2012/2013 Fiscal Cliff

[Carpenter]

Again, this has a time period bias. My analysis that I did before factored in gold PRIOR to 1972. When I did the analysis, I went from S&P inception date through a 60+ year time period and the S&P500 not only slaughtered gold in return, but had a lower standard of deviation.

It is great that you are using 40 years, but that 40 years also includes the most recent bubble which is not an indication of history for gold.

S&P500 is overall pretty routine in the long-term. Think of it as an up-ticking S-curve.

Gold on the otherhand is all over the place. If you are going to look at the most recent bubble and use that as an argument, you may as well look at gold prior to Bretton Woods ending and the Nixon Shock (when gold fell off the standard).

Ah, I choose 40 years in responce to one of your posts.

If we go back 60 (again at your suggestion) gold does even better.

Gold closed 1952 @ $34.60

$1000 / $34.60 is 29 oz of gold.

Gold closed @ $1670 oz Friday
29 oz X 1670 oz = $48,430.

How does the Dow compare?

Gold does nearly as well since the inception of the S&P (1960).

What is the return on a $1000 dollars invested in the S&P since 1960?

$23-$24K ? ?

[Carpenter]

There is no doubt barter would be difficult without a medium of exchange. Just as there is no doubt that our fiat system has challenges of its own.

However who says that gold being a medium would not be a challenge either?

There will always be challenges with any economic system. We currently stand on fiat because despite its flaws, it is better than the systems we had prior.

Like I said before, you are free to buy whatever the heck you want. But for you to think that you can come onto a forum touting your "gold will be the standard" talk without opposition is pretty silly.

Also I like how you stepped away from the investment argument and you are now on medium of exchange. It is funny because nobody truly knows what the exchange would be in a failed economy until we get there. So in a very real way, isn't it all speculation?

Gold is still a monetary metal, it is a tier one asset held by Central Banks world-wide.

It's suited for settling debts between nations, and may well be the reason Central Banks have record purchases over the last two years.

Can you see a reason why it couldn't return as a medium of exchange between individuals?


OBTW I never claimed "gold would be the standard" I stated it was suitable.

[dczech09]

Fallacy?
How so?
Do people only own an index?

I noted in one of your earlier posts you mentioned a time frame of 40 years.
Let's take a look at that shall we?


S&P 500 closed 1972 @ $118.
$1000 / $118 is 8.474 shares

S&P 500 closed @ $1414 Friday
8.474 shares X $1414 = $11,983.


Gold closed 1972 @ $63.71
$1000 / $63.71 is 15.7 oz of gold.

Gold closed @ $1670 oz Friday
15.7 oz X 1670 oz = $26,219.


We could look at the Dow, but the Dow is worse.

We could go back farther, but there again, both indicies do worse.

As for a barter system; what if you nothing I want to trade for something I have?
A medium of exchange is neccessary for commerce.

Again, this has a time period bias. My analysis that I did before factored in gold PRIOR to 1972. When I did the analysis, I went from S&P inception date through a 60+ year time period and the S&P500 not only slaughtered gold in return, but had a lower standard of deviation.

It is great that you are using 40 years, but that 40 years also includes the most recent bubble which is not an indication of history for gold.

S&P500 is overall pretty routine in the long-term. Think of it as an up-ticking S-curve.

Gold on the otherhand is all over the place. If you are going to look at the most recent bubble and use that as an argument, you may as well look at gold prior to Bretton Woods ending and the Nixon Shock (when gold fell off the standard).

[Carpenter]

Says you. Where's the link to gold stats? Basically you're implying that people are hoarding gold in their homes or some readily accessible safe?



What about the risk that no one will accept it? I know it's hard to fathom since you've probably stocked up gold. Who wouldn't want gold? Me, for starters and everyone else with food, guns, and water.





Exactly the point. Why would they honor a shiny piece of metal?



And apparently you don't understand the concept of bartering—a system where you don't need a medium of exchange. 1 bushel of corn in exchange for 1 lb of butter. Direct exchange, no medium.

I'm not your research assistant. I gave you the source, look it up yourself.


