Flight To Gold As Investors Lose Faith In Money

The last time gold touched $850 an ounce, the world was visibly spiralling out of control.

Soviet tanks had just rolled into Afghanistan. The Mullahs had seized US hostages in Iran. Pax Americana was on the ropes, and so was capitalism. Inflation had reached 14 per cent in the United States.

The final spike in bullion occurred when the Hunt brothers tried to corner the silver market, forcing up gold in tandem through arbitrage links. It collapsed within days.

If you strip out the Hunt anomaly, it is fair to say that gold established a "safe-haven" level of $600 - or $1,500 in today's money - that roughly lasted through the final phase of the Carter malaise, the oil shock, and the collapse of confidence in the monetary order.

By this benchmark, last week's jump to $869 looks tame. Yet gold is undoubtedly flashing warning signs. The price has jumped 42 per cent since the US credit markets suffered their heart attack in August. It has tripled since Gordon Brown sold over half Britain's reserves, deeming it a barbarous relic. That conceit has cost taxpayers £3.4bn, after adjusting for returns from dollar, euro, and yen bonds.

The mounting risk that Pakistan's nuclear weapons could fall into the hands of al-Qa'eda is playing a role. So are fears that Western leaders have no credible answer to the banking crisis as it drags on for month after month.

---EOE---

http://www.telegraph.co.uk:80/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/01/06/ccgold106.xml

Am I the only one sitting here eating popcorn, waiting for our fake economy to die so we can get on with things?

Our system isn't so great that we have to sit here at it's deathbed wondering if the doctor can shock it back to life again for the umpteenth time.

It's not just a recession, it's a massive fraud perpetrated by corporations and business schools in the US. There is nothing left to take over when that collapses.

see, the greenbacks that are dying out are simply a representation of exchange. All of the things that are needed for an economy are still here- labor, raw materials, land, etc.

Those voodoo economic masters may think that they have this all sown up, but possession is 9/10 of the law, especially when the gov't can't even handle a police force. All it will take is a bunch of people to realize that the corps screwed them out of their labor.

I give it 50/50.

Disclaimer: I am not an economist and I don't play one on TV.

I think that there are a couple of forces going on here. One is certainly a devalued currency. This takes the form of "it takes more devalued dollars to buy X." The other side of this is demand. If the demand goes up for gold and nothing else, is it devalued dollars or is it more valued gold? In today's scenario, I think we have seen much of the devalued dollar part, but the supply/demand side may be coming on stronger...

:bounce: