Where Is Gold Going In This Market

[sokal]

Even though I didn't say that, a bond can be a derivative. A mortgage backed security is a derivative and also a bond.

yada... yada... yada... you have the right to remain silent... anything you say can and could be used to ridicule you. but as you have (repeatedly) been ridiculing yourself there's no need for others to do that.

Keynesians.....................

[sokal]

As for what you said you do not understand....It is long to describe properly but you can look at fractional reserve banking & see it is true. Or view some of the great videos such as Money As Debt or Money Masters

Isnt fractional reserve banking some fairly ancient concept whereby a central bank controlled the money supply through the reserves it made banks pay? Havent the banks say in the US had a zero reserve requirement for several years now on time deposits? I might as well go back and look at the gold standard. The only existing reserve requirements are essentially on M1 which is approximately 15% of M2 and even less of M three. Bank balance sheets can therefore be expanded without regard to reserve requirements and in any case reserves can always be borrowed through the Fed.

My very simple point was that in general a bank has assets (loans), liabilities (deposits) and equity to finance itself. Theoretically, if all loans were paid in full as well as all liabilities repaid, a bank would be left with money on its balance sheet roughly equivalent to its equity.

You have assets and liabilities mixed up, Im assuming its a typo. In an ideal world what your saying is true but this is not ideal. All the big banks in the US and UK are technically insolvent. The only banks in the world with adequate tier 1 capital are in Canada.

[flying]

My very simple point was that in general a bank has assets (loans), liabilities (deposits) and equity to finance itself. Theoretically, if all loans were paid in full as well as all liabilities repaid, a bank would be left with money on its balance sheet roughly equivalent to its equity.

Of course

if all loans were paid back they would be left with the interest they charged on the loans. Also they would have an amount they made by loaning out the leveraged equivalent of your money.

But without looking back at the original posts I think the inference was to pay off debt does remove money from the bank system....No? I think it was suggested that the banks are loaning money they do not have. They are loaning that leveraged air as a digital entry. Not many folks make a loan for 100k & take it home after approval.

I think the poster who you were originally replying to meant it that way but he can clarify.

Edited August 13, 2009 by flying

[flying]

My very simple point was that in general a bank has assets (loans), liabilities (deposits)

You have assets and liabilities mixed up,

No he has it correct

[Abrak]

The only banks in the world with adequate tier 1 capital are in Canada.

Now on that point we can agree.

[Naam]

My very simple point was that in general a bank has assets (loans), liabilities (deposits) and equity to finance itself. Theoretically, if all loans were paid in full as well as all liabilities repaid, a bank would be left with money on its balance sheet roughly equivalent to its equity.

Of course if all loans were paid back they would be left with the interest they charged on the loans. Also they would have an amount they made by loaning out the leveraged equivalent of your money.

But without looking back at the original posts I think the inference was to pay off debt does remove money from the bank system....No? I think it was suggested that the banks are loaning money they do not have. They are loaning that leveraged air as a digital entry. Not many folks make a loan for 100k & take it home after approval. I think the poster who you were originally replying to meant it that way but he can clarify.

that fairy tale has been spread since months in various threads and only those who believe in e.g. the tooth fairy believe the story of "loaning leveraged air as a digital entry". may they live happily ever after!

[flying]

I think it was suggested that the banks are loaning money they do not have. They are loaning that leveraged air as a digital entry. Not many folks make a loan for 100k & take it home after approval. I think the poster who you were originally replying to meant it that way but he can clarify.

that fairy tale has been spread since months in various threads and only those who believe in e.g. the tooth fairy believe the story of "loaning leveraged air as a digital entry". may they live happily ever after!

As I also said I am not 100% sure that is what the original poster meant by what he said but.........I am always open to learning something new.

So are you then saying banks do not lend in excess of deposit?

They are only lending an amount equal to what they hold? No leverage allowed by law?

Or banks are required to maintain reserves equal to only a fraction of their deposits?

Which is it?

