Friday, 27 May 2011

The GSR. Or "BS" as I prefer to call it.

Many people like to think about the GSR1.

They talk about a historical norm in the ratio of 16:1 (silver 1/16th the value of gold). They talk about suppression of the price of silver compared to gold, naked short selling, short squeezes, busting the banks that are the root of all this evil; over-shoot of the ratio to 1:1 or even a $silver price higher than a $gold price.

But, basically, it's all meaningless. Nobody has any idea what the GSR should be or will be. It's just trader-mentality speculation2.

Now, here's some more speculation for you. What if the GSR, for some buyers of gold, had already recently gone to and temporarily through 1:1? What would you make of that idea? You call bullshit on this idea and laugh as you reach for the X button on your browser window containing this blog post of a total idiot3, right?

1 Gold to Silver Ratio.
2 By trader-mentality speculation, I mean chasing paper currency gains hoping to beat some other market participant with your superior intellect, speed and trading prowess. These people ought to put their pimped lawnmower ride away in the shed for a while, and stop to have a think about the world instead of taking it in turns to play games of hide the sausage on each other.


dnarby said...

OK Baron...  That's good info to know (we have 11k tons of gold, and 8k tons of other peoples gold, which I am sure they will return at market value... : p )

But I still don't see your <1:1 GSR argument.  If you could, please spell it out for those of us with wee small easily addled brains (unless you're just commenting on the fact the treasury has no silver).

DP said...

Hi Dave,

Perhaps this picture would do the heavy lifting of 1000 words?

DP :-)

PS: When you open the link, in my footnote 3 did you notice the corresponding note on section 3.13?

DP said...

PPS: The back half of note 2 is also, I think, interesting to note. MTF, MTM - what's in a name?

dnarby said...

...Oh, pbthththt!  Just got it.

And yes, 3.13 (2) Does raise a lot of questions. Mark to Face, or is it Fantasy?  Farce?

I only pray we can get through this with MLOL (minimum loss of life) , and maximum of WTFU (Wake the F**k Up).

DP said...

We can but try, Dave. We can but try...

DP said...

Just for fun now, let's run some math real quick

$1534.8 / $42.22 = 36.35244

Now that is what I call a discount! Amirite?

DP said...

Factor in that $1534.8 (actually nearly all these numbers are too low since I wrote the last comment a moment ago, but what-ev-er!) is only really that low because like 1% of the "gold" bought at that price is actual, physical gold... and suddenly some people's payday looks pretty sweet indeed.

While it lasts.

An instant 3,600%+ bookable profit would be good, but if you can wait then perhaps 360,000%+ (or much, much more) would be worth the patience involved.

dnarby said...

On that note, this guy does some very intriguing work

At times his charts are a bit opaque to me, but that one is pretty clear.

DP said...

Mmmm. OK, let's rearrange the numbers instead.

$1534.80 - $42.22 = $1492.58/oz

The cost of a Strong Dollar.

dnarby said...

Need to figure in:

x (bailouts & tax breaks and other gifts to Wall $treet) * (y $ spent on 'defense') *  z^10 (# of lives lost in non-border defense activity).

DP said...

Yes, once the gold price is set free (when the cost of the Strong Dollar Policy is deemed have been too much to bear, that is) then every additional $ that is magicked up from nowhere beyond that point, and with no corresponding gold added to the reserves, will increase the $price of gold. But that is once you are operating under $Freegold. The value of gold won't change of course. But the value of a $ will go down when it is diluted.

However, in this post I am talking with you about the continued Strong Dollar policy, of delivering gold to certain parties at the knock-down price of $42.22/oz. That is, pre-$Freegold-reset. While TPTB are willing to eat the loss on the gold they buy, to deliver it for $42.22 to the people that must be paid in gold for their commodity.

How much of a loss is too much of a loss? That is the question. (And for once the answer to the question is clearly not 42... unless perhaps it turns out to be $42.22 x 42 = $1773.24 - but that for the time being appears somewhat random IMO! :-> ) I have no idea how much is too much. Maybe it already is?

dnarby said...

"I am talking with you about the continued Strong Dollar policy, of
delivering gold to certain parties at the knock-down price of $42.22/oz"

Mmm...  That would mean the gov't would be giving up power (money being a means of purchasing it).

DP said...

Or would it? I mean, yeah, some small part of the gold in the world that changes hands, would cost them a lot of "money" (or, $ to be less cute). But as you know, they can print as much of this "money" as they feel they can get away with.

All the rest of the gold, and "gold", that is sold... well that doesn't cost TPTB a red cent, does it? That costs other people lots of green dollars, but it costs them nothing.

However, think how cheap are all the other goods and services in the world that are traded, for these Strong Dollars! Suddenly, taking a loss on a little gold, doesn't seem quite such a stupid idea after all, to me. As long as they can find plenty of people willing to sell actual gold to them for a reasonable number of my magic printed dollars of course. But those guys are getting steadily thinner on the ground as of late.

DP said...

"a reasonable number of my magic printed dollars"?! 
:-D Clearly, I meant "their".

I suppose I must have some deeply repressed dillusions of grandeur; so repressed that even I didn't know they were there until now!

dnarby said...

I think we are talking past each other, and/or I'm just not getting it.
You're likely going to need to pretend I'm a 10 year old. : )

DP said...

Perhaps you are looking for some complexity, that isn't really here? It's hard not to, I know. We can but try.

DP said...

You're not? :)

DP said...

But you look so youthful, dare I say boyish, in your FB profile pic! :-)

DP said...

And it's clear you must have a love for Disney.
Such ears! A joy to behold! :-)

DP said...

More commentary at the Facebook page

Visit the page to find more news, commentary and community... (Like the page and you'll also see comments on links above - jus sayin.)

Twits can also apply here...