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The intention of The
Golden Chalkboard is to feature a focused selection of data
or rare commentary that I think will be useful to enhance your
insights into the gold market and the monetary system.
Aristotle (5/13/02; 12:37:34MT - usagold.com msg#: 75556)
The (Personal) Gold Standard
revisited
In this representative democratic republic system of ours, we
each have (most notably) four votes apiece to change the world
more to our liking. Actually, we have those votes, and also the
persuasive powers of our convictions to lobby our leaders for
change. The sad truth is that we remain a tiny voice lost in a
wide crowd. So where do we turn to improve the quality of our
personal experience and interactions with the world at large?
As near as I can tell, the primary appeal among some of us for
a return to a Gold Standard is for the integrity it would bring
to our monetary system. At least that seems to be the prevailing
perception, anyway. (A false one, but that's the topic of previous
post.)
The truth of the matter is that if we pause to consider the monetary
system as a whole, we quickly realize that it's far more complex
and runs far deeper than the superficial quality of the coins
that happen to be jingling in our pockets. Given the nature of
the system, money (and its integrity) can be no better than the
commercial integrity of our banking institutions against a political
backstop that has the wherewithal to change the rules smack in
the middle of the game.
As we've seen in real life, the form of our currency may be Gold
one day, then cupro-nickel the next. You may vote and lobby to
the end of your days, and if you live to be a thousand this won't
change a thing.
So what's the next best thing? Get on with your life!!! Take a
good look around, make the most of the situation at hand, and
apply your energies where they might have meaning. Ply your trade
and be a success. After all, the nature of your money is secondary
to your real concerns. Or it certainly should be.
Sure, sure, the integrity of the Monetary System is very important
to all of us. After all, it plays an important role in facilitating
the human business of, well... BUSINESS! We try to organize our
lives and our operations so that we can plan ahead and reasonably
know that our future will be secure. In business, we do that through
the wonderful invention of contracts. Contracts to build, contracts
to buy, contracts to borrow, and any variation you can imagine.
Our development of the Monetary System grew out of our human desire
to plan forward. For future security.
A huge *huge* HUGE mistake that many people make, however, is
in somehow confusing their personal security with the integrity
and fate of the money they use. Note that I said only "money"
and not "Monetary System." To be sure, our personal
security is very much intertwined with the Monetary System because
it forms the backbone of our network of contracts. But that's
independent of the monetary unit itself. The System can thrive,
and the human business of business can thrive, even as the money
within the system suffers a well-recognized long slow sliding
death by inflation.
Let me put this as simply as I can.
If your physical or emotional well-being depends upon the fate
and integrity of your monetary unit, then something is seriously
out of balance. You have placed way too much of your own life's
future security on a throw of the dice.
Understand this: the integrity of the Monetary System is more
important than the Money itself. As a result, (and we've seen
this constantly occur in our real lives,) the value and nature
of our currency will always be sacrificed as necessary to save
the integrity of the System. Gold one day, paper the next. We
can do nothing to change this, nor should we really care if we
don't allow ourselves to be overly exposed to the effects of a
diminishing (some would say "dishonest") unit of money.
So what's to be done? Readjust your position! Money is merely
the ethereal middle-ground of contracts, and in our quest for
security, this is no place to live! Put yourself on a Personal
Gold Standard. Carry from month to month or quarter to quarter
no greater quantity of money than you reasonably expect you'll
need. Take your paycheck, earnings, income, whatever; drop it
in your checking account, pay your bills, contemplate an attractive
investment or two, buy some new patio furniture, and roll the
purchasing power represented by any leftover money into Gold.
In the end, you'll find that even though you must chart a course
through a life surrounded by "dishonest" ever-failing
money, you can take comfort that your actual savings are "honest"
and secure, come what may. And that's what you really wanted all
along, right? Security.
Gold. Get you some. --- Aristotle
Aristotle (5/13/02; 17:16:01MT - usagold.com msg#: 75577)
Popular movements toward
**Personal** Gold Standards?
Old Gold coins and Gold bars are part of the world's body of wealth
accumulated over the history of mankind. Along with all the existing
factories, houses, bridges, highways, cars, radios, chairs, telecommunication
networks, oil rigs, Persian rugs, fine art, Stradivarius violins,
and on and on, Gold coins and bars are physical legacies of all
past time, decisions, and human effort.
