Elko’s housing market brisk

I realize Elko, Nevada is not a market covered here in the Reno Realty Blog, but I saw a nice piece about our neighbors in the eastern part of the state in REALTOR® Magazine’s blog, Speaking of Real Estate.

Good-paying mining jobs and scarce housing availability (both rentals and re-sales) have created a housing market that is seeing its third year of recovering prices.  See the story, In This Town, the Recession Has Been Gold

Also, be sure to check out the video about Elko’s booming economy when you access the piece.

Congrats, Elko.

46 comments

  1. Elko’s housing market brisk

    […] I realize Elko, Nevada is not a market covered here in the Reno Realty Blog, but I saw a nice piece about our neighbors in the eastern part of the state in REALTOR® Magazine’s blog, Speaking of Real Estate. Good-paying … Continue reading → […]

  2. cooley

    At $1700 an ounce, everything glitters.

  3. Hudson

    Exactly…when the gold bubble bursts, Elko will be the second casualty. The first will be the sheep that have been late to the bubble party this year.

  4. John Doe

    I am moving to Elko for a mining job. The unemployment rate in Elko is 7.4% (last I saw) while it’s over 12% here in Reno/Sparks. I hope the gold “bubble” bursts as it would mean that the U.S. economy was finally doing something other than floundering. It would be great to have options to find work in more than one city in Nevada.

  5. JAY

    I was working in the Elko around July of this year. The prices for homes for sale is similiar to the Reno/Sparks area, as most miners own homes somewhere else, and do not want to buy in the Elko area. I know one Elko resident who has a very nice house for sale, for over a year now, and has dropped the price twice, and is now priced at about 260K. Not one single offer at the time. It has tile, stucco, upscale kitchen, etc, but does need the front yard landscaped.

  6. common sense

    Jay,
    If the house is listed for a year without a single offer, it is simply priced too high.

    John Doe and Hudson,
    The real bubble is the one in money printing, otherwise known as quantitative easing.
    – Consider the monetary base TRIPLED between 2008 and 2010 (due to QE1 and 2).
    – Consider fiat paper issued by governments is losing its perceived value among citizens.
    – Consider this 40 yr old experiment with fiat currency (when Nixon closed the gold window) is now terminal, as has been every other such experiment in the history of man.
    – Consider gold has been money since Mesopotamia, Greece, Rome, the British Empire, and the United States until 1971.

    Consider protecting yourself and your family and keeping at least a small portion of your reserves in the only currency unable to be counterfeited or corrupted by incompetent central banks or self-interested politicians — gold.

    OBTW, I am no fan of the gold mining companies in Nevada, who took $6 billion worth of gold out of federal lands in NV in 2008 and paid less than $90M in taxes….while our education system was cannibalized and the economy crashed. Nevada should be booming with its mineral wealth right now, but that wealth is being taken from public lands and shipped off to off-shore headquarters. That said, if you need a job, I guess you can always go to Elko and become an indentured servant for some off-shore mineral company operating in NV.

    nuff said.

  7. Grand Wazoo

    Diane – is that you?

  8. Hudson

    Gold or silver as a ‘currency’ again is ridiculous…they are simply…rocks. If the world collapses into the sort of anarchy where these rocks once again start to be looked on as a currency, i think you’ll find your time taken up with defending your home/family from raving mobs of looters, etc, who are willing to harm you and take what they want (food, posessions…*gasp* your gold/silver).

  9. rock

    Hudson is so right.

    Currency produced at the press of a button by our outstanding Federal Reserve and backed by the full faith and credit of our impeccable political leaders has much more intrinsic value than minerals pulled out of the ground.

    The barbarous relic was money good for 5000 years, but it ain’t no more. Get over it. Or move to China where they’ll give you worthless Yuan for it.

  10. Gadfly

    Neither gold nor silver are intrinsically “money” any more than paper is. Yes, they are both shiny and last longer, and they are more rare these days than paper (although that was not once true), but they are only worth something because we humans have decided they are worth something. Sure, the historical status of gold and silver as valuable and tradable commodities makes it more difficult for us to break our cultural conditioning and recognize that pretty rocks only have value beyond their practical uses because we have assigned it to them, but in the final analysis, they are no more intrinsically money than food, or water, or salt, or oil, or energy, or numerous other valuable and tradable commodities. After all, if you have all the silver and gold in the world, but I have all the food and/or water (or even all the salt) and do not want your gold and silver, then you, my friend, are in a tight spot.

