The ISEQ Thread Part I - March 2008 - October 2008 **LOCKED**

I left Squire Hall amid rain and retreated to base camp so back to a less frivolousness life style. Bit bogged down so may return to this in a few days.

I always consider money as a 'lubricant'. It is a token that enables trade. The more trade you have the more lubricant you need or the whole thing seizes up.

Has anyone considered how much money you need in an economy to make it work?

Gold is a commodity used in electronics and jewellery. What happens if I decide I need to buy some for my ring making emporium in Agra and so do all my competitors? If it is worth a thousand super dollars an ounce and demand goes up and with it the price surely that drags the value of the super dollar down in relation to gold? It could end up being sold for 2000 super dollars an ounce. In which case the currency is worth half of what it was. Or does the Bank redeem the note at face value. I head along with my 1000 supers and get one ounce, but if everyone did that the reserve disappears.

I still prefer land. The smell of a fist full of good leaf mold hard to beat.

rockyracoon wrote:

Squire wrote:

. . .I agree there seems to be a concerted effort to prop the dollar. Whilst on face value I can see the interest that Japan and China would have but soaking up dollars is simply increasing their exposure. As Dan pointed out it is the Fed supporting the miscreants and the dollar. It is the only sane explanation, but only 400 billion to go and then the printing press and fun starts.

I can see absolutely no reason to have confidence in the US economy until someone decides to address their multiple deficits. That is not going to happen this side of Bush's departure and assuming Obama is the replacement it will be a few month before reality kicks in.

Also staying well out of it myself, unless I see an anomaly or very sharp movements down.

Keep myself amused with construction projects out East. Gives me an excuse to winter in warmer parts and claim it against tax.

How's about yee squire? Ah, but, here's the rub. China and Japan own huge amounts of T-Bills etc., and every month the dollar was going down, they were losing billions in value. They're are literally caught between a rock and a hard place. Plus, these economies are seeing an erosion of their export power with the dollar going so low. They must know the US ponzi debt scheme is coming home to roost but they'd rather see an orderly erosion of the dollar until they can off load their US denomiated debt and let the US sink into the sunset. They'd also like their own domestic markets to pick up in economic activity before the US tanks.

This is an interesting article on the Chinese Investment Corporation's 5 billion investment in Morgan Stanley.

http://www.robertamsterdam.com/2008/01/dee_prince_china_morgan_stanle.htm#more

Squire. Are you on drugs or has your brain seized up because I rate you as one of the best posters here and yet you can not get your head around this. I will type slowly so please do not read quickly.

The US will have a huge qualtity of gold sitting in Fort Knox. For each ounce there they will issue say 1000 superdollars. Each of these superdollars is worth one thousanth of an ounce of gold. That never changes. It is tied to gold. If you save up 1000 superdollars you can go and get the ounce that it is tied to and exchange it and go on your way.

If the demand for gold increases the price will rise in all currencies except the superdollar. The value of the superdollar will rise exactly the same amount as the gold value. It may well cost an Indian a lot more rupees but for an American it will always cost 1000 superdollars.

You see a situation where you will come along with numerous times a 1000 superdollars and clean out the stockpile. You forget the fact that you will not have any superdollars. If the US has most of the gold they can set the price. They might price the superdollar to 10000 euros so to buy an ounce you would need 10000000 euros.

If the US defaults and introduces a new gold backed currency, exchanging domestic money only , then the Americans are incredibly wealthy and everyone else is screwed.

This is based on 2 dubious assumptions.

1. The gold is still in Fort Knox

2. The leadership has the best interest of the US citizens foremost.

There is another possibility that I favour myself, that the gold sold is in private elite hands. If this is the case you don't want to know what that means.

5 am start, bluffing requires so much preparation. Up to no good and paying the price.

The problem firstly is it takes two two tango. You assume the rest of us will want the gilded currency.

