patrick.net

Which government?

Good luck.

it will probably go nuts for a few years and than government will bail out the gold speculators somehow. thats at least how it has been done lately.

shrekgrinch says

FDR could only pull it off because he didn't have a global economy to prevent him from doing so.

I agree.

You are arguing effectiveness of imagined measures. Any measure has leaks and compliance issues.

I'm more curious what the effects would be. I think it would force money out of bullion and into the real economy.

typically, when things become outlawed, they go up in value.

Anyone know if there are any 'Gold Bubble Blogs' like the RE bubble blogs?

How about a 'predatory student loan bubble blog'?

It does not seem sustainable that the FEDS can stuff endless teenagers into six figure non dischargable in BK debt they have no way to repay for a worthless Psych degree. OTOH that is a great 'wife degree' if she meets an engineer type. Online dating is probably a cheaper way to meet a husband. haha.

Vicente says

I'm more curious what the effects would be. I think it would force money out of bullion and into the real economy.

“Eagles are dandified vultures” - Teddy Roosevelt

Gold bugs force money out of bullion every single time they buy gold: the seller gets the money saved by the gold bug, and spends it on something else. You do know, there has to be a seller to every buyer, don't you? How is gold any different from any other non-consumable goods in that regard? Houses? Stocks? Drugs/alcohol/cigarette (used as assets as by dealers, not for personal consumption as by addicts)? No money is ever "parked" in those assets, aside from the physical cash placed inside houses. The sellers get the money . . . and if loan is involved, money supply expands through borrowing (both the lender and borrower are deluded into thinking that they have the same money at the same time, hence both will bid up prices on other consumable goods

If gold were banned, gold price would simply go up in the market where it is banned as a result of "illicit premium," just like narcotics now and alcohol during Prohibition. We don't even need such analogy to show our case. We have historical records of war time nations: black market gold became more expensive (being able to buy more stuff) when it was banned from private ownership.

The more relevant question is actually, what would happen to the economy when private ownership of gold is banned. Well, more jack-booted thugs would have to be hired to enforce the ban, creating even more inefficiency, corruption, and crimes, just like the alcohol prohibition and the war on drugs.

"Just buy Gold, everyone. I already bought lots of gold years ago and I need to cash out."

Vicente says

So, what if, there were government clampdown on gold?

We certainly have some history of it in crisis. Perhaps a punitive tax on precious metals trading? This could throw the brakes on the flight into gold.

There already is a punitive tax on precious metals, its taxed (over 30%) as a collectible instead of an asset if you buy the physical metal. For stocks its totally different though, but "paper gold" has a bunch of other risks.

I think we've got a long way to go before they clamp down on gold. But if it keeps rising at its current rate you might see them do something about it in a year or so.

Reality says

The more relevant question is actually, what would happen to the economy when private ownership of gold is banned. Well, more jack-booted thugs would have to be hired to enforce the ban, creating even more inefficiency, corruption, and crimes, just like the alcohol prohibition and the war on drugs.

No they'd just tax its sale at a higher rate. Gold, outside of jewelry, is pretty uncommon these days. You almost never see it and most people have already sold theirs to the Cash4Gold folks. Most simply won't care if gold is either confiscated or taxed at a very high rate.

Especially if the gov presents its actions as "controlling an out of hand situation, oh and BTW you know those gold people are doing ILLICIT selling and buying, probably to drug dealers and terrorists right?". There are enough people who will either believe this or at least enjoy watching those who've done well (CRUSH THOSE GOLD BUGS!!) get screwed over that nothing will happen and the government will probably get its way without hassle. Hell they'll even have historical precedent on their side (GD gold confiscation).

tts says

No they'd just tax its sale at a higher rate. Gold, outside of jewelry, is pretty uncommon these days. You almost never see it and most people have already sold theirs to the Cash4Gold folks. Most simply won't care if gold is either confiscated or taxed at a very high rate.

Most people do not use narcotics or smoke cigarette either. Look what has happened to narcotics ban and exorbitant tax on cigarette.

There are enough people who will either believe this or at least enjoy watching those who've done well (CRUSH THOSE GOLD BUGS!!) get screwed over that nothing will happen and the government will probably get its way without hassle. Hell they'll even have historical precedent on their side (GD gold confiscation).

Of course there are idiots like that. Then they get to wonder why their labor output is not paid back in any meaningful currency . . . or they don't get to wonder about that before they get killed in military slavery as the slavers turn to war as a distraction after economy deteriorates further after wasting more resources on a war on gold. The historical precedence (1934 gold confiscation) was that while the peons in were banned from owning gold, the power elite continued to pay each other in gold, and gold could buy much more than before the ban (40% official re-valuation in 1935, and gold's purchase power increased even more during WWII and beyond).

