14 votes

Two Charts I Just Found Especially Worth Considering About Gold...

The first chart is just the multi-year London fix 1995-present.

Notice the pull back that occurred from late 1996 to early 2001 - from $400/oz down to $250/oz - and which accounts for a 4 year duration (recall the dot com bubble burst at the end of that period):

The second chart is from a recent KWN article (link below):

What I find not-so-intriguing, of course, but still rather spectacular, is the striking divergence between, on one hand, the pull back in the gold's price, and, on the other hand, the debt increase - same period considered 1996 to 2001 - look again, closely, these yellow and blue curves' trends at the marks 1995, 2000, 2005... one positively down (gold) while the other is firmly up (debt), sort of "unexpectedly"...

And then, even more so (spectacular), what happened to gold afterwards, after "something" (someone?) decided the divergence needed to be corrected... rather brutally.

Final note:

by the way, haven't we been witnessing, in some respect, arguably, another pull back of gold since 2011, precisely?

How much longer can the latter last... would that be 2 more years, then?

But after that, what next?

Would these charts be suggesting that, by the time the debt will have grown from 17+ trillions up to 20+ trillions around 2016 or 2017, gold's price could possibly be in the 5 digits of a mostly worthless fiat currency?

"He who has eyes..."

Anyway, now please meet The Most Productive Man In History :

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/...



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It's not just gold. Silver, copper, nickel, gypsum,...

The exponential trendline in Excel for the Debt
y = 1E-54e0.0767x
A growth of 7.67% per year for 100 years.

The exponential trendline in Excel for the commodities listed is about 3.0% growth of prices per year for 100 years.

That suggests a 4.5% error between amount of money printed and commodity prices.

This error will not produce optimal profits for general welfare.

Using 1980 metrics 20% of the economy has disappeared since 2000 with a 10% inflation rate.

Growth has been negative for 13 years.
http://www.shadowstats.com/alternate_data/gross-domestic-pro...

Money is being created for wealth that isn't being produced. Yet another error.

Free includes debt-free!

Cyril's picture

Yes.

Yes.

Good point on the 13 year-long negative growth, btw. No idea where I got that 2006 mark from...

Indeed, as another refresher, that also coincides with the DJIA pull back vs. gold ever since, unsurprisingly:

http://youtu.be/dv7H7iiyBsw

Good luck to the DJIA to recover from that, and get back to the 2000's value of that "index". Uncle Ben and his acolytes can keep blowing into the Dow and smashing gold, they still have quite a bit to stay busy for a while doing that, before the "Grand Finale".

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

Wow in a 4 year period in the

Wow in a 4 year period in the 90's gold dropped a little less than $200. In a 3 year period tody we've seen gold drop $600 from highs in 2011.

Southern Agrarian

Dollar

Don't measure that comparison in dollars--what is it in inflation-adjusted or gold terms? You need to compare these drops in percentages of itself, not in dollars.

I have to say, every time I look at a coin or paper bill, it just seems like play money. It is cheap. $600 isn't what it used to be.

What do you think? http://consequeries.com/

Cyril's picture

You are so exactly right.

You are so exactly right. We need to stop thinking in such biased terms, as you point out.

See, like many of us I've been sitting on my hands since the mid 90s when I started working. "Sitting on my hands" re: my own understanding of money, that is.

This is well over. I've eventually recalled for good now, about some personal vivid memories.

I recall seeing some family and relatives struggling in the mid 80s, to just sustain ourselves, on another continent (albeit not so different from here, in past or present).

Thus, I eventually asked myself: what was gold worth back then, btw? Answer: $300/oz.

And what was the minimum wage in French francs, monthly, to be able to afford a rent, food, utilities for a 3 or 4 person family? Answer: 4,200 francs (25 FRF x 8 hours x 22 working days)

Hourly french minimum wage, history, source:

http://www.cdg18.fr/smic.htm

What was the dollar strength, even underestimating it after the socialists plunder on our french GDP growth? 7 francs for one US dollar.

Source:

http://research.stlouisfed.org/fred2/data/EXFRUS.txt

Again: underestimate of the USD vs. the franc of the time.

I love facts. For, they're like me: DARN STUBBORN.

What does that mean?

That means that 2 ounces of gold were already just enough to sustain a struggling small family, for a monthly minimum wage. No debt, just living very humbly.

Still, LIVING. Without debt or stealing from others.

What can the American people do TODAY with a monthly 1 person minimum wage income in fiat USD?

