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alstry (35.28)

Alstry vs. Sinchiruna

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December 21, 2008 – Comments (27)

Sin's post to me...

I just draw the line at repeating myself. If you want to bring an interesting topic my way, then bring it. I literally don't have time to teach you basic theory about gold... I've been blogging in CAPS about gold for more than a year now, and over that time have covered the basics in full. If you have specific challenges to any of my past coverage of those topics based upon information of your own, then again, bring it. The notion that gold's value is dictated by nothing more than peoples' emotions is quite simply an uninformed position, and is completely contradicted by the mountain of facts I have presented in this forum. 

You're proposing that the role of gold has fundamentally changed in the last 30 years versus the preceding many thousands of years. The burden of proof, my friend, lies with you. If you can present a well-researched argument, without ignoring other widely-available key facts, then I will be happy to engage in debate about the topic.

My response.....

Let's repeat one statement...

 I literally don't have time to teach you basic theory about gold...

That statement speaks volumes......gold is just a theory....it no longer serves the same legal purpose it served for thousands of years.  People don't want to believe it...but that is the fact...plain and simple.  Facts can change...but they havn't yet.

For thousands of years....there was a theory that the world was flat.  And for many, they had proof that their theory was valid.  Thousands of years man went on believing and validating a theory.  You were a heratic if you thought the world was round......until we found out the world was really round.  So please don't tell me about how gold was money for thousands of years....if you want to live in history...then please don't let me stop you.

But the dollar is backed by a new metal today....enriched uranium.....much more difficult to obtain versus gold and carries much greater weight in trade negotiations.  It has only been around for a little over 50 years.  If you don't believe me, you may want to talk to some high level CIA employees on how the world really operates today.

As far as my burden of proof....President Nixon took care of that expressly about 35 years ago.  I am not saying an ounce of gold will go down or up in value....my bias is down buy who knows how people behave.  But if you wanted to invest in a terrible investment for the past 30 years.....gold certainly fit like a glove while inflation consistenly moved upwards.  That is the facts and if you can change them....please show me how.

 

27 Comments – Post Your Own

#1) On December 21, 2008 at 7:31 PM, redneckdemon (< 20) wrote:

Sorry to butt in, but I would like to point out a percieved flaw with your post.

 To begin with, you are misconstruing his post about Gold theory.  I'm in the navy, and am rated as an FC.  I work on radar, among other things, and had to learn radar theory.  By your argument, radar would be just a theory, but that is not true.  Nor is gold just a theory.  The theory aluded to in Sinch's post is the theory of how gold works as an investment of wealth, and is a provable formula.  Just like radar theory.

 Secondly: the world is flat.  Sure, people thought that for centuries, and had evedence to back up their claims.  Then someone proved them wrong.  That is what Sinch is inviting you to do.  Prove him wrong.

I would like to point out that I take no sides in this, and am not making attacks or accusations.  I just find it difficult to follow your logic.

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#2) On December 21, 2008 at 7:37 PM, abitare (39.81) wrote:

I can say there is a possible gold bubble and a panic into gold. But I cannot say that gold is a bad investment for 35 years.

You can look at the chart here and decide for yourself. The fact that people are going crazy now for gold is bearish sign to me.

http://goldprice.org/30-year-gold-price-history.html 

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#3) On December 21, 2008 at 10:37 PM, alstry (35.28) wrote:

redneck,

You miss my point.  Applying your analogy......right now we use radar for a number of purposes.  However, if we developed a new technology that replaced radar, than applying radar theory to the new technology would be irrelevant.

Gold used to be money,  You could walk into the store and hand the clerk a piece of gold or silver and he would accept it for goods and services.....today, except in a few rare cases....you simply can't use gold or silver as a medium of exchange.

Does gold and silver have value?  Absolutely.  Diamonds have value.  So does wheat and corn.  Buy try taking a bushel of corn to the gas station and exchange it for a gallon of gas...even though the bushel is worth more than the gallon.  Will people put more value on gold  in the future relative to the dollar...who the heck knows.....just like I can't tell you what a bushel of corn will be worth relative to one of soybeans.

As far as proving Sinch wrong....I don't need to....the president of the United States did that with an executive order.  Sinch, on the other hand, is trying to make gold something into what is no longer true..

Abitare,

Relative to putting dollars into a guaranteed investment account, gold has performed terribly going peak to peak.  Now we could go peak to trough or  trough to peak but overall, if gold was money it should have appreciated much more than it has.

This is not to say that the world might  not revert back to some sort of gold  standard.....something I doubt, but if it does, all bets are off.