Secondly if that is your new currency then how do you set a rate between existing and the new? If it is equitable will not a large whack of those new supers not end up abroad in debt reparation? The government can still issue bonds and pay the piper, but would be unable to print so with a trade deficit the economy eventually ceases up.

I have clear memories of an early childhood in India where there was generally no money in circulation and what that meant. There were no service industries, shopping at the local shops meant the free standing mobile huts located near the railway station. All very colourful, but you need enough money in circulation to get an economy to work. No lubricant and the whole system ceases up. In fact in India today, as in Russia and even China, move out into the country and small towns and villages and you will see a big difference between there and rural Switzerland, Germany or England. It is a nightmare that is hard to break, no money, no demand, therefore no jobs, therefore no money. I have seen highly skilled men work long hours, for what I would regard as nothing, because they are in a trap caused by lack of money in circulation.

So all these countries retain paper and print away, or they may have gold and decide to peg their currency. Uncle Sam goes gold and has a limited number of Supers in circulation and hopes to hell that not too many people go on foreign holidays or buy foreign goods. If these supers replace the dollar as the world trading currency then they could end up virtually anywhere and with outflow the economy of the USA starts to cease up.

The validity of those assumptions would also worry me. Some observations on who owns gold. A lot of gold is in private hands and not just extremely wealthy hands. There is a tradition in some cultures to buy the better half some gold trinkets in times of plenty and she is the families mobile reserve bank. I am convinced that this is the real reason why Muslim men want their women well covered. There is a lot of gold held in this way, add to that the bits and pieces that some have, be it candle sticks, rings or bracelets and multiply it up a billion times and a large percentage of the total is allocated.

You then have the influential wealthy and if a move to fixed currencies seems likely you can bet that they will have a vault full well ahead of the pack. So we move control from the Fed. to the Baron's vault.

Come on you know by now that government is about running the country in the interest of the powerful. Always has been and not likely to change. In democracies the electorate are inconveniences that have to be appeased and duped.

See the brain is back working again on all cylinders. Those last two paragraphs are unlikely to be bettered for a long time here.

The suspicion is that indeed the Fed and the governments are indeed working for the Barons. The evidence of this is the fact that the ECB and especially Gordan Brown sold off the gold. It was owned by the public and now it is in private hands someplace. The important thing to remember is the method of sale gauranteed a rock bottom price. Nobody could be so stupid to do this without being ordered to. If it is the Barons that have it and indeed the US gold also then not only the Europeans but the American people will be destitute as well. The Barons would issue the currency for everyone then and the Fuedal System would be back and the population reduction would be on until the world population is 500 million. Independent countries in a position to resist this must be crushed and that is what we are seeing attemped at the moment.

The discussion of the other scenario can wait till later.

Squire's point above about what if not everyone takes the gilded currency - what if countries want to print their own currency say Sweden? What if they were not alone - what if other countries wanted to be gold-free too such as the UK, Denmark, Norway and Switzerland? How your currency would interact with theirs would depend on the volume of trade between your countries, wouldn't it? Does America trade much with Sweden, Denmark etc. ? Perhaps not so much but you travel to those places at least and buy Saab and Volvo ...

The amount of a currency in circulation depends on demand in the economy and how much that economy trades or needs to trade with external economies. If people are resourceful and are lucky to live in a land that is productive then, if needs be, they will survive with little or no outside trade.

And what happens if there is capital flight out of your country - let's say the Russians suddenly fancy a couple of tonnes and buy it up? Your country is left with less backing - surely this is possible to do in your system?

And you say you will price the exchange rate with external economies at a certain level so this might not happen but then you will price your people out of being able to buy the goods they need from abroad and cannot produce at home - oil for instance. So you set a low rate with the Saudis so that your oil comes in as cheap as you want it but then they buy your gold and in no time you will have no purchasing power left to buy anything from abroad so you might end up having to produce your own and tie your currency to nothing or, better, tie it to demand in your own economy ...

Had a very good day today. Recessions do provide all sorts of opportunities if you address the needs of those with assets and problems. People are more ready to jump when their backs are to the wall. Fear is an even greater motivator than greed.


