You are here
'Giffen good' or not, gold may be good enough
4:26p ET Friday, October 12, 2012
Dear Friend of GATA and Gold:
In his latest edition of the Thunder Road Report, market analyst Paul Mylchreest reviews gold's steady price appreciation over the last decade and wonders whether gold has become a "Giffen good," an item outside the ordinary law of supply and demand, insofar as demand increases along with price, rather than falling as replacement goods are called upon.
Such unusual items are named for the Scottish economist and statistician Robert Giffen, who seems to have been thinking about the price of bread rather than the price of gold. That is, in Giffen's primary example, a rising price of bread caused poor people to reduce consumption of more expensive food, like meat or vegetables, and to increase their consumption of bread because, despite its rising price, bread remained less expensive than other food:
http://en.wikipedia.org/wiki/Giffen_good
But of course at some point bread could become more expensive than other food, restoring the ordinary relationship of supply and demand.
That probably could not happen with gold, since gold is money, not a consumable like food; since gold's price ordinarily will be the inverse of the price of other currencies; and since the more valuable gold becomes against other forms of money, the more it will be demanded.
As value is always a matter of human judgment, not just a matter of arithmetic, there may always be a law higher than the law of supply and demand -- the law of human psychology -- which is to say that there sometimes is no law at all and no accounting for anything. But as Mylchreest quotes Gold Standard Institute President Philip Barton, "No one hoards something that will not hold its value over time." "Giffen good" or not, that may be good enough.
Mylchreest's new Thunder Road Report, titled "Is Gold a Giffen Good?," is posted in PDF format here:
http://www.gata.org/files/ThunderRoadReport-10-12-2012.pdf
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Opinion Around the World Is Changing
in Favor of Gold -- Find Out Why
When Deutschebank calls gold "good money" and paper "bad money". ...
http://www.gata.org/node/11765
When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ...
http://www.forbes.com/sites/ralphbenko/2012/09/24/signs-of-the-gold-stan...
When a leading member of the policy committee of the People's Bank of China calls the gold standard "an excellent monetary system". ...
http://www.forbes.com/sites/ralphbenko/2012/10/01/signs-of-the-gold-stan...
When a CNN reporter writes in The China Post that the "gold commission" plank in the 2012 Republican platform will "reverberate around the world". ...
http://www.thegoldstandardnow.org/key-blogs/1563-china-post-the-gop-gold...
When the Subcommittee on Domestic Monetary Policy of the U.S. House of Representatives twice called on economist, historian, and gold standard advocate Lewis E. Lehrman to testify. ...
World opinion is changing in favor of gold.
How can you learn why and what it will mean to you?
Read the newly updated and expanded edition of Lehrman's book, "The True Gold Standard."
Financial journalist James Grant says of "The True Gold Standard": "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman she has finally found him."
To buy a copy of "The True Gold Standard," please visit:
http://www.thegoldstandardnow.com/publications/the-true-gold-standard
Join GATA here:
New Orleans Investment Conference
Wednesday-Saturday, October 24-27, 2012
Hilton New Orleans Riverside Hotel
New Orleans, Louisiana
http://www.neworleansconference.com/
* * *
Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:
http://www.goldrush21.com/order.html
Or by purchasing a colorful GATA T-shirt:
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
http://gata.org/node/wallstreetjournal
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit:
Fred Goldstein and Tim Murphy open All Pro Gold
Longtime GATA supporters Fred Goldstein and Tim Murphy have brought their many years of experience in the precious metals and numismatic coins to All Pro Gold as metals brokers who specialize in the delivery of gold and silver bullion bars and coins as well as numismatic gold and silver coins. Fred and Tim follow these markets closely and are assisted by a team of consultants in monitoring market trends. All Pro Gold offers GATA supporters competitive pricing on all bullion products and welcomes inquiries. Tim can be reached at 602-299-2585 and Tim@allprogold.com, Fred at 602-799-8378 and Fred@allprogold.com. Ask about their ratio strategy and the relationship of generic $20 dollar gold pieces to 1-ounce gold bullion coins. Visit their Internet site at http://www.allprogold.com/.
