A GOLD HUCKSTER GETS SMELTED. ALL THAT GLITTERS DOESN'T YIELD PROFITS IN THESE TIMES.

On Friday, July 24, 2015, a popular blogger cut and pasted a story from Bloomberg about hedge funds betting on a decline in gold prices, a first for hedgers.

In the Disqus comments, a comment by a guy named Doug Eberhardt caught my eye. That Doug Eberhardt seems to be the same Doug Eberhardt who writes gold and silver blog and who has written a book.

So in the comments, Doug claimed this:

Gold maintains its purchasing power over time. Silver too. Speaking of real rate of return, how about 51 years ago and how a quarter could buy you a gallon of gas and today that same quarter exchanged for the "scrip of the day" can still buy you a gallon of gas in most states except the left coast (up until a few weeks ago) at $2.65. Meanwhile a 1965 quarter can buy you 25 cents worth of gas today. 

Not one to believe anyone's boldface claims and already knowing that against many things, gold has lost buying power, I decided to look up Doug's claim about gasoline. The facts easily refute Doug's claim.

According to the DOE, the average price of a gallon of gasoline in the USA in both 1964 and 1965 was 30¢. At face value, a 1932-64 Washington quarter has been quoted to sell at $2.6566 (the quoted price on July 25 , 2015).

So in either 1964 or 1965, at face value, it would take 1.2 quarters to buy a gallon of gasoline.

Today, in all other states, except Washington, Nevada, Hawaii, Alaska and California, you could buy more gasoline with that same coin first sold to coin collectors than you could with that coin at face value in 1965. However, in Washington, Nevada, Hawaii, Alaska and California, every 1932-1964 quarter lost buying power with respect to a gallon of gasoline purchase. 

It never dawned on Doug that rather than any 1932-64 quarter keeping its buying power, oil production and refining become more efficient since 1965 thus letting sellers accept lower winning bids.

All should note there are storage, discovery and transaction costs associated with holding coins, finding buyers and transferring property as well as possession of the coins for today's legal tender. So the net gain anyone gets for selling gold or silver spot will be less than the spot price times quantity. It is this net gain that counts.

Also, if everyone rushed to sell his collection of 1932-64 quarters, the price for those quarters would fall. That said, nothing would preclude anyone from melting his coins, illegally of course, extracting the silver and selling that silver spot. As well, there are costs associated with smelting that would reduce the net gain upon sell.

After I presented Doug the facts, Doug accused me of being a nitpicker. Ironically, by his doing so, Doug revealed himself as one doing nitpicking. What Doug believes is nitpicking is what I call  prudent businessman reckoning.

After which, Doug engaged in a bit of ad hominem by writing, "Smack, if you knew anything about this industry, people don't rush out to sell their 90% silver quarters and dimes, they hoard them."

Of course, I never made any claims about what anyone actually does. However,  if people hoard their silver quarters and dimes, as Doug claims they do, what is the point of holding silver coins at all? Doing so is like hoarding a 1980s VHS porn collection or a collection of 1960s TOPPS baseball cards.

Doug then asked as if he believed he had something, "Did they [hoarders] rush out and sell them when silver as $49.50 an ounce in 2011? No."

Of course, stupidly, anyone who hoarded, lost out. Being paper rich is useless.

Like Bitcoin collectors, Doug seems to miss why anyone buys collectibles. If anyone sold his silver-laden coins at the top in 2011, he would have bought cash or other bank credit denominated in dollars. At day's end, collectibles are worthless until sold and what people want when they sell their collectibles is cash or other bank credit denominated in dollars.

Of course, Doug's beloved hoarders could spend their silver-laden coins for everyday products right now. However, they could only get 25¢ of buying power for each quarter, regardless of silver content.

Doug's livelihood seems to be tied into price appreciation for gold and silver. In the comments, Doug made this boldface claim: Gold maintains its purchasing power over time. Silver too.

