[QUOTE=Intrepid;8808054]In my "Gold Bubble" thread, there was spirited discussion regarding whether or not gold is (or functions as) money. On this topic I have found dramatic new evidence. Rather than resurrect the Gold Bubble thread, I thought I'd let this be my first contribution to the new megathread.

WATCH THIS VIDEO! http://www.guardian.co.uk/world/vide...tarvation-food[/QUOTE

What a tragic & horrible story; interesting times we're living in . . .

I agree that impractically anything could be used as a medium of exchange. However, I do not think it is a coincidence that out of the millions of possibilities, Zimbabweans are dealing in (tenths of) grams of gold. Gold is functioning as money because people are choosing to accept it in exchange for goods in lieu of mud pies. [Please note that I am NOT claiming that gold satisfies any particular definition of the word "money"]

In a hyperinflationary crisis, nearly everything rises in value relative to the fiat currency in which people have lost faith. In a deflationary crisis, gold rises in value relative to fiat currencies in which faith is waning; I do not believe the same is true of hats and donuts. In fact, my local donut shop has recently lowered its prices by issuing promotional coupons. [As an aside, I suspect CPI numbers fail to reflect the widespread use of sales and coupons by retailers to effectively lower their prices.]

Meanwhile, I think I'll pass on that trip to Zimbabwe. Thanks for the invite though.

All you did was show a video clip of people trading gold for food. If I show you a video of a Zimbabwean prostitute trading sex for food would that change your mind? In fact I bet that gold dust went to a prostitute who gave it to her pimp and he is then one in the video buying food.

As for gold rising in value during deflation that puts you behind Mediate in the hierarchy. Why would gold ever decrease in value?

Jimbo - I agree with you- there is a nearly infinite number of items we could theoretically use as money.

In the desert, water is rare enough that it could be used as money, but good luck using water as money in oregon/ rainforest / anywhere with lots of condensation...
In order to be considered as a store of value money really needs to be : somewhat light and compact, near immune to deterioration, RARE, useful.

Sure there's no real use for gold, but there's no real use for paper money either. Using mud as a currency wouldn't really work out very well because it's so much easier to get mud than to actually produce something of real value... there's just no real value to mud... it's heavy... it's dirty... it's extremely abundant... hard to store... etc.. If 99/100 people in my village are willing to trade for silver and 0/100 people in my village are willing to trade for mud, while neither item may technically fit your definition for money, the gold is functioning a lot more like money than the mud is imo.

Water is certainly very valuable in some areas but a gallon of water weighs 8 pounds or something... Fish can be valuable too in areas with little food, but fish are not portable, they are very susceptible to spoilage, etc.

You can't really store away a fish for a few years and assume it will have th same purchasing power unless you go through massive effort to cure the meat. 5,000 pound blocks of steel are valuable, but we don't use these as currency either...

It must just be a lucky coincidence that we've been using gold and silver as money for most of the past 6,000 years... all of the people who lived before us were savages and idiots-- they didn't understand how great it would be to have a central bank, huge taxes and fiat money to bring them unending "prosperity."

"Although gold and silver are not by nature money, money is by nature gold and silver."
-Karl Marx

Good post but consider this, if there were less of you and more of me gold would have no value. So gold only has value to some people but food and water have value to everyone. Besides I thought silver had more value than gold.

Personally I can take a mudbath in mud, eat a fish and donuts, drink water and shield my bald head from the sun with a hat. Gold isn't very useful for any of my current needs. If I ever feel the need for gold I'll just take some of my flat money and go buy some.

Gold tends to decline in value during periods of relatively normal economic growth when we are not experiencing a deflationary crisis or extreme inflation fears.

You may wish to consider being less arrogant when discussing topics you may not fully understand. I am trying to share opinions and learn from others. This is not a competition.

I'm open to learning, how about some proof that gold tends to increase in value during deflationary times other than accepting your word for it? I agree that people flee to gold for safety but if gold goes up during deflation and it goes up during inflation I ask again when does it go down and more importantly why? I need a reason to believe that you are able to predict peoples actions better than experts. There is almost never a moment in time when inflation is exactly zero.

Lastly isn't it more likely that gold only increases in value during inflationary times or when it appears inflation is inevitable?

But in the current (clearly deflationary) environment, you have the potential for an unpredictable amount of inflation with the large increases in monetary base and bank reserves. In a fantasyland where the central banks don't respond to deflation with zero percent interest rates and quantitative easing, then sure, gold probably wouldn't do so well.

I would not disagree with the above.

Consider the flip side to this; if there were less of you and more of me the country would have already revolted and pretty much no fiat paper would have any value.

