Gold Not a Perfect Way of Measuring Wealth, Just the Best Way

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Oil edged up towards $80 a barrel yesterday. And the latest numbers for producer prices showed more inflation than was expected.

Meanwhile, jobless claims were up. And the Dow rose 86 points…

What do investors see that we don’t? A mirage…the shimmering of hot money…money that comes from the feds. And they can’t believe it’s not real.

But that’s the problem. No one can tell the difference between real money and the counterfeit stuff. Nor can they tell the difference between real prosperity and the phony variety. And who can really know whether the feds are doing some good…or just up to their usual tricks?

Oh my…it’s Friday…and we’re too tired to dig very deeply into these issues. We’re going to keep it simple…even superficial…

Yesterday, gold rose $4. Is it too expensive…or too late… to buy in now?

What we’re looking at is a huge, systemic failure. Instead of ‘keeping it real,’ the financial system has been so phonied up that you can’t tell what’s what.

And then, when prices move…you have to figure out what’s really moving. Is the world spinning? Or just you?

We’ve been following the gold market for years. Gold has gone up about 300% over the last 10 years. But what does that mean? Does it mean gold has gone up? Or that the dollar has gone down?

We raise the question because we’re wondering how to keep score… Richard Russell suggests that you should keep score in ounces of gold, not in dollars. He’s right. Gold is not a perfect way of measuring wealth…it’s just the best way.

Over the long pull of history, gold is more reliable a measure of wealth than just about anything else. Whether you had 100 ounces of gold at the time of Caesar or 100 ounces at the time of Charlemagne…or 100 ounces during the Jimmy Carter years – you were well off.

Note that we said gold is a ‘measure of wealth’ not means to wealth. Gold is inert. Lifeless. Incorruptible. But inherently shiftless. It never gets out of bed in the morning. It has never earned a penny in its entire life.

Gold won’t make you rich. It toils not; neither does it spin. Since it doesn’t hustle, it won’t increase your wealth. That’s why, in the Bible, the slave who kept his master’s wealth safe in gold got beaten. Gold won’t earn a profit. It won’t pay you a salary or give you a company car. All it will do is help keep you from getting poor. We’ve never heard of a man who had 100 ounces of gold who was poor. On the other hand, we’ve read about millions of people with stacks of paper money who couldn’t afford a cup of coffee. In our wallet, for example, is a 10 Trillion Dollar bill from Zimbabwe. A dear reader gave it to us. You could have a stack of those a foot high. You still wouldn’t be able to buy a latte at Starbucks. On the other hand, imagine you had a stack of Krugerrands or maple leafs. Well, you still couldn’t buy a cup of coffee at Starbucks. Because the dumb clerk wouldn’t know what it was. And if he did take the gold coin in exchange for coffee, he’d probably rush over to the mall where some sharp dealer offered to take it off his hands in exchange for PAPER MONEY!

You see, the average person has no idea what real money is. One dollar bill looks the same as another to him. And gold? He’s probably never seen gold, unless it was wrapped around his finger.

Gold is real money. At least, it’s as real as money ever gets. Gold represents wealth. It can be exchanged for wealth. And since the above-ground supply of gold grows about as fast as the economy itself, gold tends to hold its value over centuries. Today, gold is worth about the same as it was worth 2000 years ago.

But you’ve heard us make that point before, haven’t you? Well, the point we’re making today is different. If gold holds its value, more or less, year after year…how can you expect to make any real profit by holding gold? Won’t it hold its value in the future too?

Yes, dear reader, it probably will. As inflation increases, you’ll watch your gold shoot up in price…along with other prices!

BUT…gold is subject to manias and bubbles…just like everything else. Though, it can be expected to hold its value in the long run, in the short run, it could become very over-valued. Why? Because the paper money system is doomed. It is doomed because we can’t tell the difference between a real dollar…and a phony one. And it is doomed because the people in charge of dollars find it more convenient to introduce new counterfeit dollars than to strictly control the quantity and quality of the US currency.

Little by little, average people will come to see gold as a way to protect themselves. Then, suddenly, they will begin talking about gold. Cab drivers will have opinions about which gold coins are the best one to own. Hairstylists will want to convert their savings into gold rings and bracelets. Investors will talk about how much they made by trading in and out of mining stocks.

Gold will soar. Gold’s bubble will have finally arrived. Then, it will be time to sell.

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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Comments

  1. I purchased gold bullion in 2007.I only wish i could sell it for the same aud i purchased it for.You guys nearly always avoid this point.

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  2. Paul – purely hypothesising but if we get another flight to safety – re the USD you might get a short window to cash in at a profit fairly soon.

    On the article

    “it is doomed because we can’t tell the difference between a real dollar…and a phony one. And it is doomed because the people in charge of dollars find it more convenient to introduce new counterfeit dollars than to strictly control the quantity and quality of the US currency.”

    at some point the quest to build wealth, a nestegg, etc. will not be enough to motivate people. when you can work 3/4 of your life to make as much money as the govt will just print in one afternoon the incentive to participate will be pretty much eradicated.

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  3. “Little by little, average people will come to see gold as a way to protect themselves”
    When gold goes up people always agree with me how good an investment it is. But not a single one understand it. Not a single one have bought any yet. Gold has quadrupled in price in 10 years and still only the cranks bother to own it.

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  4. I would rather have shares in gold miners than to actually hold the physical bullion, but that’s just me…

    Stillgotshoeson
    February 23, 2010
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  5. And why would not cab drivers have an opinion on gold if many of them were economists, analysts and bankers in their previous life?

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  6. Dear stillgotshoeson, it’s better to have physical bullion that shares in gold mines becuase not if, but when the market crashes, what will happen to your shares? During the great depression in the 1930’s a very famous saying was born: “If you don’t hold it, you don’t own it” as many millions of people found out the hard way. If you do not hold it, then all you own is a promise

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  7. I meant to say than, not that

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  8. I am in the sceptic camp when it comes to gold. The claim essentially is that gold has tradeable currency potential beyond the control of government. So my mind is drawn to “control of government”, and their interests, and their forces, and the historical record.

    Reading Ron Manners book I was reminded not only of the bust side of mining in Australia, which should be prescient in our minds as our boom continues even as a consumer bust is acknowledged in major markets, but also of the power of govt. Gold mining was switched off in Australia for many years because the govt required that all gold be sold to it at a fixed price which happened to be well under the combined costs of exploration and production.

    On governments and governance we have a world combining a small no. of nation states able to control their economy and politics within their borders(BRICs), capitalised developing economies, uncapitalised & stagnating agrarian peasant economies, the anglo socialist bankster world govt hegemony and the maverick power of the US energy-military industrial hegemony. The latter is full bore in charge under the GOP who flirt with the banksters, and the opposite applies with the democrats who go full bore down the Rockefeller world govt estate route but flirt with the energy-military industrial interests. Political interests determining foreign policy appear to be negotiated with the State Dept with a bent shifting toward Rand for the GOP and the CFR for the Democrats.

    Gold price is currently made by sentiment as expressed in the derivative bets. There is only a small percentage of physical gold available to cover the bets taken in the market that is making the price. The potential for a bust is high. Gold value potential is in the potential for the dissolution of the power of government not only over fiat money but also over coercive future taxation. The latter is based on implied force and social order.

    In terms of hegemonic government power the threat to the US empire is that none of the interests with political control have an economically sustainable domestic agenda or achievable foreign agenda (post Vietnam resistance to middle class conscription and total war) and the economic ticket of debt fueled consumer power and taxation spending into military industrial and socialist programmes and socialising bankster losses has been clipped into shreds.

    In terms of the capital powering nations and trade we are mostly here agreed that it is in fact not capital derived from savings or trade surpluses converted into capital. It is b/s leveraged based in this mad world of ours. But this b/s leverage has value in all the nation states and groups excepty those currently denied that capital. So surplus nations reserves don’t want it destroyed because so too goes the consumers that buy their exports, so too goes their reserves, and developing nations with capital access don’t want to lose it, and those like Australia sitting on asset bubbles in commodities and real estate don’t want it, and the anglo world govt bankster elite don’t want it.

    So who wants a fiat currency bust? Get the idea? Very few on that team.

    And if high net worth individuals and consumers work out that they are about to be taxed to death and must spend all their savings on anything that might hold value? Well remember that hiostory says that FDR mandatorily seized all the gold and named his price, and Australia having named the supply side price for so many years just means that supply and demand don’t make the value of gold alone and you can essentially justify a case to call it “fiat gold” whether physical or not unless some breakdown of the known forces of order is anticipated and the exchangeability of gold for daily bread becomes practical.

    For mine the issue of governance will be challenged by taxation and the annexation of private savings and collapse in discretionary trade. Increased authoritanarianism, social control, and use of foreign conflict and demonisation of enemies within must accompany that same.

    I notice many here are posting similar symptomatic fears, especially in respect of govts annexing their retirement savings.

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  9. By buying gold, you are betting that if governments and their currencies fail, banks will nonetheless survive. It’s the banks that have the gold, who sell it and who manipulate its price. Yet governments already depend fully on banks for their existence, even before the fall of Napoleon. Otherwise, a metal whose only practical uses are electronics and jewellery is no better than any other substance. Believing in gold is believing that banks will still honour it when the time comes. Maybe this is a correct belief, or maybe not, but real wealth has to be tangible, useful and exchangeable.

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  10. @Christina When the market crashes, I will continue to hold my positions and ride it out.

    When gold does rally, the shares in those gold mining companies will default.

    My Gold Mininer positions are..

    Citigold 400000 shares @8.5 cents
    Lihir Gold 10000 @$2.98 (down a bit at the moment)
    Gold One 100000 shares @28.5 cents

    Over the next 5 years I expect Citigold to hit $1.50
    Lihir to hit around $7
    Gold One to go around $3

    $34000 + $29800 + $28500 = $92300

    $92300/1100 (oz gold)= 83 Ounces Gold (approx)

    Gold Skyrockets to $6000 an Ounce $498000 ( I think $2400 or so)

    My guess on the share price is right.. $970000
    My guess is Half right $485000
    Somewhere in between (prolly closer to reality.. $750000)
    I put my money where my mouth is, and took the miners…
    You go ahead and buy physical gold if you wish..

    Stillgotshoeson
    February 27, 2010
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  11. oops will rise by default… biker_pete will be all over that :)

    Stillgotshoeson
    February 27, 2010
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  12. Completely, totally & utterly wrong. Gold is tangible, is useful & is exchangeable. It is in fact more exchangeable than any other substance.

    And if banks have all the gold, how are currencies going to fail? they are the (paper) currency generators. Truth is, most banks have mere promises to pay gold, including the biggest bank of all, the Central Bank.

    I even suspect, by the massive increase in IMF generated SDR’s on the balance sheet of the RBA, that Australia’s pledge of gold to the IMF has gone down the toilet.

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  13. Hope you’re right about Citigold Stillgotshoeson, but they’ll have to pull their fingers out. More likely I think, they will get bought out by a larger (hopefully better) miner if the share price falls low enough. Don’t think their latest ‘capital raising’ (should that be fleecing?) is going very well. Might force them to shape up.

    And remember, even if the share price does hit $1.50, you are only selling shares for dollars. If gold is $6000 an ounce, you might be lucky to fill your petrol tank with the proceeds. And that’s assuming that the petrol station will still have petrol, when gold is $6000 an ounce.

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  14. Contrary to popular opinion, I hold no really strong position on gold at all. I related the parable of the Aussie Rules footballer who took his life when gold crashed, to my two sons nearly two decades ago; simply to demonstrate that it then rose to almost $1000 / oz… and that he should have ‘held his position’.

    Sometimes I conclude, perhaps wrongly, that most here are pessimists. That’s a flawed perception if you consider that, in fact, many here are optimistic about gold rising. You have to acknowledge that optimism when you read genuinely-made predictions of gold at $2400 – $6000 per ounce. My stance? Could happen. Probability? Slight. That’s not pessimism, by the way… just my beliefs about chance, data and probability.

    Chance of inflation in Australia? Very, very high. And when we talk of the demise of fiat currencies in this respect, it’s not the sudden death of a currency as in Weimar Germany, or modern Zimbabwe; but the small, slow, steady relentless undermining of your buying power over time. In that continuing drama, give me tangibles every time. If gold is your happy asset, stay with gold… .

    For all its negative perceptions, I’ll buy property. The tax concessions are generous, it pays fortnightly dividends, government intervention is predictable, it’s very tangible.

    There’s a reason it’s called ‘real’ estate… .

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  15. @Justin.. I am bullish on gold but not $6000 an ounce bullish.

    $2000 to $3000 is probable with a $2400 to $2600 mid range target likely.

    I would expect the current capital raising to not be doing so good… why would you buy at 12 cents when you can buy at 9 cents…

    If they are bought out by a bigger miner I should still make money, you never lose selling for a profit ;)

    I would then direct those funds somewhere else, depending on the market at the time..

    If the world does turn to hell in a basket and Gold hits $6000 I will probably be out of work, would have taken the caravan and a wagon full of baked beans and headed up to my fathers 110 acre block in western Victoria and stay there till the dust settles…

    Stillgotshoeson
    February 27, 2010
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  16. My own thinking on gold is evolving over time too. Biker unless you were mega-leveraged you would still be wealthy in tangibles (property) regardless of a crash which is why too I have increasing like for the hard stuffs (plural) and dislike for paper. I bought more PMs this week gone as I cant afford a farm right now even a tiddler. If I could I would regardless of looming crashes but not leveraged of course. And there is a risk these types property might go through the roof if one waits. They have in other high inflation states. I would put a high value on a personal roof over my head and somewhere to grow my meat and veges etc. It takes time and effort to develop your infrastructure too and I aint getting younger.

    Ive always felt that gold/silver is the best money proven by time and maybe its impossible to dispute that evidence over that time frame. But I doubted it would have a new role as money after a crash. But then the central banks do own most and therefore hmmm. What if CBs allow higher pricing of gold which is inevitable to some extent and this allows them to survive the credit destruction with some collateral intact. I take the fiat gold point. But are PMs possibly their solution at the end. Who is hoarding PMs now? Who maybe has gold we dont know about? What other way can confidence be restored in a post global-crash paper currency without hard backing? Im still looking for the truth on all this so my PM position is always a punt. I guess however I’ll be managing risk with tangibles but no matter what (in comparison to paper/electronic deposits).

