Bitcoin Forum
December 11, 2016, 04:40:27 AM *
News: Latest stable version of Bitcoin Core: 0.13.1  [Torrent].
 
   Home   Help Search Donate Login Register  
Pages: « 1 2 3 4 5 6 7 [8] 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 »
  Print  
Author Topic: Gold: I smell a trap  (Read 78632 times)
Ten98
Full Member
***
Offline Offline

Activity: 201



View Profile
August 12, 2011, 08:22:37 AM
 #141

I think your arguments are broadly right, but about 4 years premature.

Gold:
You'd be crazy to sell bullion today. JPM are predicting $2500/oz by the end of the year, or +50%. Even if they're only half right that's a 25% increase in less than 4 months. No other investment in the world (other than bitcoin) can net you that sort of a profit. You're right that more people than ever are buying, and this is a trend that isn't likely to slow down for the next 3-4 years, as it's going to take at least that long to sort the markets out once and for all.

The Federal Reserve and European Banks both have only one strategy to combat financial collapse, print money and keep interest rates near-zero. They show no sign of wavering from this tactic, and in fact the fed announced this week that they would continue down this track for the next 3 years at least. The tactic works, but has the side-effect of devaluing currency against commodities, primarily gold, which will soar higher and higher the more money they print.

Bitcoins:
The days of enourmous spikes in the Bitcoin price are over. There are too many semi-pro investors involved now with huge holdings and ticker alerts. As soon as the price starts to spike, they're in there driving it down again with huge sell offs. There's still enough daily and weekly variance to make some good single-day gains, but the volume is too low for anyone to make serious money here. The price seems to have stabilised at around $10, and I can't see it rising more than 50 cents for the next year or two, and I would not be at all surprised to see it slowly fall away to the $7-8 mark as hoarders accept that the price isn't skyrocketing to $30 again any time soon, and slowly sell off some of their millions of coins that we know are out there.

Wild speculation about mainstream adoption of the currency sending prices sky high is a nice dream, but unlikely with the current transaction model. Bitcoin is too complex, nerve-wracking and unwieldy for the general public to use at the moment. We have a decent throughput into the black markets, but there's a limit to how much that can grow before those black markets either get shut down or implode under the weight of their own politics and infighting.

Interested to know what you think...
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
1481431227
Hero Member
*
Offline Offline

Posts: 1481431227

View Profile Personal Message (Offline)

Ignore
1481431227
Reply with quote  #2

1481431227
Report to moderator
da2ce7
Legendary
*
Offline Offline

Activity: 1218


Live and Let Live


View Profile
August 12, 2011, 08:54:15 AM
 #142

 We have a decent throughput into the black markets, but there's a limit to how much that can grow before those black markets either get shut down or implode under the weight of their own politics and infighting.

Interested to know what you think...
[/quote]

There isn't even close to saturation with black markets... The decentralized nature of bitcoin means that many interdependent markets can exist without each becoming too large.  I expect that black and grey markets to set the minimum price of bitcoin over the next year or so.

Bitcoin's won't go down in value, as these black an grey markets will have a vested interest in tightening up the supply of coins.  It will be interesting to see how much they grow... It wouldn't be surprising to me to see the markets go up to $30 or $100, just from the pressure the black markets, (bitcoins will just seep out of mtgox and tradehill and otherwise... and not be re-deposited (other than those who mine).

Either way... it is going to be very interesting.

One off NP-Hard.
Ten98
Full Member
***
Offline Offline

Activity: 201



View Profile
August 12, 2011, 10:35:35 AM
 #143

We have a decent throughput into the black markets, but there's a limit to how much that can grow before those black markets either get shut down or implode under the weight of their own politics and infighting.

Interested to know what you think...
There isn't even close to saturation with black markets... The decentralized nature of bitcoin means that many interdependent markets can exist without each becoming too large.  I expect that black and grey markets to set the minimum price of bitcoin over the next year or so.
[/quote]

I think you are misunderstanding how currency works. The black markets can't set the price of a Bitcoin any more than Walmart can set the price of the Dollar. They adjust their prices according to the current exchange rate, not the other way around. The accepted exchange rate is set (bizzarely) by an old Magic the Gathering trading cards website and like it or not, nobody is considering giving up the dollar just yet.

I think that sellers just want to cash out what they've been paid ASAP at the best rate they can get, usually selling at a few % under the market rate for a speedy transaction. Buyers just want to buy coins at whatever today's market rate is and spend them with sellers straight away. I think this sort of trade throughput drives Bitcoin prices very slightly down overall, not up, but the dollar / coin throughput it generates is good for investors as it provides the liquidity people need to be able to cash out and buy in.
cypherdoc
Legendary
*
Offline Offline

Activity: 1764



View Profile
August 12, 2011, 07:00:46 PM
 #144

yes, we both do understand what is happening.  the only difference we see is how we get there.  deflation now or later.  hyperinflation now or later.  i just happen to think we go now into an extended period of deflation to wash out the bad debt and correct imbalances whether or not Ben tries to stop it or not.


