Tuesday, 19 July 2011

Gold at $1600 an ounce

With all the bad political economic news this weekmit is notnthatbsurprising to see gold flying ahead in the markets. It is certainly not good for the world economy to have a big crisis in both the Euro and Dollar at the same time.

Germany looks to me to be making the same mistake itndid during the Weimar days. Then the industrialists were to have inflation and Government subsidy as they earned their money abroad and kept it there. Today with the Greek crisis theybare happy to reap the industrial rewards of a weak currency but not keen on paying any price for this. This is not to say the Greeks, Irish etc are not to blame. Just that in 1921, there were uncanny similarities with Germany blaming everyone else for their own poor policy decisions.

Having said this, I think today's policymakers in the US and Europe will traps the nettle and find a way manage the sovereign debt crisis because they simply have to given the market reactions in both bond and equity prices. So maybe gold won't last above $1600 past the end of the summer, a risky bet though.

41 comments:

Weekend Yachtsman said...

Gold isn't going up.

Paper money is going down.

Blue Eyes said...

What are the Germans' poor policy decisions, exactly? Apart from allowing the southern states to run up the debts in the first place, obviously. What should the Germans be doing differently?

Gordon Brown said...

So you think the price of gold will fall?

I told everyone that in 19999.

I was right.

Steven_L said...

weekmit? notnthatbsurprising? traps the nettle?

Sangria going down well is it CU?

Budgie said...

Blue Eyes said..."What are the Germans' poor policy decisions, exactly?"

As CU said, Germany is "happy to reap the industrial rewards of a weak currency but not keen on paying any price for this."

The fundamental weakness of EMU is that 'one size' does not 'fit all'. The ultimate price is a United States of Europe with a common fiscal policy, then the German taxpayer will pay anyway. And if the eurozone breaks up instead, the weaker economies leave, then Germany will have a stronger currency, and will not be (quite) so successful. For the last decade Germany has tried to have it both ways.

Blue Eyes said...

I don't see why Germany should selflessly give up its advantages though. If the other countries were stupid enough to tie themselves into the Deutschmark then more fool them. Britain tried it with the ERM, saw the future when everyone else refused to help us out of a tight spot and said "no thanks" to the full lock-in. We weren't even the only country to fall out of the ERM on White Wednesday. Germany had to live with rates which were far too high for it for the first few years of the Euro. Instead of whinging and expecting the Spanish taxpayer to bail them out they got on with making their economy more competitive by taking a ten year wage freeze and reforming their employment and other regulations.

Why should now the lazy countries which did not grasp the nettle of what it meant to enjoy a strong currency with low interest rates.

Blue Eyes said...

Whoops, that should have been "Why should now the lazy countries which did not grasp the nettle of what it meant to enjoy a strong currency with low interest rates get bailed out?".

Anonymous said...

So you think there is some possibility that the collapsing fiat currencies are going to gain ground vs gold (the historical store of value) at the end of summer?

huh.

Nick Drew said...

well you know where I am on this

more Bad News = higher gold

any end to the Bad News in sight ..?

Timbo614 said...

@ND and err.. Silver :) The Turdites are ecstatic!

Anonymous said...

yes but ND, if we suddenly get some good news is Gold going to reverse its recent gains?

Are people fleeing to gold for temporary solace, or has the relationship of these currencies 'perminantly' changed?

CityUnslicker said...

It is a fair point to say paper money is going down. However, to think this can only be a one way street is also dangerous.

ND, it ispossible that the us debt will get sorted and the eu do something sensible - two bits of good news possible before the end of the summer.

Also I note thought that with the Chinese buying gold rapidly the likelihood of any collapse in the gold price is very remote.

CityUnslicker said...

BE - the german mistakes are multiple. To unite with weaker states is a long term poornchoice for them. Then to try and impose their rates and needs on states who lack industrial infrastructure is pure mercantilism - the same way that china acts to the us and uk. The policy of hollowing out your export markets sounds great until theybgo bust and can no longer buy you products or pay back the money you lent them to buy your goods in then first place.

To then grandstand about your munificence is barmy as it only drives deeper wedges into theeuro currency disaster. The politicos in Germany today though are of low quality and are happy to pander to the masses who think this is all about lazy Greeks. It is a more complex argument than this and those in charge should be aware of this. Look at the pathetic behaviour over nuclear power to see how populist current german policy is.nappy to free ride to on uk and French defence spending and also to cozy up to Russia for her energy needs despite the dangerous regime of autocrats in Moscow.

