Gold anti trust action committee

Good old GATA, they surface in troubled times, then fade again, bit like the weather. A large part of the rhetoric also flows from whether the individuals are short or long on gold futures. I always find it "interesting" that they surface when economic troubles are raging, and sentiment causes a "flight to gold".

The gold standard as an absolute measure of a currency's intrinsic worth was dumped long ago, by all governments on the Planet for the simple reason its a false standard, there's no way that enough gold could ever be found to backup a currency in today's modern economies, there's not enough on the Planet, discovered or not.

Gold as a substance of "worth" is a product of the Herd Instinct. In itself it has no intrinsic value, its only because many over the Ages have decided it looks good, and is desirable, that it has any worth at all. That's as true in the Markets today as it was over the Ages. Sentiment drives the price. To imagine that somehow 7 Billion on the Planet are the subject of a conspiracy theory in the framework of a free market is ludicrous. The story pays a few wages, but the credibility ends there.

As for "shock horror - governments manipulate gold price for their own ends". Central Bankers have been playing the gold market for decades, its hardly new.

We will all be better off if Bankers stopped trading Debt Mountains and went back to basics. The Public at large would not then have to pick up their Tab when the Banks get it wrong, as they frequently do with Debt trading - its called bonus greed. No amount of smoke screen from GATA will ever hide that incompetence.

Regards
Zy

Nay, gold is of great intrinsic worth.

It is the best known conductor for use in contact points, extremely low corrosion and resistance. Nearly every piece of electronics you own has gold in it. If it doesn't, it's a piece of crap.

If they didn't use gold, most computer components would cease working within months. You have a few bucks worth in your case easy.

I hear what your saying no problem, by the same token so does Platinum, copper, iron tin etc etc. The value of gold is driven by sentiment because of its status in peoples minds, not by its use. Platinum however is driven by its use - currently at just over $2000 an ounce, over double that of gold.

The problem with the gold standard and why it was dropped a long long time ago as the primary currency stabiliser is it produces inflated values, and does not reflect the true state of an economy. At present there is arguably 150,000 - 200,000 tons of gold above or below ground in the world. At the current price of $900 an ounce that would support around $5Trillion, which is only about 40% of money in circulation in the US alone, let alone the rest of the world.

If it was priced to match currency in circulation it would have to rise to - arguably - $10,000 an ounce, probably much more. Watch the horrific strengthening of currencies if that happened - at a time when the economies are weak ? That's why its nonsense, and a contrived standard that worked for a less active economic era. Great price if you had the Futures in place in the modern era, but meaningless for any other measure.

The last time the US dollar was critically ill - as opposed to seriously ill - was The Great Depression. The US Government Raised the price of Gold unilaterally from $20 an ounce to $35 an ounce. Not because it was suddenly more valuable, but because at that time the US had the major gold stockpile in the world, and so could dictate price, despite an economy on its knees.

The price rise supported the US Dollar on the markets at a time when it was getting hammered due to the Depression and a lousy economy. So much for governments manipulating markets by keeping the price low. Such blatant price fixing is a classic reason why in a modern economy the gold standard is a fools paradise, keeps bankers in a prime slot, not much else though.

Regards
Zy

Wow you make it sound like we all got together and decided that the gold standard couldn't cut it.

The US dropped the last part of the gold standard in 1971 when Nixon backed out of the Bretton Woods agreement.

The way Bretton Woods worked is that it allowed foreign governments to exchange dollars for gold. Nixon tried to raise the official gold price a couple of times, up to around $42/oz, I think, but that didn't stop the flood of redemption requests from abroad that were happening as an indirect result of high government spending that started with Johnson's guns-and-butter programs.

In effect, the US was unable to meet its obligations to foreign governments, and effectively declared bankruptcy by backing out of the BW agreement, thereby putting the final nail in the coffin of the gold standard.

The gold standard means a government has to live within its means.
It was the need to expand the power of the central government and to be able print money seperated from any real worth which killed the gold standard.

Thats pretty much what happened. The gold standard was dropped by the major trading nations in and around the time of the First World War due to the high War spending. There was a resurgence of it in the twenties as a result of the Weimar Republic debacle, however within the first three years of the thirties it was once again killed off by most countries principly as a result of the American revaluation of gold to prop up the Dollar in the Depression which made a total farce of the meaning of the principles of a Gold Standard.

There was little point having a "Standard" if it could be abused at will when trouble started - "Do as I say, not as I do". By the time Nixon started his fiddling around, it had all but been abandoned by everyone else as a pointless exercise in political rhetoric. Its hardly surprising it went in waves, you cant have a "standard" if no one adopts it. If the majority will not adopt it, you move pretty fast to put something in place, like the Bretton Woods sillyness adopted by nearly all Nations in 1944 - cant live in a vacume, even one driven by US self interest.

Its that political reality that GATA flag wavers will never accept, its stance is purely theoretical. The gold standard was always doomed to fail, because in the real world politicians and governments will always manipulate "The System", whatever that system is to further their own ends. Getting high handed about living within their means doesnt cut it. Having wonderful fanfares is a pointless exercise if it doesnt work in the real world.

The best form of political government ever devised as a model is without doubt Communism it is Utopia in another word. The problem with it, as was amply demonstrated in the 20th Century, was it could not cope with human nature and its greedy self-interest driven motivations. GATA are wasting their time, the gold standard was abandoned three times in the 20th Century, because no matter the theory, in practice it cant withstand the political pressures of its use, and is always abandoned at the very time its imposition in its entirety got in the way of Political ambition.

Its the old story, too many people live in a theoretical dream like bubble. Eventually the Real World bursts theoretical bubbles. GATA should give it up, its old news, and cash in their gold Futures for something else.

Regards
Zy