Margin increases will only do so much. With margin comes volatility as overextended players are forced out with the calls. When the exchanges go to full cash backing, the manipulation can no longer carry much weight by forcing players out. All players involved then will be very strong; the game reserved for the very wealthy. How many traders can put up the full backing of $175,000 to control each 100oz COMEX futures gold contract, and how many of these professionals will be forced out by a 5% drop in price?

i just don't think they get all the way there before the gold price reverses down to correct for the 11 yr rise.  

Quote from: miscreanity
Quote from: cypherdoc
Quote from: miscreanity
Once credit is extended, it is extremely difficult to reel it back in. It isn't as though a simple recall can be issued on fractional reserves.
sure it is.  what are margin calls?  calling in a debt is easily within the purview of banks.  they do it all the time.  i just had a large credit line shut down even tho i'm an equivalent AAA with no debt on my books at all and a good income.  the banks are stressed and they don't believe in the consumer anymore.  they are bracing for the storm.  these types of margin calls are whats tipping us over right now IMO.

Even if a bank calls in a debt, will it be paid? They can only call in what hasn't been squandered. The banks did this during the past year, as many businesses' and peoples' credit limits were slashed with hardly any notice, even yours. There's the threat of debtors filing for bankruptcy too. You might not have had any debt, but how many countless others had maxed out lines?

in the scramble for cash USD's, the banks are beginning to finally foreclose on bad debtors.  they prolonged this for as long as possible hoping for the turnaround in the economy.  its now failed and they have no choice but to salvage what they can get for pennies on the dollar to try and scrape up as much capital as possible bracing for the storm.   the banks have no choice.  we're even beginning to see it at the high end.  my hedge fund friend says they have huge CDS on CMBX's which are in severe trouble.  the derivative pyramid is going to collapse and you can already clearly see the decline in the shadow banking system.  from todays Zerohedge:

http://www.zerohedge.com/news/lack-offshore-dollars-reflected-widest-spread-between-socgen-and-jpm-libor-fixing-early-2009

these european banks desperately need DOLLARS not gold to keep from collapsing.  the scramble for cash is on.  as the USD skyrockets, gold is going to reverse and this, contrary to 2008, its going to be a much bigger plunge as a result of a much bigger crash in general markets.  at least thats what i'm sensing.

Is it debt that people want or the assets they go into debt to acquire? If you choose debt, let's talk - I could use some new Penta IPS drives.

listen to Admati on Econtalk.  this is a great podcast: http://www.econtalk.org/archives/2011/08/admati_on_finan.html
bottom line is, the system has rewarded taking on debt itself to finance asset purchases even if those assets themselves don't perform substantially.  the preferential tax tx given to debt funding has discouraged equity funding for corporations and has contributed to how the system has morphed into a debt backed system.


Asset deflation is the primary dynamic; debt deflation is directly tied to that. Monetary base inflation is the reaction in order to stave off complete financial implosion.

absolutely.

There's a problem if debt is separated from assets: the debt becomes worthless because it's an abstract - a promise. With debt having been used as collateral (effectively money), the whole spider web can be dragged down by a few large credit lines. Why should I put in the same work to pay off my debt when someone else's debt was written down to 1% of its former value? That will be the public realization of what a counterparty is. The other side is a loss of investment for the creditor and reticence to supply more. That can cripple a heavily credit-dependent economy.

yes again.


Quote from: cypherdoc
this is fundamentally where we disagree.  i think its naive to think the Fed will sacrifice itself for the good of the debtors of this nation and worldwide.  i think they want to stay in power, i think they want to keep their USD franchise, i think they want to preserve their constituents wealth (the wealthy bankers), i think they want to preserve their distributed central banking system based on the USD which have made them Kings, and i think the Fed has the upper hand on their Congressional lackies who are powerless to stop them.  i think they are going to try to manage the USD UP while slowly eroding the avg Americans wealth to prevent rioting.  i think they realize the Euro experiment has failed and that trying to build a one world currency will never work and the best course of is to make the best of the current situation.  they know that of the 12 bankers in the room, probably 4 of them will die, but thats better than all of them dying from hyperinflation and WW3.

That's entirely reasonable. Self-preservation is an incredibly strong force. This also suggests to me that you view institutions as collective entities unto themselves, having properties normally reserved for an individual human.

absolutely.  we talked about the Fed Reserve Bd of Governors earlier.  in reality, the Chairman is all powerful.  what he wants is what he gets.  Econtalk has another podcast about a year ago from a former governor who outlined in detail the decision making process and how it worked with Greenspan.  it was all HIM.  yes the governors can try to influence him but if the Chair is a pig headed, insane, arrogant bastard like Greenspan AND Ben then we have a problem.  which is precisely where we find ourselves.  i don't think Ben is stupid and i think he is sensitive to all the criticism.  which means i think he reverses course and tries to surprise the markets.  they are so distorted and inflated that the resulting inflationary-induced problems of riot/revolution in Libya, Egypt, Greece, Saudi, Syria, London can no longer be ignored.  not to mention the complaining of big corporations and now the banks themselves (whodathunk) from the declining USD and their cost explosions.  have you heard Steve Wynn lately?  clearly the PPT has stepped back from stocks which is a huge red flag for me.  i'm not willing to be trapped in the gold parabola in a quick selloff.