If you ever feel the need for silver in the next few years, you MIGHT be able to afford A FEW ounces-- but come 4 years from now, I don't believe you will be able to trade any about of your "flat money" for real money. Just my opinion... An ounce of silver used to be a days wages, believe it or not... and we had a higher standard of living at the time... an ounce of silver per day was enough so that only one member of the household went to work in most cases..

I did consider the flip side and since there hasn't been rioting in the streets I must be in the majority. I still make less than an ounce of silver as my daily wage, why do you think I am on the library internet and only sleep in my cardboard box at night?

I've come to view gold more as an index of fear/confidence than of actual inflation. I do not think it is a good inflation hedge during times of "normal" inflation and growth; stocks are much better. OTOH, when people fear that their fiat money may rapidly lose its value, gold will shine..

I am not an expert nor do I have a background in economics. After the financial crisis became headline news and I noticed what happened to my investments, I began reading a variety of economic opinions. The fellow who makes the most sense to me is Mike "Mish" Shedlock. He makes a very strong case that we are and have been (and will be) in a deflationary economic environment for some time. I encourage you and others to go to http://globaleconomicanalysis.blogspot.com/ and start reading some of his articles that are listed when you enter the words "deflation" and "inflation" in the search box. This is a good one:

http://globaleconomicanalysis.blogsp...inflation.html

Then search for the word "gold" to learn about his views on gold and why it recently hit new highs in most fiat currencies in this deflationary environment. The following article is particularly relevant:

http://globaleconomicanalysis.blogsp...d-k-cycle.html

In that article, Mish makes the point that gold does not always act like an inflation hedge.

I just read your post and wanted to comment. To achieve your goal of protecting your money against currency devaluation, I'd consider purchasing real gold (perhaps dollar cost averaging) instead of etf's and "mixed currencies." I believe there are a couple of reputable companies through which you can own physical gold without taking delivery (you must pay modest transaction and storage costs) if you prefer. If the worst comes to pass, the value of those ETF's and most fiat currencies may suffer.

When the economy recovers, commodities and global equities should do well. If we experience a prolonged depression, however, those funds may substantially decline in value before the recovery finally arrives. I have a significant investment in quality bonds and am mostly out of stocks because I believe the current economic downturn may be longer and more severe than most people think.

I do not understand your strong preference for silver over gold. I believe silver will outperform gold when economic recovery takes hold, but I'm not holding my breath! In the event of a prolonged great(er) depression, do you think silver will outperform gold because of falling silver production from mines? Is your preference for silver (and other commodities) based on the belief that economic recovery is imminent?

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Anyone have an opinion on the advisability of buying generic silver one ounce rounds as opposed to the gov't minted 1 ounce coins such as the maple or liberty?

gold up at $960, great investment even in USD (in other currencies it has performed incredibly well).

im going to dripfeed more money into gold and silver to increase my exposure to 25%

SH*T....i guess we should take this as a massive indicator to sell GLD.

Barron

I don't think the economy will recover any time soon... it could take 10 years... or longer... or we could never really recover... Anyone who thinks economic recovery is imminent is way too optimistic imo... I think we are maybe beginning the second inning of this manufactured crisis. Silver is in much shorter supply since we have been consuming more silver than we produce for quite a few years now... there is hardly any silver left... COMEX needs to change their delivery rules or default this year. Also, many people will be priced out of gold and platinum and turn to silver as an alternative investment. As long as other metal prices are down, less silver will be mined ie much silver production is a bi product of copper mines. So if copper price / copper demand is down for example, silver production will likely suffer. I don't think either metal will be used as an official currency, but silver can be more easily used for barter imo, it's much more divisible than gold( by this i mean if you have 1k right now you can buy 1 oz gold or 65 oz silver, and the silver is of course easier to divide). Also as I have mentioned before, I just like the properties of silver better than gold in terms of medical, electronic, and many other uses. I believe the silver gold ratio will easily reach 20:1 within 5 years... both will have massive massive gains in 5 years certainly vs nearly all fiat.

I would buy some of both probably. You should buy whatever seems cheap comparatively. The gov't rounds will probably command a similar premium when you sell them. Gov't rounds are more recognizable by dealers. But the generic rounds can be considerably cheaper and an oz of silver is an oz of silver. Sorry i didn't really answer your question- I own a bunch of generic 1 oz rounds and a bunch of maple leaf 1 oz rounds... I prefer having a bit of everything just in case I need to some back to a dealer sometime- i will sell back whatever he or she is paying the best price for in my eyes


Barron- when the anti- silver bug people start asking where they can buy silver, then it's probably time to move into farmland. However, I don't think commodities will top for at least 18-20 years from now, so we have a long way to go until complete saturation... we are not even close to the top.

Where can I buy silver? Is it time for me to move to Iowa?

Question to the gold bugs I have always wondered:

Suppose the price of gold continues to climb in USD. It increases about 10% every month, in a random walk type of fashion (not perfectly defined what i mean by that by I think you get the idea).

The world continues 'normally', basically as you predicted right now everything would pan out (including whatever you predicted the variance in the gold markets to be)

At what price would you be looking to short gold, if any? At what price would you not want to be long gold anymore, if any?

I'd also be interested in the why of your answers, but mostly the above 2 questions

to rephrase the question above:

the world stays exactly as it is and nothing that is typically predicted with gold's rise happens (no large inflation in the US etc.),

a) at what price to you sell the gold you own?
b) at what price do you short gold?

for me, both a) and b) would be right around where we are now b/c SOME of those happenings already are priced into gold.

ironically, we sold GLD yesterday (very short term though)

Barron

I don't really own much gold but I will try best to answer your question in terms of when I will sell my silver and platinum. As many have said before, it's hard to make US dollar targets for selling and buying.

I think the most important thing to do is move into whatever is cheap historically speaking. I can't see ever shorting silver because there is such limited upside with literally infinite downside. I will sell when I need money to buy other things or take advantage of other investments that look more profitable. I think silver will go up at least 25% per year for the next 10 years , and probably a lot more. If an investment is going up about 10% per month, i'm probably NEVER going to sell it. I'm not good enough to find another buy and hold investment that makes me 10% per month... so I guess my answer is pretty much : hold forever unless i need to buy food, water, or very good investment. Assuming that everything stays normal and silver is more than tripling in price every year, i'm going to be partying like it's 1995 within a few years... but i'm not looking to sell most of my position for another 20 years or so.

A good indicator for SELLING metals and BUYING the dow jones is when the dow jones is worth LESS THAN ONE ounce of gold. However, I would be very very careful about buying in, even @ one ounce of gold... I personally believe the dow has a long way to fall... but note again, i'm not going to name a dollar amount the dow might fall to... I can name a price in ounces of gold i believe the dow will fall to, but trying to pin down a number of USDs the dow will bottom at is like trying to nail jello to a wall.

Right now an ounce of silver can buy about 7 gallons of gas. If an ounce of silver can ever buy 15 gallons of gas, I will probably convert a small amount of silver into oil. If 1 oz of silver can buy 20 or 25 gallons... i will probably convert a little bit more for each additional gallon i can buy...

If 50 pounds of honey costs 8 ounces of silver right now and I find some very good honey for 50 pounds for only 4 oz of silver, then I might buy that...

Also I have a question for everyone holding US dollars right now :

when will you start to buy silver if ever? 20$ an ounce ? $30 an ounce? $50 an ounce? Silver is a bargain at 50 / oz imho... so to answer your question i'm definitely not looking for a quick quadruple or something... silver should go up at least 20x in the next 4 years, and will only gain momentum along with the hyperinflation.

OR when do you start to selling your USD to buy AUD or EURO or JPY or NZD? I'm not saying I like or don't like these currencies- obv silver > paper, but for sake of example...

lets say the dollar goes to 2 USD : 1 euro- do you start buying euro?

I see silver as a long term investment to maintain and i believe even gain some purchasing power. It's the only safe, unhindered, unburdened investment you can own in these times.

The problem with your theoretical situation is that gold won't keep going up 10% per month especially if things remain relatively calm...
if i buy some gold for 1,000$ an ounce do you really think i'm going to want to sell @3,000 and put the money in a bank in US dollars? I doubt it... it's tough for gold to go up long term while inflation is zero... gold is honest money and will keep its purchasing power... but i don't expect it to triple in purchasing power in one year like in your example...

As long as the world continues on its current deflationary path, I expect gold to remain in a long term uptrend. When economic statistics (e.g., unemployment, bankruptcies, foreclosures etc) start to improve and money starts flowing back into stocks and real estate, I would become bearish on gold.

ty for the answer

when do I buy silver? Putting aside it having practical uses like photo development or whatever, and putting aside how cool I think it would be to make random stuff out of silver for fun, never.

even at $5, even at 50 cents and ounce, I will be reasoning "so no one wants silver eh? well, makes sense, it has no value really, it could easily fall further"

As for when do I start selling USD to buy AUD or EURO or JPY or NZD, well I have pretty standard boring answers for that, given nothing much fundamentally worldwide has changed (or more like, differed from expectations)