"Two views make a market," goes the adage, so there's no "right" value for the Dow. But as I showed yesterday, the Dow has had an extraordinary rise in the last 20 years, about double what has happened with the FTSE.
It doesn't seem related to average income (American average earnings have grown more slowly than in the UK); if it relates to greater inequality of income, then presumably if the market turns, rich bears will be capable of pushing it down as fast as it rose. And I doubt that American multinationals have exploited subsidiaries in the Far East that much more than British-based multinationals - or have they?
Or is it money invested through the carry trade, borrowing cheaply from Japan? Then maybe it will unwind when Japanese interest rates rise. Is it the benefit of low American interest rates, thanks to huge foreign support for US Treasury securities? That love affair is coming to an end.
Let's do a thought experiment. 1987 seems a reasonable base year for our measurements, since the markets weathered the "Crash" of October and still ended up ahead by the end. From the end of 1986 to close of business this last Wednesday, the FTSE had grown by some 280%. That works out at around 6.7% capital growth compound per annum, for the whole period; add-in dividends and the reasonable investor should be satisfied.
If the Dow had done exactly the same as the FTSE, it would have grown from 1,895.95 to around 7,200. Instead, it closed on Wednesday last at 13,657.86.
Maybe there's still a lot of air in that balloon.
Friday, August 10, 2007
Reading the signs
I have often wondered about chartists - investment analysts who look for patterns in trading to predict future developments. Here's a video posted on YouTube by Inthemoneystocks.com, an outfit set up this year. The report comments on yesterday's dramatic drop in the Dow.
Sometimes I think it's like astrology; but there may be a grain of truth in it. If relevant market information is already known, then (barring catastrophic surprises) some change happens because of the variable mood of the investors and their predictions of each others' behaviour. Perhaps this chart-reading is less a science and more a pragmatic art related to mass psychology and game-playing strategies.
It's an ill wind... Marc Faber cheers up
As the stockmarkets gyrate, Marc Faber is still optimistic about Asian real estate. Tientip Subhanij, in today's Bangkok Post, says:The optimism over Asian property has been tested in recent months following the volatility in the global equity markets. The woes of the US sub-prime market have already started to shake confidence. Experts have predicted a major crash in US real-estate prices that would trigger defaults and spread the contagion to most emerging markets.
Many with true faith in Asian property, however, dispute any suggestion of an overheated market in the region. Their contention is that the party has just started for regional property, given that prices in many areas have yet to exceed the peaks they achieved before the Asian financial crisis in 1997.
Marc Faber, the well-known author of Tomorrow's Gold: Asia's Age of Discovery, also believes that while stock markets are vulnerable, Asian real estate presents tremendous opportunities. He thinks that most property assets in Asia are still far below their pre-1997 highs.
Thursday, August 09, 2007
Sound counsel
Today's Daily Reckoning (I've just received it by email) offers some tips for managing your wealth in the current circumstances:
When trends turn negative, it is better to buck them...to head in a different direction. This is particularly so when the bad trends approach their inevitably catastrophic consequences.
That is what we think may be coming soon - with falling asset prices and falling standards of living in America, and probably in most of the other Anglo-Saxon countries. This is not a time to 'go with the flow,' in other words. The flow will not be going where you want to get.
As a practical matter, the course of action that is best in easy times is essential in hard times. Here, we spell it out for you:
First, you should focus on your own private business...or your own source of revenue. (Bonds, rents, retirement fund, dividend yields...whatever.) Make sure it is solid, protected, efficient and productive. Make sure it is something you understand...something you can see with your own eyes, run by people you trust. If you don't really understand it...or if it involves any form of "enhanced leveraged credit"...dump it.
Second, own the property you want to own, not the property you're hoping will go up in price. Begin, of course, with your own house. Is it the house you really want to live in for the next 5, 10, 20 years? Think long-term; the housing slump could easily last 10 years or more. Then, think about the other property you own. Would you still want to own it is if it went down 30% in price? If not, you might want to reconsider.
Third, make sure your savings and investments are diversified out of the dollar. Most experts now expect the buck to stabilise, but you can't be sure. Ten years from now, the dollar could easily be worth only 10% of its value today. Put some money into euro and yen deposits. Put some into gold too.
Fourth, once your finances are secure you can begin to think about speculating. But don't confuse speculating with investing. You speculate for entertainment, not as a serious way to finance your family. Are stock prices going up or down? You can't know. Nor can you know what prices land, commodities, currencies or anything else will sell for in the future. Don't speculate with money you're not prepared to lose.
This all seems pretty sensible to me, especially since the Dow's dropped 300 points.
UPDATE
Dow down 387 at close.
When trends turn negative, it is better to buck them...to head in a different direction. This is particularly so when the bad trends approach their inevitably catastrophic consequences.
That is what we think may be coming soon - with falling asset prices and falling standards of living in America, and probably in most of the other Anglo-Saxon countries. This is not a time to 'go with the flow,' in other words. The flow will not be going where you want to get.
As a practical matter, the course of action that is best in easy times is essential in hard times. Here, we spell it out for you:
First, you should focus on your own private business...or your own source of revenue. (Bonds, rents, retirement fund, dividend yields...whatever.) Make sure it is solid, protected, efficient and productive. Make sure it is something you understand...something you can see with your own eyes, run by people you trust. If you don't really understand it...or if it involves any form of "enhanced leveraged credit"...dump it.
Second, own the property you want to own, not the property you're hoping will go up in price. Begin, of course, with your own house. Is it the house you really want to live in for the next 5, 10, 20 years? Think long-term; the housing slump could easily last 10 years or more. Then, think about the other property you own. Would you still want to own it is if it went down 30% in price? If not, you might want to reconsider.
Third, make sure your savings and investments are diversified out of the dollar. Most experts now expect the buck to stabilise, but you can't be sure. Ten years from now, the dollar could easily be worth only 10% of its value today. Put some money into euro and yen deposits. Put some into gold too.
Fourth, once your finances are secure you can begin to think about speculating. But don't confuse speculating with investing. You speculate for entertainment, not as a serious way to finance your family. Are stock prices going up or down? You can't know. Nor can you know what prices land, commodities, currencies or anything else will sell for in the future. Don't speculate with money you're not prepared to lose.
This all seems pretty sensible to me, especially since the Dow's dropped 300 points.
UPDATE
Dow down 387 at close.
Is the Dow more overvalued than the FTSE?