Corn for butter?

What if I don't have any butter?

How will I get the corn?

[bjl584]

I would have to speculate that in a failed economy if society and order were to breakdown, then gold, silver, and paper money would all be worthless. Food, fuel, and weapons would be the new system of currency. But, that's a big if. I doubt we will wake up tomorrow and face a Mad Max existence.

[Carpenter]

Huge fallacy in this argument.

You cannot compare a stock to gold. How many stocks have gone to zero is like me asking what types of buillion are no longer in production.

The stock market as a whole has never dropped to zero, and never will. The gold market probably never will drop to zero either, but there is no historical data that supports gold being a good investment.

You are welcome to buy whatever the heck you want. But I am just saying that gold is not an investment, it is a speculation.

Also for you to say that we need a medium of exchange if our current system fails is a good point. However, who says it will be gold that will be the medium of exchange? It very well could be blossoms, corn, wheat, or clay. Maybe I should stockpile those things, right?

If our economy fails, the most logical system would be a barter system. Goods and services would be traded. Water, corn, pork and whatever else are good options for trade because they have value based on nourishment. Gold on the other is just a shiny rock and does not provide anyone any value in a broken economy.

Fallacy?
How so?
Do people only own an index?

I noted in one of your earlier posts you mentioned a time frame of 40 years.
Let's take a look at that shall we?


S&P 500 closed 1972 @ $118.
$1000 / $118 is 8.474 shares

S&P 500 closed @ $1414 Friday
8.474 shares X $1414 = $11,983.


Gold closed 1972 @ $63.71
$1000 / $63.71 is 15.7 oz of gold.

Gold closed @ $1670 oz Friday
15.7 oz X 1670 oz = $26,219.


We could look at the Dow, but the Dow is worse.

We could go back farther, but there again, both indicies do worse.

As for a barter system; what if you nothing I want to trade for something I have?
A medium of exchange is neccessary for commerce.

[dczech09]

You assume much, and incorrectly I might add.
For starters take a peak at government minted bullion sales over the last decade.
The US mint makes sales figures avaliable online.

The beauty of physical gold is it's lack of third party risk.
"If you don't hold it, you don't own it."


The OP asked his question in the context of a "financial collapse".
Do you think your local economy will honor a failed fiat currency?


How difficult would barter be without a medium of exchange?

There is no doubt barter would be difficult without a medium of exchange. Just as there is no doubt that our fiat system has challenges of its own.

However who says that gold being a medium would not be a challenge either?

There will always be challenges with any economic system. We currently stand on fiat because despite its flaws, it is better than the systems we had prior.

Like I said before, you are free to buy whatever the heck you want. But for you to think that you can come onto a forum touting your "gold will be the standard" talk without opposition is pretty silly.

Also I like how you stepped away from the investment argument and you are now on medium of exchange. It is funny because nobody truly knows what the exchange would be in a failed economy until we get there. So in a very real way, isn't it all speculation?

[elessar78]

You assume much, and incorrectly I might add.
For starters take a peak at government minted bullion sales over the last decade.
The US mint makes sales figures avaliable online.

Says you. Where's the link to gold stats? Basically you're implying that people are hoarding gold in their homes or some readily accessible safe?

The beauty of physical gold is it's lack of third party risk.
"If you don't hold it, you don't own it."

What about the risk that no one will accept it? I know it's hard to fathom since you've probably stocked up gold. Who wouldn't want gold? Me, for starters and everyone else with food, guns, and water.

The OP asked his question in the context of a "financial collapse".
Do you think your local economy will honor a failed fiat currency?

Exactly the point. Why would they honor a shiny piece of metal?

How difficult would barter be without a medium of exchange?

And apparently you don't understand the concept of bartering—a system where you don't need a medium of exchange. 1 bushel of corn in exchange for 1 lb of butter. Direct exchange, no medium.

[Carpenter]

So gold owners, where is your gold exactly? Is it in your possession at the moment? Probably not. Where is the gold you own actually stored? When society crumbles how will you gain access to said gold?

Will people in a local economy still honor prices set by a global market that no longer exists?

