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Samizdata quote of the day At a time when the UK Government is imposing another £16bn of spending cuts, is abolishing pensioner tax reliefs, and is apparently so financially stretched that it needs to tax warm pasties, it has somehow managed to find an additional £10bn to bail out the eurozone. This from a prime minister who declares himself a “eurosceptic”. Is it any wonder that the Tories are trailing in the polls?
– Jeremy Warner
I am not a great fan of Jeremy Warner, but the sight of him reporting something that should have been obvious years ago did seem worth a mention.
And by the way, I am delighted that France looks likely to elect an overt tax-and-spend lunatic even more statist and destructive than the dismal Sarko. So… hands up who thinks gold is still a bad bet?
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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*puts hand up*
Gold is way, way too inflated right now to be a good buy. Commodity investment seems reasonable, but pick a commodity that isn’t being propped up by fanatics who think all pieces of news are buy signals.
Pleased to hear it Alsadius, I am sure France electing someone even more profligate than Sarko is not a buy signal 🙂
Inflated, Alsadius?
Maybe a little bit. But considering the difficulty of storing and spending 18 barrels of crude oil versus storing and spending 1 oz of gold, I don’t think it is over valued at all unless you are arbitraging a healthy and stable economy.
If you think this economy is healthy and stable, er, I can’t think of anything to say. So after factoring in portability and fungibility, gold is if anything, perhaps undervalued.
Detlev Schlichter doesn’t agree with you either, Alsadius.
The problem is, that it’s not so much that gold has inflated (though there is some of that no doubt) but that the fiat currencies have been devalued.
If it were just gold that had inflated, one might expect a pop but is there really any hope that our economies will “unpop”
Please substitute “burst” for “pop” in the above 😀
I for one hope France gets exactly what it is asking for. A complete socialist meltdown in an orgy of unsustainable spending. This will certainly lead to a far right Le pen government in a decades time which will then dempnstrate its incompitence.
Then maybe we can have an adult discussion about the limits of government and the stupidity of overspending to buy votes.
Or am i too much a polyanna looking for a silver lining?
“And by the way, I am delighted that France looks likely to elect an overt tax-and-spend lunatic even more statist and destructive than the dismal Sarko.”
Hey! I’m not delighted. Some of us have to live here.
But I did tell my neighbour to buy lots of gold and tinned food.
Buy tin
Sell signals for gold include;
1. A Paul Volker type figure replacing Bernanke at the Fed (or similar at the ECB or B of E). He stopped the last gold rush in its tracks by allowing the wider market bust and not printing or depressing interest rates.
2. Committment and demonstrable action on the part of Western governments to stop borrowing and start repaying debt, no more stupid vanity projects like the Olympics, HS2 etc.
3. An end to bailouts of Southern euro states
4. Genuine welfare reform
5. Disengagement from mad-expensive wars
6. Significant manufacturing recovery in the West easing trade imbalances and removing pressure on Western fiat currencies
But the election of someone who thinks Sarko’s big fault was that he didn’t tax & spend enough, is probably a mild, medium-term buy signal, just on it’s own.
Not fanaticism; I don’t care if I hold assets in gold, copper, oil, wheat futures, Francs etc etc Just look at the fundamentals.
Considering that neither of the French Presidential candidates are anywhere close to doing anything that will resolve the problem, I generally agree.
In my eyes Sarkozy is a ‘soft left’ socialist (regardless of his publicised character) and François Hollande is a ‘hard left’ socialist.
Since neither of them will undertake the policies that France actually NEEDS, then I would hope that they elect François Hollande.
My rationale here is that only a true revolution which destroys the grip of the state can free France. So with François Hollande, it is likely to happen sooner as he will piss money away like a drunken Admiral of the Fleet.
Only after this might there be a chance…
As Louis XV (apocryphally) said “après moi, le déluge”
It’s just been announced that China is paying Iran for oil in gold.
End of USD as world reserve currency? The beginning
of the end certainly.
In France (like Britain AND the United States – in the United States as recently as the 1950s only a small minority of people either worked for government or got payments from it) most people either work for some level of government or get benefits from government (or both).
This being the case a Revolution is hardly likely to REDUCE collectivism – after all if a mass of violent people come out on the streets (in Britain, France or the United States) they demand MORE (not less) statism). This is only logical – as the MINORITY of people who neither work for some level of government or get benefits, are far too tired (and to responsible) to come out on the streets violently – they are rather like the work horse in “Animal Farm” who was worked till he could not work anymore, then was sent to the slaughter house.