ISEQ heading south at 4,333

On gold this may be of some interest, regarding where some of it ends up. In India there is a tradition of investing in gold trinkets and there is a substantial jewellery business. There is a lot of gold in private hands in India.

http://in.reuters.com/article/domesticNews/idINBOM15176420080819?rpc=401&

ISEQ falling at the minute and looks set to go through 4300

Squire wrote:

On gold this may be of some interest, regarding where some of it ends up. In India there is a tradition of investing in gold trinkets and there is a substantial jewellery business. There is a lot of gold in private hands in India.

http://in.reuters.com/article/domesticNews/idINBOM15176420080819?rpc=401&

ISEQ falling at the minute and looks set to go through 4300

I had heard this. The jewellry shops of Southall, London, are a wonder to behold.

Was it you, Squire, who said that this was what was hiding under the modest garments ?

cactus flower wrote:

Was it you, Squire, who said that this was what was hiding under the modest garments ?

Light hearted suggestion, but there is some truth in it. If you are partially nomadic or do not have a very secure base then what else do you do with valuables but carry them around? The jewellery is used as the family's bank of last resort. I spent a bit of time in India, Algeria and Lebanon among other places when a child and my observation would be that the middle class in these countries have a lot more gold than their western counterparts. Admittedly child's eye view and not very scientific, but I never was a dreamer. Bar a few rings western women have little gold or silver. Few Western women have a collection of gold bracelets, yet these are common place items in other cultures.

I suppose it may also be to do with economic insecurity, gold is a safe bank if you live where the currency can literally be paper.

If you want jewellery made go to Agra. They will make you anything for a price.

Quote :

20/08/2008 - 18:02:09
The ISEQ index of Irish shares was down today, falling 36.16 points to 4,297.37.

We'd better start prospecting for some more gold.

Forget the gold, grow enough food to eat, enough timber to build, produce enough stones and cement and get on with renewable energy. All else becomes a possible surplus. Never forget Midas.

Squire wrote:

Forget the gold, grow enough food to eat, enough timber to build, produce enough stones and cement and get on with renewable energy. All else becomes a possible surplus. Never forget Midas.

This is it - economics ends up coming down to simple enough stuff in the end, surely to god - the bottom rung on the Maslow hierarchy of needs ..



after that I'm afraid there are other emotions which demand attention plus there is the need to make the lower layers more efficient which is an on-going battle of Good versus Greed.

You'd never know, with a great effort and a lot of Will and work, one year our little Irish society might get to the level of job-security..

Getting back to the gold question. One scenario have the Barons holding the gold and the other has the US Treasury holding the gold. I think this gold is gone to the Barons but that is unknown

We will assume the US has the gold it says it has. This what happens. If it holds enough to dominate the market they will be able to set the price so high that they will be dominant. The other countries will will have to back their currencies with something to give it value. The days of fiat currency will be gone. Swedan might choose to back it's currency by say State owned forests. The value of their currency supply would not be worth much. What would Ireland use, it dosn't have a pot to piss in. Mexico might decide to back it's currency by silver so the Mexican currency would have a value relative to the dollar depending on how much currency the issued and the value of silver relative to gold. The oil producers could back their currency by oil but that would be a short term fix. It would be just a question of what assets any country had state owned plus what could be squeezed out of the citizen's toil. Places like Cubawhere the state owns everything would have a decent currency.

If the US only owned say .3 of all the gold then they would not be able to set the price but they would be in good shape. Places like Russia would be going on a gold standard as well and Canada Australia etc.

If the US has little gold then it would back the currency by land of which it owns plenty. Better than nothing.

The most important thing to remember is that the gold can not be bought away by foreigners. As long as only as much currency is issued as there is gold to back it everything is fine. If some trade in their bills for gold the supply of bills will drop making it more difficult to aquire the bills.

