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The Dow Priced in Ounces of Gold: Secular Bear Market Since '99
Seeking Alpha ^ | 3 August 2008 | Kirk Lindstrom

Posted on 08/03/2008 5:07:56 PM PDT by shrinkermd

When measured in ounces of Gold, the DOW has been in a secular bear market since peaking in late 1999.

Back in 1999, it took 45 ounces of gold to buy the DJIA. Today it only takes 12.33 ounces of gold to buy the DOW! Cutting the Fed Funds target rate from 6.50% in January 2001 to 1.0% in June 2003 may have inflated the US stock market out of its bear market when priced in dollars but it had consequences that we are feeling today.


TOPICS: Business/Economy; Editorial
KEYWORDS: bearmarket; dji; gold
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To: upcountryhorseman
If banks were required to maintain gold in reserve in a ratio to loans, we wouldn’t be in this mess.

If a bank had 1 ounce of gold for every $10,000 in loans, how would that prevent this mess?

41 posted on 08/04/2008 8:21:30 AM PDT by Toddsterpatriot (Half the time it could seem funny, the other half's just too sad.)
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To: the invisib1e hand

Because it is not held in universal esteem and only a few would even bother to purchase it and no individual could store or sell it.


42 posted on 08/04/2008 8:35:17 AM PDT by shrinkermd
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To: BenLurkin

“What in the world would prompt someone to even look at that metric?”

The desire to sell gold on the margin to idiots.

Me, I advise that, if gold becomes the medium of exchange, skip gold and go directly to canned goods and shotguns.


43 posted on 08/04/2008 8:38:17 AM PDT by MeanWestTexan ("Jesse Jackson was an important figure; paving the way for Osama bin Laden to appear" -- Dan Rather)
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To: Moonman62
The president has influence on the value of the dollar since his agency, the Treasury can choose to intervene or not intervene.

No, the Fed does that, not the Treasury.

He has 100% control over executive orders.

Which didn't allow immediate drilling anyway. Congress has to act.

He supported big budget increases for the IRS and SEC so they could harass businesses and individuals. He supported Sarbanes Oxley which has had a negative impact on our economy. And he supported amnesty for illegals.

You are correct.

But the best thing he did for the economy was to cut taxes. The economy blasted off for 6 years. Revenues to the Treasury increased for most of those years. He tried (poorly) to privatize some of SS.

Economically he was one of the better presidents.

44 posted on 08/04/2008 9:41:12 AM PDT by groanup (Here, bend over and let me give you my carbon footprint.)
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To: groanup
No, the Fed does that, not the Treasury.

The Fed's actions do affect the dollar's value. However intervention is done by the Treasury at the direction of the president, usually in coordination with other countries and their treasuries.

45 posted on 08/04/2008 10:33:32 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Moonman62
There was a bill in the Senate as recently as June 2007 to authorize the Treasury to intervene. Has it passed?

The Treasury doesn't have the money to intervene. Historically it has been the Fed that intervenes.

46 posted on 08/04/2008 11:48:56 AM PDT by groanup (Here, bend over and let me give you my carbon footprint.)
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To: groanup; Moonman62
The Treasury, in consultation with the Federal Reserve System, has responsibility for setting U.S. exchange rate policy, while the Federal Reserve Bank New York is responsible for executing FX intervention.

Source

47 posted on 08/04/2008 11:52:21 AM PDT by Toddsterpatriot (Half the time it could seem funny, the other half's just too sad.)
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To: Toddsterpatriot
And FX intervention is merely the buying and selling of other currencies to the tune of billions.

In Japan, the government borrows money from the Bank of Japan and then enters the forex market with it.

It's not like the Treasury can take money from the general fund and buy a couple billion euros. The Fed can do it all day long.

48 posted on 08/04/2008 12:13:11 PM PDT by groanup (Here, bend over and let me give you my carbon footprint.)
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To: groanup
And FX intervention is merely the buying and selling of other currencies to the tune of billions.

Absolutely.

It's not like the Treasury can take money from the general fund and buy a couple billion euros.

Can you see the debate on the Senate floor? LOL!

The Fed can do it all day long.

You bet.

49 posted on 08/04/2008 1:41:53 PM PDT by Toddsterpatriot (Half the time it could seem funny, the other half's just too sad.)
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To: shrinkermd
Because it is not held in universal esteem and only a few would even bother to purchase it and no individual could store or sell it.

Whadday mean by all that!? It's right there in the air. You store it there. When you want it, you simple extract it. What could be more convenient?

No more of that dull, heavy metal. It's expensive to move and to guard. And if you drop it, you break your toe or your dog's back.

Helium is just the opposite! And, it's fun.