It would certainly help to explain their behavior, after all we often look at pets as little people so why not corporations and governments as giants? That also means they may not agree with each other.

What if the Fed thinks it'll be crushed no matter what it does? Will it do what it thinks is best no matter what anyone says, hoping that when it has fallen, things will be better than they were before? Do these type of organizations have aspirations of heroism arising from their personality as represented by the corporate culture?

Who knows, maybe the Fed actually will reject the act of initiating another round of monetary inflation, though I highly doubt it. Lot's of wild questions and I think we're getting a little off the topic of economics here... Smiley

but in essence the gold bugs are relying on Ben to do another QE despite him not having done it.  talk about wild speculation.

Quote from: cypherdoc
wait a minute.  you agree with Ben that gold is just another asset, not money?  that means that golds value as an asset depends on the USD.  which means that the USD is of primary significance and gold is secondary!

I do agree that it's an asset, but not just another asset. Money is an abstract concept that can be applied to anything involved in facilitating an exchange, whether it be a shiny metal or a smelly sardine. Both of those examples are assets and can be used to determine a common value for trade.

Gold is the asset. Its properties of relative rarity, divisibility and durability lend it suitability as the ideal yardstick for commonly agreed-upon value. We can agree upon the value of a piece of paper, but is gold or paper more likely to change wildly in supply? Gold has no nationality, no borders to limit its acceptance. It is as readily recieved in Bali as it is in Boston.

wait a minute.  i'm going to have to call you out on this one.  either gold is money OR an asset.  the whole premise of the gold argument is that its real MONEY.  the true medium of exhange.  assets on the other hand are what you use that same money to invest in.  if you believe gold is an asset then you believe the USD is the main form of money, not gold.  therefore it will be subject to the whims of the market demand for the real money which by your definition is the USD.  yours is not the traditional gold bug argument.

There has never been anything else that could quite match the balance of features gold has (silver, platinum, rare gemstones, etc); not even Bitcoin, as close as it gets.

its way to early for you to make this statement!

Paper currencies (including digital variants) were as good as it came for ages, but the manifestation has always proved too whimsical to be stable. The only difference between any of them is physical presence.

Paper is subject to human nature, which can be unreliable to put it nicely. And you never know, the internet could conceivably be completely shut down and take Bitcoin with it, as unlikely as that is. Gold would still exist, even though it's harder to transport.

In a sense, Bitcoin provides debt with its own measure of value - it gives the abstract concept a definable quantity without being backed by anything other than its sheer existence, which is why it works as long as it exists. But again, if it somehow ceases to exist, we still have gold - the final insurance policy.

heres where it gets fascinating.  the argument for Bitcoin as money.  i would argue that Bitcoin is backed; by the network.  the huge amount of hashing power which has been brought to bear to process tx's and the blockchain.  this is what the gold bugs miss when they say there is no "backing" for btc.  the network comes with a cost and a BELIEF.  you said earlier belief in money makes it what it is.  lose that belief and it vaporizes.

Quote from: cypherdoc
the bond floors of Japan are littered with shorts.  i hate this argument but look at UST's rally.  i hate them too but you can't deny reality and where MOST of the money is fleeing to.  BTW,  i can't wait to short UST's but that could be years before that trade is good.

Oh, no arguing with that. I'm not suggesting taking a short position in treasuries just yet, though I do think another leg down is in the works eventually. Japan's situation was a prelude to what the US is doing now. There's a major difference, though - the whole system is coming unraveled. At least when Japan was being stupid, the rest of the global economy was still bounding along and there were always plenty of buyers for government-issued debt. Lucky for Japan, the carry unwind is helping to keep them afloat.

Who are the buyers of US government debt? Are they buying out of confidence or fear? What will they do with those instruments when startled by further signs of instability? When the debt is called in and the government can't pay because its credit line is maxed out, what happens? Another debt ceiling raise? Who will extend the credit?

damn good questions.

Quote from: cypherdoc
they will NEVER be able to shut down the Internet even if they wanted to.  that would kill everything incl the banks and gov't.  this is one reason why i'm bullish on btc.

Exogenous factors can occur. For example: a once-in-a-century hurricane and/or tsunami knocks out an entire region of your country or a cascading transformer switching problem cuts electric power to a quarter of the country.

whose engaging in wild speculation now? the internet was designed to withstand a nuclear attack wiping out multiple metropolitan areas.  as i said before, never gonna happen.

Quote from: cypherdoc
Collective sentiment is everything - money's value arises from subjective perception. Otherwise, gold would just be metal. Nothing would be worth anything relative to anything else. If people lose their belief in the dollar's value, it no longer has value.
fair enough but we're not at that point yet except in the case of the gold bugs.

Not yet, no. However, propagation of an idea can happen very quickly once it takes root. I choose to overestimate it rather than be caught in a rioting London.

Quote from: cypherdoc
there is more dependency than you think.  look at Saudi Arabia and petrodollars.  they can afford to live like Kings of the Middle East b/c of the US military protecting their borders and oil.  and you know what?  the US will FORCE thru guns the acceptance of USD's for oil.  unfair yes, but this is something we haven't touched upon as an argument for why the USD won't go away.

