Is there any reasonable expectation that gold will hit this level?
I expect it will get up there. The guy is right. There is no way out of this mess by growth or taxes. Sombody has to take the hit. We who relied on government and let them rob us for all these entitlements for a start. Nobody was paying attention while criminal polititions screwed us over.
Think about it. Gold traded for $35 for decades. It now trades for 30 times that amount. A jump to $5,000 from here is only 5 times.
The 1980 peak of $850 would be roughly $2235 in 2010 via “official” (i.e. lower than actual) CPI alone via the BLS Inflation Calculator here http://www.bls.gov/data/inflation_calculator.htm
Inflation numbers more like what we actually see, per SGS here, are roughly 2% higher than BLS numbers in their graph going back to 2001. If we say that “real” inflation is 1% higher than “official” inflation over 32 years, that’s 1.01^^32 = 1.37; the 2% boost would be 1.02^^32 = 1.88. That adjustment itself would boost that $2235 to somewhere in the neighborhood of $3061 to $4200.
So realizing inflation alone gets it more than half of the difference from here to there, before pondering how much more screwed up the monetary system is now than it was in 1980.
Since Nixon repudiated any connection between gold and the dollar in 1971, we are now using what is a “virtual currency”. It literally has no concrete value except what it can buy and except what time-value (interest rate) the market will bid for it at a given moment.
This would not be so bad except governments (because all are doing it, not just the US) are creating money out of thin air. They are addicted to doing so. They have designed their social programs to depend upon the constant expansion of the money supply. What they have planned is for the constant inflation of the value of money.
If some central bank decide to pull out of this scheme and to tie the value of its currency to a basket of commodities or to gold itself, here is the simple truth:
There is no very much gold (as expressed in ounces) compared to the ocean of dollars, or Euros, or any other currency. Therefore, in order to “monetize” or “express” the wealth held in, for example, Euros, the value of gold as expressed in Euros would have increase by a factor of 10x or 20x!
If the ECB were to tie the Euro to gold, it would have to do so overnight and all at once. That would mean the game of borrowing and inflating paper and electronic money would be over. In an instant, the world’s trading powers would start to use that new currency and dump their fiat ones, because after all who wants to hold a piece of paper backed by pieces of paper when they can hold a piece of paper that is a warehouse receipt for a that much gold?
The US Dollar as a world currency would be instantly replaced, and the price (in dollars) of anything we had to import would instantly jump, and start to creep upwards dramatically.
I first saw this idea on the blog fofoa.blogspot.com. He calls the concept “freegold”. See the article 100:1, that is after you read the most recent article on gold and money.
“Freegold” has the additional advantage for Europe that it would allow them to pay down their own debt in a one-shot transaction. Dump the US, destroy it as an economic power, make your own currency the medium of global exchange and pay down your debt? What’s to lose except it would kill export sales to the US. Maybe there will be a time when that is not such a bad thing.
In 1932 a one ounce gold coin was $20 (Twenty dollars). The spot price was $20.69 and had been approximately so for a hundred years. Roosevelt devalued the dollar to $35 in 1933 and it stayed there until the US went off the gold standard and began issuing fiat currency in the nineteen seventies. (When a gallon of gas was twenty cents, the average home price in Southern California was under $20K and a new, fully loaded, full sized American car was around $4K)
Yes. I think gold may well hit $5,500 per oz. Or more properly, the dollar will sink to $0.0036 compared to its value at the inception of the Federal Reserve.
BTW, the current value of the dollar, compared to its value from the inception of the Republic through 1932 is $0.018. Not quite two cents
Between 1979 and 1983 a dollar went from the 1978 value to around 30 cents. Todays apprx. $1000 oz of gold might go to $3000 in that situation. We’re currently printing more money faster...
(round numbers here guys...)
I don't think it's an unreasonable expectation in the event of remonetization - and remonetization is the only real alternative to hyperinflation FOLLOWED by remonetization.
But, if and when gold is remonetized after the collapse of the Fed, to allow the Treasury to issue banknotes again, you can bet there will be a ferocious G-20 wide attempt to outlaw private buying and selling of gold. As in the USSR, it could easily become a capital offense.
Your gold and silver, IOW, may work in a Mogadishu situation - but if the government uses gold again, it will become VERY difficult to convert yours into New Dollars, or Ameros, or whatever they call it.
The premise is a wholesale rejection of sovereign debt. If that premise comes true a five-fold increase in safety havens would be nothing.
This all omits the solution, the old reliable solution taught for eons in Being King 101. When the debt gets too big, inflate the money. The power of compound inflation is remarkable.
By the rule of 72, at a rate of 7% inflation, today’s debt is gone in 10 years. At 10% in 7 years, at 12% in 6 years.
If gold is the benchmark at a controlled rate of 10% inflation, the gold price will be $2200 by 2017, or $2,200 by 2016 at 12%
The catch is control. At 20% gold will be at $2,200 in 2013.
They planners have a predetermined tolerable planned rate. That is secret and will not be revealed