Like I said, buy bullets. You can set your own price for things.

You assume much, and incorrectly I might add.
For starters take a peak at government minted bullion sales over the last decade.
The US mint makes sales figures avaliable online.

The beauty of physical gold is it's lack of third party risk.
"If you don't hold it, you don't own it."


The OP asked his question in the context of a "financial collapse".
Do you think your local economy will honor a failed fiat currency?


How difficult would barter be without a medium of exchange?

[elessar78]

I have to go nerdy and answer the unasked question of why gold became the medium of exchange.

If you look at the periodic table of elements, nearly all of it can be ruled out as a medium of exchange because it exists as a liquid or gas at temperatures which are friendly to humans. So you're left with the metals. Now exclude all the metals that are radioactive or are too brittle or exist as powder and you are essentially left with 3 or 4 metals. Iron, Silver, Gold, and Platinum. Iron was too plentiful to be of use, Silver (I can't recall exactly) but is either too rare or too difficult to mine, and Platinum had too high a melting point (3,216° F) to be of use to ancient peoples. So you're left with gold. Meltable, malleable, plentiful, but not too plentiful, and relatively easy to acquire.

[dczech09]

The value of gold has never gone to zero...How many stocks have gone to zero?

Shall I start a list?

Huge fallacy in this argument.

You cannot compare a stock to gold. How many stocks have gone to zero is like me asking what types of buillion are no longer in production.

The stock market as a whole has never dropped to zero, and never will. The gold market probably never will drop to zero either, but there is no historical data that supports gold being a good investment.

You are welcome to buy whatever the heck you want. But I am just saying that gold is not an investment, it is a speculation.

Also for you to say that we need a medium of exchange if our current system fails is a good point. However, who says it will be gold that will be the medium of exchange? It very well could be blossoms, corn, wheat, or clay. Maybe I should stockpile those things, right?

If our economy fails, the most logical system would be a barter system. Goods and services would be traded. Water, corn, pork and whatever else are good options for trade because they have value based on nourishment. Gold on the other is just a shiny rock and does not provide anyone any value in a broken economy.

[elessar78]

People who continue to produce will need a medium of exchange, and a vehicle to store wealth.

Gold is well suited for that purpose, and for all, but 40 of the last 4000 years has done so.

So gold owners, where is your gold exactly? Is it in your possession at the moment? Probably not. Where is the gold you own actually stored? When society crumbles how will you gain access to said gold?

Will people in a local economy still honor prices set by a global market that no longer exists?

Like I said, buy bullets. You can set your own price for things.

[Carpenter]

I think what dontgopoor is saying is that gold's value is similar to that of anything else. On its own, it really does not have a high value. Its value is completely dependent on what others are willing to pay for it. Stock has intrinsic value because it represents equity in a business and all of the stuff owned by the company. Corn has intrinsic value because it can be consumed. Gold all by itself is just a shiny rock.

The value of anything is completely dependent on what others will pay.


The value of gold has never gone to zero...How many stocks have gone to zero?

Shall I start a list?

[Carpenter]

Tell me, when the US financial system "crumbles" who exactly will buy this gold that you hoard for $2,000/oz? On what internet based system will you trade this gold? Do you think people with food, fuel, guns, water, etc. sell to you because you have shiny bits of metal?

People who continue to produce will need a medium of exchange, and a vehicle to store wealth.

Gold is well suited for that purpose, and for all, but 40 of the last 4000 years has done so.

[dczech09]

KV968 - I think we're saying similar things. I'm not a fan of gold but I do understand the argument that some investors make about getting in and out of gold if they think others will flock to gold when scared (in just before the trouble starts and out before the trouble ends). Though not an approach that I've ever used or would ever recommend. Thank you for your comments.

I do agree here. Perhaps there can be money made in jumping in and out of gold in order to take advantage of market upswings and downswings. However I do want to point out that this is a dangerous game.

This is pure speculation and not real value investing. Its not even investing, which is what a lot of us on the forum advocate.

It is tough to time the stock market. The gold market may be a little easier especially these days when there is such a "herd" mentality.