My view is that the dependency on petrodollars is reversed. The asset is oil and the debt is the dollar. FOFOA does an amazing job of explaining the whole structure in these two posts:

this is true.  my point is will all those US troops sit idle if Saudi decides to change petrodollars to say yuandollars?  uh, i don't think so.  we will just TAKE the oil at gunpoint.

Actually, one of the only things I disagree with FOFOA on is Bitcoin's fate.

Quote from: cypherdoc
no pain, no gain.

Just don't get bowled over, and fer cryin' out loud - keep at least some of your golden insurance!

you've convinced me!


Quote from: cypherdoc
they won't be coming to any large degree.  they don't have the "cash".  we're 11 yr into this; ain't gonna happen.  mining stocks and silver are telling you as much.

In regard to Americans and Europeans still believing in their fiat, perhaps. The world beyond has increasing interest in precious metals and a growing wealth to back it. It's a sad proposition to think that much of the wealthiest 10% of the world may soon be among the poorest.

i won't be losing any sleep over that!

With the stocks, I'm siding with Dan Norcini. Large funds have been shorting the shares and buying the bullion as a spread trade. The ratios are at extreme levels, and as the mining companies are beginning to pay dividends, it will become very painful for the shorts to hold on. Watch for the ratios to snap back, making the gold and silver miners gain in value relative to their products. Correlate that principle with George Soros selling his bullion while buying gold mining company shares. The rich get richer.

I hope your brain is really churning with that bit; mine did.

no, i've been well aware of this for a while. but the other half of this trade means gold has to turn down.  which is it?


Men who can be both right and sit tight are uncommon. I found it one of the hardest things to learn. ~Jesse Livermore

yes, you are so right and i have heard this before.  i am annoyed that i've sold gold at 1550 and 1620 with it now at 1750ish.  but not if it reverses here.  Wink

A quick story - in 2005, I was playing the gold carry trade. I got in at a little over $650, looking to ride the capital gain to Disney Land after paying my bills with the interest earned. Instead, I foolishly held on until $700 was broken and closed the position for a solid loss. Thankfully it didn't wipe me out despite being the "trade of a lifetime", but since then I've respected gold the way a sailor respects the sea - majestic and powerful, but deadly if you aren't careful. And when the waves start noisily slapping against the hull, turn into them to silence the turbulence so you can focus.

It's a pleasure to discuss these topics intelligently. We may agree on a few points while disagreeing on most; rational discourse is how humanity learns. Enjoy the PacNW. Now it's time for RAPTOR JESUS! (for anyone who takes offense to that, you have no soul) Grin

i'm on the plane right now to Juneau.  King Salmon look out!
miscreanity
Legendary
*
Offline Offline

Activity: 1078


View Profile
August 13, 2011, 08:35:49 AM
 #145

Interested to know what you think...

Hi Ten, I'm not sure whom you're asking. You make solid cases in both gold and Bitcoin.

At one point, I had pegged gold at USD$4mm per ounce. That was assuming a borderline Mad Max scenario just prior to a complete disintegration of society. To be more realistic, my expectation is between Armstrong/Fields/Sinclair's ~$12,500 and FOFOA's $50,000 or so, biased toward the latter.

It seems that several major cycles, not just financial, are converging along a transition phase. Multiple factors beyond money printing are influencing gold, and my time estimates line up pretty well with yours at about 3-5 years for the really crazy changes to become apparent. Money printing is definitely a diminishing return, as you offer.

Bitcoin is an interesting case. There are definitely some very financially-savvy folks participating, but I think if sufficient interest and capital start to flow in, we could still have a few wild rides ahead. Volume is something that cannot be directly controlled, especially so the more integrated with global markets the Bitcoin economy gets.

Even if the percentage changes are less than the run from $1 to $30, the nominal volatility could still boggle the mind - not unlike gold traversing almost $200 up and $100 down over a week but only being a ~5% max daily change.

I do think it's entirely possible that there could be some further panic liquidation of BTC holdings, though I don't think it's quite so easy to put a number on where it could go. Miners will likely stop their operations en masse at USD$3-5, but exchange trading could drop it further. How far is anyone's guess - the system is too new and immature to have established readily-discernible ranges.

Black markets (and porn) are usually the spearheads into new technologies. Maturation of a technology generally leads to broader commercial adoption, which could mean a lot of capital influx on a steady basis. I'd be fine with a stable rise in the exchange rates supported by that.

For the next six months after BitCon 2011 we should be able to gain a better insight into whether the world is ready for Bitcoin or not.

Cheers.
miscreanity
Legendary
*
Offline Offline

Activity: 1078


View Profile
August 13, 2011, 08:37:25 AM
 #146

I might be speaking with an authoritative tone, but even I'm still learning from every source I can while applying my own take. Some excellent rebuttals from several in this thread have forced me to review a few items to help clarify my assessments. As long as we're forcing each other to think, we're making progress. In addition, much of the discussion that focuses on gold, I view as applicable to Bitcoin as well.

On with the games!

i just don't think they get all the way there before the gold price reverses down to correct for the 11 yr rise.  

All good - we can agree to disagree there.