On topnof all of that, Germany has.a large budget deficit than the UK, with eu bond contagion they could end up on an unsustainable debt trajectory itself. I am not sure how well Germany industry would do with it's big subsidies reduced, similarly france.

Anyway, hopefully that answers your challenge as to German policy mistakes.

measured said...

[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. Warren Buffet

Still, so many people put their faith in it. That's what Brown didn't understand. It is a shame we put our faith in Brown.

Budgie said...

I cannot think of any currency that is not 'fiat' to some extent. Obviously paper is intrinsically worthless. It is only accepted because society backs it with everyone's work.

Gold has _some_ intrinsic value (jewelery and industrial) but certainly not $1600 worth. The difference between the utility price of gold merely as a useful commodity and the current price is a speculative bubble just as much as house prices were. Remember 'as safe as houses'? Even so a house is more useful than gold.

The general public has still not quite caught up with gold yet. When it does, get out fast. But selling gold jewelery to be melted down into pigs to be hoarded is one of the signs.

As has been said, if civilisation really collapses what you need is food, matches, knives and a gun. We are still digging up gold hoards from the fall of the Romans in Britain. Fat lot of good it did the Romano-Britons when the Saxons came a-calling.

Anonymous said...

Budgie, society needs to use something as money. Unless you favour going back to a barter system.

We used to use sticks, sea shells, stones, live stock, rare metals and now even paper.

The question is what is the best form of money.

CityUnslicker said...

Paper money is fine as a cocept; indeed today electronic money is surely the only answer to make our world work. What it beds to be skied with is government policies of sound money above all else, for it's people a state needs to providevsecurity of the country, legal process, propriety rights and sound money to protect the people from inflation and debasement.

James Higham said...

With all the bad political economic news this weekmit is notnthatbsurprising to see gold flying ahead in the markets.

I can see you're excited by the English. It's the way before the crash for gold to soar.

Anonymous said...

As is normal for this forum, I find the exchanges shallow, ill thought out, and quite obviously incorrect.

Budgie..flawed logic. What they were burying was MONEY, (gold). Today you wire it, (or smuggle it, or create entities) to move it to another jurisdiction....as digits.

And the "intrinsic value of paper, or digits" is???...perhaps only what the current powers say it is....and when they fail???...as every one in history has!!!

CU : Spoken like a true banker.
The problem is the politicians who cannot fail to expand their remit to infinity, which then crashes the economy under debt

The other problem is banks who seek to increase profitability by increasing debt, to the point of customer saturation...bloated asset values decrease, but the debt reamains. Socialise the difference.

Do you think that a nationwide bonus system, where each taxpayer receives a bonus based on M1 growth would be equitable??

Given the combination of politicoes and banks, the fundamental function of MONEY..to act as a store of value, has been sacrificed...resulting in a loss of confidence, and a flight to find an alternative.

There are many, many sub arguments that can be brought in, like permanent suppression by all paper entities of every damn indicator on the planet, by a plethora of means, each layer being more difficult to unravel than the previous, all currently held in a catastrophic web of derivatives with a current gross value dozens of multiples greater than the current global GDP.

Many scripts have been written about the French Revolution, always from a political angle, with blame assigned according to the predelictions of the author.

Move behind the scenes to the banking world, and you can see the shemes hatched by the various finance houses of the day to perpetuate the paper criminalities and wholesale state murders. A really complex picture.

Linked below is a simple explanation where the truth emerges, that is was really all about the death of a paper fiat currency, whose issuers had corrupted the body politic, and most state institutions.

Rather reflects today, don't you think?

http://www.literaturecollection.com/a/andrew-dickson-white/fiat-money-inflation/1/

Blue Eyes said...

No CU you didn't answer my point at all. Did the Germans impose the Euro on anyone? Nein. The Euro was a French idea to tie German success up so that a reunified Germany couldn't pull too far ahead of France so that a power imbalance ensued. Remember there was a serious fear that a resurgent Germany could try to take Europe by force again.

Germany did not force Greece, Spain, Italy, Portugal, et al. into the Euro. Those countries wanted to get into the strong economy club and thought that adopting the Euro would be a short-cut to that. Greece wasn't even allowed to join at first. The evil German industrialists were hardly going to get excited and shoe-horn in a country which makes up 1% of the Eurozone market for BMWs and Audis.

As I said above, the German economy hardly got a free ride at the start. Should the Spanish taxpayer have transferred massive funds North in the first ten years while the Spanish economy "boomed" and Germany stagnated?

You are seeing the whole situation with very short term spectacles on and through the prism of "it's all a German conspiracy to take over Europe by stealth".

If I was a German master strategist I would have started out with a smaller Eurozone which, once a success, would have attracted new members like moths to a lamp. Christ, even Britain might have joined. Instead it was people like Barroso who wanted to hitch a free ride on German strength and have, quite rightly, come a cropper.

Anonymous said...

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8638644/Return-of-the-Gold-Standard-as-world-order-unravels.html

Budgie said...

BE - The floating euro is weaker because of the PIIGS. Consequently German industry gets to sell its products in a weaker currency than it would do if Germany had retained marks. Germany has got 'automatically' the export advantage that the UK government has sought for our own exporters: a devalued currency to make our exports more competitive in world markets.

I don't think this is a German 'conspiracy', and whether it is 'unfair' or not is a matter of opinion. That it is happening is fact.

Anonymous said...

http://www.usagold.com/germannightmare.html

Anonymous said...

http://www.youtube.com/watch?v=xqfm0zrRs9Q

Blue Eyes said...

Budgie, ja und? Does that mean that German industry should pay for Portuguese lack of industry, which is the point under discussion?

Anonymous said...

For you, CU

Enjoy!

http://www.youtube.com/watch?feature=player_embedded&v=Y--jCrDOSjk

andrew said...

No politial leader will want to be remembered as the one who let the Eur die.

also

No politial leader will want to be remembered as the one who bailed out the PIGS.

also

No politial leader will want to be remembered as the one who sold gold at an all time low.

We have one of the three.

The French / Germans will not put up with explicit transfers of wealth.

I expect that a central fund will be set up and 'dodgy' debt will be transferred there and guaranteed jointly and severally by EUR members. And new debt will be issued and passed to PIGS by this fund. In return those countries lose the right to issue their own new debt.
Fiscal union by the back door.

At this point, if it looks like working, the markets will move on to be panicky about something else.

And gold will carry on going up.

Anonymous said...

As you ask about gold at $1600. you might like to consider this chart which also clearly shows the manipulation, and the reasons.

So why do you ask such questions?

To insult your readers intelligence?

To show banker innocence?

It's plain for all the world to see. Regulatory oversight is bought off, paper is dead in the water. The western paper is running on fumes.

http://4.bp.blogspot.com/-6O0SR2XAMBU/Tic77zBIn7I/AAAAAAAARTc/4RdD4e2-opA/s1600/golddaily14.PNG

Bailout, (QE), or haircut, and anything inbetween, the dye is cast. $5.5T in bank lending to private consumers in the EU, with austerity measures killing consumers, will kill banks.

Add in socialised previous debt, and gov't debt...with previously hidden gov't debt.....

The fuckwits have destroyed the west...no painless exit possible.

And derivatives make it global contagion

Bank research says 3.5T fund should be big enough for bailout. Total BS.

I see Sarkee went to see Merky last night. Will he get any favours?

Sebastian Weetabix said...

I do find it hard to pay serious attention to a chap who can't spell "die is cast" correctly.

Anonymous said...

Sebby, baby, who gives a shiite about your lack of attention span?

Since your attention span is so limited, the link below may be beyond your time limit.

Who knows?

Continue with the medication, it may help.

http://www.roadtoroota.com/public/642.cfm?awt_l=9b4FA&awt_m=3WgaaMQvB3AZ85B

But if you can follow it, you may find it interesting.

It also may explain a few other "strange things" happening lately. :-)

Sebastian Weetabix said...

Jesus H. Christ. Out of curiosity I actually looked at the link; "the speech JFK would have made if he hadn't been killed". That's 10 minutes of my life I'm never going to get back. ("The monetary power of the USA was stolen and handed over to a group of European bankers" - give me strength.)

You're just another crackers conspiracy theorist. For the sake of your own sanity, apply Occams Razor. Don't ascribe to complex century-long conspiracies that which can be explained by cock up & stupidity. Oh, and learn to spell. It will make everything you write seem so much more *ahem* "credible".

Ho hum. Readers, never feed trolls. I did & look what happened.

Timbo614 said...