Yet, I have shown many cases where Doug's claim is quite false. You can see proof in charts that Doug's claim is false: 

• FOLLOW THE YELLOW BRICK ROAD INTO THE LAND OF FOOL'S GOLD
• MORE FOOL'S GOLD FOOLERY. GOLD VS COMMODITIES
• AFTER THE GOLD RUSH. YELLOW BRICK ROAD FINAL DESTINATION. FOOL'S GOLD VS THE S&P 500

So, after being showed facts vs his mere claims, seemingly agitated, Doug began a campaign of bragging and more ad hominem  — "Smack, I'll put my reputation on the line of understanding this market better than you or anyone else...... Congress ... asked me to testify before them in 2010." Further, Doug accused me of committed the fallacy of the strawman argument.

Comparing gold and the S&P 500 isn't a strawman. Doug doesn't seem to understand what the strawman fallacy is.

Doug's position is this: "[G]old and silver hold their purchasing power over time."

My refutation of his position is direct: Against many things, gold has lost buying power. For my argument to have been a strawman, I would needed to have argued something like this:

You say, gold and silver hold their purchasing power over time. But I say, so what! FDR banned gold ownership with Executive Order 6102. You could buy gold today and have the government take it tomorrow.

Doug made this boldface claim: "Gold maintains its purchasing power over time. Silver too."  For his claim to be true, there could be no instances where gold and silver lose purchasing power against other commodities, other products and other vehicles of speculation.

The S&P 500 is one such vehicle of speculation. Gold has done poorly against the S&P 500.

As anyone can buy a share of the S&P 500, for your claim to be true, someone with gold would have needed at least to buy the same number of shares of the S&P 500 today as he could have done so many years ago.

From Q3 1976 to Q3 2011, True Gold grew at less than 1% a year, coming in at a scant 0.5% a year for a total of 19.6%, from $87.11 to $104.18. In the same period, True S&P 500 grew almost 4 times as fast, albeit at 1.8% a year for a total of 95%, from $78.12 to $152.33.

All can enjoy the facts right here on Bizarro Theater: IS THERE EVER REASON TO BUY GOLD?

As anyone can buy a share of the S&P 500, for Doug's claim to be true, someone with gold would have needed at least to buy the same number of shares of the S&P 500 today as he could have done so many years ago.

The exact opposite has happened. It has taken ever fewer shares of the S&P 500 to buy the same weight of gold. Said another way, it has taken ever more gold to buy one share of the S&P 500. In short, gold has lost buying power to the S&P 500 as it has to many things.

Against many uniform contract commodities, gold has lost buying power. Such comparisons are valid. Since demonetization, against many things, gold has lost its buying power.

If Doug believes his claim, he doesn't understand the reality of commerce. If Doug doesn't believe his claim but says it to get others to buy from him, Doug uses questionable business practices. 

Gold and silver have been demonetized. The price of gold, the price for silver as well as anything else conforms to the one, true, infrangible law that governs all of commerce, the Law of Prices.

The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer sets the price. Unlike man-made law, this law is inescapable.

Back in 2014, I showed readers of Bizarro Theater the future of gold. If you have not done so, you should read this: LOSING ITS LUSTER. THE SECRET FUTURE OF GOLD REVEALED.

Under the current state of the economy, bank credit and interest rates, the time to buy gold long has long gone. There are no drivers to buy gold. None.

Doug's livelihood seems to be tied into price appreciation for gold and silver. Doug said, "All my company sells are bullion coins as opposed to all other gold dealers," which seems that Doug is in the business of selling rounds. Selling gold rounds is a business predicated on finding buyers who believe people like Doug and who hope for a rise in the price of gold.

The worst bit are all the gold and silver hucksters preying upon gullible who suffer from end times delusions and thus feel compelled to become preppers for a future. It never dawns on them that if there would be worldwide financial collapse and reversion to money — coined metal by weight and fineness — even a small weight of gold and silver would make anyone rich.

Under total collapse, there won't be credit. Without credit, there won't be massive edifices of capital. Without capital there won't be products or wages.

It will take little gold to buy much of the few things that can be had.

