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Let’s ‘assume’ that ‘I’ own all the GOLD on our planet!

September 10, 2013

Follow this ‘thought’ experiment for understanding of the concepts of ‘value’ and ‘price’. Today, all prices are derived from our imagination and mostly within cyberspace (our computer screen). To understand the nature of today’s financial casino, let’s ‘assume’ that I own all the above ground GOLD on our planet. Let’s estimate this above ground supply at ONE ounce/person or 7 billion ounces (some experts estimate 6 billion ounces). If each person on our planet could own 1 ounce then my estimate of 7 billion would be the result (assuming 7 billion people on our planet). Let’s further assume that this pile of gold is in my warehouse…which is located in the desert of Arizona under one roof. All the above ground gold on our planet could be stored in a cube which is 60 feet on each side. This is not a difficult task for me to accomplish. Just send me all the gold and I will store it here in Arizona in a secure location!

All the gold mined in human history (some 6000 years) can be stored as a cube (60 x 60 x 60) in a warehouse!

This image reveals the physical supply of all the gold on our planet. I could store this in my warehouse in the Arizona desert and convince you that it is located in a secure and protected location!

Now let’s assume that this unallocated gold supply is available for you to price (value) via trading with your computer programs and trading strategies. You can even ‘assume’ (in your imagination) that you ‘own’ (portions) this gold as a result of your trading activity. You can trade this gold (in your imagination) all day, 24/7, and every day, 24/7. Your can trade in the futures and stock markets via puts/calls, shorts/naked shorts, longs, ETF’s, etc. Every day I will announce the ‘price’ (in digital dollars) of a one ounce coin (assume a Maple Leaf) which emerges on the computer screen (at noon sharp) and we’ll call this the ‘daily spot price’. This spot price will change every day as you continue to manipulate (via your trading strategies) the ‘price’ (value) of my cube of gold (7 billion ounces) from moment to moment…within your computer screen. You can also assume (in your mind) that you own part of this cube.

This image of a Maple Leaf coin will be our image for the changes in the ‘spot price’ in real-time (daily)! We will start with a ‘spot price’ of $1300/ounce. for this 1 ounce coin!

Trading in real-time (via the computer or smart phone) using algorithms, software, and trading strategies can affect (manipulate) ‘prices’ and ‘values’ within our global marketplace! My cube of gold would change in ‘price’ from moment to moment as each trader executes their strategy. 

Traders watching the computer screen for changes in ‘prices’ as they speculate via their trading strategies!

Today, your ‘spot price’ is $1300/ounce (let’s say) and this results in a ‘value’ of my cube (60 x 60 x 60) = to $9.1 trillion (denominated in imaginary digital dollars). As all of you traders continue to trade your imaginary futures contracts and imaginary stocks (now in cyberspace and totally virtual) you can assume that the money which you accumulate from day-to-day is real and available for use within the global marketplace (belief is reality). After all, it’s our ‘imagination’ which makes us pleased with our trading activities and achievements. Let’s also assume that all the new gold which is mined and gets converted into dore bars must be transported to my warehouse in the desert (I will store this cube of gold in my secure location). What does this ‘thought’ experiment teach us about ‘value’ and ‘price’ and about the reality of trading in today’s markets?

Notice how the ‘price’ of gold changes in real-time! What causes this change in ‘price’? Can a well-healed trader crash the ‘price’ in seconds today? Why is this possible given today’s computer driven markets?

Trading strategies can now be executed via your Smartphone in real-time. Using your imagination to trade is all one needs to execute a trade (provided you have an account)! Cyberspace is where trades occur today!

First of all it teaches us that my physical gold is a real physical supply which exists within spacetime. I have located this physical gold in my warehouse and it’s in my possession. I can take a picture of it and send this picture to you so you feel that your trading activity is meaningful. I could also mint all this supply into one ounce coins and store these coins (some 7 billion) in my warehouse for you to see within your computer screen. Now let’s say that your trading (within cyberspace and within your imagination) creates a new spot price of $1000/ounce. This new spot price is $300 less than the prior spot price. This could occur via a trade which uses the strategy of a naked short and/or a combination of naked shorts to reduce the computer price (now a virtual number) which we witness within our computer screen.