  11. common sense

    To be an effective form of currency, money must have the following qualities:

    1) relatively rare (not easily created out of thin air)
    2) easily transportable
    3) widely accepted as a form of payment

    This has been true throughout the history of man. For an excellent treatise on why gold, and to a lesser extent silver, has been used as currency since the beginning of civilization, I highly recommend the podcast at: http://www.npr.org/blogs/money/2011/02/07/131363098/the-tuesday-podcast-why-gold

    Meanwhile, food, water, salt, oil and energy do not qualify by having the above three factors. Money is meant to be exchanged for goods, not be the goods themselves.

    Gadfly rights with an air of certitude that I more frequently hear among Fed and government officials. Only if we all could be so smart.

  12. Anonymous Coward

    The enormous disadvantage of using gold as money is that it incentivizes mining gold. We already have more gold than we have industrial uses for it, and given that its price is set more by our concept of gold as money than by human interest in the gold itself. Consequently, humanity wastes billions of dollars of labor (mining gold) that could otherwise be spent productively.

    Note that this is entirely different than mining copper or oil, two commodities whose price are set by their usefulness; there the amount of effort spent mining matches the value.

    There may be some advantages to using gold, but there will always be that one giant disadvantage. As for paper money, it could be argued that the ability to manipulate the currency by printing more may be an asset in addition to being a liability, but I’ll leave that alone for now.

    Obligatory Reno real estate comment: Hey! Anybody think we’ve hit the bottom?

  13. Gadfly

    Common Sense,

    As is common with precious metals devotees, you confuse value with the properties that make precious metals good symbolic representations of value. Gold and silver are only intrinsically valuable as conductors and for ornamentation. They have a great deal of symbolic value because of the factors given above, but they are not intrinsically valuable beyond their functional properties. Also, it is important to realize that both silver and gold are themselves goods to be traded for their functional value, and that their use of money is a cultural construct. Or put another way, money is traded for goods, but it is the goods that have intrinsic value – the money just represents potential goods that can be procured.

    And by the way, salt has served as currency (as have other minerals) in the course of human history. For some insight into the importance of salt in the history of human civilization, see Salt: A World History by Mark Kurlansky.

    Finally, I would WRITE something witty about the assertion that “Gadfly rights[sic] with an air of certitude,” but I am not sure what I am setting right, or making upright, with such certitude, so I will not comment further.

    Anonymous Coward,

    As mentioned above, gold has intrinsic value in its use in jewelry and electronics. Even absent the cultural construct that it is “real money,” its properties make it the best overall medium for jewelry of any of the precious medals. Further, it is an excellent conductor. So, even if we suddenly quit seeing gold as a money standard, gold mining would still exist because we find value in its properties, not just in what it symbolizes.

  14. Anonymous Coward

    @Gadfly,

    I agree gold does have “intrinsic” value to humanity, but my point is that the price is almost entirely decoupled from that “intrinsic” value. If we suddenly quit seeing gold as money the price would collapse, and gold mining would NOT exist on the scale it does now (possibly on ANY scale given our current gold reserves) because it wouldn’t make a lick of financial sense.

    P.S. I do enjoy your over-the-top righting style.

  15. common sense

    FWIW, I too like Gadfly’s “over the top” righting style… even if it does remind me of certain unsavory officials…

    That said, Jim Grant’s explanation regarding the value of gold is about the best I’ve heard. To paraphrase Jim, the value of gold is directly inverse to the perceived value of fiat currency. As the Fed prints trillions out of thin air, and the bonfire of the currencies continues, with all major fiat currencies in a battle of debasement, gold will only rise in value.

    As competitive devaluation of currencies takes hold among all the major central banks of the world, including the Fed, the ECB, Japan, the Swiss, the Chinese, and the BOE, the relative value of gold will only go higher.

    I am heartened by the continued bearish commentary of the general public regarding precious metals. I am also glad to see that the average pension fund holds less than 1% of NAV in precious metals and associated mining stocks. Compare this with relative holdings of tech stocks during the Nasdaq bubble and CDOs during the housing bubble.

