While the prices of gold and silver take a beating in the futures market, two weeks out from the wanton slaughter (8/11) and a week since the infamous Money Daily post declaring their historic comeback (8/18), the past week has seen a nearly continuous dilution in the price of both metals, for no apparent good reason.
Gold and silver continue to be in high demand and short supply. Perhaps the supply issues are not as pronounced as they were at the start of the COVID-19 pandemic scare, but they are still pre-eminent, demonstrated by continued high dealer premiums, quantity limits, and shipping delays. It's been a harrowing time for dealers trying to keep up with demand while at the same time attempting to stay profitable. Wild price swings render their operations unwieldy and difficult. Stability might serve them - and the buying pubic - better.
As the prices of both metals soared and then soured, the question of value has to come to mind, if only to allay fears that recent buying might not be found to be in vain. Buyers from dealers and open markets such as eBay are still paying premiums, and those open market buyers are getting delivery at a faster pace. Price is always and everywhere a prime consideration, so seriously, how much is an ounce of gold really worth?
For the purposes of this exercise - the first of its kind (with hopefully many more to come) - let's put aside the arguments over the inflated value of fiat currencies and other considerations centered on floating values as are the major currencies in use today. They are a measurement tool for now. Nothing more, nothing less, and are handy for the purpose of determining a price point for gold, and by extension, everything.
The world's know gold supply is roughly 200,000 tons. That's a rough estimate, but useful, even if somewhat inaccurate, in this arguably simplistic quest for valuation. 200,000 tons is equivalent to 6,400,000,000 (six billion, four hundred thousand) ounces. One ton equates to 32,000 ounces, and that's standard, not troy, but the numbers are good enough for this exercise. That's roughly how much gold has been mined and is in somebody's hands, or in vaults, central bank reserves, etc.
Now, there are nearly eight billion people living on planet Earth. That's a number that can change, and with it, so too should the price of gold. If the natural path of civilization - or, what's left of it - continues, the gorwth of the world's population is calculable and that should be a contributing factor to pricing gold because in the end, it's people who should own gold, especially if it's going to be regarded as currency, and, yes, it should be global.
So, we have 6.4 billion ounces of gold and 7.8 billion people, which is not enough gold for even every person to own one ounce. If that should become a standard (1 ounce per person), that would necessitate using a divisor to determine price and that same divisor could be and should be adjusted at some set schedule, be it continuously (a dangerous prospect, prone to manipulation and gaming) or monthly, quarterly, or annually.
It should be kept in mind that gold production will also increase the amount of proven gold above ground, so it is possible that the divisor would be somewhat constant, as gold production - as we can clearly see from the numbers - roughly keeps pace with population growth.
In an entirely egalitarian environment, everybody would have one ounce of gold. When a person died, that ounce would be handed down to the next newborn, and that process would be repeated constantly, globally. While that's an impractical scenario, it serves the purpose of this experiment.
So, the divisor for one ounce of gold per person on the planet would be a single, simple equation, the number of ounces of gold, divided by the global population, or, presently, 6.4(B)/7.8(B) = 0.82.
The next step would be to determine at what level - in some currency, be it yen, euro, dollar, pound, etc. - an ounce of gold would be reasonably worth.
Let's arbitrarily determine that human life is worth something, anything, remembering that fiat currencies are wildly inflated in value as opposed to purchasing power. Let's say an ounce of gold would be equivalent to a down payment on a modest, 1000 square foot house and let's assume the price of such a house in the US would be $100,000, requiring a 20% down payment, or $20,000.
Then, we take our completely arbitrary figure of $20,000 and apply the divisor, thus ($20,000 X 0.82) to arrive at a price for one ounce of gold. Our result is $16,400, and that price would then be the global standard which could be used as a determinant for everything else, such as silver, which, using one of the time-honored ratios of either 16:1 or 12:1 or even 10:1, depending on how one calculates the overground global supply of silver, would be either $1025, $1367, or $1640, respectively.