It is true that in the United States large crowds come out into the public square arguing for smaller government (very large crowds – although, of course, the msm lie and vastly downplay their numbers). But they are (contrary to the lies of the msm) not violent people (they even clear up any mess they make) – so the government (and so on) have no respect for them.
So far, so depressing.
However, the Socialist candidate for President of the Republic is neither a man of whom a cult-of-personality can be made (he is obviously an nonentity) or a totalitarian (he is not about to launch a campaign to shut down, or “reform”, dissenting newspapers and so on – which a totalitarian like Comrade Barack Obama almost certainly will do if he is relected).
So Antoine Clarke should not despair – not that he is the desparing type anyway.
Should the Socialists both win the Presidency and the Parliament, they will be office as France goes bankrupt (which, as Perry notes, might well happen even if the Socialists do not win).
Only with BANKRUPTCY (not Revolution) does the possibility of reform emerge. As the Socialists (unlike the French Communists or American Marxists such as Barack Obama) will not opt for the totalitarian alternative.
That is certainly also true in Britain – no reform can be expected before bankruptcy.
And may well be true in the United States also.
Indeed – of the three countries, I think that BRITAIN will be the worst one to be in over the next few years.
Partly due to the weakness of local communities in Britain – and to the near death of virtually all social institutions outside the state.
Civil Society is in decline in most places in the Western World – but in Britain that decline is, perhaps, the most advanced.
Britain (rather than France – which still has strong local traditions, lots of family owned enterprises and so on) has become the dream of the Jacobins.
Atomized individuals dependent on a centralized (and unlimited) state.
The fact that an Obama supporter (“Barack Obama is a great moral example to the world” and on and on) passes for a “Conservative” Prime Minister in Britain, is one sign of the utter collapse of resistance to “Progressive” ideas such as “Social Justice” here.
Between the Conservative Socialists in UK Governemnt and the French Socialist Right and others Socialists there is not much to choose.
*Puts up hand so fast he pulls a muscle*
Is anyone surprised?
Gold is always a bad bet, it’s just a question of how bad a bet it is. Suggesting that gold is a good bet is like saying that playing blackjack is a good bet – it is, in the sense that it’s just less-worse than most of the others.
Suggesting that it’s a good idea right now, at the highest price it’s ever been, is tantamount to saying that ‘we think that this-or-that country’s economy might be going completely sideways, but everywhere else is going to be just aces!’ IOW, to paraphrase Midwesterner, above, if your plan is to arbitrage against healthy and stable economies. Which they am, I ask?
The fact is that all the major economies of all of the developed nations are more-or-less seriously sideways. Where are you going to sell your shiny yellow tokens when everybody’s broke? And – as the US has done within living memory – if your shiny yellow tokens become significant enough, armed agents of the state will simply take them from you, or devalue them to whatever seems ‘fair’.
Gold (in the modern era) is an irrational cult, not a serious approach to making and/or conserving wealth.
Do you truly believe that Russia and China are truthfully reporting their production, or anything like it?
When it all goes sideways, arms, ammunition, food, water, shelter, medicines, the list goes on – with gold near the bottom.
FWIW, I own some bullion gold. It’s on my watch chain, because it has sentimental value. In these times, that’s the only sort of sense it makes.
llater,
llamas
It most certainly is a serious way of conserving wealth, with centuries worth of evidence to back up this point:
http://www.amazon.com/The-Golden-Constant-Experience-1560-2007/dp/1847202616/ref=sr_1_1?s=books&ie=UTF8&qid=1335271150&sr=1-1
That may be the daftest comment I have seen you post, llamas.
You may not agree with the reasons but claiming it is an irrational cult reduced your credibility as a commenter quite substantially.
Except is says nothing of the sort. What is very unlikely is that every major economy is going to tank equally and at the same time, so far from going to be just aces, more likely is that some places will weather the storm far better than others.
And as for the state confiscating your gold, well they can also confiscate your house, your guns and your tinned food. What *is* certain is that by running the printing presses, they are already emptying your bank account of its value.
@ Perry de Havilland – well. we’ve disgreed about this before and will do again, I’m sure. Nevertheless, I appreciate the forum.
I don’t disgree with your ‘printing presses’ comment because you are, of course, correct. But, as I keep saying, that doesn’t make a soft yellow metal the answer – certainly not for the individual.
The state can indeed take your house, or your tins of Fray Bentos – what it can’t do is negotiate those things on a world market. Gold – they can – that’s why they will, if it comes to it.