I've compared the growth of the Dow and the FTSE with the increase in national annual average earnings in each country. As you see, the Dow has advanced much more rapidly.UK earnings are calculated as 52* weekly wages. UK stats here, USA stats here. Dow and FTSE stats from the Yahoo! finance website - see sidebar.
Globalisation - a race we can't win
To put it another way, how much more does a Chinese have to earn, to live well and still undercut America?
In the sheet below, I compare six countries in terms of nominal per capita GDP (in US dollars equivalent). These have to be reinterpreted in terms of purchasing power parity, i.e. if local prices are lower, you can enjoy the same things for less money. (Nominal and PPP terms are taken from slightly different IMF surveys, but you get the idea.)
The last couple of columns answer the question, "How much income would each national need, to match America's standard of living?"
In the sheet below, I compare six countries in terms of nominal per capita GDP (in US dollars equivalent). These have to be reinterpreted in terms of purchasing power parity, i.e. if local prices are lower, you can enjoy the same things for less money. (Nominal and PPP terms are taken from slightly different IMF surveys, but you get the idea.)
The last couple of columns answer the question, "How much income would each national need, to match America's standard of living?"
Doubtless there's problems with the methodology - PPP may well change as each country's nominal GDP increases. And it seems clear that the whole world can't live exactly like Americans do today. (It's also interesting to note that pricey, high-tax countries like the UK and Japan can't catch up with the USA without exceeding the latter's per capita GDP.)
But on these figures, China could match American living standards, on a quarter the income. So the low-pay trading advantage it enjoys is huge now, and is likely to remain so.
And look at India and Vietnam - they'd only need about one-fifth American per capita income to have the same in PPP terms. In fact, they could out-compete China in labour costs, which is one reason for China to move away from labour-intensive work like trainer-stitching, and towards heavy industry.
So Vietnam undercuts China undercuts America...
And given India's enormous population, its higher proportion of cultivatable land (compared with China), its well-established political and legal institutions, and its many millions of English-language speakers, it may be that India is the economy to watch this century.
Subprime worrying Europe
Looking at the German stock exchange (^GDAXI in the sidebar widget), the market has opened lower. For Reuters comment, see here.UPDATE (10.08 a.m.)
The FTSE is looking skittish, too. As Reuters reports: "Richard Hunter, head of UK equities at Hargreaves Lansdown [says], "... as a general rule of thumb, we've certainly been following (Wall) Street on the way down although not necessarily on the way up."
Income inequality rising in China
As China industrialises, the difference between rich and poor is rising, as measured by the Gini Index. (The above chart is from the Wikipedia entry. 0 is perfect income equality, 100 means all the income is held by one person. ) The Gini score for China is around the same as for the USA.By contrast, China's very rich neighbour Japan has the lowest Gini rating in the Far East, similar to Australia's. It seems possible to achieve prosperity without great inequality.
Speaking of neighbours, see how France's very high score in the 1950s has plunged, whereas the UK's has risen steadily since the 1980s. We in Britain are now significantly more unequal than the French, and far more so than the Belgians and Italians.
Wednesday, August 08, 2007
Gold and other commodities?
For those who want to hear from the bears on their bullish attitude to gold and natural resources, here's Monica Day in The Rude Awakening last Friday:
Be Fearful, Be Brave - By Monica Day
There's a fundamental rule about investing - you've probably heard it before: Be brave when others are fearful, and fearful when others are brave.
Bill Bonner, editor of Daily Reckoning, opened the Eighth Annual Agora Financial Investment Symposium by suggesting that most people are braver than they've ever been. And that means the rest of us should be very, very afraid.
He's right, of course. Hedge funds are taking in more money than ever…despite the questionable nature of their holdings. Twenty thousand new condos are under construction in Miami…despite the current crisis in the housing sector and the ticking bomb that is subprime lending. The Dow is hitting new highs…with some mainstream commentators calling it the greatest economic boom ever.
Indeed, Bonner agrees it is "great." But more like how the "Great War" and the "Great Depression" were great.
It begs the question - what should you do when you're fearful?
"Nothing," Bonner explains. But that's hard when you have money.
So what exactly constitutes nothing?
If you're a regular reader of these pages, Bonner's answer won't surprise you a bit: Buy gold.
Doug Casey…the Mogambo Guru…and a number of speakers have agreed. Although gold is already up to a 27-year high, it still seems cheap compared with the state of the economy - and the risks the market is facing - right now.
Doug Casey ran through a list of other asset classes and gave his reasons for not wanting his money in them, and he came to this conclusion:
"Where should your money be? GOLD! That's it. Honestly. I've looked at everything and anything - I'll buy anything if the price is right. Gold isn't just going through the roof - it's going through the moon. Mark my words, the gold bull market hasn't even really started…."
And of course, the Mogambo Guru had his own unique way of making a gold recommendation:
"Run out and load up on gold…and in the future when gold prices are astronomical and there's chaos all around you…you'll look around you and notice that you're rich and everyone else is poor and you'll say, wow, that Mogambo dude was right. It's a shame he was such a hateful, detestable little man. And you'll be right…but you'll be rich! So who cares…"
Of course…the "buy gold" line of thinking was not unanimous. Some of the experts and analysts at the Symposium offered worthwhile alternatives to simply buying gold. Natural resource expert Rick Rule was one of them.
Rule believes that you must be brave if you're going to invest in natural resources. Not crazy, mind you. But brave. Meaning you have to be a discriminate investor. You must buy when others are selling, sell when others are buying. This tactic, Rule admits, "is psychologically hard, but functionally easy. And it's the only way to make money consistently in the volatile resource markets."
Byron King, editor of Outstanding Investments, examined investment opportunities among oil and gas stocks. Because the world is no longer awash in oil, King declared, the energy sector - both traditional and alternative - will be awash in great opportunities.
The "cheap oil" days are over, he warned, which means the energy-dependent American lifestyle will become costlier to maintain…maybe much costlier. "We've invented the cheap-energy system that has given us prosperity and freedom," King explained, "now we begin the descent. We'll either have to invent our way out of it, or go back to the way it was before."
He was talking, of course, about our petroleum-based economy… in the face of Peak Oil. Once mocked, denied and ridiculed, the realities of Hubbert's theory are now coming to pass as, one by one, the world's oil fields pass their peak production rates and ease into decline.
If people like Byron King and Bill Bonner are right, the shock of recognition is going to come. But the flip side of this looming societal trauma, says King, is that all kinds of energy companies will make all kinds of money.