Bear in mind that this is just a mind exercise. It does not mean that gold should be $16,400 an ounce or that silver should be $1000 an ounce or anything else. It does point up that gold at $2000 and silver at $26 per ounce seems a bit on the short side. Using our derived method, at that price, one would be putting down $2000 on a house with a value of a mere $10,000, which might be enough for a shanty hut in the outer regions of Indonesia, but hardly suitable for living quarters in New York city, Marseille, France, or even rural Iowa.
Of course, there can be more variables, or other determinants. One could calculate the price of gold as compared to the price of a live chicken, for example, or use any other widely-used commodity as a relation. What's a hammer priced in gold? A watch, an iPhone, a window, a fattened cow... The possibilities are endless, but what's essential is some form of standard beyond faith in a floating currency which has no intrinsic value. We could have a gold-iPhone standard, a chicken-gold standard, even a acreage-silver standard.
A straight gold standard with silver as a useful currency is reasonable and actually practical.
Hope you enjoyed this little experiment. Arguably, this exercise was done hastily and with many arbitrary and changeable numbers. There could be errors, but the point is that a better means must be devised for valuation of all things. The era of fiat money, created out of thin air, at interest, is coming to an end. It is imperative that some other form of measurement be established to bring global order. Gold serves this purpose as an ultimate arbiter of value, given that a reasonable and reliable value can be put upon it itself.
Come back soon. This was hopefully illustrative and promise to do more.
At the Close, Monday, August 24, 2020:
Dow: 28,308.46, +378.13 (+1.35%)
NASDAQ: 11,379.72, +67.92 (+0.60%)
S&P 500: 3,431.28, +34.12 (+1.00%)
NYSE: 12,972.88, +163.81 (+1.28%)
Showing posts with label gold standard. Show all posts
Showing posts with label gold standard. Show all posts
Tuesday, August 25, 2020
Wednesday, May 31, 2017
A Brief Look at the Fall of the Roman Empire and Comparisons to America
This is simply priceless.
Just after the market open (9:45 am ET), Chicago PMI was reported at 55.2
A couple of hours later (after the Dow was down 87 points):
So, not only do US (and, by way of inference, all other equity markets, globally) equity markets have the backstopping mechanism of central banks buying stocks, and the Plunge Protection Team at work, but now routine data releases are changed when they don't exactly fit the narrative.
Fake news, fake money, fake boobs, fake everything. Better check your pulse. It may be fake and you are actually dead.
These's only one way to report on finances anymore, with tongue planted firmly in cheek.
A major reset is coming. The sustainability of the current construct probably has a pretty short shelf life. However, in financial and historical terms, that could be months, years or decades. The fall of the Roman Empire was a slow-motion wreck that took over 300 years, roughly from 117 AD to 476.
Wikipedia has an interesting opening line on the Fall of the Western Roman Empire:
Note the wording, "failed to enforce its rule..." which would coincide roughly with the greatest fiasco related to the most recent election campaign, wherein FBI director James Comey laid out specific crimes by Hillary Clinton, but concluded that "no reasonable prosecutor would bring charges." Add to that the short meeting between former president Bill Clinton and then-Attorney General Loretta Lynch on the tarmac of the Phoenix airport just a few days prior to Comey's televised statement and you have a textbook case of "failing to enforce its rule."
So, the fall of the American empire may be in its earliest days. You can breath a sigh of relief now.
Well, maybe not.
Looking at the decline of Rome another way would be to examine its currency, which was gold and silver. The devaluation of the currency predates the earlier given date of the beginning of the fall at 117, when Emperor Nero fiddled with the silver content in the denarius, reducing it from 100% silver to 85%, during his reign from 54-68 AD. By the time Emperor Severus ruled (193-211 AD), the coinage was down to 50% silver. Eventually, Roman coins would contain less than 1% silver or none at all.
