Rocks & nuts

vault1

Typical personal gold vault of blog reader

The price of an ounce of gold hovered around the $1,000 US mark this week. It will advance.

I made that point clear in my last financial book, published in January, and also suggested most sane people might want to have some. How much depends on your view of the world. The tinfoil crowd ardently believes the future of paper money is dark, as governments crank out endless bonds and new trillions in currency. For them, love is a root cellar full of nuggets.

Of course, there’s some merit to being prepared for the unpleasant. It’s why I have a house with a generator. But gold’s unlikely in our lifetimes to be tradable for goods and services on the streets of Kelowna or Moncton, so it’s not a medium of exchange. In other words, it’s not money, and won’t be. However, odds are it’ll continue to be a storehouse of value while, of course, providing a hedge against inflation – the relentless degrading of paper money.

Oil does the same, but unlike gold it actually has a use. Unlike gold, it’s finite. And unlike gold, it will cause a global crisis which poses immense danger and unbridled investment opportunity. However, it makes one hell of a mess in the root cellar.

So, how to invest in gold if our current social experiment in unending debt makes you nervous? In my book, I look at the various forms – although it seems every bullion bunny coming on this site is married to the idea of a personal own rock collection. That always confounds me, since any commodity has to be converted to money before it becomes useful wealth.

So, here’s my fav gold play in the current environment of rustling inflation, currency unrest and hot metals: Derivatives. Why? Simple: Leverage.

You buy a contract for gold bullion for pennies on the dollar, set a price in the future at which you want to buy or sell, exercise the option or let it expire, and sell the contract for a far greater financial gain than if you’d owned the underlying asset. Plus, no storage fees. No worries about desperados breaking into your house. No yellow rivulets into the drain if your house burns.

Next fav: Precious metals ETFs. There are exchange-trade funds which hold gold assets directly in their vaults so you don’t have to, and others than trade in the kinds of futures contracts I mentioned above. Both physical ETFs and Futures ETFs are hot these days, and no wonder. They give gold nuts excellent exposure to a commodity which is both an inflation and currency hedge play, while posing temporary shelter for equity nuts fearing an October Armageddon. And that sure wouldn’t surprise me much.

In short, I’d make these things clear to anyone who asked:

  • Our future includes more inflation, higher interest rates, more taxes and a diminished standard of living.
  • People investing in commodities will do well. Gold is certainly one of them.
  • Governments will be on the ropes for years to come, paying for the decisions they’ve made in past months. Vote for the guys who promise you less.
  • Real estate won’t pace inflation. Just the opposite. Demand will be squished by the rising cost of money and stagnating family incomes, thanks to increases in sales and other taxes.
  • As far as I can see ahead, cash will be king.
  • And liquidity the god.

gold

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137 comments ↓

#1 Dan in Victoria on 09.08.09 at 10:29 pm

Oh man…. I can hear the gold bugs now,and the political blog too….Might as well stir the pot and get em all going.I’m getting the popcorn and my favorite refreshment out.Last three posts have been excellent Garth.

#2 ValueHunter on 09.08.09 at 10:33 pm

“Unlike gold, it’s finite.” — Garth

What are you talking about?

#3 Dave on 09.08.09 at 10:35 pm

people, you want to get into a bunch of small gold mining stocks. That’s where the big gains will be

#4 Jim on 09.08.09 at 10:37 pm

If you believe in the inflation scenario then buy stock in a high quality business. With the stock of a high quality business inflation doesn’t matter, the paper money will just cycle through the business and give you that return stream that the business is generating.

Also, if you believe in the hyper-inflation scenario you might as well take on more debt! Take on a huge mortgages since the nominal value of your debt won’t change but the dollars that you’re using to pay it off will increase. Theoretically you’ll be paying off your million dollar mortgage with fistfuls of $100,000 bills.

#5 Future Expatriate on 09.08.09 at 10:37 pm

Now Garth, how’d you get that picture of the first of my ten basement vaults?

As far as liquidity, my local neighborhood gold dealer loves to see me come in the door, and it beats the pawn shop hands down every time. He’s not going anywhere as long as we wee leprechaun folk will be around.

#6 Future Expatriate on 09.08.09 at 10:39 pm

Gold is infinite? When did you solve alchemy?

I know, next book.

Eight million ounces a year from Barrick alone. — Garth

#7 Jsan on 09.08.09 at 10:44 pm

Absolutely agree. In a “Normal” housing market, Inflation drives interest rates higher plus assets such as house prices higher. In a housing Bubble market, Inflation drives interest rates higher but because house prices are already at peak levels and only affordable based on low interest rates, they would actually fall in value as the high Bubble prices are no longer sustainable under higher mortgage rates.

If you bought at these near peak levels, you get twice the pain. A falling house value plus a rising mortgage payment.

This really shows why governments and Central Bankers are so utterly foolish. They try to prop up spending by pushing Interest rates to abnormally low levels to keep the spending going. Unfortunately as they will see, all it accomplishes is bringing in more naive buyers who will be taken out of the economy once interest rates go higher. All of these people who are buying at these still very high house price levels will be the future bankrupt of this country or at the least, will have no disposable income left over to spend once they barely make their monthly mortgage payments. This makes for an even weaker economy as mortgage debt ridden families are no longer spending and helping to fuel the economy.

#8 nonplused on 09.08.09 at 10:49 pm

I like Central Fund of Canada (CEF) for this purpose. Allocated gold in the main CIBC vault, audited, some silver too, relatively low fees, very liquid, and correlates very highly with the gold price. No paper gold or derivatives. There is usually a premium but you get paid it selling so it isn’t a deal breaker like the premium on gold and silver coins.

I agree with Garth that gold and silver are unlikely to ever be practical as a mechanism of exchange. Gold is near $1000/ounce right now. What are you gong to buy with a single one ounce coin? A big screen TV? The first trip will always be to Scotia McLeod to change the coin into cash. Unless they start minting a new series of coins with 1/10 of an ounce and less, that aren’t micro .999 coins. Something tough the size of a loonie. But that would essentially put us back on the gold standard, which ain’t going to happen. Every now and then the government floats sound bubbles about eliminating the penny because it costs more to make than it’s worth, which would effectively eliminate the “base metals” standard we are on now. Shortly thereafter goes the nickel, then the dime. Maybe even the quarter one day and the dollar will be the smallest unit of non-electronic currency.

Also, gold and silver are too volatile. One day an ounce of silver buys $20 worth of gas and a week later $15. That’s why only banks and coin dealers can really deal with it on mass.

#9 "Gord" in Chinglish on 09.08.09 at 10:58 pm

Watch the gold bunnies go crazy now…….it will be like the grounds at UVIC. Wheeee…….the dollar is collapsing we’ll all be rich.

#10 "Gord" in Chinglish on 09.08.09 at 11:03 pm

Just a side note for all the commodity players …..anyone read anything by Julian L. Simon.
You may want to. Just an idea. You may be getting a little bogged down in the commodity play.
There is short run and long run …….what kind of runner are you?

#11 Tony on 09.08.09 at 11:04 pm

Just like the US government manipulates the stock market it also manipulates the gold and silver markets. The banks do also but to a much lesser extent. How many times do these people who think they’ll get rich when they see gold bust a thousand US to the upside need to lose all their money before they finally figure it out? The US government manipulates the gold, silver and platinum markets. The US government doesn’t want to ever make it look like inflation is upon us. Technically gold should be making new lows not new highs. People with their heads in the clouds will once again lose 50 percent of their money in the next couple of years as gold falls to 500 US. Gold is seeing the absolute top at around 1000 US an ounce for the next millennium.

#12 Concerned Citizen on 09.08.09 at 11:04 pm

Garth,
I am confused, you outline to inves in gold etf’s oil ect , however at the end you mention cash is king.
Are you saying we should just sit idle for a while in cash and to be liquid.

#13 Keith in Calgary on 09.08.09 at 11:15 pm

You forgot to say………debt will be the ruin of the individual and the family.

#14 shalimar on 09.08.09 at 11:36 pm

Gold is, and always has, acted like money. Its no one elses liabilty. I can hide a Maple leaf in my luggage hop on a flight anywhere in the world and in some back alley, exchange the gold for equivalent purchasing power in whatever local currency or medium of exchange is in use.
The nominal fiat value may be $10 or $10000 but thats for thats for the politicos to decide.

#15 dd on 09.08.09 at 11:49 pm

You know what all the nut bars will say. Garth said that 100% of assets should be in gold.

You are a sucker for punishment.

#16 Munch on 09.09.09 at 12:37 am

Se?

If you ignore me long enough then I go away!

bwahaha

Got Gold?

I TOLD ya so!

#17 ginner on 09.09.09 at 1:01 am

I am not what you call a classic gold bug. However, I often cringe when reading your comments about its potential role in the future. You have stated quite clearly that it is a store of value, a hedge against inflation etc. but I don’t think you really get how close we came last year (and very well could again until the debt issue is resolved) to losing the currencies. In fact, the risk has not declined much.

Contrary to your opinions of yesterday, the Fed does indeed have the ability to create money out of thin air by buying laundered treasuries. The US currency is at risk if that program is expanded. China has already made it clear that continued expansion of the Fed balance sheet and debasement of the currency are not at all something they will stand for. They have called for a new international reserve currency…and they ultimately will get it. SDRs have been proposed, as have baskets, but there is no currency which will have the credibility that gold can provide.

Now before anyone jumps over a return to the gold standard, please remember that there were good reasons for getting rid of the gold standard which have nothing to do with Gold’s value as a reserve currency. The gold standard was tossed because the US could no longer control it….more specifically they could not control the money supply in their own country which has dire consequences for growth. It had to go.

But there is a middle ground…freely floating gold exchangable for freely floating currencies….pegged exchange rates a thing of the past. And a pegged gold exchange rate that would remain that as well: a thing of the past.

Gold has a future, and I think a part to play in the resolution to a confidence crisis in currencies that has yet to fully play out. That may not come to pass this year, but it’s very possible it will at some point in the next decade. For now…..6.6% physical, 3.3% virtual…and a slingshot with silver bearings to protect ‘all of it’.

#18 TaxHaven on 09.09.09 at 1:06 am

Garth, perhaps, like most mainstream investors, you are overly fixated on, and confident in, paper currency.

ETFs? Gold derivatives? Sounds like your sole purpose in the exercise is to try and accumulate even more depreciating paper currency… We all do that of course, but the real use of physical bullion is for that portion of one’s assets that one wishes to preserve at all costs.

And speaking of “rocks and nuts,” you’re the first, the very FIRST, person I’ve ever heard say the supply of gold is infinite…

Like many, you believe in the idea of “intrinsic value”. I’ve had people say APPLES are more “valuable” than gold because you can eat them! Oil is more “useful” than gold because gold has no industrial use, right? That’s because gold serves only as money – not an industrial commodity. Has for 5,000 years.

You can only play the paper currency chase game, with a portion of your assets and only for so long…

Canadian Five Cents.

1870-1919 .925 silver, .075 copper
1920-1921 .800 silver, .200 copper
1922-1942 1.000 nickel
1942-1943 .880 copper, .120 zinc
1944-1945 nickel/chromium-plated steel
1946-1951 1.000 nickel
1951-1954 nickel/chromium-plated steel
1955-1981 1.000 nickel
1982-2001 .750 copper, .250 nickel
1999-2009 .945 steel, .035 copper, .020 nickel

Obviously silver, like gold, is too valuable even for use as money.

You said it yourself: “…the RELENTLESS degrading of paper money…” You ought to have some bullion.

#19 RISTO on 09.09.09 at 2:12 am

How will bank stocks perform if your prediction comes true?

