
Credit Deflation and Gold - tomkwok
http://dailyreckoning.com/credit-deflation-and-gold/
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ChuckMcM
When people write something like this in a piece : _" Since credit was
expanded out of thin air by banks without underlying stocks of gold to cover
it, ..."_ you know they are confused.

Banks don't "expand credit" out of "thin air" they capture future economic
output by funding it in the present. You say to the bank "loan me $100,000 to
build a house." and the bank says "sure if you agree to pay me 5% of that loan
amount every year for the next 30 years." They have agreed to loan you money
today, and you are going to give them all that money back _and_ you are going
to give them some additional money (5% of the loan amount per year) that you
make over the next 30 years as well. And then they calculate what the total
amount would be over 30 years and they divide that by 360 months, and that
becomes your "monthly payment".

So no money was "created out of thin air" rather future money that doesn't
exist yet, but the bank has reason to believe will exist, has been allocated
to that bank because you are going to give it to them. And to get that money
to loan you they tell other people, "hey, we'll pay you 2% interest on your
money if you keep it in our bank." They net the difference (3%) and the world
goes around and around.

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dsmithatx
Gold is at a 5 year low because the market is up. The value at $1165 per ounce
is a bubble still. I sold my Eagles and other coins at $1600/oz. After a lot
of study I've concluded Gold isn't all that heavily used in Manufacturing and
industry. Not much more than Silver. For every ounce/pound of Silver that
comes out of the ground we get 1/17.5 that much gold. If all that research is
correct gold should be at $259-350 per ounce.

However, people don't listen. This means that if I get any sense the market is
going to crash again I will immediately buy Gold bullion again and profit
again I'm positive. Simply because people are herd animals and will always buy
high and sell low. As the market crashes they'll get scared and shelter up in
gold again.

