[DEBATE] : "Buy gold" (was From world commodity boom to bust)

[Berend Schuitema]

Two lasting impressions have gripped me from my childhood years growing up
on the Orange Free State goldfields. The first was of course the institution
of "compounds" (labour camps for black miners). The second was to
rationalise the huge dumps of waste rock into a) the amount of labour it
cost to build such huge artificial mountains, and b) that, as the popular
saying among miners went, "we dig up gold for it to get buried again in Fort
Knox". Good probing inquisitiveness as a child never faded and became more
mysterious once I was trained as a  mine engineer.   

Meanwhile, nowadays, very little is being said about the monetary use of
burying gold in the earth after the war between labour and capital, never
mind the war against mother earth itself, to get the ore prepared for
reduction into gold after it has be mined and hoisted from thousands of
meters underground. 

That there is still monetary value left in this golden booty was clear with
the suggestion some time ago that some of this reburied yellow metal could
be sold on the market to relieve and pay off odious debts. But other than
that, speaking about the mysterious existence and function of reburied gold
seems to be outside of the pale. Something as baleful as speaking of the
Irish struggle in the Anglo-American world. 

Why is this so? 

Maybe this question can be answered with the neoclassical economist JB Say's
"law": "bad money drives out good money". After all, I take it the practice
of burying gold in vaults and especially that of Fort Knox is done for some
or other pagan practice. So paper money drives gold underground! 

Remember it was with the onset of the neoliberal global regime in 1974 that
the umbilical chord between gold and the dollar was irreversibly cut by
Nixon. Until then the prices of all currencies were tied to gold, but not
exchangeable for gold.

Some days ago I read that in the EU gold is non taxable. There was also a
comment that should the EU go into depression, gold might well come to the
fore as financial currency. (Sorry, cannot remember where, so no reference!)

But surely, with the worst of expectations floating to the surface regarding
the future of the US economy in particular, and capitalist economy in
general, the role of gold should become a valid point for reflection once
more. Or, can we read its coming up in footnotes as in the article Patrick
quoted, and expect discussion on the future global exchange constructed on
metallic gold as at least no mystical thinking?  

I have no answers, just asking! Berend 

---------------------------------------       

"Buy gold" (was From world commodity boom to bust)

Doug Henwood wrote:
> If "the bubble" is a permanent feature of economic life, with only the 
> details changing every now & then, what does that mean? Does it mean 
> that everything is eventually about to break (though the break seems 
> perpetually deferred) after they run out of markets, like some game of 
> musical chairs? Or does it just mean that speculation and crash are 
> just part of ordinary capitalism?

Patrick replied > Hi comrade Doug,

The bubble keeps growing, sure... *because* the various forces at work 
within global capitalism have prevented a full-fledged meltdown. The 
techniques of crisis management have combined temporal (the bubble 
growing so it gets worse over time), and spatial (moving the bubble 
around, geographically and sectorally). In the context of 
overaccumulation, there is no "ordinary capitalism" - the "crisis" means 
that the ordinary systems of self-correction (little business cycles) no 
longer work to devalorise sufficient overaccumulated capital. Hence the 
recourse in ever building bubbles. Of which the US$'s value may be the 
biggest ever, if this report has any truth to it... what do you think?

Bailouts Will Push US into Depression: Manager
By CNBC.com
CNBC.com
| 11 Sep 2008 | 09:11 AM ET

The end result of the global economic slowdown may be the U.S.  
announcing national bankruptcy as the government cannot afford the  
bailouts that it promised and the market will not bail out the  
government, Martin Hennecke, senior manager of private clients at  
Tyche, told CNBC on Thursday.

"We expect a depression in the United States. We expect a depression,  
very possibly, also in Europe," Hennecke said on "Worldwide Exchange."

The estimated $300 billion cost of the Fannie/Freddie bailout will  
probably be considered as a loss that the government will have to  
take, therefore passing it on to taxpayers, he explained.

"We already have $3 trillion of debt, as far as the U.S. government  
is concerned. These debt figures across the U.S. economy are rising  
very sharply."

When the government can no longer pass the United States' "immense  
debt" on to taxpayers, it will turn to the holders of U.S. dollars,  
leading to the eventual downfall of the currency, Hennecke said.

"Definitely, it (the dollar) is not a safe place to be invested in,  
as real inflation is closer to 10 or 11 percent than the actual  
inflation numbers given by the U.S. government," Hennecke said on  
"Worldwide Exchange".

Investors should avoid exposure to debt and stay away from leveraging  
on any investment or asset, including property, Hennecke advised,  
adding that "banks have been too highly leveraged in the past,  
private households, everybody."

Hennecke's stock allocations are mainly Asian-based, especially in  
the Chinese market as the country's government has a large amount of  
cash and the macroeconomics are fundamentally strong.

He also suggested investing in gold, despite the recent fall in price.
C 2008 CNBC.com


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