Edited August 13, 2009 by flying

[sokal]

My very simple point was that in general a bank has assets (loans), liabilities (deposits) and equity to finance itself. Theoretically, if all loans were paid in full as well as all liabilities repaid, a bank would be left with money on its balance sheet roughly equivalent to its equity.

Of course if all loans were paid back they would be left with the interest they charged on the loans. Also they would have an amount they made by loaning out the leveraged equivalent of your money.

But without looking back at the original posts I think the inference was to pay off debt does remove money from the bank system....No? I think it was suggested that the banks are loaning money they do not have. They are loaning that leveraged air as a digital entry. Not many folks make a loan for 100k & take it home after approval. I think the poster who you were originally replying to meant it that way but he can clarify.

that fairy tale has been spread since months in various threads and only those who believe in e.g. the tooth fairy believe the story of "loaning leveraged air as a digital entry". may they live happily ever after!

You don't think much of deposits. Were you the one advising Gordon Brown when he sold half of Britain's gold at multi decade lows ?

[Naam]

My very simple point was that in general a bank has assets (loans), liabilities (deposits) and equity to finance itself. Theoretically, if all loans were paid in full as well as all liabilities repaid, a bank would be left with money on its balance sheet roughly equivalent to its equity.

Of course if all loans were paid back they would be left with the interest they charged on the loans. Also they would have an amount they made by loaning out the leveraged equivalent of your money.

But without looking back at the original posts I think the inference was to pay off debt does remove money from the bank system....No? I think it was suggested that the banks are loaning money they do not have. They are loaning that leveraged air as a digital entry. Not many folks make a loan for 100k & take it home after approval. I think the poster who you were originally replying to meant it that way but he can clarify.

that fairy tale has been spread since months in various threads and only those who believe in e.g. the tooth fairy believe the story of "loaning leveraged air as a digital entry". may they live happily ever after!

You don't think much of deposits. Were you the one advising Gordon Brown when he sold half of Britain's gold at multi decade lows ?

i have no idea what you mean. please explain in a language i master. by the way, i couldn't care less what Gordon Brown was doing in the past or will be doing in the future.

[Naam]

I think it was suggested that the banks are loaning money they do not have. They are loaning that leveraged air as a digital entry. Not many folks make a loan for 100k & take it home after approval. I think the poster who you were originally replying to meant it that way but he can clarify.

that fairy tale has been spread since months in various threads and only those who believe in e.g. the tooth fairy believe the story of "loaning leveraged air as a digital entry". may they live happily ever after!

As I also said I am not 100% sure that is what the original poster meant by what he said but.........I am always open to learning something new.

So are you then saying banks do not lend in excess of deposit? They are only lending an amount equal to what they hold? No leverage allowed by law? Or banks are required to maintain reserves equal to only a fraction of their deposits? Which is it?

banks can and do of course lend in excess of the deposits they hold by issuing own debt or borrow from other institutionals. the reserve requirements have nothing to do with lending practices. in fact quite a number of countries exist where the law does not mandate any reserves for banks. what i am saying is that the [in]famous "digital entry/creation of cash out of thin air" is a fairy tale meant to bullshit ignorant sheeple.

[flying]

banks can and do of course lend in excess of the deposits they hold by issuing own debt or borrow from other institutionals. the reserve requirements have nothing to do with lending practices. in fact quite a number of countries exist where the law does not mandate any reserves for banks. what i am saying is that the [in]famous "digital entry/creation of cash out of thin air" is a fairy tale meant to bullshit ignorant sheeple.

I was under the impression reserve requirements do in fact have something to do with what they are allowed to lend. Or are we thinking of two different scenarios?

This is from the horses mouth.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html

Reserve requirements are the portion of deposits that banks may not lend and have to keep either on hand or on deposit at a Federal Reserve Bank

Reserve Requirements and Money Creation

Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.

http://www.discusseconomics.com/banking/wh...et-their-money/

Turns out money creation sometimes appears out of thin air. All banks lend based on a reserve ratio of their deposit: they must keep a certain % of each deposit at the bank but can lend out the rest. Of course, the whole system is dependent on a) the bank being responsible with lending, everyone not defaulting on their loans. If these two things happen eventually the system collapses which is what we're seeing in the current market.

