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Keynesianism and gold: like oil and water in economics

  • 17 Luglio 2018
  • by Blogger

In the Keynesian framework, the ever-expanding monetary flow is the key to economic prosperity. What drives economic growth is a monetary expenditure. When people spend more of their money, this implies they save less. Conversely, when people reduce their monetary spending in the Keynesian framework, this is viewed as them saving more. In the popular — i.e., Keynesian — way of thinking, saving is bad news for the economy. The more people save, the worse things become. (The liquidity trap comes from too much saving and the lack of spending, so it is held.)

Observe, however, that wealth comes not from money, but from goods that have been produced. The chief role of money is as a medium of exchange. Hence, the demand for goods is constrained by the production of goods and not by the amount of money as such. (The role of money is to facilitate the exchange of goods). To suggest that people could have almost an unlimited demand for money that is viewed as an unlimited saving that supposedly leads to a liquidity trap would imply that no one would be exchanging goods. (It would mean that people do not exchange any longer money for goods).

Sound money doesn't need price inflation to grow an economy

  • 14 Luglio 2018
  • by Blogger

The positive association between economic activity and price inflation is not because of an expansion in real wealth but because of an expansion of the money supply. Real economic growth cannot be quantified — it is not possible to add potatoes to tomatoes to obtain a meaningful total that is required to calculate real economic growth. So-called economic growth is established from the monetary turnover, which is deflated by a dubious price deflator. This means that what is labeled as economic growth is in fact the growth rate of a distorted monetary turnover data, which is erroneously called total real production. According to mainstream thinking the stronger the monetary pumping is the stronger the pace of spending is going to be and consequently the stronger monetary income and the so-called real economy is going to be. In this framework, more money means more spending and this leads to stronger economic growth.

Gold will do its come back

  • 07 Luglio 2018
  • by Blogger

The international monetary system has gone through a series of changes since 1891. Prior to 1922, the United States and most of Western Eu­rope were on a full international (and domestic) gold coin stand­ard. Paper currencies were freely convertible into a stated quantity and fineness of gold or silver. Gold was the medium of payment in­ternationally. Because of this free convertibility rule, central banks and governments were partially restrained in the creation of paper currency and debt; if the value of the paper began to fall, due to an increase in the supply, domestic populations and foreign­ers rushed to convert the paper into special metals.

"Price inflation is good for the economy": yet another central bank artifact

  • 03 Luglio 2018
  • by Blogger

The so-called positive association between economic growth and price inflation, which is labeled as the Phillips curve, and is regarded by almost all economists as natural law on par with the law of gravity, is a misleading concept.

All that it describes is the fact that the variation in growth rate of money supply must result in a variation in prices of goods and services over time. Now, as long as the machinery of wealth generation is still functioning Fed policy makers can get away with the illusion that they can grow the economy.

Three critical lessons from Europe’s recent mini-meltdown

  • 29 Giugno 2018
  • by Blogger

The current president of the European Central Bank (ECB), Mario Draghi, said in July 2012: “[T]he ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” Taken at face value, these words suggest what the ECB is ready to do: to print up ever greater quantities of euro balances to prevent the euro currency from falling apart. Ironically, however, this is precisely what the ECB’s money printing scheme will bring about.

Is This Why Germany Repatriated 583 Tons Of Gold?

  • 26 Giugno 2018
  • by Blogger

We live in an imperfect uni­verse. We are not perfect crea­tures, possessing omniscience, om­nipotence, and perfect moral na­tures. We, therefore, find ourselves in a world in which some people will choose actions which will benefit them in the short run, but which may harm others in the long run. The gold miner, by diluting the purchasing power of the mone­tary unit, achieves short-run bene­fits. Those on fixed incomes are faced with a restricted supply of goods available for purchase at the older, less inflated, price levels. This is a fact of life.

Here Is The Stunning Reason Why Treasury Yields Blew Out In April

  • 22 Giugno 2018
  • by Blogger

Bloomberg, Reuters and other media are now reporting that Russia dumped Treasuries in a major way in April and today comes news that Russia bought another 600,000 ounces of to add to its already sizeable and growing gold reserves. It is not just Russia that is diversifying into gold in recent months and years. India, Turkey, Mexico, Iran, Kyrgyzstan, Kazakhstan, Belarus, Uzbekistan, Tajikistan, Mongolia and of course China have been increasing their gold reserves. Trump's erratic and risky economic and foreign policies pose a risk to the dollar as the reserve currency of the world.

On Donald Trump's "Madness" & A New Gold Standard

  • 19 Giugno 2018
  • by Blogger

A full gold coin standard would unquestionably solve the problem of international acceptance and solvency. Gold has always functioned as the means of internation­al payment, and there is no reason to suppose that it will not in the future (assuming that prices and wages are permitted to adjust on an international free market).

The History And Rising Power of Central Banks

  • 15 Giugno 2018
  • by Blogger

The world has been plagued with periodic bouts of the economic rollercoaster of booms and busts, inflations and recessions, especially during the last one hundred years. The main culprits responsible for these destabilizing and disruptive episodes have been governments and their central banks.

Gold & The Turning Of The Monetary Tides

  • 12 Giugno 2018
  • by Blogger

Who is going to win the gold wars? Holders of gold. The big winners will be Indian wives whose fathers gave them a lot of gold as a dowry. The rest of us gold bugs will also do well. The general public will never catch on in time, and by the time that it occurs to even 10% or 20% of investors that they better by gold, it will cost them so much to get into the market that they will not make the kinds of profits that today's gold investors are going to make.

 

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