UPDATE:

Today, 7/28/2015. a day after I wrote the above work, Doug couldn't resist himself. At the end of debate, one day ago, Doug wrote:

"I'll give you the last word and ignore you as you have your own agenda."

Doug lashed out recklessly, engaging in ad hominem. Some of Doug's gems were these:

• "You wouldn't make a good attorney."
• "I have now classified you as a troll who sits in their underwear at his computer and has nothing better to do with their time."
• "Next you used a strawman to make a point in bringing up the S&P 500 and not sticking with the 'issue.'"
• "#troll"

It seems Doug has stewed on everything I've written and having become enraged, Doug had to lash out it what seems to be little more than a childish tantrum. 

And yet, Doug Eberhardt wants adults to enter into purchases and sales with him by selling them gold or silver and buying from them their cash or bank credits. Doug's behavior should give anyone pause before considering entering into contract with him to buy gold or silver from him.

Doug still does not seem understand the fallacy of the strawman argument. Idiotically, Doug claimed "gold and silver hold their purchasing power over time". Whether or not Doug believes that to be true or Doug says such a phrase to wheedle others into buying gold and silver from Doug lacks relevancy.

It is not a strawman argument to compare things directly to which anyone would have lost their purchasing power had they bought gold and silver. It's a direct counterclaim. Producing a factual direct counterclaim so refutes your false claim, easily. 

One of those things is the S&P 500. Anyone can buy a share the S&P 500. The S&P 500 is one of those factual direct counterclaims.

I gave Doug a perfect example of what would be a strawman argument:

Doug's premise: You say, gold and silver hold their purchasing power over time.

Strawman: But I say, so what! FDR banned gold ownership with Executive Order 6102.

Knocked down strawman: You could buy gold today and have the government take it tomorrow. 

Ironically, Doug Eberhardt of buygoldandsilversafely.com's (that is the site Doug who commented put into the Disqus comments) argument against me is an example of the strawman fallacy. To wit:

After Doug Eberhardt said all should buy gold and silver because "gold and silver hold their purchasing power over time," Smack MacDougal showed factual instances where gold and silver lost purchasing power against other things.

Doug Eberhardt responded by implying that he was surprised that Smack hates anyone speculating on gold and silver so much that he wants them to become bankrupt by losing out on going long gold and silver. 

Doug Eberhardt of buygoldandsilversafely.com ought to prove to the world that he can time the market for gold and silver, exactly. His publicly-accessible writing on his blog alludes to Doug having such skill. However, Doug's publicly-accessible writing on his blog seems to be a whole bunch of gibberish masquerading as experience.

In True Dollars™, which is what counts, gold and silver will be going down for years, not months, but for years to come. There are no drivers for gold, none.

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ANTI-BANKING PITCHFORK POPULIST BLOGGER BLOWS IT ON GREECE, BIG-TIME.

Mike Shedlock is a prolific blogger. Becoming popular has let Shedlock appear through television to espouse his views on economies, politicians, stocks and bonds.

His 5.9 million yearly page views are impressive, although not as impressive as during his peak readership years of 2009 through 2012, which peaked at 22 million. Since his peak viewership, his unique page views have fallen -73.7%!

Shedlock has written quite a bit about the Greek Legislature Public Finances Crisis. Read standalone, any one of the stories written by Shedlock about the crisis seems plausible. Yet, if you were to read all of the stories in succession, giving yourself context, you would see that Shedlock writes much of nothing.

In brief, Shedlock hailed the ascension of Greek communist Alexis Tsipras to job of prime minister of Greece. Then Shedlock hammered on the idea of Tsipras telling the "nannycrats of the Trokia" to "shove it."

After the disastrous snap referendum called by Tsipras (Bizarro Theater: Greeks Vote for Grecocide), which Tsipras called on Greeks to reject a bailout proposal from Eurogroup ministers, Shedlock hailed Tsipras as a genius, more or less, the guy dictating to the Eurogroup ministers — the finance ministers of the respective countries of the Euro zone banking system.

