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09/15/2005 Archived Entry: "Gold hits 17-year high"
Gold hits 17-year high
Blogeneur Silver here. My lack of recent blogging has nothing to do with Katrina but rather a plethora of modern inconveniences such as Claire discussed recently.
Gold is beginning to be recognized as money. As I write gold is trading near $455 per troy ounce, and this morning December futures were trading for $458 or $459. These are the highest prices in 17 or 18 years; it isn't hard to imagine gold trading above $500, breaking a 25-year record. If one attempts to adjust for inflation, even at these prices gold is still extremely cheap compared to historical norms.
Many Americans seem to be stupid enough (sorry, I don't know a more polite term) to believe that money can be created from thin air forever. Whether its taking interest-only or negative amortization mortgages, saving little or nothing, or watching Congress flood billions of dollars into the hole that Katrina left behind, few seem to notice, or care, about the source of all this cash.
Most of the rest of the world knows better. Savings rates in excess of 20% are common in many parts of the world, and experience with currency devaluations, hyperinflation, and other unpleasant effects of fiat money is strong in people's memory. India buys enormous amounts of gold for jewelry that is often used as a dowry. China is actively encouraging its citizens to keep some of their savings in gold.
These people don't buy the guff about gold as a "barbarous relic." They know that when a banker or government official blathers about "liquidity," they are really talking about stealing money from savers and pensioners without bothering to pass a new tax law. They know that if the US Congress sends $200 billion to New Orleans and $200 billion to the Iraq war, but Americans aren't required to make new sacrifices, the money is simply being created out of thin air, and so impoverishing all those who trade or save in paper dollars. The savers and traders are increasingly not Americans, but foreign governments and citizens. The price of gold is rising because they recognize that trading increasingly worthless paper for increasingly valuable metal is a good deal. Demand goes up, supply is fixed, price goes up.
Gold has been selected by free markets as THE monetary metal in an evolutionary process that spanned thousands of years. It is preferred precisely because it's quantity is strictly limited; it canít be printed, counterfeited, or duplicated. Real economists (as opposed to the government-paid whores that are used to defend fiat paper) know that unlike any other commodity, an increase in the commodity used for money provides no net benefit to society. Our present experiment in pure paper money is only about 35 years old, the blink of an eye compared to gold's history as money. Our paper money experiment will most certainly end badly, as has every single previous attempt for hundreds of years.
Most Americans have forgotten these truths, along with many other important lessons. Economic and physical reality is now colliding with a mountain of lies. People the world over are losing their faith in paper money, particularly American paper money, and we will all soon be suffering as a result.
Posted by Silver @ 12:36 PM CST