From that perspective, we could be almost at an end. These days, life moves faster than it did in Roman times. Romans didn't have instant communications, computers, cell phones or any of the "essentials" which we today take for granted. Consequently, technology has made it possible for everything outside of nature (animals, climate, insects, geology, etc.) to move at a much faster pace.
Thus noted, the American empire may be collapsing much faster than mainstream economists are willing to admit. The US Mint stamped its last gold coin in 1932. It stopped 90% silver coinage in 1964. Nixon took the US off the gold standard in 1971. Since then, our money has had no backing beyond the "full faith and credit" of the federal government, which, as many are now aware, has overextended its credit, causing a severe loss of faith by its loyal subjects (eh, that would be us, homey).
It's probably close to a majority of people living today in the United States which are clueless concerning the value of their currency, which is basically the paper upon which is printed numbers, words, pictures of dead presidents, and other indicia of America's greatness. Anybody born in 1971 would be 46 or 47 now; anybody born after that date would be, obviously, younger. All of those people have been living in a world of fiat currency, backed by absolutely nothing except empty promises from a federal government which can't balance its own books.
Making matters worse, US currency (or legal tender, to be correct) may be technically unconstitutional. The arguments concerning the constitutionality of the Federal Reserve to print paper money - granted that right by Congress in 1913 - are vague, various, contentious, and too deep for this limited discussion. But, a great many people have and some still do believe that money not backed by gold or silver or some other base commodity is, well, garbage.
104 years of the Federal Reserve ruining our economy has devalued the US dollar by 98%. So, where are we headed?
On the other hand, perhaps modernity consists of allowing such counterfeiting and fakery by central bankers and the tacit approval of the populace. In other words, don't rock the boat, keep with the status quo; the modern mores and normalcy bias will prevail. In that regard, Americans are a pretty complacent bunch, like the traders, movers, and shakers of Wall Street. We all go along to get along, or, in the words of a Russian during the Soviet era, "we pretend to work, and the government pretends to pay us."
We're deep down the rabbit hole, folks, and it appears that we're going deeper.
BTW: No "window dressing" on the final day of the month. Also, hat tip to Zero Hedge for inspiring this article.
At the Close, 5/31/17:
Dow: 21,008.65, -20.82 (-0.10%)
NASDAQ: 6,198.52, -4.67 (-0.08%)
S&P 500: 2,411.80, -1.11 (-0.05%)
NYSE Composite: 11,598.03, -3.28 (-0.03%)
Just after the market open (9:45 am ET), Chicago PMI was reported at 55.2
U.S. Midwest factory activity index retreats in May - Chicago PMI
NEW YORK U.S. Midwest manufacturing activity fell more than forecast in May from its strongest level in more than two years, an index jointly developed by MNI Indicators and ISM-Chicago released on Wednesday showed.
A couple of hours later (after the Dow was down 87 points):
Updated: Chicago PMI Increases in May
Earlier, the Chicago PMI was reported at 55.2. That has now been corrected to 59.4. This was above the consensus forecast.
So, not only do US (and, by way of inference, all other equity markets, globally) equity markets have the backstopping mechanism of central banks buying stocks, and the Plunge Protection Team at work, but now routine data releases are changed when they don't exactly fit the narrative.
Fake news, fake money, fake boobs, fake everything. Better check your pulse. It may be fake and you are actually dead.
These's only one way to report on finances anymore, with tongue planted firmly in cheek.
A major reset is coming. The sustainability of the current construct probably has a pretty short shelf life. However, in financial and historical terms, that could be months, years or decades. The fall of the Roman Empire was a slow-motion wreck that took over 300 years, roughly from 117 AD to 476.
