Gold mine production is now at the highest level since 2000, when gold prices were at $250 per ounce!!
And gold demand from jewelry—the largest source of physical demand for gold—is collapsing!
Meanwhile, investors keep stockpiling gold at a feverish pace. Gold inventories on the Comex are up ten fold from 2001!!
So, add it all up…
Mine production already exceeds total gold jewelry demand by 50%!
And investors are piling up gold inventories…
When it comes time to sell, who will they sell to???
Nobody will be there to buy all that gold.
This is a major disaster waiting to happen. A MASSIVE bubble!
BE CAREFUL!!!!!!!!!!!!!!!!!!
16 comments:
CB's buying heavily on the way down to prevent a collapse after short covering is over?
The people buying gold are still large institutional investors and central banks for the most part. Most ordinary Americans are SELLING their gold. When the vast majority of people in a given market are net sellers of the asset in question can it possibly be a bubble? People are buying less jewelry because the price has skyrocketed past the point where many can afford it for ornamental uses. This lowered demand for ornamental usage is being more than offset by the demand for gold as a protection against dollar debasement. Gold is going "up" because the dollar index has fallen precipitously over the last decade along with the built-in expectation that more dollar debasement is coming. Mr. Norman always myopically views gold for its industrial and oranmental uses when these functions of gold have for most of the last $4,000 years been secondary to its function as a natural money.
Joe Six-pack isn't buying going for the most part yet. Joe Six-pack is still selling his gold. When a large percentage of Americans are buyers of gold instead of sellers then maybe I'll listen to the gold Cassandras of Mr. Norman's ilk.
When did you stop buying gold Mr. Norman? $400?, $500? How about silver? Is that a bubble too? Why should anyone trust your judgement now given how wrong you were about the housing bubble and the precious metals market over the last decade? You haven't even been a run-of-the-mill wrong. You have been wrong on a grand scale.
cheers!
Tom Hickey,
Central Banks do try to manipulate the gold market. It is because they seek to hide the real rate of currency debasement from their citizens. Some central banks have been increasing gold reserves because they would rather hold gold than say American dollars. Who can blame them?
Welfare,
Would it make a difference to you to know that a while back Rev. Pat Robertson was advising his viewers on the 700 Club TV preacher show to buy gold (back at $1000ish)?
Matt, exactly right! People listening to the Glenn Beck's and Michael Savage's of the world are going to get sucked into the gold bubble. Gold standard monetary systems have been the exception and not the rule and they have collapsed each and every time. That -my little gold bug/Austrian/Ludwig von Mises friends- is what they don't tell you.
Used to have an ownership interest in an outbound telemarketing center and some of the employee's told me stories about working in gold "boiler-rooms" where gold is sold over the phone for a 2X markup. They are selling to scared old ladies in Nevada and such. Its terrible. In fact, I saw somewhere that congress is investigating these types of operations as well they should.
On the other hand, it is kind of hard to get a handle on what the price of gold should be given the new easy investment vehicles like 'GLD' and what they do for demand.
What difference does it make if Pat Robertson advocates buying gold? My suspicion is that he also advocates that people save for their retirements, care for their pets, and brush their teeth in the morning too. What does is matter? Is that supposed to be an intellectual argument? He worships his god while you guys worship the god of central planning.
I've been buying gold and silver for many years and laughing all the way to the bank. You guys keep believing that the Keynesians can put this perverted inflationist/fiat paper system back together again. When Mr. Hayek pointed out to Keynes that his system would never work in the long run, Keynes didn't try to refute him but simply answered, "in the long run we're all dead." Well, Keynes is dead and right now is the long run. In the long run it's Keynes's theory that is dead.
You guys keep saying that Austrian economics is a religion. Well, I say that fiat paper is the faith-based system.
You cannot make a cogent argument to support gold as money being superior to fiat money and gold standard money systems have always collapsed. In fact, it is argued here that the problem with our current system is that policy makers 'act' like we are using commodity money. I dare you to make an rational argument that the gold standard is better. How can you? You haven't demonstrated a basic understanding of current monetary system.
Oh, lord, he dared me so I guess I'll take a stab at it.
I think it is important to first define money and where it came from. Money is a medium of exchange, unit of account, and storehouse of value. The concept of money and money itself came out of the market order. It was not a creation of academics or government. It is just that governments always want to control the money supply because it is 1/2 of every transaction. The monarchs of old always wanted monoploy power of the coinage because they could clip the coins and profit by seignorage.
Today, the process is far more insidious because no longer does the government have to clip the coins to fleece the people. The people don't even notice what is being done anymore. The Federal Reserve can simply through the stroke of a keypad increase the money supply. Governments are incentivized to debase paper currencies because it makes their liabilities easier to repay. The creditor is payed back the nominal amount of the loan plus interest but in real terms he is cheated. TIPS don't protect you either because they are indexed to the government's dubious CPI index. There is no free lunch though because the users of the currency, the American citizenry, will pay for this through the hidden tax of inflation. Just last week the federal government announced for the second year in a row that no increases for COLA would be forthcoming. This is becuase the government's fraudulent CPI index showed no inflation. Our seniors beg to differ though. The federal government is trying to pay off its entitlement program liabilites through inflation.
Back to gold....
The reason that gold (and silver) are natural monies is because they have the qualities that one would want in a money:
1) Gold isn't corrosive so it is a great storehouse of value
2)It has a high unit value per measure of weight
3)Highly divisible--It doesn't lose value when broken up into much smaller pieces.
4) It has intrinsic value because it is valued for ornamental and industrial uses.
5) Gold is malleable but resilient so it is great for coinage.
It is for these reasons that gold was chosen by the people in their transactions as money. No vote was taken. It just came about spontaneously through the market order. People do not value gold for magical-mystical reasons but because it is a natural money.
You mentioned gold standards do not last. This is because governments hate the restraint that gold imposes upon them. Gold can't be created out of thin air. gols isn't "flexible" (meaning the central planners can't debase it at will). In short, gold will not be conned like paper.
It isn't a gold standard that I am after anyway. I posit that we will never have good money again until there is a separation of state and money. Money is a commodity like toothepaste and coffee. Let the people choose their own favored money. There are already many different types of money used. Why not allow competing currencies?
I did want to address the quantity of money. Beyond a minimum threshold, the supply of the money is irrelevant. A price is just a relationship between the medium of exxhange and what it is being exchanged for. The prices will simply adjust to the supply of money.
There are many great books out there by classical and Austrian economists, but I would highly recommend Hayek's "The Denationalization of Money." Not that you'll bother.
Cheers!
Welfare,
Why do Austrians want to make such a big deal about settlement balances? ie "money".
Why should these balances be distinguished with their own 'asset class', these balances are just a sort of "utility" that the payments system uses to settle transactions involving real assets... to elevate these balances to this level seems absurd, they are not an asset class in themselves, they are only used to help transact in real assets.
You are putting the cart before the horse.
WS,
Your understanding of modern money is limited. You are confused. I'll try to elucidate a few things.
I would define modern money as bank deposits (which are recorded in electronic accounting systems) which could then be further divided into bank money(bank deposits) and federal money (deposits in reserve accounts). Paper currency is federal money, but it is a fraction of electronic deposits.
Today, the process is far more insidious because no longer does the government have to clip the coins to fleece the people. The people don't even notice what is being done anymore. The Federal Reserve can simply through the stroke of a keypad increase the money supply.The fed does not do that. The only way it could do that is if the fed purchased something. You are wrong. If the fed did this they would loose control of interest rates.
Governments are incentivized to debase paper currencies because it makes their liabilities easier to repay. In pure MMT the government can meet any liability by issuing currency.
As for the rest of your rant, tell me how the government is specifically 'debasing the currency' as you say. You read like a religious zealot; self-righteous and blind to all other viewpoints.
bubbleRefuge,
I am well aware that the paper money supply is only about 4% of the total money supply.
The Fed can and does make purchases on the open market. They can lower the rate at the discount window. They can also lower the reserve requiremnts of member banks thereby resulting in an increase in the credit money supply.
You also said that the government can meet any liabilty simply by issuing currency. Yes, that much is righ. Do you think that there is such a thing as a free lunch though. If the government can meet any liability simply by issuing money then why bother with taxation at all. All of our troubles are over. How simplistic. The cost of the governement issuing currency to pay its debts is just a loss of purchsing power for the user of the currency. It is a form of silent theft.
Ho-hum, another religious zealot jibe. I'll reiterate that fiat paper is a faith-based system. Keynes and his followers are the witchdoctors and not Hayek, Mises, and Rothbard.
Matt, I am very well aware that one of the functions of money is to settle balances/accounts ( I alluded to this in one my earlier posts). You are completely discouting money's function as a storehouse of value though. I view money as a commodity in itself though. Certainly fiat paper has no value at all, but a commodity money does. I am concerned about the saver who holds his money only to see a portion of the product of his labor silently stolen through the hidden tax of inflation.
A continaully debased dollar disocurages savings that is need for credit. Real credit can only come form real savings. Artificial banking procedures can produce phony credit that only deceives market actors into thinking that there is more savings in the economy than there really is. Incessant inflationist measures encourages financially unsophisticated people to risk their money in equities. Wouldn't it be a lot easier for these people to save in a money that gained purchasing power over time instead of this resort to inflationism?
This inflationist/Federal Reserve system serves the people that get the new money first before it has lost any of its purchasing power: investment bankers, commercial banks, hedge fund managers, industries with large government contracts, areas where government is heavily involved, etc. In other words, it benefits the Mike Norman's of the world, while impoverishing main street. That the man on the street is fed a steady diet of propaganda by Court economists (read:Keynesians) for a seat at the power table doesn't particularly impress me either.
Cheers!
Welfare,
Why not just park the funds in govt bonds?
Its not right to think you can just hold coins in your pocket and get rich.
The Fed can and does make purchases on the open market. They can lower the rate at the discount window. They can also lower the reserve requiremnts of member banks thereby resulting in an increase in the credit money supply.
Lowering reserve requirements does nothing. You don't understand modern money yet you are railing against it and acting self-righteously.
You also said that the government can meet any liabilty simply by issuing currency. Yes, that much is righ. Do you think that there is such a thing as a free lunch though. If the government can meet any liability simply by issuing money then why bother with taxation at all. All of our troubles are over. How simplistic. The cost of the governement issuing currency to pay its debts is just a loss of purchsing power for the user of the currency. It is a form of silent theft.
Taxation destroys money and therefore serves to regulate the level of demand in the economy. It does not 'fund' government. In MMT taxation gives money value. So you have to have taxes. There is no free lunch when it comes to the economy as far as creating the products and services we need. Somebody has to do it. However, financial considerations such as 'funding' in the form of electronic money are not the problem.
Anyway you haven't not showed us that you actually understand the way money works as evidenced by your mis-statements on inflation.
bubbleRefuge,
You simply have been indoctrinated into an economic model that I think is wrong. You haven't proven to me that you know how money and inflation works, either. You were presented one economic model in school and that is all you know. At the end of the day Neo-liberal economics is opinion. No matter how many times Keynesians fail to predict economic events, the faithful are never swayed.
Lowering reserve requirements does have the effect of incresing the available supply of credit money. Do you think that lowering the reserve requirement decreases the money supply? It allows the banks to pyrmaid more debt (credit money in other words) on top of the same reserve base. Of course lowering the reserve requirment tends to increase the credit money supply unless the bank voluntarily decides not to take advantage of the lowered reserve requirment.
Cheers!
WS, You continually make incorrect statements.
1) The views expressed here are anit-neo liberal.
2) We are now calling it MMT. Modern Monetary Theory.
3) MMT is a based upon the factual accounting records that take place in the monetary system. So its not an opinion. Why don't you try to understand something before you disagree with it? Or is your disagreement an attempt to understand?
Lowering reserve requirements does have the effect of incresing the available supply of credit money. No it does not. Again you are unfamiliar with MMT. You are wrong. Credit Money is endogenous.
Do you think that lowering the reserve requirement decreases the money supply?It has no effect. Banks make loans first and acquire reserves later if they do not have them.
It allows the banks to pyrmaid more debt (credit money in other words) on top of the same reserve base. Of course lowering the reserve requirment tends to increase the credit money supply unless the bank voluntarily decides not to take advantage of the lowered reserve requirment.
Wrong. False. Same as above. Banks make loans irrespective of reserves. The money multiplier is a myth.
You know you Gold Bug zealots love conspiracy theories, are distrusting of government etc. Well, MMT demonstrates how the government and both political parties are catastrophically ignorant at best and liars at worst. While the MMT intellectuals believe it too be innocent, they have shown that everything that comes out of the mouths of 98% of politicians and economists is a lie. How is that for a conspiracy?
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