Posted on 11/13/2009 6:45:21 AM PST by SeekAndFind
Comparing the price of gold from the year that the federal reserve act was passed to today gives us the full picture of just how poor a job the fed has done with the dollar. Using our definition of money, a medium of exchange, unit of account, and a store of value let's consider just how well the dollar still fits the definition:
Is the dollar used as a medium of exchange? Yes, though due to it's performance on the other two money characteristics (see below), this may not be the case for much longer.
Is the dollar a good unit of account? It's a pretty horrible unit of account, actually. It's value fluctuates widely, and while we know the long term trend is down, we don't know how fast the fed will reach their ultimate goal of zero. So we have to give it a big fat NO here.
Is the dollar a good store of value? Here, by anyone's accounting, the answer is another huge NO. When I said; Let's see, gold was 20 dollars an ounce. Now it's ELEVEN HUNDRED dollars an ounce.Your answer was; Wow! 6% return a year. You're looking through your FRN prism. Gold IS a good store of value. A more reasonable way to look at it is that the dollar has LOST 98% of it's value (so far), since 1913, as measured by gold.
So, the dollar itself only meets one of the three characteristics of money, and that one characteristic it DOES still meet - medium of exchange - is in jeopardy. A reasonable person can see the problem. The dollar is losing it's money status.
Now my guess is that you might want to want to come back at me with a "how well does gold fit the definition of money". Before you go to the trouble let me point out for you that your analysis will be distorted if you view it through the FRN prism. As a medium of exchange in this country, gold served well until it was outlawed by FDR, and the reason it doesn't function as such now is because of legal tender laws and this little thing called taxes, which is what happens when you try to use gold as money while the fed is destroying the dollar's value.
Also, we know that gold's history as a unit of account will look poor as viewed through the FRN prism, but again, we have to look at what actually happened. While gold was illegal for American's to own it's price in dollars was suppressed. When the top of that pressure cooker finally blew, not surprisingly, gold's value in dollars skyrocketed. It then settled down and only fairly recently (this decade), as the dollar's value accelerated it's slide did gold start it's bullish move.
Finally, as a store of value, well, no explanation needed there, right? Here, even you dollar defenders have to admit - gold IS money.
In all seriousness... I do hope that if you don't yet own any that you are buying some gold. The dollar might very well be dying.
Are you under the impression that there was no inflation or deflation under the gold standard?
It's a pretty horrible unit of account, actually. It's value fluctuates widely,
The dollar fluctuates much less than gold does.
we don't know how fast the fed will reach their ultimate goal of zero.
You think the Fed wants the value of the dollar to be zero?
Gold IS a good store of value.
Because it's never been worth zero? LOL!
Excellent-- hey Todd, I knew you'd be able to explain that even though gold may be a great commodity for speculation, money is something completely different. I don't know what it was you said but thanks just the same!
your post 40 "NO I did not bring it up..."
your post 33 "...why do we have the GDP numbers, less investment, and unspeakable unemployment numbers?"
Guys like Obama can say something and turn right around and deny they said it, but we can't.
dang— cheap Chicom keyboard, sorry about that last post...
I'm pretty sure a high-intensity X-ray would detect it.
Look up "Industrial radiography".
Back toward the end of the era when those of British ancestry ran Rhodesia, the folks with a lot of money bought very, very nice boats.
The plan was that when the time came to go, they just get in the boat and sail away, then when they got wherever they were going, they would sell the boat and they’d have money to start over.
Called them “crash boats”, as I recall.
You alluded to something similar in FEAT.
I don’t think X-rays would penetrate very far into a gold bar.
They had a long way to go from Rhodesia to the ocean! But it was done a lot in South Africa.
Gold and tungsten have different densities (gold at 19.32 g/mL and tungsten is 19.25 g/cm3) --off by four parts in a thousand. Any decent engineer could measure that in his kitchen, but an easier way is using off the shelf kits with a magnetic/xray/density mix and that can be carried into the vault. More info here.
Personally, I'd have thought the simplest way would be by melting point. With gold at 1064 °C and tungsten at 3422°C (hotter than the surface of the sun), just stick a white hot needle into the bar...
up this morning
Gold Price Change due to Weakening of US Dollar
+3.70
Gold Price Change due to Predominant Buying
+6.60
Gold Price: Total Change
+10.30
Forget gold’s spike to $850 which was all of two days. The highest inflation adjusted one month average for gold was about $700 back in the early 1980s. If we reach a one month average of $1800 next month then we will be the same when inflation is taken into account. So we are not that far off from a new AU peak...not that it will happen next month
My numbers $700 and $1800 might be off a bit but you get the idea
Hey a blast from the past --a four month lag time is hard on the old memory but we were talking about how gold isn't money because it's not a unit of account and it's not a medium of exchange. We were also talking about the fact that no matter how many times this is said. the info never makes it across so that's why I asked Todd to see if he could explain it.
Looks like nobody can get it across, seeing how after four months not even Todd could clarify it.
btw, that "$400/oz later" is a fantasy. November's close was $1,372 and yesterday it was $1,427. The math is easier for me to do than explain but I get $55. While that may be a 13% annualized rate of return, we get a -81% annualized rate if we look at how gold's fallen since last Wednesday. A serious look tells us that precious metals are not a 'store of value' when the amount stored changes at rates jumping from +13% to -81%.
Uh-oh! Look what happened a year and half later. Higher prices everywhere!!!
Please point out the conflict you think you see between these two statements.
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