"Everything you need to know about gold"
Kelsey Williams Do cryptocurrencies still have value? Some would say yes, absolutely. Others might be rethinking previous expectations for cryptocurrencies. We give the nod to the former – with some strong caveats.
The value of cryptocurrencies has to do with the transaction process. Bitcoin and other cryptocurrencies have value because they provide a process for the private transfer of money.
SIGNIFICANCE OF 1980 GOLD PEAK
When President Nixon slammed shut the gold window for foreign holders of U.S. dollars, it was the final step in a planned exit from the gold standard. It was also tacit admission that the United States government, in conjunction with the Federal Reserve, had debased the world’s s reserve currency beyond a point that could no longer be ignored.
GOLD LEAVES SILVER BEHIND
Complicated and convoluted technical analysis, inflamed fundamentals, never-ending last chance warnings and all the supposed evidence to the contrary – there is nothing that justifies the ultra-bullishness of silver stackers and investors. We might say “gold leaves silver behind, waiting, and in the dust.
COST OF PRODUCING GOLD
Ever wonder how much it costs to produce an ounce of gold? Most of us tend to focus on the market price for gold since that is what we hear referenced on a daily basis.
That makes sense. However, investors and owners of gold mining stocks have valid reasons to pay more attention to production costs of gold in addition to the market price. After all, you have to get the gold out of the ground first, before it can be refined and sold.
NEW HIGHS FOR GOLD?
All of the talk about new highs in the gold price seem to be wishful thinking unless one is focused on only nominal prices. Below is a chart of monthly average closing prices for physical gold since the summer of 2020…
DID THE FED CAUSE THE 2008 RECESSION?
A review of the history regarding Fed interest rate policy yields information that says “yes”.
On June 30, 2004, the FOMC began to tighten policy by increasing the Fed Funds target rate to 1¼%. By June 2006, two years later, the target rate was at 6 1/4%. It remained at that level for the next year – well into 2007.
IS BITCOIN STILL THE NEXT BIG THING?
Remember when Bitcoin and other cryptocurrencies were the “next big thing”? For most investors, it was only because the prices were going up in radical fashion.
The anticipation of hitting it big coupled with FOMO (fear of missing out) overcame fundamental analysis and common sense. Aside from the techno geniuses who created them, and maybe a few savvy ‘miners’, who else could explain the process?
The word “process” is critical to an an elementary understanding of any imputed value derived from cryptocurrencies. Simply stated, the value offered by Bitcoin and its counterparts was this: they provided a digital (convenient) process for the ‘private transfer of money’.
Proponents of Bitcoin claimed that the elimination of a middleman/bank and the resulting privacy were huge benefits; and they are.
The privacy is attractive for tax and regulatory reasons; taxes and regulations are obstacles to free trade. But it wasn’t then, nor is it now, realistic to think that any private transaction system will be allowed to function unimpeded for long, if it is successful.
Those who claim to have regulatory authority would not sit by idly without making a concerted effort to intercede. The potential loss in tax revenue would cause any government to declare monetary war.
THE LONG ARM OF GOVERNMENT
In effect, they have. Over the past two years, a long list of examples highlighted by the United States Federal Reserve and U.S. Treasury have stated their concern and implemented preliminary discussions regarding the official use of cryptocurrencies. Other countries have announced variations in a similar vein.
The stated justifications for ‘official’ sanction and use of cryptocurrencies, whatever they may be, are primarily political in nature. Whether it is Janet Yellen citing her concern about money laundering by terrorists, or some other high profile politician clamoring about monetary stability, or consumer advocates calling for user protection; politics will preempt the markets.
Efforts to regulate and control the use of cryptocurrencies remove the basic, singular advantage of cryptocurrencies – transaction privacy. Without that privacy, all that is left is another form of digital currency. Most financial transactions today are digital in nature, anyway, so nothing gained.
Investors who still think that Bitcoin and other cryptocurrencies can make them rich are fooling themselves. Once governments are fully in control, it will no longer be a free market.
Whatever creative names the regulators and bureaucrats come up with won’t change the end result of this exercise, either. Cryptocurrencies will be just another name for fiat currencies.
(Also see Is Bitcoin Money – Does It Have Value?)
Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!
SILVER IS A BARGAIN
Silver fever is rising. Calls for $100 silver (see $100 Silver Has Come And Gone) and higher echo loudly. With its price close to $25 oz. after being as low as $18 oz. last fall, now would be a good time to review how well silver has responded to past predictions of impending higher prices.
FED’S GAME PLAN IS ALWAYS CHANGING
“Inflation is likely to take longer to return to our price stability goal than previously expected” Fed Chair Jerome H. Powell March 16, 2022
BANKING CRISIS = LIQUIDITY CRISIS = DEMAND FOR MONEY
Events this past week are indicative of what could be a more formidable problem for the Fed, investors, and the economy. Before we talk about that, lets first emphasize the key point made in my article SVB, MMT, TNT.
What happened at Silicon Valley Bank, Signature Bank, and now, Credit Suisse and First Republic banks, are not individual issues. All of them are the obvious signs of banking system fragility due to the practice of fractional-reserve banking. Therefore…
What has been termed a banking crisis is actually a liquidity crisis; and the loss of liquidity translates to a DEMAND for money.