Reality says

Most people do not use narcotics or smoke cigarette either. Look what has happened to narcotics ban and exorbitant price on cigarette.

Narcotics are common and cheap to make though, so of course it'd still be available if the demand was there illegal or not. Gold is scarce and you can't really make much more of it. So the demand will be there but the supply won't, at least for the non rich anyways. They'll fix gold at a given price and it'll stay that way. Oh I'm sure there'll still be a few illicit deals on the side, there always are, but it won't become common.

Reality says

The historical precedence (1934 gold confiscation) was that while the peons in were banned from owning gold, the power elite continued to pay each other in gold, and gold could buy much more than before the ban (40% official re-valuation in 1935, and gold's purchase power increased even more during WWII and beyond).

Yes the rules have always been different for the rich. Its how they're able to stay rich or get richer.

tts says

Narcotics are common and cheap to make though, so of course it'd still be available if the demand was there illegal or not. Gold is scarce and you can't really make much more of it. So the demand will be there but the supply won't, at least for the non rich anyways. They'll fix gold at a given price and it'll stay that way. Oh I'm sure there'll still be a few illicit deals on the side, there always are, but it won't become common.

Not sure what you are saying. The demand will be there but the supply won't, therefore . . . ?

The market clearing price will skyrocket!

Reminds me of the joke about the old lady complaining to the gas station owner about the gas being too expensive compared to the gas station across street.

The station owner: why don't you get gas across street?

The old lady: they are all out.

The station owner: when I'm out of gas, I will sell you at half price!

Yes, as gold price skyrockets, most people will be priced out of the market. They will have silver though, as alternative currency to an even more debased fiat money if the government embark on a war on precious metal.

Reality says

Not sure what you are saying. The demand will be there but the supply won't, therefore . . . ?

If the gov can control supply effectively they'll control the price effectively too. Normal rules of supply and demand go out the window when that happens. You won't see gold at $10K, or $20K, or $50K like some think it'll get to an oz.

tts says

If the gov can control supply effectively they'll control the price effectively too. Normal rules of supply and demand go out the window when that happens. You won't see gold at $10K, or $20K, or $50K like some think it'll get to an oz.

A price at which no transaction can take place is not a valid/meaningful price at all. Government can not control price; it can only create shortage when artificially set a too low price on any goods. At that point, black market price becomes the market clearing price.

I don't believe $10k, $20k, $50k are likely in the near future either, unless there is hyperinflation . . . however, in the long run, even at 2% inflation a year, $10k price target will be reached in about 80 years; at 6% in 25 years; at 10% in 15yrs . . . there is almost zero probability that the current dollar, which lost 98% of its value in less than 100 years, can last another 80 years without some kind of currency re-denomination.

Reality says

Government can not control price; it can only create shortage when artificially set a too low price on any goods.

Normally I'd agree with this but the gold market is so small and so few participate in it, it'll be easy to control.

Reality says

At that point, black market price becomes the market clearing price.

Would also normally agree with this, but when something like gold or other PM's are so incredibly rare and controlled other factors come into play, particularly with black or grey markets. There was this fantastic series of articles about some guy who lived in Argentina during the worst of their financial crisis during the late 90's/early 2000's. One of the things he mentioned was that all gold/silver/jewelry was sold at "junk" or melt prices at the very best.

The reason was that the grey and black markets became flooded with fake materials and con artists willing to guarantee most anything as genuine for any price you could ask, so no one was willing to pay more than what they knew they could get almost no matter what. Only the rich or a few influential folks had acess to those who would pay the higher prices. Everyone else ended up getting screwed on the black and grey markets.

You won't see gold at $10K, or $20K, or $50K like some think it'll get to an oz.

Care to make a wager?

tts says

Normally I'd agree with this but the gold market is so small and so few participate in it, it'll be easy to control.

It is not as small as the transaction volume suggests. All the stockpile on the side lines also factor into the market price, as it can enter the market at any time. BTW, price volatility is normal, just like any other commodity, like oil, or even real estate. Market is after all a price discovery mechanism. Without volatility (i.e. different opinions about value over time), there wouldn't be a market at all (who would be paying the commission fee if a stock, an ounce of gold, or a plot of land stayed at exactly the same price for years).

One of the things he mentioned was that all gold/silver/jewelry was sold at "junk" or melt prices at the very best.

Why should that be a surprise at all? House, stocks and fiat "cash" would have dropped even more in purchasing power. That's what a hyperinflationary depression does: the value of human labor (that which makes bullion into jewelry) is reduced to next to nothing due to market exchange breaking down.

wtfcapinv says

Care to make a wager?

Nope. I never bet on this stuff. FWIW I owned a bunch of silver up until a month ago. Sitting in cash ATM.

