Posted on 08/12/2011 7:20:45 PM PDT by blam
Gold contracts come in 100 oz chunks. It is the silver contracts that are 5,000 oz based.
(I know you didn’t write the article, so just sayin...)
Which is why you can’t have a gold standard.
Can you explain that statement to me?
I have been told by some on Free Republic that everybody needs to have gold for when the economy collapses...that it is “insurance” and for “wealth protection”...but I am not seeing it. If the economy would collapse in the U.S. I would think we would drag down the rest of the world with us along with the value of gold. If that would happen, then how would gold be valued...I would not think it would be valued in U.S. dollars...current price $1800...future price ????...
If value is driven be supply and demand, then if demand dries up...do to economic collapse...and supply remains the same...how does gold retain its value?
My original discussion on FR about gold happened when gold was trading around $1300 and I had the option to buy an ounce or a bred cow for the same price. I bought the cow and others could not understand why I would...since then gold has gone up to $1800 while my cow gave birth and raised her calf...she gave us so much milk that I decided to buy a bull calf (to drink some of that milk) to raise for meat (cost $10). So for my $1310 “investment” (plus feed around $500) I have now sold the cows calf, have a steer that will provide around 600 pounds of beef for the freezer, and fresh milk every day. If I go with conservative numbers that would mean for a cost of $1810 I have a return of...calf sold for $700 plus, 600 pounds of beef at around $3.00 per pound equals $1800, and around 250 gallons of milk at $2.50 a gallon (currently around $3.50 here) equals $625 for a total of...$3125. And I still have the original cow to start over with...or I could have an ounce of gold.
If the economy would collapse I can still feed my family with the things that the cow can provide...and barter with some of the things as well. Gold would only provide me with substance if I sold it...if I could find a buyer...and then it is gone.
Am I missing something about gold being “insurance”?
“I do not expect to survive the chaos undamaged, but I do intend mitigate the damage by eliminating debt and buying real assets as paper dollars become available to me.”
What you have written makes sense to me. Can I ask what do you classify as “real assets”?
It’s more banal than that. It deals with growth and if you outpace growth trouble begins.
Governments get into trouble because of debt. Either they spend to much or going to war requires funding or investors are not happy with a 1% to 5% growth rate so money/credit is created to satisfy the greedy and/or the directive (like a war or pie in the sky programs).
And the US prints bonds and no so much money. The only real
‘new money’ is the interest paid to bond holders because even Red China is not dumb enough to dump US Treasury paper or the US dollar would crash becoming worthless so they sell the long paper and immediately buy short term paper and slowly invest/convert US holdings to tangibles like rare earths and grains, mainly because they have to, to keep their economy moving forwarded but do this very slowly as not to drive their own dollar holdings down by injecting to many dollars into the financial world at one time.
If you can sell the debt to others like when Nixon sold China our debt or if you can’t sell the debt then you devalue the currency by gathering up the gold then set a new price or print more paper money or create a war to hide your short comings in the economy...the Ponzi scheme in debt seems endless but it is not, always ends with a reset after much pain and suffering borne by citizens that finally revolt in some fashion that forces the issue of resolving debt.
Then human nature kicks in and the cycle repeats, throughout history it repeats...You just happen to be living at a time when financial systems are about to reset.
Gold is an indicator of confidence in governments and their fiats. As long as money is changing hands (inflows and outflows) dependent on any one thing, it can be played as an investment... or loss.
I agree that the basket scenario is the most likely, but it won’t happen anytime soon. And certainly not before a cataclysm. The near future holds more money printing as a short term fix.
Yep, land, equipment, maintenance, vet supplies, labor, taxes and risk on your calculations of return.
That said, I agree 100% that a person should acquire necessities first. Are you going to buy another bred cow once you have an extra $1,700? What about if you had a couple hundred thousand dollars to invest???
Just sayin'...
That sounds more reasonable.