Then when Tsipras struck a deal, contrary to his purported analysis, in seemingly mindless reaction, Shedlock called Tsipras to resign, "If Tsipras had an ounce of decency left, he would resign, put forth a new referendum, and let the people decide." Of course, if Shedlock understood what side held the winning hands, Shedlock would not find himself shocked and on the wrong side of his many predictions.

For your amusement, I've cherry-picked relevant quotes attributable to Shedlock from the flurry of stories written by him on the Greek Legislature Public Finances Crisis.

"Tsipras Trades Royal Flush for Draw at Inside Straight...Tsipras won the game. He had the backing of Greek citizens no matter what he did...Tsipras traded all that away for nothing!...Did the US bribe Tsprias with a secret account worth millions?...Is someone holding his kids hostage?" ~ Mike Shedlock, July 13, 2015

"Is Grexit what Alexis Tsipras, the Greek prime minister, really wanted all along? If so, and assuming that's what happens, he played his hand masterfully." ~ Mike Shedlock, July 08, 2015

"Does either side really want a deal? ...  both sides would be happy with Grexit as long as they can blame the other party. Let's hope so." ~ Mike Shedlock, July 08, 2015

 "Yet, the nannycrats in Brussels and Berlin still don't get it. The odds of contagion are very high. Next up: Spain, Portugal, or Italy." ~ Mike Shedlock, July 06, 2015

 "...the eurozone officials are also electioneering, so perhaps they simply feel trapped and have no idea what to do or say about Tsipras' moves." ~ Mike Shedlock, July 01, 2015

"One may or may not like the result, but this was a triumph of democracy over technocrats and nannycrat puppets...The big shock will come when Spain marches down the same path."  ~ Mike Shedlock, June 29, 2015

"ECB Cries Uncle..." ~ Mike Shedlock, June 28, 2015

"If anyone has blinked, it now appears to be Germany and France, rather than Greece." ~ Mike Shedlock, June 26, 2015

"Greece has nothing to lose by defaulting." ~ Mike Shedlock, June 14, 2015

"Tsipras Won't Agree to Irrational Proposals" ~ Mish Shedlock, June 5, 2015

"Ever since Alexis Tsipras won the Greek election and appointed finance minister Yanis Varoufakis, an expert who wrote a book on game theory, it's been extremely difficult to determine who is bluffing and who isn't... Heck, it's very difficult to determine what most of the players really want." ~ Mike Shedlock, June 5, 2015

"Greek prime minister Alexis Tsipras keeps hinting that a "deal is close" while publicly trashing every deal offer...One seriously has to wonder if this is purposeful gamesmanship." ~ Mish Shedlock, June 5, 2015

"What cannot be paid back, won't. And anyone with any bit of common sense knew four years ago." ~ Mike Shedlock, May 31, 2015

"I have read countless articles over the past few week stating a belief that Syriza party leader Alexis Tsipras is bluffing in his threat to stay in the euro but default in debts...I suggest his positions are carefully crafted." "I have read countless articles over the past few week stating a belief that Syriza party leader Alexis Tsipras is bluffing in his threat to stay in the euro but default in debts...I suggest his positions are carefully crafted." ~ Mike Shedlock, May 25, 2015

"Tsipras has nothing to lose and everything to gain and the Troika knows it." ~ Mike Shedlock, May 25, 2015

"Given that no changes are acceptable to the Troika, Greece's days in the Eurozone are numbered. It will be a good thing for Greece ... once they finally get the nerve to tell the Troika to go to hell." ~ Mike Shedlock, May 9, 2015

"I am convinced that Syriza will not agree to another bailout adding still more debt on top of the already unsustainable €323 billion pile...All this extension did was give both sides more time to come up with an exit strategy." ~ Mike Shedlock, April 04, 2015

"On Friday German finance minister Wolfgang Schäuble rubbed Greek capitulation in Tsipras' face with his comment, "The Greeks certainly will have a difficult time to explain the deal to their voters. As long as the programme isn’t successfully completed, there will be no payout."...Let's see what happens four months from now...With roles reversed and Schäuble playing the witch, I envision Tsipras' silently saying "All in good time my little pretty, in good time". ~ Mike Shedlock, February 22, 2015