    If this is a bubble, it is the least owned, least loved bubble in history. Seeing that the total amount of gold ever mined would only fill two olympic-sized swimming pools, that demand for gold among the rising middle classes in China and India is voracious, and that most folks in the west (as exhibited by this blog) seem to hate the shiny metal, I think we have a long, long way to go in this most hated of all bull markets.

    FWIW.

  16. Hudson

    I don’t think the general public has a bearish tone towards gold/silver. The fact that every other commercial on TV or the radio is to sell your gold, as well as the positioning of a Gold/silver buying store in nearly every strip mall in town means that the general public is buying into this bubble. Typically the the general public are the last ones in and the bag holders in these recent bubbles (internet, housing). The money has already been made. It is now just a matter of selling at the right time and preserving profit (selling in the next 12 months).

  17. common sense

    Hudson,
    Read your own words:

    “every other commercial on TV or the radio is to SELL your gold, as well as the positioning of a Gold/silver BUYING store in nearly every strip mall”

    When the lines outside the gold/coin dealers are people wishing to BUY gold, not SELL it, I’ll look a bit harder at the perceived excitement of gold buyers.

    As long as the stores and commercials are trying to acquire your gold by providing you paper in exchange, I’ll know that we are still a long way from the end of this bull market.

    Again, gold is the least loved, least owned “bubble” in history. How many readers have any friends or relatives at all that have a respectable gold or silver position?

  18. Commodity Bubbles Burst

    When the gold bubble collapses, and it will, this gold fever nonsense will end, just as it did in the early 1980s. All the talk about $2,500/oz being the “correct and stable” price is pure extrapolation from the peak price in 81/82. What’s the correct and stable price? Approx. $400/oz, just as it was from 1983 until 2006. Anyone who thinks otherwise is ignoring 20 years of value data set by the free market, outside of panic times like now.

    And any “intrinsic” value that gold may have is based on its physical qualities not as a currency.

  19. Hudson

    Amen

  20. Sully

    “Anyone who thinks otherwise is ignoring 20 years of value data set by the free market, outside of panic times like now.”

    Are you talking about the same free markets that Greenspan manipulated via low interest rates? Also, I suspect you are thinking these “panic times” are ending soon. Any idea as to when?

  21. rock

    Commodity Bubbles is absolutely right. The intrinsic value of most things is round about the price level for that thing in 1983. Makes total sense. Never mind gold had already risen to over $700/oz by 2006 — it’s beside the point.

    Also, who doesn’t have total trust in the paper currency created by the Fed. In fact, they just created more to bail out Europe. Paper currency has intrinsic value. Deal with it!

  22. dense as a rock

    Dear rocky, not the 1983 price, but the long term price as set by the free market.

    It’s just so odd that many of the same people who could see that real estate was a bubble are in total denial about gold.

  23. Sullen

    Dear Sully, gold fever will end when the major global economies show signs of a real and sustainable economic recovery. I can’t say when, I can only say that we are definitely in a panic- and demand-driven gold bubble … that will collapse right back down to the long-term trend line, around $400/oz, as all bubbles do.

  24. rock

    Dense is dead right. All those naysayers who couldn’t see the housing bubble until two years after it popped in their faces have been all over this gold bubble! More power two ’em, I say!

    $400/oz seems fair to me, especially since we have about three times more dollars chasing after the same gold. Spot on analysis. Just what I expect from the RRB!

  25. Gadfly

    I have no trust in either the paper or in gold and silver as currency. Money is a cultural construct. If the willingness exists to trade things with actual value for a currency that is a symbolic of potential value, then money works. If that willingness does not exist, and the intrinsic (or physical) properties of the material are not valued by the person with goods that have real value, then the money has no value beyond the value of the material.

    Of course, the argument with gold and silver is that their intrinsic value makes them money, and thus they are real currency instead of symbolic currency. This is illusory. The economies of precious metals depend on their history as money and the security we believe they represent. However, the system only works so long as the people with real goods buy in to the fiction that currency (whether it be pretty paper or pretty minerals) has the same value as their goods. When true economic collapses occur, it is not the people with the pretty paper or the pretty minerals who survive – it is the people who control the necessities of life and/or the transportation of those necessities who survive.

    Or put another way, the physical properties of gold and silver, even taking into account their relative scarcity, does not account for the current price. The price is fueled by speculation – speculation on whether the economy will improve in the short term. The same was true in the late 70s, which led to the highs in the early 80s. A lack of certainty in the economy led to higher gold prices.

    But even adjusted for inflation, the early 80’s price of gold is an anomalous spike. After the early 80’s spike, the price of gold dipped to what was likely an unnatural (i.e. manipulated) stagnant period. Now we see an over-correction (another spike) due to our current economic uncertainty. If we have a fairly quick recovery (yes, you all can laugh at that), then we will see a sharp decline as gold seeks its “normal” price, a period which would likely include several months of volatile gold prices. If we have a slow recovery (that may deserve a snicker), we will likely see gold fall slowly as the economy gains strength, and it likely will not “yo-yo” up and down the way it probably would if it had a sharp decline. If the economic downturn (another chuckle) turns into economic malaise (What? No one is laughing at that one?), then gold will likely continue to be high as a hedge against uncertainty. In the end, the value of gold is inversely proportionate to our confidence in the economy. I guess we could say that gold is the comfort food of the economy.

    Of course, the entire discussion of paper v. gold is academic. Paper money, and even more so debased coinage, are on their way out. Electronic currency is the future. Then we won’t even have to print money to make more of it. Oh wait, that is already what the Treasury is doing.

    Hey, just think, our children and grand children will lament the days when money had an actual physical form. 😉

  26. Gadfly

    Oh, I forgot to mention that even though I by no means support the idea that gold as currency is anything beyond a cultural construct, I am not on board with the idea that what we are seeing with gold right now is a “bubble”. Bubbles expand over a period of time and then pop quickly. Gold spikes rather rapidly in times of uncertainty, and what occurs after the spike depends on our confidence in the economy. It may drop rapidly, or it may drop slowly, or it may remain stable for some time before doing one or the other. It does not “pop” in the same sense as economic bubble.

    There is another important difference as well. Current gold speculation is not (for the most part) intended to generate wealth. It is for the purpose of preserving wealth. Bubbles are fueled by people trying to make money. The current gold spike is fueled by people trying to keep their wealth from being consumed by inflation (just like in the early 80’s). As soon as they think it is safe to move their money from gold, they will, which will lead to a fall in gold prices. However, unlike a bubble bursting, it will not lead to a massive loss of money in the economy (unless people leveraged to buy gold, in which case they are fools).

  27. Hudson

    2 bubbles so quick…internet and housing. I’m thinking the folks with the real money in gold and silver are going to be very very quick to pull the plug on this one. It’s all a matter of determining the catalyst for the trigger pull. Will it be a EC default/collapse, further collapse over here, etc. I don’t think its necessarily a recovery that will be catalyst. More of a cleaning out of all the bones in the closet (the beginnings of a recovery). I’m personally in ZSL in the low tens. Not playing the small ups and downs. I think/hope i will be rewarded in 12-24 months.

  28. common sense

    Gaddy,
    Lots of strawmen and baseless assertions in that last one. You’ve been quiet lately, so some of the points raised must have at least caused you to rethink some of your previous assertions.

    Strawman: “…the argument with gold and silver is that their intrinsic value makes them money, and thus they are real currency instead of symbolic currency.”

    Says who? I think the arguments for gold were farely well stated above. Namely,
    – the value of gold is inverse to the perceived value of the dollar
    – gold has been considered as currency for millenia, and is therefore much more trusted than paper/electronic currency, which can be and is created out of thin air
    – gold is immune to the vagueries of politicians and central banks, who are subject to corruption and self-interest.

    Baseless assertion: “When true economic collapses occur, it is not the people with the pretty paper or the pretty minerals who survive…”

    – In true economic collapses, gold holds its value. That’s the whole point! You can use it to buy life’s necessities, or to bribe govt officials. Please provide one historic example of an economic collapse where gold did not hold its value. During the Great Depression, for example, gold went from $20/oz to $35/oz overnight, and stayed there.

    Interesting to me that, as an academic, you are so close minded. Do you even consider the countervaling opinions of noted experts in the area such as: Jim Grant, Jim Rogers, Jean Marie Evelliard, Robin Griffiths, and Marc Faber? Read some of their stuff on the internet and get back to me. I believe you would struggle mightily in a debate on gold with any of them.