Our resident Maniac Trader, Kevin Kerr, also banged the natural resource drum - but to a slightly different beat: Food.
More specifically - how in the world is China going to feed all those people? Even with its one-child policy in place, the population of China is expected to go from 1.3 billion today to 1.49 billion by 2025. But only 11% of China's land is arable farmland. Compare that with 26% in the U.S. to feed a smaller population and you can start to see for yourself: China is in desperate need of a solution.
Plus, it is struggling with other issues. Combine factors such as soil erosion, inadequate water supply, lack of qualified labor for farming, lack of modern farming equipment and methods and extreme weather patterns, and you've got a darn good crisis in the making. But crisis spells opportunity.
A lot of bad things might happen in the world. Some we can foresee, while others will be like the proverbial Black Swan - completely unanticipated. But if you pay attention…and play your hand right…the bad things shouldn't happen to you.
Doug Casey said it best…
"Internationalize yourself. Keep your citizenship in one country, your bank account in another and live in another…treat the world as your oyster."
Be Fearful, Be Brave - By Monica Day
There's a fundamental rule about investing - you've probably heard it before: Be brave when others are fearful, and fearful when others are brave.
Bill Bonner, editor of Daily Reckoning, opened the Eighth Annual Agora Financial Investment Symposium by suggesting that most people are braver than they've ever been. And that means the rest of us should be very, very afraid.
He's right, of course. Hedge funds are taking in more money than ever…despite the questionable nature of their holdings. Twenty thousand new condos are under construction in Miami…despite the current crisis in the housing sector and the ticking bomb that is subprime lending. The Dow is hitting new highs…with some mainstream commentators calling it the greatest economic boom ever.
Indeed, Bonner agrees it is "great." But more like how the "Great War" and the "Great Depression" were great.
It begs the question - what should you do when you're fearful?
"Nothing," Bonner explains. But that's hard when you have money.
So what exactly constitutes nothing?
If you're a regular reader of these pages, Bonner's answer won't surprise you a bit: Buy gold.
Doug Casey…the Mogambo Guru…and a number of speakers have agreed. Although gold is already up to a 27-year high, it still seems cheap compared with the state of the economy - and the risks the market is facing - right now.
Doug Casey ran through a list of other asset classes and gave his reasons for not wanting his money in them, and he came to this conclusion:
"Where should your money be? GOLD! That's it. Honestly. I've looked at everything and anything - I'll buy anything if the price is right. Gold isn't just going through the roof - it's going through the moon. Mark my words, the gold bull market hasn't even really started…."
And of course, the Mogambo Guru had his own unique way of making a gold recommendation:
"Run out and load up on gold…and in the future when gold prices are astronomical and there's chaos all around you…you'll look around you and notice that you're rich and everyone else is poor and you'll say, wow, that Mogambo dude was right. It's a shame he was such a hateful, detestable little man. And you'll be right…but you'll be rich! So who cares…"
Of course…the "buy gold" line of thinking was not unanimous. Some of the experts and analysts at the Symposium offered worthwhile alternatives to simply buying gold. Natural resource expert Rick Rule was one of them.
Rule believes that you must be brave if you're going to invest in natural resources. Not crazy, mind you. But brave. Meaning you have to be a discriminate investor. You must buy when others are selling, sell when others are buying. This tactic, Rule admits, "is psychologically hard, but functionally easy. And it's the only way to make money consistently in the volatile resource markets."
Byron King, editor of Outstanding Investments, examined investment opportunities among oil and gas stocks. Because the world is no longer awash in oil, King declared, the energy sector - both traditional and alternative - will be awash in great opportunities.
The "cheap oil" days are over, he warned, which means the energy-dependent American lifestyle will become costlier to maintain…maybe much costlier. "We've invented the cheap-energy system that has given us prosperity and freedom," King explained, "now we begin the descent. We'll either have to invent our way out of it, or go back to the way it was before."
He was talking, of course, about our petroleum-based economy… in the face of Peak Oil. Once mocked, denied and ridiculed, the realities of Hubbert's theory are now coming to pass as, one by one, the world's oil fields pass their peak production rates and ease into decline.
If people like Byron King and Bill Bonner are right, the shock of recognition is going to come. But the flip side of this looming societal trauma, says King, is that all kinds of energy companies will make all kinds of money.
Our resident Maniac Trader, Kevin Kerr, also banged the natural resource drum - but to a slightly different beat: Food.
More specifically - how in the world is China going to feed all those people? Even with its one-child policy in place, the population of China is expected to go from 1.3 billion today to 1.49 billion by 2025. But only 11% of China's land is arable farmland. Compare that with 26% in the U.S. to feed a smaller population and you can start to see for yourself: China is in desperate need of a solution.
Plus, it is struggling with other issues. Combine factors such as soil erosion, inadequate water supply, lack of qualified labor for farming, lack of modern farming equipment and methods and extreme weather patterns, and you've got a darn good crisis in the making. But crisis spells opportunity.
A lot of bad things might happen in the world. Some we can foresee, while others will be like the proverbial Black Swan - completely unanticipated. But if you pay attention…and play your hand right…the bad things shouldn't happen to you.
Doug Casey said it best…
"Internationalize yourself. Keep your citizenship in one country, your bank account in another and live in another…treat the world as your oyster."
Tuesday, August 07, 2007
Why gold?
The Market Oracle yesterday and Gold Seek today both feature an article by Michael Kosares from his own site (USA Gold) on why he thinks you should own gold.One reason is the fecklessness of the US Government:
"...the national debt stands at $8.9 trillion - nearly $30,000 for every man, woman and child in the United States. And there appears to be no end in sight to the fiscal madness. The debt clock ticks non-stop at the rate of about $1.3 billion per day.
I should point out that there is a difference between the "deficit" and "additions to the national debt." The deficit often quoted by politicians and the mainstream press is discounted by borrowings from the social security fund - a machination meant to dilute the real budget deficit which is the actual addition to the national debt."
I only knew recently about this business of putting their hands in the social security till and leaving an IOU. That is disturbing, because of the desperation it implies. Wasn't it the financial cost of the First World War that led to the raid on British social security funds and the switch to a rob-Peter-to-pay-Paul system?