50 posted on 08/04/2008 4:24:55 PM PDT by the invisib1e hand (when did the circus freak show escape and take over the entire world?)
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To: Toddsterpatriot

It would have prevented banks from making loans in excess
of a predetermined gold to loan ratio. in other words, most
loans would be backed by gold reserves and the amount loaned
out would be limited by that ratio. As it stands, bank loans
are backed by nothing: numbers on a piece of paper.


51 posted on 08/04/2008 4:35:50 PM PDT by upcountryhorseman (An old fashioned conservative)
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To: upcountryhorseman
It would have prevented banks from making loans in excess of a predetermined gold to loan ratio.

Currently, they hold a certain portion of their deposits in reserve, why would gold have been better?

most loans would be backed by gold reserves and the amount loaned out would be limited by that ratio.

Right. And that would have prevented them from making bad loans how?

As it stands, bank loans are backed by nothing: numbers on a piece of paper.

There were no bank failures when we were on the gold standard, right?

52 posted on 08/04/2008 4:52:56 PM PDT by Toddsterpatriot (Half the time it could seem funny, the other half's just too sad.)
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To: cherry
I’ve got 100 1 oz troy pieces....

Good for you....better than $1700 if you ever need a little Christmas money.

I did some Googleization, and found a place called Midwest Refineries that "in theory" would pay a lot better than the coin shop we used......92% of daily market on your coins. I'll be crossing my fingers and mailing them our 1/4 ounce Y2K coins shortly.

53 posted on 08/04/2008 6:31:14 PM PDT by ErnBatavia (...forward this to your 10 very best friends....)
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To: Toddsterpatriot

RE: current bank reserves: These “reserves” are nothing but numbers on a piece of paper that are not backed by any
asset of true value.
RE: making bad loans: If their loans were limited by the
amount of gold in reserve, they would be more careful to not exceed that reserve.
RE; bank failures: regardless of the monetary base, there
are bad apples. However, depositors could depend upon
being made whole with something of value, gold.


54 posted on 08/05/2008 8:15:12 AM PDT by upcountryhorseman (An old fashioned conservative)
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To: upcountryhorseman
These “reserves” are nothing but numbers on a piece of paper that are not backed by any asset of true value.

These reserves are either cash in the vault or a balance in their account at the Fed. A balance that could be turned into cash.

RE: making bad loans: If their loans were limited by the amount of gold in reserve, they would be more careful to not exceed that reserve.

Loans are limited now by cash in reserve. Why does 1000 ounces of gold (worth about $900,000) protect the bank more than cash of $900,000?

RE; bank failures: regardless of the monetary base, there are bad apples.

I'm glad you see that gold didn't magically protect banks in the past. Not sure why you think it would be different today.

However, depositors could depend upon being made whole with something of value, gold.

Or cash.

55 posted on 08/05/2008 8:56:46 AM PDT by Toddsterpatriot (Half the time it could seem funny, the other half's just too sad.)
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To: Toddsterpatriot

Have you checked the value of the dollar relative to other
currencies lately? It’s way down. With the Fed dumping
dollars from airplanes and true inflation at 10% to 12%:
the dollar is not fairing very well.


56 posted on 08/06/2008 7:56:58 AM PDT by upcountryhorseman (An old fashioned conservative)
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To: upcountryhorseman
Have you checked the value of the dollar relative to other currencies lately?

Yes.

So how would gold prevent banks from making bad loans? How would 1000 ounces of gold (worth about $900,000) protect the bank more than cash of $900,000?

57 posted on 08/06/2008 8:16:47 AM PDT by Toddsterpatriot (Half the time it could seem funny, the other half's just too sad.)
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To: Toddsterpatriot

Currently, because of inflation and the cheapness of
dollars, it takes an ever increasing number of dollars
to maintain reserves.


58 posted on 08/07/2008 8:30:51 AM PDT by upcountryhorseman (An old fashioned conservative)
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To: upcountryhorseman
Currently, because of inflation and the cheapness of dollars, it takes an ever increasing number of dollars to maintain reserves.

Wrong. $1,000,000 in reserves covers the same $$ amount of loans, whether the dollar is worth 90 Yen or 120 Yen.

Gold has dropped about 15% from the recent peak. Should banks have to reduce loans by 15%?

59 posted on 08/07/2008 8:37:37 AM PDT by Toddsterpatriot (Half the time it could seem funny, the other half's just too sad.)
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To: Toddsterpatriot

The issue is not dollar value relative to other currencies
but inflation pure and simple: it now takes many more dollars to buy the same asset than it took a year ago.
A bank may have to add gold reserves or reduce gold reserves
from time to time:so what?


60 posted on 08/08/2008 1:17:38 PM PDT by upcountryhorseman (An old fashioned conservative)
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