UNLOCKING GOLD’S TRUE VALUE: The Economic Code – Finally Revealed

The true value of gold is much higher than the spot price quoted in the market.  This is due to several factors, but the most important reason is misunderstood by just about every economist and monetary scientist in the world today.  Those who are able to understand the information in this article, will finally be able see the value of gold (money) in a totally different way.

It has taken me years of research and reflection to understand GOLD’s TRUE VALUE.  Unfortunately, the majority of economists and precious metal analysts look at gold in a very specialized way.  While precious metals analysts see gold as real money versus the Keynesian view of a Fiat Dollar System, both fail to grasp gold’s true value.

Gold is more than a precious metal based on supply and demand.  Furthermore, the Austrian School of Economics looks at gold as a foundation of money in the procurement of goods and services.  However, gold’s real value comes from energy in all forms and in all stages in its production

I am going to repeat it one more time…. gold’s real values comes from ENERGY in ALL FORMS and IN ALL STAGES in its production.

I have been saying this in interviews and writing about it for years, but I still believe a lot of people just don’t get it.  So, now I am going to break it down in a simple chronological way.

The Foundation Of Gold Money:  ENERGY = GOLD = MONEY

To understand this principle, I have decided to use one of the largest gold producers in the world as an example, Newmont Mining.

According to Newmont’s 2013 All-In-Sustaining-Cost for producing gold, they provided the following chart:

Newmont-All-In-Sustaining-Cost-Chart

Now, this was a few years ago when the price of oil (energy) was higher, so with lower energy prices, costs have come down since then.  Regardless, this still provides us with a list of costs.  The main part of Newmont’s sustaining costs are shown as CAS – Cost Of Sales.  That’s the blue part of the bar chart, which is broken down on the right, in the circle pie-chart.

If we look at the pie-chart by itself, we see that energy comprises 20% of the total costs.  Of course, the knee-jerk reaction from a typical precious metals analyst is that energy is only 20% of Newmont’s cost to produce gold.  The analyst only sees 20% energy cost because his mind has been trained to look in a superficial and specialized way.  We are going to change that limited viewpoint HERE & NOW.

Here is a breakdown of the CAS -Cost Of Sales pie-chart:

Newmont-CAS-Breakdown

As we can see, diesel at 10% and power (electricity) at 10% comprises 20% of pure energy for Newmont’s gold cost.  However, we must realize that labor at 50%, is also a form of energy…. it’s HUMAN ENERGY.  People need to understand that science breaks down labor into work or energy.  The term Horsepower was developed from the energy of horses performing work.  Thus, human labor is a form of work, and is also a form of energy.

Now, some of the labor force gets paid more because their labor contains more experience and specialization.  For example, an experienced mechanic working on the huge earth moving machines gets paid more than another working doing regular manual labor because of the TIME & ENERGY invested in the mechanic’s trade.  The mechanic spent years doing work and education which consumed one hell of a lot of energy in different forms to have 20 years experience.  Thus, the energy in labor for years of work has provided him that experience.  Which means, the amount of work-energy the mechanic has done for 20 years allows him to be paid a higher rate.

So, if we add human labor (work-energy) of 50% of the CAS cost with the 20% of diesel and power, the total is now 70%.  So, if we were going by scientific terms of doing work-energy, pure energy and labor energy comprises 70% of Newmont’s cost to produce gold in its CAS- Cost Of Sales breakdown.

Okay, let’s look at the remaining two categories:

  1.  Consumables = 10%
  2.  Materials & Parts = 20%

Newmont’s uses a lot of consumables to produce gold.  Here is a list of some of Newmont’s consumables provided in their 2015 Sustainability Report:

Newmont-Mining-Materials-Used-2015

I decided to use lime as perfect example, because the production and transportation of lime is very energy intensive.  Again, according to a typical gold mining analyst, he places lime as a “consumable cost” and not an energy cost.  Once we look at the total process of producing and transporting lime, we will realize the overwhelming value or cost of lime is from the ENERGY in ALL FORMS and in ALL STAGES.

Here is simple diagram of the production of lime, which Newmont consumed 515,800 tonnes in 2015 to produce gold:

Lime-Production-Flow-Chart

The lime is first mined from the ground and transported to the production plant.  This costs a lot of energy from the diesel in the truck as well as the labor-energy of the truck driver.  As the lime moves through the producing plant, it consumes a great deal of energy as electricity is needed to power the plant as well as the high-temperature Kilns that process the lime.

Here is a small section of an EPA Report on the Economic Production of Lime in the United States:

EPA-Report-Lime-Cost-Breakdown

As the report states, the cost of materials for producing lime is much greater than the labor… three to four times greater.  If we go back to Newmont’s CAS – Cost of Sales, labor was 50%, which is half the cost, while the other half was from energy, materials and consumables.

Regardless, the largest percentage of materials used to produce lime is liquid fuels.  Furthermore, the lime industry spent $138.2 million on energy in 1996, which was 31.4% of its material cost.  I would imagine that energy cost is much higher now and accounts for an even higher percentage of total costs.

In addition, we must add the percentage of human labor to the total energy cost in producing lime.  Moreover, all the other materials used to make lime also must be viewed the same way in their production.  Even though the lime industry purchased materials to produce lime, the overwhelming value of those materials came from the energy consumed in ALL FORMS and in ALL STAGES.

Once the lime is produced, it has to be transported to Newmont’s gold mines.  Lime is very heavy, so it takes a lot of energy to transport lime via ship, railroad or by truck.  Either way, the energy burned in the ship, locomotive and truck as well as the labor by the ship captain and crew, locomotive engineer or truck driver also must be added to the total cost as ENERGY.

If we break down the total cost in producing lime, I would assure you the overwhelming majority of its value comes from the ENERGY in ALL FORMS and in ALL STAGES.

Using lime as an example, we can see that other consumables such as cyanide, grinding materials and cement also get their value from the ENERGY in ALL FORMS and in ALL STAGES in their production.  This is also true for the other category of “Materials & Parts.”

If Newmont has to replace a large part of a system in one of their ore processing facilities, the value of that part comes from the energy consumed in ALL FORMS and in ALL STAGES along the way.

Additional Newmont Mining Full Cycle Energy Costs Explained

Let’s take a look at Newmont’s All-In-Sustaining-Cost chart once more:

Newmont-All-In-Sustaining-Cost-Chart

Okay, I just explained the first category on the bottom of the bar chart in blue, the CAS – Cost Of Sales.  Let’s discuss the next category called “Sustaining Capital (in red).”

Newmont Mining spends a lot of money on sustaining capital to be able to produce gold on a continual basis.  According to their Q2 2016 financial report, they will spend between $650 and $700 million on sustaining capital in 2016.  One part of sustaining capital is “stripping costs.”  This is a tremendously energy intensive activity of stripping (removing) overburden and poor quality ore.