I'm learning to ignore spelling, word meaning mix ups, context problems and tense swaps in web forums/blogs becasue they are so frequent. They cause a little "spike" of brain activity as I read them but then the brain switches them to the right word/spelling/tense and continues reading automagically. Funny how we don't spot our own mistakes or typos!
P.S. Don't feed the trolls unless you have a plentiful supply of sheep or goats and are prepared to stay up all night battling strawmen, ad hominems, logic failures etc. While slaughtering your flock needlessly :)

Budgie said...

BE - "ja, und?"

Sorry, I thought the point at issue was CU's statement that the Germans "impose their rates and needs on states who lack industrial infrastructure [which] is pure mercantilism", and similar statements.

The result is that Germany has an artificial export competitive advantage, which distorts markets and has a deleterious effect on the PIIGS. It is not all about 'idle' Greeks. I am simply agreeing with CU.

Anonymous said...

Seggy and Timbo.

I too worry deeply about the ignorance shown on many blogs.

In the main, I find those who call "conspiracy theorist" to all and any who explain a situation that is beyond their personal comfort zone very weak minded and unwilling to pursue reading beyond the limits of their comfort zone.

Their calls are rampant and one of the main callers is BillyboyQ on this site.

Sometimes I cringe when I read his bilge concerning 9/11, 7/7, and a few other favourites. You would think that someone who blogs frequently would be concerned about the accuracy of his words... Perhaps he doesn't care.

Whatever!

In a honest effort to educate you, and anyone else who cares to read, the following link is a PDF to a book written a few years ago by an extremely superb source, who was given access to base documents for research purposes.

Frankly, I am surprised he survived its' publication. Quite a few presidents and national leaders (Not limited to US guys) have been eliminated down the years who held this knowledge.

Sebastian, When you have read and understood it, I look foreward to a full and frank apology for the content of your post at 11.14 am today. Quite frankly, your ignorance disgusts me.

Timbo, I am also surprised at your response. If indeed you are a Turdite, or just a reader of such, you should know enough by now to understand the under-currents flashing around the globe right now.

The said PDF is 1090 pages long. Put it on your hard drive, and study it. It will serve you well in understanding the globe, and why things are happening, and why, if and when the west fails, the absolute shiit and derision of vengence that will descend on the anglo nations, and certain european bodies, as it will be payback time!

Enjoy.

http://www.bibliotecapleyades.net/archivos_pdf/tragedy_hope.pdf

Remember that apology, Sebastian!!

Anonymous said...

http://www.youtube.com/watch?v=_d33-Lk5Zbw&feature=player_embedded

Electro-Kevin said...

The Euro just had to be a bad idea.

Such disparate countries under different conditions being run along the same lines.

And what happens to an exclusive club when it admits new members and becomes less exclusive ?

It goes downhill fast.

Budgie said...

Sebastian Weetabix: "Jesus H. Christ. Out of curiosity I actually looked ..."

Oh oh that's really fatal. These Anon trolls combine incoherence with automatic belief in conspiracy theories. I know exactly what you mean about the loss of those 10 minutes; I have been trapped too.

Timbo614 said...

@ANON:2:08PM:

Grammatical Error: Bad form; repeating the same word or phrase in a single sentence "comfort zone" , "the limits of their comfort zone" should have been "it".
Turdites: Just lurk for fun.
Carrol: Tragedy and Hope. Read it.

Anonymous said...

Budgie.

That would be as coherent as conch shells, would it?

Stick to the tried and tested response it always works for the weak minded...but I know you are not such, so why the act?

Do you come from an agricultural heritage? I just wonder, given the straw men you always create to then argue around.

Timbo.

Then you should know that EE means far more than just those who create paper on COMEX, and NYMEX, and the less visible LBMA.

And your nit picking does not hide your stupidity, it is recognisable as a deflection ploy.

Blue Eyes said...

Yes, Budgie, it is about CU's point that Germany somehow "imposes" anything on other countries for its own purposes. None of these countries have to accept German interest rates or currency strength. They were not forced into the Euro by the Panza division.

Budgie said...

BE, we were not 'forced' into the EU, but our establishment certainly felt we had no choice. There is no doubt that the EU (magically?) favours German industry and French agriculture.

There were indeed no Panzers 'forcing' Greece into EMU, but there sure was a lot of political pressure. It took immense effort to resist that same pressure in the UK, so no wonder Greece succumbed.