). I am just wondering why the significance in gold? The point is that people think it is valuable which is the same as money. People think it is valuable. Actually, it is illegal for anyone to refuse coin or paper dollars in Canada as payment of debt.

[jensend]

two reasons gold is used as a standard - relatively rare, not inflationary and physically stable, doesn't deteriorate over time. no more intrinsically valuable than tulip bulbs but people have determined it will be used. it's just as big a hoax as fiat currencies except that people generally accept it as valuable.

[liberty]

As if to confirm my belief that the Federal Reserve is now openly running a casino instead of a central bank, I just read on the Daily Reckoning that the Fed recently announced that it will even consider making low interest loans to hedge funds!

This is absolutely nuts. The U.S. dollar is finished as a reserve currency.

[gregpet]

It comes down to peoples perception and what they are used to. Gold has always been used in the past much like US dollar is used to trade different commodities. Why the US $, why not the Euro which has more value? Gold only has the perception of value. CP, if you had all the gold in the world would you be the richest person in the world? Answer, only if other people value it and want it. Otherwise, if no one else wants it it is worthless.

[TOM4CWB]

Cottonpicken;

"Somebody paid a million and that million is in the system."

Unless the person who got the million actually saved it...in cash... it too has deflated to 50% of its previous value...

EVEN In India, China, the Asian Tigers... even they... when they bought our grain on contract at 50% more last summer... now have deflated.

Fertiliser... now worth half of what it was worth... zzap... the money is GONE.

This has sucked up massive amounts of the money supply...!

There is a very fine line to walk... and many agree that unless carefully managed... inflation from too much money supply... will be a problem at some point... if the fed does not mop the excess back up!

To have the mideast countries... in the shortage of money supply... the same as us... shows just how fast things can turn around!

Russia has virtually lost everything it gained in money supply over the past 3 years... when it zapped Georga... and crashed its stock market.

So there is value sopped up in gold... right now... BUT...

If the IMF/central banks want to deflate monetary systems.... which it does not want to right now... (oil/grain has does a huge job of the already) what do you think they would do... C. P. ?

[cottonpicken]

I double dare all of you to go down to the bank or coin shop and buy a one ounce gold coin.

You will understand in a heart beat why it is an exeptable form of payment.

Then think about the amount of time and energy(blood,sweatandtears) it takes to obtain one ounce.

Then consider that in all of human history the amount of all the gold ever mined fits into a fifty footxfifty footxfifty foot block.Enough to fill an average house.


Then consider that the price of copper has fluctuated relitive to the price of gold.And that the price ratio of copper to gold is ruffly that of its availibility in the earths crust.

I honestly urge you to hold an ounce in your own hand,the weight to size ratio alone is worth the experience.Then you will relize why the earth choose this substance over others,without even talking about it.

[gregpet]

Like I said it's only worth something if someone else wants it. What has more value to someone starving out in the middle of Africa. Food or gold? Clean water to drink or gold? Gold is worthless if they have no one to buy it from them. It is all perception and the only reason gold is valued in this way is a result of tradition. it has always been used.

PS, CP my wife values her platinum rings more than gold or white gold. Platinum, much rarer and expensive. Why not platinum, just because? or personal preference/history/tradition...

[classicalliberal]

Lower interest rates definately inflates asset prices in the long-run because investors seek greater returns an buy assets. When this economy turns around, I can forsee another bull run in the future which will include grains. Anyone with extra cash to burn, which I'm sure not many people have, should be buying oil six months to a year in advance because I can't see it staying low like this. Inflationary pressures will likely take place and the central bankers will increase interest rates and lower the money supply.

[cottonpicken]

Greg,do think before you talk?

I love platnium,pallidium,uranium,rhodium,copper and could talk for hours on the subject.

Gold "standardizes" the price of all these things and everything else.

When the us was on the gold standard the cost of a loaf of bread stayed the samish for two hundred yearsish.

Look up what the price has done in the past hundred.That is how inflation punishes the savers.

Platnium is ten times rarer than gold but as of today is the same price.

So whats the catch?

I cant find any to buy and dont feel like investing in the russian mining sector.But the one north american junior is interesting as well as the one resource mining company that has a cobalt deposit.Cant go to war without cobalt.

[gregpet]

CP, read then think. I said gold is used because it has been the default in the past. It doesn't matter what a person 'likes' it matters what is valuable to a person.

[gregpet]

Lately, last 30 years, has gold been the standard of the US dollar?

[cottonpicken]

And thats why it was 35 dollars 30 years ago.