Along the way through the many generations of mankind, a great
many products of human effort have been destroyed. Some with benign
intent (we eat the bread we bake and burn the coal we mine each
year), some accidentally (have you ever backed over your kid's
bicycle?), and some with malicious intent (war.)
When it comes to permanence, however, Gold is king. Aside from
the fact that some atoms may be scattered and lost (erosion of
jewelry,) all the Gold that's ever been mined is still with us.
And despite it's enduring nature while all around it crumbles
or is consumed, compared to all the other ownable property of
the world that exists at this fresh moment in time, the relative
quantity of Gold is minuscule. Precious and indestructible, no
other item packs a punch so obvious and suitable for representing
liquid savings for peoples around the world. Framed against a
world of wasting monies and wasting assets, there is no wondering
about Gold's enduring appeal in this role.
Given the importance for an enduring functional integrity of the
Monetary System (i.e., as a domestic and international framework
for our fabric of contracts woven by the human business of business,)
it stands to reason that the politically elected and appointed
custodians of that System would in the course of time come to
understand the importance of measures to limit the potential for
collapse through elimination of elements of undue systemic risk.
Duisenberg
recently stressed, STRESSED mind you, that the euro was the
world's first currency that had managed to sever its link to both
Gold and to the nation-state. His important implication as I take
it was with respect to the currencies resulting NEUTRALITY. Without
bias it can (assuming free functioning markets) fairly price anything
under the sun -- INCLUDING GOLD. It is also free from custodial
management bent upon the sole benefit of a singular national interest
-- its own.
...As FOA has told us, given the options, our political leaders
would much rather have us save with Gold than to give our European
counterparts a free ride by saving excessive amounts of euros.
Meaning, we won't be officially eager to return the monetary favor
all the world has been providing to us for the past half century
through holdings of our dollars.
Gold. Get you some. --- Aristotle
Aristotle (05/14/02; 12:36:34MT - usagold.com msg#: 75653)
Patio Furniture
"I'll never sell my patio furniture."
What a ridiculous thing to think or actually say. You'll never
hear it from me.
I bought my patio furniture for the comfort it would bring me
during the course of my life. I assure you, at all points along
the way it's been much more gratifying having it than not having
it. Real Patio Furniture is my reward for the value of my prior
labors, a purchasing power which was briefly expressed in my bank
account as the amount of money I received for my work. And now
it is expressed as the Patio Furniture that gives me physical
comfort and meaningful satisfaction following my productivity.
People have been known to change their lifestyles. For example,
selling a motorcycle in preference for a car, or selling a large
city house in preference for small country cottage, or selling
a boat and moving inland. For that reason, I'll never vow not
to sell my Patio Furniture. Heck, for all I know, I just might
need the cash someday simply to put food in my belly! (But let's
hope it doesn't come to that! Where would I sit as I ate it?)
But from early on, I was conscious that our government has had
a track record of changing the rules of the game, declaring public
emergencies, claiming eminent domain, etc. It also became known
to me that, hanging like a dark cloud over my interest in Patio
Furniture, the government has a potential interest (along with
a history) of seizing any and all publicly held bulli... er, I
mean New Patio Furniture.
What did I, the light and lively king of my own domain, decide
to do? Undaunted and well armed with Information, I took advantage
of the Knowledge that the government has been hesitant to take
away a citizen's Antique Patio Furniture. That's right! I bought
some Exceptional Patio Furniture that was four generations old,
and most pleasantly without the usual antique premium on its price.
Now let me tell you something. The craftsmanship in this old stuff
is remarkable. As far as delivering comfort and satisfaction of
ownership, it's even better than the new stuff -- not only does
it let me lounge at ease with peace of mind, it also fills me
with a sense of connection to all those wonderful generations
who enjoyed it before my turn in the easy seat.