Finally: then, how does that compare to what they can do with 2 ounces of gold?

Can someone, TODAY, have a roof AND provide food, AND energy for TWO adults, AND TWO kids, with NO DEBT, with NO govt assistance, with $1,200 a month, yet not willing to hurt themselves with more than that one job?

Now, same question, but how about 2 x $1,300 = $2,600 a month (when in gold)?

Isn't the latter a tiny little bit more bearable?

How come the honest working, small humblest people, have seen their monthly sweat translated FROM TWO ounces of gold (and equiv. purchasing power) down to ONLY ONE ounce?

How come, "indeed"?

That's what I usually like to ask to anybody with "two working neurons" on this matter, and serious about giving thoughts to it, starting with THE BASICS. I don't think it's any formidable thing to consider, really. Is it?

So... Are we supposed to expect and accept passively, like a deer in the headlights, that it'd be cut in half, AGAIN, in 20 more years, if not sooner?

Riiiight.

In truth:

Nobody can serve me b.s. with the stocks, fiat money, or govt entitlements any longer.

NOBODY.

And that would still hold at $900/oz for gold.

Which I currently almost pray for to see.

Gold "weak" at $1,300/oz?

At $1,100/oz?

At $900/oz?

Or even: at $600/oz?

Such a grossly tasteless joke. Almost insulting, rationally speaking.

For those who can use their memory.

Gold is still very, very precious TO ME.

I don't love it. It's just money. But I have respect for it.

I have no respect but contempt for my dollar or euro bills.

But sure, YMMV.

Peace.

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

Where is private sector debt?

Where is private sector debt? Since private sector debt is about 4 times public sector debt, the chart is meaningless without it. I'll give you a hint too; when private sector debt is rising, gold falls.
This is a chart of fear vs gold price, not public debt vs gold price. Gold price fell from 1980 to 2001 as private debt was exploding. Private debt was exploding because there was no fear, there was confidence. As confidence fell (people became fearful) so too did private debt, and as private debt fell public debt increased, by the Fed, to prevent a collapse.

As fear collapses (confidence increases), gold price will follow that collapse. Yet OVERALL debt will be increasing as private debt will grow with increasing confidence.

----------------------------------------------------------
"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

(No subject)

----------------------------------------------------------
"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

Cyril's picture

Yes, I got your point,

Yes, I got your point, thanks. I hear your reasoning.

But the underlying threatening fact is rationalizing the confidence factor with the study of the private debt increase, only works for so long.

As I said, debt is still debt. Like taxes a point in time always eventually comes that it's by then quite difficult to escape. An euphemism.

Debt is like making bets and accepting to cut some of your limbs off, knowing they can grow later again by themselves, if you give them enough time for that, between the last and the newly done cuts. What happens when the spared limbs, rest of the body, have gotten too old already, with miserable amounts of life left?

People have the natural instinct to avoid debt when possible, or when they don't, lasting long, it's likely something really wrong is going on with their perception of the world vs. their self-interest, IMO.

If that weren't the case, I don't see why more people of the middle class wouldn't fear to put themselves in the millions $$$ debt each, and tell themselves, who cares? I'm not gonna pay it back ever, anyway.

People or businesses haven't been that much insane in their vast majority, yet.

Thus, the private debt shown on your graphs is much deceptive in this sense, re: it's supposed link to confidence, because, IMO, if one bothers to look closer, it has for most of it been forced on the peoples through the rest of various other deception and plunder schemes, like money printing, exacerbated consumerism, moral hazards in securities, insurances, and stolen purchasing power, to name a few.

My .02 oz

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

I too understand your

I too understand your reasoning, I've already read it all over the internet for the last 10 years.

The charts most commonly found relating to Public debt are deceiving, mainly because they show 3-4 decades of debt, and they use exponential charting of the debt, such as the chart you present above. This gives the illusion of a relatively calm debt growth at the beginning followed by a sudden explosion of debt near the end of the chart. Yet Public debt growth in this country can be shown to have been steady since the year 1791, when viewed on a logarithmic scaled chart. Such a chart would give a visual image of the rate at which the Public debt was doubling, and if it draws an upward slanting line, as opposed to the "hockey stick" most people are common with, then the rate of growth would be steady. The following charts below are exactly the same data, just different scaling. The doubling rate is nearly a straight line from the Civil War era up till today. In the first chart it appears to be flat for a hundred half years, but it is not. It just simply doesn't show up because it takes a long time for $100,000 to double into $2 trillion dollars. The HUGE anomalous increase in Public debt occured from 1831-1865.