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#4) On December 21, 2008 at 11:00 PM, jesusfreakinco (28.91) wrote:

Alstry,

If go is only emotion and theory, then why is there record demand for gold...

http://www.sprott.com/pdf/investorsdigest/digest.pdf

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#5) On December 21, 2008 at 11:09 PM, alstry (35.28) wrote:

There is record demand 6 foot blonds with measurments of 36-26-36.......it doesn't mean  you can take em to the store and exchange them for wheat......

Seriously, because there are those that feel gold will be valuble in case there is a collapse of the dollar has caused a run on physical gold...it has also caused unprecedented demand for short tern treasuries....go figure and try to reconcile that one....and demand may persist as long as enough  people view  it as such or there is a legislative change.

There was record demand for tulips, dot com stocks, pet rocks, and many other things.  Each with individual qualities..... but  record demand establishes nothing when the madness of crowds takes over.

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#6) On December 21, 2008 at 11:14 PM, jesusfreakinco (28.91) wrote:

Al,

If you are so confident in the drop in gold and rise in the dollar, let's see you make some picks to back up your talk.  Come on... Red thumb the following: NEM, ABX, GG, TRE, NXG, NG, CDE, RGLD, GOLD, GLD, IAU, DGP, NGD, AU, NG, JAG, LIHR, CEF, JOYG, EGO,KGC, GDX, AUY, GFI...

Put your money where your mouth is Mr. Smartiepants :)

JFinCO

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#7) On December 21, 2008 at 11:16 PM, redneckdemon (< 20) wrote:

Jesusfreak:  That one's easy.  Gold is the traditional safe house during economic trumoil.  Folks are folking to it right now in droves, with all the doom and gloom floating around.  In fact, it has a few folks worried about a future gold bubble.

 Alstry:  Thank you for clarifying.  I would argue that most places in the country would hesitate too much to accept gold as a currency, but your point is understood.  It is illegal to do that, too, which is very frustrating.  I find it difficult to understand how they divorced us from a gold standard to get a license to print money like it was going out of style, and convinced people that it was a good idea.  But that's a rant that I won't clutter your thread with.

Again, thank you for clarifying.

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#8) On December 21, 2008 at 11:26 PM, redneckdemon (< 20) wrote:

Also, Jesus: saying that the percieved value of gold is silly isn't saying that everyone else agrees.  Hence the current run on gold.  And it certainly wouldn't be wise to short a company just because you think their product is overvalued.

Having a different opinion dosen't equate with stupid, just different.

 edit: The previous post should say :WOULDN'T hesitate.

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#9) On December 21, 2008 at 11:27 PM, alstry (35.28) wrote:

redneck,

Now you are addressing  a whole different issue and one that is probably more important....but this forum is probably not  appropriate to dig into detail.

JF,

I am not sure which way gold is going to go....Up or down is a coin toss to me........I have a hard enough time dealing with my wife's emotions....you expect me to take on the world???

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#10) On December 21, 2008 at 11:55 PM, FleaBagger (29.74) wrote:

Alstry: do you like TBT? Do you dismiss the whole inflation hawk argument? Are you just investing in guns and ammo and canned goods? What are you buying?

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#11) On December 22, 2008 at 12:05 AM, alstry (35.28) wrote:

FleaBag,

I am investing in beer.  The problem is that I am drinking it shortly after I make my investment.  The same could be said for a very attractively priced Italian table wine at Costco.

I guess that brings a new perspective to one's investment evaporating.

 

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#12) On December 22, 2008 at 12:18 AM, XMFSinchiruna (27.50) wrote:

Alstry,

There are no facts in your post above for me to debate, and your misuse of the word 'theory' frankly just leaves me uninterested.

Fact: Article 1 of the U.S. Constitution states: "No state shall make anything but gold and silver coin a tender in payment of debt". Just how legal (constitutional), then, is your precious Federal Reserve Note?

Also, it is NOT a fact that gold was the only legal tender for thousands of years. Many other monetary experiments were conducted throughout the centuries, and post-1971 is certainly not the world's first experience with fiat currencies. Fiat currencies have come and gone before, and they have most often failed drastically.

"Paper money is like dram-drinking, it relieves for a moment by deceitful sensation, but gradually diminishes the natural heat, and leaves the body worse than it found it. Were not this the case, and could money be made of paper at pleasure, every sovereign in Europe would be as rich as he pleased. But the truth is, that it is a bubble and the attempt vanity. Nature has provided the proper materials for money: gold and silver, and any attempt of ours to rival her is ridiculous…."

Thomas Paine (1737 - 1809)

 

Also, look into the notion of burden of proof. Under the rules of debate, if you propose that uranium is more of a currency than gold, you can't then offer no evidence and compel your debate opponent to contact the CIA for corroboration. :)

I still have respect for what you bring to the CAPS community and respect your point of view. Because I don't share it, though, I will not cede the debate.

"Gold still represents the ultimate form of payment in the world". - Alan Greenspan, 1999  

http://www.fool.com/investing/international/2008/12/19/what-the-crashing-dollar-means-for-you.aspx

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=118549&t=01008115229194713562

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=100403&t=01001768469531369712

http://www.fool.com/investing/small-cap/2008/09/12/in-defense-of-gold.aspx

http://www.fool.com/investing/general/2008/10/02/700-billion-reasons-to-own-some-gold.aspx

http://www.fool.com/investing/general/2008/03/19/dodge-the-dollar-with-a-silver-bullet.aspx

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance."
- James Madison

"You have to choose [as a voter] between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold."
- George Bernard Shaw

"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our children a legacy of bankruptcy. We have defrauded our country to get ourselves elected."
- John Danforth (R-Mo)

"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
- Friedrich A. Hayek

"We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people."
- Daniel Webster

"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."
- Daniel Webster

"Every circulating FRN (Federal Reserve Note) represents a one dollar debt to the Federal Reserve system."
- Money Facts, House Banking and Currency Committee

"Neither paper currency nor deposits have value as commodities, intrinsically, a 'dollar' bill is just a piece of paper. Deposits are merely book entries."
- Modern Money Mechanics Workbook, Federal Reserve Bank of Chicago, 1975

"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it."
- Congressman Louis T. McFadden in 1932

 

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#13) On December 22, 2008 at 12:49 AM, alstry (35.28) wrote:

Sinch,

Fact: Article 1 of the U.S. Constitution states: "No state shall make anything but gold and silver coin a tender in payment of debt". Just how legal (constitutional), then, is your precious Federal Reserve Note?

I get your point, but none of us should pay income taxes either applying your logic by its absence in the Constitution.  Laws change, so does the application of the constitution, how it is enforced and applied to the citizens.  Let's refrain from getting into the constitutionality of the Federal Reserve Note....you and I both know this topic well.

Also, look into the notion of burden of proof. Under the rules of debate, if you propose that uranium is more of a currency than gold, you can't then offer no evidence and compel your debate opponent to contact the CIA for corroboration. :)

You live not too far from Langly, I figured it would not be too difficult a drive.  Going back to no evidence, I will simply have you admit it to me and then I have all the evidence necessary to satisfy whatever standard of burden you desire.

Remember, when throwing out all your quotes at me, enriched uranium is only about 60 years old as being applied in this debate.  So your string of quotes preceeding this date really fall mute to such a world changing invention.

For illustrative purposes only, let's say you owned all the gold known to man in the world, and you didn't have to worry anyone would come and steal it.  I, on the other hand, possessed a satisfactory quantity of enriched uranium and an excellent delivery system to shower it upon you.  Further, let's say I was a mad man, or at least credibly came off that way, and entered into negotiations with you where you thought I was capable of delivering what I said as I knew you owned all of the world's supply of gold.

What would be your counter to me if I said in exchange for me not giving you a nookleah shower, you destroy all of your gold or maybe hand it over to me.  Which would be worth more, a small portion of my enriched uranium or all the gold in the world??

Remember, I am trying  to take you laterally, the world doesn't always move vertically....it only usually moves vertically.

 

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#14) On December 22, 2008 at 1:17 AM, jegr5347 (< 20) wrote:

I have to agree with Alstry here. Gold is romantic, it gives us a flavor for days long gone......like the movie Casablanca. Gold is only as good as the currency it backs and Nixon did away with that as Alstry well said. Why not silver or even copper. Copper is a lot more useful that gold. It can be used for construction, piping, cookingware. There are more valuable and less valuable commodities that can easily back a currency or be traded as barter better than gold. I would disagree with uranium, though, but it is a good analogy to show how ludicrous a gold standard would be in the 21st century.

You can't back a currency with a metal as volatile as gold. Why not diamonds. It would create pandemonium or more instability than what we have today.

There will be a bubble, it may be even relevant in a basket index along with other metals or commodities, but gold's best days are in the past, just like Intel 386 chip.

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#15) On December 22, 2008 at 1:22 AM, jegr5347 (< 20) wrote:

I would also say that if you are going to back a currency with a metal or commodity, you have to back it with a finite/non eroding metal or commodity in order to have a reference to stored value. Otherwise, volatility in the backing will create volatility in the currency.