Up to 1933 things worked. You had a twenty dollar bill and a 1 ounce 20 dollar gold coin both in circulation. 20 dollars was a decent bit of money so also in circulation was a one ounce silver coin worth 1 dollar. This is a coin you will see Clint Eastwood throwing on the bar in Westerns. So gold was worth 20 times silver. There was practically no inflation.

It was the Federal Reserve started in 1913 that wanted gold gone so that they could print with abandon. That was the start of the biggest con-job in history.

youngdan wrote:

We will assume the US has the gold it says it has. This what happens. If it holds enough to dominate the market they will be able to set the price so high that they will be dominant. The other countries will will have to back their currencies with something to give it value. The days of fiat currency will be gone. Swedan might choose to back it's currency by say State owned forests.

You make a very swift jump between the Americans switching to gold and the Swedes suddenly switching to trees. Why so sudden? If the price were set so high in America then Sweden would cease trade with America depending on how high your prices rose.

Sweden would keep its token currency and begin trading whatever goods it traded with America in the old fiat system with its neighbours instead. America I'd say would collapse unless Europe and China and the Arabs also bought into this which is very unlikely.

If anything should be tied to money then it should be a basket of world resources including water as well as a body of certain technical skills which humans possess along with the energy which is involved with production. That's even leaving out tying externalities of the environment to your new currency. A currency which overly-depends on another nation's advantage-taking of its comparative advantage is in danger of being devalued in the long term. And unless that devaluing currency is somewhere ultimately based on a comparative advantage of its own then inflation will occur in that nation to a degree where it will adjust by producing to fill the deficit or it may engage in war ...

I contend that this is roughly how it is in the present system.

I only mentioned Swedan as it was asked about by yourself earlier. Maybe the state owns other assets like hydro,I don't know. Other states would trade with themselves but they would be poor. They all would have to back their currency with something.

youngdan wrote:

I only mentioned Swedan as it was asked about by yourself earlier. Maybe the state owns other assets like hydro,I don't know. Other states would trade with themselves but they would be poor. They all would have to back their currency with something.

Well Sweden is a good example because it has good natural resources and thus a good comparative advantage while it is also outside the Eurozone currencies.

The currency would be backed by the underlying strength in the economy and how successful it is in trading with other countries. The idea must be that countries mutually take advantage of their own natural features to compliment and enrich each other. This must happen in the States too. Thus in Europe there tends to be high production in the North, farming to the West and tourism to the South, but that's very general.

Ireland has no outstanding comparative advantage unless maybe farming. We have abundance of water and natural energy but we need to trade something in order to acquire materials to take advantage of this natural God-given wealth as there is little mining or oil to generate plastics and other raw materials of manufacture.

I think with little effort this country could become fairly self-sufficient given our low population and abundance of some natural resources and it might be no harm if we try to take advantage of that ourselves.

ISEQ is struggling to get up around 4250 today...

Auditor #9 wrote:

youngdan wrote:

We will assume the US has the gold it says it has. This what happens. If it holds enough to dominate the market they will be able to set the price so high that they will be dominant. The other countries will will have to back their currencies with something to give it value. The days of fiat currency will be gone. Swedan might choose to back it's currency by say State owned forests.

You make a very swift jump between the Americans switching to gold and the Swedes suddenly switching to trees. Why so sudden? If the price were set so high in America then Sweden would cease trade with America depending on how high your prices rose.

Sweden would keep its token currency and begin trading whatever goods it traded with America in the old fiat system with its neighbours instead. America I'd say would collapse unless Europe and China and the Arabs also bought into this which is very unlikely.

If anything should be tied to money then it should be a basket of world resources including water as well as a body of certain technical skills which humans possess along with the energy which is involved with production. That's even leaving out tying externalities of the environment to your new currency. A currency which overly-depends on another nation's advantage-taking of its comparative advantage is in danger of being devalued in the long term. And unless that devaluing currency is somewhere ultimately based on a comparative advantage of its own then inflation will occur in that nation to a degree where it will adjust by producing to fill the deficit or it may engage in war ...

I contend that this is roughly how it is in the present system.

Seems so to me too. It seems that the dollar and maybe other currencies are much overvalued when taken in the way your describe Auditor. Reversion to gold would be a shock to the world economy that is already contracting. Plus the economy is too globalised for any nation state to go it alone without a massive contraction of production. Perhaps that is why I sometimes imagine youngdan a bit like Davy Crockett, dressed in hides, furry hat with tail and a trusty rifle.

My neighbour says to me, look Squire I have a few gold candle sticks and from now on I am going to value them at 10,000 euro an ounce and issue my own currency based on that assumption. What will my response be? "Be careful picking your own mushrooms Stan." I am not selling myself into prostitution to pay him whatever he thinks his time is worth based on his valuation of worth. So until he wises up trade between us will be zero.

Gold is currently trading at about 840 an ounce. That is its market value and it rises and falls. I personally do not believe that the USA holds such a large supply of the stuff that it could corner the market. If the move is in that direction the decision will be made by the Baron's friends, Bankers etc and you can then be certain where large quantities lie. They will use the chance to get themselves out of the hole or increase their stranglehold. They will benifit and the rest of us can whistle. IMO right now we should be calling for Banks to be allowed to fall without bailouts and just consider ways of protecting the customers. Let these parasites take the hit that they richly deserve and don't do anything that they can manipulate in their favour. It is obvious that the system is rigged and many of the important decisions are made by a very few individuals.

I am totally unconvinced that life was a bed of roses back with the gold standard, quite the opposite, and that was when world trade was distinctly more limited and less complex. There were constant financial crises.

I am also totally unconvinced that any country that is running such almighty deficits can pull of such a stunt and if it did it would find itself in skid row in a very short period of time. First thing you know there would be a bullion shipment to China followed by one to Japan and the OPEC countries.

Then there would be all the complications with being the worlds trading currency. The vault just is not big enough.


There is two ways of looking at the US economy. The traditional one is that its consumption drives the global economy. The second is that it is simply a parasite. If you produce less than you consume then you need us more than we need you. The country is a debt junkie. It needs to go cold turkey, no other cure.

The USA running at near equilibrium (bit up or down doesn't matter) would restore the countries fortunes and would be good for everyone else. Hope you start the rehab soon.

ISEQ at 4228 can't see it going anywhere useful just yet.

Interesting to see more US jobs returning to the US today, this time from Ireland (Boston Scientific). Increased shipping costs ?

According to this the total ever mined is 158000 tonnes. As hard as it is to believe it is a cube with sides of only 20 meters as gold is almost twice as heavy as lead.

http://en.wikipedia.org/wiki/Gold

This article would have convinced anybody that gold should have been bought at this time http://news.bbc.co.uk/1/hi/business/the_economy/337685.stm

The US is supposed to own about 8500 tonnes. Some believe it is gone. This is not a big enough percentage to set the price at a high arbitrary level

If they have this amount and used it to back the federal debt the price would be about 9000 dollars an ounce.

Whatever happens gold should be bought while it is available

Maybe the Treasury bought the European gold with printed dollars which would be a great stunt but if The Barons have used their central banks to buy the gold with confetti then we are screwed.

It's surprisingly small if it's 20x20x20 metres but it will never happen that the dollar will be backed by gold dan - it will only be so by force of war which will never happen.

Has anyone heard how Zimbabwe is doing with its "currency" of petrol vouchers and old coinage ?

It is a small but heavy cube. The situation in Zimbabwe will be everywhere. They have nothing to back a currency with. Rhodesia was a wonderfull country till fools decided that the Walli-Walli tribe should run the show.

Just to get the US reserve in perspective as far as I am aware India imports about 700 tonnes a year. About 1/12 of the reserve. Turkey imported 230 tonnes last year. I wouldn't go rushing into a gold standard you may get a real shock where it is actually owned. I would guess that there is probably more gold in India than there is in the USA. Just a hunch.


ISEQ 4203