#20 HouseBuster on 09.09.09 at 3:19 am

“Unlike gold, it’s finite. ”
————————

Gold is finite too.

#21 Jimmy on 09.09.09 at 6:45 am

My metal of choice for holding is lead. I like the 5.56mm in 55 grain. It comes in a nice brass package. It’s storage life is a very very very long time if you keep it dry. If gold goes to $5000 an ounce the conditions just might be that you’re better off with a cabin, a rifle, a pack of seeds and a watering can. I wonder how much gold I could trade my lead for if things got that nasty? I mean honestly. I’m not a sicko ya know.

No, of course. — Garth

#22 JO on 09.09.09 at 7:00 am

Derivatives / ETFs are loaded with counter party risk. GLD has over 30 counterparties alone. In a time of major systemic stress where many FIs will be under extreme stress and many will fail, you cannot take any counterparty risk. This is THE main risk in these products going forward. Stay away from them. CEF is a good option as someone alluded to, so is GTU.UN. There are others now. Sprott just launched a traditional mutual fund that holds bullion too.

Holding some gold is a good idea..it should break its former high of around 1033 in the next month or so..but I can’t shake the feeling we’ll see gold under 700 in 2010. US Dollar scare / China revlauation may be the on way in the next 2-4 weeks to help gold reach a new high…2010..look out below.
JO

#23 cashman on 09.09.09 at 7:20 am

“Unlike gold, it’s finite. ”
————————

Gold is finite too.

Almost all the gold every taken out of the ground is still in holding or circulation.

Oil gets burned during consumption.

Gold is a mineral. Oil is stored sunshine. — Garth

#24 NOBODY on 09.09.09 at 7:20 am

Garth wrote:

Our future includes more inflation, higher interest rates, more taxes and a diminished standard of living.
People investing in commodities will do well. Gold is certainly one of them.
Governments will be on the ropes for years to come, paying for the decisions they’ve made in past months. Vote for the guys who promise you less.
Real estate won’t pace inflation. Just the opposite. Demand will be squished by the rising cost of money and stagnating family incomes, thanks to increases in sales and other taxes.
As far as I can see ahead, cash will be king.
And liquidity the god.

A 10 year old would have come up with a similar assessment.
You HAve spent the greater part of the past 18 months reiteratingthe same old crap.
What we need to know is:
WHEN

Most among us are trading liquidity for debt and cash for assets. It will result in a catharsis. I’m ensure you’re the last to know. — Garth

#25 Mike (Authentic) on 09.09.09 at 7:33 am

We don’t own any gold shares nor hold any gold. I agree with Garth, it isn’t currency and will never be again. Even if aramageddon was upon us and you had 1000oz of gold and I a loaf of bread, I wouldn’t trade it.

We do own oil company shares and have increased our buying of them by 50%. Oil is life for billions that could not live without its byproducts.

Mike

#26 Cash is King on 09.09.09 at 7:49 am

Hmmm, that amount of gold looks exactly like the amount missing from the Royal canadian mint. Someone has some ‘splainin to do.

On a more serious note for the gold bugs.

How do you plan on purchasing items from these gold bars? Walmart will not give you your change in gold. How much propane does it take to melt gold into useable pieces. Not trying to be a smartass. But if all hell breaks loose and people know you have a vault full of gold…well its been nice knowin’ ya.

#27 ca on 09.09.09 at 7:51 am

Garth —

Could you update your view of dividend paying stocks and stocks in general for the next few years?

#28 D in London on 09.09.09 at 7:59 am

Leave it to Garth to stir up a hornet’s nest now and then. Watching the gold bugs and gold bashers have at it is great sport, but the arguments (on both sides) get repetitive after awhile. It is sort of like watching two bums fight over a cigarette butt found on the sidewalk – it’s amusing at first, but it gets real sad real fast. I want to walk away until the fight is over, and not see that again if I can help it.

I often wonder what the demographic profile of the average gold bug is. Are they predominantly male or female? Caucasian or other? Retired or working? What decade of life are they in? From the posts I (often) see here, I always assume they are white males, 50-70 years old, with paid off mortgages and kids long out ago of the house. Probably 50%+ are retired or semi-retired. I have nothing at all to base this view on – I would love to see some stats on the demographics though.

Are there any gold bugs out there who care to self-report?

#29 pbrasseur on 09.09.09 at 8:00 am

Oil is not finite either, current prices already take into account tough to get ressources which are abundant, then there will be synthetic oils made from coal or whatever.

http://news.mongabay.com/2006/0816-wsj.html

Peak oil is a myth and will be the biggest non event ever, anyone who understands how markets function should understand that.

#30 jess on 09.09.09 at 8:00 am

http://www.latimes.com/business/la-fi-pricewar2-2009sep02,0,7546968.story
GROCERIES

Groceries to cost even less as supermarket price war intensifies…

============

#31 jess on 09.09.09 at 8:04 am

According to lenders like GE Capital, the average interest rate on DIP loans has nearly doubled in the last two years, to 6.5 to 9.5 percent above benchmark interbank rates. Lenders have also doubled their fees.

==========

The popularity in recent years of companies taking out loans that were secured against their assets also complicates securing a DIP loan, as the companies are left with fewer unencumbered assets to pledge against the loan, Morgan Stanley said.

“This is yet another example of the unintended consequences of the proliferation in leveraged loans and securitization over the past few years,” the bank said.
“This is yet another example of the unintended consequences of the proliferation in leveraged loans and securitization over the past few years,” the bank said.

Bankruptcy proceedings may also be more contentious than previously as corporate lenders have shifted away from banks to hedge funds and other investors.

“The holders of paper heading into bankruptcy are very different in this cycle relative to history,” Morgan Stanley said.

#32 cj on 09.09.09 at 8:09 am

Gold is a mineral. Oil is stored sunshine. — Garth

huh?

#33 Bill Muskoka (NAM) on 09.09.09 at 8:15 am

You buy a contract for gold bullion for pennies on the dollar, set a price in the future at which you want to buy or sell, exercise the option or let it expire, and sell the contract for a far greater financial gain than if you’d owned the underlying asset. Plus, no storage fees. No worries about desperados breaking into your house. No yellow rivulets into the drain if your house burns.

ROFLMAO! A CONTRACT? A piece of paper worth less than the paper our money is printed on? Man, you must be the marketing manager for Energy Direct!

Let’s see how a contract works shall we?

1. Two, or more, parties make a written agreement to do something.

2. One of the parties then decides to default and scurry off with the assets.

3. The other party is pissed and threatens to take them to court.

4. All the assets have been spent and are non-recoverable.

5. The lawyer fees exceed what you lost, or you cannot afford them because you are BROKE.

6. You are SCREWED SUCKER!

Doubt this? Does the name Bernie Madoff or Earl Jones bring any prescient vision to your mind?

Carry on and may the Farce be with you!

Bill, learn how the futures market works and the safeguards against counterparty risk. — Garth

#34 Jonathan on 09.09.09 at 8:21 am

Gold doesn’t do well in times of inflation. Gold doesn’t do well in times of deflation.

Gold does well when their are shocks to the economy or financial systems.

The largest inflationary period of our time was 1980-2000 when credit expanded the volume of dollars in the world economy by 80 trillion and in real terms, quadrupled it. CPI didn’t catch this since it excludes leveraged investments. All those loans were created out of thin air, yet gold did miserably.

Gold did well in the Great Depression – but it was a deflationary time..

Gold did well once it was allowed to float in the 70s, but that was more gold trying to find its own value. During the oil crisis gold did very well.

Gold did amazingly well after the tech bubble collapse. Fighting deflation with more leverage, the markets got worried about credit (and as it turned out, rightfully so), and as such the value of gold did well.

Therefore gold attempts to predict future credit or economic crisis. What inflation or deflation does is irrelevant. Gold is not a store of value. It’s a speculative commodity.

Gold’s price today reflects the fact that the market is still very concerned about the financial and economic situation. And rightfully so. We have way too much debt out there.

#35 Bill Muskoka (NAM) on 09.09.09 at 8:55 am

Just curious, does anyone deal in reality today or are we now into the Michael Jackson like fantasy world of ‘future markets’ where those a tad bit more refined than your basic casino addict dwell, expecting a great reward to come?

We now have millions of people gainfully employed producing absolutely nothing tangible but raking in billions in psuedo profits ‘managing’ other people’s money.

We don’t need the LHC (Large Hadron Collider) costing billions to create a Black Hole, we have the financial markets fed by an endless stream of greedy, mindless, impatient, and lazy Sheeple.

Presto Magico! The money goes in and disappears from your account! Then , miraculously, a new Villa , luxury yacht, private jet, and semi-slave staff appear somewhere offshore to provide a wonderful life for ONE from the money of thousands. Man,talk about Alchemy being real? The system turns your lead into their gold.

And people thought ‘1984’, ‘THX-1138’, ‘Animal Farm’, and ‘Blade Runner’ were bizzare concepts? Welcome to the New World Disorder where ‘WMD’s’ (Words of Mass Deception) are the accepted reality. Remember…’You can’t win if you don’t play!’

Then we have the Poster Girl for Ritalin, courtesy of Faux News, crying that a President who promotes hard work, self energizing effort, and ‘stick to it to succeed’ is a threat of Socalism? Global National picked right up on that childish insanity. The question is ‘Did they do that to expose this idiocy or promote it?’ Remember, American Conswervatives have two key words ‘Socialism’ and ‘Communism’, and at their mere utterance panic and hysteria break out at a level that makes the H1N1 flu epidemic seem like a minor threat.

Brave New World? I think NOT! Thus ends the debate over Evolution versus Creationism. There is no ‘evolution’ just de-evolution of the human species.

PLEASE Scotty! Beam me up! There is no intelligent life down here on this planet!

Have a wonderful day!

#36 Kurt on 09.09.09 at 8:56 am

I *finally* get it. It is *impossible* to run an industrial economy on little lumps of metal for exchange of value; in fact, we can’t run our current economy on physical tokens at all – too much friction in moving the stuff around and counting it. I’m thinking of all the business-to-business transactions we never see, both large and small. To run an economy like ours, it has to be possible to count and store money with computers, and transfer money using data networks. So, it’s a great idea to have a chunk of cash laying around for the days or weeks that a weather event or some such takes down the net, but the immense momentum of business *will* ensure that the net is restored. Similarly, a little gold is good insurance, because jackasses like Bob Mugabe *do* happen, but to advocate putting all your money in gold means that you’re betting that Steve Harper (and BHO and every other western leader) *is* Bob – and even *I’m* not rabid enough to hurl that insult at little Steve. Either that, or you’re betting that electronic money will disappear altogether – which would mean, at a minimum, collapsing the economy back past the introduction of wire transfers, sometime between the invention of the telephone and the telegraph. If you really *do* believe that, farming skills, hand tools, fertile land, seed, livestock, long guns and amunition are all better bets than gold.

Regarding the finiteness of gold relative to oil, it’s not that gold is infinite, it’s that we’re a hell of a lot better at getting oil out of the ground than we are gold, the net effect being that we’re running out of oil much faster than we are gold. And then we burn it – it’s just gone! Add to that the fact that some parts of our transportation system will be very difficult to run without oil (airplanes, for instance) and oil make for a much better long-term speculative play than gold.

#37 mattbg on 09.09.09 at 9:11 am

Mark Carney seems interested in the idea of using price-level targets rather than inflation rate targets — allowing a period of high inflation to follow a period of low inflation and would not seek to meet a target of where the inflation rate should be. It would seem to allow them to keep interest rates low even when traditional thinking would require that they be raised. Any thoughts on that?

#38 mattbg on 09.09.09 at 9:13 am

If you really believe in collapse, invest in bars of soap and rolls of toilet paper :) People will love you far more for those than if you have gold.