Reality says

All the stockpile on the side lines also factor into the market price, as it can enter the market at any time.

Stockpile on the sidelines? Most folks already sold off their gold to the Cash4Gold guys or a pawn shop. Most of the gold these days is held by the rich or central banks. The average person on the street will never see it nor have it.

Reality says

Why should that be a surprise at all?

Hey you were the one saying the black market would set the price and all. Those "junk" prices were after hyperinflation was considered BTW. That is the price of even "junk" went up, same for melt value, but after inflation was considered it often worked out you got less than what you paid for it.

FWIW that same guy said that if he had it all to do over again he would've had some cash outside the country and fled when the shit hit the fan. Its pointless to stay when your society starts to undergo a massive regression like that and what passes for a government is too incompetent or corrupt to do anything about it.

tts says

Stockpile on the sidelines? Most folks already sold off their gold to the Cash4Gold guys or a pawn shop. Most of the gold these days is held by the rich or central banks. The average person on the street will never see it nor have it.

Stockpiles of buyers and sellers. All who have cash and looking to exchange into gold are also part of the market. "The rich" is 6,000,000 people in this country alone, by the administration's definition. That's heck lot more people than the number of shareholders in any particular stock.

Hey you were the one saying the black market would set the price and all. Those "junk" prices were after hyperinflation was considered BTW. That is the price of even "junk" went up, same for melt value, but after inflation was considered it often worked out you got less than what you paid for it.

"Junk" is not "worthless." Take for example, "junk silver coin" is roughly $39/oz. It just means bullion value, with all the art work value from labor stripped away. If you use gold or silver value for inflation adjustment since 2001, you'd have lost money in almost every single other class of investment: stocks down 80% adjusted for gold/silver price as inflation proxy, house down 75% still dropping, cash (fiat dollar) down 80%, average salary (labor cost) down 80%, cars down 80%, boats down 90%! Even Palatinum is down 50% in gold value.

Only storable food items like Pasta have kept up with gold/silver. Not even cans of tuna have done as well. How many tons of pasta can you store in your house?

Vicente says

You are arguing effectiveness of imagined measures. Any measure has leaks and compliance issues.

I'm more curious what the effects would be. I think it would force money out of bullion and into the real economy.

As mentioned, taxing gold as a collectible rather than treating it as currency(as written in the Constitution) is one form of active suppression that keeps prices artificially low. Market manipulation(any gold market) is another(read GATA site). There's even a phone call every day where the price of gold is fixed by our old friends from the Revolutionary War.

But I'm sure you were already aware of these forms of suppression. Apart from that confiscation is probably the last resort, and it has nothing to do with price manipulation. If it comes to that, the point is not simply setting a price, it's robbing us of any chance to be independant(numerous quotes by Jefferson). But that's really the point of all of this... speculation on price manipulation is like touring the Sistene Chapel and never looking up.

Also, if I'm going to support a "real economy" it won't be one based on fiat debt, fractional reserve banking, and endless consumerism of worthless products. It will be one backed by real currency, real food, medical practioners focused on prevention, and legal hemp(commercial)/cannabis(medicinal/recreational).

Holy Crap, it just about touched 1800.

Reality says

All who have cash and looking to exchange into gold are also part of the market.

Sure but that still isn't a big market. Even if you quadrupled the current gold markets' size it'd still be tiny and easily cornerable or influenced by any single decent sized government or large hedge fundie.

Reality says

"Junk" is not "worthless."

Of course it isn't, which is why I've got the scare quotes around that word. People were selling for less than they paid when they needed the money or just when they wanted to cash in, there is no good way to spin that.

Look I like PM's and all but if things get so bad the government starts confiscating PM's or cranks up the tax rate to something stupid like 90% on sale then its too late to really sell. You're supposed to sell before it reaches that point into something which is hopefully a) cheap and b) will go up or keep its value (ie. stocks at the end of the Depression).

BTW that doesn't mean you go buy stocks per se, its just a historical example. I know Rogers suggests people buy into BigAgri right now, either directly or an index fund, and he was one of those buying into gold years ago. Others suggest energy and still others I know are hanging onto their gold + short term Treasuries (essentially cash).

thunderlips11 says

Holy Crap, it just about touched 1800.

Leadership and Management are not the same thing.

FWIW the guys I read, who were buying gold 10 years ago when it was $200-ish/oz, think it'll get to $2500/oz. Maaaybe $5000/oz but in their opinion that is bubble territory. They're already looking for an exit of some sort because they think gold might hit that price mid or late next year. They admit they're probably selling early but they like to keep things low risk if possible.

tts,

I can certainly agree that sector rotations happen, including precious metal. Some days in the future, gold and silver prices too will scream skyward, then collapse, just like NASDAQ in 1999-2000 and Vegas house in 2006-07.