Edited August 14, 2009 by flying

[Naam]

I was under the impression reserve requirements do in fact have something to do with what they are allowed to lend. Or are we thinking of two different scenarios? This is from the horses mouth.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html

we are talking two different languages Flying as you are most of the time exclusively focussing on how things work in the Greatest Nation on Earth™and i am talking about banks of this planet in general. may i remind you that banks do indeed exist in other countries too? anyway, the real topic was "digital entry" which i consider >>>

[flying]

we are talking two different languages Flying as you are most of the time exclusively focusing on how things work .....and i am talking about banks of this planet in general.

I see.......

[sokal]

I was under the impression reserve requirements do in fact have something to do with what they are allowed to lend. Or are we thinking of two different scenarios? This is from the horses mouth.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html

we are talking two different languages Flying as you are most of the time exclusively focussing on how things work in the Greatest Nation on Earth™and i am talking about banks of this planet in general. may i remind you that banks do indeed exist in other countries too? anyway, the real topic was "digital entry" which i consider >>>

Bank for International settlements members are the central banks or monetary authorities of:

Algeria, Argentina, Australia, Austria, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong SAR, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Macedonia (FYR), Malaysia, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, the United Kingdom and the United States, plus the European Central Bank.

[sokal]

I think it was suggested that the banks are loaning money they do not have. They are loaning that leveraged air as a digital entry. Not many folks make a loan for 100k & take it home after approval. I think the poster who you were originally replying to meant it that way but he can clarify.

that fairy tale has been spread since months in various threads and only those who believe in e.g. the tooth fairy believe the story of "loaning leveraged air as a digital entry". may they live happily ever after!

As I also said I am not 100% sure that is what the original poster meant by what he said but.........I am always open to learning something new.

So are you then saying banks do not lend in excess of deposit? They are only lending an amount equal to what they hold? No leverage allowed by law? Or banks are required to maintain reserves equal to only a fraction of their deposits? Which is it?

banks can and do of course lend in excess of the deposits they hold by issuing own debt or borrow from other institutionals. the reserve requirements have nothing to do with lending practices. in fact quite a number of countries exist where the law does not mandate any reserves for banks. what i am saying is that the [in]famous "digital entry/creation of cash out of thin air" is a fairy tale meant to bullshit ignorant sheeple.

What about central banks ? If you don't think central banks can issue legal tender money/credit out of thin air then I nominate you for chair of the Federal reserve.

[Abrak]

Reserve ratios now no longer have a meaningful effect to the US financial system...

http://www.marketskeptics.com/2009/03/us-b...ut-reserve.html

[flying]

Reserve ratios now no longer have a meaningful effect to the US financial system...

http://www.marketskeptics.com/2009/03/us-b...ut-reserve.html

Obviously

The Federal Reserve

The Federal Reserve is completely aware and complicit in this scheme. In order for a bank to begin using deposit reclassification, it first has to obtain Federal Reserve’s "no objection." So the Federal Reserve not only knows of the practice, but has also OKed every single deposit reclassification program.

But I think we have somehow merged where is gold going into Financial crisis.

Not that the two will not be ultimately linked anyway

[sokal]

Reserve ratios now no longer have a meaningful effect to the US financial system...

http://www.marketskeptics.com/2009/03/us-b...ut-reserve.html

Obviously

The Federal Reserve

The Federal Reserve is completely aware and complicit in this scheme. In order for a bank to begin using deposit reclassification, it first has to obtain Federal Reserve's "no objection." So the Federal Reserve not only knows of the practice, but has also OKed every single deposit reclassification program.

But I think we have somehow merged where is gold going into Financial crisis.

Not that the two will not be ultimately linked anyway

This also confirms what I said earlier in the thread. If every debt was paid off there would be no money left in the banks. Which also confirms that gold is the only form of currency that is not an IUO.

[Abrak]

Which also confirms that gold is the only form of currency that is not an IUO.

