Ireland's lack of gold - a problem?

feargach

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Ireland is fairly unusual as a country which has been capitalist and democratic for the last 200 years, but has virtually no gold reserves held in its name in the central bank.

Certainly, we are going to be faced with an extreme situation in 2036 to 2056 or so, as our demographic bulge will be retiring then.

The potential pension crisis is getting a lot of air time today, 29 years before it's due to hit us. Everyone's being urged to set up a pension fund. Now in one narrow sense pension funds are financially valuable, for the consumer: they get big tax breaks, in essence.

However in another sense there's a major problem with pension funds that nobody is addressing: they are directed towards international shares and bonds which are today massively overvalued. Today's dominant market players: the EU, Japan and north America, are moving into a long period of economic stagnation.

It's arguable that all 3 major powers are no longer really growing significantly, and are approaching or have reached the limit of their growth potential.

The dollar has been treading water for the last five years, and is now falling heavily as the effects of financial gravity take hold. So the USA is growing: but only with the help of a debased currency. European pension fund investors are getting burned by the plummeting € value of their $ holdings. Ludicrous companies like Apple and Google account for a huge proportion of the US market. And your pension is heavily invested in them.

If the West continues to operate a free-trade system with China and India, it is certain that those two nations will continue to grow hugely. Democratic India is buying gold with both hands, Sanjeev Q Public has no intention of trusting his future to devalued Rupees, thank you very much. China currently operates and anti-gold, pro-US dollar policy. But China can turn on a sixpence when it wants to, as was displayed in 1978 when it went from Stalinism to capitalism over lunch.

Anyway, in 1999, gold hit the buying opportuntiy of a lifetime: because all the new money was flowing into doomed dot-coms, it collapsed to $250. It has steadily advanced since then.

Is it time for Ireland to acquire a few dozen tonnes of the yellow stuff while it's still extremely cheap? Over the next decades a billion people are going to move from poverty to the middle classes. Jewellery demand alone can be expected to cause its value to treble. Add in investor demand, and a six-times rise by the time Ireland's pensions crunch hits seems pretty certain.

Or do you still think that Google will be boss of the world for the next 3 decades?
 


onthefence

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Feargach there is so much here that i disagree with. Sets start with the basic one, how can you predict the future with any accuracy?
 

johnfás

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onthefence said:
Feargach there is so much here that i disagree with. Sets start with the basic one, how can you predict the future with any accuracy?
 

feargach

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onthefence said:
Feargach there is so much here that i disagree with. Sets start with the basic one, how can you predict the future with any accuracy?
Well, the world's gold supply is growing at 1% a year and the world's paper-money supply is growing at 10-15% a year. Any relatively rare chemical substance like oil gold and copper that people have a strong desire for is guaranteed to grow heavily over the coming decades.

I'm also predicting that the sun will rise tomorrow morning, do you doubt my predictive powers on that? ;)
 

Fionn_McCool

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onthefence said:
Feargach there is so much here that i disagree with. Sets start with the basic one, how can you predict the future with any accuracy?
Whaddayamean ?

Prophecy is an extremely accurate science, just as long as it has nothing to do with the future !

;)
 

youngdan

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I think it is very important for the individual to grab some for himself. I don't have the figures but believe Ireland has a decent quantity of gold relative to it's size and did not have a fool like Brown selling it at the cheap price of 260.
 

feargach

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youngdan said:
I think it is very important for the individual to grab some for himself. I don't have the figures but believe Ireland has a decent quantity of gold relative to it's size and did not have a fool like Brown selling it at the cheap price of 260.
The World Gold Council says ( http://www.usagold.com/reference/official-gold-2007.pdf ) we currently have 5.5 tonnes, which puts us 75th in the world. Netherlands are 7th with 640 tonnes, Portugal 13th with 382t. Belgium 20th with 227t. Thailand 33rd with 84t. Borat's own Kazakhstan is 38th with 67t. Nigeria 53rd with 21t.

Boy our central bankers have reason to be fierce proud! We almost have a third of the reserves of Africa's worst disaster story.
 

Watcher

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feargach said:
youngdan said:
I think it is very important for the individual to grab some for himself. I don't have the figures but believe Ireland has a decent quantity of gold relative to it's size and did not have a fool like Brown selling it at the cheap price of 260.
The World Gold Council says ( http://www.usagold.com/reference/official-gold-2007.pdf ) we currently have 5.5 tonnes, which puts us 75th in the world. Netherlands are 7th with 640 tonnes, Portugal 13th with 382t. Belgium 20th with 227t. Thailand 33rd with 84t. Borat's own Kazakhstan is 38th with 67t. Nigeria 53rd with 21t.

Boy our central bankers have reason to be fierce proud! We almost have a third of the reserves of Africa's worst disaster story.
"Anyway, in 1999, gold hit the buying opportuntiy of a lifetime: because all the new money was flowing into doomed dot-coms, it collapsed to $250. It has steadily advanced since then. "

FEargach, when do you predict the next gold price collapse will be? YOu talk about it as if it is a sure winner, however, what views of golds future did people have before the above mentioned collapse? They probably thought gold would continue to soar until it fell.

You may have a good point but I dont know enough about gold trading right now to predict yes or no. Interesting stuff, and I noted Youngdans comments on other threads regarding oil. Truly interesting.
 

youngdan

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That is why I did not read about them selling any then. I believe this is a disgrace. Celtic tiger my asal. I have even less respect for the Biffo and the guy with the yellow suit but not golden suit now. I am flabbergasted. Anyone with half a brain would have corrected this during the good times but the don't have half a brain.
 

