November 29, 2008

Soot & Ashes Serious Question of the Day



Will gold be the last store of value in world history?




41 comments:

investorinpa said...

Keith, check out this box of cereal..its called Credit Crunch..free helicopter inside..hysterical!

http://tinyurl.com/6jb8de

investorinpa said...

ok now my serious answer to your serious question of the day....I think within 2-3 years, the US dollar will be revalued to be included with a backing of a basket of commodities. These will include some gold & silver, agriculture products (wheat, cotton, sugar, etc), natural gas, timber, and any other resource that the US has in bountiful portions. I don't believe oil will be included in this as the Obama administration sees the fossil fuel as having a finite amount.

Mammoth said...

"Will gold be the first and last store of value in world history?"
-----------------------
Yes, but...say, everything collapses and all that you have left is a box full of 1-oz Maple Leafs.

If you give one of these in exchange for a day's worth of food for your family, will you get anything back in change?

Or will you have just paid $825 (at today's prices) for one day's ration of food?
- - - - - - - - - - -
In addition to hoarding gold, it may be prudent to learn some sustainability skills as well.

Just sayin'
-Mammoth

keith said...

Here's what I see:

Gold as a one-world currency.

Your bank account will be denominated in ounces of gold. Your debit card will be linked to this value and when you spend, it'll subtract the fraction you just used. You'll be paid in gold ounce equivalents. Your Gold AMEX really will be a Gold AMEX. You'll be able to trade in any country on a consistent basis. There will be no more currency markets. There will be no more currency.

This may take 50 years, or 500, or 5000. It's just what I see.

The lasting impact of this meltdown will not be housing dropping 50%, or stocks dropping 80%. No, it will be the lost of trust in paper currencies all over the world.

It hath been foretold.

Batman said...

I think the only honest unit of currency is in units of energy. So Joules in most of the world (or kWh) or BTU in the U.S.

Energy is the one solid thing that is a physical proxy for work or effort.

Eric said...

Gold is only a store of value so long as it is useful, and the expansion of the supply matches the expansion of the economy. Aluminum and sugar used to be extremely valuable. The Washington monument was topped with aluminum due to its extreme value at the time it was built. There is a great twilight zone where a group of guys rob a bunch of gold and put themselves in hibernation in the desert. When they come out many years in the future, the gold has no value because technology had advanced to the point where gold could be synthesized.

Cinch said...

Energy is the first and last currency.

menlobear said...

I'm acting as if it will be.

Am buying:
1) physical gold & silver coins/bars to hold myself
2) bullion held at the Perth Mint
3) bullion ETFs like GLD, DGP and SLV
4) mining ETFs like GDX and RYPMX
5) individual mining stocks

Think these will all rise substantially in value in the near future, even we don't get to armageddon status (which I hope we don't)

I truly hope we return to a sounder, hard asset-based currency of the type Keith & investorinpa propose. Unfortunately, don't see it happening until the dollar crashes...

Anonymous said...

Whatever currency we use, the Chinese will soon own us. When the debts we owe them cannot be paid, they will take out payment in land. Our land. And they won't be satisfied to just let us use it. Or even rent it. No, they will occupy it. Do you want an egg roll with that?

Tyrone said...

"Will gold be the first and last store of value in world history?"
-----------------------

I think the NWO dream of the banksters is to own all the gold, themselves, and put the sheople on to some other sort of "currency". It will be much easier to control us with fiat paper.

Answer: Yes, but the sheople won't have any

keith said...

Ruh-roh - they're catching on quick...

http://tinyurl.com/6glve3

Citigroup says gold could rise above $2,000 next year as world unravels

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.

Anonymous said...

Keith,

I have a feeling the ones currently looting the treasury are going to confiscate gold also. God forbid the little guy protects himself. "Land Of The Free" my ass.

I think next year's $2,000 gold will buy the same goods today's 815 dollar gold does.

Naked Troll said...

I've been thinking about energy as money for some time. This is the first time I've heard of this mentioned other than myself(Batman and Cinch). Interesting.

If the money shoved into the bank balance sheets starts to filter into the economy then there will be massive inflation and gold will rise. Right now I think we're having deflation.

