Are we coming to the end of the largest paper-money experiment the world has ever seen? Will there be a return to the gold standard? That's the argument of Tom Dysonin Moneyweek - http://www.moneyweek.com/investments/why-the-world-could-return-to-the-gold-standard-13910.aspx...
Thoughts?
The extreme gold bugs argue that, with anything else, you are taking risk - when you hold cash in a bank you are taking on individual company risk – that's why you are paid interest to compensate. You are also taking on government risk, as all cash is a promise from and a belief in the government...
These articles make the points that returning to the gold standard would have the disadvantages of any system of rigidly fixed exchange rates (i.e. reducing monetary flexibility which would exacerbate recessionary effects). Furthermore, "gold is not a stable standard when measured in terms of other goods and services. On the contrary, it is a commodity whose price is constantly buffeted by shifts in supply and demand that have nothing to do with the needs of the world economy--by changes, for example, in dentistry".
http://tealtan.wordpress.com/2008/01/09/why-going-back-to-gold-is-a-bad-idea/
in the brave new world there is nothing to stop a relatively sophisticated basket of commodities being constructed as currency backing. Throughout history many types have worked well and a tri-metallic system of copper gold and silver would be a good combination as they combine monetary value and luxury (gold) through high technology (silver) to growth at the level of infrastructure (copper). The issue is not whether previous examples of gold standards were perfect, but rather whether we can afford to issue new unbacked currencies now that everyone can see Emperor Fiat's nakedness.
This is very interesting...i wonder how much gold they bought:
economictimes.indiatimes.com/International_Business/Iran_converts_some_reserves_to_gold_/articleshow/3717335.cms
Yes indeed, good for Iran - and the Chinese have mooted through the press the idea of moving from 400 tonnes to 6000. Russia said to be considering a 10% backing for the ruble...Middle Eastern Gold Dinar, Dubai Silver ETF and most excitingly of all ..... Friday was the first delivery date for the December Precious Metals contracts on COMEX, inventory rapidly disappearing and expected to continue all next week (back over $800 already after the first day) - could be the watershed, if not by Spring next year there won't be a drop of metal in their inventory anyway as people finally work out the scam. Physical premiums for immediate delivery are off the scale - silver now over 100% in places. My friend Eric Lemaire has a new section on his EXCELLENT resources website www.24hgold.com which shows the realtime feeds from ebay of all sorts of Au and Ag coins and bars with the premiums run alongside - strongly suggest you use it as a more realistic price discovery method than the electronic comex 'price' feed which is now just a bad joke. The banner for this feed is right at the top of his website under the charts
Thanks for the tip and my compliments to your friend...24hgold is great.
Your analysis of friday's price spike is interesting. The proportion of longs in the market who wish to take delivery has clearly taken shorts by surprise.
The wide price discrepancy between the futures and physical gold price reveals the firm indertone to the gold price.
There is also the price discrepancy between the small gold miners and the gold price. If one views the gold price as an opportunity then surely the gold miners are an even greater opportunity. What is going on here? Is it just that the good has fallen with the bad?
Banks are still being shored up on an hourly basis. Governments are now resorting to the printing press, the US Fed yesterday and the UK for sure in the not far off future, and all this before any real unemployment has hit the world economy (banking excepted).
Markets go through irrational phases but with government debts balooning, how can any one think that 30 year US T Bonds at 4% or UK Gilts at 4.5% will not turn out to one of the worst long-term investments of all time.
So we turn to gold and if you want yield gold miners. For most of the gold miners the price of gold has not fallen much from its record highs, in local currency terms, the demand has not fallen as the physical price underscores and yet the small gold miners continue to be very weak.
this is the buying opportunity of a lifetime in the majors - although they are off the bottom the majors are still down 60% from their highs with gold only down 18% or so at this point form the very top...and of course at all time highs in GBP etc etc investors have sold gold and silver equities as though they are base metals - there has been no consideration of the flight to safety element