#39 $fromA$ia "Garths Nugget Boy" on 09.09.09 at 9:16 am

I like this link that a fellow blogger left last thread.

http://www.chrismartenson.com/crashcourse/chapter-20-what-should-i-do

Watch all 20 videos.

The part that really blew me away about gold is how he explained that the Iraq/USA war created mass amount of inflation because all the bombs bought and made by the Americans were destroyed in the war causing the price of gold to rise from $300’s an ounce to where we are now.

Gold is grossly undervalued.

BTW Garth, GOLD stocks have done me very well this year. Commodity driven, (heaper labor/deflation), inflation, economic worry, its all worked for me. :)

#40 Tom Araxias on 09.09.09 at 9:17 am

“Eight million ounces a year from Barrick alone. — Garth”

Eight million barrels per day from Saudi Aramco alone – what’s your point?

Oil burns. Gold accumulates. — Garth

#41 Bill Muskoka (NAM) on 09.09.09 at 9:19 am

Bill, learn how the futures market works and the safeguards against counterparty risk. — Garth

We have a highly competent financial advisor that manages our investments. We have seen how the future markets work, and I personally consider them to be one of the worst ideas ever created. They have been the primary source of inflation in food, fuel, and other consumables. While people work to have a good life, these clowns milk off the profits for themselves. Think Pork Bellies as an example!

Safeguards? Don’t make me laugh. Vapourized money is still NOTHING! The investment community has destroyed its own credibility by protecting the scum bags.

The government is too balless to enact tought laws to protect against them. Where have you been the past two years? Does not AIG, Merrill Lynch, BoA, Bernie Madoff, Earl Jones, and the rest of the players ring any bells of warning?

I had a dear friend be ripped off of over $250,000 USD in retirement funds by the illustrious M-L and that was from a life time of hard work and investment. They ‘lost it all’ after promising a guaranteed lifetime income. That didn’t stop that SOB at M-L or his predicessors from a million dollar office makeover, now did it?

In fact, I believe the entire financial and economic theory people have swallowed is nothing short of insanity. Inflation has produced exactly what for the good of the people? A carrot and stick promise of a better life?

#42 PVC on 09.09.09 at 9:32 am

Good to see Garth is becoming more of a gold bugger.

#43 jess on 09.09.09 at 9:32 am

What about tipping points? What is gold really worth?Water depletion /poisoning. Greed seems to have a short memory.

“On April 11, 2007 Marvin Gonzalez Castillo, a 19 year old boy, was killed by two bullets to his torso. He was a victim of police repression against protests organized by social and eco-logical organizations, as well as the local government of Ancash,to demand the cancellation of the contracts with the mining firms, Barrick Gold and Antamina*, according to community reports.The police moved in duringthe blocking of roads. Thirty dem-onstrators were also detained, mostof them construction workers. Onewoman died of a heart attack afterthe police tear-gassed protesters.This protest was part of a regional 48 hour strike,was part of a series of coordinated actions that included thousands of march-ers throughout the Ancash ”

On average, it takes 79 tons of waste to extract one ounce of gold,according to a conservative estimate bythe No Dirty Gold campaign, a projectof EarthWorks and Oxfam.The process involves grinding up ore,and then expos-ing it to cyanide in order to extract thegold. Sulfides in the crushed rocks interact with air and water to create sulfuric acid, which in turn creates acid mine drainage (AMD).In and of itself, AMD is harmful to ecosystems because it makes water too acidic to support life. Additionally, the sulfuric acid in AMD leaches out other substances from the waste ore,such as arsenic,cadmium,lead and mercury,which can have disastrous health effects,and cancontaminate both air and water. Metals mining has been linked to 96 percent ofthe world’s arsenic emissions. A recent report by the University ofNevada found startlingly high mercury concentrations in the air around a number of northern Nevada gold mines.”

http://74.125.93.132/search?q=cache:fTkZaxcHnsYJ:protestbarrick.net/downloads/barrick_report.pdf+Barrick+apparently+claimed+in+court+in+2003&cd=3&hl=en&ct=clnk&gl=ca

#44 Grantmi on 09.09.09 at 9:37 am

Well it’s over! The Housing Market has FINALLY bottomed! THANK-YOU RBC for making it very clear!!

;-)

http://www.cbc.ca/money/story/2009/09/09/housing-affordability.html

Housing affordability improves, RBC says!
Low mortgage rates spurring sales

It’s becoming easier to carry the costs of home ownership, but a survey on housing affordability suggests this may be as good as it’s going to get.

Home ownership became more affordable in the second quarter, according to a measure taken by RBC Economics. It was the fifth straight quarter that the measure improved, it said.People walk past new homes for sale in Oakville, Ont. (Nathan Denette/Canadian Press)

“The national home affordability level has been restored to pre-housing boom levels,” senior RBC economist Robert Hogue said in a statement.

But he warned that consumers shouldn’t expect affordability to improve much more.

#45 PVC on 09.09.09 at 9:46 am

I wonder what BS the anti-gold crowd here will be spouting when gold hits $1500,$2000,$2500 etc.

Will they then turn their “oh, I shoulda bought” regrets
towards gold just like they have with Canadian real estate.

#46 $fromA$ia "Garths Nugget Boy" on 09.09.09 at 9:51 am

Oil burns. Gold accumulates. — Garth

Agreed, and the population of the planet is 6 Billion and growing. There will be a shortage of oil and possibly gold amongst the 6 billion plus people on the planet.

China shares a housing bubble with Canada and USA.

#47 Future Expatriate on 09.09.09 at 10:01 am

#6 Mining is not creating… now unless you’ve come up with some sort of abiotic theory of gold creation (which actually is somewhat believable for oil and quite impossible for gold, barring that El Dorado in the center of the hollow earth) I’d still say gold was quite finite. Yes as price and scarcity go up, new (and old) mines are opening up all over the place, but there’s still a peak coming somewhere where extraction will no longer be cost effective. At any price.

And of course, you refuse to factor in any possible sort of usage of physical gold as currency, which would put even more demand on gold.

#48 Onemorething on 09.09.09 at 10:03 am

The USD is down, the USD is down! Time to buy some more! Now that we are repeating the cycle and QE is likely minimal (it just wont work) and its effect catastrophic, flight to safety to USD comes right after a run into GOLD ends.

This might just be the right time to get in! Just like Mid Sept 2008 or maybe Mid November 2008.

Disclaimer – I am not a USD bug long term, I just know that people will be going right back into the world currency as a safe haven one or two more times which equals the one of two more dips in the stock market.

RE at its lows 20-25 months from now in US and 36 months in Canada. Banks will also be offering you anything you want for your cash on hand.

Stock up on cash, agree to purchase the new hedges like commodities, agri stocks and dont forget Oil, the new GOLD.

#49 Devil's Advocate on 09.09.09 at 10:04 am

As an economics prof. once pointed out to me early on in my education “We will never run out of oil. As the supply diminishes the price of it will simply rise to that point that no one buys those last remaining drops”

We are aggressively seeking alternative fuels which would be more efficient and cleaner than oil. Once an alternative fuel source is discovered oil’s worth will plummet.

Gold is firmly entrenched in our psyche as having value. That value is far more extrinsic than intrinsic and entrenched not so much by reality as perception – perceived value that dates back years and years such that it is solidly lodged into our mindset and would be most difficult to dispel. To dispel the perceived value of gold from the common mindset would take as many years as that which lodged it there in the first place.

When economies fail people seek a currency which has no boarders or liability. Gold has no boarders and no liability.

The gold standard did work well for many years. Clearly the departure from the gold standard in 1975 correlates remarkably with the beginning of our modern day economic woes. A return to the gold standard however is improbable as we have adulterated our economic models with the influence of fiat currencies such that we now rely upon the ability to manipulate and print ever increasing money supplies without regard to future consequence as we seek to solve the problems we create by borrowing against our futures.

#50 sold out of cowtown on 09.09.09 at 10:05 am

Hi Garth, In your opinion are there any areas in Canada that have hit their lows? Would you consider Windsor Ontario or anywhere in the Atlantic Region a good buy or are we all hooped? Would you consider coal a good commodity to invest in?

#51 Bill Muskoka (NAM) on 09.09.09 at 10:05 am

We have way too much debt out there.

#34 Jonathan

I totally agree, but who is asking the hard question as to WHY? The answer is simple. In a Roman Empire like madness we have been using an economic theory that, even former FedRes Chairman Greenspan has admitted is wrong, is based on growth by inflation with ever expanding markets.

The ‘debt’ level is due solely to two things INFLATION and an unrealistic viewpoint regarding material values.

Wages have NOT kept up with inflation and the Trickle Down theories of ‘acting’ Presidents like Reagan simply are a fantasy created by the greedy rich to extract more from those not as educated or capable to keep their heads above the critical level.

The recent, and ongoing ‘adjustment’ is the reality check that comes naturally to such follies. It is like watching the Vatican attempt to defend their outdated beliefs with the adherents running to and fro screaming ‘Safety! Trusts us!’, all designed to maintain the illusion of prosperity for their religion, based solely on a ‘hope’ for the future, which is based on maintiaining the status quo.

Their weapons are Fear, Uncertainty, and Doubt, and a ‘promise’ things will be better just as liong as everyone keeps playing the game.

The RE industry cares less about people having a home or place to live, they have turned it into an insane cocept of wealth creation, which falling back to the cause, is based solely on INFLATION!

Garth wrote about ‘The Greater Fool’ and Sheeple, but have many actually asked ‘How did we get here? What has caused this to happen?’ I have, they apparently have NOT!

I saw this coming decades ago, (No I am not Nostradamus) as the prices kept edging slightly ahead of income potential. The younger generations are now enslaved by the greed and unconscious profiteering of those who came before them. We are all guilty because we failed to adhere to sound principles handed down for millenia. Now the Piper is calling to be paid and he WILL BE PAID! There will be more and more discord and suffering until the Sheeple wake up and take a stand against this insane consumerism.

How can it be turned around? First debt reduction, but that means the governemnt must squash the outrageous interest rates charged by credit card companies. They fostered non-recoverable debt at high risk by sending out credit cards like Halloween treats for years. The plan was simple:

1. Extend credit to promote globalized consumerism by creating a worldwide credit card system.

2. That compensates for their knowing the reality to begin with that Globalism would fail, and has, after allowing companies to move out of locale areas and nations to some foreign land to avoid paying a living wage to their own people, while a few enhanced their own profits personally, and promised to ‘share’ the wealth with ‘investors’. (Read John Ralston Saul’s book ‘The Collpase of Globalism and The reinventiuon of The World’)

3. Allow those credit companies to charge high interest rates so they can protect themselves from their own lack of realistic controls.

4. Tie that together with life’s necessities like food, fuel, housing, clothing, education, etc. and you have then silently enslaved the population into an addiction they can not escape from.

In short, it is just one of the many religions that mankind has allowed to replace sentient thinking, and this one is far worse than the Inquisition or the Crusades. This one is literally world-wide and like any dieing creature is in its death troes. Expect many convulsions unless those we have elected to act on our behalf get the solution in place and asap.

I still have hope things will come around, but they cannot return to how they were. There have to be some fundamental changes made. Consider the Old Testament Levitical Law of Jubilee. Every fifty years the people’s debts were wiped clean. That is about the only real solution we have at this point.

The rich will have to give up their wealth and equalization, real equalization, will have to occur. It is all just money and perception anyway, so people will need to make a serious choice between humanity and materalism. Choose wisely.

Failing to choose wisely is going to be like experiencing the Andromeda Strain. As people become more desperate crime will increase, thereby increasing costs for more protection and prisons, and etc. That will cause a further loss of societal stability, which will lead to more FUD becoming the means by which people attempt to cope. It will reach an endemic point of no return, and has in several countries already. Look around ask ‘what is causing this?’ There is one answer..the failed economic theory and policies that promote INFLATION!