Many of you are aware of this huge cost if you watch the show, GOLD RUSH.  If my memory serves me correctly, the team under Parker Schnabel spent something close to $500,000 to remove the overburden and move their wash plant on one of their biggest gold cuts last year in Alaska.  The majority of that cost was the diesel to power the huge earth moving machines to remove that overburden.

Basically, the stripping cost listed as “Sustainable Capital” is from the liquid energy burned and human labor.  Another energy cost found in sustainable capital is the making of new haul roads to get to the new ore cut.  This takes a huge amount of energy as loaders, haul trucks and other earth moving machines transport the rock and gravel to make these new haul roads.

If I went down the entire list of sustaining capital, the overwhelming expenditure of the $650-$700 million Newmont will spend this year will be from the ENERGY in ALL FORMS and in ALL STAGES.

Another category not included here is regular “Capital Expenditures.”  This would include purchasing a new one of these babies below:

CAT-797F

This is the Caterpillar 797F that costs $5 million.  If we went on the same journey as we did when I explained the cost to produce lime, we would find out that the overwhelming value of that massive CAT 797F comes from all the ENERGY in ALL FORMS and in ALL STAGES.

Hell, the huge tires for the CAT 797F, that cost $40,000 a piece, each contain nearly 2,000 pounds of steel, enough to build two small cars and enough rubber to make 600 tires to put on them.

Again, according to the gold mining analysts, they list the Caterpillar 797F as a capital expenditure.  However, if we look through the entire ENERGY MATRIX, we now see that what Newmont purchased as a CAT 797F haul truck, is all the ENERGY in ALL FORMS and in ALL STAGES in its production.

If we consider the last few categories in Newmont’s All-In-Sustaining-Cost bar chart of Exploration-Advanced Projects, General & Administration and Other, we can apply the same energy logic.  It takes a lot of energy to explore for gold as well as advancing new gold mining projects.  Not only does it take the burning of a lot of energy to explore and advance projects for gold mining, there is also a lot of human labor (manual & experienced), materials and parts to consider in the total process.

Unfortunately, most people have been programmed to compartmentalize everything today.  They see most things separately and are not able to understand how energy gives value to the majority of goods and services in the world today.  They just aren’t able to see the entire process of ENERGY in ALL FORMS and in ALL STAGES.

They just see the end result and believe that it magically appeared on the storeroom shelf.  I would assure you that the value of most goods sitting on the shelves in the thousands of Walmarts across the country were derived from ENERGY, in all forms and in all stages.

There are several other items that Newmont has to dish out money to be in the business of producing gold, such as interest expense and taxes to name a few.  I would imagine someone reading this article would be quick to blurt out that interest expenses and taxes are not energy.  Well, that might be true if we look at them in a superficial way, but most taxes go to pay the governments to maintain roads, infrastructure, public buildings and government employees that function as a necessary part of our highly complex society.

Thus, the government spends a lot of money on energy as well as human labor to maintain roads and infrastructure.  So, if we really expand our ENERGY MATRIX horizons, we would see that ENERGY is the main driver that comprises the value of most goods and services in the world today… including GOLD.

The Strategic Importance Of ENERGY = GOLD = MONEY

Hundreds of years ago, the prize by empires was obtaining gold and silver.  This was especially true for the Spanish Empire and its leading role in the world at the time due to its ability to swindle massive amounts of gold and silver from South America and Mexico.

During the 1500’s when the Spaniards were using Aztecs as slaves to loot gold and silver from their lands, the energy source at the time was mainly human and animal labor.  To build the massive Spanish Armada that was destroyed or sunk in huge storm in 1588, it took a great deal of human and animal labor.

Spanish-Armada

(courtesy of Wikipedia)

Furthermore, according to this source, On May 28th 1588, the Armada, with around 130 ships, 8,000 sailors and 18,000 soldiers, 1,500 brass guns and 1,000 iron guns, set sail from Lisbon, Portugal, headed for the English Channel.  The Spanish were able to amass such a large fleet of ships, crew and armaments due to massive amount of gold and (especially) silver they plundered from South America and Mexico.

According to the Historical World Silver Production 1492-1927, the Spaniards produced over 90 million oz of silver from 1521-1600 in Mexico alone.  They started mining silver in Zacatecas, Mexico in 1540, the region where the largest primary silver miner in the world, Fresnillo is currently producing silver.

Furthermore, the Spanish opened large-scale mines in Peru, in the land of the Incas.  From 1533 to 1600, over 94 million oz of silver were produced.  As we can see, the Spanish became the leading empire on the globe due to their ability to amass the largest hoard of silver on the planet at the time.

Well, this all changed in the early 1900’s when the top oil barons realized the value of money would come from oil and no longer from just human and animal labor.  This is why the top oil companies decided to carve up the globe in the early 1900’s and work with each other to control, extract, and sell the most important energy source to world.

Oil was also the main reason why Hitler decided to attack Russia in World War 2.  He needed the oil to continue with his plans of Nazi expansion.  Instead of using gold or silver, Hitler needed oil.. and badly.

Germany-Attacks-Russia-WW2NEW

According to this source on Germany & Oil:

At the outbreak of the war, Germany’s stockpiles of fuel consisted of a total of 15 million barrels. The campaigns in Norway, Holland, Belgium, and France added another 5 million barrels in booty, and imports from the Soviet Union accounted for 4 million barrels in 1940 and 1.6 million barrels in the first half of 1941. Yet a High Command study in May of 1941 noted that with monthly military requirements for 7.25 million barrels and imports and home production of only 5.35 million barrels, German stocks would be exhausted by August 1941.

The 26 percent shortfall could only be made up with petroleum from Russia. The need to provide the lacking 1.9 million barrels per month and the urgency to gain possession of the Russian oil fields in the Caucasus mountains, together with Ukrainian grain and Donets coal, were thus prime elements in the German decision to invade the Soviet Union in June 1941

Here we can see that Hitler gained five million barrels of much-needed oil from Norway, Holland, Belgium and France  to be able to attack Russia.  I have read some accounts that Russia was the REAL PRIZE for Hitler and the Nazi’s.  Which is why they used their lightning-speed Blitzkrieg Warfare on the Western European countries to consume as little fuel as necessary while acquiring the necessary petrol to attack Russia.

When the United States entered into World War 2, it was just a matter of time before the Germans were beaten.  The U.S. was the Saudi Arabia at the time and was providing most of the oil to the allies.  It was the huge reserves of oil and natural resources that propelled the United States to become the leading empire in the world.

