Posted on 01/22/2009 12:21:10 AM PST by TigerLikesRooster
Gold is shifting from West to East – along with the balance of power
By Dominic Frisby Jan 21, 2009
What's going on with gold?
Twice a day – at 10:30AM and 3PM - the price of gold is set on the London market by the five members of the London Gold Pool (HSBC, SocGen, Deutsche Bank, Scotia-Mocata and Barclays). This is known as the London fix and it's used as the benchmark to price gold, gold products and derivatives in markets around the world.
I've been looking at some charts and an astonishing pattern has become apparent. It's a pattern which, if you'd traded it methodically, would have earned you 1% a week over a period of 24 years. That compounds to a staggering 24,720,000%!
What is this spectacular strategy? Read on… The astonishing pattern in London gold fixing
The strategy is really quite simple. You buy gold at the London PM fix (3PM), as the American markets have just opened for trading, and you sell your gold the following morning at the London AM fix (10:30AM), as the Asian markets are closing.
My thanks, as always, to Tom Fischer of Herriot Watt University for the charts below. The first demonstrates the weekly 1% gain that would have been yours since 1985 (the green line).
(Excerpt) Read more at moneyweek.com ...
Ping!
I guess I'm old school...
I think you should produce something useful in order to make wealth instead of simply redistributing what someone else produced.
While government may be behind it, I go for the (non conspiracy) theory proposed at the end of the article. It’s probably as simple as that the east is accumulating wealth while the west is spending it.
Gold isn’t wealth, nor is money. These things are merely mediums of exchange. Wealth is made up of actual goods and services. In times throughout history, some of the poorest economies had the largest reserves of gold and other precious stones and metals.
It’s a common fallacy to those who haven’t studied economics. Thomas Sowell’s excellent Basic Economics is a good primer, and in it he discusses some of the fallacies surrounding gold and money throughout history.
Cheers,
What is and has been happening is that the east is creating stuff, trading it to the west for fiat money, and then turning some of it into real money (gold) and saving it. I’m suggesting that they may be doing more saving, in the form of gold, than the west.
It’s my sense that the east still values gold more than the west. They’re wise to do so. Their wisdom may come in handy soon.
Of course they still seem to think the dollar is sound too, though that may be changing.
BTW, thanks for the Sowell recommendation. I’ve studied quite a bit of economics, and I’ve read some of his stuff and appreciate his generally free-market outlook, but frankly the Austrian’s are the ones who, in my mind, get it right.
I once went down the Austrian/borderline anarcho-capitalist school road, but the work of Hernando De Soto changed my mind and made me more Chicago School (Hayek, Friedman, Stigler), especially on monetary policy. Have you read Friedman’s writings on monetary policy? Not what others say about monetarism, but what he himself had to say about it?
Anyway, neither fiat money nor gold have inherent value, they are both used as money simply because of the expectation that they can be exchanged for goods and services. It’s rare for a currency to actually collapse, as in “invaded by another country and entire government toppled” rare, which is why currencies with broad support like the Euro and the US dollar are so strong and unlikely to fall anytime soon.
More to the point, Mises and others aside, modern Austrian economists can sometimes be alarmist quacks. I don’t know how to put it another way. Ron Paul, who I respect and was my choice of all the weak candidates this past Presidential election, just makes stuff up about the money supply. I don’t think he really knows how the money supply works in this country, or who controls its growth. He seems to think its Congress. He made a dumb remark during the debate blaming the poor economy on the inflation tax that was being levied to pay for the war. The other candidates actually laughed at him for it, because it wasn’t remotely true. The Fed controls the money supply, Congress levies taxes and borrows money, they weren’t using inflationary financing for the war (or anything) as he was alleging.
I have read Friedman, and like Sowell, I appreciate his generally free-market outlook. It was “Free to Choose” that brought me into the Reaganomics fold.