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  17. @Justin

    “And remember, even if the share price does hit $1.50, you are only selling shares for dollars. If gold is $6000 an ounce, you might be lucky to fill your petrol tank with the proceeds. And that’s assuming that the petrol station will still have petrol, when gold is $6000 an ounce. ”

    So I am still better off with the miners if I am right.. at least I can get a tank and half of petrol instead of selling the gold and only getting a tankful… :)

    Stillgotshoeson
    February 27, 2010
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  18. Lachlan: “Biker unless you were mega-leveraged you would still be wealthy in tangibles (property) regardless of a crash…”

    It’s hard to know what ‘mega-leveraged’ means today, Lachlan. If you mean ‘Would your super pay off all your property debts?’ the answer is ‘No’.
    If the question is “Would your _combined_ super pay off all your property debts?” the answer is a healthy ‘Yes’.

    That’s why I believe in a three-asset mix: Property, Super, Cash. (Our eldest (28) believes in four: Shares, Cash, Property, Super… in that order. His younger brother (24) invests in three: Property, Cash, Shares, in that order.) All assets will move up and down over time. The ability to _move_ money is critical, not just in volatile times; but in times when we _know_ governments will mess with the rules… ! ;)

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  19. I am with your eldest… same 4, different order.. but I am a little older so my priorities are a different.

    Stillgotshoeson
    February 27, 2010
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  20. I been away for a while but I see DR is still pushing gold so I guess somethings never change. Every day more and more gold is mined and moved into vaults so that it can, well, sit in a vault :)

    Want a good measure of wealth?…try oil. Oil has made more fortunes than gold.

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  21. Exchangeability is all in the mind, you know. If people believe in something, you can exchange it. I know quite a few people who have a gold stash, some quite sizeable, but they wouldn’t dream of using it unless they were desparate, like for airfares, border-bribes and setting up in a new country.

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  22. No Dan, gold is NOT in the mind. The dollar on the other hand is the obligation of the issuer & no matter how much the issuer pretends that it is exchangeable, it remains an obligation so IS all in the mind.

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  23. so long as the issuer is obligated to pay nothing.

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  24. or should that be obliged?

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  25. Gold, as money, is a token of value, just as is paper, or an electronic record of credit. What you can buy with gold depends on what people think of it (even though its quantity in the world is ultimately limited). But the necessities in life remain so – food, shelter, clothing, and whatever else people consider to be necessary – and any necessity that has a fixed or limited supply, is the greatest because its value is _guaranteed_. I am really not for or against ownership of gold, and I accept that if/as/when fiat currency fails, something must and will take its place, but I can see no guarantee that if AUD becomes worth less than the electrons that count it, that suddenly I will be able to survive on my brick of bullion. For all we know it might be a rival of gold, or simply a new fiat currency with a bunch of new rules.

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  26. You are confusing payment with an obligation to pay. Spend some time investigating the nature of money.

    There is no rival of gold, if there was it would be gold.

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  27. Justin: “You are confusing payment with an obligation to pay. Spend some time investigating the nature of money. There is no rival of gold, if there was it would be gold.”

    Spend some time investigating the nature of precious metals. There is a rival to gold. It is platinum.

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  28. Ultimately it’s up to the people with the most planes, tanks, guns, nukes and subs to determine what people use as currency. Behind whoever it is, you will find that the ultimate power lies in the central banks. It’s only because of this fact that I believe that gold has a (by no means guaranteed) future as an alternative to today’s fiat currencies. Yet I can’t see how those same central banks want to give up on a system that has essentially given them sovereignty over the whole earth.

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  29. Yes Biker Pete we don’t hear much about platinum. There are also a few other precious metals that are higher up the pecking order than gold because industry needs them as opposed to using them to fill up vaults. Personally I am a fan of uranium as even the U.S are back in the building nuclear power plants game now it seems.

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  30. Greg, I’ve been watching the price of the $5 Koala fluctuate on ebay with some interest. Currently the range is 99c to $149.00…!

    Uranium: Worth noting that the Entergy plant is being decommissioned even as Obama signals it’s all go, Greg. And mining approvals for thorium/monazite are becoming scarce. There was a French proposal to mine about 80 km south of Perth, but I think that was KO-ed. The French no longer approve mining it in France. No wonder the Chinese are prepared to buy it anywhere they can!

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  31. Cant a revision of the gold price upward (a lot) solve problems for CBs at some point (post crash)? Or not?
    OK we cant tell the future, maybe we’ll kill each other over trade differences but some things to do with the future are either possible or not, so I wonder about this.
    I agree with Dan about the importance of food,shelter etc for the individual level but gold important on a CB, government level, which eventually ensures its global importance as money to re-emerge…eventually (maybe not long now), so to save for anything I have to choose it.

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  32. Lachlan: “…the importance of food…” Ahhh, food.

    That’s why a nice little block with lots of water is the ideal, mate! Some top-quality imported snares, a few chooks, a small multi-grafted orchard and a vege patch and Robert’s yer dad’s sibling. Wouldn’t be dead fer pre-decimal currency. A few mates producing F & V themselves, to trade with.
    And if there’s a LETS operating near you, so much the better.

    “…maybe we’ll kill each other over trade differences… ” More likely to be water and/or fuel… but it could be food… . That’s why populating our Ord region could be wise. If we don’t, maybe someone else will… .

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  33. Hmmm … For what might I exchange my gold and virgin daugthers in times of great trouble and wont? ;)

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  34. Let the Bidding Wars begin…!~ :)

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  35. Dear stillgotshoes on, I understand what you are saying, and I totally respect your opinion. However I think that you are making a very dangerous financial assumption. You are making he assumption that “when the marklets go back up again you will do this and this and this” Who says the markets are going to go back up again in our lifetimes? Many a failed empire in history are still waiting for their market to go up again. The Romans, Egyptions, etc etc waited and waited and waited for their empires to “bounce back again” but it never happened. And their empires were like thousands of years old and thought to be too great to fail. Our Western “empires” are only hundreds of years old. Plus, in the 1930’s crash, all the “experts” went around telling everyone to leave their money in the sharemarket because the sharemarket always goes up. What they did not mention is that yes, the sharemarket does always go up again, but it might not be in your lifetime. What is the use of that? If the market crahses and all your stocks get totally wiped out, what use is it to you then if the share market goes up? Zero going up is still zero. If you want to be totally stubborn and leave it all in gold shares, then at least convert some of it to physical bullion so your family won’t starve. After all, when the big crash comes, you can’t eat a paper share certificate

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  36. Oz is a flea on the tail of a dieing dog. The question is, will the tail take on a life of its own?

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  37. “dying” I do believe?

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  38. Dan: “I am really not for or against ownership of gold, and I accept that if/as/when fiat currency fails, something must and will take its place” – A gold/commodities based currency won’t cut it. IMO. Because the one thing we can be sure of is that the moment it doesn’t suit the owners of said gold/commodities based currency to retain the tie, they’ll ditch it. The only thing option we have is what we’ve come down to – Trust and faith – In a government and its people to behave in a fiscally responsibly way …Ouch! … Pick ya Pig!!! :)

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  39. I only ever bought gold to trade back into land after a theoretical reset in the ratio gold prices:land prices following or during a fiat collapse. I would value the land/water and the food you grow there much much higher in such circumstances as a global depression. For money substitutes in a depression I have cheap silver coins and other. I am a seed collector (native grass/tree seeds go into gov’t works and mining reveg) so I naturally have tinkered with production and storing of vegetable seeds. I have no idea how that would turn out in the real scenario. Of course the veges themselves would be important. I’m going to research into alternative currencies more.
    Biker and Christina…my ex wife used to present and sell little gold nuggets on ebay. She did a great job with her camera. They would occasionally 3-4 times gold price.

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  40. Then we shall find a healthy young puppy Ned.

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  41. Have a vague recollection of reading the only stuff Marc Faber reckoned represented value at the moment Lachlan is agricultural land in Russia and Uruguay and Paraguay? No idea if he’s ever been to Uruguay and Paraguay … But suspect he’s never been to Russia? :)

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  42. In fairness to Faber, while he could well be right about Russkie wheat ‘n stuff (?), the land blocks they do their serious production on are huge – And roll to the horizon – Literally. The old collectives structure still exists in some shape or form I imagine? I asked about any opportunity re getting a bit of same once for a little Aussie boy and just got told No way – Rightly or wrongly. But it’s not a country one would rush to invest in regardless … The whole system is simply too corrupt. IMO. (And that’s saying a LOT in these days of general and obvious corruption everywhere.)

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  43. @Christina

    It is not ALL in Gold Shares only 15% of my portfolio is Gold Shares…
    I have Financial, Real Estate, Iron Ore, Energy (Oil and Gas) and health, I am also carrying cash..

    7 years ago I had $12000 to my name and $50000 debt

    I now have no debt, a $700000 portfolio, Have been to America, England and Japan and purchased a Landcruiser.. I think I have played the game fairly well so far.. Biker_Pete may view this as smugness and arrogant but I am damn proud of my achievements so far.. I have made good calls so far and have had stop losses in play to protect me from the bad ones.

    Always have a Plan B….

    Stillgotshsoeson
    February 28, 2010
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  44. as for Citigold… Past announcements indicated a revised forecast for 2010 production down from 85000 ounces to 50000 ounces, April Quarterly Report should give an indication if they are on target to achieve that revised forecast.. 1st Quarter production should be no less than 10000 ounces and hopefully up around 12000 to 14000 ounces to achieve or improve on forecast if they do achieve forcast share prices should improve a little, if they fail to achieve then things could turn sour…

    Stillgotshsoeson
    February 28, 2010
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  45. Christina: “…the big crash comes, you can’t eat a paper share certificate.”

    And gold is so much more palatable… . And c-r-u-n-c-h-y! Ooops, that’s a molar…

    Immediately after food and water, in Maslow’s hierarchy comes ………. ?

    a. Gold
    b. Platinum
    c. Shelter
    d. Mrs Maslow

    Ned: “Oz is a flea on the tail of a dieing / dying / dyeing dog.”

    Remember when your physics teacher explained that we’re all very likely a complex speck on the leg of a flea on the tail of a dog in space? No? You failed Year 12 Physics?! The Ultimate Trouser Snake puts it all into perspective:

    “So remember, when you’re feeling very small and insecure,
    How amazingly unlikely is your birth,
    And pray that there’s intelligent life somewhere up in space,
    ‘Cause there’s bugger all down here on Earth.”

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  46. The big one is coming today!!! But its made of water. There is a “tsunami alert”from about Rocky to Tasmania. Fair dinkum.

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  47. There are strong predictions coming out this weekend of the imminent collapse of the Pound and USD, so despite my negativity on gold (which is more philosophical than practical), it would appear that its price is set to ‘decouple’ (ie: soar like a bird with a rocket up its posterior). Still, having no debts, a reliable backup for food and shelter, personal safety etc, come first.

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  48. Excellent idea BIKER Pete, but should put your money where your mouth is. Go buy platinum, store it at your houses.

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  49. Justin, if you’ve been reading or hearing about the discussions among central bankers you’d be aware that of the few that are contemplating a return to a metal standard consider all the precious metals as viable alternatives to gold. If Russia went for palladium, for example, while others stayed with fiat (eg: trading on the back of oil and militarism) would you wish you’d bought palladium?

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  50. Gee, Justin, Multiple Choice is supposed to be easy.

    The correct answer is: c. Shelter

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  51. Shoes: “Biker_Pete may view this as smugness and arrogant but I am damn proud of my achievements so far…”:

    No problemo there, Shoes.

    As the man says: “tread ya own path.”

    We did it differently, but there are many paths to success. We rocked on to two different bands, in two different towns today… and caught some great surf in between. Life she is pretty good in Oz, yez?! :)

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  52. Shoes: “Always have a Plan B….”

    Your timeline should have the following fallback positions:

    Plan B

    Plan C

    Plan D

    Plan F: For when everything goes belly up and recreation is all ya have left. Plan F stands for FUN… . Necessary to explain this for those who thought otherwise.

    Rock on… .

    Reply
  53. Okay here is a piece of evidence for you stillgotshoeson that there is no way you can ignore. Watch this youtibe video right now. It is called Zimbabwe: bread for gold, and it shows a video of the actual situation right now in Zimbabwe and it shows how people who want to buy bread have to give the shops gold, it shows how the shops only accept gold and nothing else for food. It shows people starving who have not got gold. Here is the link to the video http://www.youtube.com/watch?v=7ubJp6rmUYM

    And Biker Pete, I am not saying that you can eat a tasty piece of gold for lunch and that it will taste much better than eating a share certificate. I am saying that gold can be exchanged in real life situations for bread and food and medical supplies, whereas a share certificate can not. Is 6,000 years evidence that gold and silver are the only money that works in a crisis not enough years of evidance for y’all?

    Christina
    March 1, 2010
    Reply
  54. @ Ross
    Your posting was very interesting to consider. Thanks.

    @ Biker Pete
    Too funny! (re: Maslow’s wife)

    Both of you please keep posting.
    And peace to all.

    Reply
  55. But Christina, surely the shopkeepers in Zimbabwe accept platinum too?

    After all, BIKER Pete is a financial genius & I’m not the only one who’s said so. If he says platinum is gold, then it is.

    By corollary, that means if the government says paper is gold, then it must be.

    Looks like I’ve had it backwards the whole time!

    Reply
  56. Justin, how could anyone hold a different opinion to someone who commences his post (27/02/2010): “Completely, totally & utterly wrong.”
    You _must_ be completely, totally & utterly right. (& I’m not the only one who’s (sic) said so.)

    But your original comment “Gold has no rival” is so uninformed (like any Zimbabwean who would decline platinum) that I should simply have ignored it… .)

    “…if the government says paper is gold, then it must be.” Note that it has said so for the last eighty years. And that paper has bought everything from ocean liners to your daily bread.

    “Looks like I’ve had it backwards the whole time!” Well, that’s being a _little_ hard on yourself. Only your whole life…. . ;)

    Biker Pete
    March 1, 2010
    Reply
  57. @Christina

    “Okay here is a piece of evidence for you stillgotshoeson that there is no way you can ignore.”

    I can and I will thanks…

    Your entitled to your opinion and I am entitled to mine.. I am a bear in the current economic climate but I am not a pessimist, I have the ut most faith in Human greed and our captalistic nature to improve our lot..
    Real Estate here is going to take a hit, someplaces worse than others, The share market is going to take a hit, some companies, sectors worse than others but life will go on.. things will improve and Biker_Pete and I are going to have fun along the way..

    By all means go live in a cave with your 50 pieces of silver and gold if you wish.

    Stillgotshoeson
    March 1, 2010
    Reply
  58. Bill Bonner: “On the other hand, imagine you had a stack of Krugerrands or maple leafs. Well, you still couldn’t buy a cup of coffee at Starbucks. Because the dumb clerk wouldn’t know what it was.”

    I thought Bill put that particularly well: “Because the dumb clerk wouldn’t know what it was.”

    (Like any Zimbabwean who would decline platinum for bread… .)

    We’d be back-to-basics, wouldn’t we?! Traded a tiny pellet of ‘precious metal’ for a bunny this morning. Just leaned out of an upstairs window and pinged dinner with a 2c airgun slug. Now for a handful of rosemary, some garlic and a little port. :)

    Biker Pete
    March 1, 2010
    Reply
  59. Christina, I think you make a very good point. Zimbabwe is a failed state, par excellence, but the African continent is not Australia, with its white population, first-world mentality and no strong opinion on what metal shiny things should be made from. But Australians understand bartering very well:

    Fix your neighbour’s deck, and he’ll fix your plumbing. Give the bloke across the road some veggies and fruit, maybe share a few beers, and he’ll diagnose your car for you. But try to run from this country when all hell breaks loose and I think not even gold is going to help. You’d be better off with a yacht.

    Reply
  60. Okay stillgotshoes on, I raise my white flag, you are totally entitled to your opinion and I hope you have fun with your plans :-)

    Ps- to everyone who thinks that Australias is different from Zimbabwe, just remember that up until 1980 Zimbabwe was called Rhodesia and it was the glittering jewell of Africa where everything in the economy was rosy. Until it all went belly up

    Christina
    March 1, 2010
    Reply
  61. Christina makes a good point here. Zimbabwe and Australia have identical cultures, demographics, politics, histories and economies. If over-processed carbohydrates are on your list of supermarket necessities when Armageddon rocks in, buy gold at $1100 / ounce now. Like it’s only _bread,_ man!~ :)

    Biker Pete
    March 2, 2010
    Reply
  62. Christina – Rhodesia … Zimbabwe … Australia?
    Sister please?????
    Come HOME sis – You’ve spent WAY too many years hanging ’round them Yank boogey men! :)

    Reply
  63. Christina – Have you EVER had even one good long chat to a white Rhodesian who used to go into the bush to kill these bits of crud who were butchering his people? Or to even ONE black Zimbabwean who reckons Robert is a good guy who the Western media portray in an extaordinarily wrong and and shabby light? I have. And do try to hold off having an opinion. Although, Yep, I guess I’ve got my own personal biasses.

    Reply
  64. Dear ol Ned, all I am saying is that everyone is Australia says that “Australia is different” What is so different about Australia? We print too much money, 90% of the population is in debt 150% of their income and nobody saves. Why is Australia difffernt?

    Christina
    March 2, 2010
    Reply
  65. Christina / Steve Keen: “Why is Australia difffernt?”

    Biker Pete
    March 2, 2010
    Reply
  66. Why is Australia different? Well that cuts right to it hey?
    Well, Oz “could” be different (no guarentees :) ) because their new and biggest and best buddy has a 2.4t surplus to spend on “stuff”. With Oz having some saleable “stuff”???

    Reply
  67. Christina really does have a point, but having gold in Zim is not for buying bread, but for getting the hell out of there. Will Australia go the same way as Zim? Doubtful, because the types of (insert expletive here) who did what they did to Zimbabwe are unlikely to do so here, because too many of them live here themselves.

    Reply
  68. Australia sells “stuff” to China. China uses it to make other “stuff’ in factories to sell to Western consumers who are almost broke. Who will buy Chinas “stuff” when Westeners are wiped out in the coming crash? Answer- nobody. The Chinese people are avid savers are there is not enough domestic demand for China to sell its own “stuff” that it makes to its own people. I doubt that the thrifty Chinese would buy the gaudy plastic junk that Westeners do. Without anyone to buy their “stuff” China will not need Austrlias resources to power factories that are making nothing. Australia is a one trick pony who has put all its eggs in one basket.

    Christina
    March 3, 2010
    Reply
  69. …somehow i get the “feeling” that dislike of plastic and dislike of the american way go hand in hand…plastic cars don’t rust,while plastic vacuum cleaners suck up dust,and plastic champagne “glasses’ are a must, as long as plastic rules,china ain’t going bust…o that’s right, australia exports ore…cars of iron on iron tires, cast iron feather dusters for arms that never get tired, or iron glasses on iron faces those iron wings will take us places…swell!…

    Reply
  70. I respectfully disagree with your assessment of Australia Christina: “Australia is a one trick pony who has put all its eggs in one basket.”

    I agree that there is a high chance that industrial output from China will decrease significantly when various countries start scaling back their consumption due to their debts. This will of course flow on to the demand for raw materials which we supply in abundance to China/India and of course a reduction in revenues. However that said, the modernisation of China and India will continue apace and this will still require a substantial amount of resources. Yes, the Chinese are avid savers who will not make up the shortfall caused by a drop in foreign demand but that still doesn’t mean they all like living in squalor and will just sit there and take it. Their domestic development will go on as will India’s and for this they need the raw materials which we have in abundance.

    I remember years ago, the early nineties, where various pundits were writing us off as well as an “old” economy, way out of touch based on nothing but digging stuff out of the ground. Over the last twenty years we have weathered quite a few storms and come out doing pretty good for such a bunch of old fuddie duddies:

    I remember the 90’s when metal prices kept going down and down along with the Aussie dollar (dropped to 45 cents I remember) but as a result mining was buffeted by the low dollar (but still struggling of course), agriculture was doing pretty good, manufacturing could compete ok and tourism really picked up. So many predicting our imminent demise but we held on and somehow kept growing. Then after that the various crisis kept coming – Tech Crash, 9-11, high oil prices and then the GFC which we somehow managed to dodge (although the government is doing its best to make sure we have a debt legacy to pay off like so many others).

    Not too bad but yes there are concerns with the way that everything is being so distorted by the resource sector at the moment but I believe that we will cope with that as well. I always bet on form and I do not believe that this pony has gone belly up just yet :)

    Reply
  71. To Christina……

    I am old but not that old…..I came up with

    “If you don’t hold it, you don’t own it”… Ponce…in 2004 and not in 1930, but thanks for saying “those famous words”………Ponce

    By the way, I am doing a Yahoo search and my quote has been posted from Hong Kong to China, Australia and the UK and also by many (like you) here in the US.

    Reply
  72. That’s true Don, you make some great points. I hope that China and India will need to keep building and expanding to raise the living standards of their own people, but as it says here in the daily reckoning, China is using stimulus money to build whole cities that sit empty and unused. I wonder how many empty cities they could build before they had enough?

    Christina
    March 4, 2010
    Reply
  73. Very true Christina. There is no doubt that there are quite a few excesses going on behind the China story as well as terrible waste. This is what I find fascinating about economics, it doesn’t matter if you are capitalist/communist/whatever, the wrong choices eventually lead to problems, there is no hiding it. That said, I can’t stand the regular economists :)

    Reply
  74. I work in the Hydraulic Pnuematics industry, we opened up a design/production facility based in Shanghai a few years back. Last few months work has dropped of about 30%. Since starting the wages costs have more than doubled.. still a lot cheaper than the wages bill in other countries we are based in (company I work for is US owned/based) however the trend is up..

    Stillgotshoeson
    March 4, 2010
    Reply
  75. Good News Stillgotshoeson! Citigold has just found some suckers with deep pockets, sorry, I meant sophisticated Chinese investors, to hand over some cash. CTO stock up a massive 9/10ths of a cent & it’s only 10.30am!

    But seriously, lets hope the Chinese apply the thumbscrews.

    Reply
  76. Chinese have had been sniffing around for awhile…

    Stillgotshoeson
    March 4, 2010
    Reply
  77. @Justin

    Your right…
    Change (Today) Price($)

    Change for today is shown in two columns: Price shows the difference in security price between close of trading on the previous trading day and the Last Price. Value shows how holdings have changed in value between close of trading on the previous trading day and the present time.
    Change (Today) Value($)

    Change for today is shown in two columns: Price shows the difference in security price between close of trading on the previous trading day and the Last Price. Value shows how holdings have changed in value between close of trading on the previous trading day and the present time.
    Actions
    CTO

    CITIGOLD CORP LTD FPO (ORDINARY FULLY PAID)
    400,000 400,000 0 0.009 3,600

    Stillgotshoeson
    March 4, 2010
    Reply
  78. 400000 CTO @ .085 $34000
    400000 CTO @ .10 $40000

    hmmm not bad return on a $34000 house in barely 2 weeks
    Yep I am so I decided to by houses..

    Stillgotshoeson
    March 4, 2010
    Reply
  79. With all this talk of the economy going on, it’s easy to forget that money is just an invention. It doesn’t have to work forever like the sun or the moon do. It’s just an invention. Poeple used to think that salt was the most precious thing on Earth. In the old days, people used to get paid in salt. That is where the word “salary” is derived from, from the word salt in Latin.

    By the way, the word mortgage is derived from the same Frech word as the word mortuary, because mortgage was known as “debt until death”

    Christina
    March 5, 2010
    Reply

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