just in in-tray, re the essential imperative
From: H
Sent: Saturday, January 28, 2012 8:29 AM
Subject: Re: Gold-Ratios - comparison to 1980
excellent, thanks - let me add another famous one by Ludwig von Mises:
"The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market. But it could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up boom and the breakdown of the whole monetary system."
On Sat, Jan 28, 2012 at 12:41 AM, W wrote:
Thanks very much R, and for the general interest of all on this email list, please see below and attached a compilation of great quotations that I’ve put together over the past year, and I’m sure many of you have seen most of them before (and in fact some of you feature in the list), but there may be a few new ones that you might find complementary to your writings going forward, as history’s lessons continue to repeat and/or rhyme…
***
· "It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” - Henry Ford
· “Among the countless evils that bring about the demise of entire states, these four are probably the prior ones: internal discord, high mortality, infertility of the soil, and the deterioration of the money. The first three are so apparent that hardly anybody would contest them. The fourth evil, however, which stems from the money, is only noticed by a few, and only by those, who think deeply, for the states fall victim to demise not at the first attempt, but gradually, and almost invisibly.” - Nikolaus Kopernikus
· “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” - Ernest Hemingway
· “One of the saddest lessons of history is this: If we've been bamboozled long enough, we tend to reject any evidence of the bamboozle. The bamboozle has captured us. Once you give a charlatan power over you, you almost never get it back.” - Carl Sagan
· “Gold is an expression of the world’s distrust of the way our central bankers conduct their affairs.” – Jim Grant
· “We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.” – Sir Eddie George, Bank of England, September 1999
· “Gold, unlike all other commodities, is a currency...and the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.” – Alan Greenspan, ex-US Federal Reserve Chairman, August 23, 2011
-----Original Message-----
From: R
Sent: Saturday, 28 January 2012 12:23 AM
Subject: Gold-Ratios - comparison to 1980
Gentlemen,
I just did a few comparisons and longterm-charts, as most people only look at nominal prices, and not in relative comparisons to monetary aggregates or other asset classes. I think that ratio-charts clearly reveal the undervaluation of gold at the moment. Maybe useful to squash those hoards of pundits that still think that gold is in a bubble..
Have a look at the attached excel file!
1st Chart: Gold/M2: currently 0.162x
Currently the ratio of Gold/M2 is above its long-term mean of 0.12x and trades at 0.16x. Bull markets do not end around the long-term median - they end in extremis. In order to reach the all-time high of 1980 (0.47) gold would have to increase to more than USD 4,500/ounce (given a constant M2).
2nd Chart: Gold/Money Zero Maturity (MZM): currently 0.169x
Even if we look at narrower money supply aggregates such as MZM (Money Zero Maturity) or M1 we find that gold still has substantial upward potential. Right now the Ratio Gold/MZM is only trading at it's longterm mean-price of 0.16. In order for the 1980s highs at 0.8 to be reached the gold price would have to rally to USD 8,500.
3rd Chart: Gold/S&P 500 Ratio: currently 1.25x
Currently the ratio is only slightly above it long-term mean of 1.2x. In order to reach 6x, gold would have to increase to more than USD 8,500/ounce (given a constant S&P index).
Quick Conclusion: We are definitely far from the levels of 1980. As the problems that we are facing at the moment are definitely bigger and more global, i believe that we'll definitely exceed 1980s highs.
I thought this might be interesting for you and the readers, as most of the gold analysis is very much the same!
Hope you're doing well, have a great weekend!
R
 |
