lördag 18 februari 2012

Gold as money a terrible misstake

In a world where fiat currencys are in the process of beeing debased as we speak it may seem they are keeping up their value as the relationship vs another fiat currency may not change that much overtime as they all and together go down in a downwards spiral valuation vice.

In such a world the relative value of commodeties such as e.g. gold is a good investment. This as for instance gold maintains its purchasing value over time and thus protects wealth.

Bottom line and key here is that the driver when Gold is increasing in value is that what actually is happening is that currencys are loosing in purchasing power relative everything else.

"after The Fed’s creation, from 1913 to 2008 (95 years), the value of the dollar, relative to the Consumer Price Index, decreased by 95%. A dollar could buy 95% fewer goods in 2008 than in 1913. Thus, if in 1913, you sat on your savings pile of $1,000,000 for 95 years, it would then be worth only $50,000 in purchasing power (it will have depreciated in value by 95%). One would now need to pay about 20X more than J.P. Morgan for one’s bread.

Ask my mother how much the price of milk has increased just in the last ten years alone.In other words, the value of the dollar remained extremely stable for 150 years, then The Fed was created in order to "stabilize the value of the dollar" and the result has been a 95% devaluation of the dollar in less than 100 years following its creation.

Below is a graph of this history, which I’ve marked with the year 1913 so you can see the change. The graph is also marked with the years of decoupling from the gold standard, as no examination of dollar value would be sound without such mention."

No wander people now are turning to hard assets:


Question then is how should our monetary system be reformed in order to mend
thise issues?

Clear is we must not make the misstake and base a new monetary system on a gold standard because:

in a world ruled by the wealthy money is defines as wealth (e.g. gold)
In a world ruled by the bankers (as we have today) money is defined as credit
In a world ruled by the people and for the people money is defined by law.

The underlying reason for the financial crisis we now see unfolding in all the OECD countries is based on the fact money today is created as debt and as debt saturation now has reached completely unsustainable levels in ALL parts of our society, (private as well as goverment) the economy is now set up for a real crash as we now can
witness there are basically only two options awailabe for the current establishement to try to solve the challange of over in debt ness.

One is austerity to an extent never in fact seen before (the European prefered solution it seems) or extensive money printing as prefered by the US where today ALL of the tax generating incom on an annual basis (some 2 $trillion) is used to back stop new money printing.

Un sustainable as real and viable economic recovery never has been made successfull by reducing a populations standard of living to more or less a stone age level and as getting in to more debt in order to pay off interest of old debt that not is annualised never was a good idea.

Here more about the real viable alternativ to our current debt based system:

Max Keiser interviews Bill Still

Stephen Zarlenga works with Rep. Kucinich on The American Monetary Act, designed to resolve the banking crisis. This clip from a longer film defines 3 steps: In addition to nationalizing the Fed. and removing the power of banks to
create money as debt out of thin air, the Act reminds us of the Constitution, Article I, Sec. 8, that states that our government has the sovereign power to issue money and spend it into circulation. Whatever you think about point 3 - the government could not possibly do any worse than the banks.


In the above Zarlenga discusses the FED relationship vs the Treasurie but rest assured the same kind of issues prevails relative how now central banks act in Europe. Listen here to what proffessor Hudson says at 06:30 about real choises and also at 09:30 about the Maastricht criteria and the ability of European Central Banks to act as Central banks:

Then regarding preciouse metals you then also need to understand the history e.g. as Gold in 1933 actually was confiscated and owning gold by US citicens not allowed again until 1971

You also need to know Silver was included in these events:

1934: In accordance to the Silver Purchase Act of 1934, U.S. President Roosevelt issued executive order No. 6814 to confiscate and nationalize silver, and outlawing private ownership of quantities more than 500 troy ounces.

March 6, 1933: To curb mass panics and bank runs, President Roosevelt declared a four-day Bank Holiday to stop hoarding and export of gold and silver. The "Emergency Banking Act" passed on Day 3 shut down banks, which needed to be deemed "financially secure" to be reopened.


Gold Confiscation: Could it Happen Again?

People who scoff at the suggestion that the government might restrict private gold ownership should remember that many other countries have restrictions on (or absolute prohibitions against) private gold ownership. They should also remember that, in 1933, Franklin Delano Roosevelt dealt with a monetary and banking crisis by confiscating all privately owned gold; paying for the gold at $20.67 per ounce; immediately devaluing the dollar by 40 percent; and setting the price of gold at $35.00 per ounce. At a single stroke, Roosevelt increased the government's gold assets, stabilized the monetary system and increased wholesale prices by more than 33 percent. However, he also inflicted losses of 40 percent on gold owners and stripped them of the gold that they saved to insure their financial futures.

Sure is we now have a real monetary crisis world wide and if you want a world where money then in some form would be backed by gold well then what happened above sure could happen again.

By the way there are other ways in order to revalue an asset e.g. by introducing new trading limits and restrictions. In that regards the story about the Hunt brothers sure is worth while reading.

The Hunt Brothers Silver Corner

In the mean time more and more people are now waking up to the fact our current monetary and fianancial system simply isen't worth saving:

The loan sharks are now beating up a poor viktim as an example for all the others

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