    I’ll part with a favorite aphorism of one of my favorite commentators. Any who recognize the author gets a gold coin from me (even if it’s a gold wrapped, chocolate coin):

    “In a social democracy with a fiat currency, all roads lead to inflation.”

  29. rock

    Again, Hudson nails it. Bravo, my boy. Just look at that chart on ZSL. Who wouldn’t want to jump in on that?

    From now on, I’m listening to everything this guy has to say!

  30. Hudson

    Like anything, you buy low and sell high. You think it’s high right now? or low?

  31. rock

    Hudson,
    Dude, just genius on your part. Also, I see the 52 wk low as $10.63, so the fact that you got it in the “low tens” is incredible. Once again, Hudson nails it!

  32. Goods not gold

    Gadfly is correct that goods, not gold, are the real currency in a collapse.

    If you have gold and I have food and water, well guess what, *I* will be the one setting the prices, not you Gold Boy, and if you don’t like my price, try to drink and eat your gold.

  33. Gadfly

    The alleged straw man is not a straw man at all. The premise I gave is the underpinning of the arguments offered. Those arguments only work if the premise of gold having intrinsic value beyond its material uses is presumed true. Without the underlying premise of the intrinsic value of gold, the points given only present historical facts.

    The alleged baseless assertion is not baseless if we broaden our scope from Western/European derived societies that already have a strong presumption that gold is wealth. For example, the history/prehistory of Mesoamerica is rife with examples of economic collapses resulting in the abandonment of symbolic wealth/civilization for smaller scale agriculture. Gold, as well as many other forms of material wealth, were abandoned and not collected until a new economic system was in place. During the collapse, subsistence was the focus, and hoarding gold, precious stones, and semi-precious stones were not the focus for the people trying to survive. The evidence is that the folks who knew how to grow food moved on and established new subsistence agriculture economies. And, a common (if not universal) feature of subsistence agricultural economies is that symbolic wealth is secondary to subsistence. In fact, one of the many difficulties the European Colonial powers encountered in many newly colonized areas in both the Americas and Southeast Asia was that people with no desire for symbolic wealth (subsistence agriculturalist) were quite often unwilling to move from their land when offered European ideas of wealth (even gold), whereas cultures that valued symbolic wealth were much more easily swayed to go along with the Europeans in exchange for symbolic wealth. In a subsistence economy, those who survive are those who control the food and water (and from the Copper Age to the Age of Discovery in Europe, and even into the 1800s in Africa, the salt).

    Further, even in the great depression, which was not the type of economic collapse I am referencing, there are accounts of folks who did not know they were poor because they had enough necessities (they were subsistence farmers), and who did refuse to take money (which was then fiat for gold) for their food. In those instances, the value of the gold was not important to their economic realities.

    I think the real problem is that we are looking at the issues on completely different scales. You are looking at the value of gold in a gold based system that is in economic crisis. I am looking at the value of symbolic wealth in an economic structure that is in total collapse. Perhaps the confusion is in the term economic collapse. A true economic collapse is a situation in which the economic structure of a civilization cannot sustain itself and is abandoned or, eventually, gives rise to a new economic structure. The great depression, which some label an economic collapse, was not a complete collapse of the US economic structure. The same economic structure existed after the recovery, and still exists today. Since the value of gold as money is a part of that economic structure, it would survive a depression, especially since if it was the basis of the fiat currency, so long as the basic economic structure survived.

    I have read many of the authors mentioned, and I find them unconvincing on one simple matter, but one that underlies everything else: They start from the a priori assumption that gold has intrinsic value as currency, and then offer evidence that supports their a priori assumption rather than looking at the evidence a devising a hypothesis as to the value of gold. And while I even agree with some of their analyses of the economic reality of gold, but I find those I have read to be too caught up in the belief that the social construct of gold as currency is somehow a part of the natural world rather than a part of human culture.

    As for being silent on some points, I was mostly uninterested in the bubble debate as I do not believe, nor have I stated above, that gold is a bubble. I am much more interested in the deeper philosophy and cultural understanding behind our social construct of gold as currency than I am in the current market.

    Finally, the mantra of a true believer is that his (or her) opponent must be closed minded because his/her opponent would necessarily see the truth of the true believer’s position if the opponent just had an open mind. My philosophy, both academically and personally, is that the person who has an open mind is the person who considers diverse opinions rather than following any one consensus, and forms his/her own opinions. Offering support for those opinions, even in the face of supposed consensus, does not make one close minded; rather, it makes one an independent thinker (actually, an open minded person could share the consensus opinion and still be open minded so long as that person’s position was reached by studious consideration, not just mere “sheep think”). In the instant matter, had you offered any arguments I had not heard before, I would have considered them. I, however, have not seen anything that I have not pondered before, so changing my position would not evince open mindedness, but rather epistemological weakness. That is not to say I am never closed minded – I fail to live up to my philosophy too often for my own satisfaction – but I do not believe I am being closed minded here.

  34. Gadfly

    Or if you prefer a shorter version of tmy post, read what “Goods not gold” posted right above mine. I guess, upon reflection, I must confess that I *may* have a penchant for using 1000 words (actually 915) when 54 would do. 🙂

  35. John Doe

    Make hay while the sun shines. I make 34% more in Elko than I did working for Washoe County and sidestepped being laid off. You know where that extra money is going? Under my mattress!

  36. mornings

    Seems to me the anti-gold crowd here is missing the point, confusing value with price.

    There is no such things as an intrinsic value but gold has maintained its very stable, considered value for thousands of years. But the rising PRICE of gold is not about gold but about the VALUE of the dollar (or practically any other paper currency).

    There is one reason for the rise in the PRICE in dollars of gold and that is: the Fed is creating more dollars out of thin air. There is one reason the VALUE of gold is rising: fear of the former. If the Fed stops creating counterfeit, the price will stop rising and the value will stop rising — but it won’t collapse, it will just stable back out to what is always has been. Now you can call that a “bubble” if you like but it is very distinctly not the same issue as real estate or tulips.

    BTW, if you owned all the food in the world and I owned all the gold in the world we would BOTH be in trouble. My gold will last for ever; not so your food. If I can’t get some of your food, I will starve. All other things being equal, if you can’t exchange some of your food for a STORE of value, you will starve too.

    Pieces of paper (dollars, digital or otherwise) are currency (not money), a demand for goods and services. If more pieces of paper are created out of thin air, this does not increase wealth (goods and services), it reduces the value of each new piece of paper by reducing what it can demand. Worse still, with each piece of paper created, that has even less it can demand, it causes wealth to be consumed at a faster pace and decreases the wealth. This is called deflation, the effects of which we will, in due time, experience.

    Disclaimer: I’ve owned gold and been buying since 1972.

  37. evenings

    Dear mornings, your gold will certainly last longer than my food and water, and if that’s the goal, you win. But I’ll live to see next week, you’ll die of thirst before then. Do you still think gold is better than food and water?

  38. CommercialLender

    Question: anyone try to take a few gold bars to the Washoe County courthouse steps to buy a foreclosure?

  39. Gadfly

    I would not personally classify myself as anit-gold. I grew up around gold mining, and while an undergrad I worked summers at both a gold mine and a gold leach facility. I own a little gold (in coin form) myself, because of the role gold played in my life in my younger days. I did not buy my gold as an investment or out of a belief that it had value beyond its price. I wanted some gold coins, and I bought some (mostly US Liberty series). They are worth (or as you want to phrase it, priced) about four times what I paid for them, and I have no plans to divest them, but not because I think we will ever, or can ever, revert to a gold standard. They mean something to me personally, and I like having them.

    I also wanted to discuss the value/price distinction. My focus, as someone more interested in the cultural construct of gold rather than the economics of gold, is in the near mythic associations that are made with gold when discussing world monetary systems, and whether those associations are illusory (I think it is quite clear that I fall on the side of them being illusory). I purposefully used value because I do not see the current price as that important as part of a more abstract discussion on the value of gold. The price of gold, as Morning correctly pointed out, is heavily dependent on many factors, not the least of which is the strength of the dollar.

    Finally, I wanted to point out that the “all the gold” v. “all the food (and water)” dichotomy is hyperbole for the sake of the hypothetical, and I would have thought that was apparent. The point is that gold’s value (not just its price) is only real as long as we accept that it is real. If an economic system were to reach the point where those with food did not want the gold, then its value would be less than the food. Of course, I was also envisioning a system in which I was not just hoarding food but producing it as well, which would take care of some of the concern about spoilage.