Where I will call you out (ITNPW) is on this comment:
‘ . . . .more likely is that some places will weather the storm far better than others.’
Perhaps you would name those places that you think will ‘weather the storm’. I can’t think of one – every developed economy is head-over-ears in debt, and you are picking over the corpses as though one is a little-less dead than another.
@ James – ah, yes, the fallacy of “constant gold”. Are we going to talk about the price of togas again?
This fallacy is based upon a very careful selection of points on the historical graph of gold prices. All it shows is that with a graph and a ruler, you can establish a ‘constant’ of two points – if you get to pick the points.
Yours, daftly,
llater,
llamas
@ James – ah, yes, the fallacy of “constant gold”. Are we going to talk about the price of togas again?
Nope – we’re talking about common commodity prices across decades and centuries of English and US history.
It does indeed seem to be very much a ‘go with gold’ scenario.
But I also do have this feeling of coming rather too late to the party.
And, further, that such widely accepted (popular?) wisdom tends to get shot down by the manipulators who, as ever, are dealing in the unexpected.
Perhaps gold is not that popular outside certain circles and thus not such a ‘popular wisdom’?
Alternatives do seem to be in short supply.
You have to give llamas points for consistency — he is always vociferously anti-gold whenever the topic comes up here. I’d have been disappointed if he didn’t show up. And I agree with him that “arms, ammunition, food, water, shelter, medicines” are prudent things to hold in these parlous times. Where we disagree is that “when it all goes sideways” governments will be broke, but not all individuals will. We may then be reduced to a barter economy, at which point ammunition and medicines will be useful trading goods. But I happen to think that gold (and silver, and maybe even nickel and tin) will also be seen as stores of value. And they have the virtue of eliminating the “coincidence of needs” problem. It has ever been thus throughout human history, and it don’t think the next collapse will be any different. Humans haven’t changed all that much. We shall see.
@ James, who wrote:
‘Nope – we’re talking about common commodity prices across decades and centuries of English and US history.’
If the commodity we’re talking about is gold – and I think it is – then a ‘common commodity price”, aka ‘constant gold’, does not exist, and never has.
Here’s the inflation-adjusted price of gold, just for the last 40 years:
http://graphics.thomsonreuters.com/11/07/CMD_GLDNFLT0711_VF.html
(Note that this is from a source that’s NOT trying to persuade you to buy gold).
If gold value were constant, the inflation-adjusted line should be close to horizontal. Note how it – you know – isn’t. And, in fact, how the inflation-adjusted value of gold has fluctuated by an order of magnitude, just in the last 40 years.
This simple data absolutely refutes the fallacy of ‘constant gold’.
Gold prices are driven mostly by irrational fears and beliefs, chief among which is that gold is somehow a limited commodity. Two centuries ago, this was sort-of true, but now it isn’t.
It has no ‘intrinsic’ value and it has no ‘constant’ value. Apart from those minor drawbacks, it’s an excellent stable repository of value.
/sarcasm off/
But, as I’ve said before, it’s an irrational cult, which is why, when I point out these simple truths, I get called ‘daft’ and suchlike. Nobody likes having their deeply-held beliefs challenged.
Daft as ever . . . .
llater,
llamas
Llamas, note that little ‘*’ at the right bottom of the chart you linked, where it says ‘using U.S. CPI’.
And on a somewhat different note, just ran into this.
@Llamas
does that chart not merely show the elastic value of the $ in terms of the constant gold oz, over past 40yrs?
@ gustav larsson, who wrote
‘does that chart not merely show the elastic value of the $ in terms of the constant gold oz, over past 40yrs?’
No, that’s what ‘inflation-adjusted’ corrects for. It attempts to show the price of gold over that time period in cpnstant, inflation-adjusted, 2012 dollars.
I realize (and Alisa tangentially points out) that there are different ways of calculating inflation, and that these can affect the numbers. But, unless you believe (for example) that the US dollar decreased in real value (inflated) by 500% between 1975 and 1980, and then somehow increased (deflated) by 400% between 1980 and 1985 – or any oner of a dozen other exmaples from this chart that fly in the face of historical inflation data – there is no way you can consider that this is actually a map of the varying value of the US dollar against some contant gold value.
Unless, of course, you believe implicitly in the ‘constant gold’ concept, in which case, nothing I can say or show will change your mind.
llater,
llamas
I was referring to common commodities – wheat, corn, copper, etc – priced in gold. And I never said gold’s purchasing power didn’t fluctuate over years and decades. It does – sometimes violently – as Jastram’s book makes perfectly clear, as well as your 40-year CPI chart. But in terms of gold’s purchasing power in relation to commodities, revision to a “horizontal” mean is a constant theme of the British and American experience over the last 400+ years.
Given the negative real returns on savings offered in America, Britain and other countries at the moment, and the determination of central banks to inflate their way out of trouble, I don’t really see what’s irrational about buying gold at the moment. And the world’s aboveground gold stock is only increasing by 1.7% a year, and there’s only been around 165,000 tonnes mined over the course of human history. This seems like a fairly limited commodity to me.
If it has no intrinsic value, why have humans all over the world and at different times in history tended to use it as money? Coincidence? Or were they all just idiots? What does “intrinsic” value mean anyway – isn’t value a largely subjective and situation-dependent concept?
@ james, who wrote:
‘ . . . revision to a “horizontal” mean is a constant theme of the British and American experience over the last 400+ years. ‘
Translation – gold has constant value, except when it doesn’t.
Find me a ‘horizontal mean’ in the chart I posted of inflation-adjusted gold prices. Just one.
You can’t, because no such mean exists. The belief in such things is just another example of the irrational beliefs and fears which are the primary drivers of the price of gold in the modern era. It is an endless cycle of bubbles folowed by crashes. What ‘horizonal means’ we have seen in the last couple of centuries have mostly existed because dominant world powers have fixed the price of gold in their respective currencies, and because higher inflation is a relatively-recent phenomenon.
‘That’s real money!’ says Gordon Liddy on the TV, as he clinks his shiny metal talismans. No, Gordon – it was real money once, but those days have gone and they ain’t coming back.
‘ . . . isn’t value a largely subjective and situation-dependent concept? ‘
Congratulations! You grasped my point at last! That’s exactly what the price of gold is – subjective and situation-dependent. And it is precisely for those reasons – because the price of gold is driven by irrational fears and beliefs – that it has no constant value and is a lousy store of value.
Note that that does not mean that you can’t make money buying and selling gold, or that it has no value. But its value is not based in predictable economic factors, and so is uniquely unstable and insecure. Nothing has ‘intrinsic value, including gold, but it has now assumed a talismanic state in the minds of many, who assume that it somehow has a unique stability. This is classical ‘magical thinking’, and (on some levels at least) a yearning for a supposed past stability that never really was.
llater,
llamas
Good that you accept my point about gold’s long-term purchasing power at last. And as far as my argument is concerned, it makes no odds whether or not governments fix the gold price or not.
Ah yes, those “irrational fears” Perry talked about in his last post.
Well, Russia and Mexico’s CBs just added to their cult status in a rather big way yesterday, buying a shade over 16 tonnes each of the stuff.
The only cult is that of fiat currency as far as I can tell. I watch the markets everyday too, and when I see a thousand futures contracts dumped on the market in 0.2 seconds, as has been happening a lot recently, I become more and more convinced of the claims of people like GATA and Andrew Maguire that the price of gold is being manipulated downwards, and is very, very far from a top, at least in its physical form (the price of which is currently ‘discovered’ by hugely over leveraged futures market).
Paul Marks
What we are witnessing may not be “decline,” in the classic sense. At this point in the evolution of Western Civilization, we can observe losses of cohesion in those places that have held the “core” of that civilization, France, England (U K if preferred) and now the U S. The extensive patterns of mobility, the massive movements of peoples within and from without those core areas are probably major factors in the diminished cohesions. There are certainly far less commonalities of “moral sentiments,” beliefs, convictions, sense of obligations and traditional “certainties,” both in kinds and degree, than existed in those core areas up to 1935; and in some up to the 1950s or 60s.
Over the past 45 years Britain has incurred tremendous waves of totally heterogeneous peoples, some with “cultures,” some without. The domestic populations, of largely regional characteristics and commonalities were basically stationary until widespread internal movements began in the mid-1970s and have since accelerated and become commonplace.
Similar developments are observed in the U S, with differing time-frames. France has had even more concentrated effects from exogenous population movements and limited assimilation, although its internal movements have been limited to regional urbanizations in the main. But all have diluted commonalities and affected cohesion.
We are also seeing the continuing impacts of the trends noted by Ortega y Gasset in The Revolt of the Masses. But, it is possible that what we may be observing is the beginning of a new “mixing period” that could precede the formation of a successor to our present civilization, as postulated by Carroll Quigley in The Evolution of Civilizations. What remains to be seen (by others than ourselves) is whether our civilization ends by conquest or in destructive hostilities.