Again the answer is yes, indeed they can. However unlike other wars that we have seen in the past, the beauty of these two wars are - all (major) global policy makers and powerful bodies, including the present super power who actually is leading both the wars belong to the same side in this war. They all are uniformly against terrorism, and they are against gold, to a varying degree based on their intrinsic interests. And in spite of that, the wars go on for years. And they are likely to go on for years till fundamental changes take place that can bring equality and sustainability globally.
Let's repeat the 3rd question why should there at all be a war of gold against dollar? Well, this is difficult to answer. However we know the story of the goose that laid the golden eggs. Why did the farmer kill it? It was pure greed to live better, to be richer, to cosume more, to be more powerful, etc. Well, that was a story. Something similar was happening in reality in the backdrop of cold war when the war of dollar against gold was declared after the warring sides realized there was no chance of diplomacy against Mother Nature (and a few gold-bugs!) in 1971. And that's when human greed dropped the metamorphical 'Tsar Bomba' on global monetary system against gold through dollar. Soviet Russia collapsed as a correction as it was not a major party to global monetary system, and could not sustain the load of overspending on defence far too long alone. And people who matter be it our Government, policy makers, and corporate leaders had to show better growth, employment, profitability, etc. year after year. Otherwise they were shown the doors. So each of them individually had to fall in line as rest all in their category did in a relative mad race to exploit natural resources free or charged by some human organization by now in our capitalistic society. And Government continued pumping in money that generated and sustained demand.
Everybody was indeed happy barring a few who never had capital to start with as in this system capital bred capital.
Gold didn't breed gold!
And that underprivileged section remained as bad as they ever were. But they were there all the time in history so why bother...Money breeds money in present economy. So if you don't have any, sorry bad luck this time. And though this underprevileged didn't consume more - thro' money or borrowed money, because they didn't have any, they too now pay the same price, probably more because their livelihood is more dependent on Nature.
And barring another entity i.e. Mother Nature...because She could not sustain the increased human demand inspite of her rich unending resources and balances. And the tell-tale signs became visible, and with time they grew bigger.
So the war of gold against dollar can be termed, in a way, as the first covert war of mankind against Nature, willingly or unwillingly. We wanted more Nature failed as gold supply was limited; and had some costs too. So why not dump gold and create money and have policies where all over the world that money is accepted with credibility.
So far so good... barring again Mother Nature and thereby sustainability of mankind in Nature....
Let's look at the fourth question now how's this war fought. It's not another war that ended apparently with the dropping of the metaphorical atom bomb in global monetary system. Policy makers wanted it that way, but they could not destroy our age-old practices, and some logical thinking of mankind, and there were gold-bugs too.
People all over the world don't change overnight. We know how difficult any change management is. So people globally, who looked at gold as money for years, didn't dump gold. They still bought it, and retained whatever they had accumulated as family treasure. And unlike policy makers who took to selling gold covertly in this war, individuals started accumulating gold overtly.
And if one looked at Gold from an investment perspective, for a long time the gold-bugs lost out. Because inflation adjusted dollars returned more anyway it depends on timeperiod of holding. Because global policy makers didn't want gold to be accepted as money or even any measure of money where there existed no meansure any more after winning the initial war without much of a fight for over twenty years, post 1980s. First ten years was expectedly difficult as practice of thousands of years was abandoned, but then there was almost no war it was an easy victory for global policy makers in their covert war against gold with dollar.
And they enjoyed their power to be creators of wealth. Gold having being beaten, they started misusing that more often. Remember the elections after every four to five years...
But the war was not over yet. Gold started to make a come back since last couple of years and then made a spectacular run in 2006 itself until May this year. But then again it collapsed (and regained part of the loss too!).
Before proceeding more we must know who is fighting for gold against dollar. Yes, a few gold-bugs and few investment gurus and many people all over the world who still consider gold to be the monetary safe heaven and thereby following tradition give gold to their daughters at the time of their weddings, more as jewellery overtly but as safe money covertly. Unlike paper money and promise of some mankind, gold is gold is gold. And we know how often our Governments globally and locally have failed us in maintaining their promises.
And then there were few emerging central bankers, now flooded with dollar who wanted better port-folio for their rapidly increasing forex reserves. So for the first time since 1971, gold was not supported by individuals alone!
All the Governments put together could not maintain their promise of dollar is gold made in 1945 while launching Bretton Woods even for twenty-six years. And now there is a promise printed in all paper currencies globally common sense defies me to understand even what that promise is to begin with.
The interesting thing about gold is its value as a measure of purchasing power. An ounce of gold has throughout history been about the same value as a very good man's suit (today roughly $625). Looked at another way, it tells you what a dollar is worth. As the dollar rises in value, the price of gold falls.
Unfortunately I could not find a way to put a graph into these remarks, so I'll just have to describe a graph I made recently. From 1990 to today the price of gold has risen from about $400 to about $625. That's a 56% increase in the price of gold which is equivalent to about a 36% decrease in the value of the dollars you are lucky enough to be hording in you savings account.
Since you can's see the graph let me tell you that 1990 showed a decline, but when Clinton took office in 1992 gold made a jump up from $333 to $391 and then stayed fairly steady through 1996. It fell to around $290 in 1997 and stayed there (roughly) until 2001 until Bush took office. Remember that a decline in the price of gold means that the money you have in the bank is worth more. Overall the the price of gold declined from 1992 through 2000.
However, the price of gold has been increasing during the Bush reign, rising from about $290 to a recent price of $637. That means that the money you have in the bank is worth 54% less today than it was when Bush took office. Of course you have been earning 1%-2% interest on that money, so you have perhaps as many as 12% more dollars now.
by
PrMaine (9 articles, 7 quicklinks, 2 diaries, 324 comments)
on Friday, September 8, 2006 at 7:22:54 PM
1 comments
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