"Tsipras' claim that he wants Greece to stay on the euro...If not, then unless he gets nearly everything he wants, Grexit is all but assured." ~ Mike Shedlock, January 30, 2015

"Greece Will Not Accept Bailout Extension or Deal With "Rottenly Constructed" Troika; Mish's Game Theory Math... the Troika has its hands full with Yanis Varoufakis, an expert who wrote a Book on Game Theory...I suspect prime minister Alexis Tsipras picked Varoufakis precisely because of his skills at game theory." ~ Mike Shedlock, January 30, 2015

"A simple economic truism is that what cannot be paid back, won't be paid back." ~ Mike Shedlock, January 29, 2015

"I suggest it is pretty clear Greece cannot possibly pay back €256 billion even at 0% interest. " ~ Mike Shedlock,  January 27, 2015

"Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the "bail out" debt foisted on their country to be null and void. That person will be elected...Possibilities...Greece: Alexis Tsipras - Syriza (Radical Left)"  ~ Mike Shedlock, January 03, 2015

The latter three comments reveal Shedlock's persuasion-in-propaganda strategy. Shedlock likes to create simple mantras that he repeats to his readers, hammering away at them for weeks on end. This results in his readers parroting the mantras in the comments they write on Shedlock's blog.

Such a technique is typical in cult formation. Having jargon and mantras leads to group cohesion.

Shedlock seemed especially fond of this mantra — what can't be paid back, won't. Shedlock would invoke the mantra while deciving his readers to believe that Greeks law givers needed to pay €256 billion, then €330 billion, and then later €400 billion. Before SYRIZA, Greek law givers had been asked and agreed to pay back something closer to €65 billion over 10 years. That is closer to one-fifth of what Shedlock claims.

Shedlock revealed himself to be horribly wrong about the whole Greek Legislature Finances Crises throughout the ordeal. Yet, that didn't stop Shedlock from writing.

For my view of what happened, check out MY BIG FAT GREEK STUPIDITY. THE TSIPRAS AND VAROUFAKIS GREEK COMEDY SHOW WRAPS UP. That work contains links to the rest of my writing on what truly happened with the Greek law givers.

Since 2008, Mike Shedlock has become one of the most popular bloggers who tries to write about economies, economics and politics. A civil engineer by training and historically, a computer analyst by vocation, though working today as a "a registered investment advisor representative" like many, Shedlock took to blogging when he found himself unemployed. You can read bits and pieces of Shedlock's personal story here and even more so, here.

This bit that Shedlock says of himself is quite revealing:

I started a blog in 2005 hoping to be discovered as an economic writer. Given there are millions of blogs the success of which are near-zero, one might even think such a chance would be impossible since I had no background in either economics or investing.

Shedlock has claimed to be an adherent of the so-called Austrian School of Neoclassical Economics. Shedlock claims to have become one after having read a couple of books.

Its last-known major disciple was a guy named Ludwig von Mises. Von Mises based his beliefs on the interest rate theory of a guy name Eugen Böhm-Bawerk. The Austrian School's founder, Carl Menger, had this to say about that theory:

“The time will come when people will realize that Böhm-Bawerk’s theory is one of the greatest errors ever committed.”

Von Mises  time preference theory of interest is quite wrong.
In INTEREST, CAPITALISTS AND FUTURISTIC TIME COPS, I explained how interest comes about.

Time preference is illusory. Persons buy something now — a reckoned belief in the share of the profits. There is no time preference. There are only buying preferences now.

When someone sells cash for bank credits recorded in a checking account, he or she does so to buy banking services now. That one is not being compensated so as to buy something later.

If the world operated as falsely as the Miseans believe, then why do people deposit cash in a bank when bankers aren't paying interest? According to Miseans, bankers must pay interest right now to induce people to forgo present consumption. Yet, at peak credit, deposits were $324.2 billon and today at much lower interest rate, deposits are much higher.