Unfortunately, the United States peaked in cheap oil production in 1970.  One year later, Nixon dropped the Dollar-Gold peg.  How ironic… aye?  Then of course we had the Arab oil embargo in 1973 and Iranian oil crisis of 1978 which pushed the price of oil from $1.80 a barrel in 1970 to $31 by 1979.  This had a profound impact on the price of gold and silver as they skyrocketed during that decade.

However, over the next 45 years, clever bankers on Wall Street, London and etc, have hoodwinked investors into putting their surplus funds into paper assets which have become the GREATEST PONZI SCHEME in history.

This paper ponzi scheme can only work on RISING OIL PRODUCTION.  Again, the greatest ponzi scheme in history can only work on rising oil production.  Furthermore, it can only work on rising CHEAP oil production.  Unfortunately, the world has peaked in cheap oil production a decade ago.  We are filling in the gaps with very expensive oil production that the world cannot afford without the massive increase of debt.

According to the work by the Hills Group and Louis Arnoux, they believe an OIL PEARL HARBOR will take place by the end of the decade:

EROI-Oil-Pearl-Harbor

They don’t see a rising oil price in the future, rather they believe it will fall as the available net energy to the market will continue to decline.  They also believe the economic principle of supply and demand will no longer function as a “Thermodynamic Collapse” of oil will take place.

With rapidly falling oil production, the $250 trillion in total world assets of Stocks, Bonds, Real Estate and Insurance Funds will be in big trouble.  Thus, investor fleeing rapidly falling paper assets and Real Estate will move into gold (and silver) to protect wealth.

Energy has been the key driver for the value of gold and silver for thousands of years.  For the majority of our history, the energy has come from human and animal labor.  However, as coal, then oil came in the picture, this changed the dynamics considerably.  With the peak of inexpensive global oil production, the world is about to experience one hell of a FINANCIAL CALAMITY.  Very few people are prepared for what is coming.

With the understanding that most goods and services in the world are based upon all the ENERGY in ALL FORMS and in ALL STAGES, things are about to get very interesting.  Some believe falling energy production will depress the price of gold.  This is an incorrect assumption

Due to the massive funneling of the world’s funds into paper assets over the past 45 years, this has artificially lowered the value of gold (and silver).  Once the world wakes up to the fact that they are invested in ENERGY IOU’s, investors will move into physical gold to protect wealth as oil production declines in earnest.

I will be writing more articles detailing this in the future.

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80 Comments on "UNLOCKING GOLD’S TRUE VALUE: The Economic Code – Finally Revealed"

  1. Nice Works Steve~~~~~

  2. gold has no value. it has utility as money, and serves that role well, but the value of that money is determined by market supply-and-demand conditions at that exact instant and by nothing else whatsoever. money, and gold, are never ever worth more than you can get for them at any particular instant. ever. if you go by comex the value of 1oz of gold this minute is $1339.30, and not one penny more. if you can get someone to pay you $10,000 for your 1oz round, then it’s worth $10,000, and not one penny more. if you can get someone to trade you a bic lighter and a 5lb bag of rice for your 1oz round then it’s worth a bic lighter and 5lb of rice and not one grain of rice more.

    ever.

    • gman,

      If gold doesn’t have value, they why is most of the gold mined for the past 2,000 years still held by investors, banks and countries? You fail to understand that ENERGY is the key DRIVER for money, and has been for thousands of years.

      Energy, whether its human-animal labor or oil, is the basis of MONEY. You need to change your thinking and drop the Austrian School of Economics theories on money as they fail to incorporate ENERGY.

      steve

      • “ENERGY is the key DRIVER for money”

        actually, energy is the key driver for an economy. money is merely a tool for trade within that economy. and when the fossil fuel energy stops (either from depletion or from fiat debt dollar failure) then most people will not have what it takes to drive any kind of economy by muscle power, and the economy will shut down, and money will have no utility.

        sorry, you’re never going to buy your way out of it.

        • gman,

          Get a grip. Money was used for thousands of years before oil and will be used for thousands of years after oil – assuming some of us survive the collapse.

          If you don’t hold it, you don’t own it.

          Buy for cash and stash.

          SteveW

        • Buford Pusser | August 23, 2016 at 7:34 pm |

          thats the stupidestthinhg ive ever heard. PEOPLE ARE FUCKING L-A-Z-Y

        • buna_capital | August 23, 2016 at 9:13 pm |

          gman, SRSrocco is 100% correct if you consider gold (in order to be defined as money) must act as a store of value. SRS is simply following scientific principles through to its economic conclusion. In other words, the expenditure of energy yields mass, and vice versa. Mass cannot be created out of nothing and neither can energy. Einstein said it well with E=mc^2.

          Throw into the mix human ingenuity / productivity, and surplus value from our expense of energy becomes stored in our “money”. Fiat currencies are useless stores of value for self-evident reasons. Thus, as SRS deduces in this piece, the surplus value is stored in gold, such surplus value being the sum of all energy inputs required to achieve the surplus.

          Your own argument essentially ignores anything SRS lays out. It’s as if the article was never read in the first place. It would be more interesting to read how you take the energy principle presented by SRS and use that as the basis to prove SRS incorrect. My guess is that would not be possible, as taking things back to first principles as SRS has done unfailingly reveals truth.

          • “SRSrocco is 100% correct if you consider gold (in order to be defined as money) must act as a store of value.”

            gold stores nothing. it is never worth more than what is available for purchase.

      • robertsinclair | August 24, 2016 at 12:22 am |

        Thanks for the article Steve I have briefly scanned it and i will read it with closer scrutiny later. You appear to be transporting Adams smith theory of “natural values” through time, to 2016. Most people, “don’t get it”.
        There none so blind etc. G!- man!

    • you did not understand

    • gman, you confuse value and price once again. the price one gets now is NOT its value. 2 examples: a) I have got a hammer in the basement that is 50 years old. if I wanted to sell it I would probably get 50 cents for it at a yard sale; however, to me it is highly useful and valuable and worth more than 2 cents. b) a gallon of fresh water is cheap. go withough water for 2 days and tell me, how much would you then give for that gallon? so what is the value of fresh water then??? Same goes for gold. Obviously it has an official paper price (which is a scam perpetuated by the CONeX/LBMA which are levered 300 paper onces to 1 fizzical ounce of PM) and only we shrimp can get metal in “shrimp size” at this price. China would like to buy 1000s of tons of gold and could do that in one swoop, they have enough cash, but they CANNOT. They can only accumulate at a rate that does not upset mentioned scam. Declining ore grades and declining availability of energy (due to a low ERO(E)I) guarantee a peak in metals production, whereas our fiat money (debt) will go to infinity in volume, i.e. worthlessness to it’s holders. At some point, hyperinflation (debt is already hyper inflating) and/or debt hypercollapse (default on outstanding debts) will lead to new currencies. It is during that transition you want to own and hold the metals, and we are in the beginning of said transition.

