.
my mother was alive, although a mere tot, when the last american double eagle was minted. just shy of a full ounce of gold, it was a thing of beauty:
and it was worth twenty american dollars--i.e., this damn thing was spending money.
of course, if you didn't wanna walk around with a bunch o' huge, clunky gold coins in your pockets, you could, like most people, use the infinitely-more convenient greenback instead
secure in the knowledge that, anytime you wanted, you could freely switch between the two. because, as it had been since its inception, every american paper dollar in circulation--as it said right there on its face--was fully redeemable in an immutably-fixed amount of gold.
by the time my mother was eating solid food, that was no longer true--americans had by then been forced by their government to surrender their gold, given $20 and change for each ounce they possessed, and then left to watch in helpless dismay as that same government then hiked the exchange rate to $35 an ounce, thus (a) granting itself the ability to print tons of new dollars, which had the effect of (b) instantly diminishing its own citizens' wealth by almost half.
nice, huh? all done in the name of patriotism, of course--and thus, dollar inflation was born.
we kept it in check for awhile, but only because our international trading partners weren't as easily cowed as our citizens--having gold-backed currencies themselves, they demanded the same from us. and thus, gold remained internationally redeemable at $35 per ounce for almost 40 more years.
what changed? simple: the french, shrewdly realizing by the late 60's that we were running huge trade deficits and couldn't possibly be paying for the vietnam debacle without printing far more dollars than could be redeemed at a mere $35/oz, started demanding gold instead of greenbacks in settlement of trade. this drain on fort knox went on until 1971, when nixon finally said "fuck it" and closed the gold window.
and thus, freed from the shackles of the gold standard, america fired up the printing presses and never looked back.
* * * * *
silver? now, silver was different--a relatively cheap, unappreciated metal, silver remained the american coin of the realm well into my childhood. quarters, dimes, half-dollars--they were all 90% silver until 1965.
until, that is, the money-sucking military-industrial complex swung into full gear, and that quickly changed. i still remember how they sold our money's sudden new debasement to the american people:
see? we were "saving" silver with these new coins. they even had a cute name--they were called "sandwich" coins, for the fact that, instead of the solid silver of the originals, they consisted of a thick copper core, with a thin coating of cheap nickel on each side (i.e., not a speck of silver to be found).
i remember when they came into circulation, all the kids at school couldn't wait to trade their stodgy old silver coins for the neat new sandwich versions because they were so shiny and cool. but we were just dumb kids--what did we know?
in retrospect, it's the reaction of the adults of america to the new coins that's so goddam disheartening. most of 'em were old enough to remember when their gold had been taken away a mere 30 years before, but even with that memory fresh in their minds, they let their silver be stolen with nary a whimper.
* * * * *
today?
it would take seventy-one $20 bills to buy that same ounce of gold a single twenty woulda bought you in 1933.
the silver ratio's not as extreme--you can still pick up a pre-1965 silver quarter for only twenty-two of today's copper/nickel quarters--a bargain, you ask me.
why did i write this post? because i'm tired of being called glenn beck, and because i'm tired of hearing all this bullshit from the government and the economists and the pseudo-intelligentsia about how gold and silver are barbarous relics which have no place in today's "modern" monetary system.
but mainly, because i'm tired of americans looking at "inflation" as just a commonplace occurrence, like the weather or something. because it's not--it's a systematic, carefully calculated theft of your wealth.
and you know what? regardless of how much these assholes try to convince you otherwise, they still ARE money--in fact, the only money that matters.
a fact that's gonna become only more apparent in the coming months--trust me.
6 comments:
Well, the proof is in the empirical results that happen.
So, if there is an economic crisis in the next few months and hyper-inflation in the United States (and gold trading at $5000/per oz. with silver at $500/per oz.). Then we will know that guttermorality is right.
It is worth noting, however, that inflation has always existed. But because the United States was on a fixed gold standard, it lead to very harsh boom and bust cycles.