Visualizing the US National Debt 1791-2010

Exponentially Scaled Chart (impressive, deceiving):

Logarithmically Scaled Chart (not so impressive, tells the true story):

----------------------------------------------------------
"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

Cyril's picture

Interesting, thanks.

Interesting, thanks.

Sure, of course the type of scale obviously matters.

But anyway. The pull back and what actually explains ("God knows") what's before and/or after isn't where I'm utmost focused to consider and watch out for.

As far as I'm concerned (read: for my family) and if we stick to speaking only in terms of today's USD's "value" assumed constant over whichever period of time, I'll only start worrying about gold if I've bought at $1,300/oz and it suddenly drops under $600/oz or if I bought at $600/oz and it suddenly drops under $300/oz, or etc.

My very main point is only this one, in fact (for whoever cares):

http://www.dailypaul.com/286027#comment-3081516

And it's been that way for a while. I only keep rephrasing it slightly each time. I'm rather unimaginative.

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

Cyril's picture

Although you make some sense,

Although you make some sense, I have hard times to imagine "confidence" to be a major feature of the private sector for the short, middle, and possibly long term.

I don't quite care if "confidence" also implied the individual family debt average to explode, too: it's still debt.

As for the GDP (which I take as the roughest index of how the economy performs, hence the private sector, as we're officially not in USSR V2... well, yet) and its positive, lame growth at less than 2%, everybody knows but the ignorant it is total b.s. We all know the growth has been negative since at least 2006. And not only in the U.S. of course.

I don't care either that a 500 or so dice players in wall street feel confident in a rigged game they're happily the first beneficiaries.

They're not the ones who produce and strive or struggle, only a shrinking couple dozen millions do. The latter's confidence matters.

I have yet to see hard evidence that one is good.

Reagan times are way behind us.

Finally, my post wasn't meant sensational, I only tried to point out a legit question one can ask:

does it seem we are in another major gold pull back, and if so how long can we expect it to last?

On this end, I hope it can for just 2 more years, if this pattern has any profound mechanics to explain and repeat it. No one needs a drawing of why this wish of mine, I suppose.

Peace.

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

ecorob's picture

Sorry, texas, i disagree...

respectfully.

The word you use, "fear", is very misleading and seeks to cloud the issue.

First of all, where was this "fear"? Was it fear from the lenders or fear from the borrowers? Clearly, there was no "fear" on either side from 1980-2001. But, now, there is "fear" on both sides with MOST of it coming from the banking institutions who refuse to let go of "their" fiat money. The public side has a very hard time procuring "credit".

To my point...

You say, "As fear collapses (confidence increases), gold price will follow that collapse. Yet OVERALL debt will be increasing as private debt will grow with increasing confidence.

This is where you are flawed. Where is your "confidence" coming from? An increase in the fiat money supply? QE infinitum? This is NOT confidence, this is a house of cards built on shifting sands. There is NO manufacturing base left in this country, ergo, NO WAY for real confidence to grow. Confidence in socialism (obamacare)? Confidence in food stamp growth and poverty? Confidence in UNREPAYABLE debt? Confidence in the military industrial complex to build and sustain an amerikan "empire" across the globe? Confidence in the amerikan "government" to protect freedom and liberty in America? Frankly, I don't see the "confidence" you see.

There is a NEW paradigm we must look to now. It is the "inevitable collapse" paradigm. There is a line that we crossed a long time ago in this country that set us on this NEW course.

Your illusion of confidence is based on bubbles, fiat currency, and ignoring the LOSS of real value in this country. Precious metals, i.e., gold and silver, are the ONLY place where serious investors, and frankly, Countries (like China and Russia), will place their trust.

Please don't mislead the people here in America of their chance to protect themselves in the coming, inevitable collapse/crisis.

Buy gold. If you are wrong then you will be wrong with Russia, China, and a billion Indians (as in India).

its 'cos I owe ya, my young friend...
Rockin' the FREE world in Tennessee since 1957!
9/11 Truth.

Increasing the money supply

Increasing the money supply requires 2 things: a willing lender and a willing borrower, period.

Confidence is not an illusion. It may not be well founded, but lenders/borrower either have it, or they don't. Confidence is credit expansion comes down to: the lender believes the borrow can repay, and the borrow believes he can repay.

Nice sensationalized post though....