Kosares starts his article with two quotes (I've added the sources):
"[U]nder the placid surface there are disturbing trends: huge imbalances, disequilibria, risks -- call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it. . . We are skating on thin ice." - Paul Volcker, Former Chairman of the Federal Reserve (Washington Post, 10 April 2005)
"[W]e live in a globalized environment and in a country which has enormous fiscal and external deficits. So you have to figure out some way -- which I have not done I might add -- to protect yourself if we should have a real currency problem here." - Robert Rubin, Former Treasury Secretary (interview with Kim Schoenholtz, Citigroup New York, 10 October 2006)
He discusses 6 trends: the US National Debt, the trade deficit, dropping real rates of investment return, derivatives, debt to foreigners, the US dollar's decline.
The conclusion, obviously, is that in times of doubt and distrust, gold will act as a haven for real wealth, as it has done in the past. "Price appreciation... is a sidebar to gold ownership. The main story is gold's asset preservation qualities."
Monday, August 06, 2007
More on Brad Setser
Further to the last, it's worth struggling through Brad Setser's presentation to the Congressional committee even if (like me) you're not an economics buff. In essence, he says that America has gotten away with its continuing trade deficit over the last few years, for several reasons:
- the effective interest rate on foreign debt held by the US, is higher than on loans made by foreigners to America
- foreign equities have had higher yields and better capital appreciation, so US overseas investment has done better than foreigners' share holdings in America
- the weakening dollar has amplified the effects in both points above
- foreign central banks' willingness to buy US debt has kept US interest rates low, making Americans' debts easy to service and fuelling share and property booms
But it can't go on for ever. Either America's debts will continue to increase, or foreign sovereign wealth funds will buy more and more equities, or both. If foreigners slacken in their support for US debt, interest rates will rise; and losing equities to foreign owners takes away from America's future wealth and income.
Setser concludes:
The US will likely both have to sell more equity to the rest of the world and pay a somewhat higher interest rate on its external debt than it has recently...
While rapid central bank reserve growth and large official financing of the US deficit can help the US postpone the necessary adjustment, the longer the adjustment is deferred, the greater the long-term risks...
Bringing the US deficit and emerging economy surpluses down without tremendous costs will also take time. If the US and the world are to adjust gradually, they need to get started.
Yet again, I wonder whether the UK's enormous purchases of US dollar-denominated securities since June 2006 make sense for Britain.
Another thought: seeing two late market interventions last week, Dan Denning in The Daily Reckoning Australia (3 August) speculated that there may be "...in the financial market a buyer of last resort who comes in to goose the indexes at critical times, when investor confidence is especially fragile."
Rather than the Plunge Protection Team, could it be foreign sovereign wealth funds buying-in on the dips? Maybe that's why the Dow has bounced back 286 points today, as I write.
China close to owning $1 trillion of US assets
This graph is from evidence given by Brad Setser (of Roubini Global Economics) to Congress on June 26. His presentation was on US debt to foreigners and the economic vulnerability that it implies. The full PDF document can be found here.
Noriel Roubini himself theorises that the US is approaching a Minsky turning point - i.e. a credit crunch - as reported in FXStreet last Friday.
Saturday, August 04, 2007
Which US Presidential candidate is the best hope for the American economy?
Looking at the current field for the 2008 US Presidential race (and trying to set aside other important issues), which candidate's economic ideas make the most sense for America? Unless the questions are asked, they won't come high on the agenda.
I have tried to use Blogger's new poll facility, which allows for more than one answer, but there's a glitch at the moment, so it's a one-shot question for now.
Your comments on the candidates, their ideas and the issues are welcomed.
I have tried to use Blogger's new poll facility, which allows for more than one answer, but there's a glitch at the moment, so it's a one-shot question for now.
Your comments on the candidates, their ideas and the issues are welcomed.
Friday, August 03, 2007
An alternative reserve currency?
As America's balance of trade continues to weaken it, and the dollar's value erodes, the question arises, what could replace the greenback as the world's trading currency?
Assuming that gold reserves are relevant to trust in the currency, it's interesting to note that Germany has almost half as much as the US, and its balance of trade is not so unhealthy. Interesting also that the German mark, although currently in a fixed exchange rate with the Euro, still has a nominally separate existence.
Julian Phillips (GoldForecaster.com) says in his 29 June article, "Germany is aware that the times they are a-changing, and so it is keeping one eye on the future of the global economic and monetary order – and guarding against it."
Here are the four greatest world holdings of gold (June '07 World Gold Council figures):
United States 8,133.5 tonnes
Germany 3,422.5 tonnes
IMF 3,217.3 tonnes
France 2,680.6 tonnes
France has a negative balance of trade, and has reduced its gold hoard by around 11% since 2000, but nevertheless, between them the last three on the list above have gold reserves totalling 14.5% more than the US. Politically, France and Germany are the Western core of the EU. If things change radically, who knows what the new world order may look like?
Assuming that gold reserves are relevant to trust in the currency, it's interesting to note that Germany has almost half as much as the US, and its balance of trade is not so unhealthy. Interesting also that the German mark, although currently in a fixed exchange rate with the Euro, still has a nominally separate existence.
Julian Phillips (GoldForecaster.com) says in his 29 June article, "Germany is aware that the times they are a-changing, and so it is keeping one eye on the future of the global economic and monetary order – and guarding against it."
Here are the four greatest world holdings of gold (June '07 World Gold Council figures):
United States 8,133.5 tonnes
Germany 3,422.5 tonnes
IMF 3,217.3 tonnes
France 2,680.6 tonnes
France has a negative balance of trade, and has reduced its gold hoard by around 11% since 2000, but nevertheless, between them the last three on the list above have gold reserves totalling 14.5% more than the US. Politically, France and Germany are the Western core of the EU. If things change radically, who knows what the new world order may look like?
The gold question
Here's a couple of articles by Julian D. W. Phillips at GoldForecaster.com. They're extracts and the entire text is only available if you subscribe to the site.
But because they are freebies, and have much interesting and relevant information, I reproduce the extracts here. The first is a response to the recent sale of some gold reserves by Switzerland. It appeared in BullionVault on June 29:
WITH THE Swiss central bank selling 250 tonnes of its gold reserves, the classic question has to be asked again, what is the price of gold? If we answer that it's worth a certain number of Dollars, then we have to ask the next question:
Just what is the price of a Dollar?
Is the US Dollar such a reliable a store of value that it can be used as a measure of gold's value? To ask would be to question the very foundation of the paper currency system. Can one trust the Dollar or even the international monetary system? It’s all a question of degree.
