Friday, April 04, 2008

Happiness Is a Warm Puppy/Gold Bar/50-Pound Bag of Rice

Readers Journal has finally been updated, with 29 new Readers commentaries on a huge range of great topics and three new incisive, fascinating essays (links to your right); Read them all!
Also, check out a new feature in the right sidebar below Readers Journal, "This Month's Highlighted Books."

Longtime correspondent (and resident Gold Bug) Don E. offered this commentary on why he owns gold. His thoughts inspired my own ruminations on "security" and that led me to food which led to some astonishing charts of agricultural commodities courtesy of frequent contributor Harun I. Yes, it all ties together....

"We have seen what Harun has to say on gold. let me give you my more mystical view.
I do say that with tongue in cheek, but - huge BUT here, i believe gold is money. that is almost a mystical pov according to the powers that be. they would have it be a barbarous relic and/or strictly a commodity. this view i have of gold is not exactly based on gold's attributes of holding its value, immutability, easy transport, rarity, etc. it is based solely on my view of human nature.
We are terrible liars and cheats. we just are. is this an age of unreasonable mendacity? not in the least! i have been rereading macaulay's 'history of england'. it is as rife with deceit and perfidy as anything coming out of today's political gymnastics. it has always been thus. we, as a race, limp along jostling each other for position and power. what is to stop us? nothing in our natures. what ten good men can do is as easily, more easily?, undone by one bad man.

we need absolutes to hold on to. many think religion is such an absolute and cling to it tooth and nail. unfortuneately they are clinging only to their own particular view of what is right. this quite handily leads to co-opting, or simply killing, individuals who express a different view - all in god's name, of course. no, that isn't it. what is? well, i think to some degree gold is such an absolute.
Bankers cannot stand it as it enforces honesty in a way a paper, fiat, currency cannot. politicians don't like it as it limits their abillity to expand the monetary system, and inflate the rest of us into oblivion, to the gold they have on hand. what's to like about being told you can be in charge but your powers are limited by your stash of yellow metal?

So, mystically enough, i see gold as the antidote to prevarication, dishonesty, spurious b.s. I have some gold. i think of it as an anchor that holds me steady in very stormy waters. my view is long term; centuries long. have i profited? yes. my investments have increased three or four fold since about 2002. do i recommend gold for this reason? emphatically no. i recommend gold because it simply gives me a warm feeling of believing there is an honest basis for money when i turn on the t.v. and hear the babblers tell me what to buy today - now that the bottom is in - again....

I guess that's mystical enough. i think we, my wife and i, are people with a modicum of good sense. when others were buying houses they could not afford we paid off our mortgage - thank you gold. now we are raising chickens and will be putting in a big garden after mud season.
does any of this help you? probably not. i just wanted to point out that there is a side to owning gold that has little to do with its ups and downs or the waves of fear and exultation that sweep across the nation. i see it as a vote, one man's vote, for honest government, for a sustainable lifestyle. that is not exactly an investment viewpoint. hope i don't disappoint you by not really offering advice about when to buy, etc.

What buttresses my beliefs? take is as a recommendation, or not, but i read jim sinclair,, a free site, and i read jim willie,, $14/month. there are many others, but these two i do like and depend on. to me it is all about honesty, integrity and the government we 'ought' to have but will probably never achieve."

Most interesting, Don. Thank you for a provocative view of the benefits of owning gold. It's not required that anyone be interested in buying gold at its relative low points, but I continue to believe that pursuit is a worthy one for us poor dumb types who tend to buy at the peaks instead of the valleys.

Personally, though I like the feel of a one-ounce gold coin, nothing spells "basic security" like a 50-pound (22-kilo) sack of rice. Wheat and legumes, too, and of course my stash of water. (This is Earthquake Country, and the water mains around here will last about 15 seconds into a two-minute-long major earthquake.)

As you know from both headlines and your recent visits to the supermarket, the cost of basic food items has leaped. Frequent contributor U. Doran sent in this story from the Chicago Tribune which summarizes the impact: Food Price Inflation Changes How We Shop.
Rice has jumped 50%, sparking food riots around the globe and causing China, Vietnam and India to impose export restrictions: Panic grips Asian rice trade after India’s move.

"Since January, rice prices on the international market have jumped almost 50 percent, rising on almost a daily basis and causing unprecedented volatility in the market even though world stockpiles on the politically sensitive grain remain at the same level as last year.
"We could be seeing some kind of a panic reaction here," opined Broca.
This week, Cambodia and Vietnam have followed India’s lead to increase stockpiles. China, faced with food inflation at home and adverse weather conditions, has already announced rice export restrictions."

In other words: we're starting to see hoarding on a national scale. Growing up in Hawaii, you see what perceived shortages can do to otherwise rational people. Every once in awhile, the longshoremans union (ILWU) would go on strike, which meant that ships from the U.S. mainland and elsewhere would not be unloaded.

The immediate response to the announcement of the strike was somewhat comical: toilet paper would suddenly vanish from every market's shelves. Fearing a shortage of this essential (at least to Americans) item, the citizenry would rush out and create the very shortage they feared. before the strike, having a couple extra rolls of TP was deemed adequate; but once the strike was announced, then a closetful was deemed the absolute miniumum required for a sense of security.

To provide some context for a discussion of agricultural commodities' recent price increases, here are charts of soybeans and wheat, courtest of Harun I. Click on the image for a full-sized view of the charts. Are these prices reflecting a speculative bubble which is about to pop, or actual imbalances of supply and demand? Harun sent in this chart to suggest that perhaps the dwindling of global grain in storage is one driver of the price increases.

Please go to to view the charts.

Now comes the unknown part: how much of the shortage is "real," i.e. not enough grain to meet demand, and how much is perceived, i.e. stockpiling and hoarding as a defense against the perceived threat of shortage?

Once that mania of fear and insecurity grips a populace, it can take quite awhile for a sense of plentitude/security to return. In such manias, it is easy to see how wheat could jump from $10/bushel to $30/bushel, and gold from $1,000/ounce to $3,000/ounce.

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