      In summary, your in good company as 99% of the people in the west do not value the metals as they should, but price them in (guaranteed to be worthless) fiat currency.

      • “b) a gallon of fresh water is cheap. go withough water for 2 days and tell me, how much would you then give for that gallon?”

        you are misunderstanding supply and demand. suppose TWO men go without water for two days, and then one gets a gallon of water and one gets an ounce of gold. sure the man with the gold will trade it for the water, but the one with the water won’t trade, not for a billion ounces of gold. that is what is going to happen.

        • You are deluded… Why were gold and silver traded as money in the first place? Because you want to trade in a ox not for 2 tons of grains that you could not carry, but maybe 10 peaces of silver, with which you can by 2 chickens, a bag of grains, etc… Pure barter is very inefficient. Read up on history of money!

          • “Read up on history of money!”

            I’m sure you know more about money than I do. but you’re not paying attention to the environment in which it is (to be) used.

            “You are deluded”

            good luck.

        • gman, our fiat money system is failing right in front of our eyes and at some point we will be running out of energy at the pace we go (declining ERO(E)I). What will you be holding going into the great turmoil? Bitcoins? Bic lighters? Guns? A swag of bills? Time will tell, and good luck to you too.

        • “you are misunderstanding supply and demand”.

          No I’m not – that was the point of it all – “price” is not equal to “value”. Something can be cheap and yet very valuable, an as supply and demand change, so will the price…

          The energy (and declining ore grades) story of our host implies that at some point PMs cannot be produced anymore whereas demand for the fizzical metal will likely be unabated (BRICS put is in play) – they are currently selling ++200 of paper ounces for every real ounce of gold and silver… But their CONeX/LBMA paper games will not stand the test of time IMHO.

          GLTA and a great thanks to Steve for sharing his phenomenal work.

    • robertsinclair | August 24, 2016 at 9:18 am |

      The dollar and all fiat currencies function as long as they make a profit for the participants and their value is maintained by derivitives, government mandated force and by manipulating the gold market and other markets. Their only function is scam the holders of them. When there no profit in it they cease to have any value.

  3. And, GLD is not your hedge. Physical is. As you will only get the frozen paper price after things blow up. Central banks, not only as lendors of last resort, but also as physical gold providers of last resort.

    Providing gold bars to GLD, multiple claims on the same bars, that’s fraud. But we already knew that didn’t we. Exchange Traded Fraud.

    http://fofoa.blogspot.nl/2016/08/eight.html

  4. What goes for gold, goes for silver. And rice, copper, wood. It’s energy that’s needed to get it. Gold and silver is a medium of exchange –> money!

    Fiat currencies fucked it all up. What happens with 100 times leveraged paper promises on future growth when the lack of affordable energy really kicks in? .gov debt turns negative and central banks start buying stocks with printed currencies. This idiocy will lead to global Weimar.

  5. Superb analysis Steve.

    Maybe if all the solar and wind power believers were to do an equivalent analysis they would see the light.

    The Seneca cliff for oil is THE determinative cliff for virtually all things. How many mines for how many commodities still have high enough ore grades to be mined by man and animal – my bet is very, very few even at astronomical prices. Just like oil, all of the low hanging fruit has been picked by man already.

    SteveW

    • Steve W,
      If you extend the rational and implications of the Seneca Cliff for oil to the other vastly misunderstood component input CALORIES; the energy source which powers the human labor; an equivalent cliff looms large.
      Much of the world’s productive farm soils are depleting at a rapid clip, as is our ocean resources, etc. It took earth ecosystems billions of years to develop into the ‘resource’ we exploit. When this resource collapses, the entire paradigm built upon PAYMENT with something as worthless as a paoer promise will be thought absurd. Our present status quo and normalcy bias is racing towards an epic collapse.
      Gold and Silver will certainly reassert thrmselves when the paper trust matrix collapses.

  6. It would be interesting to see how much energy is used to produce 1 % of US GDP. In this case it would put a relation between our debt + unfunded liabilities and amount of energy that is required to fulfill the obligations. It is very unlikely that this energy will be available for use.

  7. Paper Silver | August 23, 2016 at 12:50 pm |

    The Chinese are melting the LBMA 400 OZ bars into small kilo-bars … it shouldn’t be much longer than another few years until the 400 OZ LBMA bars become so rare you’ll only be able to see them in museums and private collections.

  8. “Value” is a very slippery concept. It depends on human assumptions and expectations, as well as possible changes in future circumstances. For example, the value of a home depends on the expected sales price and/or the expected utility of providing shelter and/or social status in the future. These two expectations are in turn based on the assumptions of things behaving in a normal or beneficial manner in the future. If changes in the future are abnormal or not beneficial, then the value of a home can change greatly. What is the value of a home in a war zone, in a depression, in a world without cheap energy? Who knows.

    Likewise the value of “money” or any other medium of exchange depends on its future use in obtaining whatever is desired or needed by the holder of that medium of exchange. If an economy can no longer produce as many useful products, services, or information in the future, then the value of money may decline. The value of money also may decline if there is an increasing amount of money compared to a constant supply of what is available to be purchased.

    • OutLookingIn | August 23, 2016 at 4:01 pm |

      Charles, value is indeed a “slippery” concept.

      However, before a valuation may be assigned, a cost must be ascertained and with that the amount of “profit” set. Once this process is complete then comes price discovery, which is agreed to by the respective partners of the agreement.
      When this is point is reached and is accepted by both parties, the “deal” is concluded with both sides to the agreement satisfied with the outcome.
      You must remember that physical gold is money. All the rest are fiat currencies. The value of gold will never decline to zero. However fiat currency can and often do.

      • Hello, OutLooking,

        I believe you are referring to a sales price. When speaking of value, most people are referring to expectations of future conditions or future transactions. Once a sale has taken place, it may or may not be used as a guide to future value, depending on conditions in the future.

        As far as cost is concerned, it may or may not be meaningful. The sales price is not just determined by past costs. It may be affected by many other conditions or circumstances. The sales price may be higher or lower than past costs. A particular sale may result in a profit or a loss, depending on various other factors that are too numerous to mention.

        Physical silver has also been used as money. So has salt, which I believe was the origin of the word “salary.” Some historical figure once specified the requirements for items that make suitable money, such as being divisible, portable, not perishable, possessing intrinsic value, etc.

        While the value of gold probably will never sink to zero, it certainly can fluctuate as conditions and expectations change. However, I read somewhere that an ounce of gold could almost always be used to purchase a good set of clothes.

        On the other hand, you can probably disregard my reply as utter nonsense.

    • but value is a less slippery concept than “energy used”.
      Because you can use energy poor and effectively.
      So there is simply no better way, than useing a currency to set the value of something.

      the final product is important, not the effort you put into it.