The US government itself holds mainly gold in its reserves, because it is the issuer of the world’s reserve currency. This does imply that it is completely dependent on its own currency, the Dollar, in the global economy. As the foundation of the world’s monetary system, should this currency lose the confidence of its own or other nation’s citizens, the international money system – and trade relations across the world – will be damaged severely. It is thought that this process is well under way.
The Eurozone community’s Central Bank drew off 15% of its reserves in gold from its members. This does not mean it intends to only hold 15% of its reserves in gold, nor does it imply that there is a rigid exchange rate between gold & the Euro. But the question of how to measure 15% of reserves is raised.
From the beginning of the Central Bank Gold Agreement, the European Central Bank decided to sell a fixed tonnage of 235 tonnes of the reserves it inherited from its member banks in return for paper currencies. Ostensibly, this was to keep gold's proportion in the ECB's reserves roughly fixed. The ECB is fully aware of the dangers of measuring gold in the Dollar – and in the Euro for that matter – but for the sound functioning of our paper-currency world, it is crucial that gold be subject to measurements in paper currency terms, and not the other way around.
With gold now higher from seven years ago, bullion is now around 25% of the ECB's reserves. Perhaps that's a level the Frankfurt policymakers prefer?
Germany, who gained the right to sell up to 500 tonnes of its gold under the CBGA, has not taken this option yet, citing that “gold is a useful counter to the swings in the Dollar.” Of course, a doubling in the price of gold since making this decision is paying off handsomely. We commend the pragmatism of the German Bundesbank; its reserves are there for a rainy day. They are not a pension fund scheme requiring profitable investment.
Certainly, growing a nation's reserves through investment and trading can be a secondary objective, but it should never take over first place. The reserves have to be credible in times of distress, and they have to acceptable to all trading partners.
Germany is aware that the times they are a-changing, and so it is keeping one eye on the future of the global economic and monetary order – and guarding against it.
Italy has no plans to sell any gold, which is unsurprising given the very poor history of the Italian Lira. They too have seen several currencies come and go in the last one hundred years, so they have few illusions about the joys of compound interest. After all, adding noughts to a currency doesn’t make it more valuable. It’s only the buying power that counts.
So will the Dollar today, with interest added over the next decade or two, be worth more than today’s equivalent in gold in a decade or two?
The Swiss Franc has always been one of the most stable of the globe’s currencies, based upon one of the most stable and constant of economies. In times of global war or uncertainty, this peaceful anti-war country becomes itself a ‘safe haven’ for foreigner’s savings. So it is almost a source of safe money and financial security in itself.
The Swiss concept of a rainy day contains far less moisture than most other countries fear. Switzerland is therefore financially more secure and less dependent on its reserves than other countries, whilst also being small enough to adjust its reserve holdings within the foreign exchange markets capacities at present. With the mix of gold and currencies in the Swiss National Bank's portfolio, you can be sure they have covered their backs on the risk front and stand to gain either way the cookie crumbles.
It is of little account whether the Swiss sell some more gold or not. We see their latest move – announcing the sale of 250 tonnes by 2009 – as a gesture of support for the paper currency system. The SNB no doubt sees it as a gesture to protect its overall reserves portfolio.
Again a key question: Why sell gold at all – or more pertinently, why sell a little gold and retain sufficient for rainy days ahead? It is to ensure the retention of value in the overall portfolio. The SNB is not the getting rid of the gold content therein.
Clearly Switzerland – with its constantly sound position as banker to the wealthy of Europe, alongside its dependence on the banking industry – has a vested interest in a mix of global paper currencies. It retains a greater vested interest than those nations with an unsound Balance of Payments, smaller reserves, and facing greater economic risks in the global economy. Besides the United States, nations now suffering a poor balance of payments include Australia, New Zealand, Britain, France, Italy, Greece, Spain, Czech Republic, Poland, India, Pakistan, Colombia, Mexico, Hungary, Turkey, South Africa and many others.
The big question: will gold have a greater real value in times of distress than yield earning national currencies? In the last world war, what value did the Deutschmark – or indeed the US Dollar –have internationally? Remember, forgery is one of the acceptable weapons of war. And what value did gold have? No contest.
With economic power shifting Eastwards, and the Asian nations growing away from their dependence on the US economy, it is inevitable that reserve currency dependence such as we are used to with the Dollar is now changing. It is fragmenting, with other currencies coming onto the scene and with national interests clashing and exerting pressure on the different leading world currencies.
Should these pressures grow beyond a certain almost indefinable point, then paper currencies will not garner the same level of confidence as they do now, and the unquestionable international reliability of gold as a measure of value will ascend further still.
Prime Minister Brown of the UK went the same way that Switzerland is, once again, going to go. Looking for a more profitable content to the UK’s gold and foreign exchange reserves in 1999, the UK paid a heavy price that continues to grow as the gold price rises. Did Brown act for political reasons in support of the Euro and the more controllable paper currency system? We believe Switzerland may be following the same line of reasoning as Brown did then.
After all, if we measured the proceeds achieved from the last sale – and the total value plus the interest thereon – what would the shortfall be against today’s value of gold?
The mix of foreign exchange and gold reserves is essentially a gamble on the future.
The second is issued today on GoldSeek:
As the move to keeping what nations have already Protectionism is in full swing. This will inevitably disturb the currency world, who quite rightly will look to something that will protect them from the rising volatility in the currency markets alongside seeping confidence from the U.S $. This ‘something’ will include gold and gold investments. Both Protectionism and Capital Controls will enter the scene as this happens as testified to by history.
Will the States do such a thing? Of course it would. The games played to prevent China acquiring U.S. oil companies with reserves in Central Asia demonstrated this aptly, last year. U.S. patriotism will ensure this happens wherever it is obvious. The necessary legislation is in position already, albeit in a seemingly unrelated form. It is always hard for Politicians to pass unpopular or freedom-inhibiting measures, so they are best attached to causes that persuade individuals and Congress to accept such limitations, such as the recent powers over troublesome individuals in Iraq. This paves the way for full control over financial markets of all types. Here is an example of how a popular cause can be used in this way from the White House itself.
“Pursuant to the International Emergency Economic Powers Act, as amended (50 U.S.C. 1701 et seq.)(IEEPA), I hereby report that I have issued an Executive Order blocking property of persons determined to have committed, or to pose a significant risk of committing, an act or acts of violence that have the purpose or effect of threatening the peace or stability of Iraq or the Government of Iraq or undermining efforts to promote economic reconstruction and political reform in Iraq or to provide humanitarian assistance to the Iraqi people……….. In these previous Executive Orders, I ordered various measures to address the unusual and extraordinary threat to the national security and foreign policy of the United States posed by obstacles to the orderly reconstruction of Iraq, the restoration and maintenance of peace and security in that country, and the development of political, administrative, and economic institutions in Iraq.
