Quote Originally Posted by silverheartbone View Post
Two points, the first addresses the topic at hand.

1) Eliminate all unnecessary derivatives. (Necessary for JPM or GS does not count, they can and should fail.)

The second addresses a point made earlier by Vale.

2) Dude we are already in WW III. (Just because you are not the one suffering a loss, and the war is illegal, does not mean that we are not at war.)
Good exchange! Couple of points. You cannot use 20-20 hindsight to pick stocks, either good ones or bad ones! Use indexes. And gold and silver SHOULD under perform stocks as metals are only sound money which has a store of value (unlike fiat currency). They are NOT an investment. So the comparison is not with stocks, it is with fiat currency. Since 1913 the Dollar has lost over 95% of its value against gold. QED.
Second point. The tally stick story makes our point! It was fiat currency. It only had validity because the King (who was short of money) would only accept it in payment for taxes. He essentially printed money. That is EXACTLY the validity of our current fiat currency. The Government imposes validity by requiring it to be used as a numeraire and a medium of exchange. But the third utility of money, to be a store of value, is breaking down due to currency debasement. So we have the choice of buying gold and silver as an alternate to fiat currency. And lets not forget, for every one of the 726 years when the tally sticks circulated, by FAR the biggest currency in circulation was gold and silver coins. But you do raise one issue. There is not enough silver and gold to be used as a universal currency. But there is a solution. Don't impose a denomination on the metals. Allow the price to float up but not down. (there is exhaustive rationale for this) And you can use the metals again. The price may rise, but so what? A fine diamond of one carat weight is worth $5000. So if a tenth of an ounce of gold (way more than a carat of diamond) was worth $10,000 fiat dollars we would have no supply problems, and a float would cope with the need for expanded money supply. Liberate your minds!! Don't say it can't happen. ANYTHING can happen!