  9. A simple and quick way to express the importance of energy in gold mining today is to imagine the cost of gold would be if it was mined the same way as in the 1600s. Horses, donkeys, lots of human labors digging… all that with today’s mile deep open mines.

  10. OutLookingIn | August 23, 2016 at 3:45 pm |

    The “Hills Group” utilizes the “Second Law of Themodynamics” in their conclusions.
    Their use of “entropy” as it pertains to the second law, is a false premise.

    It may be useful to consider statistical mechanical definitions of other quantities that may be conveniently called “entropy” but they should not be confused or conflated with thermodynamic entropy, properly defined for the second law.
    These other quantities indeed belong to statistical mechanics, not to thermodaynamics, the primary realm of the second law.

  11. “I am going to repeat it one more time…. gold’s real values comes from ENERGY in ALL FORMS and IN ALL STAGES in its production.”

    Yes but…almost no one cares about that. And when 31.1 grams costs a lot more dollars, yen, pounds, euros, etc…they still won’t care why.

    I’m just playing devil’s advocate here.

    • David,

      They may not care now but they will.

      I reread the post and many of the comments this morning with my coffee. It takes me some time to fully absorb the thoughts and ideas.

      When I went to the hardware store this afternoon it struck me that EVERYTHING “comes from ENERGY in ALL FORMS and IN ALL STAGES in its production.” There really wasn’t anything that didn’t qualify. It made me think “shit, I need three of everything.”

      We all need to keep saying and writing EVERYTHING “comes from ENERGY in ALL FORMS and IN ALL STAGES in its production.” and over 99% of that energy is from oil.

      With out it we are all in for a world of hurt.

      SteveW

      • Or could we just say : “There ain’t no such thing as a free lunch”

        Tahnks for your work !

      • “When I went to the hardware store this afternoon it struck me that EVERYTHING “comes from ENERGY in ALL FORMS and IN ALL STAGES in its production.” There really wasn’t anything that didn’t qualify. It made me think ‘shit, I need three of everything.’”

        oh, I see. you are just behind the curve.

        here.

        http://www.survivalblog.com

        http://www.shtfplan.com

        • gman,

          Maybe I am, wish I knew. Been a Scout for 50+ years and have been prepping for nearly 20 years. Took five years to find my perfect bug out spot. Got enough supplies for my family for a couple of years and enough munitions for a small war.

          I was clearly behind the curve of having a full understanding of what it really means to run out of oil.

          SteveW

          • great! so why did you write, “It made me think ‘shit, I need three of everything.’’”? makes you sound all newbie.

            and speaking of newbie, rawles says the worst opponent for preppers is some guy who has 30 days of food and a “battle rifle” (sounds manly, don’t it?) who just sits outside your perfect bug out spot waiting for you to show. so, you ready to deal with one or a couple of guys like that? ’cause they’ll be there.

  12. Gold value is not driven by the energy… the used energy to get it is driven by the gold price.
    You need to understand that used energy is not important. When i punch my pillow the whole day, i burn a lot of energy… but it has no worth.
    don’t get me wrong, i’m bullish for gold, but the used energy is not important for the price. the supply and demand is… and it always was. for thousands of years.

    Let me give you another explanation… if i use my energy to create a table which doesn’t look good and noone wants to buy it… sure it is worth my energy and the energy to create the wood… but i am not alone on the planet and if i want to sell this table and the people have no demand for an ugly table then noone will buy it for the energy price.

    Used energy is not a real value… only the product is the value.

    Sure you could say… “but anyone can create his own mine company to create gold with the actual energy prices.”
    That’s right, but because of the limited supply of gold, the energy prices to get an ounce of gold would increase. Now you think “thats exactly what i’m saying”. But aggain… without demand it wouldn’t happen… if peoples don’t see a value in gold, the energy is completely useless.

    So i’ll use my first sentence…
    Gold value is not driven by the energy… the used energy to get it is driven by the gold price.
    that’s it!

    • Steven,

      Never have I read a bigger load of unmitigated bullshit in my entire life.

      Energy comes in two fundamental forms, potential and kinetic. Potential energy is that energy contained in a mass (ball) sitting at the top of the hill or energy ready to be used. Kinetic energy is that energy expended as the mass (ball) rolls down the hill or energy being expended to do work.

      Oil has tremendous potential energy. One barrel of oil contains 5.8 million BTUs of energy or 6,119,348,000 joules of POTENTIAL energy. That is 2272.73 horse power in one single simple barrel of oil that sold today for about $48.00. So one ounce of gold that closed today at $1,336.90 or about 28 barrels of oil for for a single ounce of gold which represents over 63,300 horse power or 1.704 x 10 to the 8th kilojoules of energy (17,0423,841,800,000,000,000 joules). In other words, one ounce of gold represents 22,597 hours of human labor (A healthy well-fed laborer over the course of an 8-hour work shift can sustain an average output of about 75 watts.[2]

      https://en.wikipedia.org/wiki/Human_power) So, at the politically correct hourly wage of $15.00 per hour, an ounce of gold should be worth $338,955.00.

      Gold is and will always be a store of ENERGY value. Our universe runs on energy.

      So buy it now before everyone realizes what it is really worth.

      And get your head out of your rectum.

      SteveW

    • Steven: I agree with your point that the value of gold should not be determined by the used energy to get it. However, I believe the value of gold is determined by people’s confidence in gold/silver as a means to exchange them for future goods and services. For example, in Venezuela, the people have no confidence in its fiat currency that they will be able to exchange it for goods and services in the future. Hence, no one wants it. They will however, take gold/silver because they have more confidence that gold/silver will be able to make that exchange in the future when they may need those goods and services. So, it is the relative confidence in the form of money that makes gold valuable in relation to other forms, like fiat. That is why gold/silver may be worth much much more in value in the future…since all fiat currencies appear to be going to zero in confidence that it will buy them goods and services in the future, since they are all being ever increasingly debased. Gold/Silver cannot be debased so easily. As such lack of confidence grows for fiat, with more and more demand to exchange fiat for gold/silver, the more valuable gold/silver will become since there is a finite amount of both. In a collapsing world of endless fiat currency, would you rather hold a virtually worthless US dollar, Japanese Yen or Euro, or would you rather hold gold and silver…at least until a new currency is established that brings back confidence in its use to acquire future goods and services? Isn’t that why we are all holding physical gold/silver, since we believe that there are no paper assets today that will have any value (confidence that they will be able to be used to acquire goods and services) in the future?

