Maybe Ron Paul Was Right

[Paulie]

The trend of the price of oil in Dollars and Euro, from 2001 to 2008. Notice that the price fluctuates in mirror fashion between both currencies, the only difference being the Euro (red) not being quite as inflated as the Dollar (blue) over that time. Otherwise, the Euro has been in lockstep with the dollar in terms of oil prices.

Notice that the price of oil in gold (purple), however, has not changed much at all.

When you factor that in, with this:

You obviously see that oil and gold have trended the same.

This is due to monetary devaluation, not demand, as many on here would like to espouse. The numbers don't lie. While demand obviously plays SOME role in it, it's not playing nearly the role that currency devaluation is playing. The supply and demand factor probably accounts for the subtle differences in the trends, ultimately, but it's obviously not CAUSING the trends.

And a good article:

http://www.thedailygreen.com/environmental-news/latest/oil-gold-commodities-47041507

Maybe Ron Paul Was Right

The Price of Oil Hasn't Budged Since 2001 (If You Pay for Black Gold with Gold)

By Dan Shapley

The American Geological Institute Workforce Program has published an interesting analysis of world oil prices.

As we know, the price of oil has risen steeply. We pay more dollars for the same amount of oil. Those who purchase in Euros also pay more, though not as much as we pay in dollars. But if you compare the spot prices of oil to gold, there has been almost no increase.

As AGI wrote:

"The steep increase in the price of crude oil in the United States remains a headline issue, along with the falling US dollar. The drop in the dollar has caused concern in oil-producing countries which use it as the economic basis for the commodity, and often their currency. The chart below shows the spot market price of crude oil per barrel (BBL) in US dollars and in euros from 2001 to today (I posted that chart above ^). The price of oil has grown faster relative to the dollar than to the euro. Yet, a portion of the rise in oil prices is due to the fall of the value of the dollar. The graph also shows the number of barrels of crude oil per cost of an ounce of gold, demonstrating the parallel growth in commodity pricing.

"If the US dollar had remained strong in the global economy, oil might, in theory, be around $65 per barrel. However, oil is priced in dollars, and oil prices continue to rise. The impact of increased oil prices can not be ignored in the US economy, and, in turn, can further weaken the dollar. Resource economics is a complex feedback loop where today’s resource boom is driven by many external factors."

Republican longshot candidate Ron Paul has talked about how monetary policy, as much as energy policy, is behind inflationary problems like the run-up in oil prices.

 

[Gungnir]

Saying "Paul is right" is like saying "we should have let them build that extra nuclear reactor" in the middle of a brownout.

Paul is one of the best remedies out there right now but he would have been much more useful if he was declared despot instead of declaring Bush Sr. President.

More to that, Goldwater should have been elected.

 

[indago]

Paulitics wrote:

The trend of the price of oil in Dollars and Euro, from 2001 to 2008. Notice that the price fluctuates in mirror fashion between both currencies, the only difference being the Euro (red) not being quite as inflated as the Dollar (blue) over that time. Otherwise, the Euro has been in lockstep with the dollar in terms of oil prices. Notice that the price of oil in gold (purple), however, has not changed much at all.

The more things change, the more they stay THE SAME

 

[Paulie]

No one wants to comment on it, Indago. It's China and India's fault for needing more oil.

No one wants to place the blame where it actually lies, regardless of how obvious it ought to be to them.

But hey, let's just all hope John McCain FIXES it all for us!

 

[indago]

Paulitics wrote:

No one wants to comment on it, Indago. It's China and India's fault for needing more oil. No one wants to place the blame where it actually lies, regardless of how obvious it ought to be to them.

Actually, what's to comment? The boldfaced truth and facts are right there for all to see.

 

[Paulie]

Paulitics wrote:

Actually, what's to comment? The boldfaced truth and facts are right there for all to see.

Very true. Given the fact that many here would lose precious sleep if they didn't chime in with an opposing opinion on most subjects, I'd say the proverbial silence from the peanut gallery is deafening.

