Skip to comments.Business As Usual ..Louis Rukeyser .....Gold Bugs' Have Amnesia . (from 1978)
Posted on 12/01/2012 8:01:36 PM PST by dennisw
Use your skills this is an IQ test... The article is there and is a true blast to the past
(Excerpt) Read more at news.google.com ...
When the market crashes, gold's going with it.
It’s a good article to be careful and well diversified. In the current environment there is are very good reasons for gold to be high and going higher: the US has debt that is going up almost exponentially; the US and most of the world are “easing” i.e. printing money like there is no tomorrow; what killed gold is the advent of Reagan and Volker-we currently have their opposites in power at POTUS and Fed Chairman positions; the price of gold will be very tough to go below $1300 as the price of extracting it has become much higher, and it has become much much more difficult to find more economical reserves, even at these prices - gold miner stocks would have been flighing higher, and banks would have been throwing a lot of money to finance them were this not the case.
Would the prognosis for gold be different if we have reduced deficits and growth? Absolutely. In fact, who knows what the prognosis for gold been if Romney had been elected. But another 4 years of Obama and the kind of dependent electorate that we currently have...
On a two year chart, the two are far more correlated...outside of July 2011 > Apr 2012. The two diverged, with gold powering a lot higher, then they converged. It all depends, like many things, upon one’s time frame. Of course, you are aren’t supposed to look at the two over the last decade, LOL. (I’m more on your side, btw)
And let’s not forget that the article is from 1978!
Louis Rukeyser ~ 1978. Wow.
Side note: I used to type the teleprompter for him on Wall Street Week.
Arrogant guy. I could have gone off script and typed anything and he would have read it that way. Stooge.
In the late 70s, hard to believe, the US was still a creditor nation. Now our debt is at a world record. The only things keeping the dollar up are the other crappy currencies and depressed economic growth.
Could be. But...
Keep in mind that we are entering uncharted territory. There is real potential for an economic disaster ranging from depression to anarchy. IMO, we are already in a depression that is being masked by *gargantuan* government spending, phony government stats making inflation appear as GDP growth and most importantly, the blind refusal of governments and markets to acknowledge the end game is near for borrowing and printing money as a means to growth, or even survival.
People should be defining metals as disaster hedges, not investments as such. They may go up or down now, but *if* the SHTF, it’s anybody’s guess what will be valuable. But I’m betting it won’t be paper money.
If the SHTF then I’d say a truckload of 22 long rifle cartridges would be more valuable than gold coins.
Those bags of old silver US coins (dimes and quarters) might be nice though. Gold coins have too high a value to buy groceries with in a SHTF economy. I mean what ya gonna do, file off a few flakes to buy a dozen eggs? A silver dime or a small box off 22lr would be welcomed anywhere for small purchases.
Very nice accounting!!!
“If the SHTF then Id say a truckload of 22 long rifle cartridges would be more valuable than gold coins.
Those bags of old silver US coins (dimes and quarters) might be nice though. Gold coins have too high a value to buy groceries with in a SHTF economy. I mean what ya gonna do, file off a few flakes to buy a dozen eggs? A silver dime or a small box off 22lr would be welcomed anywhere for small purchases.”
Maybe the post of the day ;-)
It would be interesting to see the history of gold prices before and after Nixon's "colossal error" of taking the dollar off the gold standard.
“the US was still a creditor nation”
You understand the problem. If you or me want to live a nice existence (for our family too) we have to sell something we make to other people. The same applies to nations. Even in 1981 after Jimmy Carter and when Reagan came in. We still ran trade surpluses or minor trade deficits. Even Carter could not wreck this nation
That is the conventional wisdom and the historical relationship of precious metals to the dollar since the end of Bretton Woods. In that, you are correct, more so than others making different claims.
However, this has frequently not been the case since 2008. I’ve been watching currencies and PM over that period, and have seen PM falling as the dollar declines, PM rising as the dollar rises, the historical relationship no longer appears to hold true.
Some claim this is due to rising economic strength in other nations, but I haven’t seen that being born out in currency exchange rates. There is a lot of distortion and periodic panics have created historically unusual exchange rate situations, but the only clear trend favored currencies of commodity oriented economies.
That appears to have changed more recently, though, as recession and depresssion have taken hold across the world, marking the commodity spikes and busts that have defined the period for what they are, speculation, in the light of falling demand.
So, the explanation for a change in the historic relationship of gold to the dollar seems to lie elsewhere. It’s frequently noted that gold has long been traditionally regarded as a safe haven and, incredibly, so is the dollar still, so flight to safety during the runup to one of the many periodic panics we’ve experienced is a very plausible explanation for gold rising in tandem with the dollar.
Fire sales when these periodic panics lead to an actual blowup somewhere in the world explains both gold and the dollar falling in tandem. This would not be so much governments or individuals but hedge funds.
Then, there’s manipulation as an explanation. Trillions of dollars are in the hands of financial entities and this liquidity is not at all transparent. So, traditional relationships and expectations would likely have flown out the window with the introduction of such a thing.
So, hedge funds on the one hand and massive stimulus on the other, possibly acting in concert given the lack of transparency, means that the traditional rulebook seems no longer applicable at times. Relative newcomers have taken this four year period of panic, manipulation and distortion to mean that this is just how it is, and have been dreaming up new conventional wisdom, but it’s based upon smoke and mirrors and will not withstand the test of time. Unless, that is, the forces behind the distortion continue indefinitely.
That’s what I’ve observed, at least. Feel free to disagree. The only thing certain is uncertainty anymore.
You can find a Milton Friedman quote on this>>>>
Silver was the first metal to be used as a currency more than 4,000 years ago. For millennia, silver has been viewed by the world as a form of money and as a store of value. For centuries, monetary systems around the globe relied upon the silver standard as an economic unit of account. According to Nobel Laureate and world-renowned economist, Milton Friedman, the major monetary metal in history is silver, not gold. Because silver is more reasonably priced, and therefore more accessible to the common man, it has been called the poor mans gold. It has been said that Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.
No one asks the question:
If the economy completely fails who will buy my gold?
This question is never asked. Who would?
If the method of payment for your gold is dollars and dollars were worthless what would you do?
You can’t go into the grocery store and shave a sliver of it off to pay for milk and bread. You won’t be able to go to the bank and exchange it for worthless dollar bills.
What would you do? The answer is “you have been screwed!”
In a complete collapse of our fiscal system trading will become a way of life. The main things that will be traded are food, shelter and transportation. Barter will be the key and those with gold will find that trying to convert gold to one of those categories would mean a severe loss in it’s value before the crash of our financial system.
A word to the wise...purchase only things as your investment that will provide those things mentioned above.
Gold bugs don't think gold is an investment at all. It's an inflation hedge. If Bernanke announced today that all quantitative easing will end and the dollar supply held steady, gold would sink like a stone. Or, perhaps more accurately, the dollar would rise.
As I said, I think the test should include pre-1971 gold-standard dollar performance vs. gold commodity performance. The big issue of course is getting the dollar back on the gold standard. Gold commodities is a secondary issue. Having said that, I think a pre-1971 review would be revealing.