Commentary - 01/08/2008

Does Anyone Know The Real Value of Anything?

Price of Gold/Silver (Gold broke through $875 today.)

This article appeared on the Financial Post website, entitled US$1,100 gold will look like a bargain, analyst says, which was posted January 04, 2008, Alia McMullen. Here are a few quotes:
Investors should jump on board the precious metals bandwagon to hedge their portfolios against dramatic inflation increases and financial risk, Nick Barisheff, president of Bullion Management Group said yesterday. ... “However, the major cause of gold’s rise in price is the unprecedented increase in money supply and its resulting inflationary implications.”

He said over the past year alone, money supply has increased by 8% in Canada, 12% in the U.K., 12% in Europe, 14% in Mexico, 16% in Brazil, 18% in China, 21% in India and 42% in Russia.

The U.S. Federal Reserve stopped reporting M3 money supply figures in March 2006, but analyst have estimated it rising at an unprecedented annualized rate of 16%, he said.

I think that Nick knows of which he speaks, so with that said, let's take a look at how the U.S. Dollar Index is calculated, from

USDX = 50.14348112 × EURUSD-0.576 (continued)
× USDJPY0.136 × GBPUSD-0.119 (continued)
× USDCAD0.091 × USDSEK0.042 × USDCHF0.036

You can see how easily these figures could be manipulated by central banks, thus "painting" the charts. As shown in the previous paragraph quoting Mr. Barisheff, many countries are inflating their money supply. Central banks have recently shown that they will coordinate their efforts, so what does that mean for the dollar index? What should be the current value of a dollar or for that matter, the current value of gold in any currency?

I know it's the amount people are willing to settle their trade. But who knows whether or not they got burned? Perhaps that's just the mystery of the markets that we have to accept. But I still feel like I chasing the business end of the bullwhip, rather than being able to see which way the handle is moving.

At any rate, I'd still rather hold a piece of precious metal in my hands, for which a lot of folks had to do some work, rather than a computer-generated blip on my computer monitor or a pocket full of scrip. In these barbaric times, a piece of barbaric precious metal with no promises attached suits me just fine for storing my labors for the near future. I'm just glad that someone will still take a reasonable wad of paper for an ounce of gold or silver.

Price of Gasoline

What about the current price of gasoline? In 1968, [I turned 21 then] the price of gasoline was 34 cents and a barrel of oil went for $3.18. From 1957 to 1968, the price varied from 3.14 to 3.18, so I think I'm being conservative here. With oil now approaching $100 a barrel, how is it that I can still buy gasoline at my local gas station for about $3.00. Dividing $3.18 by 34 cents gives 9.24, rounded, so I was getting about nine and a fourth gallons of gas per barrel of oil. Now if I divide $99 per barrel by 9.24, shouldn't gas be costing somewhere around $10.71, or at least somewhat more than $3.00? Have I missed something here? Am I being set up for a hard punch? And by the way, back in 1968, didn't we pump and refine oil totally within the United States. I don't think much of it had to be brought in from the Middle East, yet.

In 1968 I was reasonably happy to start out making $3+ per hour, which bought almost 10 gallons of gas for an hour's labor. But today, someone starting out at $9 an hour can only buy 3 gallons of gas for an hour's labor, and less if you count taxes.

Price of Labor

So the problem for Walmart-type workers, of which my daughter was one for a while, is they are essentially working for 90 cents per hour, or less than 1/3 of what I made back in 1968. At least as far as transportation costs are considered. In 1968, I was fortunate enough to buy a top of the line Firebird 400 for $3900. The same type of car now costs $39,000, at least, if you could even buy it. So that's about 10 times. So my starting pay of $3.00 per hour would equal $30.00/hour today in terms of automobiles. Even long-term autoworkers topped out at $27.50, before having their pay cut to $17.50. So I guess the automakers don't want their own employees to be able to buy the cars they produce.

Those at the top of these absentee-owned corporations easily make 400 times that amount today. That's where the major disparity lies. They know they are stealing the results of their worker's labor, because it used to be only 40 times. They're the ones who swiped 10 times from their employees. Of course, they will all deny this. The river of denial runs slows and deep.

Hidden Taxes

So it comes down to this; the Feds steal one-percent per year of the worker's labor right out of the worker's bank accounts, and have done so each and every year since the Fed's 1913 formation. Right now, they've finally reduced the dollar's value to around 95%. Because of the consolidation of the absentee-ownership of almost all major corporations, the labor pool gets squeezed in such a way that now they're working for less than they ever did. Those at the top are pilfering more than they ever have before. This situation isn't going to last very long and it isn't going to be a pretty ending.

Us peasants are becoming highly restless. The faux kingdoms are going to have serious problems in the very near future. This is NOT my wish; only an observation. I'm older and my turn is almost over, but younger one's are going to figure out that they're being screwed royally by both their government and absentee-owned corporations. Sociopathic greed always ends this way. Always!

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© 2008 by Edward Ulysses Cate
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