      • So that’s exactly my point of view. The value of gold is made by demand… and the demand exists because people see a value in gold. This will not change, because it has proofen itself for thousands of years as a storage for value… for qualitative work.
        That’s why people trust in gold and why the demand will increase.
        The dollar and other fiats are only numbers in the computer… they also get their value by trust. But it can be created unlimitedly by central banks and is not physically in your pocket. Ok you can hold a paper, but that’s just a bit of wood and ink.
        The supply of Gold is not endless.
        So the author of this article is right when he says the value of gold is driven by the energy prices, BUT i say only if gold will get the the only currency (and i mean when the whole world accept it as their only currency).

        This is actually not the case… because people are fooled and they still believe in the fake currency of their state…

        And after the actual fiat there will propably come another…
        i don’t believe the plan of the elites is to keep gold as the currency after the fiat crashes, because it’s way more lucrative to use a currency which they can control and create completely.
        And of course, at the moment this elites buy gold because they want to deliver their value to the next fiat system, and then they are in the same position as now… but the people without gold will pay the actual debts. They are too stupid or manipuated by media to get the big picture. They will blame theirself, because they trust the mainstream media. And then they will see people like rockefeller and other investors (the one who created this crisis) himself warning them before the crash came… and they will accept it as their own fault.

        And then the game begins aggain… perhaps first with a gold backed curreny… but they will change it… and they will aggain use people as their chess figures.

    • Not now, but it will when energy is scarce, because gold mining will slow down tremendously, whereas the demand for fizzical gold will go thru the roof…

  13. Money is value. Service and goods in demand are money. Not a very good type of money because they may lose value over time or may not be divisible but they are money. Food is money and has been used as money in the past. The barter system is money for money, maybe not in exact equal values but it is money for money. Gold and silver have industrial uses are rare and divisible and will last without losing value so they make the best type of money…obvious. Colored paper is money but of little value because it is plentiful and we can see colored paper in the form of toilet paper and writing paper with low value. What industrial use is a bit coin..no value! I read copper was more valuable than gold during the bronze age…obviously with weapons and tools all made of bronze which needs copper we can see the demand for copper explode while the mines of copper (at the time) were few. So we can see gold and silver will increase because in this finite world where mining is a surface phenomenon and the concentrations are in specific locations and are decreasing and depleting and requiring more energy to extract and purify the results are obvious especially for silver because it is the most conductive with other elemental properties that requires its use in different industries which keep a high demand constant in a growing populated world that will eventually deplete the resource and cause its eventual sky rocketing value.

  14. Steve, you analysis that Germany attacked Russia just for the oil is not correct. Did you you know
    that the Soviet Union invaded Finland for example in 1939 and Germany was bascly only country helping the fins. Same as for when the Soviet Union invaded together with Great Brittain Iran to get control
    over their oilfields. Yes Energy was a big motive but the Soviet Union as a truly wall street creation wanted to take whole of europe. The soviets were amassing their regiments at the Polish border not
    for a picknick clearly. You could say the Wall street banksters were as usually playing both sides and make a killing because of this war was so profitable and they wanted to get their parasytic central banks operated globally. Especially when Germany used their formidable labour force to back their new german marks that was the red line.

    “We were not foolish enough to try to make a currency coverage of gold of which we had none, but for every (new reich´s) mark that was issued interest free [non usury system], we required the equivalent of a mark’s worth of work done or goods produced. . . .we laugh at the time our national financiers held the view that the value of a currency is regulated by the gold and securities lying in the vaults of a state bank.”

    -Adolf Hitler, 1937 (CC Veith, Citadels of Chaos, Meador, 1949.)

    “And it proved sound. It worked. In less than ten years Germany became easily the most powerful state in Europe. It worked so magically and magnificently that it sounded the death knell of the entire (Zionist) Jewish money system. World Jewry knew that they had to destroy Hitler’s system, by whatever means might prove necessary, or their own [system of usury] would necessarily die. And if it died, with it must die their dream and their hope of making themselves masters of the world. The primary issue over which World War II was fought was to determine which money system was to survive. At bottom it was not a war between Germany and the so-called allies. Primarily it was war to the death between Germany and the International Money Power.”

    William Gayley Simpson

  15. Michael Francis | August 23, 2016 at 7:14 pm |

    Great work thank you! I have a question though and of course I have seen many predictions of how many dollars per oz. gold and silver WILL GO UP TO but what I’m wondering is…
    When we hear a price like 150 right on up to $1000. Per oz for silver I would like Steve to give his thoughts on if (and when) silver goes up to the one or the other I wonder what the purchasing power of those dollars would buy. If an oz of silver will buy $20.of groceries (for example) in today’s dollars what would the future $150. value of silver buy in today’s dollars? Same question with $1000.00 silver? I guess the base question is will the value of rising silver and gold prices be partially (how much over how much time-speculate) offset or totally offset by hyper-inflation of the dollar whether it be Amerucan Canadian Euro etc.
    Thanks very much!

  16. Bhavesh Modi | August 23, 2016 at 7:54 pm |

    Good work, serving us with knowledge and understanding on many issues…thanks.

  17. Gold is money for many reasons one of which being the energy input used to produce it. But if we went by this measure alone it would be inaccurate. Many things take energy to produce and many can be considered a medium of exchange, take a jar of jam for example to make a jar of jam one must pick the fruit, we’ll say apples for arguments sake, boil the fruit, using energy of course, add sugar, pectin and the like and jar it. This jar of Apple jam then contains the energy used to produce it and store it as a tradeable commodity. But yet gold is a superior medium of exchange in most situations compared to a jar of apple jam. This has to do with it’s rarity and being a store of Value over long periods of time, as far as anyone knows indefinitely. Gold does not rust, tarnish decompose and keeps it’s luster under almost any condition.
    It is these characteristics combined with the energy involved to turn raw gold and silver into a standardized weight, purity and size that become a superior form of money from any other yet devised for most people in most circumstances.

  18. Terrific stuff, Steve, thought provoking as always. I never appreciated how integral energy is to the value of so many things before reading your work.

  19. Interesting take on crude oil production, Steve.

    A question I have is – does the direction of gold and silver prices spike in relation to a drop in crude oil surplus (in storage?) Then as that runs out is that when we expect the fireworks to begin?

  20. Couple of points

    Saying that gold price does not reflect supply and demand is like saying 2 + 2 does not reflect 4. GOLD’s TRUE VALUE can only be realised when all market participants have full information.

    Labour energy becomes a valued added output with respect to intellect, opportunity and ability. Homogenous human output measured in time units does not exist, like btu’s burning energy per hour.

    We would not be having this discussion if the USD fiat wasn’t backed with ‘might is right’ nuclear/conventional war energy paper credits. War Fiat is very good at directing human energy at present.

    If the market is ‘wrong’ it will correct. When fiat fails then productive and stored energy will come into its own.