There were economic contractions similar to the Great Depression throughout our history. These contractions are extremely painful. Taking the money off a fixed gold standard (as you call it, fiat currency) has the effect of making these contractions significantly less painful -- it is plain Keynesian economics.
What matters now is the trust and security of the currency. The U.S. has it currently and t-bills go for a 3 percent rate. Spain or Ireland do not and their government debt has to offer interest twice as high or more.
Part of this is a comparative exercise. Where is the money that is in t-bills going to go to? China? A currency that actually does not freely trade? Japan? Mired in long term economic malaise? Europe? Really, Europe?
The fact of the matter is that although the U.S. long term fiscal outlook is not so hot, it is better than the alternatives.
If you don't believe me (and guttermorality rarely does), take a look at the unfunded government pension liabilities of the Japanese government. Or Italy. These countries make the U.S. Social Security problem look small by comparison.
America's gold money was not only pure gold, it was art, much if not most of it being designed by Augustus St. Gaudens. It had a classical gravitas that said solid reliability like the marble-columned older-style banks said security and continuity through the decades. Even the symbolism could be "taken to the bank."
I read it...and unsurprisingly, I agree with noblesavage. The amount of gold and silver in circulation is an arbitrary number. And there's no reason any currency should be based on that, rather than the amount of lithium, cadmium, tin, or aluminum...or heck, why not arsenic? found in the earth's crust.
If you don't like the Government printing money and increasing the deficit and decreasing the value of your money, then take it up with the politicians. Blame the Republicans for wanting to give $700 billion to millionaires and the Democrats for wanting to give unemployment insurance to the long-term unemployed and neither party wanting to tax the American People to pay for it.
But really it's not their fault. The fault resides entirely in the vast majority of the American People, for wanting massive debt that they don't want to pay for. That includes the Tea Party. Did you hear a peep from them as we go hundreds of billions into debt to give extremely wealthy people a bit more? I didn't. Because the truth is true deficit hawks are endangered species. Most of us just want everyone else to pay tax cuts and spending that benefit us.
My bet against gold is not a bet against government deficits. That would be a very bad bet. It's a recognition that the amount of printed money, as bad as it is, has not quadrupled in the last 10 years even as gold prices have. You make a good argument that gold prices should track the extra printing of dollars. But the amount of dollars in circulation has not doubled, much less quadrupled. Even if you predict future deficits, there is no indication I've seen that we are heading into hyperinflation. Germany in the 1930's, we're not. Nor are we Greece and Spain, because as "bad a bet" as the American economy is, we're still the strongest on earth.
We have "printed" a lot of dollars. That's true. So gold prices should rise from ten years ago. And they have. But they shouldn't rise as high as they have. To me, that is classic bubble behavior. I "sold" at about $1340. So far, I'm losing my bet. But selling short means I can wait, without paying interest, as long as I want, as long as I cover the difference. Gold may hit $1500. It may not. But I'm confident that within two years or so, that gold prices will track inflation, rather than the amount of hype on TV. They have to come down to earth because there is no economic reason why they should fly so high. Sink just to $1000 (still more than twice the price of 10 years earrlier) and I've made three times more money than I'm losing now.
So I'm glad you made a profit. I hope you sell some of your profit. (Heck, Mike, at least half! Do you remember the internet bubble? Do you know how much people are kicking themselves that they didn't sell half then?) And use that profit to visit me and make your life better.
And if we disagree? That's OK. It won't be the first time. Or the last.
Looking forward to seeing you!