My new order takes additional steps…………by blocking the property and interests in property of persons determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Defense, to have committed, or to pose a significant risk of committing……… The order further authorizes the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Defense, to designate for blocking those persons determined to have materially assisted, sponsored, or provided financial, material, logistical, or technical support for.
I delegated to the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Defense, the authority to take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA as may be necessary to carry out the purposes of my order. - “ GEORGE W. BUSH “
Such moves seem reasonable in this case. Our reason for the inclusion of this quote is to clarify just how quick and easy it is to impose restrictions on the spending of the U.S. $ in the hands of any person, institution or nation, not acceptable to the U.S. Administration, [whether he be a foreign national or a U.S. citizen, just as it is in any other nation’s hands [Whether it be Germany, or China itself or any other nation – this is the power a politician has always].
Capital Controls
In all the historic instances of either Protectionism or Capital Controls, but in particular Capital Controls, such measures were and can be imposed overnight and became an instant unchangeable reality. Protectionism appeared to be the most reasonable and less dramatic but produces softer but similar consequences in each case. Applied globally [and nations hit, usually respond by imposing their own protectionist measures] they rupture the smooth flowing of trade and finance.
Capital Controls are more draconian than Protectionism however broadly spread, causing huge swings in currency values, so are halted as quickly as possible so as not to damage what is left of a nation’s economy. However, in the case of Britain, where a dual currency system was instituted it stayed for a couple of years. In South Africa where Exchange Controls have been present for more than 30 years now, the Capital Control component lasted for around 20 of these years. In both cases a main component of these controls covered investments of all kinds, loans and any transaction of a Capital nature. In both cases the “discount” on the value of the sales of shares for the repatriation of Capital reached 30%.
Bear in mind that as far as we can see ahead Asian and other nations’ surpluses will continue to burgeon. As they become so bloated that they pose a threat to the $ by the sheer risk of their movement from the U.S. Consequently the possibility of even a partial exit of foreign nation’s surpluses from the $ becomes almost inevitable. So, the nation will, at some point, just have to impose Capital Controls, if only over the removal of foreign nation’s surpluses from the Treasury market.
If such Capital Controls were imposed in the U.S., which would be an almost certainty at some point in the future as money floods from the country, the entire global money system would be irreparably damaged and a flight to hard assets [lead by gold, silver and other precious metals] certain. The break in confidence in currencies themselves would be savage.
Much to chew on here.
But because they are freebies, and have much interesting and relevant information, I reproduce the extracts here. The first is a response to the recent sale of some gold reserves by Switzerland. It appeared in BullionVault on June 29:
WITH THE Swiss central bank selling 250 tonnes of its gold reserves, the classic question has to be asked again, what is the price of gold? If we answer that it's worth a certain number of Dollars, then we have to ask the next question:
Just what is the price of a Dollar?
Is the US Dollar such a reliable a store of value that it can be used as a measure of gold's value? To ask would be to question the very foundation of the paper currency system. Can one trust the Dollar or even the international monetary system? It’s all a question of degree.
The US government itself holds mainly gold in its reserves, because it is the issuer of the world’s reserve currency. This does imply that it is completely dependent on its own currency, the Dollar, in the global economy. As the foundation of the world’s monetary system, should this currency lose the confidence of its own or other nation’s citizens, the international money system – and trade relations across the world – will be damaged severely. It is thought that this process is well under way.
The Eurozone community’s Central Bank drew off 15% of its reserves in gold from its members. This does not mean it intends to only hold 15% of its reserves in gold, nor does it imply that there is a rigid exchange rate between gold & the Euro. But the question of how to measure 15% of reserves is raised.
From the beginning of the Central Bank Gold Agreement, the European Central Bank decided to sell a fixed tonnage of 235 tonnes of the reserves it inherited from its member banks in return for paper currencies. Ostensibly, this was to keep gold's proportion in the ECB's reserves roughly fixed. The ECB is fully aware of the dangers of measuring gold in the Dollar – and in the Euro for that matter – but for the sound functioning of our paper-currency world, it is crucial that gold be subject to measurements in paper currency terms, and not the other way around.
With gold now higher from seven years ago, bullion is now around 25% of the ECB's reserves. Perhaps that's a level the Frankfurt policymakers prefer?
Germany, who gained the right to sell up to 500 tonnes of its gold under the CBGA, has not taken this option yet, citing that “gold is a useful counter to the swings in the Dollar.” Of course, a doubling in the price of gold since making this decision is paying off handsomely. We commend the pragmatism of the German Bundesbank; its reserves are there for a rainy day. They are not a pension fund scheme requiring profitable investment.
Certainly, growing a nation's reserves through investment and trading can be a secondary objective, but it should never take over first place. The reserves have to be credible in times of distress, and they have to acceptable to all trading partners.
Germany is aware that the times they are a-changing, and so it is keeping one eye on the future of the global economic and monetary order – and guarding against it.
Italy has no plans to sell any gold, which is unsurprising given the very poor history of the Italian Lira. They too have seen several currencies come and go in the last one hundred years, so they have few illusions about the joys of compound interest. After all, adding noughts to a currency doesn’t make it more valuable. It’s only the buying power that counts.
So will the Dollar today, with interest added over the next decade or two, be worth more than today’s equivalent in gold in a decade or two?
The Swiss Franc has always been one of the most stable of the globe’s currencies, based upon one of the most stable and constant of economies. In times of global war or uncertainty, this peaceful anti-war country becomes itself a ‘safe haven’ for foreigner’s savings. So it is almost a source of safe money and financial security in itself.
The Swiss concept of a rainy day contains far less moisture than most other countries fear. Switzerland is therefore financially more secure and less dependent on its reserves than other countries, whilst also being small enough to adjust its reserve holdings within the foreign exchange markets capacities at present. With the mix of gold and currencies in the Swiss National Bank's portfolio, you can be sure they have covered their backs on the risk front and stand to gain either way the cookie crumbles.
It is of little account whether the Swiss sell some more gold or not. We see their latest move – announcing the sale of 250 tonnes by 2009 – as a gesture of support for the paper currency system. The SNB no doubt sees it as a gesture to protect its overall reserves portfolio.
