If he's right, we're 'stuck' with holding the physical, but if Monsieur Levenstein errs you'll be smacking yo'self upside the head wondering why you didn't get off the couch and see a coin dealer. One note: Our Govt could further display its concern for our welfare by selectively managing your 401K or IRA for you. You know, determining the "safe investments" for you to own. Gold in any form will not be one of them, be assured of that.
Evidently, Levenstein is waiting for a "left-wing" American government before personal gold would be stolen from the people again. We suggest he return from Jerusalem and take measure of America's government now - if not leftwing, what is it?
Some fat IRA accounts out there good be redeployed in US Treasury bonds for the "common good" and show the Greeks how to bail themselves out and steal the American way!
Sacrebleu!
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September 19, 2011
I am writing this in reaction to an article recently published by Bloomberg.
In the article, Dylan Grice, a global strategist at Societe Generale SA, presents the possibility of the price of gold rising to $10,000 per ounce. He uses the U.S. Monetary Base as the basis for this possibly happening.
There are two periods of history in the U.S., during which the U.S. dollar was convertible into gold, that are of interest. One is before gold bullion ownership by Americans was made illegal in 1933. The second is after.
Prior to the confiscation of gold owned by Americans, the U.S. Treasury had a policy of keeping gold reserves at a level of 40% of the Monetary Base. During the second period, after it was made illegal for Americans to own gold bullion and non-numismatic coins, there was a policy change. At that time the level of gold backing eventually reached 25% of the Monetary Base. (My source is Friedman and Schwartz's "A Monetary History of the United States 1867-1960".)
After the confiscation of gold from American,s the dollar was convertible into gold at a fixed price but only for non-Americans. The question is what price of gold would be necessary for these ratios to be in effect now.
- 40% gold backing of the Monetary Base would require a price of $4,088 per ounce.
- 25% gold backing of the Monetary Base would require a price of $2,555 per ounce.
Both these prices are high but not $10,000 per ounce. The calculations are based on the 7 September 2011 level of the Adjusted Monetary Base (pdf) of $2,672.575 billion.
One might imply from this that if the very unlikely event occurs, namely that the U.S. Treasury is forced into returning to gold convertibility of the dollar, then a minimum price of $2,555 would be required. If the Monetary Base continues to grow then the required gold price will rise accordingly.
I assume that the U.S. government will not confiscate gold owned by Americans and make ownership of gold illegal for Americans as it did in the past. For this to happen one would need a strong left-wing U.S. Executive Branch, a left-wing Congress, and left-wing Supreme Court.
Actually I don't think gold confiscation in the U.S. could happen again. However, political science is not my area of expertise and I don't think my view on the chance of gold confiscation is relevant.
If the price of gold reaches a level where the value of U.S. gold reserves is equal to or greater than 40% of the value of the Monetary Base, then I think full gold convertibility of the U.S. dollar would be credible, barring an economic and/or political situation that is very bad... continued