Wikipedia has an interesting opening line on the Fall of the Western Roman Empire:
The Fall of the Western Roman Empire (also called Fall of the Roman Empire or Fall of Rome) was the process of decline in the Western Roman Empire in which it failed to enforce its rule, and its vast territory was divided into several successor polities.-emphasis Money Daily
Note the wording, "failed to enforce its rule..." which would coincide roughly with the greatest fiasco related to the most recent election campaign, wherein FBI director James Comey laid out specific crimes by Hillary Clinton, but concluded that "no reasonable prosecutor would bring charges." Add to that the short meeting between former president Bill Clinton and then-Attorney General Loretta Lynch on the tarmac of the Phoenix airport just a few days prior to Comey's televised statement and you have a textbook case of "failing to enforce its rule."
So, the fall of the American empire may be in its earliest days. You can breath a sigh of relief now.
Well, maybe not.
Looking at the decline of Rome another way would be to examine its currency, which was gold and silver. The devaluation of the currency predates the earlier given date of the beginning of the fall at 117, when Emperor Nero fiddled with the silver content in the denarius, reducing it from 100% silver to 85%, during his reign from 54-68 AD. By the time Emperor Severus ruled (193-211 AD), the coinage was down to 50% silver. Eventually, Roman coins would contain less than 1% silver or none at all.
From that perspective, we could be almost at an end. These days, life moves faster than it did in Roman times. Romans didn't have instant communications, computers, cell phones or any of the "essentials" which we today take for granted. Consequently, technology has made it possible for everything outside of nature (animals, climate, insects, geology, etc.) to move at a much faster pace.
Thus noted, the American empire may be collapsing much faster than mainstream economists are willing to admit. The US Mint stamped its last gold coin in 1932. It stopped 90% silver coinage in 1964. Nixon took the US off the gold standard in 1971. Since then, our money has had no backing beyond the "full faith and credit" of the federal government, which, as many are now aware, has overextended its credit, causing a severe loss of faith by its loyal subjects (eh, that would be us, homey).
It's probably close to a majority of people living today in the United States which are clueless concerning the value of their currency, which is basically the paper upon which is printed numbers, words, pictures of dead presidents, and other indicia of America's greatness. Anybody born in 1971 would be 46 or 47 now; anybody born after that date would be, obviously, younger. All of those people have been living in a world of fiat currency, backed by absolutely nothing except empty promises from a federal government which can't balance its own books.
Making matters worse, US currency (or legal tender, to be correct) may be technically unconstitutional. The arguments concerning the constitutionality of the Federal Reserve to print paper money - granted that right by Congress in 1913 - are vague, various, contentious, and too deep for this limited discussion. But, a great many people have and some still do believe that money not backed by gold or silver or some other base commodity is, well, garbage.
104 years of the Federal Reserve ruining our economy has devalued the US dollar by 98%. So, where are we headed?
On the other hand, perhaps modernity consists of allowing such counterfeiting and fakery by central bankers and the tacit approval of the populace. In other words, don't rock the boat, keep with the status quo; the modern mores and normalcy bias will prevail. In that regard, Americans are a pretty complacent bunch, like the traders, movers, and shakers of Wall Street. We all go along to get along, or, in the words of a Russian during the Soviet era, "we pretend to work, and the government pretends to pay us."
We're deep down the rabbit hole, folks, and it appears that we're going deeper.
BTW: No "window dressing" on the final day of the month. Also, hat tip to Zero Hedge for inspiring this article.
At the Close, 5/31/17:
Dow: 21,008.65, -20.82 (-0.10%)
NASDAQ: 6,198.52, -4.67 (-0.08%)
S&P 500: 2,411.80, -1.11 (-0.05%)
NYSE Composite: 11,598.03, -3.28 (-0.03%)
Monday, August 15, 2011
40 Years After Nixon Killed the Gold Standard, The Great Sucker Rally of 2011
Those savvy traders who toil at their computer screens, doping out the finest of five-minute investments, went at the markets today like the economy was in the midst of a major boom, sending the Dow up by more than 200 points and all major indices back to levels prior to the careening downshift from August 4th.
Like it never even happened...