  21. silverfreaky | August 24, 2016 at 12:44 am |

    Oh god everything in english.This discussion is fruitless.There are assett classes who compete.
    It’s to academic.What is valueable in the moment decide the central banks and (or) inflation.
    Last example:The ECB wants to buy stocks or still do.I’am not shure.
    This means you had to compare this asset classes.

    stocks
    bonds of companys
    bonds of states
    houses

    In germany loans are very cheap.But the house prices are increasing.Even in towns with 30-40 000 people it’s very expensive to buy a house or condominium.

    American stocks are really eypensive and the stock market is dominated by big players.The revenues are not high.The companys buy backs and lift up (artificially) the prices of them.The european stocks are cheaper, but we have the problems with the banks.Now you see what happens.All centrall banks
    make the same.They try, step by step to outsorce the debts to the central banks.As long as there is no
    imbalance this works because of the low interest rate.

    Bonds in general have low or zero interest rate.So the general trend is that central banks buy back everything(with unlimited money).You see that banks and government works together and can make debt’s as long as no inflation appears.On the other hand this means that nobody want o make investment in real economy.

    The final question is:”How long do people accept that they hold up the financial system in relation to a weak economy”.
    The next thing they maybe do is to create taxes for gold in europe and then they lift up the price.
    Logical bankster thinking?So they can avoid that the folk buy a lot of gold?

    • “How long do people accept that they hold up the financial system in relation to a weak economy”

      as long as people get more out of the financial system than people pay into the financial system. as soon as people pay more than they receive, they will stop accepting it.

  22. silverfreaky | August 24, 2016 at 1:20 am |

    http://www.trend.at/wirtschaft/fed-treffen-alle-augen-janet-yellen-7535135

    German article about Yellen.USA is in recession mode for me.But yellen decide what the market thinks.
    When do you increase the interest rate.Yellen:”Maybe,eventually when this happens,when this not happens, when the color of gras is blue,bla,bla,bla,……bla,bla.Years later:”Bla,Bla,Bla”.And so on!

  23. Gold moved lower right on time amid yesterday’s session, yet returned up later on lastly gold finished the session just under $3 lower. Can we view such an inversion as a bullish sign? Not inexorably – an inversion ought to be affirmed by high volume and yesterday’s session wasn’t. Subsequently, one needs to take a gander at different parts of the valuable metals area for affirmations.

    Gold had a justifiable reason not to decay more – the USD Index moved higher a bit and after that gave the additions away. The critical thing, in any case, is that the bolster line stays in place – therefore, the viewpoint stays bullish.

    As we composed before, gold turned around, however the volume that went with the inversion was moderately little, which proposes that it wasn’t generally an “inversion”, despite the fact that the value activity may recommend so.

    At the primary sight it might give the idea that specialized marvels like inversions, or breakouts and so forth are simply pretty much irregular names for pretty much arbitrary value developments without anything that legitimizes changing the viewpoint in light of any of them. In actuality, these are basic terms that allude to wonders that are in reality happening in the business sector and that were observed to be generally trailed by some sort of activity. On the off chance that enough of the dependable variables are seen, the standpoint may in reality change.

    If there should be an occurrence of inversions, the thing that the single candle on the outline speaks to is the circumstance, in which one side (bulls or bears) endeavored to push the cost in one course and got practically or for the most part overpowered by the other side. On the off chance that both strengths square with each other, the cost won’t change regarding every day shutting costs (or week after week shutting costs, which was pretty much the case with gold a week ago). Presently, if the cost had been falling beforehand and we saw this sort of activity, it implies that the offering weight was no more sufficiently critical to trigger further decreases and in the meantime, the purchasers were more grounded than already. The suggestions would be bullish. On the other hand, if the cost had been arousing beforehand and we saw the said sort of activity, it implies that the purchasing weight was no more sufficiently noteworthy to trigger further rises and in the meantime, the dealers were more grounded than already. The suggestions would be bearish.

    Actually I am also a Financial Adviser at Equity Profit . We provide Live Trading Signal ffor Comex , Forex & Stocks Trader.Keep Touch With us -www.equityprofit.com

  24. silverfreaky | August 24, 2016 at 10:53 am |

    NYSE Arca Gold BUGS (HUI)

    245,1236 -5,44% -14,0989

    Miner Crash.From the High 15% downwards.It seems that the banksters had full control over the gold market.

  25. In manipulated markets, like gold and silver, manipulators can take control from time to time to force options out of the money and discourage potential price increases. However, over time, supply and demand control the price even in manipulated markets.

    The best strategy usually is to maintain a core position and protect your remaining positions from extreme price fluctuations with a suitable stop loss order.

    In manipulated markets, true value may not be reflected in the market price from time to time.

  26. Can somebody please fully and clearly in laymen’s terms explain to me how declining available net energy to the market will cause the price of oil to FALL? Here is the quote from the article above I am having difficulty understanding:

    They don’t see a rising oil price in the future, rather they believe it will fall as the available net energy to the market will continue to decline. They also believe the economic principle of supply and demand will no longer function as a “Thermodynamic Collapse” of oil will take place.

  27. silverfreaky | August 24, 2016 at 12:06 pm |

    I didn’t sell because my miner stocks are in relative strong hands.When i calculating the spread from Bid/Ask it makes no sense to jump in and out.

    Only Tahoe resources is very weak.I don’know why?

  28. Doug,

    I don’t think anyone can explain it because it is a misinterpretation.

    If you go back to the original article and look at the graphic “About an Oil Pearl Harbor in the Making” (see above or http://cassandralegacy.blogspot.com/2016/07/some-reflections-on-twilight-of-oil-age_15.html )

    You can see the baby blue line which is the “Societal Oil Cost to End Users (SOC) goes off the chart in 2026. The actual cost of oil WILL skyrocket but these authors believe that the net beneficial benefit will go to zero. See http://cassandralegacy.blogspot.it/2016/07/some-reflections-on-twilight-of-oil-age.html and look at the graphic “Figure 1 – End Game” where the “Net Enerygy Available for GDP Growth” goes to ZERO.

    In other words the EROI (EROEI) reaches 1/1 in 2030 – no more benefit to society. Only people with enough wealth will be able to use oil products because the will be able to pay more in accumulated energy value, in the form of gold and silver, than they expect to get out of it because they don’t care. It is like the guy that buys a diamond studded Rolex Presidential (Best Price on Ebay $18,999.99.) when a $10.00 Timex has exactly the same functionality.

    Hope this helps.