More so, as interest is an kind of income, it must adhere to the same law for all kinds of incomes — copyrights, annunities, wages, and the like. If interest needs one theory to explain it and other kinds of income have another theory, then either theory must be wrong or both must be. There can be only one theory that explains every phenomena of a class of phenomena.

Von Mises spawned his own school that mistakenly gets called the Austrian School. Von Mises biggest disciple was a man named Murray N. Rothbard.

Rothbard was born in the Bronx borough of NYC to Russian-Polish immigrant Jews. Rothbard's thesis advisors were Joseph Dorfman and Arthur F. Burns, the latter who went on the chair the Federal Reserve. It's a massive stretch to call Rothbard an Austrian economist.

I like Rothbard's Conceived in Liberty. He wrote excellent work about the political side of things. Rothbard was a superb champion of liberty and an incredible historian.

However, stupidly, Rothbard claimed  there exists double claims of ownership on deposits. Under commercial law, deposits get bought by bankers and they sell credit, which gives depositors rights of action. Likewise, depositors sell their cash and buy bank credits.

Shedlock believes commercial banking is fraudulent because Shedlock believes in a fallacy perpetrated by Austrian the now-dead Rothbard.

Brushing aside that no one uses money — coined metal by weight and fineness — but instead, all use cash, which is bank credit in circulation, here is what Shedlock claims in his Idiot's Guide to Austrian Economics:

If I give money to a bank and it promises my money will be available on demand, and the next moment it lends a large portion of it out, my property rights are clearly violated. What happens in such instances is twofold. I own my money. Someone else owns my money too.
Logically that is impossible. And that is precisely why it's fraudulent.

That is the basis of Shedlock's thinking and Shedlock's thinking is quite wrong. In short, Shedlock doesn't understand how commercial banking works.

This is why Shedlock opposes commercial banking.  Shedlock is quick to reference Rothbard's works What Has Government Done to Our Money along with Case Against The Fed to support his diatribes against commercial banking, especially what many call fractional reserve lending, which is more like multiple of reserves lending.

As it seems Shedlock holds this view, he believes bankers are evil as he has expressed as much on his blog. Likely, this is why he has sided with the Greeks.

Anyone who knows about Commercial Law knows that a banker is a trader who buys cash and debt by selling bank credits. In a purchase and sale, a customer, known as a depositor sells property in cash or receivables to a banker and buys property in bank credits.

With property in bank credits, the bank customer has a right of action to demand an amount of cash from his banker at a future date. Evidences of such right includes checking account bank statements and passbook savings books.

Bankers become owners of said cash, bank credits from other bankers and debt bought in a purchase and sale from depositors.

In commercial banking law, a deposit isn't a depositum, but truly a mutuum in law of a purchase and sale of cash for deposits.

A banker is a trader whose business consists in buying cash and debts by creating other debts. While the grocer buys food for resale, the banker buys cash or debt and sells credit. A banker sells credits payable on demand as cash.

More so, no one is saving his cash with a banker. In a purchase and sale, selling cash or perhaps other bank credits and buying an interest-bearing account, a bank customer is a capitalist who buys a share of future bank profits, which gets called interest.

Bankers and other capitalists deal in property with confidence in forthcoming profits, transmuting property that lacks saleability into property that does, enabling the adventurer-entrepreneur to transmute property as capital of production into property as wealth for trade.

In spite of the title of his blog publication, Global Economic Trend Analysis, Shedlock doesn't provide any kind of trend analysis. Instead, Shedlock writes up opinions rooted in fear-mongering to appeal to his conspiracy theory susceptible readers, readers who have formed a cult around him.

To let you know, I have pasted many links on Shedlock's popularly read blog referencing my works for his readers mostly to stop typing the same words in comments that I've written already. To my understanding, that is how the Internet of sharing is supposed to work. I've done so on Forbes and many other sites.

Here are my Disqus comments on Mike Shedlock's Global Economic Analysis.

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