Tuesday, October 11, 2011

Gold and Unjust Weights and Measures

The Bible has a phrase in it that goes something like this: "God hates unjust weights and measures". Now whether you are a christian or not, you probably couldn't disagree with a statement like this? It makes sense. Weights and measures are involved in finding true value in commercial transactions. When our weights and measures are secretly adjusted, our trust of value disappears. So does our trust in each other.

Some of the weights and measures used were scales or pure pieces of gold or silver. In older times, to undertake commerce one took goods to traders where these goods were weighed and traded for fair value in gold and silver or some agreed barter. Alternatively, you could take your gold and silver to a trader and buy goods. The trader would weigh out the goods and give you an equivalent value.

But how was value measured? That's the difficult bit. It can be argued that over time goods and services find their natural value. Markets forces of demand and supply are the primary ways that economists describe this value seeking process. Too much of a good or service supplied and the price goes down. Demand for a good goes up, price goes up.

It is when these market froces of demand and supply are tampered with is when we get into a mess. When dishonesty creeps into a system and eventually runs amock. Unjust weights and measures become paramount for the fraud to work. In history, the weight was adjusted to greater or lesser amount to diceive the seller or buyer. Today, the value of your wealth, as measured in paper money is adjusted to distort real value.

As we may be nearing the end of the monetary system as we know it, some of us wonder how we got here. Unjust weights and measures are surely a factor.

Gold in New Zealand dollars: $2147.98 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $40.97 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)

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  1. I'm interested to hear how insulated you think the NZ economy is from the inevitable US and European collapse. Our public debt seems manageable at only 20% of GDP.

    As other countries currencies become devalued against gold, what will happen to the NZ currency against gold?

  2. Hi Phil. As at June 30, 2011 (ex NZ Herald):

    NZ International Assets = $113 billion
    International Liabilities = $253 billion

    Net International liabilities = $140 billion (or 70% GDP)

    This is the overall picture with public and private debt. The experts say that when this figure hits 90%, then it's a self-sustaining cascade to bankruptcy.

    I think another important figure to look at is household indebtedness. For NZers it is around 150 per cent of household disposable income. This simply means the working and spending population do not have sufficient disposable income to cover their obligations.

    The NZ dollar is seen as a commodity currency and is strong in times when the market is positive to risk. Now is not one of those times. The NZ dollar has dropped as risk comes off and cash is king.

    Gold in NZ dollars is still steadily rising. In January 2011, it was around $1800, today it is $2100, even with the large recent sell-off.

    So the NZ dollar has many factors pushing and pulling it. We are small and vulnerable. To me, all nations are devaluing their currencies in order to remain competitive. Therefore the gold price will keep rising in all currencies until the system is fixed or cleaned out.