 

[Zoomie1980]

The trend of the price of oil in Dollars and Euro, from 2001 to 2008. Notice that the price fluctuates in mirror fashion between both currencies, the only difference being the Euro (red) not being quite as inflated as the Dollar (blue) over that time. Otherwise, the Euro has been in lockstep with the dollar in terms of oil prices.

Notice that the price of oil in gold (purple), however, has not changed much at all.

When you factor that in, with this:

You obviously see that oil and gold have trended the same.

This is due to monetary devaluation, not demand, as many on here would like to espouse. The numbers don't lie. While demand obviously plays SOME role in it, it's not playing nearly the role that currency devaluation is playing. The supply and demand factor probably accounts for the subtle differences in the trends, ultimately, but it's obviously not CAUSING the trends.

And a good article:

http://www.thedailygreen.com/environmental-news/latest/oil-gold-commodities-47041507

The old addage that an ounce of Gold today buys about the same amount of bread an ounce of Gold bought 5000 years ago and will likely buy 5000 years from now.

Meaning, it's a great protector of existing wealth but is a horrible vehicle of ACCUMULATION of wealth over time.

 

[Gunny]

Very true. Given the fact that many here would lose precious sleep if they didn't chime in with an opposing opinion on most subjects, I'd say the proverbial silence from the peanut gallery is deafening.

Maybe that means they agree? As was already posted, the facts are right there to see.

Shall we go back on the gold standard?

 

[LOki]

The old addage that an ounce of Gold today buys about the same amount of bread an ounce of Gold bought 5000 years ago and will likely buy 5000 years from now.

Meaning, it's a great protector of existing wealth but is a horrible vehicle of ACCUMULATION of wealth over time.

What?

Money is not wealth.

 

[Paulie]

The old addage that an ounce of Gold today buys about the same amount of bread an ounce of Gold bought 5000 years ago and will likely buy 5000 years from now.

Meaning, it's a great protector of existing wealth but is a horrible vehicle of ACCUMULATION of wealth over time.

Zoomie, this particular thread had nothing to do with investing in gold, especially for the purpose of accumulating wealth.

The purpose was to show that our monetary policy has devalued our currency to the point of making oil, and the gasoline we buy to fuel our cars, cost more.

Some think it's OPEC just gouging the market, some think it's the oil companies gouging the market...But in REALITY, it's the policy we've undertaken of inflating the money supply to no end and artificially tampering with interest rates.

But given a choice of either holding $1,000 cash or owning $1,000 worth of gold...I'm taking the gold.

Maybe that means they agree? As was already posted, the facts are right there to see.

Shall we go back on the gold standard?

You and I both know that facts being right there to see means nothing to some people. For instance, I'd love to see a liberal chime in here and say they agree with this thread. It would probably make my day.

Gold standard? Not necessarily. But why not allow competing currencies and let the market decide which one makes the most sense? If a particular currency happens to have gold or silver backing, so be it. (EDIT: btw, I'd LOOOOVE to see a liberal chime in and agree with THAT. )

 

[Care4all]

i heard on an educational program that the dollar today is worth 4 cents compared to the dollar the day before we went off the gold standard....how much more can it be devalued for goodness sakes!

why is the administration taking such a strong stance on devaluing the dollar?

what is their purpose? how would America benefit from this policy?

printing 350 billion for bear stern bailout probably just devalued it even more just recently.....

care

 

[Gungnir]

i heard on an educational program that the dollar today is worth 4 cents compared to the dollar the day before we went off the gold standard....how much more can it be devalued for goodness sakes!

http://www.usagold.com/germannightmare.html
Look at what happened after that.

why is the administration taking such a strong stance on devaluing the dollar?

what is their purpose? how would America benefit from this policy?

Cheap, easy money for funding of government programs. A side effect is a balooning economy. Only the government and the oligarchy benefit from this. I call such a situation Capitalism and oppose it to Free Market.

Don't understand the difference? Then start singing the International.

printing 350 billion for bear stern bailout probably just devalued it even more just recently.....