    SteveW

  29. Gold seen from the view of Adam Smith certainly has value. But not the value you will give it. I think he meant gold is the ultimate extinguisher of debt. And as far as I’m concerned, that’s true. That together with a understanding of how gold turned into paper money (Real Bills), may give you an idea of the ‘true’ value of gold. But first you have to have an idea on how nowadays fiat money came to be. And when you’re talking about manipulation and pure stupidity that’s how fiat money was born. And that manipulation and stupidity goes on the account of the users that never had any second thought about it. Money for them is just something you can use to buy something, but has no foothold in the real economy at all any more. Which it should have.
    There are more aspects than just energy to give something a ‘true’ value, whether it is gold or whatever. A couple of those things come from the Austrian schools with their Human Action, most tradeable goods as form of money, and present and futures goods, which result in discount and interest as two very separate items following Adam Smith in a perfect natural way. Some very sound basic economic ideas most of us hardly remember or made an effort to really understand. Let alone to spell out the nasty consequences facing us right now. Try the New Austrian School of Economics and see what they have to say on economy and gold as form of money. You might be surprised about a few things.

  30. The only other person I know about who understands energy anywhere near as well as you do Steve, is Dr Kent Moors. Lots more people should get your insights. I think David Stockman’s Corner could be a good place for you to appear, and maybe Huffpost too?
    Energy is such a basic component of the Universe that it’s in Enstein’s theory of relativity.

  31. gman,

    In some respects I am a newbie. I have had an epiphany of sorts that has finally eliminated all vestiges of the normalcy bias. Intellectually I understood the ramifications of a world without oil but only recently understood it viscerally.

    So much to do and so little time. Ordered “Wood Gasifier Builder’s Bible: Advanced Gasifier Plans to Build Your Own Wood Gas Generator.”

    Been carrying for 45 years, been robbed and am prepared. I will be there long before they show up. Now that I think I fully understand, I will be “Out of There” long before others realize that the time has come.

    SteveW

    • Hopefully not alone Steve, you sound like a great person. I’m 61, locked in an area due to a disabled family member and two elderly parents. Thankfully I’m 30 miles from a city’s center…but that isn’t far enough.

      • David,

        You are right, 30 miles is not enough if the city is bigger than 100,000. You are lucky though to still have parents I lost both of mine within one week in 2009. I have a great and large extended family, many of whom are wise to the world.

        SteveW

  32. The initial mises is an interesting comparison of gold in today’s Eco climate; but the whole idea of this site is the depletion of fossil fuels and how that might affect the future Eco climate.

    Perhaps a comparison of human energy to an ounce of gold would be more telling; but then we must factor in today’s difference in mining quality with that of the pre 1900’s.
    Now mines deal in ounces per tons of ore when at one time nuggets were taken in whole, the present is much more energy intensive.

    It very well could be that without fossil fuels, all new gold production evaporates.

    Man will always need money (not currency) to exchange his over production in his chosen field for needed goods from another. Gold has always been deemed money and always will be.

    IMO gold will be valued bases on human energy rather than fossil fuel energy.

  33. The last sentence of the article says: I will be writing more articles detailing this in the future.
    Well to tell you the truth, I’m looking forward. But at the same time there are so many aspects involved that it will drive people crazy. And then I’d like to know how it all came to be. And a lot has been written and a lot has been said on the subject of gold as precious and/or monetary metal. But in 2004 Smeagol wrote a very remarkable poem, which some of you will like and others definitively not, based on The Ancient Mariner of Samuel Taylor Coleridge. So every couple of years I’ll mention it as it has the appearance of very well thought-through prediction. As far as I know originally published on what later became Fofoa.
    http://www.usagold.com/hall/mariner.html
    Of course I understand it’s a bit of topic, but nevertheless it’s just aother way of looking at the gold situation.

  34. robertsinclair | August 29, 2016 at 2:58 am |

    Here’s the thing. Some people confuse the purpose of money. They think that money’s purpose is to acquire goods and services. Money does these things but they are not its main purpose.
    The paper fiat system that has been going on as long as any of us can remember, and the propaganda supporting it, has facilitated a materialistic, society, where everyone must have the latest throw away goods, cars phones etc.
    They have become more important,than the thing that buys them.
    To allow this to happen and to create jobs, more and more paper has been borrowed it into existence and at the same time raising individual and societal debt. This has destroyed the economy and the markets of the very same system.
    The modern world is a mirage a fake reality built on lies.
    Society has been hollowed out. Debt has replaced wealth and greed has replaced patience.

    The acquision of money through work, is to obtain wealth through postponing current spending and in so doing, learning the virtue of saving. In a free society people will choose to save the good with the best retained value in terms of intrinsic value.
    To obtain wealth one has to become parsimonious rather than profligate, thus gaining virtue or/and be skilled in a, much demanded, art or natural skill, but even then to hold on to wealth the same virtues are required.. Virtue has a higher spiritual value and its physical representation are precious metals. Labour is independant of capital. Capital is only the result of labour. Capital could not exist if labour had not first existed. Labour is super to capital and deserves much higher consideration (Ab lincoln), and gold is past labour, in its most concentrated form.
    When we live in a debt based society with money based future human labour, reality is deliberatly kept hidden. See the reality of the situation. Paper money is robbery, steeling our future. There are no free markets.

    • robertsinclair | August 29, 2016 at 4:31 am |

      Operation paperclip- whats all that about. in ww2 mad scientists did mind contol experiments using torture. So why, operation paperclip? These criminals were let off and brought to the US to continue these horrific experiments etc? I bet you haven’t seen that in msm.
      Mind control mk ultra- the population must be controlled using the media (and fear) to accept debt as money and keep people in the system.. You have to be out of your mind to make any sense of the current monetary system. DEBT is considered as money and people talking about freemarkets? All assets when bought with debt, are going to lose value because the holder of them has to earn more debt money to finance them. So more currency is required. This debases all former currency and gives the impression of asset appreciation which works as long, as more currency is fed into the system. More money= lower interest rates= bond appreciation. When the rates go to zero. thats it the games up. the goose is cooked.

  35. We generally agree with Steve that cheap energy has made debt based financing possible, and that when it disappears there will be future Hell to pay.

    Had there been honest money, from the outset, the world would be far different today due to the moderating influence of it on human activity. The level of dishonesty would be much less. That is really the value of honest money, to forge a pathway into the future. Absent this, as is currently the case, time lost over the many years it has been out of circulation will have to be made up to discover ways for all to survive that became lost due to the corruption of elitist self-interest that kidnapped honest mediums of exchange. So we see honest money, and not energy, as the necessary component to progress. Energy scarcity might well have current solutions. How real money arrives into human hands should be a function of the masses, and not a small number of elitists that capture it for themselves creating misallocation of resources.

  36. SRSrocco, you are 100% correct. I myself knew this for about 20 years.

    But Dr. Shütte recently published that as general theory some years ago, because it does not only apply to Gold:

    http://www.kosten-energie-aequivalenzgesetz.com/
    (Cost Energy Equality-Law)

    The site is German, but there is a English translation:

    http://www.kosten-energie-aequivalenzgesetz.com/KEAG-e.pdf

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