Comments on: There is More to Wealth than Money

By: hazenyc

hazenyc — Mon, 06 Jul 2009 17:31:07 +0000

rising gold is inflationary not delfationary cuz it means u need more dollars to buy the same gold.. = dollar less valuable = goods more expensive.

By: Mark

Mark — Mon, 06 Jul 2009 17:15:49 +0000

As has been noted above, "wealth" and "value" are completely subjective concepts that depend on society's perceptions. These can and do change and we may be on the brink of major change currently.
Monetary inflation is caused by NEW money entering the system and the only legal way this happens is when central banks "expand their (im)balance sheets and create it. This new money is the SAME stuff whether it is a loan, a purchase of MBS, purchase of long term bonds(quantitative easing)or purchase of short term securities (to reduce interest rates).
I think your US colleague has hit the nail on the head Dan, there will be a major divergence in price between essentials bought with cash and things Western consumers buy with debt.

By: Lachlan

Lachlan — Sat, 04 Jul 2009 10:56:28 +0000

I dont know if this helps Annie but it is at least possible that silver could see some lower prices in the current deflationary environment. I have aquired some silver too a while back when relatively cheap but am hoping for a chance to buy a little more if this takes place. I only expect silver to go down with the current deflationary events unfolding- more mortgage forecloseures and resumption of cyclic bear market in stocks. This reasoning due in part to silvers industrial useage. So I look back to November 08 and silver was around $9 US. I'm hoping at least $10.50-$11.00 this time around. Gold at that time was about 750-800 although I think we have slim hopes of getting gold that cheap.
I believe both metals will correct upwards sharply as the year wears on.
Good luck.

By: Annie

Annie — Fri, 03 Jul 2009 23:52:31 +0000

hahaha Dan, good question about kfc. Still trying to work it out. Having said that, I get a craving every six months or so for it, cave in and regret it every time!! And yes Biker Pete, here in the land of drought and flooding plains we should indeed count our blessings. I do everyday.

Am seriously considering silver as a good buy at the moment. Always needed for technology and could be more popular in the future if gold keeps dilly dallying.

By: Dan

Dan — Fri, 03 Jul 2009 21:36:38 +0000

Greg, on that point, and beyond (re: manipulation of the gold market) I found an interesting website: http://www.gata.org - Gold Anti-Trust Action Committee - it seems some wealthy gold traders were cheated out of their fortunes and weren't particularly happy about it.

By: Greg Atkinson

Greg Atkinson — Fri, 03 Jul 2009 12:41:44 +0000

Gold is subject to the same pricing pressures as anything else. It is only worth what it is now because there are more buyers than sellers not because of any intrinsic value. Gold could go much higher if buyers continue to buy, but it could also fall quickly if sellers start to outnumber buyers.

If you were on a sinking ship then life jackets would be worth more to you than a bar of gold...it is all relative

Just remember this, gold production costs are around $500 or so an ounce. So if you buy now you would want to be sure that people keep buying gold and keep supporting prices. Normally this is called a bubble if it relates to tulips, real estate or anything else trading way above it's intrinsic value but with gold....well....it seems many people feel the rules do not apply...but what if they are wrong?

Maybe just maybe, DR could discuss the other side of the gold story and tell us how things could go terribly wrong?

By: Biker Pete

Biker Pete — Fri, 03 Jul 2009 11:33:55 +0000

Yeah, we Aussies are indeed wealthy, Annie. Once a week we count our blessings... and fall asleep before we can finish counting. Why count sheep in a land where they outnumber humankind?!

By: Dan

Dan — Fri, 03 Jul 2009 05:54:20 +0000

Annie: But is kfc food?

And Dan, should not the value of dollars be inversely related to the value of gold? If gold is cheap (in dollar value), does this not suggest that money is valuable? Reading your article you seemed to imply the opposite.

One problem with gold is that there are large amounts on the loose (not in bank vaults, largely as jewellery) so that if a gold standard was reintroduced, there would be a rather dramatic shift in wealth that could cause tensions. For this reason I suspect that there might be many different metals used as monetary standards, on a regional basis. I am hoping this, because if the whole world goes to gold, then it's going to be a single world currency - something I am crossing my fingers and hoping never happens.

By: Annie

Annie — Fri, 03 Jul 2009 05:20:56 +0000

"Hmm. Gold rising indicates the rising value of cash...because gold is money. But if money is not wealth...and gold is money...does this mean gold is not wealth? Now there is something to think about over the weekend. Our thoughts on Monday..." Dan you're doing my head in!!! Gold and money is just a form in which there is transfer of one form of energy to another. If you're starving, you'll swap a gold bar for some kfc. The perception of wealth is in your head.