golden thoughts

GOLDEN THOUGHTS

I'm on vacation.  The articles are pre-posted, but I may or may not get to posting the comments.  Be good minions and keep buying through my Amazon links.
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Why yes, it is true. All my thoughts ( along with all my utterances, bleating, blatherings and tirades ) are golden. But today we delve into the wild and wonderful world of gold. Why? Because of the roller coaster ride of gold prices lately, perhaps a bit of perspective can’t hurt at all. I think we really need to separate gold from economics. Look at oil. It has had geopolitical implications for over a hundred years, and even then almost all economists are pretty much just looking at it as a transportation fuel and dismissing future availability as nothing more than a prospecting issue. Humping idiots. Oil never should have been allowed to be treated as a mere tradable commodity. Of course, since it has, it is closely linked to gold itself. We’ll get to that.

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First of all, whatever the spot price of gold is, try not to get too excited or too depressed. It is an artificial construct in many different ways. Gold is reflecting the price of speculation to a large degree. The trading rules for pure financial games effect the price. There is aboveboard futures trading, and hidden manipulation. We have no way of judging the true impact. It has been said that an ounce of gold, throughout history other than small periods of time when huge new mines are discovered and producing ( Spanish in the New World, perhaps the California and South Africa supply ) would buy the equivalent amount of goods such as a mans fine suit. As a general rule, this is fine, but keep in mind that it is a reflection of industrialization and colonialism more than a historical truism ( ie, not applicable past around 500 years ago ). And, gold itself has no use outside of a storage of wealth, which is only redeemable through the facilitation of trade. Gold holds value and allows trade. And trade is what pretty much has kept mankind alive after they passed from the hunter/gatherer lifestyle ( we’ll ignore the issue of warfare here for simplicities sake ).

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Finally, gold was not adequate at performing its historical role for the last one hundred years. Black gold, petroleum, largely edged it out. Because petroleum was onto itself largely capable of doing everything gold had done, from becoming the basic building block for a military to substituting for fertilizer to taking over from metal and other materials, but even better with far les effort, gold has been taking the century off. Why did you need a medium of exchange when oil itself could be made into everything you were trying to trade for? For the oil rich nations, anyway. Look at Britain. She had no oil, and then used most of her precious metals, accumulated over centuries of controlling global trade, to fight a war over control of oil ( the middle east saw a huge investment of Commonwealth soldiers, so much so that the French spilled the majority of blood into the trenches, who were only there to see after their oil control ). The US won that war of control, mainly through the private oil companies backed up by our military ( an interesting side note- we disposed the Iranian ruler to occupy that country to force a trade passage to Russia to supply Stalin during WWII, in case you are ever confused as to why those folks hate us so much ).

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So, why did gold go crazy in the late 1970’s? It looked like we would lose control of the globes oil, and gold was trying to reach its long lost true price. Why did gold plunge ten years later? We won back global control of oil, the last major supply out of our hands, in Russia, was placed in the free economy which we controlled. Why is gold going crazy now? Peak Oil was reached about the time the gold price started going up. And the reason gold is trying to double so quickly is that our empire, which controls the oil, is in the slow process ( slow so far, hello waterfall collapse soon? ) of melting down. Oil is running out, the military is losing control ( in sync with the bankers of course ) of what remains, and now gold is trying to reclaim its true value outside their control. Oh, sure, financial manipulation, printing press inflation, all that good stuff has an effect, but by and large long term, gold is waking up after a century. It is confused with Malthusian elements and petroleum still hanging on to control for dear life, but it will find its true value once again. And take back over its historical role as global trade facilitator.

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On a personal level, what does this mean? I would forget about gold if I were most of you. If you didn’t buy gold when oil was flowing at $10 a barrel in the Nineties, you simply missed the one lone boat. It passed by your island and then sank. It ain’t coming back. You can postulate about Long Wave Economics and The Coming Depression all you want, but gold isn’t getting down to 400 US Dollars ever again, baring a Artic oil discovery equivalent to three Saudi Arabia’s ( hey, it would be nice, it’s even possible, but also highly improbable ). Leave gold where it has always belonged, in the hands of kings and large merchant trading houses. The average man used silver for trade, if at all. Barter doesn’t impose a middle man cost and is adequate if you are living in a Dark Ages. Gold is largely illiquid. Oh, you can dig it up, sneak into a coil shop, pay a five percent ( or whatever it is ) fee and get cash. Which I assume you would only do to stock up on tons of wheat or arsenals of Russian bolt guns. But as a unit of trade, it is pretty much illegal and hence illiquid. Gold should be what it is meant to be in uncertain times, a store of wealth to keep safe until normalcy returns. Not because gold itself is worth anything, but because it is historically that magic trade unit that allows you to buy what will keep you alive.

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Gold has many wonderful uses for a survivalist. You use it to buy arms and ammunition from pirate traders during a national gun control. You buy bags of coffee after the collapse, the only source Central America by mule train. But, again, that is the province of kings and large traders. Are you trying to just survive the end of the current Oil Age or are you stocking up as a future king/trader? On a personal level, gold can just be troublesome. Some of the cost of keeping gold is guarding it, with armed men. Yes, storing silver will still get you tortured as bandits seek to learn the location. But that won’t act as the magnate for them as gold will. Once gold returns to its true price, you shouldn’t own gold unless you can protect it. Silver and lead is what an average person needs to store wealth.

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My e-mail is jimd303@netzero.com
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