Gyroscopic Investing

LC475 wrote:

rickb wrote: The problem of course is that there aren't enough of these coins (particularly gold eagles) to replace the current paper (and digital!) money supply.

Ahh, yes, "of course"!  How many tons of paper money exists?  How many tons is the right amount?

Irrelevant you say?  Depends on what numbers are printed on it?  One ton of paper bills with "1"s printed on them is not the same as one ton with "1000"s printed on them?  Hmm.

Interesting.

Verrry interesting.

How many tons of gold exist?  How many tons would be "enough" to replace the current money supply?

Get it?

Of course you are right, but I think it needs to be spelled out even more clearly.
If the "price of gold" were $10,000/oz., would there be "enough gold"?
If not, how about $100,000/oz.?
...

Libertarian666 wrote:

LC475 wrote:

rickb wrote: The problem of course is that there aren't enough of these coins (particularly gold eagles) to replace the current paper (and digital!) money supply.

Ahh, yes, "of course"!  How many tons of paper money exists?  How many tons is the right amount?

Irrelevant you say?  Depends on what numbers are printed on it?  One ton of paper bills with "1"s printed on them is not the same as one ton with "1000"s printed on them?  Hmm.

Interesting.

Verrry interesting.

How many tons of gold exist?  How many tons would be "enough" to replace the current money supply?

Get it?

Of course you are right, but I think it needs to be spelled out even more clearly.
If the "price of gold" were $10,000/oz., would there be "enough gold"?
If not, how about $100,000/oz.?
...

i think it comes down to how conveniently divisible gold is, if it became convenient to carry around a small coin sized certified slab with 1-2-5 or 10 atoms of gold in it, and you could use your atomic microscope phone app to look at it and make sure they were untampered with, then then there is no real limit..   

l82start wrote:

Libertarian666 wrote:

LC475 wrote: Ahh, yes, "of course"!  How many tons of paper money exists?  How many tons is the right amount?

Irrelevant you say?  Depends on what numbers are printed on it?  One ton of paper bills with "1"s printed on them is not the same as one ton with "1000"s printed on them?  Hmm.

Interesting.

Verrry interesting.

How many tons of gold exist?  How many tons would be "enough" to replace the current money supply?

Get it?

Of course you are right, but I think it needs to be spelled out even more clearly.
If the "price of gold" were $10,000/oz., would there be "enough gold"?
If not, how about $100,000/oz.?
...

i think it comes down to how conveniently divisible gold is, if it became convenient to carry around a small coin sized certified slab with 1-2-5 or 10 atoms of gold in it, and you could use your atomic microscope phone app to look at it and make sure they were unhampered with, then then there is no real limit.. 

How about a gold certificate from a trustworthy issuer? Obviously that would leave out governments...

LC475 wrote:

rickb wrote: The problem of course is that there aren't enough of these coins (particularly gold eagles) to replace the current paper (and digital!) money supply.

Ahh, yes, "of course"!  How many tons of paper money exists?  How many tons is the right amount?

Irrelevant you say?  Depends on what numbers are printed on it?  One ton of paper bills with "1"s printed on them is not the same as one ton with "1000"s printed on them?  Hmm.

Interesting.

Verrry interesting.

How many tons of gold exist?  How many tons would be "enough" to replace the current money supply?

Get it?

What I mean is that if we assume everyone in the US wanted to convert to using "hard money" rather than dollar bills, and wanted to store their dollar denominated savings as gold rather than as book entries at banks - we'd essentially be replacing the components that make up M2 with hard money.  M2 in the US is currently about $12T.  There is (also of course) a valuation of existing gold and silver, even existing gold and silver coins that have already been minted, that would make this work out - BUT the valuation would then be completely impractical for ordinary daily transactions.

For example, to amount to $12T if we use all the gold in the world (about 170,000 tonnes which is about 5.5B troy oz) each oz of gold has to correspond to slightly more than $2000.  Although this sounds reasonable, we've consumed all the gold in the world to equal only M2 in the US (and the rest of the world would presumably not go along with this).

If we instead try to use already minted US gold and silver eagles (http://www.cmi-gold-silver.com/american ... ns-minted/) we only have about 18M troy oz in gold and 282M oz in silver.  Assuming a 100-1 silver to gold ratio we're at about 20M oz of gold equivalent.  To replace the $12T M2 amount with this, each oz of gold has to correspond to about $600,000 (and each oz of silver to $6,000) - at which point a silver dime is worth about $550 (way more than a loaf of bread costs).  If we throw in the (claimed) 8,000 tonnes of gold at Fort Knox, we have an additional 257M oz of gold - and now rather than $600,000 each oz of gold has to correspond to about $50,000 making a silver dime worth about $45 - still WAY more than a loaf of bread costs.