Governments have always liked to devalue their currencies because it's easy to go to war and pay off debts that way. I think they will always find a way to devalue whatever currency they have. Romans mixed their gold with other metals to pay off their debts until they were found out and collapsed.

Anonymous said...

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.

Don't you see people pouring money back into stocks too?? Once the Sheep realize that the currencies of the world are crap, they will want something real. Be that gold, silver, oil, or piece of a company.

science teacher said...

@ Menlobear - DGP isn't a bullion ETF - it's a double 'paper gold' derivative. Watch out what you're buying.

ArtE said...

No,future value store will be in 7.62x39mm rounds.

The war profiteers become the new US Mint. Fiat ammo! NRA's dream.

Everyone can be a Bank (head stamp on casing to identify). Make as much as you want like Bernanke and Paulson.

Go 2nd Amendment!

i've had it said...

The last store of value in world history?...Hmmm...that's a tough one since the world, presumably, will go on for a long, long time. I guess I would have to say "maybe". It's been a store of value for thousands of years so it's got a pretty good track record. Will it go on forever?...well, maybe.

There is no way that our bank accounts will be denominated in gold again. I just don't see it. The problem with gold as the basis for economic value of economies is its scarcity. Because it is scarce, it means that GDP can grow only to the extent that new gold increases. It's an artificial limitation really. Ironically, it is partly because of its scarcity (and partly because of its universal acceptance) however, that it is valued. That is why it is a good "store of value", but not a good basis for economic expansion.

As for using gold for buying food...I don't think that's why people are buying it. They buy silver for use in buying everyday items like soap, gas, food, toilet paper.

Gold would be used for buying larger ticket items (a house? a car? a college education) or for cashing in for the equivalent in silver units (like silver quarters and silver dollars).

To sum: I've bought gold coins as a store of value to hedge against the money bombs, not to purchase my toilet paper.

Paul E. Math said...

Schiff was on cnbc predicting gold at $2,000/oz by the end of 2009.

Not sure it will double before the end of 2009. It could happen in 6 months. Or it could happen in 2 years. But it seems pretty likely to happen.

As to the best store of value, fiat currencies would be the best if only we could trust our governments and central banks to behave responsibly.

Precious metals are the most reliable store of value because they defy manipulation and abuse like fiat currencies. Their value, relative to fiat currencies, will rise and fall inversely with the level of manipulation and abuse of paper.

Like anything, supply and demand for precious metals also affect the price. But this is another reason they are a stable store of value: their supply and demand are relatively stable as well.

This is the truth as I see it.

George L. said...

yes,as well as all other commodities.but they always have been.the world moves because of commodities.

re-invest your gold profits accordingly in a few years.that would be the smartest thing to do.because it would be dumb to just hoar it,unless you're a Rothschild...

Paige Turner said...

RE: Will gold be the last store of value in world history?

Since the US has very little gold, this might present quite a problem.

The current United States' holding of gold is worth approximately $241 billion as of July 2008.

If the price of gold goes up to $2000 per ounce, the US still would have less than $1 trillion worth of the precious yellow metal.

This barely amounts to chump change.

P.T.

Anonymous said...

standard caliber ammunition... trumps everything

Anonymous said...

Bernanke: "We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

Shouldn't he add "in dollar terms" to that final sentence? Flooding the economy with dollars won't change the amount of goods and services purchased. It will only change their prices. Why would anyone do this? This is stupid.

On another blog, someone gave this parable: suppose your car is out of gas. Instead of putting more gas in the car, you fiddle with the gas gauge and force it to read "F" (full).

It seems to me that manipulating the suppy of money will only mask what the pricing signal is telling the market.

Anonymous said...

There are smarter ways of controlling currency issue than throwing up one's arms and leaving it to the whim of mother nature. A gold currency system has the disadvantage of being at the mercy of natural forces; both if we strike the mother load at the bottom of the ocean (sudden inflation) and if we've already dug it all up (perpetual deflation.) What's needed is a wiki style currency that is free to expand with the expanding population/economy, but not under control by any single individual. Expect central governors to fight anything like this tooth and nail, much the same way the legal profession fights mandatory awarding of attorney fees and and governments fight term limits. Don't worry though, real change like this is long way off. Perhaps after the class wars of the 2010's and 2020's, where one has a 30% chance of getting fire bombed offed in the street if the neighbors suspect your net worth is above $10M. Until then keep paying those taxes.

Anonymous said...

If the price of gold goes up to $2000 per ounce, the US still would have less than $1 trillion worth of the precious yellow metal.

This barely amounts to chump change.

--------------------------

That's why the comming USD HYPERINFLATIONARY PANIC will push physical gold trading outside the CRIMEX over $50K/oz within 3 years.

Sound crazy? So did $1000 gold within 8 years back in 2002.

Anonymous said...

In time what we should be asking is will the defense of the Status Quo lead to World War III.

The Reserve Currency of the World sits on three legs which are value as it's prize assets.

a) Military Supremacy
b) Manufacturing Capabilities.
c) Influence to Dominate Global Financial Markets

The holder of the reserve currency sit on an imperial economy which depends on drawing wealth from abroad, without any reciprocity.

The reserve currency of the 18th and 19th century was undoubtedly the British pound sterling.

The British ship building industry played a role in the British pound becoming the reserve currency in that it allow British merchants to trade surplus British manufactured goods around the World.

The growing sea power of the British military also played a role in that it ensure the safe passage for their merchants' ships and the merchants' ships who traded with the British Empire.

The growing sea power also allow the British military to be placed around the world with it trading partners to bring economical stability.

In 1883 Germany challenged the status quo by extending its colonial empire; however, Germany colonial empire ended with the Treaty of Versailles in 1919 following World War I.

Despite Britain and its empire emerging as victors, World War II saw parts of the British Empire in Asia occupied by Japan which damaged British prestige and accelerated the decline of the empire.

In the post World War II period, the US Dollar took over the reserve currency role from the British pound, because the supremacy of US manufacturing guaranteed US trade surpluses.

The British pound lost its role due to debts of two world wars, loss of empire, a run down industrial base.

It is because the US Dollar is the world's reserve currency that the US is able to maintain its twin deficits (fiscal and trade) and depend on the world's generosity.

http://www.tradetnt.com/
japan-says-us-should-work-to-
reduce-deficits/1261.html

In an effort to ensure that the world’s reserve currency does not falter, Japan’s top currency official announced that he feels the United States should work to reduce its deficits.

According to Naoyuki Shinohara, the Vice Finance Minister for International Affairs, “We want the key currency to be stable. We want the key currency to be strong. We do not want the key-currency country to continue running huge current-account deficits. We do not want the key-currency country to keep borrowing large amounts of money from abroad.”

Shinohara’s defense of the dollar came after French President Nicolas Sarkozy suggested that there were alternatives.

Bukko_in_Australia said...

It farking well better be! I've got five kilos of the stuff in Switzerland that I'm betting on it being so.

(At least, I think I've got five kilos. If you can't trust a Swiss banker, then there's no one you can trust...)

yoski said...

Gold is a store of value. Throughout human history gold was always considered special (Europe, Incas, Chinese, India, etc.). All major civilizations independantly came to the same conclusion. That said gold only seems to be an efficient store of value in somewhat stable environments. Once order breaks down all bets are off. An excellent store of value is booze. Seriously, on the black market alcohol is a highly valued commodity. One Krugerrand for a gallon of 100 proof vodka. If you have the space, start hoarding good booze instead of gold. Worst case scenario, you got to drink it yourself :)
I like gold, but I spend more money on practical stuff, like a wood stove, a garden, tools, a nice bike, better insulation on the house, more efficient HVAC system, a well with hand pump, etc.
Gold is nice, but food, water and staying warm are even nicer in my book.
Just my $0.02

yoski said...

"That is why it is a good "store of value", but not a good basis for economic expansion."
Since the earth, farmland and energy are finite/constraint in all likelihood there won't be much expansion in the future. Problem solved.

Nick said...

If gold goes up to $2000 per ounce then you'll be ok. But if gold were to go to $2500 or more, then the government will confiscate it! You SA'ers are so fucked. You Fucked Savers are so fucked!!!

Anonymous said...

"Once the Sheep realize that the currencies of the world are crap, they will want something real. Be that gold, silver, oil, or piece of a company."

If currency is becoming valueless, shouldn't we renters be buying real estate now? After all, we can't live in gold and silver.

Anonymous said...

The Government will not confiscate gold, and I’ll tell you why. Since the dollar in 1933 was backed by gold, the Government confiscated it so they could print as much money as needed to shore up both the banking system and the economy. 99% of the population owned gold in 1933, they carried it in their pockets, and they carried it in their purses. Now, in 2008, less than 1% of the U.S population own gold. Thus, it would not be worth the Government’s time to confiscate it. Consider buying some gold to protect your wealth due to either inflation or deflation. Gold has been, and will always be, real money.

JaneZ said...

You SA'ers are so fucked. You Fucked Savers are so fucked!!!

repeatin urself again..

Jon said...

"Don't you see people pouring money back into stocks too?? Once the Sheep realize that the currencies of the world are crap, they will want something real. Be that gold, silver, oil, or piece of a company."

Yes, this is exactly what happened in Germany and Argentina when they had their bouts with inflation. The market indexes shot up to record highs in proportion to the falling value of the currency. People who stayed invested in the markets ultimately lost out though because hyperinflation is self-limiting and usually ends in chaos. IOW you might own a quadrillion dollars worth of GE, but the value of the shares is meaningless in the context of other currencies.

Anonymous said...

.

This government is so crooked

and have F**ked things up so royally

Do you think for a minute that those that have invested in gold will simply just give it up to confiscation....

to a corrupt government from the Top down,

F**K that!

You want it? Find It!

I'm the one (as are many others) who took the gamble, paid the price, sat with it through the 90's and when it finally does what we've waited for...they want it!

They can't handle what they already have!

So they think confiscation will Help???



.

.

Lady Di said...

Gold has actually been a great place to hide out even in this deflation year of 2008. It was $835 an ounce in January 2008 and is close to returning to that amount today. Can't say the same about commodities or the stock market.

But I agree, to just hoard gold with no plan is not productive. I've been buying for a while - told myself I would stop when it hits $1,100 an ounce and cash in when the time is right, which we are at least a couple years away from IMO.

Anonymous said...

Iceland people who had savings in gold faired much better.

keith said...

If you are from Iceland and had your savings in Icelandic stocks and Icelandic Krona, you lost everything.

If you had it in gold, you're the king of Iceland

'nuff said.

What do you trust more today, dollars, pounds, euros or gold?

Anonymous said...

The ultimate measure of monetary value is time - specifically time spent in productive labor.

We exchange an hour of our current labor for an hour of future labor.

IF there were a trustworthy mechanism of recording such transactions, THEN there would be no need for physical "markers" - such as gold.

Alas, the history of humanity makes it clear that the tension between individual interests and tribal interests makes such long term trust impossible - so gold it is.

The amount of time to extract a unit amount of gold is fairly constant over the lifetime of a human, so all other labor can be judged fairly in that span of time.

Even in a S/F world of matter replicaters where anything - including gold bars - could be created at will, there would still be a need for a medium of exchange for productive labor.

Robert Heinlein discussed the use of money as debt in his classic S/F novel Stranger in a Strange Land where he introduced the monetary concept of "obligations - obs" - the other side of the ledger.

Anonymous said...

Oops - I misremembered: The concept of "obs" was introduced by Eric Frank Russell in his 1951 novel And Then There Were None.

It has been a long time since I read both.

bajadownunder said...

Modern society is the result of applying increasing units of intelligence and energy into the economy.
Since intelligence is difficult to measure and storage(and lately in decreasing stock) I agree that a currency based on energy would be the ideal best.

Joe said...

Gold has been the only real money for 6,000 years. It will act as insurance against a failing fiat currency. It is in everybody's best interest to hold some.

However, an overall balance must be attained with everything. This means having shelter, food, water, hand tools, shortwave radio, water purification such as the Doulton water filter that will filter any water source.

I think we are headed into a period of about 2 years, starting early-2009, where you had better be self-sufficient. Think about getting 2 years worth of freeze-dried food and live close to any water source be it lake, stream or river.

Joe M.