by Mish Shedlock, Mish Talk:
Is the Fed playing politics? Does the Fed know what it’s doing at all?
Fedthink!
Today I coined a new word, Fedthink. I hope it catches on. Here are some reader thoughts and my comments on them from a recent post.
Regarding Fedthink
Reader: Sometimes I wonder if people like Mish really think that the Fed plays it straight in times like this, versus telling us what is ostensibly the straight dope while they are actually playing some complex metagame.
TRUTH LIVES on at https://sgtreport.tv/
Mish: I have commented on this before. The Fed believes the nonsense they preach on 2% inflation, inflation expectations, the Phillips curve and other economic nonsense that amusingly even the Fed’s own studies prove wrong.
There is no diversity in thought at the Fed. You get in the position of Fed Governor or President by thinking the same way as the rest of the members.
People confuse diversity with race and sex. True diversity is in thought. But there is no diversity of thought at the Fed. They have all been trained to be ignorant. And you do not get into the group unless you believe the same things.
This we call Fedthink.
Regarding Debasement
Mish: [Regarding why gold was $43 per ounce when Nixon killed gold convertibility, and is over $2,800 now.] “What’s changed is persistent Fed and government-sponsored inflation.”
Reader’s Accurate Assessment: Or to put it another way, it’s currency debasement. The dollar is not sound, it is a sliver of a fraction of itself from early last century, but has held its position relative to other currencies
Regarding Platinum
Reader: Platinum, which is much scarcer than Gold, hasn’t budged in price in 5 years. It remains around $1000 per oz. Based on the gold price it should be something like 30-40K an oz.
Mish: Platinum is nearly 100% an industrial commodity and has to compete with palladium. Also the primary industrial use is in catalytic converters of which there is no need in EVs. Gold’s primary use is as a monetary metal.
Regarding Jewelry
Reader: 50% of gold is used for jewelry.
Mish: Nearly 100% of gold ever mined is still in existence. Yearly production is miniscule. The supply of gold is 100% of gold ever mined minus what is lost at sea, buried and forgotten, on in valuable art pieces in museums. Of the rest nearly all in bars. You confuse the supply of gold with annual production, a major error.
I looked this up and there is more gold in jewelry than I thought but less than my reader thought.
USGS says there are about 244,000 metric tons of gold of which 57,000 metric tons are in underground reserves. 92,000 tons of gold are currently used in jewelry according to the World Gold Conference. That’s about 37.7 percent is in jewelry, much higher than I expected, but still consider a monetary use.
Finally, I have no idea how much of that jewelry is in priceless museum pieces, not for sale, and not really part of overall supply of gold. The same applies to old gold coins that are worth much more than their weight in gold. So 37.7 percent is in practice overstated.