I still dont quite get this concept. Gold is not really a currency - you cant use it to buy groceries at Villa. You could borrow say US1million dollars against a holding of US2million dollars of gold which would turn the gold into currency but then the gold becomes an IOU. Seems you could do much the same with land in Nacorn Nowhere.

I do get the concept that both gold and the dollar worth is based on perception and that when a) the government that is the largest debtor of dollars continues to spend infinitely more of them than it earns and c) has the ability to print as many dollars as it wishes at virtually zero cost, then it is highly optimistic to put much value on the dollar at all.

[flying]

I still dont quite get this concept. Gold is not really a currency - you cant use it to buy groceries at Villa.

Misconception

But US Gold & Silver coins is money/ legal tender

So is Canadian coins

Actually Austrian Phils & SA Krugs are probably too.

But speaking for the US both gold & silver US coins ( eagles buffalos etc ) still are.

They can even legally be held in IRA's & 401K's

Again not speaking for others but when most say that gold is the only form that is not someones liability it is true.

Gold is nobody's liability - its value does not depend on someone's ability to pay and it cannot be debased.

Compare gold with cash, bonds and equities whose value hangs on their issuers’ future ability to honor their obligations which can, in certain circumstances, become worthless.

Edited August 14, 2009 by flying

[lannarebirth]

I still dont quite get this concept. Gold is not really a currency - you cant use it to buy groceries at Villa.

Misconception

But US Gold & Silver coins is money/ legal tender

So is Canadian coins

Actually Austrian Phils & SA Krugs are probably too.

But speaking for the US both gold & silver US coins ( eagles buffalos etc ) still are.

They can even legally be held in IRA's & 401K's

Again not speaking for others but when most say that gold is the only form that is not someones liability it is true.

Gold is nobody's liability - its value does not depend on someone's ability to pay and it cannot be debased.

Compare gold with cash, bonds and equities whose value hangs on their issuers’ future ability to honor their obligations which can, in certain circumstances, become worthless.

And why do their values change so much in relation to each other if not for speculation?

Surely you'd agree the Krugerrand is debased Gold currency, no?

[Abrak]

Compare gold with cash, bonds and equities whose value hangs on their issuers’ future ability to honor their obligations which can, in certain circumstances, become worthless.

You still cant use it to buy groceries at Villa.

But more seriously why not compare it to land which also cannot be debased (or even oil to some extent).

I realize gold has one advantage - you can swap it into cash at anytime.

But is there really a good argument that gold will outperform land as an investment? A house's value doesnt depend on the issuers future ability to honor their obligations.

Lets not compare gold with say equities where there is probably more risk but assuming a decent ROE much more reward.

As far as I can see the only real argument for gold is a comparison to cash where it stacks up well (but would seem a little on the expensive side)

[flying]

And why do their values change so much in relation to each other if not for speculation?

Just horses for courses.

In the end I guess it is in the eye of the beholder. It is not a single currency & its value again is not determined by anyone's future ability to make good on it. It is honest money. The free market decides.

Personally I prefer Maples over Eagles for their content

Although buffaloes were nice before folks caught on.

[flying]

You still cant use it to buy groceries at Villa.

But more seriously why not compare it to land which also cannot be debased (or even oil to some extent).

I realize gold has one advantage - you can swap it into cash at anytime.

But is there really a good argument that gold will outperform land as an investment? A house's value doesnt depend on the issuers future ability to honor their obligations.

Lets not compare gold with say equities where there is probably more risk but assuming a decent ROE much more reward.

As far as I can see the only real argument for gold is a comparison to cash where it stacks up well (but would seem a little on the expensive side)

You lost me as to what or where Villa is

But then again you lost the b in your last post too

when a)

and c)

But if Villa is on the planet Earth I bet you can

As for is it better than land, cash or what ever you want to compare it too.

That is for you to decide. I am a building contractor so I have homes as investments also. But as you say gold is much more liquid as well as does not take any maintenance.

The funny thing about these threads is they start out as a simple question like...

Why is gold nobody's IOU?

Then in turns into a big merry go round where folks like you want a good reason to own it?

Own it if you like...sell it as you have done before....choice is yours.

It is just another thing.

