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TMFAleph1 (95.10)

Gold's Anti-Social Behaviour Order

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June 01, 2012 – Comments (13) | RELATED TICKERS: GLD , SLV , CEF

From the desk of Izabella Kaminska:

Which leaves two possible plans out of the crisis:

1) The goldbug plan: based on encouraging everyone to hoard ever greater amounts of natural wealth for themselves and themselves in what is ultimately a commodity you might never be able to eat.

2) The fiat plan: based on encouraging society to trust each other again, and via that storing, redeeming and returning favours until the system’s ails are eliminated.

Gold's Anti-Social Behaviour Order, FT Alphaville

From the same author, don't miss:

Debunking goldbugs, FT Alphaville

13 Comments – Post Your Own

#1) On June 01, 2012 at 9:04 AM, devoish (97.33) wrote:

Alex,

I am not impressed with Alphaville on this one. 

The argument that gold and printed money are only valuable because the king stamped his face both and they are non-perishable is fine.

 Gold has come to compete on the currency stage because of its own non-perishable characteristics which echo those of official sovereign promissory notes. It is the longevity that is associated with both of these instruments that has made them desirable stores of value. They don’t decay. And that’s the whole point. 

The argument that a fiat money system is better because the amount of cash in circulation can be manipulated vs the goldbugs claim that gold is better because it cannot be manipulated really depends upon the assumption that the manipulation will be done to benefit society at large, an assumption for which there is no guarantee. 

That gold does not even provide that option does, in my opinion, make it second best for society if not a select few individuals.

 The problem with promissory notes from a goldbug’s point of view, however, is that a sovereign always has the means to “manipulate” supply so as to regulate the system’s excesses and deficits for the benefit of the group: bringing their purchasing power of the notes down when there is an abundance of goods to notes “by printing more”, and bringing their purchasing power up when there is a deficit of goods to notes. 

The argument that a fiat money does not inherently encourage hoarding is incorrect. It only  discourages hoarding if it is being devalued, when the choice is made to restrict the money supply or "austerity" then it encourages hoarding.

 1) The goldbug plan: based on encouraging everyone to hoard ever greater amounts of natural wealth for themselves and themselves in what is ultimately a commodity you might never be able to eat.

2) The fiat plan: based on encouraging society to trust each other again, and via that storing, redeeming and returning favours until the system’s ails are eliminated.  

But the very real point the article misses when it refers to David  Graebners book "Debt the First 5000 Years", is that money, gold or fiat, changes an obligation into a debt. 

From the book;

What is the difference between a mere obligation, a sense that one ought to behave in a certain way, or even that one owes something to someone, and a debt, properly speaking? The answer is simple: money. The difference between a debt and an obligation is that debt can be precisely quantified. This requires money. 

Before money the debtor, chooses if, when, where, how and to whom he will repay an obligation. Money changes that. 

Money allows my obligation to that really pleasant therapist who got my knee back in working order quickly, to be transferred to the back stabbing reckless dirtbag who broke my knee.

That is the equivalancy and the poblem with both types of money, fiat or gold.

Best wishes,

Steven 

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#2) On June 01, 2012 at 9:36 AM, whereaminow (< 20) wrote:

Alex,

You really buy the stuff written in these links?

Also, I feel I need to thank you and all the gold bears today. We've had our best week in a while and the stock market is about to tank again while gold is up again.

So thanks.

Finally, why don't you guys just save yourselves all this trouble and actually watch monetary growth. You would have known this trouble was coming since annualized M2 has fallen +4% this past quarter.

This stuff isn't that hard. I don't understand why the guys with degrees in this get beat over and over again by all of us who learned it on the Internet. Crazy waste of money.

David in Liberty

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#3) On June 01, 2012 at 9:39 AM, whereaminow (< 20) wrote:

fallen to +4%

David in Liberty

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#4) On June 01, 2012 at 12:12 PM, Valyooo (99.39) wrote:

Alex,

I don't understand your opinion at all.  So you don't like gold because you can't eat it?  When is the last time you ate fiat cash?

Also, Europe just proved that trust does not work.  why would they repeat the same mistake and hope for better results?  Einstein would not approve.