The point is we don't end up with a usable valuation.  We could extend this to include copper pennies which historically were 1/10th of a silver dime - but if a dime is worth $45 a copper penny would then be worth $4.50 - STILL not granular enough to pay for a loaf of bread.

Libertarian666 wrote: Not just in the realm of possibility, that is a "has happened many times" event.

But in modern times?  I've read up on a lot of modern SHTF.  Diamonds, stamps, toilet paper, soap, costume jewelry, tobacco, etc. but gold coins?  I can't recall any in particular, except Argentina, but that wasn't a SHTF.  The problem is gold is very hard to smuggle across borders invisibly and it doesn't have any practical use without a functioning banking system.

So, provide some examples to refresh our memory.

Libertarian666 wrote: How about a gold certificate from a trustworthy issuer? Obviously that would leave out governments...

Perth Minth owned by the Perth government is the must trusted gold certificate issuer in the world.  Gee, I wonder why... 

MachineGhost wrote:

Libertarian666 wrote: Not just in the realm of possibility, that is a "has happened many times" event.

But in modern times?  I've read up on a lot of modern SHTF.  Diamonds, stamps, toilet paper, soap, costume jewelry, tobacco, etc. but gold coins?  I can't recall any in particular, except Argentina, but that wasn't a SHTF.  The problem is gold is very hard to smuggle across borders invisibly and it doesn't have any practical use without a functioning banking system.

So, provide some examples to refresh our memory.

I guess if you define "modern" to mean "in the last 30 years", there probably aren't too many. But that does seem a bit like cherry-picking, wouldn't you say?

If we go back a bit farther than that, South Vietnam comes to mind immediately, and I imagine I could come up with plenty of examples in the 20th century.

After all is said and done, gold is stagnant most of the time, moving with tight ranges, over such a long time as to make the holder feel its a waste. When it does move, it is often violent and unpredictable. It will disappoint over and over so often that faith can be lost. However the forces the move gold are always near the surface, waiting to explode.

rickb wrote: What I mean is that if we assume everyone in the US wanted to convert to using "hard money" rather than dollar bills, and wanted to store their dollar denominated savings as gold rather than as book entries at banks - we'd essentially be replacing the components that make up M2 with hard money.  M2 in the US is currently about $12T.  There is (also of course) a valuation of existing gold and silver, even existing gold and silver coins that have already been minted, that would make this work out - BUT the valuation would then be completely impractical for ordinary daily transactions.

For example, to amount to $12T if we use all the gold in the world (about 170,000 tonnes which is about 5.5B troy oz) each oz of gold has to correspond to slightly more than $2000.  Although this sounds reasonable, we've consumed all the gold in the world to equal only M2 in the US (and the rest of the world would presumably not go along with this).

If we instead try to use already minted US gold and silver eagles (http://www.cmi-gold-silver.com/american ... ns-minted/) we only have about 18M troy oz in gold and 282M oz in silver.  Assuming a 100-1 silver to gold ratio we're at about 20M oz of gold equivalent.  To replace the $12T M2 amount with this, each oz of gold has to correspond to about $600,000 (and each oz of silver to $6,000) - at which point a silver dime is worth about $550 (way more than a loaf of bread costs).  If we throw in the (claimed) 8,000 tonnes of gold at Fort Knox, we have an additional 257M oz of gold - and now rather than $600,000 each oz of gold has to correspond to about $50,000 making a silver dime worth about $45 - still WAY more than a loaf of bread costs.

The point is we don't end up with a usable valuation.  We could extend this to include copper pennies which historically were 1/10th of a silver dime - but if a dime is worth $45 a copper penny would then be worth $4.50 - STILL not granular enough to pay for a loaf of bread.

I myself am skeptical of any grand Master Plans to convert the United States from the status quo to a gold money system.  Your concerns about "M2" are not necessarily right on target, for this is not the figure that would need to be completely replaced by physical gold coins, but clearly the price of gold would need to increase dramatically in a conversion to make the dollar fully convertible to gold.  There have been plans put forward to make the dollar convertible again, and some are somewhat workable and realistic, but, as I say, I am skeptical of the real value of any such plans.  It's almost surely not going to happen that way, as a top-down monetary reform.  No, it will be bottom-up, ad-hoc, innovative, and driven by entrepreneurs.

I've always thought that the ideal hard money would be lithium AA batteries.

They are lightweight, have a 20+ year shelf life and can be used to power countless devices.

For smaller transactions, you could use AAA lithium batteries.  You might receive change for transactions in the form of hearing aid and watch batteries.

Anyone like the idea of a lithium battery standard?

Battery currency sounds pretty Mad Maxesque but VW apparently has vending machines that will accept used batteries as "currency"..

MediumTex wrote: Anyone like the idea of a lithium battery standard?

I think you are on the right track here, Tex.  I was just thinking something similar after paying an outrageous amount for a titanium coffee cup.

The problem is, you need a system that stores value exponentially proportional to weight.  That way you can cary a wide range of values for a small weight.

Think about copper, silver, gold.  Or 1's, 10's, 100',s 1000'.s

Maybe carbon, lead, lithium, atomic batteries...

Lithium batteries are not the only possible currency. Human ingenuity is limitless.

After World War II my Uncle Bob was in the Navy, and his battleship, the U.S.S. New Jersey, visited Japan. At that time the Japanese yen had collapsed, and cartons of American cigarettes were the unofficial currency.

To dampen inflation, members of the Navy police, the Shore Patrol, tried to prevent cigarettes from being taken ashore by frisking every sailor before he left the ship. To avoid detection when they were frisked, sailors such as my Uncle Bob took advantage of their bellbottomed uniform trousers by strapping two cartons of cigarettes to the calf of each leg before marching off the ship to have a very good time.

Desert wrote: The lithium AA's sound like an excellent currency. 

I have to think hard liquor would be excellent as well.  I like the concept of a consumable currency.  Cigarettes, liquor, batteries ... they all have a fundamental underlying value.

I think I should mention that anyone who is concerned about the "horror" of deflation should not be in favor of consumable currencies.
Not that you are one of those concerned; I'm just pointing out this as a general issue.

Here we go again. Gold is down over $25 in Asian trading.
Good thing I won't have to sell any in the next couple of years.
Actually, if I get some new cash in, I'll be buying with both hands.

Oh, good god.

The day I plan to liquidate my mining stocks this happens. I'm not sure if Ill look back in 5 years and say it was the dumbest thing to sell here or the best thing ever. There goes a years salary because I wanted to outsmart the markets.

So sorry to hear it. The entire commodity complex is stricken due to dis-inflation, no-inflation, de-flation, whatever you want to call it... and a powerful US Dollar. I lost my job as an oil geophysicist in March, that was my wake-up call; getting my head slammed against a concrete wall at 100 MPH. It could get worse before it gets better. And there is no telling how quickly precious metals go up after reaching their true lows for this cycle. Maybe fast... maybe slow. Best to wait on the sidelines in cash. There will be plenty of chances to buy. Don't buy miners, buy metals. I am looking at a mix of gold and platinum. Someday...

Matthew19 wrote: The day I plan to liquidate my mining stocks this happens. I'm not sure if Ill look back in 5 years and say it was the dumbest thing to sell here or the best thing ever. There goes a years salary because I wanted to outsmart the markets.

Sounds like a good day for a poem:

                If

If you can keep your head when all about you
  Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
  But make allowance for their doubting too;
If you can wait and not be tired by waiting,
  Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
  And yet don’t look too good, nor talk too wise...
... You can invest in  HBPP and rule the Earth!

I don't pay attention to the markets that much anymore but I happened to stumble on CNBC and they were talking about gold so I took a look online and... HOLY $%^&! Gold has taken a real pounding since the last time I looked. If this keeps up I may have to rebalance my PP. Haven't looked at that in a few months either.

I'd wait. The pounding could get worse.

Ad Orientem wrote: I don't pay attention to the markets that much anymore but I happened to stumble on CNBC and they were talking about gold so I took a look online and... HOLY $%^&! Gold has taken a real pounding since the last time I looked. If this keeps up I may have to rebalance my PP. Haven't looked at that in a few months either.

ochotona wrote: I'd wait. The pounding could get worse.

Ad Orientem wrote: I don't pay attention to the markets that much anymore but I happened to stumble on CNBC and they were talking about gold so I took a look online and... HOLY $%^&! Gold has taken a real pounding since the last time I looked. If this keeps up I may have to rebalance my PP. Haven't looked at that in a few months either.

Eh. I just looked. No rebalancing anytime soon. My PP has barely moved. God I love this portfolio.

Ad Orientem wrote: Eh. I just looked. No rebalancing anytime soon. My PP has barely moved. God I love this portfolio.

You know they have pills for that nowadays.

Pointedstick wrote:

Ad Orientem wrote: Eh. I just looked. No rebalancing anytime soon. My PP has barely moved. God I love this portfolio.

You know they have pills for that nowadays.

Perhaps. But gentlemen never tell.