Quote from: cypherdoc
in the scramble for cash USD's, the banks are beginning to finally foreclose on bad debtors.  they prolonged this for as long as possible hoping for the turnaround in the economy.  its now failed and they have no choice but to salvage what they can get for pennies on the dollar to try and scrape up as much capital as possible bracing for the storm.   the banks have no choice.  we're even beginning to see it at the high end.  my hedge fund friend says they have huge CDS on CMBX's which are in severe trouble.  the derivative pyramid is going to collapse and you can already clearly see the decline in the shadow banking system.  from todays Zerohedge:

http://www.zerohedge.com/news/lack-offshore-dollars-reflected-widest-spread-between-socgen-and-jpm-libor-fixing-early-2009

these european banks desperately need DOLLARS not gold to keep from collapsing.  the scramble for cash is on.  as the USD skyrockets, gold is going to reverse and this, contrary to 2008, its going to be a much bigger plunge as a result of a much bigger crash in general markets.  at least thats what i'm sensing.

Indeed, it's a catch-22. On one hand, as you state, there is no alternative but to take the write downs that have been put off as long as possible. On the other, the deflationary effects of contracting derivatives that will cause margins to be completely wiped out, triggering the waiting defaults across the board (assuming no more Enron-style book-cooking magic). Rock, meet hard place.

Even at that, I don't think the banks (and government, being complicit in the game) are out of delaying strategies just yet. Granted, most of their solutions are one-off tactics (asset fire sales being one) but when pressed, people can get very creative. Everything possible will be done to reduce defaults and write-offs to a trickle rather than a deluge.

I'm not blindly saying that the dollar is going to be on a one-way flow back to the US. Obviously, there will be arbitrage to balance the flows, but the problem could escalate faster than rebalancing and recapitalization can take place. If the system deflates faster than the defaults can be absorbed and capital can be balanced, the easiest solution to make up the difference is a slip of the finger that adds a few instances of 10^12 zeroes to the monetary base.

This is irrespective of which currency is involved, as they're all in basically the same situation to varying degrees. Gold comes a little further down...

Quote from: cypherdoc
listen to Admati on Econtalk.  this is a great podcast: http://www.econtalk.org/archives/2011/08/admati_on_finan.html
bottom line is, the system has rewarded taking on debt itself to finance asset purchases even if those assets themselves don't perform substantially.  the preferential tax tx given to debt funding has discouraged equity funding for corporations and has contributed to how the system has morphed into a debt backed system.

Thanks for sharing - excellent explanation of the debt developments. I took some issue with a few of the concepts presented, but that's for another time.

Quote from: cypherdoc
absolutely.  we talked about the Fed Reserve Bd of Governors earlier.  in reality, the Chairman is all powerful.  what he wants is what he gets.  Econtalk has another podcast about a year ago from a former governor who outlined in detail the decision making process and how it worked with Greenspan.  it was all HIM.  yes the governors can try to influence him but if the Chair is a pig headed, insane, arrogant bastard like Greenspan AND Ben then we have a problem.  which is precisely where we find ourselves.  i don't think Ben is stupid and i think he is sensitive to all the criticism.  which means i think he reverses course and tries to surprise the markets.  they are so distorted and inflated that the resulting inflationary-induced problems of riot/revolution in Libya, Egypt, Greece, Saudi, Syria, London can no longer be ignored.  not to mention the complaining of big corporations and now the banks themselves (whodathunk) from the declining USD and their cost explosions.  have you heard Steve Wynn lately?  clearly the PPT has stepped back from stocks which is a huge red flag for me.  i'm not willing to be trapped in the gold parabola in a quick selloff.

but in essence the gold bugs are relying on Ben to do another QE despite him not having done it.  talk about wild speculation.

Absolute power corrupts absolutely...

Even the chairman can't force the markets to his will indefinitely. I've interpreted the act of calling off the working group as a scolding, where the politicians and Wall Street are the spoiled brats and Bernanke is the bumbling (and misguided) parent. With growing opposition from the more responsible elements of society, further stimulus became less of a foregone conclusion (momentarily taking away the punch bowl).

Paying lip service to responsibility has quelled the opposition somewhat. Now, with the brats' eyes tearing up and tantrums being thrown, the Fed is ready to relinquish; they can have their proverbial candy back (punch bowl refilled and re-spiked) as long as they stop screaming.

This way the Fed reasserts its relevancy enough to carry on, establishes a path for additional stimulus and virtually guarantees a boost for the current administration through election time in 2012. It's a win-win-win for the Fed, Obama administration and Wall Street. The consequences will have to be dealt with by everyone else.

When is enough, enough? When enough people have had enough. Until then, business as usual.

Quote from: cypherdoc
wait a minute.  i'm going to have to call you out on this one.  either gold is money OR an asset.  the whole premise of the gold argument is that its real MONEY.  the true medium of exhange.  assets on the other hand are what you use that same money to invest in.  if you believe gold is an asset then you believe the USD is the main form of money, not gold.  therefore it will be subject to the whims of the market demand for the real money which by your definition is the USD.  yours is not the traditional gold bug argument.

Real money is like the term infinity: it's an abstract concept. There are two primary components.

A definition of money:
  • A medium that can be exchanged for goods and services and is used as a measure of their values on the market...
  • Assets and property considered in terms of monetary value; wealth.