Like there's no debt crisis in Europe. Like the US debt to GDP ratio isn't close enough to 100%. Like the unemployment rate isn't 9.2% (really, upwards of 17%).
Supposedly, according to experts at these kinds of things, this is what the Fed was saying when it pegged federal funds rates at zero percent last Tuesday - that treasuries and savings were for fools and that the only way to make money was to invest in risky assets, like stocks.
It just so happens that today is the 40th anniversary of then-President Nixon closing the gold window, and setting global economies off on a fiat money adventure, wherein currencies are backed by nothing but "good faith and credit" of sovereigns, and nothing more. Whatever hell in which Richard M. Nixon is currently residing, one hopes that the flames are hot enough to toast his dead bones to a crisp, because, more than anything else, taking the US - and thus, the world's reserve currency, and thus, all other currencies - off the gold standard in 1971 has created the gross inequalities in income levels and the bankster/crook/casino mentality that pervades capital markets today.
Nixon destroyed the concept of sound money and replaced it with a world of volatile, floating currencies, mountains of debt and middle class wage slavery. If anyone asks who caused the great collapse of currencies and the three-year financial mess that the world is currently embroiled in, tell them, "Nixon did it," because he started it all (and maybe, when people wake up to reality, they'll elect Ron Paul president to undo it).
Traders (not investors) took to the market like hungry wolves right out of the gate, ignoring the August Empire State Manufacturing Index, which delivered the third straight month of negative readings, coming in at -7.7, an hour prior to the opening bell. It was the third straight month the index came in below zero, which indicates that the economy of NY state has been contracting since May.
Well, it's just one state, like Greece, and Italy, and Portugal and France, are each just one country. But, if New York is contracting, you can bet other states are doing similar, or just barely expanding. Besides, New York is one of the biggest states, by population, 4th in the US.
No problem. Just move along, the government will fix all the bad economic data that's coming out this week, including industrial production, capacity utilization, new and existing home sales, PPI and CPI. Besides, Ben Bernanke has made it very clear that the only place to put your money to work is in equities (oh, and oil), not bonds, or gold or silver.
As CNBC's chief cheerleader, Jim Cramer, would say, BUY, BUY, BUY.
Dow 11,482.90, +213.88 (1.90%)
NASDAQ 2,555.20, +47.22 (1.88%)
S&P 500 1,204.49, +25.68 (2.18%)
NYSE Composite 7,482.71, +178.83 (2.45%)
Stock winners beat losers by a count of 5737-970, in a broad-based beat-down. On the NASDAQ, new lows continued to outnumber new highs, 49-14. The opposite was true on the NYSE, with 11 new highs and just six (6) new lows. The combined total of 25 new highs and 55 new lows, still retains a modest downside bias.
Volume returned to more pedestrian levels after the ridiculous wind and unwind of the previous seven sessions.
NASDAQ Volume 1,915,922,250
NYSE Volume 4,952,016,500
Oil caught a bid, gaining $2.50, to $87.88. With any luck, the speculators and oil barons controlling the futures markets will have it back to $100/barrel by Labor Day. In case nobody's noticed, even though oil is well off it's highs around $100 just three weeks ago, prices at the pump have barely budged. The oil companies say that's because the gasoline already delivered was bought at a higher price and has to be sold at a higher price. When that runs out, and gas can be bought lower, then prices will come down.
Yeah, sure. AAA reports the national average for a gallon of unleaded regular at $3.594 per gallon, down about a nickel from July 22nd, when oil began to slide.
Gold and silver suppression schemes seem to be running out of fuel, however. Gold gained $15.40, to $1,758.00, while silver was up 19 cents, at $39.31.
On Tuesday, a slew of data hits the street, though it will mostly be ignored since there is no other way to make money than by buying stocks.
Finally, below is a video (ain't technology great?) of Richard Nixon forty years ago today, dissembling, in his own beautiful, self-destructive way, in front of the entire world. Enjoy.
Like it never even happened...
