hello studdog, re gold and its 'fair value', i believe there are several ways of examining the subject
1. value as useless commodity (usd / euro 250-2,500?; forget yen due to its considerably shorter life expectancy)
2. value as official reserve (3,000-10,000?)
3. value as units for state-to-state commerce/finance (4,000-40,000?)
4. value as units for b2b commerce/finance (6,000-60,000?)
5. value as units for b2c commerce/finance (8,000-69,998?)
6. value as units for c2c commerce/finance (100,000+?)
7. value as habitual pleb savings (100,000+?)
8. value as salvation from existential monetary demise (priceless, w/o a question mark)
now gold is ranked between a commodity and official reserve, though very large economic nations hold very little of the stuff. what remains on the books are legacy gold lacking use for transaction. this state of gold shall change.
(i) i suppose one might choose to reckon that gold is always at 'fair' value as that value which balances supply and demand.
the wrinkle would of course be that (a) there are quite a bit (50-100x of daily physical trade) of paper gold 'supply', and only 3 swimming pools' volume of for-all-time everyday (each day a physical holder does not sell he is 'demanding' to stay in gold, that which does not get consumed in the cement sense) physical 'demand', and
(b) statements by the likes of eddie george that suggest gold price was subject to central bank massaging
“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
(ii) i do not believe gold is at fair value and would only rise as the global money supply rises, because of
(a) phase-change due to evolving expectation - as and when people, companies, and central banks begin to fear in the biblical sense that their savings would vaporize and no-longer money-good, and the tepid worries would phase-change to surging panic, and at that juncture no one would care much about what the 'fair' value of gold would be as none would haggle over the cost of a parachute while inside of a soon to explode airplane at 10k feet
if the unpayable and unserviceable debt shall result in 98% of all savings by every which means, and in countering that destruction, company shares would be impacted by rising taxes and drooping business and cratering stock exchange liquidity, and government bonds are just a bigger denomination 'cash' that is not money-good, and real estate is only a fixed taxing address with a high carry-cost, then i suspect gold, silver, ... cigarettes, nylon, ... bubble gum ... food ... would all be tee-ed up as alternative forms of 'savings' and 'units of transaction'
(b) gold does react to money supply, of course, but i suspect gold would react more to what happens to the flow of money supply ... meaning when the bank of japan was printing money (let us not get technical) to buy pebble beach golf course, the new money supply does not do much directly for the price of gold
but what would happen as and when the big central banks start to print specific tranches of money to directly buy gold? 'omg' comes easily to mind.
“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
meaning as and when gold is actually money that can be used directly to purchase oil, and is demanded as payment for certain rarer-still dirt, what would happen?
an working inventory of gold would then be 'needed' where the need was not in existence before. ouch ...
when so, silver would also have to be tee-ed up as 'money'.
platinum can never be money because it is too rare and otherwise too useful.
what happens as and when there is a 2- or 3-tier gold exchange rate, for paper gold, physical gold in a faraway warehouse, and gold deliverable immediately to one's out stretched palm?
what happens as and when bonds must be partially or fully denominated in ozs of gold?
what happens when economic activities must be denominated in gold?
Message 25054811
what happens when a large enough nation actively encourages its citizens to save in gold?
Message 25916530
what then for the 'fair' value of gold as the use of gold continues to evolve from periodic table element to financial reset #2
Message 21941081
at some juncture, a feared monetary / financial reset would involve instant vaporization of all money in circulation and storage ... what then the price of gold - how many homes per oz of gold?
i figure the journey is still long, and we shall witness many wonders still to be.
i aim to learn much and with much enthusiasm.
bad monies limited in space n time n w/o intrinsic value but still retain e-bay worth
eternal n universal monies w/o use-by date
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