The first definition describes a means of exchange; the second describes a store of value. Any asset can act along a continuum as one or the other, its location in the spectrum determined by subjective perception (agreement a la bid/ask negotiation). Some assets have attributes that make them more suitable as a means of exchange (currency, seashells) while others function as stores of value (fine art, real estate). In modernity, gold has acted primarily as the latter, but in times of fiscal duress it can be called to function as a means of exchange (e.g. to replace a failed currency).

It's a concept that I had to come to terms with as well. I think the difficulty arises from the whole social mindset of attributing wealth exclusively to debt/dollars as discussed earlier. Not many people make the distinction between a means of exchange (contemporary concept of money) and store of value (the other side of the coin - ha ha). Who thinks of their wealth in terms of how many computers they own, or how many cars? It's possible, just not common, even though the GDP attempts to do just that.

It might help to visualize a bell curve - at the apex is the ideal means of exchange. The farther out toward the tails, the better suited an asset is as a store of value. In my interpretation, gold normally lies at the very end of the tail, but when there's a void at the apex it can fill the spot. If society hadn't narrowed down the ideal properties for a means of exchange, we probably wouldn't be having this conversation. Over 6,000 years, society has consistently returned to gold as money (in both underlying meanings), so I'd say that's a pretty strong vote of confidence and very unlikely to break anytime soon.

Quote from: cypherdoc
There has never been anything else that could quite match the balance of features gold has (silver, platinum, rare gemstones, etc); not even Bitcoin, as close as it gets.

its way to early for you to make this statement!

Do you mean that in reverse? Gold has been proven throughout history to be the choice of money, but we can't say that won't change sometime in the future... ? Smiley

Quote from: cypherdoc
Paper currencies (including digital variants) were as good as it came for ages, but the manifestation has always proved too whimsical to be stable. The only difference between any of them is physical presence.

Paper is subject to human nature, which can be unreliable to put it nicely. And you never know, the internet could conceivably be completely shut down and take Bitcoin with it, as unlikely as that is. Gold would still exist, even though it's harder to transport.

In a sense, Bitcoin provides debt with its own measure of value - it gives the abstract concept a definable quantity without being backed by anything other than its sheer existence, which is why it works as long as it exists. But again, if it somehow ceases to exist, we still have gold - the final insurance policy.

heres where it gets fascinating.  the argument for Bitcoin as money.  i would argue that Bitcoin is backed; by the network.  the huge amount of hashing power which has been brought to bear to process tx's and the blockchain.  this is what the gold bugs miss when they say there is no "backing" for btc.  the network comes with a cost and a BELIEF.  you said earlier belief in money makes it what it is.  lose that belief and it vaporizes.

Precisely! It isn't just belief, but mathematically-provable certainty. Currencies over the ages have been structured in a bid to mitigate the human intervention element. Bitcoin actually does it - it's as abstract as the concept of money itself. And yes, the network is the reason it has value; existence of the network is the belief and therefore the existence of Bitcoin. Well, that in combination with the way individual, relatively straightforward technologies are utilized in conjunction with each other (cryptography, distributed networking, triple-entry accounting) to form a truly unique system that is (as cliche as the saying is) greater than the sum of its parts.

Forget just gold bugs, almost nobody (even some economists with doctorate degrees) grasps that distinction thus far. For now, it's just a bunch of nutcases pushing computers to melting points who "get it". I'd even go so far as to say this is as big a development as written language, but to go down that road I'll have to start talking about Gaia theory and human-machine integration - i.e. fringe.

We definitely agree on Bitcoin. Grin

Quote from: cypherdoc
whose engaging in wild speculation now? the internet was designed to withstand a nuclear attack wiping out multiple metropolitan areas.  as i said before, never gonna happen.

Hey, I didn't say it had to be especially likely, just possible. Two words: solar flare.

Quote from: cypherdoc
this is true.  my point is will all those US troops sit idle if Saudi decides to change petrodollars to say yuandollars?  uh, i don't think so.  we will just TAKE the oil at gunpoint.

Military might can only do so much (another case of diminishing returns), particularly if met with growing resistance. Wasn't Libya supposed to only be a month-long ordeal?

By the numbers, Saudi Arabia is perhaps 1/7th of the overall United States forces. That needs to be tempered by the land mass available and necessity of preserving the integrity of desired natural resources. There's also the issue of allies. Nothing is ever as simple as it seems... just like dating.

Also, with the US forces engaged in multiple fronts and being worn down from extended campaigns, is that military at full strength? To my knowledge, every great empire has overextended itself militarily.

Martin Armstrong has done immense work in exploring such history. For additional perspective from an anthropological point of view, Jared Diamond's Guns, Germs & Steel and Collapse are seminal works.

Quote from: cypherdoc
you've convinced me!

Good Smiley

It's never a bad idea to diversify a little.


Quote from: cypherdoc
i won't be losing any sleep over that!

Heh, neither will I. At least until the angry mobs are knocking on our doors. Got a last plane out plan?

Quote from: cypherdoc
no, i've been well aware of this for a while. but the other half of this trade means gold has to turn down.  which is it?