----------------------------------------------------------
"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

SteveMT's picture

I disagree.

If the interest rate to borrow is 0.25% and it can be lent at a 3-30% interest rate, the willing lender-borrower argument falls apart.

The 0.25% interest rate to

The 0.25% interest rate to borrow is an overnight rate. Banks have used that rate to make a profit at arbitrage, but they do not use the overnight rate for longer term loans, consumer lending.

Additionally, a bank will not necessarily lend even for a 10%-20% gain if it appears very likely that that loan will actually result in 100% loss. Further, you're argument opposing the "willing lender-borrower argument" only address the lender. What about the borrower? Will the borrow take a loan in bad times for 30% interest? 10% interest? What about the borrower Steve?

----------------------------------------------------------
"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

SteveMT's picture

The borrower doesn't have a choice if that is the going rate.

Auto, house, student, credit card, home equity, and payday loans are all in a narrow range of variability. If the borrower is desperate enough, they will borrow are any rate to postpone the inevitable a little bit longer, like our government has been doing.

Of course the borrow has a

Of course the borrow has a choice, same choice they have in any market conditions, borrow or not borrow. Banks are still not lending to "desperate" borrowers, except with government guarantees to these loans, although recently even that is beginning to loosen up some.

The "subprime-toxic debt" problem is widely been extinguished through refinance, a huge chunk of consumer debt has been eliminated, pent up demand is looming...what's that spell? This is been exactly what would be expected in a recession; defaults/reduction of consumer debt, reduced consumer spending/increased savings and the government doing the opposite, increased spending, increased debt.

The "inevitable"? The inevitable began in 1986 when we shifted from a producer nation to consumer nation. Yet this "inevitable" was kicked off by a HUGEMONGOUS bull market. It is only inevitable because the entire system is based upon Human Confidence, the basis of a fiat currency system, and it can continue into the billions, trillions, quadrillions, ect... of dollars, into infinity, SO LONG AS CONFIDENCE continues to carry it. Reaching deficit levels of 100's of Billions was a shock to this country in the early 80's and many thought it was unsustainable. And now we're spending trillions, and it is just a sustainable now as it was then, PROVIDED the players have confidence. Its all the same thing with more zeros on the end. Its only when confidence is lost that it begins failing.

I agree with you though, its total failure is inevitable. Just that it may not be now. It could easily right itself, lenders increase lending and borrowers increase borrowing, allowing the Fed to exit, wages to increase, government revenue to increase...all on top of a total debt (public and private debt) REFINANCED at a lower rate creating less of an interest burden on the "system". I am not saying this WILL happen, I'm saying it is possible, it can happen, and signs continue to point in that direction, though there are still ob stackles that could lead to de tours in the opposite die rection.

To see things as "inevitable" is for one, close minded. It leads to tunnel vision, which results in getting T-boned at the crossing...you gotta keep both eyes open, looking both ways, not just straight ahead. Things change, much of the dire conditions of a couple years ago have quietly been resolved while the "metal dealers" only continue to keep focus on the negatives. Actually accentuating the negatives every chance they get, while ignoring or denying any improvements. To sum it up in a word, "Denial". Just take a look at Zerohedge...does he ever present anything economically positive without finding some way to dismiss it?

----------------------------------------------------------
"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

ecorob's picture

i am surprised to see you attack my argument...

(but, not really)

because you have no argument!

look at what you just said..."confidence is not an illusion...but it is a "belief"???!!!

which is it? an illusion or a belief in something unseen? to me, they are synonymous

my remarks are based on the facts...yours are based on the confidence of an illusion or a belief (as you, yourself, stated)

your argument is based on "fear", not an "illusion", but, a "belief"...

mine is based on facts...if you call stating the facts as sensationalizing something then, again, your argument is flawed

I rest my case.

its 'cos I owe ya, my young friend...
Rockin' the FREE world in Tennessee since 1957!
9/11 Truth.

I agree, you should take a

I agree, you should take a rest...

----------------------------------------------------------
"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

ecorob's picture

i'm sure you do believe that...

so you can freely spout your nonsense without having to defend it!

its 'cos I owe ya, my young friend...
Rockin' the FREE world in Tennessee since 1957!
9/11 Truth.

I see nothing different from

I see nothing different from you second post that is not already in the first, nothing to "defend".

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"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

Very true

There's no mistaking what's going on.

There's only mistaking what to do about it.

Thnx for the info, Cyril!