#52 Future Expatriate on 09.09.09 at 10:06 am

#40 “Oil burns. Gold accumulates. — Garth”

And when oil burns you have… toxic smoke. And when gold accumulates you have… wealth.

I think your point backfired there.

Now you can buy gold with oil… but not forever.

#53 This guy is smart on 09.09.09 at 10:16 am

Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

– Warren Buffett

#54 CM on 09.09.09 at 10:21 am

It may not be metallic, but this article by Neil Kitson is pure gold nonethess.

Thinking Outside the Herd

Apart from the complete vacuum around the question of the horrendous war in Afghanistan, he has this to say about my absolutely favourite politician.

“Alternatively we have Stephen Harper, who seems to have a primordial, completely un-Canadian dream of converting the world into a disciplined unit that will do whatever he says, which always involves more punishment and less imagination. Show me something – anything – that Harper has done in his life that has contributed – remotely – to the well-being of Canadians. Show me that he’s produced anything at all.”

Bravo!

#55 D in London on 09.09.09 at 10:28 am

# 41 – Bill Muskoka (NAM)

Bill, if you think that anything is produced for the good of the little people, I believe you may be nuts. Things are produced for the good of the little people only: 1) as a by-product of producing greater good for the big people; 2) in order to produce greater good for the big people; or 3) as an unintended consequence of looking after the interests of the big people.

The majority of us fight like seagulls over scraps, while the elite dine in luxury. It has ever been so, and always will be so.

So let’s get back to squawking over the scraps, like whether the tiny returns we get on investing in stocks/bonds/GICs/gold/derivatives, etc. really matters, while the elites continue to enrich themselves at our expense.

(I know, I know, you believe this too – I am just using your post as an excuse to vent I guess :-) ).

#56 Peter Wiener on 09.09.09 at 10:28 am

# 22 JO

Could you please elaborate on your feelings re US $ 700 gold and why in 2010? I’ve been feeling the same way despite the charts and all I see, read and hear and I am sure we are not the onlt two.

Thanks in advance.

#57 Depressing on 09.09.09 at 10:35 am

The more I read this blong the more depressed i get!!
You all are so negative and it seems like you see no light at the end of the tunnel.
Where does all this negative crap come fom? Are we all doomed? Will we have anything to eat in future??
Garth please try and be positive for a change! Housing will go down doller will crash world will be f… you might as well say we all will be dead one day!
And Gold was over 1000 before what makes you think it will not go below 1000 just like last time?

#58 Barb the proof reader on 09.09.09 at 10:36 am

Calgary’s 911 system failed Monday.

It’s a reminder of your cautioning Garth, about preparedness, bunker, generator and not to rely on what we thought was going to “be there for us.”

.. news “may not be so lucky next time.”

http://www.calgaryherald.com/news/this+emergency/1974053/story.html

#59 Got A Watch on 09.09.09 at 10:43 am

Karl at Market Ticker Blog has put up several excellent posts in the last few days, drawn from official Government statistics and put into charts that you would never see in the MSM, as they describe what is really happening out there in the US economy.

“The Government’s Effort Has Failed”, “Labor Day Musings” I & II, posted in the last few days, show:

“The important point is that we have never been here before in the post-Depression era. Any and all claims that “The Consumer has reached a bottom”, or “The Recession is over” (based on July data) or any such is pure nonsense….the credit peak was actually not in January of this year, but rather in July of 2008! The impact of this is very material in that we have been deflating our credit system on a consumer level for six months longer than The Fed was disclosing just last month.

Yet a huge part of being able to “earn your way out of the hole” – the entire premise of the “banking rescue” – required that you be able to soak people who have credit with higher rates and fees.

Banks can’t do that when the credit base is contracting, and it is.”

This is an American analysis, but the trend is clear, and I think Canadians consumers are about 18-24 months behind on the same track to nowhere.

It is almost certain the American experience will be repeated here in Canada more or less: soaring Government deficits, plunging tax revenues, sharp declines in consumer credit and spending. Etc etc. We may not suffer quite as deeply as Americans, but with them being our largest export market and trading partner we can’t escape the inevitable.

Some trends seem almost too easy to predict: declines in the residential real estate market, massive reduction in overbuilt commercial spaces, shrinking tax revenues for Governments causing them to raise taxes into the face of ‘The Great Recession’ (always a good idea, if you want to kill an economy), huge growth in the “underground economy” (tax avoidance, ca$h deals etc), deluded public workers still demanding raises and more benefits (solution: just fire all of ’em).

An economy that is stagnant at best for years, until the excess debt and resulting bad credit is worked out of the system – as it should be, this is the healing process after the binge is over. At the end we will have a shrunken Government and reduced social programs and medicare, as those costs will have to be cut – the last choice in official and political circles, but it will be made, as over-burdened taxpayers finally revolt. I hear the first signs of this already.

By 2018 our economy should be on the road back to health. The real ‘recovery’ will be slow and will only return the economy to a level probably 20% below the recent peak – above that it was all froth anyway.

Credit may not reach the same level of excess until 2087, in time for the next ‘Great Depression’.

#60 Bogdan on 09.09.09 at 10:52 am

“Oil… Unlike gold, it’s finite. ”
“Gold is a mineral. Oil is stored sunshine.”
“Oil burns. Gold accumulates.”
I understand what you try to say, but all, chemistry, physics, math and logic are saying that it’s the other way around, gold is finite and new oil gets created as you read this.

Indeed, when there will be just 2 billion people on this planet and the newly extracted/generated oil will be used just for farming, the present quantity of useless gold will look like unlimited.

” * Our future includes more inflation, higher interest rates, more taxes and a diminished standard of living…
* As far as I can see ahead, cash will be king.”
… so … it feels good to be king on a deflated fortune. The combined question still remains, how far can one see ahead their future and in how many colors? Today was in orange-yellow.

#61 Barb the proof reader on 09.09.09 at 10:57 am

#30 jess Groceries to cost even less

Jess, thx for posting that. Just yesterday at the groceteria I was thinking about how out-of-control prices are.. we reject these high prices, lower prices will have to prevail to bring us back.

Of different note: Safeway was dead all summer, but as soon as September arrived they got a little busier. People shop either when it’s affordable or when they ‘feel’ like they have money in their pocket.

#62 Sudcouver on 09.09.09 at 11:11 am

Does anyone think that there is any chance the BOC raises rates tomorow, when they meet?

#63 Eduardo on 09.09.09 at 11:31 am

Garth,

Based on your 8 million oz nonsense, that’s 226 tonnes.

Amount of gold reserves held by banks and private investors >> 226 tonnes.

Amount of paper/electronic money = infinite and increasing at a much more rapid rate than the amount of gold % wise.

Gold is a currency, Dollars are also a currency. Oil is not a currency, its an end use consumable.

To all the people saying “well if I had the last loaf of bread I wouldnt sell it to you for gold” well you wouldnt sell it for cash either.

The difference is the amount of gold is limited and the amount of cash isnt. Gold/Silver are the only limited currencies with no debt attached to them.

Sorry Garth, but good luck storing 100,000 of oil.

Cash is not king. Cash is just paper and has no end use either, gold is for kings.

They are both currencies, one is limited by production that is tiny compared to the amount outstading, the other is not.

Tell me where I can gas up at PetroCan in exchange for gold wafers, and I’ll send you an ounce. Until then, it’s not money. How many times do you nuts have to hear the same thing? — Garth

#64 DaleFromCalgary on 09.09.09 at 11:31 am

“Bill, learn how the futures market works and the safeguards against counterparty risk. — Garth”

You’re trolling, aren’t you Garth? The Panic of 2008 demonstrated how there are no safeguards against counterparty risk for paper. The stock market is far below what it was in 2008. Gold dipped briefly during the panic but is now back to where it was because people realize it doesn’t need any counterparty. That’s physical gold, of course. If you buy gold ETFs or other derivatives, you are not buying gold, you are buying paper.

I am working towards 10% in physical gold and 10% in physical silver as part of my old-age pension. Twenty years from now they will still be worth something, as opposed to real estate or paper investments.

I am about 10% invested in conventional physical oil for my cash flow (which I use to buy gold and silver). Physical oil doesn’t mean storage tanks in the backyard; it means mineral rights and partnership units in producing wells. By this, I mean private equity (actual ownership of the oil), not publicly traded shares (actual ownership of pieces of paper). Even in Calgary, it is difficult to find these because the good stuff is bought up before you hear about it. No one in their right mind is selling mineral rights anymore, but there are private junior petes still doing infill drilling or fracing existing wells. However, with a lot of research and networking, I have built up some nice ownerships. It would be more difficult for readers in eastern Canada to find such investments but if you are prepared to do the research you may be able to buy in from a distance.

Learn the difference between OTC and exchange-traded derivatives. — Garth

#65 GGF on 09.09.09 at 11:33 am

“Gold is a mineral. Oil is stored sunshine. — Garth”

Gold is the result of a supernova billions of years ago. Which is more rare? Hard to say. I’d bet on uranium being the mineral of choice in the future. It can be turned into power and is a mineral.

#66 Bill Muskoka (NAM) on 09.09.09 at 11:41 am

#55 D in London

I assume this is the point where we should humbly request of the Lords of the world ‘Please Sir, May I have some more?’ LOL

Vent away! Who knows maybe a few will catch on and things will change. And people thought the Matrix was science fiction, eh?

Now, shall we take the Red or the Blue Pill and find out? Meet you in Zion mon ami!

#67 ginner on 09.09.09 at 11:42 am

There will never be a shortage of gold. That is a fact. Unless you are talking about the view of an individual not having enough, or a country for that matter. If there was only a single ounce and we decided that gold was a currency, we only need to allow it to float in value against other currencies and be exchangable like a currency and price discovery takes place. Any notion of gold shortages or inefficient exchange is foolish. Gold can and will co-exist as a currency alongside other currencies whose value will rise and fall with the supply of money and interest rate changes as it does today.

Oil on the other hand….is a consumable….and it’s being consumed.

#68 Jimster on 09.09.09 at 11:45 am

“gold’s unlikely in our lifetimes to be tradable for goods and services on the streets of Kelowna or Moncton, so it’s not a medium of exchange”.

What’s this supposed to mean, that we will be buying our groceries with Garth’s favorite, Prefered Bank Shares?

Garth, you seem to pumping out ‘strawman’ faster than a scarecrow factory these days.

Money is a medium of exchange. Gold is not. Not are oil futures or share certificates. How hard is that to understand? — Garth

#69 Bill Muskoka (NAM) on 09.09.09 at 11:45 am

#61 Barb the proof reader

But! But, Loblaws, aka Zehrs locally, has spent lots of money to make up huge banners to adorn their stores telling us ‘Prices On Over 3,000 Items Reduced!’

Funny though how people are shopping more at the new Walmart Super Centre than Zehrs? How can this be? Have the marketeers lost their pocket watch and spiralywhirlajig that keeps the masses hyponotized?

#70 Adam on 09.09.09 at 11:55 am

Gold, like silver and copper, has many uses. We tend not to use gold commercially because it is so rare. But the rich do use gold in jewelry and cutlery. If gold were common, we might use it for plumbing and electric wire.

The value of gold does not oscillate wildly; the value of currencies oscillate wildly.

The Canadian mint does issue coins that are less than an ounce. If we encounter hyper-inflation, metals will be used as currency: gold (expensive transactions); silver (middling) and brass or copper (trivial).

There is no need for a gold standard. Rather, the world ought to eliminate central banks altogether, and allow private banks to issue notes that represent a quantity of precious metal: gold, platinum, silver, whatever.

Our worst enemy is the central bank. It is the cause of these boom/bust cycles, and is always the cause of massive inflation.

Deflation is not our enemy. The cost of computers has dropped consistently over the past decade. The drop reflects an improved efficiency.

When gold was the primary source of money, there was a slight increase in its purchasing power over time. In other words, deflation ruled. That’s a good thing. It encouraged savings, which are required for investment.

#71 pbrasseur on 09.09.09 at 12:02 pm

“Peak Oil theory represents economic ignorance”

http://network.nationalpost.com/np/blogs/fullcomment/archive/2009/09/08/peter-foster-oil-and-the-minds-of-men.aspx

#72 rick in Surrey on 09.09.09 at 12:02 pm

Derivatives are what caused this monumental cluster screw we are in for the past few years! Not to mention the fact that they outweigh in value all the money on the planet. No thank you, not with my money. Check out this link to a recent article about Derivatives and China (especially Oil) and tell me what you think.

http://thefundamentalview.blogspot.com/2009/09/china-and-buzz-of-pending-bank-default_03.html

#73 Weeping in Windsor on 09.09.09 at 12:02 pm

#50
sold out of cowtown

Windsor, Ontario is a GREAT buy!!

See my post from yesterday.
Have I got a bargain for you.

signed
Weeping in Windsor

#74 Devil's Advocate on 09.09.09 at 12:02 pm

#57 Depressing

Run away. Run away as fast as you can. If you stick around here and learn a thing or two you will soon see that there is, really, little hope things will get better before they get a whole lot worse… a whole lot, for we have not learned our lessons quite yet.

Ignorance is bliss. Run away #57 Depressing. Run away as fast as you can.

#75 PVC on 09.09.09 at 12:03 pm

As gold skyrockets, governments will be forced to print more money to buy their own bonds to halt rates from skyrocketing. If the bond market collapses, a real estate holocaust will take place. Yet, ironically, the collapsing US dollar itself could cause banks to hike mortgage rates, regardless of the Fed’s T-bond buy programs. My sense is the whole situation is on the verge of blowing out of control. Even the perception that this could possibly occur could cause a massive institutional buying panic of gold. Most investors have forgotten about oil. Given the absolutely hair-trigger situation in Iran , with Pakistan also pushing the limits of stability, the energy markets could be next to see a powderkeg price explosion upside!

#76 Roial1 on 09.09.09 at 12:12 pm

#35 Bill Muskoka (NAM) on 09.09.09 at 8:55 am

PLEASE Scotty! Beam me up! There is no intelligent life down here on this planet!

Have a wonderful day!

Damn! I really hate it when you get it ssooooo right!

#77 X on 09.09.09 at 12:17 pm

Millions more to go into foreclosure in the US:

http://www.financialpost.com/news-sectors/story.html?id=1975824

#78 Barb the proof reader on 09.09.09 at 12:26 pm

Garth,

Finances, real estate or politics, thank you for reminding people to be beware.

Being the media savvy guy, you might appreciate a public admission from top right-wing strategist Mary Matalin, stateside (same thing in Canada), who has publicly confirmed conservatives organize loud “false narratives” “rumors” and “untruths” to deceive the public:

“Yes, some of the town halls were set up, and yes, the [right wing] media go overboard,” added Matalin.. “You can say that [conservatives] fought with crazy rumors and they fought with untruths”.

From reuters.

There you have it. The sickness of Glenn Beck, Matt Drudge and Rush Limbaugh is an infestation that destroys truth and civil society.

Can good people fight these evil “perpetraitors” and win, or not? Anyway, Garth, on all fronts, thanks for trying to help people one at a time. With any hope, by November you can do so on an even larger scale.

#79 jess on 09.09.09 at 12:30 pm

Perhaps Barb you will enjoy reading about mothers(autoconvocados) Look how pressure was put on “blood” diamonds. anyone interested in buying that image for the wedding day?

Legislation to Ban Open-Pit MiningIt was not long before allegations of corruption surfaced.Vice Governor Beder Herrera,in abrupt change of heart,introduced a bill in the provincial legislature to prohibit open-pit metals mining in the province.Approved by the legislature,it called for a binding public referendum on the question of open-pit min-ing to be held on July 29, 2007.The autoconvocados, emboldened but mistrustful of the entirepolitical process, decided to blockade the mining road at PeņasNegras,some 9,300 feet up Famatina,forcing Barrick to suspendactivities on March 14,2007. The blockade continues to this date(4/24/07),and according to activists, will continue until BarrickGold and the threat of open-pit mining are gone from La Rioja.

#80 Barb the proof reader on 09.09.09 at 12:36 pm

Sept. 9 (Bloomberg) — Barrick Gold Corp., the world’s largest producer of the precious metal, will increase the size of a share sale by 17 percent to $3.5 billion to raise more funds needed to unwind fixed-price bullion contracts.
Underwriters have an option to increase the sale to $4 billion in what is the biggest stock offering in Canadian history.

#81 Ultraman on 09.09.09 at 12:42 pm

Warren Buffett says gold is useless? I know that’s not the case. Can someone with knowledge of science and chemistry enlighten us about the matter?

For example the fact that you can take a tiny amount of it and cover the entire roof of BC Place is an indication of its chemical property that are irreplaceable in some technological application.

Mr. Science please help us.

#82 Mike (Authentic) on 09.09.09 at 1:00 pm

63 Eduardo “Gold is a currency, Dollars are also a currency. Oil is not a currency, its an end use consumable. To all the people saying “well if I had the last loaf of bread I wouldnt sell it to you for gold” well you wouldnt sell it for cash either.”

True enough. But I would trade the bread for tank of gas to get out of town, a jug of clean water or some ammo (and you could trade those back what you didn’t use)

Food and water become the ultimate store of value, thus the reserve currency.

You can also add shelter, fuel, protection and electricity.

Mike

#83 ALE on 09.09.09 at 1:07 pm

We are in a period of unprecedented deflation (as defined by the money supply including credit). See Mish’s recent post on the contraction of consumer credit.

Gold, housing, stocks and some other commodities are reacting to the injection of $trillions into markets by financial institutions and government through either direct government funding or through government gaurantee (e.g. cmhc). More bubblets to burst yet as consumption and credit continue to contract and incomes and employment decrease. Unfortunately for the bugs gold is one of those bubbles.

Look out below.

#84 kitkat on 09.09.09 at 1:17 pm

Look there, a shiny thing!

There were lots of questions yesterday about quantitative easing, the nature of money printing, deflation/inflation, and general bondage. Today, The Garth switches to rock and nuts. It’s the fixation of the day.

To my mind, as long as paper money buys gold and paper money is created at will ad nauseum by governments the game is equivalent to rock/paper/scissors. Paper covers gold. The bad drives out the good and the governments can control the game up, down, and spin it all-around.

We, the public, are the hamsters on the turntable. They are now bundling derivative bonds on bets when the hamsters will be flung off the table, as they :-) go forward :-)

#85 Mike (Authentic) on 09.09.09 at 1:19 pm

Actually, thinking about the whole situation, if gold does go up in value, the Gov’t will most likely take it from you anyways.

“President Franklin D. Roosevelt authorized the confiscation of all private holdings of gold, and permitted the private banks to confiscate gold deposits pursuant to Presidential Executive Order number 6102, which effectively confiscated all privately held gold in the United States on April 5, 1933”

“Give not to yourself, but to your Country when your Country needs you the most.”

Then all ETF’s and paper gold will be cashed for gov’t value, all physical gold handed in and fiat notes given out.

You want to say no?

Jail or Miliary time. Then they take your gold.

Plus, do you really want to live in a Country that’s dirt poor in debt and you are sitting on 10 tonnes of gold you can’t use or you’ll be reported?

Mike

#86 dd on 09.09.09 at 1:29 pm

#29 pbrasseur

…synthetic oils made from coal or whatever….

Ya. It is talked about at $150 a barrel.

#87 Bill Muskoka (NAM) on 09.09.09 at 1:33 pm

There you have it. The sickness of Glenn Beck, Matt Drudge and Rush Limbaugh is an infestation that destroys truth and civil society.

#78 Barb the proof reader

Barb, That lot of propagandists are the REAL Terrorists that are the enemy of the U.S.. They are an open sewer of bias, disinformation, outright lies, and the primary source of FUD that bring out the very worst in people.

Listening to their diatribe is psychologically damaging as evidenced by the recent news coverage of Obama’s speech to the school children. Good grief, their followers make sheep look like Einsteins.

Like I mentioned, the one young blonde mother who was weeping and had totally lost all perspective is the current Poster Girl for Ritalin, and probably Prozac as well. Makes me wonder if G.H.W. Bush dumped his Halcion supply in the drinking water? Their depth of ignorance is overwhelming.

Compared to them Goebbels had real class and purpose.

#88 Bill Muskoka (NAM) on 09.09.09 at 1:34 pm

Food and water become the ultimate store of value, thus the reserve currency.

You can also add shelter, fuel, protection and electricity.

#82 Mike (Authentic)

You’ve got the RIGHT for sure Mike!

#89 CalgaryRocks on 09.09.09 at 1:35 pm

Governments will be on the ropes for years to come, paying for the decisions they’ve made in past months. Vote for the guys who promise you less.

Are you announcing that you’ll be supporting Harper in the next election? That was unexpected! Lol

His is the biggest-spending government in Canadian history. — Garth

#90 jess on 09.09.09 at 1:38 pm

race to the bottom http://www.nlcnet.org/reports.php?id=562

Each year, tens of thousands of foreign guest workers—mostly from China and Vietnam—are trafficked to Japan, stripped of their passports, cheated of their wages and forced to work under abusive sweatshop conditions—including producing auto parts for Toyota.

Anywhere from 70,519 to 93,000 foreign guest workers are trafficked to Japan each year. The guest workers, who come from China, Vietnam, Indonesia, Philippines, Thailand and Brazil, are stripped of their passports the minute they arrive in Japan. During their first year, guest worker “trainees” are not covered by Japan’s labor or minimum wage laws. As guest workers are allowed to stay for up to three years, this means that at any given time there are at least 212,000 to 279,000 foreign guest workers in Japan—not including those who may have illegally overstayed their visas. The Japanese government is now considering extending the guest worker visas to five years.

Under pressure—including from the U.S. government—the Japanese Diet (congress) is now considering reforming the law, both to mandate the return of the guest worker passports, and in 2009, that first year “trainees” will be covered under Japan’s labor laws. (In June of 2007, the U.S. State Department cited Japan in its report on human trafficking: “The government should make greater efforts to investigate the possible forced labor conditions of workers in the foreign trainee program.” In response, in December 2007, the government of Japan announced that it was illegal to strip foreign guest workers of their passports. However, the practice continues.)

In the last ten years, there has been a dramatic increase in the number of foreign guest workers employed in Aichi Prefecture, home to Toyota and the country’s auto industry. The surge of poor foreign guest workers coincides with Toyota’s ten year plan to slash the price it is willing to pay its auto part suppliers. Toyota is more than half way into its ten year plan, which in the first three years called for price cuts of up to 30 percent followed by a further 15 percent cut in the fourth through sixth years. There are four years left in Toyota’s cost reduction program.

Foreign guest workers are not only stripped of their passports—one of the most serious of all human rights violations—they are also prohibited from leaving the factory they are contracted to, or even changing the housing they are assigned. If a guest worker dares change jobs or moves, he or she will be immediately and forcibly deported. Moreover, if guest workers even dare to complain about the abusive and illegal conditions, they will also be deported. (A knowledgeable source in Japan explained that the country’s immigration officials are “very tough,” making it quite easy to have guest workers deported.) This is human trafficking at its worst, as it is only the right to relocate to better factories and more decent housing that would isolate and expose the most abusive sweatshops. The inability to move to new housing also leaves the guest workers in a very vulnerable position, where they are easily cheated and forced to pay wildly excessive rents.