Both bullion and shares have been rising for a decade. What's to say a reversal in the spread would stop that? An even better spread will eventually be discovered and adopted.

As Norcini suggested, long mining shares and/or bullion while short the broader equity markets. That's where my money has been for a few weeks now. As soon as treasuries take their first major swan dive, I'll be shorting them on a retracement as well. I might be waiting a while yet.

Quote from: cypherdoc
yes, you are so right and i have heard this before.  i am annoyed that i've sold gold at 1550 and 1620 with it now at 1750ish.  but not if it reverses here.  Wink

Just buy back in when it comes back down to the $1,600s from $2,500+ and hold it this time. Grin

Quote from: cypherdoc
i'm on the plane right now to Juneau.  King Salmon look out!

Jealous lol.
achillez
Hero Member
*****
Offline Offline

Activity: 784


View Profile
August 13, 2011, 04:46:54 PM
 #147

Very interesting thread. I'm not sure I buy that selling gold and going long in BTC is the right approach (at least right now).

The biggest issue I have with BTC is that forthe average person it is very complicated to understand, whereas gold is simple. Gold is pretty, shiny = want to buy. BTC is some random number on my computer. Another issue with BTC is that it is *very difficult* to actually purchase BTC. There are exchanges, yes, but all of them require multiple days/weeks of effort to get into. e.g., I've been trying for the last week to get some funds into MtGox. First I had to setup a Dwolla account (which is still wip), then once I get the access to the account I have to transfer funds to MtGox, and hopefully at that point I can actually purchase something. WHY isn't BTC available as a commodity on the NYSE?? If we could get an ETF or something similar added that people see as a legitimate, and easy, way to purchase BTC then it would shoot through the roof.
grod
Full Member
***
Offline Offline

Activity: 154


View Profile
August 13, 2011, 05:28:52 PM
 #148

For now there is another very fundamental difference in BTC vs gold.  The general populace and as an extension government agencies universally recognize gold as a valuable commodity with an undisputed cash value, and a theft of even $500 in gold will be given due consideration. 

Requesting investigation of theft or fraud ranging in the millions of $ worth of BTC is unlikely to end well for the victim.

It's just way too easy to make a mistake and lose substantial amounts of money with bitcoin in addition to that.  Gold won't instantly evaporate when your hard drive crashes, nor will letting someone take a snapshot of your house key mean they irretrievably and anonymously get posession of your gold. 

TL;DR: The safeguards for preservation of existing means of wealth don't apply to bitcoin, and that's a big issue when comparing BTC to other currencies or stores of value.
Ten98
Full Member
***
Offline Offline

Activity: 201



View Profile
August 13, 2011, 05:56:06 PM
 #149

Very interesting thread. I'm not sure I buy that selling gold and going long in BTC is the right approach (at least right now).

The biggest issue I have with BTC is that forthe average person it is very complicated to understand, whereas gold is simple. Gold is pretty, shiny = want to buy. BTC is some random number on my computer. Another issue with BTC is that it is *very difficult* to actually purchase BTC. There are exchanges, yes, but all of them require multiple days/weeks of effort to get into. e.g., I've been trying for the last week to get some funds into MtGox. First I had to setup a Dwolla account (which is still wip), then once I get the access to the account I have to transfer funds to MtGox, and hopefully at that point I can actually purchase something. WHY isn't BTC available as a commodity on the NYSE?? If we could get an ETF or something similar added that people see as a legitimate, and easy, way to purchase BTC then it would shoot through the roof.

Shorting or selling gold today is downright stupid. Hold your gold if you're lucky enough to have any, buy whatever you can afford.

Every reputable analyst says it will top $2500 by the end of this year, then from there who knows Collapse is certainly on the cards if the grand plans the US and EUrozone governments have to stabilise this whole mess don't work. In that scenario all banks start calling in their defaults and we play write-down dominos. Personally I'm selling at 2400, as my heart won't stand the stress of waiting for the price to collapse Wink

I'm really not sure if there will ever be the interest to reverse the steady decline of BTC. It's too early and the market is too small to make any informed calls one way or the other, but anyone can see that 90%+ of Bitcoins are held by people waiting to sell, and only a handful are being traded. This for me is a ticking bomb, as market panic could trigger a huge sell-off at any time, knocking the floor out of coins.

Your comments about how hard it is to buy and sell BTC are spot on. It's only going to get harder as regulations and more charges creep in. It's amazing that they have the value they do, as they're still basically inaccessible to the vast majority. We've got a lot of work to do with security, usability and currency exchange before we can even think about using BTC at Amazon, or even a small independant retailer.
BitcoinBug
Full Member
***
Offline Offline

Activity: 196


View Profile
August 13, 2011, 06:24:06 PM
 #150

Shorting gold is not wise, the value can explode any time now (and wipe out short positions). It CAN go down, but not much (15% at most), as people are waiting in line to buy it. I live in ex-yugoslavia country and I remember and know how hyperinflation feels like. What "Deutsche Mark" meant to us then, gold might mean in 5 years, when central banks start competing, which one can devalue their currency more.
The world is changing, relying on technical chart analysis seems very wrong ATM. Look at the fundamentals instead.
miscreanity
Legendary
*
Offline Offline

Activity: 1078


View Profile
August 13, 2011, 09:59:44 PM
 #151

TL;DR: The safeguards for preservation of existing means of wealth don't apply to bitcoin, and that's a big issue when comparing BTC to other currencies or stores of value.

