Gold hasn’t gone up in value

gold standard

Germany should end the secrecy and bring its gold home

Goldseek – LARS SCHALL – Oct 10, 2011

I believe that the time will come when oil-producing countries and other natural resource exporters will no longer sell their commodities for paper money but only for precious metals. The age of cheap and abundant oil and natural ressources is over and with it the age of “expensive real values for cheap paper promises.” As geopolitical analyst James G. Rickards says:

“This is all part of an evolution away from the U.S. dollar. It has a number of ways to go. I do think that what may happen is that gold will be used as a pricing mechanism. In other words, Middle Eastern and Russian natural resource exporters may begin to price their goods in units of gold while still accepting dollars, but the problem, of course, is that the amount of dollars won’t be fixed. A simple example: Right now oil is around $100 a barrel and gold is around $1,500 an ounce, so it takes 15 barrels of oil to purchase one ounce of gold.

“If you look at the oil-to-gold ratio it has been very constant for a very long time. Of course the price of oil has moved between $30 per barrel and $150 per barrel, and the price of gold has moved between $200 an ounce and $1,500 an ounce, but if you look at the ratio, it always hovers around that 15-1 or 16-1 ratio, and that tells you something about the real intrinsic value of commodities.

“But you could have a situation where somebody in Saudi Arabia says: ‘From now on a barrel of oil will be 1/15 of an ounce of gold. Now if you want to pay me in dollars, that’s fine, but you have to do the dollar-gold conversion (to figure out how many dollars you owe me in a world of an increasing gold price), so you have to pay more dollars for a barrel of oil.’ So even if the Saudis accept dollars, you can still have a world where oil is priced in gold but gold is convertible to dollars and you can pay with dollars but you have to pay a lot more. Go to story

Related:

Britain’s secret house price crash

Moneyweek – DOMINIC FRISBY – Sep 7, 2011

Gold cannot be issued, printed, inflated or debased in any of the ways that dubious policy-makers find to suit the political whims of the times. So it makes for a far more honest and accurate unit of account than any government currency.

That’s why I like to look at markets priced in gold. I get a truer idea of value, and of where we are in the business cycle.

Today we take our occasional look at everybody’s favourite subject: the UK housing market – but priced in honest money.
House prices have fallen by 80%, measured in gold. Go to story


USA would rather go to war than reinstate gold-backed money.
The conversations below took place thirty years ago. Now, three decades later, we are witnessing the economic meltdown. As of today, it takes US$1686 to buy one ounce of gold. America has gone to war in Iraq, Afghanistan, Iraq and back to Afghanistan, and unemployment is higher than at any time since the Great Depression. Prabhupada told us the solution was to reintroduce gold coin for currency, but the very persons who have got us into this jam ridicule the idea. They’d rather spill blood.

excerpt from conversation, Portland, Oregon, January 13, 1980:

HANSADUTTA: Inflation means the government is printing paper money without sufficient gold in reserve. During inflation, money is abundant, but worthless. If we buy something at a fixed price this year, ten years from now, if money has inflated twenty times, we’ll get the same thing for practically nothing. Soon the economic bubble will burst, and all the paper money will become completely worthless. The public will lose its faith in paper money. People will start bartering — “I have a banana, and you have an apple; let’s trade.” The more money inflates, the easier it is to pay off debts. During inflation, the debt collector loses, while the debtor is getting ahead, because the debt collect gets nothing, whereas the debtor receives tangible goods.

GUEST: Will there come a time when we won’t be able to use paper money?

HANSADUTTA: By that time, the gains and losses will already have been transacted.

GUEST: When there’s so much money that it’s not worth anything, we’ll have to accept a new standard.

HANSADUTTA: The economists will create another standard. By that time, if we are dealing in tangibles such as land or gold, we’ll have already paid off the debt. Ten years ago we could buy gold for thirty-two dollars an ounce. Now it is seven hundred dollars and ounce. That means the price has gone up more than twenty times, two thousand percent inflation.

GUEST: Incredible.

HANSADUTTA: That’s inflation. It’s the same piece of gold, but the money has been inflated twenty times against the value of the original item. And the price of silver has been inflated even more. In the last year alone, the value of silver has gone up five times.

GUEST: If we exchange the gold for money, although we may have a lot of money, the money soon will be worthless.

HANSADUTTA: Before inflation runs wild, everyone takes his money and spends it on something tangible like land or gold. The basic principle of modern economy is just an agreement. The government agrees to recognize a piece of paper as having a certain value, but when the government and business no longer agree and no longer want to play the game, the system collapses. At present, everyone is trying to exchange his money for gold, real estate or other tangibles, so the discrepancy between the actual gold stock and the value of paper money is becoming apparent. Paper money has no value, because the government has printed more promissory notes than there is gold in stock to back them up.

Paper money was introduced for the purpose of cheating people. Why should the government substitute paper for gold? American Express says, “Give us your dollars, and we’ll give you this cheque. Wherever you go, you can cash it at one of our branches.” Srila Prabhupada said that actually what they are giving is worthless—it is only worth something because they promise to pay. It’s another step removed from the actual gold substance, and in the meantime they are using our money to make more money. The banks take our money and say, “Okay, we’re going to give you four percent interest.” We may think we’re making money by giving them money, but in the meantime they lend out our money and make ten or twelve percent on it. Then the fellow who borrows lends it to someone else. One day the whole thing will snap, and then, depending on what the government does, we’ll see either inflation or depression.

excerpt from conversation with a guest, Berkeley, California, January 15, 1980:

GUEST: What do you see our position is today in America?

HANSADUTTA: America will experience tremendous inflation. Our money will become worthless. It is practically worthless now. Ten years ago gold was selling for thirty-two dollars an ounce. Today it sells for seven hundred dollars an ounce. On the open market the money has been inflated twenty times its value. It’s just a matter of time before this shows up in the buying market. Your salary has not gone up twenty times; your salary has remained more or less the same. At best, it has doubled.

GUEST: The average salary has doubled in the last three years.

HANSADUTTA: Though your salary may have doubled, inflation has gone up two thousand percent. Due to the inflating money, our currency will become worthless. We’re going to experience very difficult times here in America. America will be going to war, because that’s the way to revive the economy. War gives everyone some kind of employment.

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