Mark
noblesavage: good god, where do i start?
in the first place, you're wrong about inflation--from the mid-1650s until around 1914 (hello, federal reserve!), and with the exception of wartime spikes, there was virtually no inflation in the US.
in the second place, yeah--pre-fed, there was a pretty regular boom-and-bust cycle working in america, kind of a "two steps forward, one step back" pattern. the corrections were generally sharp, painful--and brief.
contrast any of them, even the panic of 1907, with the great depression or today's "great recession" (both caused by the loose-money policies of the very body which was created to prevent such events), and they seem laughably insignificant. me? i'll take my chances without the "help" of the fed, thank you very much.
as for your third point--that yeah, we're bad, but we're better off than the other guys--honey, the US is on the hook for $200 trillion of unfunded liabilities over the next 20-30 years, with an ever-growing entitled class, a citizenry with little to no savings and a shrinking tax and industrial base. we are greece to the third power.
and the only reason our bond yields are so low (a fact which is beginning to change even as i write this) is because the world is still cowed by our reserve-currency status, not to mention the myth of american exceptionalism. it's wearing then, tho--very, very thin.
will: the st. gaudens coins were majestic, weren't they? and yeah, that shit did mean something once.
[reply to mark coming]
mark: i could go into all the reasons gold and silver have been used as media of exchange for thousands of years, but i won't bother--you heard 'em all in school, and they obviously don't impress you much (thanks, no doubt, to the keynesians who taught you economics).
you also obviously think that modern-day man is clever enough to manage his currencies without the governing influence of gold and silver. which, indeed, we now are--for the first time in history, not a single major world currency is tied to gold. it's a novel experiment that's been ongoing for 40 years now, and by now it's obvious to even the most casual observer that it's spiraling out of control.
which is why gold and silver have been steadily rising for the last 10 years, mark--they're not exhibiting any classic bubble behavior that i can see. and i never said they were tracking M2--their rise is a direct response to the wild expansion of cheap credit thanks to alan greenspan's panicked response to the dot-com bust.
you blame the foolish greed of the american people for the mess we find ourselves in--i couldn't disagree more. in a free-market economy, the greedy get slapped down soon enough, and hard. but in a managed economy like ours--in an atmosphere of artificially declining interest rates engineered by the central bank--the american people were left with no choice but to take risks with their money if they just wanted to stay even. and with the artificial housing boom that resulted from such foolish policy, what happened was pretty much guaranteed.
and as for our comparison to other countries, you and noblesavage both seem to cling to the myth of american exceptionalism. i'm sure 100 years ago when the pound sterling was the world's premier currency, the UK thought it was pretty special, too--and it took a mere 10 years to smash that illusion to dust.
as i pointed out to noblesavage, the US is on the hook for upwards of $200 trillion in unfunded liabilities over the next 20-30 years--the only reason we're not 20's germany, or greece or spain is because (a) we're the world's reserve currency of the moment, and (b) unlike them, we can create money at whim, and the world pretty much has to accept it. and we'll continue to do so--for as long as the world lets us.
as of right now, the federal reserve is the no. 1 purchaser of treasuries, mark--the world isn't buying our act anymore. and we (and most of the other countries of the world) are run by self-serving fools who will continue to make policy based on avoidance of short-term pain, rather than making the hard choices that really need to be made.
for these reasons and many more, i'm sticking with my gold and silver--not only are they the only real money there is, they're the most reliable barometer of the profligacy and irresponsibility of our leaders we have available. which is why the establishment despises them, and talks them down at every opportunity (while quietly naked-shorting them, and buying on the resulting dips behind the scenes).
anyway, thanks for playing--i miss our back-and-forths.
[ oh, and buy silver ;) ]
I agree with guttermorality on one thing: Buy silver.
The rest, not so much.
Is gold in a bubble? Yes and no. Gold is a reactionary play for people who are scared or when there is an inflationary spiral.
Which is what makes gold's rise so interesting now, because inflation is so low. If you track gold's rise, in the past five years, it was below $700 an ounce for all of 2006 and most of 2007. It only started a rise to about $800 in mid-2007 as the housing bubble was bursting. After the economic collapse of Fall 2008, gold went down again to almost $700 and has basically doubled since then.
Yet, stocks have also basically doubled since the bottom of the market in March 2009 (the Dow has gone up about 75 percent).
Gold's increase is also reflected in a much broader rally in precious metals of all kinds and commodities generally.
So, I would consider pork bellies. Pork bellies have increased 50 percent in the past year -- far better than gold.
Maybe Hillary Clinton was on to something.
Post a Comment