The Clinton-Comey Effect, Gold Report

Twice this week, the prices of the metals spiked. Once on early Monday due to a cause unclear to us. The second on Friday late morning (Arizona time) due to, get this, additional problems for Democrat Hillary Clinton. The stock market dropped at the same time that the prices of the metals surged. Call it the confidence speculation.

The price of gold ended the week +$10, and that of silver +$0.18.

Was it speculation? Or was it, this time for once, stackers going bananas buying up metal along with dried food, barrels of water, prime bunker real estate, and lead (ammo)?

Before we get to that, we want to tackle a fallacy that comes up over and over again. How do you define or measure the value of money?

The same school of thought that gives us the Quantity Theory of Money — which Keith has debunked decisively, and which we have spent so many words in this Report addressing its implications for the price of gold — offers a simple answer. Tempting, because it sounds so simple, it’s utter rubbish. What’s the idea?

You measure the money by its purchasing power. Prices are measured in money. So why not reverse it, and measure the money by … prices?! Well, for one thing, it’s circular. Self-referential. Infinite recursion, in the terminology of computer science.

But more importantly, this view lumps taxes, regulations, labor law, lawsuits, compliance and you name it, all together. If the government adds a costly new tax which wipes out half an industry, you can bet (literally!) that the product of the remaining companies will sell at higher prices. Maybe much higher prices.

But does this mean that the money has gone down in value? That it is on the path to hyperinflation, even? No.

Taxation is not a monetary phenomenon.

Further, suppose you look at prices in different cities. For example, things are cheaper in Yuma Arizona, than in New York City. Can we compare the Yuma dollar purchasing power to the New York City dollar? Of course not. It’s the same US dollar!