Again a key question: Why sell gold at all – or more pertinently, why sell a little gold and retain sufficient for rainy days ahead? It is to ensure the retention of value in the overall portfolio. The SNB is not the getting rid of the gold content therein.
Clearly Switzerland – with its constantly sound position as banker to the wealthy of Europe, alongside its dependence on the banking industry – has a vested interest in a mix of global paper currencies. It retains a greater vested interest than those nations with an unsound Balance of Payments, smaller reserves, and facing greater economic risks in the global economy. Besides the United States, nations now suffering a poor balance of payments include Australia, New Zealand, Britain, France, Italy, Greece, Spain, Czech Republic, Poland, India, Pakistan, Colombia, Mexico, Hungary, Turkey, South Africa and many others.
The big question: will gold have a greater real value in times of distress than yield earning national currencies? In the last world war, what value did the Deutschmark – or indeed the US Dollar –have internationally? Remember, forgery is one of the acceptable weapons of war. And what value did gold have? No contest.
With economic power shifting Eastwards, and the Asian nations growing away from their dependence on the US economy, it is inevitable that reserve currency dependence such as we are used to with the Dollar is now changing. It is fragmenting, with other currencies coming onto the scene and with national interests clashing and exerting pressure on the different leading world currencies.
Should these pressures grow beyond a certain almost indefinable point, then paper currencies will not garner the same level of confidence as they do now, and the unquestionable international reliability of gold as a measure of value will ascend further still.
Prime Minister Brown of the UK went the same way that Switzerland is, once again, going to go. Looking for a more profitable content to the UK’s gold and foreign exchange reserves in 1999, the UK paid a heavy price that continues to grow as the gold price rises. Did Brown act for political reasons in support of the Euro and the more controllable paper currency system? We believe Switzerland may be following the same line of reasoning as Brown did then.
After all, if we measured the proceeds achieved from the last sale – and the total value plus the interest thereon – what would the shortfall be against today’s value of gold?
The mix of foreign exchange and gold reserves is essentially a gamble on the future.
The second is issued today on GoldSeek:
As the move to keeping what nations have already Protectionism is in full swing. This will inevitably disturb the currency world, who quite rightly will look to something that will protect them from the rising volatility in the currency markets alongside seeping confidence from the U.S $. This ‘something’ will include gold and gold investments. Both Protectionism and Capital Controls will enter the scene as this happens as testified to by history.
Will the States do such a thing? Of course it would. The games played to prevent China acquiring U.S. oil companies with reserves in Central Asia demonstrated this aptly, last year. U.S. patriotism will ensure this happens wherever it is obvious. The necessary legislation is in position already, albeit in a seemingly unrelated form. It is always hard for Politicians to pass unpopular or freedom-inhibiting measures, so they are best attached to causes that persuade individuals and Congress to accept such limitations, such as the recent powers over troublesome individuals in Iraq. This paves the way for full control over financial markets of all types. Here is an example of how a popular cause can be used in this way from the White House itself.
“Pursuant to the International Emergency Economic Powers Act, as amended (50 U.S.C. 1701 et seq.)(IEEPA), I hereby report that I have issued an Executive Order blocking property of persons determined to have committed, or to pose a significant risk of committing, an act or acts of violence that have the purpose or effect of threatening the peace or stability of Iraq or the Government of Iraq or undermining efforts to promote economic reconstruction and political reform in Iraq or to provide humanitarian assistance to the Iraqi people……….. In these previous Executive Orders, I ordered various measures to address the unusual and extraordinary threat to the national security and foreign policy of the United States posed by obstacles to the orderly reconstruction of Iraq, the restoration and maintenance of peace and security in that country, and the development of political, administrative, and economic institutions in Iraq.
My new order takes additional steps…………by blocking the property and interests in property of persons determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Defense, to have committed, or to pose a significant risk of committing……… The order further authorizes the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Defense, to designate for blocking those persons determined to have materially assisted, sponsored, or provided financial, material, logistical, or technical support for.
I delegated to the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Defense, the authority to take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA as may be necessary to carry out the purposes of my order. - “ GEORGE W. BUSH “
Such moves seem reasonable in this case. Our reason for the inclusion of this quote is to clarify just how quick and easy it is to impose restrictions on the spending of the U.S. $ in the hands of any person, institution or nation, not acceptable to the U.S. Administration, [whether he be a foreign national or a U.S. citizen, just as it is in any other nation’s hands [Whether it be Germany, or China itself or any other nation – this is the power a politician has always].
Capital Controls
In all the historic instances of either Protectionism or Capital Controls, but in particular Capital Controls, such measures were and can be imposed overnight and became an instant unchangeable reality. Protectionism appeared to be the most reasonable and less dramatic but produces softer but similar consequences in each case. Applied globally [and nations hit, usually respond by imposing their own protectionist measures] they rupture the smooth flowing of trade and finance.
Capital Controls are more draconian than Protectionism however broadly spread, causing huge swings in currency values, so are halted as quickly as possible so as not to damage what is left of a nation’s economy. However, in the case of Britain, where a dual currency system was instituted it stayed for a couple of years. In South Africa where Exchange Controls have been present for more than 30 years now, the Capital Control component lasted for around 20 of these years. In both cases a main component of these controls covered investments of all kinds, loans and any transaction of a Capital nature. In both cases the “discount” on the value of the sales of shares for the repatriation of Capital reached 30%.
Bear in mind that as far as we can see ahead Asian and other nations’ surpluses will continue to burgeon. As they become so bloated that they pose a threat to the $ by the sheer risk of their movement from the U.S. Consequently the possibility of even a partial exit of foreign nation’s surpluses from the $ becomes almost inevitable. So, the nation will, at some point, just have to impose Capital Controls, if only over the removal of foreign nation’s surpluses from the Treasury market.
If such Capital Controls were imposed in the U.S., which would be an almost certainty at some point in the future as money floods from the country, the entire global money system would be irreparably damaged and a flight to hard assets [lead by gold, silver and other precious metals] certain. The break in confidence in currencies themselves would be savage.
Much to chew on here.
Out and in
Another quote, this time from Ludwig von Mises (via the Daily Reckoning Australia):
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
Like any sane person, my preference is the first option.