The guest workers are in a trap. They also have to borrow money in order to pay—for them—the enormous fees that manpower or employment agencies in their home countries charge them to purchase their three year contracts in Japan, often amounting to $8,800 to $10,000. The guest workers and their families typically borrow this money at an interest rate of 10 percent a year, meaning the interest comes to $880 to $1,000 a year. This puts the guest workers under pressure to routinely work overtime, no matter how excessive the hours. At least in the case of Vietnam, it appears that the government is profiting off the trafficking of its own people, taking 15 percent of the profits of the local manpower agencies.

In July 2007, the International Herald Tribute reported the case of 22 year old Ms. Le Thi Kim Lien, a guest worker from Vietnam. She often worked 15 ½ hours a day from 8:30 a.m. to past midnight, seven days a week, while being paid just half of the legal minimum wage at a subcontract plant called TMC, which supplied Tokai Craft, which in turn was under contract to supply auto parts to Toyota and Nissan. Ms. Le and the other Vietnamese workers were fined 15 cents for every minute they took in the bathroom. She and her coworkers sewed arm and headrests for Toyota cars.

It is typical for guest worker “trainees” to earn—especially during the first year when they are not covered by Japan’s labor laws—Just 50,000 to 60,000 Yen a month, or $478.84 to $574.60.

#91 CalgaryRocks on 09.09.09 at 1:46 pm

#57 Depressing on 09.09.09 at 10:35 am
The more I read this blong the more depressed i get!!
You all are so negative and it seems like you see no light at the end of the tunnel.

Lots of doomers here. People become fearful when they age.

Just stick to the main points of saving for a rainy day, eliminating debt and working on your skills and you will be allright.

#92 Bill Muskoka (NAM) on 09.09.09 at 1:51 pm

For example the fact that you can take a tiny amount of it and cover the entire roof of BC Place is an indication of its chemical property that are irreplaceable in some technological application.

Mr. Science please help us.

81 Ultraman

Well, golly gee, now there is a critical use, eh? Actually the biggest value gold has is that it is non-oxidizing, meaning it does not form oxides (rust), is the best conductor of electricity of all the elements. That is from the common scientific point of view.

What commonly gives gold its intrinsic value is it is ‘bright and shiny’ and people still think they are like King Midas or other royalty if they have some.

Now, when the mining companies create a broader market for the leachate created by extraction using potassium cyanide, and the arsenic trioxide that are the waste products of gold ore extraction, they will be viewed as better citizens.

Ask the people of Yellowknife, NWT, how they like the 10’s of thousands of tonnes of poisonous Arsenic Trioxide in the Giant Mine? Ask the people of Colorado how they like the toxic pollution coming down the mountains from the gold mines?

Here are couple of links reglating to these:

Giant Mine Arsenic Trioxide

Summitville Mine

There is another use for gold, but people will not believe it, and it is ancient.

Read and learn ORME

#93 D in London on 09.09.09 at 1:58 pm

# 65 – Bill Muskoka (NAM)

As we saw in the Matrix trilogy, even the red pill/blue pill was a part of the game.

The older I get the more I am confronted with the reality that the things we have a “choice” in are mostly an illusion. They give us the illusion of choice so that we might maintain our illusion of control. There is very little real choice. In most cases it is picking heads or tails on a coin, rather than having the power to pick another coin entirely. (For example, the Dems and Republicans in the US – a forced choice between heads or tails, while the coin never changes. Same deal between Crips and Bloods on the streets, or Rogers and Bell Mobility ).

OMG, time for me to break out the tinfoil! lol

#94 brett on 09.09.09 at 2:01 pm

Oil is not stored sunshine, it is not “fossil fuel” it probably IS infinite, it is replenished from deep within the earth, as the russians have demonstrated with their old wells being renewed over time, and russia has become an energy super power by drilling super deep wells to tap into the earths bounty of oil.

peak oil is a scam for higher prices.

I know. When we run out, Gold will make more. — Garth

#95 brett on 09.09.09 at 2:13 pm

On May 20, 1999 Al an greenspan testified before Congress, “And gold is always accepted and is the ultimate means of payment and is perceived to be an element of stability in the currency and in the ultimate value of the currency and that historically has always been the reason why governments hold gold.”

–all the gold ever mined will fit in a roughly 90x90x90 foot cube

–as for the gold ETF, better read the prospectus before you buy that paper….
“Investing in the Shares involves significant risks. See “Risk Factors” starting on page 6.” Page 11 states “Neither the Trustee nor the Custodian independently confirms the fineness of the gold allocated to the Trust in connection with the creation of a Basket [issuances].” Page 12 “In issuing Baskets, the Trustee relies on certain information received from the Custodian which is subject to confirmation after the Trustee has relied on the information. If such information turns out to be incorrect, Baskets may be issued in exchange for an amount of gold which is more or less than the amount of gold which is required to be deposited with the Trust.”

–There is no assurance that the ‘gold’ held in the ETFs is actually the same gold as defined under the periodic table.

On page 11 “In addition, the ability of the Trustee to monitor the performance of the Custodian may be limited because under the Custody Agreement the Trustee has only limited rights to visit the premises of the Custodian for the purpose of examining the Trust’s gold”.

–In other words….NO AUDITS ALLOWED…. ‘Just trust us, the gold is there.’ –No thanks

#96 Barb the proof reader on 09.09.09 at 2:15 pm

#35 Bill Muskoka does anyone deal in reality

I’d say no Bill. The world is overpopulated, humans are too susceptible to convenient lies and fantasy…. most societies have become unreal. It’s too easy for the bad and the stupid guys to tip over the truths that used to make us as a group, strong.

#97 miketheengineer on 09.09.09 at 2:17 pm

Garth:

You forgot to mention one thing….you must have money to buy the gold and be able to sit on it till the SHTF. Most of us that are now outa work, are struggling with day to day expenses.

You keep your gold, if that’s what makes you feel secure at night. You can sit there all night and watch it, and feel it.

Cause when the SHTF…the people who don’t have gold will vastly out number the people with the gold, and then the fun will start.

Good luck to the gold bugs, keeping your gold from the roaming herds of people without.

Better to spend your money and buy some food and give some food to the food bank.

Good luck gold bugs.

#98 Nostradamus Le Mad Vlad on 09.09.09 at 2:45 pm

#30 jess on 09.09.09 at 8:00 am — “Groceries to cost even less as supermarket price war intensifies…”
— with —
#82 Mike (Authentic) on 09.09.09 at 1:00 pm — “Food and water become the ultimate store of value, . . .”

In today’s KDC, there is a short article entitled “Guatemala dangerously short of food due to crisis (AP)”

One para.: “Guatemalan officials warn that thousands of families (approx. 400,000) in the Central American country are dangerously short on food due to un-cooperative weather, poor soil and the troubled economy.”

The weather will do what it wants to, poor soil is the result of what the weather does and the economy cannot be blamed for the first two, whether it goes up or down.

When added to water shortages / droughts occurring repeatedly thru-out the world, the Old Testament tale of a farmer who had seven good years, stored his crops properly and lived modestly so when the seven lean years took over, was able to feed his family and friends.

There are a plethora of other things happening, but when all is being totalled up together, chances are good that we’re in the beginning of the seven lean years.
——
#3 Dave (and several other bloggers) on 09.08.09 at 10:35 pm — “. . . you want to get into a bunch of small gold mining stocks. That’s where the big gains will be.”

Agreed. Far better to have shares which can eventually be cashed in at a nice profit to buy food and water. Speaking of which . . .

#38 mattbg on 09.09.09 at 9:13 am — “. . . People will love you far more for those than if you have gold.”

Haven’t figured out how to have a shower with a bar of gold! Silver still holds an alluringly, sexy appeal — akin to Cleopatra wearing an NFL outfit, complete with helmet!
——
The four-letter word is back to haunt us again. Gold, possible US – China trade war, sinking US$ — what more does one want? —
http://emsnews.wordpress.com/2009/09/08/uschina-trade-war-may-erupt-over-tire-import-tariffs/
“. . . gold has no more intrinsic value than any other commodity when it comes to finances except for the value we set on this metal.”
——
Ron Paul hits the big time! —
http://www.voteronpaul.com/newsDetail.php?The-Coming-Collapse-2153
——
China is shifting gears. —
http://www.washingtonsblog.com/2009/09/3-signs-that-china-is-moving-out-of.html
——
The chart further down — comparing recessions — looks like a plate of spaghetti.
http://globaleconomicanalysis.blogspot.com/2009/09/depression-debate-is-this-depression.html
——
First para. is interesting. Methinks this would be a first step leading to a totalitarian state.
http://www.google.com/hostednews/afp/article/ALeqM5jihcuQZGxzOxy-juB4s17dZ5-VtQ

#99 steven rowlandson on 09.09.09 at 3:33 pm

I got good news for the gold and silver bugs. The gold and silver prices are grossly inaccurate due to manipulation by governments and financial institutions and this accounts for the alleged problems with gold and silver. The manipulation is done so that interested parties can make believe that paper assets and electronic money is real money that has value.
I suppose it is worth what it is made of but over the the long haul its real value can not compare with gold and silver money. That is why politicians and banker hate the precious metals because it competes with what they are trying to sell. Right Garth.
Coins are money therefore coins made of gold or silver are money. If in doubt ask James Turk, Jason Hommel, Dave Morgan, Ted Butler, Sean Rahkimov.
For now I suppose untill the powers that be come to their senses or totally disgrace themselves we gold and silver bugs can view our favourite money as wealth and insurance with the possibility of a capital gain.

Nice Gold Porn Garth.

Steven

#100 brett on 09.09.09 at 3:41 pm

we will never run out of energy Garth, and we will never run out of psychopaths who manipulate us through both glut and scarcity, the glut/scarcity of oil, of credit, of food, etc…. thats the one thing you can count on.

read the tea leaves, and place you bets accordingly. nat gas a quadruple within 5 years, gold also a quadruple, but within 2 years.

#101 steven rowlandson on 09.09.09 at 3:51 pm

Gold and silver price challenge:
Discover the total cash and credit in the world and then divide it by the total amount of tradeable gold and or silver bullion that can be proven to exist without the use of hearsay evidence and falsifyable statistics.
The real fiat money to ounce ratios are not equal to the so called commodity prices available to the public.
I would venture a guess that gold is trading for 2 cents on the dollar and silver for near zero cents on the dollar.
For gold and silver prices as most people know them to be correct then the vast bulk if not just about all forms of fiat money would have to be wiped away. That suggests a 98% +- deflation of the global money supply including credit and other financial instruments.
Probable reality is very fugly don’t you think?

Steven

#102 Eduardo on 09.09.09 at 4:10 pm

Garth,

Feel free to stick to cash. How about this?

Today a barrel of oil is 72$USD/bbl. To trade that barrel of oil you need USDs. If you are in CADs you can get USDs to trade that barrel or if you are in gold you can get USDs to trade that barrel. Gold is as much of a currency as the CAD when it comes to global trade.

You like bringing up Iceland. Ask them if they thought gold was a currency before shit hit the fan… Ask them what they thought after.

Ask anyone who’s currency has been destroyed OR any central bank who holds it as reserves OR practically any civilization in history.

Currency is as good as its liabilities, when money doesn’t have any liabilities it works fine, when cash is being devalued on a daily basis and encumbered by debt confidence in it is lost.

#103 TS on 09.09.09 at 4:35 pm

As we all know, Canada’s economic health is very closely tied with the US, its biggest trading partner. Here are some recent statistics…so much for ‘green shoots’ in the US economy…things seem to be grower darker each day.

