CPI lies

"ricochetboy" <philzberg@e...> wrote:

There is no conspiracy, it is all quite out in the open. [...]
Jim puplava puts the picture
together nicely...http://www.financialsense.com/stormwatch/2005/0624.html

Phil, if the low Volcker-Greenspan-era inflation as measured by CPI is an
illusion, then why is the dollar price of gold no higher now than it was in
1982? (See the graph at http://www.nma.org/enumerate/gold/gold.htm.) How
have the conspirators managed to fool the entire gold market for over twenty
years?

Yes, I know about hedonic pricing. Inter-temporal comparison of prices is a
complex topic, and you'll have to come up with a more competent critique
than the above for me to take it seriously. Puplava's discussion of Owner's
Equivalent Rent is laughable:

Many homeowners may not be aware that as a homeowner they receive a
fictional income referred to as Owner's Equivalent Rent (OER). Essentially
the BLS samples the price of rents in residential housing to come up with
what a homeowner would receive hypothetically if they were to rent their own
home. That sounds idiotic to me, since most homeowners would agree the
family castle is in many cases a money pit and not a source of income.
Unless the home is owned free and clear, most homeowners have cash outgo
each month due to mortgage payments, property taxes, utilities, and repairs.
As absurd as this concept appears [...]

The above disqualifies Puplava as a serious analyst of economic matters.
EVERY homeowner knows that the point of buying is to stop paying rent. That
the rent paid to yourself is a net wash does not change the fact that if you
weren't living in the house, you 1) could earn rental income from it and 2)
would have to pay rent to someone else. This phenomenon is independent of
whether you have a balance on your mortgage or not. It's ludicrous for
Puplava to pretend that because no cash changes hands, the value of not
having to pay rent is zero.

But feel free to take Puplava's implicit advice and to sink all the dollars
you can into gold while I keep my portfolio in real estate and equities. If
there's one thing we can agree on, it's presumably that markets are an
efficient way for the poorly-informed to voluntarily transfer wealth to the
well-informed. If you want to meet here again in ten years and compare rates
of portfolio return, you've got a date.

Brian Holtz
Yahoo! Inc.
2004 Libertarian candidate for Congress, CA14 (Silicon Valley)
http://marketliberal.org/>
blog: http://knowinghumans.net/>
book: http://humanknowledge.net/>

The price of gold has been systematically suppressed by the trmporary
delusion of the public that the fractional reserve fiat system is
working and can work indefinitely, and by the extablishment of paper
subsitutes for gold in the form of the comex futures market. For those
betting for gold for the past twenty five years, Keynes was correct,
Markets can be irrational longer than one can remain solvent. For the
last four and a hlaf years though, gold has ooutperformed most other
markets, rising from 258 to 430. Extremely powerful intersts are
allayed against gold. Gold is anti fiat and anti dollar. The key
mechanism to suppress the price of gold over the last twenty five
years was central bank dishording combined with the comex paper system
and gold priducer forward selling. As discussed previously, the
fractional reserve banking system enables commercial banks to create
money out of thin air in virtual unlimited quantities, as the reserve
requirement s heve beeen reduced to zero in many categories of
deposits.Follow the Wilkipeadia link all the way to the feds reserve
requirements.
http://tinyurl.com/745tl
JP morgan has been the most active in shorting gold at the comex.
Because of its status with the dederal reserve to back up any losses,
Morgan can take an infinitely large paper short position and keep it
regardless of losses. The game however has it's limits. and the limit
is the ability to deliver gold into thephysical market when a contract
comes due. The massive endless net short position of the commercial
banks has done much to discourage the physical gold buyer. Dishording
has done the4 rest.The socialist central banks of europr have
beenenthusiastic dis hoarders over the last few years. but the stash
appears to be running low. The British have been pushing for the wold
bank to dis horde it's casche to help the poor debtor nations.
congress in a very rare spasm of sensibility put the quash to that.
For those like me who have watched the drama unfold over the last few
years, the battle is epic. When will the central banks store get so
low that they stop selling. When will the spot market spell blood, and
massive physical possession start taking place. Gold was first around
four hundred an ounce in the mid to late seventies, since then we have
seen an explosion in paper assets worldwide. There is estimated to be
125 thousand tons of gold in the world, or two trillion bucks worth at
present prices. If the worlds fiat paper money system's stability
comes into question, many people will be rushing out of paper assets
into gold. This is the lesson of history. Of course the more typical
grinding reality of the woeld is grinding inexorable inflation eating
away at the social fabric. In that case, the best sage haven in most
of the second and third world has always been real estate. In that you
are correct. But in an advanced economy real estate is primarily a
fincial sset, its price relative to oter goods and services largely
determined by interst rates, and the direction of interst rates.

Controlling the gold price was the core of Robert Rubin's Strong
Dollar policy under Clinton. China has liberalized the gold market
domestically. with the revaluation of the Yuan underway, Gold may
become cheaper to the chinese. Also as an emperic observation, ooil
and gold have historically tradedin a ratio of about ten barrels of
oil for one ounce of gold. In the early seventies when we went off the
gold standard gold went from 35 dollars on ounce to 350 in a few
years. Oil made a similar percentage move soon afterwards.
Cooincidence, I don't think so. Oil remains historically cheap in
inflation adjusted dollars. There are re3asons to believe that oil
too has entered into a major bull market.Amd so sure, keep your real
estate. But get some gold coins too. Bill Bonner loves to tell the
story of a bbell hop in Berlin who kept the gold coins given him as
tips by wealthy patrons sooon after the war. By the time the
hyperinflation of the twenties was over, these gold coins could pay
off the mortgae on the whole hotel. To getr the full montie on the
illegal price frixing of gold, the large naked short positions on the
comex and the liklihood that the comex eill default on physical
delivery of either gold or silver perhaps sooner than later, go to
GATA.OTG. I do not know when it will happen, this month, this year or
maybe in a hundred years, but history says that fiat money allweys
end in trdgedy. The longer it lasts, the worde it is for liberty and
the better it is for war mongers statists, and the well connected.

Brian - I would concur with Phil on the dumping of
gold by central banks. This has been going on for
years now. Also, why is it that whenever someone tries
to debunk gold they always 'conveniently' reference
1980 or 1981 as the starting year? Was it not then
gold was at an all time high against the dollar? hmm..

It will be interesting to see what happens when the
US, UK and China central banks all divest themselves
of the gold they have hoarded over the past 100yrs -
convinced that gold is now a worthless holding.

Now I agree with you that gold is not a good long term
investment. It's value as a currency is in it's
stability. Otherwise it's just like any other
commodity. Wealth generation will always be higher in
equity building investments. By the way, do you know
of any good stocks that are gold denominated?
(assuming offshore of course :slight_smile:

I am also curious about your cynicism towards Puplava
when you said - "EVERY homeowner knows that the point
of buying is to stop paying rent." I think this is a
grand over-generalization about homeowners. A major
aspect of the Austrian School states that is
essentially impossible to second guess everyone's
intentions for why they choose to purchase X over Y or
none at all.

For instance, someone could buy a second home for
investment, vacationing or for in-laws - without ever
having the intention to rent it out. The way houses
are constructed or located also makes some of them
unsuitable for renting..conditions that would have
impacted their purchasing decision.

So at best, OER is distorted as it doesn't accommodate
variances between the two markets. With rental costs
making up 30% of CPI these distortions can seriously
add up. And why use the OER method just for housing?
Why not convert all capital expenses to services?
After all you can rent computers, cars,furs, cell
phones..

cheers,
David

--- ricochetboy <philzberg@...> wrote:

I found an enthusiastic young high school student to do our little tv
show. He has good equipment and has made a few films already.

I can't help but add that Michael Badnarik really got the gold issue.
there has not been a public audit of the gold at fort knox since the
eisenhower administration. Bbadnarik repeatedly promised that one of
his first acts of elected would be to go to Fort Knox with cameras in
tow.

Phil,

"Little TV show": The economic debate? Filming the gold/absence of it
in Fort Knox? Walking Tour? Sounds great, but let us know more.

Marcy

--- In lpsf-discuss@yahoogroups.com, "ricochetboy" <philzberg@e...>
wrote: