for the folks without gold, they are implicitly saying "this time it's and will be different"
WHAT ARE THE CONSEQUENCES IF I AM WRONG ?
Re: buy more gold
I liked your article about the consequences of being wrong, and the fallibility of reasoning. I do some work in the area of stochastic processes, where randomness still follows underlying trends. Multipath in GPS can cause extremely large errors in a position estimate on the order one kilometer, where normally, one could achieve a few meters of accuracy under good conditions. Multipath is as hard to model as a black swan event in financial markets, yet much effort is expended by many smart people to do so.
The argument that the value of gold will increase relative to a collapsing economy has many historical data points in favor of it. If the world economy collapses, gold should reach sky high levels as a store of value. This seems like a clean argument.
Does this argument allow for the manipulation of the price of gold by governments or desperate hedge funds deleveraging out of gold contracts, or the shorting appropriate indexes? Is the counter argument that eventually gold will find its proper value once the manipulators have exhausted themselves? Is this commodity metal less prone to long-term manipulation than say silver, copper, or platinum? I’d be curious to know your view on which metals are more or less susceptible to manipulation. Is there enough fiat money running through the system to keep gold prices depressed below its “proper” value? In the next few years after the collapse, will there still be groups of men with sufficient funds that might profit from depressing the price of gold?
For myself, I must mathematically model noisy measurement into the physical dynamics of a GPS receiver; however, at some point the consistency of the model will break down when too much multipath enters the system, and the software can no longer offer a position estimate to the user of the device. In this mode, the device has “failed” the user because either the consistency checks have failed or the system has no data to process. At this point my model as failed in practice, but of course, all the theory still applies.
TJ, do you have a price for gold, that if hit, would make you question the suggestion to “buy more gold”? In an earlier email, you stated that gold could not go to $80/ounce, but could go to $500/ounce. At what point between $80 and $500, would your model of the economics for gold have failed (if at all)?
TIA |