Commercial mortgage defaults doubled in the US in the second quarter:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9FRZ6ipJB8Y

US home mortgage defaults hit all time high in second quarter:
http://www.latimes.com/business/la-fi-mortgage-defaults21-2009aug21,0,4202530.story

US consumers slash debt in July by $21 Billion…but still owe over $2 TRILLION
http://voices.washingtonpost.com/economy-watch/2009/09/consumers_slash_debt_by_record.html?hpid=news-col-blog

US bankruptcies still on the rise
http://www.dailyherald.com/story/?id=312903

1 out of every 25 US homes in foreclosure
http://www.app.com/article/20090825/BUSINESS/90825051/U.S.+home+prices+tumble+6.1++on+surging+foreclosures

And, while the Harpo Conservatives would like to put a positive spin on their mismanagement of our economy, Canadian consumers are increasingly taking on the chin with personal bankruptcies:

Canadian bankruptcies up 31% in May
http://www.theglobeandmail.com/report-on-business/bankruptcies-soar-by-31/article1208996/

Canadian bankruptcies up 51% in June
http://www.thestar.com/specialsections/recession/article/679732#survey

While the Canadian economy has had a small upward bump lately all of these stats point to significant declines in corporate profitability, more unemployment in the months (and perhaps years) ahead. As this economic reality takes hold we can expect to see an increase in mortgage defaults in Canada with related declines in home prices as people try to desperately move homes.

#104 dd on 09.09.09 at 5:20 pm

#100 brett

…gas a quadruple within 5 years, gold also a quadruple, but within 2 years….

Sure it has. But what does that say about the future?

#105 Calgary Rip off on 09.09.09 at 5:22 pm

Garth,

This post is entirely relevant to those in Calgary who are interested in paying their rent and possibly saving for a house. And why Gold? Platinum is worth more.

What’s the point in getting gold if you cant use it for monetary exchange? If all hell breaks loose you’d be better off with an AK-47 or a .357.

It’s not like all the banks in Canada are going to collapse with exec’s on the run like in Nigeria where a couple CEO’s are wanted by Interpol.

Looking forward to more of your ominous interest rate forecasts.

#106 dd on 09.09.09 at 5:35 pm

#94 brett

“peak oil is a scam for higher prices”

So the talk about $75-90 cost of oil in northern alberta is BS? What would be the cost? $10? $20?

#107 dd on 09.09.09 at 5:40 pm

#80 Barb the proof reader

…Barrick Gold Corp … will unwind hedges…

So if BGC is unwinding hedges does that mean gold price is at the top of the market?

Once it hits the front page it might be time to sell.

#108 Men With Hats on 09.09.09 at 5:58 pm

Tell me where I can gas up at PetroCan in exchange for gold wafers, and I’ll send you an ounce. Until then, it’s not money. How many times do you nuts have to hear the same thing? — Garth

Over and over and over again.
They will not surrender until you admit that their
‘ precious’ is as good or better than money .
You still can’t eat it .
I keep coins around so the wife and I can play pirate .
Don’t ask .

#109 Chaostrology on 09.09.09 at 6:34 pm

Attaboy Mr. Turner,

The fish have taken the bait, hook, line and sinker!

I believe that you must be setting them up for a future post.

Gold is not money, gold is not rare, gold is a durable commodity. We can’t eat gold, we can’t heat our homes with it and we can’t drive it. A gold coat will not keep you warm.

Gold does however make really great teeth.

Gold is also excellent for the mounting diamonds, another not so rare commodity.

Gold also has super conductive qualities useful for the manufacture of Hi-tech components.

When the SHTF, gold owners can take all their gold and melt it down and make some really nice bullets!

#110 Nostradamus Le Mad Vlad on 09.09.09 at 6:42 pm

#103 TS on 09.09.09 at 4:35 pm — “. . . Canada’s economic health is very closely tied with the US . . .”

Anyone noticed the ever-DEcreasing US$, heading toward zero and then combine it with the ever-INcreasing debt level (now US$$12.1 trillion)?

Both ends of an elastic band are being stretched so far apart that, at some point, the elastic band splits and there is nothing left. Guess that is when the SHTF!
——
Scroll down a little in the second link to the map, and it shows the US divided up into four parts, not six. Alaska is part of Russia, Hawaii is part of Japan. First link brings China into the picture. —
http://online.wsj.com/article/SB125243309793493085.html
http://english.pravda.ru/world/americas/08-09-2009/109155-usa_collapse-0
“. . . Alaska is pictured on the map as a part of Russia. Hawaii were shown as a territory of Japan, whereas four new states were pictured on the territory of the USA: the Californian Republic, the Central North American Republic, the Texas Republic and the Atlantic America, which included the traditional states.”
——
#96 Barb the proof reader on 09.09.09 at 2:15 pm — Hi Barb.

“The world is overpopulated, . . .”

Hence the nicely-timed introduction of the pig – bird – human flu. In 1976, vaccinations caused 51 deaths, the mythical swine flu one — a 50:1 ratio.

Do I hear population reduction / control, downsizing or variations on same, ordered by the ‘elite’?
——
#91 CalgaryRocks on 09.09.09 at 1:46 pm — “. . . saving for a rainy day, eliminating debt and working on your skills and you will be allright.”

Bravo! Realistic, down-to-earth people do understand this concept; sheeple don’t.
——
Third and long? Put these two together and what happens. —
http://www.guardian.co.uk/commentisfree/cifamerica/2009/sep/08/obama-healthcare-speech
http://www.whale.to/b/flexner_report.html
(How US Healthcare Was Taken Over By Rockefeller)

#111 Too Old Bob$ on 09.09.09 at 7:32 pm

Holy Cow! Just recently got back from the lake where I have no internet and what do I see…Garth talking about Gold. :(

Actually what’s wrong with a little Gold. I’ve held Gold since it was just over $300 just for the hell of it. Maybe one day I will give it to the kids. Maybe it will be worth nothing, then again. I think if Gold goes over it’s high of $1037 it will thus go higher because that seems to be how the markets react. Not a big deal really just something to consider if your shorting the market etc.
I much prefer to stay diversified, that’s why a little Gold is just part of the package, if you can afford it. Like i’ve said before, invest only what you can afford to lose and try to overcome the ups and downs until you are absolutely sure it’s time to cash in.

Personally I think the best investment would be internet access at the Lake, then I could read Garth’s blog while I’m drinking beer and fishing. :)

#112 RJ on 09.09.09 at 7:46 pm

Gold has more liquidity than fiat currency. It can be exchanged for local paper in any country on the planet. Try buying gasoline with paper featuring a picture of the queen on it in Florida. When the oil is gone, gold will be here.

Garth +1
Woodwork -109

#113 Justin on 09.09.09 at 7:55 pm

# 92 Bill-Muskoka

The best (element) metal conductor of electricity is Silver.
1. Silver 2. Copper and then Gold which follows in third place.

It is true that Gold is not effected by air (oxidation). This is why very expensive printed circuit boards often have their traces plated in Gold (gold plating over copper).

I am very interested in the white powder of gold article and know most people are unaware of the antibacterial properties of Silver.

Of course it’s no surprise that table cutlery is called Silverware. Appears (serendipity?) that
our ancient ancestors discovered this property which of course is useful when warm running water and dish soap are in short supply ;-)

#114 Casanova on 09.09.09 at 7:59 pm

If buying gold at 1000 now is a hedge against inflation, I might as well prefer real estate. If the future is inflation, real estate will be a better investment then gold. And more useful too.

#115 Maurice on 09.09.09 at 8:00 pm

Amigos: So food is going to be so expensive. In the real world we farmers know that basic grain prices are going in the opposite direction. Deflation in grains. Last August Wheat was $250 a tonne delivered to Guelph. In January 2009 wheat was $182 a tonne delivered to Guelph. Today it is $128 a tonne for the same destination. At 1.5 tonnes per acre $128 a tonne doesn’t even cover the direct imput cost to farmers. Food shortage will only happen if the prices are manipulated by Chicago Traders.

#116 X on 09.09.09 at 8:19 pm

BOC to aggressively raise rates when they do begin to raise rates, Laurentian Bank economist:

http://www.financialpost.com/news-sectors/story.html?id=1976736

#117 Coho on 09.09.09 at 8:20 pm

#93 D in London wrote:

The older I get the more I am confronted with the reality that the things we have a “choice” in are mostly an illusion. They give us the illusion of choice so that we might maintain our illusion of control. There is very little real choice. In most cases it is picking heads or tails on a coin, rather than having the power to pick another coin entirely. (For example, the Dems and Republicans in the US – a forced choice between heads or tails, while the coin never changes. ..

Excellent realization!

And let’s not forget this left/right… red/blue… liberal/conservative… conservative/labour — two sides of the same coin — applies in many other “democracies” such as in Canada, the UK, Australia ,etc.

Whether we realize it or not, we’ve all made the only real choice that we have. The only thing of real and everlasting value individuals posess is his or her will or spirit. It is the only thing we can really control in this world and the only choice we really have had is whether to trade our spirituality for the allure of this plastic, materialistic, pseudo-reality. I would guess that the vast majority of us through ego, deception, coersion, trickery, bribery and blackmail have traded our will for our wallet.

#118 TaxHaven on 09.09.09 at 8:38 pm

I have an 1885 U.S. $20 gold coin – a “double eagle”. It contains 0.9675 troy oz. of gold and has a face value of $20. In those days, gold was fixed by governments at $20.67 per ounce.

They didn’t make one-ounce $20.67-face value coins. They minted $20.00 coins, weighing 96.75% of a full ounce, for convenience. Fine. But if they had placed a face value of, say, $18 on the coin, every one of them would have disappeared from circulation…

Tell me this: why don’t TODAY’S one-ounce American eagle coins have a face value of – currently as I write – US$993.60? Why do they only say “$50”?

The answer is that next month the face value might have to be $1005 or $1010, then $1015…yes, perhaps even temporarily $985. (But you know the trend – UP.)

And why don’t the $50 gold Canadian Maple Leaf coins or $50 gold U.S. Eagles circulate?

GRESHAM’S LAW, under which bad money will always drive out good money.

Seems to be a confidence problem here with the governments’ paper currencies – a problem that gold doesn’t seem to have.

This won’t end until legal tender laws are abolished and the definition of “money” returned to the free market.

#119 45north on 09.09.09 at 8:53 pm

#98 Vlad the Old Testament tale of a farmer who had seven good years, stored his crops properly and lived modestly so when the seven lean years took over, was able to feed his family and friends.
It wasn’t a farmer it was Egypt.
http://www.catholic.org/bible/book.php?id=1&bible_chapter=41

#120 PVC on 09.09.09 at 8:59 pm

Does Garth knows more than Greenspan about what is money.

Read this Garth. According to Greenspan GOLD IS MONEY! Read the ultimate source of payment comment.

Yes payment =money. End of debate.

Sept. 9 (Bloomberg) — Gold prices that jumped above $1,000 an ounce this week are signaling that investors are buying metals to hedge against declines in currencies, former Federal Reserve Chairman Alan Greenspan said.

The gains are “strictly a monetary phenomenon,” Greenspan said today at an investment conference in New York. Rising prices of precious metals and other commodities are “an indication of a very early stage of an endeavor to move away from paper currencies,” he said.

The price of gold has jumped 13 percent this year as rising government debt coupled with declines in the dollar spurred demand for the metal as a haven. Silver, platinum and palladium also gained.

“What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment,” Greenspan said.