I have no idea how much longer this expansion will continue, but we've asked to take our modest holdings today. Maybe we'll miss out on a further commodity boom in the next few weeks, though it seems that when the market gets skittish gold runs with the herd for a while. We plan to come back in soon enough, on a regular premium basis; but unless Monday sees a significant drop, we've done all right over the last couple of years. Thank you, Mogambo Guru and others.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
Like any sane person, my preference is the first option.
I have no idea how much longer this expansion will continue, but we've asked to take our modest holdings today. Maybe we'll miss out on a further commodity boom in the next few weeks, though it seems that when the market gets skittish gold runs with the herd for a while. We plan to come back in soon enough, on a regular premium basis; but unless Monday sees a significant drop, we've done all right over the last couple of years. Thank you, Mogambo Guru and others.
Official market intervention?
Interesting quote from today's Daily Reckoning Australia:
Meanwhile, is the Plunge Protection Team (PPT) hard at work in the US? For the second day in a row, Wall Street rallied over 100 points in the last hour of trading.
You can interpret this in one of two ways. First, bulls and bears are earnestly engaged in combat for control of the market. Bears are winning the field for most of the day, with the Bulls rallying late.
The other, more sinister theory is that there exists in the financial market a buyer of last resort who comes in to goose the indexes at critical times, when investor confidence is especially fragile. We take no position on the matter. But it sure does look weird on a chart.
This could be connected up with the UK's surge in US Treasury security purchases over the last year. The conspiracy theory here would then be that the plane is already in trouble, and the stewardesses (I've forgotten the PC term) are walking the aisles to reassure the passengers.
Time to take gains?
Meanwhile, is the Plunge Protection Team (PPT) hard at work in the US? For the second day in a row, Wall Street rallied over 100 points in the last hour of trading.
You can interpret this in one of two ways. First, bulls and bears are earnestly engaged in combat for control of the market. Bears are winning the field for most of the day, with the Bulls rallying late.
The other, more sinister theory is that there exists in the financial market a buyer of last resort who comes in to goose the indexes at critical times, when investor confidence is especially fragile. We take no position on the matter. But it sure does look weird on a chart.
This could be connected up with the UK's surge in US Treasury security purchases over the last year. The conspiracy theory here would then be that the plane is already in trouble, and the stewardesses (I've forgotten the PC term) are walking the aisles to reassure the passengers.
Time to take gains?
Hiding Public Debt
In response to comments from "City Unslicker" (see previous post), a Business Wire article trawled via Highbeam (subscription required) reveals that in the UK, the equivalent of US $98 billion of projects have already been agreed under the Private Finance Initiative.
These are, apparently, also known as BOT (build-operate-transfer) projects. Half are to do with transport, but PFI is also used for schools and hospitals.
These are, apparently, also known as BOT (build-operate-transfer) projects. Half are to do with transport, but PFI is also used for schools and hospitals.
From: In the UK, under the Government's "Private Finance Initiative" Launched in 1992, BOT Projects with a Value of GBP 48.3 Billion Had Been Signed by March 2006.
Source: Business Wire, January 15, 2007. Via: 
The Independent (June 6) reports on a National Audit Office finding that many PFI projects are poor value. This kind of financing has been controversial for a long time, and seems like another way of burdening future generations while pulling the wool over the eyes of the present electorate. It seems to me like another sign that governments are losing control of our money and trying to pretend they're not. The pretence merely prolongs and increases the problems.
From: Half of PFI deals fail 'good value' test ; Business News IN BRIEF
Source: The Independent - London, June 6, 2007. Via:
...and now a high-profile project in London, servicing the underground railway system, has suffered financial collapse, leaving behind extra costs and political embarrassment:
From: Tube's 17bn upgrade at risk as Metronet collapses ; Mayor will need to find 50m a week by DICK MURRAY
Source: Evening Standard - London, July 18, 2007. Via:
Thursday, August 02, 2007
Poll update
Early responders seem to prefer gold and silver to foreign currencies, as stores of value. As Shylock correctly pointed out, "thrift is blessing, if men steal it not", and the fear of inflation's theft appears to be greater than the promise of interest on foreign bank accounts. The "breed of barren metal" is winning at the moment.
Please vote in the polls opposite.
Please vote in the polls opposite.
Gold stocks heading for a postwar low
I've looked at the World Gold Council's long-term series from 1948 on. Current gold stocks held by governments are at a low not seen since before 1949: WGC figures for June 2007 total 30,374 tonnes (another 9 tonnes down from last December).
In 1948, official world gold reserves weighed 30,182.6 tonnes; in 1949 they were 30,623 tonnes, more than today's holdings. From then on, the hoards increased, reaching a peak in 1966 (38,283.6 tonnes). In 1967, they dropped suddenly to 36,900.9 tonnes.
Then the slow slide, taking these periods to lose around 1,000 tonnes at each stage:
1968 - 1978 (11 years): 36,000 - 37,000 tonnes
1979 - 1992 (14 years): 35,000 - 36,000 tonnes
1993 - 1996 (4 years): 34,000 - 35,000 tonnes
1997 - 2000 (4 years): 33,000 - 34,000 tonnes
2001 - 2002 (2 years): 32,000 - 33,000 tonnes
2003 - 2004 (2 years): 31,000 - 32,000 tonnes
2005 - 2006 (2 years): 30,000 - 31,000 tonnes
You'll see that the rate of loss steepened from 1993 onwards, and accelerated further from 2001. We're now approaching the lowest point since these records began, 59 years ago.
Are gold stocks a measure of world economic progression and regression?
In 1948, official world gold reserves weighed 30,182.6 tonnes; in 1949 they were 30,623 tonnes, more than today's holdings. From then on, the hoards increased, reaching a peak in 1966 (38,283.6 tonnes). In 1967, they dropped suddenly to 36,900.9 tonnes.
Then the slow slide, taking these periods to lose around 1,000 tonnes at each stage:
1968 - 1978 (11 years): 36,000 - 37,000 tonnes
1979 - 1992 (14 years): 35,000 - 36,000 tonnes
1993 - 1996 (4 years): 34,000 - 35,000 tonnes
1997 - 2000 (4 years): 33,000 - 34,000 tonnes
2001 - 2002 (2 years): 32,000 - 33,000 tonnes
2003 - 2004 (2 years): 31,000 - 32,000 tonnes
2005 - 2006 (2 years): 30,000 - 31,000 tonnes
You'll see that the rate of loss steepened from 1993 onwards, and accelerated further from 2001. We're now approaching the lowest point since these records began, 59 years ago.
Are gold stocks a measure of world economic progression and regression?
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