Who is to say what is best for you? Only you my friend

I have a portion of my liquid assets in metals. I intend to add more if as I think there is one more pullback this month. It has worked well for me it may or may not in the future.

Edited August 14, 2009 by flying

[lannarebirth]

Compare gold with cash, bonds and equities whose value hangs on their issuers' future ability to honor their obligations which can, in certain circumstances, become worthless.

You still cant use it to buy groceries at Villa.

But more seriously why not compare it to land which also cannot be debased (or even oil to some extent).

I realize gold has one advantage - you can swap it into cash at anytime.

But is there really a good argument that gold will outperform land as an investment? A house's value doesnt depend on the issuers future ability to honor their obligations.

Lets not compare gold with say equities where there is probably more risk but assuming a decent ROE much more reward.

As far as I can see the only real argument for gold is a comparison to cash where it stacks up well (but would seem a little on the expensive side)

Advantages to Gold are that it is portable and therefore probably concealable and as you say fungible globally. Disadvantages are that it's supply versus land is expanding more rapidly and under most circumstances has less utility.

Actually, I should correct that to say I don't know at what rate investable land is expanding, if at all. It's just my sense of it.

Edited August 14, 2009 by lannarebirth

[churchill]

Good site lots of charts and links http://goldstock.co.uk/gsnew.htm

[Abrak]

Advantages to Gold are that it is portable and therefore probably concealable and as you say fungible globally. Disadvantages are that it's supply versus land is expanding more rapidly and under most circumstances has less utility.

Actually, I should correct that to say I don't know at what rate investable land is expanding, if at all. It's just my sense of it.

Makes perfect sense. Gold demand annually a bit like property is about 2% of total supply (a guess).

Or you can compare it with a currency.

So the question you asked before about volatility is a good one. Its fundamentals are so stable. It is not like sugar where a 10% fall in supply triples the price.

Take property in 130 years it has never increased from the bottom of a bear market more than 2.5x relative to GDP. Has the dollar increased or decreased relative to GBP more than 2.9x over a 20 year period.

So maybe gold was undervalued by 100% at its bottom but it has increased 3x in real terms. I realize that part of the explanation is that the dollar has gone down rather than the price has gone up. But if most of it is speculation you are on the wrong end of the value curve. More to the point momentum seems to be waning and the fundamentals trending against it. (falling inflation expectations, rising real yields and a total collapse of broad money supply growth.)

BTW one thing I notice is that there are a lot of people on this thread who bought at say 600 and are obviously very happy. In many cases they are happy to see it fall to 700 without being bothered. Fine and maybe the negatives I point out you consider crap or perhaps the reason you wouldnt be surprised if there was a pull back. What I dont see is anyone who is actively buying now and why.

[churchill]

I personally think Gold is a crass yellow metal devoid of any real use.

i agree it is (nearly... kinda... sort of) useless but it doesn't look too bad around the neck and on the wrists of Mrs Naam.

For Mrs Naam ? http://www.jupiterandsuns.co.uk/index.php?cPath=26

[Abrak]

The funny thing about these threads is they start out as a simple question like...

Why is gold nobody's IOU?

Then in turns into a big merry go round where folks like you want a good reason to own it?

Own it if you like...sell it as you have done before....choice is yours.

It is just another thing.

Who is to say what is best for you? Only you my friend

Actually the 'simple question' in this thread is 'whether you believe gold is going up or not'

If you believe I post so as to get someone like you to offer me investment advice, I am afraid you have overstated your view as to your own abilities in your own mind.

[churchill]

The funny thing about these threads is they start out as a simple question like...

Why is gold nobody's IOU?

Then in turns into a big merry go round where folks like you want a good reason to own it?

Own it if you like...sell it as you have done before....choice is yours.

It is just another thing.

Who is to say what is best for you? Only you my friend

Actually the 'simple question' in this thread is 'whether you believe gold is going up or not'

If you believe I post so as to get someone like you to offer me investment advice, I am afraid you have overstated your view as to your own abilities in your own mind.

and look at where gold was when the thread was started and where it is now - So the answer is UP .