Like there's no debt crisis in Europe. Like the US debt to GDP ratio isn't close enough to 100%. Like the unemployment rate isn't 9.2% (really, upwards of 17%).
Supposedly, according to experts at these kinds of things, this is what the Fed was saying when it pegged federal funds rates at zero percent last Tuesday - that treasuries and savings were for fools and that the only way to make money was to invest in risky assets, like stocks.
It just so happens that today is the 40th anniversary of then-President Nixon closing the gold window, and setting global economies off on a fiat money adventure, wherein currencies are backed by nothing but "good faith and credit" of sovereigns, and nothing more. Whatever hell in which Richard M. Nixon is currently residing, one hopes that the flames are hot enough to toast his dead bones to a crisp, because, more than anything else, taking the US - and thus, the world's reserve currency, and thus, all other currencies - off the gold standard in 1971 has created the gross inequalities in income levels and the bankster/crook/casino mentality that pervades capital markets today.
Nixon destroyed the concept of sound money and replaced it with a world of volatile, floating currencies, mountains of debt and middle class wage slavery. If anyone asks who caused the great collapse of currencies and the three-year financial mess that the world is currently embroiled in, tell them, "Nixon did it," because he started it all (and maybe, when people wake up to reality, they'll elect Ron Paul president to undo it).
Traders (not investors) took to the market like hungry wolves right out of the gate, ignoring the August Empire State Manufacturing Index, which delivered the third straight month of negative readings, coming in at -7.7, an hour prior to the opening bell. It was the third straight month the index came in below zero, which indicates that the economy of NY state has been contracting since May.
Well, it's just one state, like Greece, and Italy, and Portugal and France, are each just one country. But, if New York is contracting, you can bet other states are doing similar, or just barely expanding. Besides, New York is one of the biggest states, by population, 4th in the US.
No problem. Just move along, the government will fix all the bad economic data that's coming out this week, including industrial production, capacity utilization, new and existing home sales, PPI and CPI. Besides, Ben Bernanke has made it very clear that the only place to put your money to work is in equities (oh, and oil), not bonds, or gold or silver.
As CNBC's chief cheerleader, Jim Cramer, would say, BUY, BUY, BUY.
Dow 11,482.90, +213.88 (1.90%)
NASDAQ 2,555.20, +47.22 (1.88%)
S&P 500 1,204.49, +25.68 (2.18%)
NYSE Composite 7,482.71, +178.83 (2.45%)
Stock winners beat losers by a count of 5737-970, in a broad-based beat-down. On the NASDAQ, new lows continued to outnumber new highs, 49-14. The opposite was true on the NYSE, with 11 new highs and just six (6) new lows. The combined total of 25 new highs and 55 new lows, still retains a modest downside bias.
Volume returned to more pedestrian levels after the ridiculous wind and unwind of the previous seven sessions.
NASDAQ Volume 1,915,922,250
NYSE Volume 4,952,016,500
Oil caught a bid, gaining $2.50, to $87.88. With any luck, the speculators and oil barons controlling the futures markets will have it back to $100/barrel by Labor Day. In case nobody's noticed, even though oil is well off it's highs around $100 just three weeks ago, prices at the pump have barely budged. The oil companies say that's because the gasoline already delivered was bought at a higher price and has to be sold at a higher price. When that runs out, and gas can be bought lower, then prices will come down.
Yeah, sure. AAA reports the national average for a gallon of unleaded regular at $3.594 per gallon, down about a nickel from July 22nd, when oil began to slide.
Gold and silver suppression schemes seem to be running out of fuel, however. Gold gained $15.40, to $1,758.00, while silver was up 19 cents, at $39.31.
On Tuesday, a slew of data hits the street, though it will mostly be ignored since there is no other way to make money than by buying stocks.
Finally, below is a video (ain't technology great?) of Richard Nixon forty years ago today, dissembling, in his own beautiful, self-destructive way, in front of the entire world. Enjoy.
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