It comes down to cost/benefit. If the benefits of using Bitcoin outweigh the benefits of protecting a depreciating US dollar, Bitcoin will gain ground regardless of the legal safeguards in place. The same situation exists with gold, only gold is already established as being more beneficial, a fact that simply hasn't been acknowledged by many US dollar holders.

The world is changing, relying on technical chart analysis seems very wrong ATM. Look at the fundamentals instead.

Charts still hold validity in helping to navigate weekly/monthly price gyrations, but yes - the fundamentals dictate the long-term trend. Even then, very long time scale charts can help to get an idea of how far the fundamentals will push. Use all relevant tools appropriately.
Bitcoin_Silver_Supply
Sr. Member
****
Offline Offline

Activity: 259



View Profile
August 14, 2011, 07:43:03 AM
 #152

I haven't seen your charts going back far enough yet so here is a near-100 year one to sink your speculative teeth into: http://www.thumbcharts.com/1333/gold-and-silver-prices-since-1915

The real question now is whether or not the inflationary pressure of 2007-onwards is lower or higher than that of 1971-80s. My impression is that we're just getting started. Stagflation is nasty business.
BitcoinBug
Full Member
***
Offline Offline

Activity: 196


View Profile
August 14, 2011, 08:21:22 AM
 #153

Inflation-adjusted graphs are using official CPI, if you use unofficial one (www.shadowstats.com), 70s inflation adjusted value of gold would be a lot higher.
Otoh
Donator
Legendary
*
Offline Offline

Activity: 1918



View Profile
August 15, 2011, 12:47:23 AM
 #154

a fine thread, many thanks to the contributers, just read through it all in one sitting & will continue to follow now with interest

Re: Gold: I smell a trap

that recent run from around $1500 to about $1800 was some bear trap  Wink

http://www.the-privateer.com/chart/gold-pf.html


Node40.com is a leader in DASH hosting, dedicated exclusively to fully managed masternode hosting. Professional, organized, and responsive. I have many dozens of nodes with them.    
BTC = $c²     BTC = 1otohotohMoQoxHuxLBveQiZcV3Pji3Tc      DASH, Digital Cash = www.dash.org   
   CHARITY | MY REP | DICE
foggyb
Legendary
*
Offline Offline

Activity: 1302


View Profile
August 16, 2011, 01:52:35 AM
 #155

http://blog.ml-implode.com/2011/08/watch-goldsilveroil-price-ratios/

Buy precious metals.
MatthewLM
Legendary
*
Offline Offline

Activity: 1092



View Profile WWW
August 16, 2011, 10:03:21 PM
 #156

They have probably lost any profits on the short positions by now and will start to lose money as gold goes higher from here or sometime soon.

Bitcoin Extra Wallet | Peercoin Android Wallet
BTC: 1D5A1q5d192j5gYuWiP3CSE5fcaaZxe6E9  PPC: PH7fVn1Xs7nkUFmdwCX2ZRYfLPCSwGxAq9
Ten98
Full Member
***
Offline Offline

Activity: 201



View Profile
August 18, 2011, 01:53:01 PM
 #157

They have probably lost any profits on the short positions by now and will start to lose money as gold goes higher from here or sometime soon.

We broke $1800/oz today. Hope it closes over this point...
miscreanity
Legendary
*
Offline Offline

Activity: 1078


View Profile
August 18, 2011, 02:49:26 PM
 #158

We broke $1800/oz today. Hope it closes over this point...

Spot touched $1825 and front month futures hit $1829. The gap at $1680 has yet to be filled, and I won't be comfortable until it is. Only a week ago, we had the bear raid that took off nearly $100 in two days, yet here we are at new record highs. I'd expect another raid with tomorrow being options expiration, and more raids the rest of the month for futures options expiration and September delivery notification.

Massive amounts of gold and silver are being moved at the COMEX and LBMA. Large shifts in GLD gold related to COMEX member banks with heavy outstanding obligations of delivery to clients, along with movement of metal out of GLD during price rises when the opposite should be taking place.



The big fish are rapidly redeeming their gold. Something is rotten in Denmark...
bitcool
Legendary
*
Offline Offline

Activity: 1441

Live and enjoy experiments


View Profile
August 18, 2011, 03:35:09 PM
 #159

curious, is it just a deeper trap, or different type of trap, i.e. a bear trap
MatthewLM
Legendary
*
Offline Offline

Activity: 1092



View Profile WWW
August 18, 2011, 03:37:44 PM
 #160

Gold can't go up and up all the time, you must expect corrections. If you have the time, expertise and appetite for risk you can short these corrections but over the long term gold is going up.

Bitcoin Extra Wallet | Peercoin Android Wallet
BTC: 1D5A1q5d192j5gYuWiP3CSE5fcaaZxe6E9  PPC: PH7fVn1Xs7nkUFmdwCX2ZRYfLPCSwGxAq9
Pages: « 1 2 3 4 5 6 7 [8] 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 »
  Print  
 
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!