Finally, why don't you guys just save yourselves all this trouble and actually watch monetary growth. You would have known this trouble was coming since annualized M2 has fallen +4% this past quarter.

This stuff isn't that hard. I don't understand why the guys with degrees in this get beat over and over again by all of us who learned it on the Internet. Crazy waste of money

Could not agree more.

Also, what exactly is the problem with hoarding money?  less money in circulation = cheaper prices for society.

More money in circulation does not = more production.  Otherwise when you print a 5 dollar bill a chicken would magically appear on a farm.

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#5) On June 01, 2012 at 12:26 PM, Valyooo (99.39) wrote:

David,

If you are relying on money supply as buying and selling indicators, wouldn't you expect gold and stocks to move together?

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#6) On June 01, 2012 at 12:45 PM, whereaminow (< 20) wrote:

Val,

 If you are relying on money supply as buying and selling indicators,

I would never do such a thing :)

Seriously, that can be extremely tricky. One, there's always a lag between money supply growth/shrinking and the stock market reacting. Two, lately Bernanke's been more up and down than any Fed pres in history, so judging what will come next is a coin flip.

wouldn't you expect gold and stocks to move together?

I do. I was surprised that stocks were not moving together over the last couple months , but I figured they eventually would.  Perhaps the stock market is "catching up" so to speak to what we have known for a couple months now.  This puppy can't keep going uphill without massive steroid injections.

That's as far as my eye can see.

David in Liberty

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#7) On June 01, 2012 at 12:55 PM, whereaminow (< 20) wrote:

Also, what exactly is the problem with hoarding money?

Besides your correct argument, is it beyond weird that the same people claiming hoarding money is bad have absolutely no problem with the Federal Reserve sitting on that big pile of gold at Fort Knox. (for 80 freaking years!!!!)

Isn't that the biggest case of hoarding in world history? Brought to you by the people who claimed to be saving us from hoarders?

Funny, I think.

David in Liberty

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#8) On June 01, 2012 at 1:12 PM, TMFAleph1 (95.10) wrote:

Also, I feel I need to thank you and all the gold bears today. We've had our best week in a while and the stock market is about to tank again while gold is up again.

So thanks.

Much as I'd like to be able to take credit for that, I don't think I had much to do with it.

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#9) On June 01, 2012 at 1:20 PM, Valyooo (99.39) wrote:

Seriously, that can be extremely tricky. One, there's always a lag between money supply growth/shrinking and the stock market reacting. Two, lately Bernanke's been more up and down than any Fed pres in history, so judging what will come next is a coin flip.

I have been having trouble getting onto EPJ's site...have you been able to find a correlation between lag time?  Like, money supply grows, then 2 months later stocks are up?

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#10) On June 01, 2012 at 1:30 PM, whereaminow (< 20) wrote:

Val,

Economist Frank Shostak has done a lot of work on that. You might want to check out his stuff. I don't know if he has his own website off hand, I've just read his papers.

http://aaseconomics.com/profile-dr-frank-shostak/

David in Liberty

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#11) On June 01, 2012 at 1:44 PM, Valyooo (99.39) wrote:

Cool, thanks, I'll check it out.

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#12) On June 01, 2012 at 2:05 PM, Munchies101 (99.39) wrote:

Gold guy: Buy gold, its going up, WAAYYY up! 

 Other guy: But gold has been going on a rip lately, reaching record highs, shouldn’t we start worrying about gold being overvalued? 

Gold guy: Forget value, it’s irrelevant.  

Other guy: That’s stupid, you can’t just assign an arbitrary value to shiny rocks because you don’t believe fiat money. There’s no value in gold, and buying it is just a Ponzi scheme of who is willing to pay a higher price than the person before him. 

Gold guy: Your stupid. You believe in a system based off of paper money that can be arbitrarily increased on the whim of an economist who believes in unlimited consumption based on limited resources. 

Other guy: I hate you. 

Gold guy: I hate you more. 

THE END

 

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#13) On June 01, 2012 at 10:48 PM, MoneyWorksforMe (< 20) wrote:

I almost recc'd this for whereaminow's comments--awesome.

TMFAleph1 is becoming one helluva contrarian indicator. Gold's best day since January 09, and up ~$100/oz. this week...If my memory serves me correctly his timing was just as well last year, and the year before that...

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