Increasing the supply of something while demand is constant serves only to lower value.

 

[TopGunna]

Paulitics - great post and very interesting. I do have a question though, maybe you can clarify.

It would seem to me that the divergence of the red line (Euros per barrel) from the blue line (USD per barrel) captures the effect of the US monetary policy. But it doesn't seem that it would explain the divergence of both currencies from the gold index.

The article you linked said that oil would likely be priced at $65/barrel in the absence of the USD being devalued. Do you think the jump from $25/barrel to $65/barrel can be linked to increased worldwide demand?

Having asked that question, the graph is pretty convincing to me that monetary policy does explain why prices are at $125/barrel instead of $65/barrel. What's your take on the other $40 (even if it's not the main culprit)?

 

[AllieBaba]

http://www.usagold.com/germannightmare.html
Look at what happened after that.



Cheap, easy money for funding of government programs. A side effect is a balooning economy. Only the government and the oligarchy benefit from this. I call such a situation Capitalism and oppose it to Free Market.

Don't understand the difference? Then start singing the International.


Increasing the supply of something while demand is constant serves only to lower value.

You are exactly right.

 

[Paulie]

Paulitics - great post and very interesting. I do have a question though, maybe you can clarify.

It would seem to me that the divergence of the red line (Euros per barrel) from the blue line (USD per barrel) captures the effect of the US monetary policy. But it doesn't seem that it would explain the divergence of both currencies from the gold index.

The article you linked said that oil would likely be priced at $65/barrel in the absence of the USD being devalued. Do you think the jump from $25/barrel to $65/barrel can be linked to increased worldwide demand?

Having asked that question, the graph is pretty convincing to me that monetary policy does explain why prices are at $125/barrel instead of $65/barrel. What's your take on the other $40 (even if it's not the main culprit)?

Good question. I thought about that myself. I think an easy case can be made for THAT difference in pricing being attributed to demand. While it was only a short time ago that oil was in the 20's, I don't think we'll ever see that again, short of a brand new discovery. We could have "printed" zero more new Dollars since oil was priced in the 20's, and the price would still have risen. But demand just does not account for the entire rise.

Gasoline should probably cost more like $1.50 to $1.75 per gal.

 

[indago]

Economist Ben Stein wrote for the New York Times 11 May 2008 explaining rising prices in relation to the depreciation of the "dollar":
-------------------------------------------------------------------------
...the price we pay is denominated in dollars, and as the dollar falls, the price in dollars rises. ...But there is another hugely important factor now in world energy markets: the pricing of energy as a speculative item. Traders can and do buy vast amounts of energy futures. Right now, there is a worldwide mania to invest in them. In this situation, when investors and traders are pouring buckets of money into thimbles of energy quanta, to use a phrase from my pal Tobias M. Levkovich, chief United States equity strategist at Citigroup, the price is bid higher and higher. And, as the price goes up, demand does not fall. It rises, because investors and traders think that it will keep rising and they will make money on it in the future. (Oil, gasoline and natural gas can be stored indefinitely.) It's like the bubble in Miami Beach condominiums. As the price of them soared, traders did not stay away. Instead, they kept buying, anticipating more or less endless gains. ...And now the big boys have been joined by you and me. Little folks like us can buy our very own energy baskets of exchange-traded funds and the like, and are doing so in big numbers. Now, the alert reader will notice two truths at this point: One, bubbles always end, and almost always end badly. So will this one. There is always some supposed reason that "this time is different," but it never is. Second, the fact that small players are getting into the game is almost always a sign that the end of the bubble is near. This will be good news for us drivers, homeowners and swimmers. But it will be bad news for those who thought that buying baskets of commodities would make them rich.
-------------------------------------------------------------------------

The more "worthless" paper government pumps into the economy, the more the speculative bubble will inflate, the speculators purchasing grain futures, metals, and etc., so the "dollar" "price" of these items continues to rise. They know that the "dollar" is not worth investing in, and they are hedging their bets against it. Those with the know-how will benefit the most, while the little guy takes it in the ass.

BOHICA

 

[Paulie]

Economist Ben Stein wrote for the New York Times 11 May 2008 explaining rising prices in relation to the depreciation of the "dollar":
-------------------------------------------------------------------------
...the price we pay is denominated in dollars, and as the dollar falls, the price in dollars rises. ...But there is another hugely important factor now in world energy markets: the pricing of energy as a speculative item. Traders can and do buy vast amounts of energy futures. Right now, there is a worldwide mania to invest in them. In this situation, when investors and traders are pouring buckets of money into thimbles of energy quanta, to use a phrase from my pal Tobias M. Levkovich, chief United States equity strategist at Citigroup, the price is bid higher and higher. And, as the price goes up, demand does not fall. It rises, because investors and traders think that it will keep rising and they will make money on it in the future. (Oil, gasoline and natural gas can be stored indefinitely.) It's like the bubble in Miami Beach condominiums. As the price of them soared, traders did not stay away. Instead, they kept buying, anticipating more or less endless gains. ...And now the big boys have been joined by you and me. Little folks like us can buy our very own energy baskets of exchange-traded funds and the like, and are doing so in big numbers. Now, the alert reader will notice two truths at this point: One, bubbles always end, and almost always end badly. So will this one. There is always some supposed reason that "this time is different," but it never is. Second, the fact that small players are getting into the game is almost always a sign that the end of the bubble is near. This will be good news for us drivers, homeowners and swimmers. But it will be bad news for those who thought that buying baskets of commodities would make them rich.
-------------------------------------------------------------------------

The more "worthless" paper government pumps into the economy, the more the speculative bubble will inflate, the speculators purchasing grain futures, metals, and etc., so the "dollar" "price" of these items continues to rise. They know that the "dollar" is not worth investing in, and they are hedging their bets against it. Those with the know-how will benefit the most, while the little guy takes it in the ass.

BOHICA

This is definitely true. However, I think there is a growing number of people who are less speculators, and more of protectors. Our current monetary policy simply does not allow for the strengthening of the Dollar anytime soon. One would be a fool not to dump their Dollars and buy something with historic value. The one's trying to PROFIT from commodities NOW, may be in for a let-down. While I have no doubt that returns can be had still, at this point it's about protecting your wealth and your purchasing power.

A great question to ask yourself is, why is gold dropping while oil is continuing to rise? There are no doubt forces at work behind the scenes (PPT?) artificially holding back the price of gold. It should PROBABLY be priced at about $1,200/oz right now, as it's been in lockstep with oil and oil is at $120+. But while oil has continued to rise, gold has dropped. I suspect the MSM had a lot to do with it, when they started on their tear trying to get people to SELL, as they promoted the so-called "forecasts" pointing to the price coming down ANYWAY. But that is simply bullshit. The price can not, and WILL not, stay down for very long. I expect it to come down to the 600's, but it will most certainly be coming back up again. We haven't started to see the full effects of the coming inflation monster. People will be rushing right back to gold soon enough. Also, in 2005 when the gasoline prices were in the mid $3 range, the price of a barrell of oil was around $65. Now, with the gasoline prices back in the $3 range, oil is TWICE that price, at $120. I guess demand has doubled in onnly 2 1/2 years? Please.

Watch out for the IMF doing a huge gold sell-off soon. That will probably be what drops the price down a few more hundred. I'll be buying BIG when that happens.

 

[Uknow_me72]

Gold is just a mineral. Why does it have so much power? Gold can not do anything unless we make it do something.

Why hold our life's on something that can be depleted.

 

[Gungnir]

Gold is already in circulation and has a relatively constant demand. Electronics increases that demand though. It's devaluation trends are less severe than fiat paper money.

 

[Paulie]

Gold is already in circulation and has a relatively constant demand. Electronics increases that demand though. It's devaluation trends are less severe than fiat paper money.

The understatement of the century.