04 October 2010

InfoGraphic: All About Gold -- Past and Present

 Once again, the world's ultra-rich are stocking up on gold.  Do they know something that you do not?  Or did they become rich by falling for every scam that came along?   Regardless, if this goes on, how long will it take before the Obama reich steps in to put a stop to this anti-social trend?

From OneMint (via BusinessInsider) comes this data-packed chart that looks at gold's present, recent past, and ancient past.  You can find more information here or here.  Gold has been seen as "real money" by most civilisations from ancient times.   For a clearer, larger image, see here.

Paper money has no value in itself, but is instead a symbol (an IOU) of underlying wealth residing elsewhere. Gold is generally seen as real money.   If you have total faith in the central bank of your nation, forget about gold.  Otherwise. look at metallic wealth -- including gold, silver, copper, platinum, etc.

What about oil? Oil is being manipulated out the kazoo by the big money investment funds and firms. If the price of oil ever does rise -- AND STAY -- above $100 a barrel (1980 dollars) for a long period of time, substitutes for oil will pop out of the woodwork after their natural respective delays for development and scaling.

So no, oil is not the new gold. Even platinum is not the new gold, since catalytic substitutes for platinum -- as well as several promising ways of reducing the amount of platinum in catalytic units to tiny amounts -- are coming on fast.

Gold is not so much an investment, as it is a stable repository of wealth -- although a lot of people have done much better than the stock markets via gold investments recently.

If you had invested in gold when I first mentioned it, you would have done very well. If you scoffed, you lost. At this point, gold will only drop dramatically if Obama completely changes his approach to governing, loses his anti-market bigotry, and dumps his blood-sucking friends in public sector unions, the faux environmental movements, and abandons the radical left.

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Blogger Kinuachdrach said...

In ordinary conversation, "wealth" gets used to describe very different things -- income, stored value, productive capacity.

The problem with gold is that it is only stored value. Real sustainable wealth is productive capacity -- the capability to make a great wooden table, and to cover it with food, and to build a nice roof over it, and to park a usable automobile outside.

Gold has no intrinsic value, other than its scarcity. When the economy collapses, gold won't make crops grow or make cell phones appear out of thin air. Gold is not a productive capacity. If a generous time traveller went back to the Stone Age and dumped tons of gold bars in front of some cave dwellers, then guess what? -- when the time traveller left, those poor guys would still be living in a cave.

Yes, it is reasonable to be highly concerned about fiat currencies. The flight to gold is an understandable response to the idiocies of the transnational Political Class, and the corresponding desire for a safe temporary store of value. But sustainable wealth requires pumping our surpluses into new productive capacity, not sticking those surpluses under the bed in the form of non-productive gold bars.

Monday, 04 October, 2010  
Blogger gtg723y said...

Very good point. I have also heard that if things completely collapse the only things worth carrying around will be water, food, lead, seeds, and whatever you will need for the junkyard war.

Monday, 04 October, 2010  
Blogger PRCalDude said...

There is almost surely a gold bubble. I'm fine with using it as a hedge, but don't buy at the top like now.

Tuesday, 05 October, 2010  
Blogger al fin said...

Sometimes -- in the context of an idiocratic governing regime -- stored value is the best you can do in terms of "wealth."

You may want to ask yourself why the Obama administration has so much antipathy to an entrepreneurial market economy. The answer to that question may help you to decide whether or not to buy silver and gold investments, at least for the time being.

Wednesday, 06 October, 2010  
Blogger PRCalDude said...

I'm not a supporter of his (I don't vote) but I'd like to know what it is he has done that is so much worse than the last guy.

The socialism/capitalism debate gets tired when you realize, as Steve Sailer has pointed out numerous times, there are plenty of socialist countries in Europe that do just fine per capita GDP-wise.

Until they become diverse. Nothing destroys quite like diversity. Even California, had it not become Mexico, could have turned things around had it remained full of Americans. But the diversity-based housing bubble, diversity based school segregation, diversity-based hiring, etc have made a return to the golden years impossible.

I'm almost sure there's a pump and dump of gold in the works as JP Morgan owns so much of it and just opened another vault full of it that hadn't been opened in decades.

Wednesday, 06 October, 2010  
Blogger PRCalDude said...

Here's another good article on gold.

Gold bugs like this line, "Considering that the US dollar has lost about 97% of its value against gold since the Federal Reserve has been in business, one can conclude that confidence in fiat money has been waning rather precipitously over time. This trend is certain to remain a one-way street over the long term, with occasional fluctuations as confidence in paper (or digital) money waxes and wanes."

Fiat currency isn't pegged to the value of gold in this country - it's pegged to the increase in productivity over time, or at least it should be. The problem it has is that the Fed has to counteract fiscal policy with monetary policy and also the Fed like to play monetarist games (bailouts, MBS buy-ups) to influence the economy positively, despite the fact that there's not much evidence for this working.

The latter point is, I think, the real problem with the Fed - it turns a bunch of dials it doesn't really understand (nobody does). It also has less control than it thinks it does. When a mountain of credit is built on a molehill of actual cash reserves, the Fed can't influence much when demand for credit begins to contract as it has over the past 3 years.

In summary, I think the gold bugs are promoting gold out of their own self-interest (what a surprise).

Wednesday, 06 October, 2010  
Anonymous Anonymous said...

Many European countries like mine (Italy) don't and didn't do well with socialist politics. Their economies lagged, the people out of work (or working illegally) is plenty and what you don't pay in money, you pay in time.

Diversity simply help to show up faster the consequences of socialist politics. The same politics would fail in 20 years in the homogeneous Sweden of 1960 and in ten years in Italy in the 1980. Why? Because Italy was much more "diverse" and with a larger population than Sweden. Now Sweden is more diverse and the socialist politics will fail faster and faster. And people will notice it easier.

Gold bug could be interested in seeing more people buying gold, but this don't imply they are telling some lies. They are speculating that the currencies will be debased more than they are now. If they are right, and it is difficult to disagree, their investment will simply bear fruits faster if more people start to see the reality of currency debasement. In this case, the only to lose are the governments.

Thursday, 07 October, 2010  
Blogger PRCalDude said...

What does "currency debasement" mean? Isn't everyone else running the presses at the same time we are?

The fact is that I live a lot more comfortably than my grandparents did, despite the fact that the dollar has lost its value. I can buy hand-held devices that have the computing power of a room-sized computer of yesteryear. I have plenty to eat and only need to put in a couple of days worth of work to feed my family for a month.

Goods are cheaper and services are better now than they ever have been despite the dollar losing its value by 99% since whenever. This is because in the long run, productivity has sky-rocketed due to technology making it possible.

You may well be right about the other stuff though. That's a plausible narrative for California.

Thursday, 07 October, 2010  

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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