The dollar has no intrinsic value IV: Celebrating $1700 per oz Gold

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Zimbabwe money has no intrinsic value either

Gold hit $1700 in overnight trading last night, and it is time that I write a post celebrating this $100 incremental increase.  This is only a mere three weeks after thanking Ben “Gold-is-not-money” Bernanke for $1600 gold.  It used to be that  dollars were fixed in price to money, gold and silver.  Then, it was taken off the precious metals standard and become “money”–but it is what is called a “fiat” currency, a currency that has nothing real backing it.  This means that the dollar has no “intrinsic value”.  Nouriel Roubini and the other bright luminaries with PhD degrees have said that gold has no intrinsic value, and thus I created this series to remind them that the dollar is not money.  It was once a note that gave the bearer the right to money on demand, but now it cannot be used to demand money any more.

This is a basic economic fact that I’ve known since my teen years when Carter was president and the US Federal government was likewise devaluing the dollar.  It took Paul Volcker and severe interest rates and austerity to put the dollar back on track.  Now the United States has suffered a belated downgrade in its credit rating from AAA to AA+ and we are seeing a renewed debauching of the currency.  Still, there are those who claim that it is gold that is in the bubble, because look at how high the price is in dollars!  I would remind people that the dollar has no intrinsic value, and the fact that we measure things in a currency with no set value is a form of reification–the value of the dollar is an abstraction because it is the ultimate derivative product, which has no discernible reason that it should be worth anything except that it can be used to pay debts and taxes.  To measure gold, which has  real intrinsic value, in dollars, which have none, is reification, the assigning of a concrete value to an abstraction.

The dollar has no intrinsic value III

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“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises (hat tip Jim Quinn)

My prediction for the current debt crisis:  John Boehner and the establishment Republicans will form a coalition with the Congressional democrats to sell out the American people.  They will raise the debt ceiling, Obama will sign the bill, Bernanke will officially begin QE3, and it will be business as usual.  The dollar will continue its downward spiral and much of world is going to starve to death.  During the Weimar Republic, food became the most expensive part of people’s budget.  Gonzalo Lira explains why food production fails during times of hyperinflation: Is Farmland A Smart Hedge Against Inflation?

The right of expatriation II: The Ninth Amendment

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In an earlier post, I argued against renunciationguide.com that there is indeed a right of expatriation enshrined in the Declaration of Independence.  Now I believe that I’ve found the same right in the United States Constitution–the Ninth Amendment:

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

Now since the American Revolution was the colonists’ major assertion of the right to expatriate from Britain and the King of England, it only makes sense that the Ninth Amendment must be interpreted as protecting that same right in the case of anyone who wishes to expatriate from the United States.

The dollar has no intrinsic value II

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A year ago I mentioned that my in-laws were in India November and unlike previous trips, the U.S. Dollar was no longer accepted by vendors.  About a year ago, my next door neighbor was in his home country of Burkina Faso.  In previous years, the premium for exchanging US dollars for CFA (the Franc of French Africa) was reasonable.  But when he was there last summer they started with 16% premium and negotiated from there.

Jim Rogers is right–the US has already lost its AAA credit status.  When vendors and money changers overseas have rejected the reserve currency status of the dollar, small players, then the rest of the world will not be far behind.  My utter rejection of dollar began in January 2009, as documented here.

thanks to Zerohedge

Goldcorp: notes

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Well, it seems that those who say you can’t time the market are right.  Yesterday I sold a put on Goldcorp (Jan 2013, $52.50 for $9.40); on April 28, I bought back my last position (July $45 $4.60) for $0.33 on April 28 when GG was at $56.  Then, Goldcorp announced yesterday after hours that they were cutting their production forecast by 9%.  The Globe & Mail decided to highlight this aspect of their announcement with the headline: “Goldcorp scales back production forecasts“.  Sometimes I wonder if the major media wants industry to do well.  Their focussing on the negative all the time is quite ridiculous sometimes.  (As I write, GG share price has dropped $2.10 from yesterday’s close).

But the announcement was not at all bad news.  Their 2Q reports says that revenues are up 62%.  If the share price goes down because of the cut in the production forecast, then it probably represents more of a buying opportunity than it already is.  As it is–and this applies to GG as much as any gold miner–gold mining companies are a bargain compared to their typical price vis-a-vis the price of gold–see Fabrice Taylor and Monty Pelerin (here and here).  I will sell another put if the share price drops to $45.

Update:  TD Newcrest has downgraded GG from “Action List Buy” to “Buy” and lowered its target price from $70 to $68.  (Price is now down $2.76).

Note: All prices in U.S. dollars (which has no intrinsic value).