#121 PVC on 09.09.09 at 9:02 pm

Here’s the link to Greenspan on gold is money.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=acrGvxBXPDfk

#122 dd on 09.09.09 at 10:14 pm

#105 Calgary Rip off

… And why Gold? Platinum is worth more…

Platinum … you have to look at the car industry demand to size this up.

#123 Davinci on 09.09.09 at 11:38 pm

In the event of default everyone will get dollars from their ETF or COMEX contract. These items are Derivatives and part of the $1 quadrillion dollar pool.

I am 100% confident that everyone will get their dollars. I’m just not sure what it will buy.

That is why you own gold and silver and not a paper promising it.

#124 Tom Araxias on 09.09.09 at 11:58 pm

“Oil burns. Gold accumulates. — Garth”

Oh, I get it now, because gold accumulates it must mean supply is infinite. Get a grip.

#125 Freedom 85 on 09.10.09 at 12:41 am

Garth (et al),

The argument of Gold’s worth is clear to me. Gold may not be exchanged for bread in difficult times but that is why we grow gardens. Gold may not be as useful as a bill-type currency, etc. etc. What Gold is to me is a preserver of purchasing power when governments go mad as they are currently doing in slow motion at an increasing rate. Purchasing power means that when the dust settles (and it will) prices of things will have changed, probably for the worse and you can then (if need be) exchange your gold for the next stable currency and buy what you need at that time. So the gold is money argument is blah blah blah (who cares). The purpose gold serves is that it is the ultimate preserver of PURCHASING POWER!

#126 Mike (Authentic) on 09.10.09 at 3:16 am

#120 PVC “Does Garth knows more than Greenspan about what is money.”

I would say no, Garth knows more. Greenspan knows a lot about money, but has created the greatest debt load his country (and US citizens) has ever seen. I’d bet Garth would have done much better in the same position.

Yes, this man even has his own Wikipedia page:

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

Mike

#127 ally ally oxycontin free on 09.10.09 at 6:18 am

Geez, Garth! I let you take the picture, but I did NOT think you would marginalize my privacy.

http://www.greaterfool.ca/wp-content/uploads/2009/09/vault12.jpg

“Typical personal gold vault of blog reader”

#128 steven rowlandson on 09.10.09 at 8:10 am

Hello to those concerned with the peak oil theory.
As I understand it the peak oil theory is all about the depletion of known and in production oil reserves on one hand and the ability to find and bring to production new reserves on the other. Without new discoveries and new production then existing oil deposits are assumed to be in the process of being depleted and that implies a shortage. Want to defeat the peak oil problem then go find and bring to production oil deposits that allow for production growth that exceeds consumption of oil and or oil field depletion.
In theory the gull island field can supply america for 200 years. In practice its off limits due to political considerations and america’s economic arrangement with opec. The Bakken oil shale deposit might be huge and able to supply oil and gas for a long time also .
It may or may not be available. If they allow exploitation then alot depends on investing in drilling holes to get at the oil and that means horizontal drilling. It will take time and much investment. At the point of proving up reserves the whole thing could be put on hold for the same reasons as the gull island deposit plus environmental considerations.
So in theory Canada and America might indeed have huge reserves of petroleum but for political and environmental considerations most or all of it might stay in the ground. The strategy being to suck the rest of the world dry first and keep opec oil money buying government debt to support the dollar which is backed by nothing but a promise to pay more dollars backed by nothing. So if those huge reserves are kept out of production its almost as if they were never discovered in the first place there fore unless some one breaks ranks and produces more and more oil then we will be at risk for real or percieved shortages and price volitility.
Thats how I see it based on what I have learned.

Steven

#129 CalgaryRocks on 09.10.09 at 8:58 am

His is the biggest-spending government in Canadian history. — Garth

I feel you. Unfortunately, given the minority governments we’ve had, Liberals, NDP & Bloc aka ‘the coallition’ had a lot of input into all spending.

As such, nothing leads me to believe that spending under the coallition would have been less.

Remember Harper lost Quebec after he cut 1 percentage point out of the ‘culture’ budget. Obviously Canadians like spending. They just want to be on the receiving end and to have someone else to pay for it.

#130 Bill-Muskoka (NAM) on 09.10.09 at 9:53 am

#113 Justin

You are correct, I mis-spoke on the resistivity. According to my engineering references the following are the resistances in mOhm/cm of each Gold 244; Silver 1.629; Copper 1.724 making silver the least resistant.

Unfortunately, silver does oxidize readily, and, therefore, is not the ‘best conductor’ overall. Copper also oxidizes and creates an insulator. Copper is also, fortunately, the cheapest metal for good conductors we have available. You may recall the attempt to use Aluminum in its place and the coefficient of expansion problems encountered, as well, as the oxidation problems leadign to high resistance connections? Another failed attempt to cut costs that resulted in mega-costs being encountered.

NASA discovered some neat tricks during development of the the Mercury and Apollo spacraft. They were using wire wrap connections and because of the interstitial space created by the round wire on a square post an air gap was created which, when exposed to to air and moisture caused and oxidation to form resulting in either a high resistance or outright loss of that circuit. They solved the problem by encapsulating the connections in a goop that hermetrically sealed the connectors and prevented the oxidation from occurring.

Nowadays we use pressure contact connectors with mechanical locks and they are generally gold plated to eliminate the oxidation at the points of contact.

Linde Labs Division of Union Carbide Corp. developed the LASER Welder which allowed the micro-electronics industry to microscopically weld gold wires to the connections of microcircuit semi-conductors. This literally was a significant breakthrough that has led to our modern electronics and especially high density chips.

Sometimes the littlest things are the most important, eh?

#131 Bill-Muskoka (NAM) on 09.10.09 at 10:08 am

#113 Justin

I also enjoyed your comment regarding ‘silverware.’ I believe you will find that Pewter played a major role as well in eating equipment. It is relatively easy to cast and is much more rugged than silver for daily use.

Materials science is a little spoken of, but major influence, thing to our way of life. In fact, more progress has been made in technology by materials science than the more obvious developments.

Regarding the White Gold Powder ORME (Orbitally Rearranged Monoatomic Elements) there are many online references available. Laurence Gardner wrote a fascinating book detailing the history of it called ‘The Lost Secrets of The Sacred Ark’, and I strongly recommend reading it for both the scientific as well as the historical information contained therein. He traces the true ‘power’ of the Ark from ancient Egyptian times to modern day. It certainly is an interesting endeavour of research.

They almost had it right in ‘Indiana Jones: Raiders of The Lost Ark’ except it was not a ‘transmitter’ but rather a ‘transmutator.’ Alchemists spent a lot of time experimenting trying to find the ‘Philosopher’s Stone’ (yeppers, Harry Potter comes to mind, eh? LOL), but the story has been twisted and almost lost as to what they were really seeking and what the Philosopher’s Stone really is.

The story really ties together a lot of history that now, thanks to the research of many, is made clear about many things that have become religious legends.

#132 Bill-Muskoka (NAM) on 09.10.09 at 10:11 am

I forgot to include a link to a good reference. Here it is.

White Gold ORME

#133 brett on 09.10.09 at 10:55 am

#104 dd

those are my predictions for the future, haa.
nat gas back to 15, which is actually 447% above todays low, and gold 5000 before end 2012, US dollar will probably have a partial gold backing at that time.

#106

oil will go higher, because they refuse to drill for it, the north slope of alaska has enough oil for 300 years of US consumption, also mideast shenanigans should push it to 200 at some point. fair value at this point is between 75-90 US dollar per barrel, thats based on the official supply numbers and the US monetary inflation numbers, both of which are highly massaged.

#134 slopetester on 09.11.09 at 12:19 am

Tell me where I can gas up at PetroCan in exchange for gold wafers, and I’ll send you an ounce. Until then, it’s not money. How many times do you nuts have to hear the same thing? — Garth

Garth, maybe not gas Garth, but I’ll give you a list of 100 Vancouver business owners who will accept your Gold wafers (and gladly make dollar change for you, if any) for everything from transmission repair, to dental work, to helicopter skiing and heavy equipment. PLUS, to encourage you to part with your Gold, they will discount their BEST price by another 15%. Call me.

#135 slopetester on 09.11.09 at 12:28 am

Garth, how come “legal tender” (defined in the Currency ACT as ONLY coins and Bank of Cad notes, aka Cash) is NOT contained within the Federal Governments definition of “money” ?? I’ll assume you know where the Feds hide this very important definition – if you do not I can give you a hint.

#136 gold bugger on 09.11.09 at 12:55 pm

Anyone who wouldn’t trade a loaf of bread for an ounce of gold is swimming in the shallow end of the gene pool.

Besides the fact that you can buy gold bullion in fractions of an ounce at Bank of Nova Scotia, buying gas at Petrograd isn’t the only use of money, as gold skeptics mockingly point out. Plenty of important things cost all of a thousand bucks or more, including monthly rent or mortgage payments, new cars, substantial repair or renovation work, etc.

Unless and until we get another fascist like PET for a PM, nothing forces your mechanic, your electrician or your landlord from accepting brightly colored paper with pictures of QEII and various past PMs.

If anyone cared to read up on the superior durability, transportability, and divisibility of gold, the comparison of oil – and especially bread – to gold would be more obviously laughable.

Cash is not king. Cash is for suckers. Gold is king.

#137 john on 09.15.09 at 1:33 pm

Re Rocks & nuts:
This was really a confused piece of work by Mr. Turner. To start the government can sell more bonds than it can finance. It’s called monetizing the debt (http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-monetizing-debt/25806).
Despite Mr. Turner’s recommendation of ETFs this is really the worst way to buy gold. Why is this? Well the value of gold in the long run tracks the decline in the purchasing power of fiat money as does the price of an ETF. When you sell physical gold there is no effective capital gains tax, but capital gains do apply with the sale on units in a ETF. The result is that the ETF is subject to confiscatory capital gains. In Canada there is a $10,000 cash reporting limit. If as a gold seller you stay within this limit there is no reporting to FINTRAC in Ottawa and therefore no possibility for taxes.
A little known fact is the deemed sale upon death provision of the Tax Act. When a person dies in Canada there is a deemed sale of all financial instruments and rental property. At this time capital gains taxes are applied, as well as recapture on the deemed sale of rental property, if of course capital cost allowance was taken on the rental property. The point is that the increase in nominal value of investments over the long run is really just a reflection of inflation. When assets are subject to capital gains taxes the result is confiscatory taxation. It is ironic that the same year that capital gains taxes were applied in Canada (Dec. 31, 1971) was also the year that Nixon ‘closed the gold window’. I do not view either of these events as permanent situations.
Under Canada’s Byzantine and confiscatory taxation code personal use property (PUP) is subject to capital gains taxes. However this is just a technicality at this time since it cannot be effectively applied. Nobody in their right mind would voluntarily pay capital gains taxes on the sale of antiques or their Grandmother’s sterling silver tea service. The result is that numismatics, philatelics, antiques, including sterling silverware, are not subject to capital gains taxation. This also of course includes precious metals such as bullion coins.
This is important since it means that these are very legitimate avenues of wealth preservation. A study by the author showed the rate of return over the last 36.5 to 38 years was between 4.5 and 8.5 percent compounded on English gold coins (comparison of sale prices of the ‘Samuel King collection’ of English gold coins at Spink and Sons in May 2005, with sale prices in B.A.Seaby’s circular from the late 1960s). However the deemed sale provision of the Tax Act does not apply to numismatics, philatelics and antiques. Investment advisors such as Mr. Turner ignore this area but it is a very important part of wealth preservation, apart from being something of interest and very many cases great beauty.
Of course the inverse is also true. If you are going to invest in stocks then make sure in the main that they pay dividends. In this case Mr. Turner to his credit does stress dividend paying stocks. If a stock does not pay dividends than why own it? It is really a case of a dog that can’t hunt isn’t it.