I sure won't be pleased -- in sympathy for my neighbors -- if
the government takes their new deck chairs, or seizes the factories
that build the new ones. But if it happens, I'm sure I'll probably
enjoy all their company as they come over to my patio for a place
to sit and enjoy a beer with me in the sunshine. After all, the
sun will always come up tomorrow. You just need to make sure you'll
still have a place in it.
OK, ok, because I can't absolutely foresee my future financial
needs, maybe I'll sell one chair or two to a neighbor as necessary.
But thanks to my caution, they'll still be mine to sell.
More importantly, I won't have to complete the transaction in
some dimly lit back alley with the drug dealers and other creatures
of the underworld.
This I will say, "I'll never sell the ENTIRE set." Why?
Because as long as I live, I'll need that comfortable place to
sit in the sun. Otherwise, what's the point of life?
Gold. Get you some. --- Aristotle
Aristotle (05/22/02; 12:25:24MT - usagold.com msg#: 76249)
Please bear with me!!!
Mornings I just drrraaagg along.
There was a time when I used to enjoy a cup or two of imported
coffee with breakfast each morning. The beans would be shipped
to me directly from a distributor in Istanbul. I'll tell ya, those
were the good ol' days!
I would hand grind my daily ration, and as the beans would crack
under the turning burr the rich aroma alone would already begin
to work its magic, bringing pep into my day. Sometimes, I'd take
my cup outdoors to savor the final product of my efforts, comfortably
basking upon my patio furniture (of which you've already heard
a thing or two.)
My life couldn't have been better, and this love of coffee I shared
one day in a conversation with a friend of mine, a stock broker.
He smiled and nodded approvingly upon hearing the details of my
morning ritual, commenting that my passion for coffee must run
deep indeed to fuel my industrious routine. I assured him that
the effort of preparation enhanced the final satisfaction of consumption,
and that the building anticipation of of the inevitable consumption
also imparted a particular joy to the preparation. Double benefits.
He laughed, confessing that he just drives through Starbucks on
his way to work.
We talked a bit more in our easy manner, and before all was said
and done he had convinced me of the merits of Starbucks Corporation.
"Someone with your level of interest in coffee..." he
said to me, musing, "...you just can't go wrong with Starbucks."
I'd never been to a Starbucks (can you believe it???) but so great
was his enthusiasm and insistence that I consented to buy no small
number of shares -- Starbucks Corp [SBUX].
Sitting here now in my afternoon haze and looking back, boy was
I stupid! Being somehow temporarily confused into thinking that
SBUX would now satisfy all my coffee needs, I foolishly allowed
my inventory of Turkish coffee to dwindle and run out.
It's probably been two months since I last had those familiar
peppy benefits of my coffee to help lift me out of the depths
of the darkest morning hours. These days it seems like life itself
just drrraaaggs...
If you haven't already figured it out for yourself, let me be
the first one to tell you at my own expense. Ownership (use) of
company stock IN NO WAY serves as a satisfactory substitute for
the benefits of ownership/use of their Products.
Laugh if you must, but only a fool would obtain SBUX to the complete
exclusion of any real Coffee Beans. It would be akin to thinking
that "Mornings don't happen." Well, OF COURSE 'mornings'
happen! They happen every day!! And when they do, we need COFFEE
BEANS, DAMMIT! Not a certificate of SBUX!!!
I've wasted this precious space on MK's fine forum only because
I want to help you draw this parallel thought:
It would be the height of foolishness to obtain shares in "GroundGold
DeepMine Corp" [A.HOLE] to the complete exclusion of any
Physical Gold Metal.
That investment strategy would be akin to thinking that "Argentina
isn't happening," that "the Asian Contagion never happened,"
that "LTCM, Enron and bankruptcy of pension plans don't happen,"
or that "911 cannot, will not happen!" It happens, folks.
It happens somewhere in this wide world every day. Every morning,
somebody somewhere loses everything but the shirt on their back.
Gold is a mighty fine shirt to wear. An armor of wealth against
the perils of the world that we arise to face every morning.
Fools selling each other on the "benefits" of SBUX and
A.HOLE instead of their products . . . Sheeeeeeeeesh! Gimme a
break!
