This is the first instance I've seen of cases where, for a limited period of time, the PMs had declining value during economic upheaval -- not for their fundamentals, but due to political intrigue. Still, as a stacker, I like to read both sides. Excerpted from "The Prudent Bear" newsletter, February 25, 2013: "...However, as you can read in Jung Chang's "Wild Swans," during the Maoist famine years of the "Great Leap Forward" of 1958-61, when market mechanisms ceased to operate, gold and silver were no longer useful, because possession of them endangered your position in a society that was full of informants and imprisoned the bourgeois. Similarly during the Ukrainian famine of 1928-32, possession of gold and silver got you labeled as a "kulak" and subject to liquidation by Stalin's secret police. In both cases however, food itself remained a highly acceptable means of exchange and could obtain you any kind of services available, or indeed antique furniture and jewelry if your taste ran to that sort of thing and you were confident your political connections made you safe from liquidation."
Hi Doug, Gov'ts do all sorts of things when faced with desparate situations. Superimpose this over us in the '30's after the prohibition and envision how Uncle Sam might go about confiscating everyone's gold (and silver). Yeah, bloody impossible. However, what they could do was to have a pr campaign and vilify the hoarders as anti-american xxxxxxxx and encourage folks to narc on them. What exacerbates our present depression is that there are 70 million baby boomers starting to retire. The generation on average hit their 'crossover' period in 2009/10. This is where more are dis-investors than investors. Now they're starting to sell assets in order to fund their retirements. Ah, there's the rub. The Great Liquidation. This is the issue that they're not talking about. Right now the stock market is being kept inflated by the unrush of new dollars, new yen, new euros, new quid. That's what they're were trying to pry out of Uncle Ben this week ~Edited: read the rules on language happens when you stop QE . . . nth? Whence they stop filling the punch bowl, the Great Liquidation is going to be felt. And so it goes, peace, rono
Prudent Bear Chat and Doug Noland were my introduction to PMs as an asset class, back in 2000. I've been a "Gold-Bug" ever since. Their forum was one of the best - does anyone else remember Rasputin? That said, no commentary is gospel and Martin Hutchinson's deeply flawed in several ways. (doug444 - thanks for posting this anyway!) Novelist Jung Chang was born on March 25, 1952. Her father was a propagandist of the Communist Party; she was a privileged child, even a member of the Red Guards, until the Cultural Revolution of the 1970s (her teenage years.) She's no historian; inference drawn from "Wild Swans" is dubious, NOT FACT. The question of whether (or not) possession of Gold/Silver in Mao's China made a very perilous social life worse or better isn't answered here. Hyperbole/hearsay from biased/brainwashed sources is insufficient evidence. Ditto, for Ukraine. wikipedia says that under the Law of Spikelets (Закон о трёх колосках) peasants couldn't eat their own food under penalty of death. Hoarding food was also a crime. The famine became so bad that farmers fled to cities TO EAT ... and redeemed 274kgs (12,020 ozt) of Gold worth at two torgsins alone, in January-February 1932. Almost anything could get you labelled a kulak or counterrevolutionary, but the sheer volume of Gold redeemed at that date suggests Hutchinson is historically ignorant, clueless. Bad data, wrong conclusion! In these two examples, the risk-assessment for holding PMs remains completely unknown. However morbid, the relevant question ("Did having Silver in the Łódź Ghetto help one's circumstances?" "Did holding Gold in ______ in 19__ make life easier or worse?") remains unanswered. A comprehensive study would carefully consider facts from several country-cases & periods. I cannot answer the question by anecdotes either, but I've met half-a-dozen very different ethnic nationals, each of whom fled Nazi/Communists with Gold or real wealth. For every one, Gold/real wealth was a very important survivalist tool. So I have to wonder: what is the real purpose of this 'Gold-Will-Get-You-Killed' scare-mongering? Why the persistent pattern of disinformation (or bias) on this key point, a case FOR (not against) Gold/Silver? And let me offer another rebuttal: North Korea. Isn't owning Gold illegal there, too? Hasn't the hermit kingdom branded gold-hoarders counterrevolutionary since Joe Stalin said so? By Martin Hutchinson's shoddy logic, OF COURSE the North Korean Gold-hoarders must all be dead by now. YET STILL (since 1945!!!) people in DPRK hoard Gold as wealth. Parse this recent news item carefully. A-ha! "Gold trinkets" but how can that be? Impossible! http://newsinfo.inquirer.net/277138/cash-starved-n-korea-secretly-sells-gold-report 2 metric tonnes = 64,300 ozt is approximately the annual production from DPRK mines. It's unclear how much Au "in Gold trinkets" the people owned in 2011 or still own in 2013 - but there it is. GOLD IS WEALTH, even where it has been forbidden/confiscated for over 65 years. "Scorned"? I doubt that. Both North Korean and Chinese traders know better: Gold is MONEY.
I think there have been a few instances when the government has said that anyone who owns gold is doing so illegally, but it still had value. It was just harder to move it.
For Juan - sorry Martin was having one of his bad days, and thanks for the clarifications. I was looking at the other side of the coin, so to speak. As for "why denigrate?" = to drive PM prices down, which is in some folks' best interests. You don't have to convince ME about PMs -- I am right behind you, picking up the ones you drop.
Hi doug444- Yes I realize you're playing devil's advocate (I do, too.) But still, to show how little we actually know... Reading the Bear's Lair piece, so I don't understand your inference here. Hutchinson didn't cite "declining value" - I'm almost certain he doesn't know what Gold/Silver traded for in either mkt, either. And everything hinges on that. fwiw, the Jan.-Feb. 1932 Gold price wikipedia cites for Kharkiv as 24.46 руб./ozt equivalent. I doubt that! Does someone have a Kharkiv black-mkt bourse rate for Au in early 1932? The 1924 chernovets (10 Rouble = 7.74232 Fine Au) was rated 40.17 руб./ozt but those coins had been withdrawn by 1930 or hoarded from 1924. wikipedia says "The Soviet currency (ruble) was non-convertible after 1932 (when trade in gold-convertible "chervonets", introduced by Lenin in NEP years, was suspended) until the late eighties. It was impossible (both for citizens and state-owned businesses) to freely buy or sell foreign currency even though the 'exchange rate' was set and published regularly." In a footnote from Our Daily Bread: Socialist Distribution and the Art of Survival in Stalin's Russia 1927-41 (2001, p.229) I see a 1932 blackmkt rate of USD$ 1. ~ 15-25 руб. currency; this suggest 1 Au/ozt = ~ 310 - 516 руб. currency, at least. Again, to know if POG rose or fell in this period we'd have to see the Kharkiv black mkt rates, charted. In Ukraine, I'd guess the value of Gold Chernovets increased, rather than declined. But I have no evidence either way. Does anyone, for Kharkiv?
LOL o.k., so I'm a numbers freak I had seen the 1932 footnote before, so I knew the wiki value was off. But I'm not a total weirdo here. I have a few friends in Kharkiv (traveled there) historical interest in Russian PMs (Rouble values, back to 1790) and I'm fascinated with black-market rates generally. And official numbers from Soviets/Maoists are completely untrustworthy IMO.