  40. Sully

    gadfly, based on your last paragraph. I was thinking along the lines of an ice cube (food) and a freezer (gold). Neither one is much good without the other. Food will spoil and gold will last forever, however the owner (gold) will spoil (die). Which brings up the food owner/producer. What good is hoarding it if you have no intentions of selling it? Letting it spoil for the sake of spoiling doesn’t sound like a good plan. If plans are to sell it, then what medium of exchange are you suggesting?

    Additionally, the expectations of inflation being 10% is on the low side. We are already showing over 10% in food items. Housing is helping to keep that number low. I would expect inflation to be in the 50 – 70% range once all this money (munny) is released into the system. There is usually a two year delay from printing to inflation showing up. With the addition of the QE kick the can down the road programs, that might extend the time frame another year or two.

    The current fad is to fight this depression like the last one. Not much different than a general fighting a current war the same way the last war was fought. At some point in time they will realize things are not the same this time and changes must be made.

    In the meantime, assuming gold continues to perform well, what other asset can be used for a store of value that is better? Keep in mind that fiat currencies have a 40 year life span and the USD is in its 40th year now.

  41. Gadfly

    Sully,

    Agreed on the plan on fighting this economic crisis is currently very similar to the New Deal, and we should all understand that it was not the success that popular perception might lead us to believe. And I will agree, given the absence of a complete economic collapse, that gold may better keep its value than some other investments, which is why I agreed above that the value (as well as the price, as Morning reminded us) goes up in uncertain economic times. However, I do not find the history of previous fiat currency that great a predictor here as we have seen a complete shift in the global monetary system away from any tangible standard, which has not been the case in the past.

    As for the gold v. food hypothetical, the hypo was given in the context of an economic collapse resulting in a subsistence based economy, and is intended to address the intrinsic value theory of gold. It is not intended as a practical exercise for our current economy. The entire economic system would have to collapse beyond repair for us to return to such a situation. What is instructive about the hypothetical is that is captures the choice between necessities and gold, and reveals that the necessities have actual value for human sustenance whereas the value of the gold is only symbolic.

    But let’s explore further. For the sake of discussion, I am a subsistence farmer. I grow grain, root crops, some leafy vegetables, and fruit. The leafy vegetables and fruit I can only eat seasonally, unless I dry them, and then I may have a few months worth of storage time. I can store the root crops maybe up to a year. I can store the grain for a year up to four years in the right conditions. So, if I grow some extra grain I can store it or trade it for other items I need, maybe some livestock (food on the hoof, as it were). If I do not use the grain for my food or trade it, I will feed it to the livestock. If it spoils, I may use it for composting, depending on how much waste I have.

    If/when I move from subsistence farming to producing a consistent surplus every year that goes beyond what I can store, use or trade to get what I need, then I would need to look for a long lasting commodity I could store and turn into necessities later. And, skipping a whole bunch of interesting history that is too long to address here, when humans encountered that very problem, they created money (as a fiat currency for food, so to speak) as a way to keep the value of what they produced beyond the time frame for which it could be stored. Gold, for the reasons Common Sense gave above, was the best material for money. However, its value was and is predicated on the willingness of people with goods that have actual value to trade for something of symbolic value that, in and of itself, does not provide sustenance.

  42. MikeZ

    I would expect inflation to be in the 50 – 70% range once all this money (munny) is released into the system.

    You can’t be serious?!

  43. Hudson

    Gold and silver looking pretty fragile. Hey Rock…hope you picked up some ZSL the other day…tidy little gain on it at the moment….d-bag. Retread a little…possible…but i think there’s more value for them to give up.

  44. Webster

    gad·flyNoun/?gad?fl?/
    1. A fly that bites livestock, esp. a horsefly, warble fly, or botfly.
    2. An annoying person, esp. one who provokes others into action by criticism

  45. Glimpse Into The Elko Real Estate Industry

    […] Nevada but is unsure about which city to live in. But before you jump right into the possibility of buying a home in Elko, Nevada, you must first educate yourself about the mortgage industry. Make sure to read the rest of […]

  46. Rock

    Damn, wish I got me some of that ZSL…

Leave a Reply

Your email address will not be published. Required fields are marked *