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#16) On December 22, 2008 at 1:33 AM, SARG0N (27.40) wrote:

 Alstry,

“For thousands of years....there was a theory that the world was flat.  And for many, they had proof that their theory was valid.  Thousands of years man went on believing and validating a theory.  You were a heratic if you thought the world was round......until we found out the world was really round.” 

 

The whole the world is flat thing is largely a myth. It has been known since antiquity that the world was round. There was even this Greek mathematician who calculated the circumference of the world within 170 miles. It’s not as if Chris Columbus thought he would sail off the edge of the earth as many now erroneous believe.

 

“But the dollar is backed by a new metal today....enriched uranium.....much more difficult to obtain versus gold and carries much greater weight in trade negotiations.”

 

Currencies are subject to the same laws of supply and demand just as any other good. If they decided to print 100 trillion USDs tomorrow, all the enriched uranium could not leave the Currency unaffected.   

 

I agree that over the long run gold will lose its value inflation adjusted. In the 80s wasn’t there this economist that bet an environmentalist that a basket of metals would decrees in price after inflation and in every case the price did indeed decline?  None the less gold has always retained some of its value even after the nations that minted it have long passed. If one thought that their currency was going to be massively devalued wouldn’t it make sense to put your money in something that would retain some of its value like commodities or real estate? Gold and other metals have the advantage that they don’t have a shelf life like wheat or oil.   

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#17) On December 22, 2008 at 2:00 AM, redneckdemon (< 20) wrote:

Guys, Alstry is saying that enriched uranium backs the USD in the same way "protection" is backed by large men with missing teeth.  "Take our dollars or we BOMB you!" kind of thing.

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#18) On December 22, 2008 at 3:20 AM, SARG0N (27.40) wrote:

 redneckdemon 

"Guys, Alstry is saying that enriched uranium backs the USD in the same way "protection" is backed by large men with missing teeth.  "Take our dollars or we BOMB you!" kind of thing."

I had heard before that America’s Military might supports the currency and I had wondered what their line of reasoning was. Thanks for connecting the dots for me.

 

 

 

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#19) On December 22, 2008 at 4:13 AM, DaretothREdux (44.04) wrote:

Russia has plenty of enriched uranium and methods of deployment yet their money is worth practically nothing compare to ours. China also has the bomb...if everyone has the bomb then you arguement is obsolete because technically it does no good to kill everyone in the world just to claim you are the richest...

it's called Mutually Assured Destruction and while not perfect it does seem to have worked fairly well so far

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#20) On December 22, 2008 at 4:48 AM, kaskoosek (67.54) wrote:

Alstry

I think that you have too much faith in paper currency especially the US dollar.

There is no alternative to $ other than GOLD due to the following two reasons.

1) The metal is scarce making it easy to store.

2) Very important (the price of gold rarely goes below the price of extraction)

This could also apply to other metals, but the problem is that other metals are much more abundant.

I am a technical trader and personally wouldn't buy gold at the current junction due to it being close to its high, but I personally beleive that the downside risk is limited. A 50% loss eventhough large in my oppinion is the floor for gold.

Using the 800$ peak price to prove your point that Gold has underperformed is also an important point against your argument. It shows that gold prices are not neceassarily bubble prices and still have room to rise.

 

Alstry, I have also looked at your picks and I beleive that you have put an underperform call on ERX. I can not describe how much I disagree with you. Fundamentally you are right that demand for oil has decreased, but If you beleive that there is no floor for oil then you are deeply mistaken. There is no any incentive for anyone to sell their oil below 35$. You have forgot the supply side of the equation.

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#21) On December 22, 2008 at 8:39 AM, thewindowlicker (28.28) wrote:

This is all just semantics and has been debated endlessly by gold bugs and those who alternatively feel the metals are archaic.  Alstry and Sinchiruna are both valuable members of this site and don't need to prove anything to anyone. 

Sometimes gold is a great investment and sometimes it is a lousy one, just like everything else it depends on the environment. 

I do know that GLD has performed quite nicely for me since I jumped into it back in 05. 

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#22) On December 22, 2008 at 8:57 AM, XMFSinchiruna (27.50) wrote:

Oh brother ... this is getting out of hand.