Auditor #9

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Didn't gold as a reserve get replaced by a floating currency system (or something) in the 70s?

As for the future, isn't it likely that some new standard will emerge, some new trade agreement. If there isn't a war to introduce this I suggest it could be based on energy efficiency and human-economic indices. If your country or trading bloc is relatively self-sufficient yet people want to go there for some reason (education, travel, knowledge, justice, standard of living, experience) then somehow simple laws of supply and demand apply.
 

feargach

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Auditor #9 said:
Didn't gold as a reserve get replaced by a floating currency system (or something) in the 70s?
What happened was this: in 1945 the non-communist world made an economic agreement called Bretton Woods. The US dollar would be the international currency. Basically, the US Federal Reserve would print the world's money. In order to keep the US honest, the Fed would have to hand over an ounce of gold for every $35 in paper money it received.

In the 50's most of Europe had recovered from the war, and was earning more and more dollars from trade with the USA. As time wore on, more and more European dollar holders were demanding their gold from Fort Knox.

By the late 60s, Lyndon Johnson was scared the USA would be bled dry of its gold, because they had spent the previous two decades printing far more paper dollars than there were ounces of gold in Fort Knox to pay for it at the official $35 an ounce rate.

In a shock move, he banned private individuals from getting gold for their dollars. Foreign governments could still redeem their paper for gold at the official rate.

In the early 70s, even this was too much. Nixon simply reneged on the USA's 1945 pledge to pay $35 gold to anybody. And that's where we are.

The gold link was there to keep inflation under control. The long post-war global economic expansion died shortly after Nixon broke his nation's promise. People blame the 1973 oil shock, but oil fell significantly a few years later, yet the big boom never came back.
 

Auditor #9

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Thanks for that.

This is my tuppence halpenny's worth: can we not print euros for projects as long as inflation is under control thereby bypassing gold? Wealth is defined in other ways, therefore. Other parts of the economic system work alongside in the usual market-supply-and-demand manner.

Surely as long as a bunch of economic entities agree on a system for money supply then it doesn't have to be gold at all?
 

youngdan

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Auditor. There is hearty discussion on gold in the oil at 90 dollars and the 2 stock market threads.
 

feargach

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Auditor #9 said:
Thanks for that.

This is my tuppence halpenny's worth: can we not print euros for projects as long as inflation is under control thereby bypassing gold? Wealth is defined in other ways, therefore. ?
De nada.

If you inject new money into a finite economy, how can you expect to control inflation, if the growth in money supply is greater than the growth in goods and services?

More money and fewer goods pretty much guarantees inflation.

Right now, inflation is "controlled" by simply excluding various items from it. Fuel and housing and food are excluded from official US inflation figures, for example.

Does gold have a central role? Maybe, maybe not.

Is it undervalued, as a finite precious resource as measured by a non-finite currency? Yes.

I'm arguing that it simply has more growth potential than most types of investment, and Ireland might consider it prudent to increase its currently ultra-pathetic holdings.
 

Champa

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I know a guy who is a bit of an anorak, he goes panning for gold in Cavan and Monaghan and has actually found some over the years!!.
 

Auditor #9

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feargach said:
Does gold have a central role? Maybe, maybe not.

Is it undervalued, as a finite precious resource as measured by a non-finite currency? Yes.

I'm arguing that it simply has more growth potential than most types of investment, and Ireland might consider it prudent to increase its currently ultra-pathetic holdings.
So gold is disengaged from the money-printing process after all, right? There's a lot more money than gold in the world in the end of the day. For me it's it's use value (certainly not it's aesthetic aspect) which is important - gold is essential in certain electronics for its high conductivity I believe and you would have to look at how that market is behaving and growing to see the real value of gold, I think.

feargach said:
If you inject new money into a finite economy, how can you expect to control inflation, if the growth in money supply is greater than the growth in goods and services?

More money and fewer goods pretty much guarantees inflation.
You left out 'services' in your second sentence - does that mean that certain services are non-inflationary? Education comes to mind.

feargach said:
Right now, inflation is "controlled" by simply excluding various items from it. Fuel and housing and food are excluded from official US inflation figures, for example.
I can see the logic of houses (and their like) getting left out but (this is a good which can have a finite supply, probably, due to the excessive cost of owning one -forking out the money for the land, the cost of building/buying it then the running costs which leads me onto...) fuel is a bit crazy to ignore and should be the last on their list and food too. Certain consumption patterns need to be challange by inflation and it's a mistake to leave these goods out.

If a currency is tied to anything it should be to the sum total of finite resources in the world, silver, copper, oil etc. then it's up to us how we use those things in a sustainable way which 'grows' the economy at the same time.
 

feargach

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Some minor points: jewellery will probably always be gold's biggest non-investment consumption use.

It's used in electronics, but only a very tiny amount needs to be used, even in massive things like mainframes. Gold could treble in price without the electronics industry even noticing.

Dentistry is the next biggest use, but there's fairly limited growth potential there, unless we as a race hit the Mars bars particularly hard.
 

feargach

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Now, I know that it would be easy to make too much of this, but...

One the day that the mystic meg pic was posted, mocking my prediction of a significant upsurge in gold, the metal was at $780. 13 days later, gold was $60 higher. A rise of over 7%. The highest price ever. And gold hardly ever moves up or down more than 2% in any 2 week period.

So maybe you think it was a silly guess and I got lucky. Or maybe I know that particular market quite a bit better than most people. Judge for yourself.

All I know is thag Meg is only ever right 50% of the time, just like a coin flip. But I respectfully submit that my prediction was clearly better than random chance ;)
 


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