Gold. Get you some. --- Aristotle
Aristotle (05/22/02; 14:07:38MT - usagold.com msg#: 76260)
"How High can Gold
Go?" Great find, YGM.
http://www2.marketwatch.com/news/story.asp?guid=%7B376C816E%2DA560%2D4B68%2DA50B%2D77658557DCB7%7D&siteid=mktw
I found the article you mentioned. It was nearing the bottom of
the newswire so I've captured it here for any Johnny-come-latelies.
Here are some scenes from the report that impressed me one way
or another:
JOHANNESBURG (CBS.MW) -- Though they differ on whether shares of their local mining companies are currently overvalued, South African mining analysts are unanimous about the price of gold. They say it can only move higher.
The rising price is forcing hedged companies to cover their positions. Durban Deep is currently borrowing the money to cover its positions
the move to cover those positions will continue to push the price of bullion higher.
Also buoying the metal skyward is a looming shortage of supply. World gold production is beginning to plateau, said Davis. Beginning in 2003, it will begin to drop off between 3 and 4 percent annually. By 2005, it will fall sharply.
"If you think the crises of the world are going to escalate, you can buy some very expensive shares. If you think things will pass, you will go underweight."
Long-term, Davis said, a truly conservative investor would be well-advised to buy the metal itself and avoid the gold mining shares altogether.
But shares of gold mining stocks, say the South African analysts, are to be traded, not held, whether the price of bullion goes up or down.
Hey everyone, that second-to-last
paragraph sounds like something I'd say!
The key to very last paragraph is that anyone dabbling in mining
shares had best adopt a trading mentality... but what a wasted
life! Who has time to sit as a trader and dote over the latest
corporate developments, political developments, currency exchange
developments, swings in share price, etc. that all affect the
profitability of the company and your share ownership?
If you're a gambler, and an interest in this sorta trading thing
IS your lifestyle, then go for it! With my blessing. You've found
your calling, and I hope you do well! (Do you drink coffee in
the morning, or do you muddle through with SBUX trading, too?)
The reason that share ownership of mines [A.HOLE] is necessarily
NOT a buy-and-hold sorta thing (in contrast to Real Gold) is because
mining companies, by nature of their mines, are a wasting enterprise.
Every day of operation brings each mine one day closer to the
exhaustion of the ore body. The mining company must either pour
its profits into exploration with the hope of finding somewhere
else to continue operations before their mine life (and corporate
life) comes to an end, or else they merge with other companies
who are also in the Same Boat. Each day bringing them one day
closer to a played-out hole in the ground.
Let me put it this way to cover the bases...
Mining companies are fundamentally a crappy investment.
They always tend to operate at the margin of existence. Everyone
employed by the company has a vested interest in merely preserving
the longest possible existence for their employer/goldmine, ever
and always at the sacrifice of fat profits or possible windfall
dividends to the shareholders.
To extend mine life mines will operate marginally, engaging in
highgrading (at low POG) or "lowgrading" (at higher
POG,) and for tax purposes will expense out interim "profits"
for exploration in attempts to replace the ever-diminishing in-ground
reserves.
At the end of a successful mining operation, what have you got
to show for it all? A body of workers who were gainfully employed
for a good while, all standing around a spent out hole in the
ground. An no retained Gold to show for it -- UNLESS, and ONLY
IF, the workers spent some of their salaries to buy the final
Product! Same thing goes for the owners/shareholders who maybe
got some paltry dividends (see above) but no salary from the money
flow of the operation along the way.
Standing around an empty hole with all the minable Gold now in
the hands of others. In the end of ends, after all intermediate
mergers and whatnot, this is where all mining companies end up.
Unless...
Unless they shift their operation into other types of activity.
During the past years of lean returns when even highgrading wasn't
enough to make ends meet, we actually saw a number of miners throw
in the shovel and try to become some sort of internet service
company. Do you remember that during the tech-boom of the late
1990's? I do. But I haven't kept track of their fate, so I can
only imagine that they, too, went bust along with many other dot.coms.
So go ahead... invest in A.HOLE, and then tell your children you're
too busy charting its performance to join them for a picnic in
the park.
Gold. For life. It'll always be there to dip into whenever your
days of need might arrive.
Gold. Get you some. --- Aristotle
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