Posted on 12/06/2005 11:25:43 PM PST by Capitalism2003
December 5, 2005
The market price for an ounce of gold rose to over $500 last week, a significant milestone for economists watching precious metals and commodities markets. The last time gold topped $500 was December 1987, in the wake of the “Black Monday” stock market collapse earlier that fall.
Gold prices historically rise when faith in paper currencies erodes, as investors seek the intrinsic value of gold to protect themselves from inflation. It’s interesting to note that while the U.S. dollar has regained some of its value relative to other paper currencies like the Euro, it continues to lose value relative to gold and other hard assets. This shows the folly of using one fiat currency to value another.
Gold is history’s oldest and most stable currency. Central bankers and politicians don’t want a gold-backed currency system, because it denies them the power to create money out of thin air. Governments by their very nature want to expand, whether to finance military intervention abroad or a welfare state at home. Expansion costs money, and politicians don’t want spending limited to the amounts they can tax or borrow. This is precisely why central banks now manage all of the world’s major currencies.
Yet while politicians favor central bank control of money, history and the laws of economics are on the side of gold. Even though central banks try to mask their inflationary policies and suppress the price of gold by surreptitiously selling it, the gold markets always cut through the smokescreen eventually. Rising gold prices like we see today historically signify trouble for paper currencies, and the dollar is no exception.
President Nixon finally severed the last tenuous links between the dollar and gold in 1971. Since 1971, the Federal Reserve and U.S. Treasury have employed a pure fiat money system, meaning government can create money whenever it decrees simply by printing more dollars. The "value" of each newly minted dollar is determined by the faith of the public, the money supply, and the financial markets. In other words, fiat dollars have no intrinsic value.
What does this mean for you and your family? Since your dollars have no intrinsic value, they are subject to currency market fluctuations and ruinous government policies, especially Fed inflationary policies. Every time new dollars are printed and the money supply increases, your income and savings are worth less. Even as you save for retirement, the Fed is working against you. Inflation is nothing more than government counterfeiting by the Fed printing presses.
See the gold market has been going sideways for 18 years. I learned this kind of analysis from an economic genious on a stock thread yesterday.
The S&P represents the price of those 500 stocks, but doesn't include dividends.
The price of gold represents, well, the price of gold, but doesn't include dividends.
It's a valid comparison.
When you start comparing gold to stocks, you have to include TOTAL return of both, or it's just another shabby goldshill halftruth.
And here I thought taxpayers were "the full faith and credit" of the country.
Course the Fed can just roll the presses as it has done in every financial storm causing a boom and it's malinvestments that only has be slowed again with the rate hikes that cause recessions.
And if you think that after the recent 1% rates of easy credit that we won't be seeing another 1987, 1994 & 2001, you've got your head in the sand, or are just to young to know better.
The Feds have recently stopped reporting M3 which tracks
how much paper they are printing.
Yer the goods!!!
It appears that we agree completely.
Um, recessions and inflation existed when we were on the gold standard, too.
The price of gold represents, well, the price of gold, but doesn't include dividends.
It's a valid comparison.
When you start comparing gold to stocks, you have to include TOTAL return of both, or it's just another shabby goldshill halftruth.
We were comparing price level returns.... apples to apples. Including dividends for a TOTAL return makes it apples to oranges. Comparing Gold stock TOTAL returns to S&P 500 TOTAL returns makes it oranges to oranges.
The best part is even with dividends re-invested for the S&P 500, Gold has still outperformed the S&P 500 TOTAL return the past 5 years. That is the full, not gold shill, but investor truth.
A clever comparison for you to make, since it leaves out dividends. LOL
The best part is even with dividends re-invested for the S&P 500, Gold has still outperformed the S&P 500 TOTAL return the past 5 years. That is the full, not gold shill, but investor truth.
Run that comparison from 1980 or 1982.
Five years is not just a random number in this case, it's also a best-case scenario. Run it from 10 or 20 years.,P>Like I said, goldshillery, pure and simple.
""Fiat money" is a ridiculous term and only used by boobs."
Weinmar Germany is an example of a government simply printing paper (I refuse to call it money) and lets not forget Soviet Rubles, semi worthless except to the drones in the Soviet Union.
paper money is only of value if the people believe it is.
Gold and silver always have value. paper is paper.
Define gold stock. And show the historical correlation between the price of gold and the price of gold stocks.
While you're at it, show the correlation between gold dividends and gold stock dividends--oops, can't do it, you don't collect benefits from your big-ass chunk of gold.
Five years is not just a random number in this case, it's also a best-case scenario. Run it from 10 or 20 years.
Like I said, goldshillery, pure and simple.
...you don't collect benefits dividends from your big-ass chunk of gold.
Mostly due to Govt interventions
*sigh*
The dollar's value drops when you print more precisely because it is tied to the economic assets of the nation. If the dollar were backed by gold and you printed tons of it, then each dollar would buy less gold, too.
The only advantage gold backing had was tying the money to a fixed asset. But even that can be abused. In the 1800s farmers heavily in debt wanted silver certificates to be given equal weight to dollars based on gold. The feds could just as easily pass a law that said next week one dollar buys only half as much gold as it did before. In fact, Roosevelt did stuff like this all over the place during the Great Depression. He loved to artificially manipulate gold markets and gold values. The effect was exactly the same as printing more dollars.
So you see, simply backing currency with a precious metal is meaningless.
As a further illustration, let's go ahead and assume we tie the U.S. dollar to gold and someone suddenly discovers a huge vein of gold that doubles the world supply of the metal.
Has the economic strength of your nation suddenly doubled because you have twice as much gold, now, or has your dollar's purchasing value declined because the commodity isn't quite so rare?
Fanatic gold backers are suffering the same problem the Spanish had. They thought their wealth was measured by how much gold they had in their treasuries. The Brits knew better. They understood that wealth was what you made and traded. Guess who went on to rule the world.
May I suggest some further reading??
http://www.mises.org/rothbard/genuine.asp
Precisely, yet people like Ron Paul claim that tying the dollar back to gold will protect us all from government monetary policies. History proves him wrong.
Of course the Fed would go.
Their ability to roll the presses are what has given politicians the ability to turn us into the welfare - warfare state we are.
Wow!! Over the last 5 years! Well, that says it all. What about 10 years? 20 years? 30 years? And what dividend did gold pay again?
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