But, IMO, where the Chicago school goes wrong and the Austrians get it right is on the issues of centralized monetary control and fractional reserve banking. The Austrians understand how expansion of the money supply via the fed and FRB causes the “malinvestments” of the boom - the building of the credit bubble(s) that represent the boom times - which are inevitably and unarguably ALWAYS followed by the bust... which is what we are experiencing now, and which decimate people and their lives. What the fed and FRB do might be well intentioned, but it decimates lives.
The Chicago school just pooh pooh’s this entire concept, and I think hey’re completely wrong to ignore this. It’s ironic to me that Friedman, who was so responsible for reviving free-market thinking during the 80’s, just accepts as a necessity a centrally controlled monetary system.
Fiat currencies are at the heart of the world economic problems, and we will not have truly sound economies again until we allow the market to take back control of the money.
You might want to check out Rothbard’s “What Has Government Done to Our Money”, which can be downloaded in .pdf from mises.org, for an elaboration of the problem.
And believe me, Ron Paul may not be the most charismatic guy out there, but he understands this issue as well as anyone and much better than anyone else in national politics.
Excellent choice.
More to the point, Mises and others aside, modern Austrian economists can sometimes be alarmist quacks. I don’t know how to put it another way.
I usually call them a cult. They'd love nothing more than to see the world's financial system collapse.
Hayek is Chicago school?
It has been noted that almost the entire gold production from the Americas that went to Spain in the 16th century ended up in Asia as payment for European imports. There was a balance of payments deficit settled in Gold.
The thought is that in the east, gold is hoarded as security and is for having, not using.
In America, we know not to settle in gold. The trick is to settle with promises.
.....I think you should produce.....
You prefer to work. Others prefer to play the game.
The proceeds developed are merely a way to keep the score
“I think you should produce something useful in order to make wealth...”
That’s for saps. ;)
I’ve been sitting on my gold & silver for 10 years now. It’s MY turn. Now, if you produce something I want to buy, then you’ll be wealthy, too. :)
Can any of you erudite persons discuss the impact on people who actually save money for their old age. It appears to me that Uncle steals it through inflation.
I'm a pie maker...
It is the pie redistributors that put us in this economic mess and it is only pie makers that can get us out in the long run. That is if they are still willing to work for less after being taxed and regulated to death...
“That is if they are still willing to work for less after being taxed and regulated to death...”
I got this in e-mail the other day. This is one reason I’ll NEVER have employees, and why I’m going as underground as possible in this ‘0bamaconomy.’
To All My Valued Employees,
There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn’t pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.
However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.
First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a Back Story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You’ve seen my big home at last years Christmas party. I’m sure; all these flashy icons of luxury conjure up some idealized thoughts about my life.
However, what you don’t see is the BACK STORY:
I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.
My diet consisted of Ramen noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn’t have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business — hard work, discipline, and sacrifice.
Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom’s for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn’t look like it was birthed in the 70’s. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.
So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don’t. There is no “off” button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden — the nice house, the Mercedes, the vacations... You never realize the Back Story and the sacrifices I’ve made.
Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn’t. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.
Yes, business ownership has its benefits but the price I’ve paid is steep and not without wounds.
Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:
I am being taxed to death and the government thinks I don’t pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him!
Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my “stimulus” check was?
Zero. Nada. Zilch.
The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.
The fact is, if I deducted (Read: Stole) 50% of your paycheck you’d quit and you wouldn’t work here. I mean, why should you? That’s nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.
Here is what many of you don’t understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn’t need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.
When you have a comatose man on the verge of death, you don’t defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.
So where am I going with all this?
It’s quite simple.
If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child’s future. Frankly, it isn’t my problem any more.
Then, I will close this company down, move to another country, and retire. You see, I’m done. I’m done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.
So, if you lose your job, it won’t be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about....
Signed,
THE BOSS
He’s both Austrian school and Chicago school, but I argue that he’s more the latter than the former. He does not advocate pure laissez faire capitalism, he endorses a certain amount of social services (including, I believe, a guaranteed minimum income, probably via Friedman’s NIT), and I think he’s less dogmatic and more utilitarian and pragmatic. He certainly doesn’t fit in well with modern Lew Rockwell types.
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