A naked short strategy can be executed via your laptop or desk computer and then cancelled prior to any delivery. This could be a great strategy for driving the virtual/computer ‘price’ DOWN in milliseconds within our casino markets! Is this happening today? Who might be executing ‘naked shorts’ to drive the price of silver/gold down?

The ‘spot price’ of gold is derived within our cyberspace markets daily. London and New York create a ‘spot price’ for the markets to use as a reference point for ‘value’. This ‘spot price’ is imaginary and derived subjectively!

We can now witness (within our computer screen) the changes in ‘prices’ (value) from day-to-day as we trade this cube of physical gold via all our casino trading strategies. The one ounce ‘price’ can be manipulated up and down as our imagination changes ( about the importance and future uses which this gold might accomplish for our economy). What else can we learn from all this computer trading and all the real-time ‘price’ changes? We should learn that the ‘value’ of this cube of gold in my warehouse is a result of your/my ‘imagination’ and our subjective emotion. Value is not intrinsic and/or inherent within this cube of gold. Rather ‘value’ is derived within our ‘imagination’ and is therefore illusionary/subjective. Value is a concept of our subjective metaphysical MIND’s and our ‘value’ does not EXIST within spacetime as an objective reality. Today, ‘value’ is imaginary…and digital ‘prices’ are imaginary. What else can be learn from this thought experiment?

Austrian economics views ‘value’ as subjective and within the individual’s subjective MIND! This theory of ‘value’ is quite obvious in today’s virtual markets!

The final concept that we can learn is that ‘price’ and ‘value’ are not necessarily identical. The imaginary ‘price’ of the cube of gold changes from moment to moment and could go to zero if our digital dollar is no longer legal tender. Price is derived via ‘dollars’ which we accept only because our ‘dollar’ is legal tender and promoted by our government. The ‘Price’ of my cube of gold could go to zero, however,  if the ‘dollar’ is declared no longer legal tender. Value, however, is also imaginary (within our mind) but since my cube of gold is a physical object in spacetime, ‘value’ (in terms of purchasing power) could be substantial and much different from ‘price’…even though ‘dollar price’ has gone to zero. Both ‘price’ and ‘value’ are imaginary concepts within our subjective mind…but gold (the element) is NOT imaginary. Gold is a physical item of matter/energy which exists in spacetime.

Gold has an atomic weight of 79 and silver of 47. These elements from nature exist within spacetime and will not disappear with a political decision. Money, however, is legal tender and can disappear if it is no longer a legal tender or is not accepted within the trading marketplace. 

This means that my 7 billion ounces of gold bullion (now in storage within a secure location in the desert of Arizona) has purchasing power after the imaginary digital ‘dollar’ has gone to zero (nothing). What does this ‘thought experiment’ reveal? It reveals that gold is an object within nature that does not disappear. Money, currency, and the digital dollar, however, can disappear as it is a ‘mental abstraction’ (a unit of consciousness). Who understands this reality? Money is basically imaginary and within our MIND whereas GOLD/SILVER are units of matter/energy (a mineral from nature). You can check this out by going to the periodic table of elements. Au has an atomic weight of 79 and Ag has an atomic weight of 47. This means that these elements do not disappear! Value and Price, however, can disappear if we no longer desire gold/silver or whatever as our money and store of value.

Money emerges from a ‘barter’ economy or marketplace! The purpose of ‘money’ is to measure ‘value’! Value is then denominated in a currency unit chosen within the marketplace. Prices then emerge from trading activity!

The above ‘thought experiment’ gives us some philosophy to think about as we witness our current financial non-system collapse over the next few years. The collapse process will likely take many years…so now is the time to internalize some of the potential consequences which will transpire AFTER the collapse. We will need a NEW ECONOMIC SYSTEM for our planet. The core concepts of economics need to be understood now so that everyone can participate in the creation of our NEW SYSTEM. I am:

One Comment leave one →
  1. overtheedge permalink
    September 29, 2013 8:56 pm

    You confused atomic number with atomic weight.
    Au 196.967


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