Merry Christmas! :)

I hope your USD do well for you in the new year, but I'll stick with gold, thanks. Let me know when they're selling one-ounce coins of uranium, and I'll send you one for next Christmas. :P

If the value of money exists only because of the perceived threat of military force behind it, then we have no need for it anyway because WWIII would be imminent. I am hopeful we are not there yet, though I do feel that geopolitical tensions could rise substantially in 2009. As those tensions rise, however, watch gold. Military threat does not add value to the dollar, it detracts value from the dollar, and sends more people around the world into gold.

Anyway... since you brought me nothing to debate, offered no evidence for your hypothesis that uranium is more a currency than gold, failed to account for the widespread global distribution of WMDs, and still sidestepped your burden of proof in a way that would have had you ducking for cover were we in a live debate ... for all these reasons, I see no reason to continue to invest my time in this thread. It's Christmas ... let's go enjoy our families! :)

That being said, I really do appreciate your unique angle on some issues, and I think you have a very creative mind. In a debate, however, I would crush you. :P

Merry Christmas and Happy New Year, Fools!

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#23) On December 22, 2008 at 11:27 AM, alstry (35.28) wrote:

Sinch,

The only place you are crushing me is between your ears.  In that arena I gladly concede defeat.  Most others places.......

The dollar buys you more house.

It buys you more car.

It buys you more of a persons life(wages declining)

It buys you a better vacation.

It buys you more shares of stock.

And we could go on and on.

If this is you crushing me...than keep it coming.....the pain....I just love the pain.

Merry Christmas back.

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#24) On December 22, 2008 at 12:34 PM, XMFSinchiruna (27.50) wrote:

alstry

Your topics have swerved all over the place, but as for your original topic of whether gold remains a viable store of value, you have presented no evidence in support of your case against gold.

I never disputed that we are presently experiencing deflation, and have written about it extensively. But what's happening today says little about tomorrow unless we consider the broader context... and that broader context is a world nervously holding dollars while the prospects for THEIR purchasing power with said dollars is beyond bleak.

A dollar may buy you more house or car today than it did last year, but that has little significance in an environment in which banks are hoarding capital and consumers have nothing left to consume with. The worse our economy gets, the greater the certainty of hyperinflation replacing this momentary deflationary phase as it becomes increasingly clear that we cannot repay the trillions of dollars recently added to our national debt and foreign holders of USD flea the currency as a result.

There are rules to a debate, and your use of faulty logic (and above) and disingenuous examples does nothing to help your cause. 

According to the logic of your reply above, global warming is false because it's freezing outside. Observations and circumstantial evidence are helpful additions to economic theory and reasoned discourse, but to favor circumstantial evidence while omitting other key variables and ignoring basic economic principles is ill-advised.

While we agree on many key issues and I continue to enjoy your posts, I propose that Alstrynomics... in addition to bordering on self-agrandizement, contains some fundamental flaws of logic.

I'm happy to agree to disagree and move on at this point. I've said my peace. Merry Christmas and Happy New Year!

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#25) On December 22, 2008 at 1:49 PM, alstry (35.28) wrote:

but as for your original topic of whether gold remains a viable store of value, you have presented no evidence in support of your case against gold.

Sinch,

Your problem is that you are misrepresenting my position.  My problem with gold is not that it remains a viable source of value....I have no opinion on this issue as it goes to emotion from my perspective.....and I have a terrible track record trying to anticipate emotion.

My position relates to gold relative to the US dollar.  You are trying to perdict the future as to gold's relative strength compared to the dollar.  You may be right....who knows????but for the last 35 years or so......you are sooooo deep underwater you better get a new tank to reach the surface.

My money is made in reality.......not fiction...

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#26) On December 22, 2008 at 1:51 PM, alstry (35.28) wrote:

As a quick follow up....my bias right now is that the dollar will also outperform gold over the next 5 to ten years.

But I have been wrong before.....and expect it may happen in the future....it is just that it tends to be the exception when I am this stubborn on a topic.

As far as Alstrynomics.....please find a single flaw in logic when you present the facts fairly.

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#27) On December 22, 2008 at 4:18 PM, DemonDoug (82.77) wrote:

Al, you make a good point about gold over 35 years, or 25 years, or whatever (Mish had an example of a fictitious 6% CD rolled over every year since 1980 would destroy gold as an investment).

However, you assertation about uranium is ludicrous and serves only to knock down any respect you might get in this debate.  As money or currency, uranium fails in many ways, in fact you mention trading corn or wheat for gas - I'm sure that could probably be arranged.  I've heard of rural doctors trading medical service for chickens, wheat, other farm commodities.  Also, your logic is circular on why uranium is the world's reserve currency, which again weakens your stance.

I have no dog in this race.  Funny part about the alcohol investment tho al. :P

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