Thank you. This whole subject of debt and inflation has been one I have been paying attention to for a couple months. The post is how the product of that ongoing study and not fast typing. Not too hard, because I worked in accounting, finance and investments until I retired. Monetary policy first captured my interest in graduate school in graduate school.
“Yep, land, equipment, maintenance, vet supplies, labor, taxes and risk on your calculations of return”
And gold ownership doesn’t come with extras as well? Where is the gold stored...safe deposit box, a safe, under the mattress? All have either expense or risk tied to them. If the value of the cow goes down I can still eat it and get the full value I paid for it out of the meat in the animal...if the value of gold goes down you lose money. That is the reason I still do not see the “insurance” side of owning gold...I understand the risks of a cow, but I also understand the risk of owning gold...
“Are you going to buy another bred cow once you have an extra $1,700? What about if you had a couple hundred thousand dollars to invest???”
At this point I would not need to...the cow will be bred again shortly...but I could buy another one now if I wanted to since I do not need to buy milk or meat for the family, there is extra money available. If I did have a couple hundred thousand dollars to invest I would buy more land to increase the size of the hobby farm...I can provide for my family currently on this farm but the family is growing so eventually we will probably need more land...and then I could probably raise my own hay for winter feeding reducing my costs even more...that is our long range plan.
I can put my gold coins in my pocket and fly to a foreign country with them and then exchange them for the currency of that country. Can you really do that with your cow? I have a barn and could put a couple of cows in it but I’m a very busy man, I don’t have time to play farmer. Now then, If you took the cash profit from your cows and bought gold with that, your profits would be protected against the eroding nature of fiat currency. Or, you could stick it in the bank and watch it become worth less and less. Or you could buy more cows. that too comes with its own set of risks of course. Gold doesn’t get sick and die for example. Having said all of that, if I had more time, I would own a couple of cows and a coop full of chickens and a pen full of rabbits. As it is, however, I have a degree in nursing and that is my biggest asset right now.
just make an ounce of gold worth $25,000 instead of $1750 and it works. or 50,000 dollars. you get the idea.
It's much easier to hide a gold coin than a COW! lol
Agriculture sounds like a great plan. Best to have a little gold and silver also. It's portable, easily hidden and much more liquid than most other types of property.
if the value of gold goes down you lose money.
Have you ever heard the comparison of what gold will buy and how it hasn't changed through the years. It's the value of the dollar that's dropping. Certainly there is variation but some gold/silver is indeed good insurance. Maybe a few thousand dollars of 90% silver would be the better plan.
If you get a chance, read what happened at farms during the Wiemar republic.
That 200 trillion, is that counting all the crap and toxic waste thats been spewed out as “investments”?
No it doesn’t. The increase in the money supply would be dependent on how much gold you are producing. The existing stock is how much you already possess. So countries with no gold have no money? The US is in the top five producers, but only produces a fraction relative to the GDP. China is the biggest producer, but has a small stock of gold. Canada is a big producer, but owns no gold. Invade Canada to increase your money supply. Also, at the numbers you quote, between your house and the nearest Starbucks, there would be 3 dirt hills as people dig for the metal.
Maybe I need to ask the question a different way...If I would buy gold with my profits at $1800 and then the price of gold goes to $1200 then how is that “protected against the eroding nature of fiat currency” any better then any other investment in real assets?
For the record...I have the cow, a small flock of sheep (yes we spin our own wool), a coop full of chickens, and a pond full of ducks...we got rid of the rabbits (the children didn't like the taste of the meat).
“I have a degree in nursing and that is my biggest asset right now.”
I some what agree with you...our biggest assets aren't what we own (be it gold or cow) but our knowledge and I would add our relationships with others. With having the farm my children have been able to learn skills that have led to them landing jobs in this poor economy...and those jobs have led to an increase in other skills...
I’m pretty sure the chart includes toxic assets. The chart was put together in 2010. I think it’s much larger than 200T now.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.