Tuesday, September 22, 2009

Open Source Education

The concept of Open Source is catching on. First there was Open SOurce software, then I read about Open Source building construction, yesterday I read about Open Source Education. MIT has opened up its course material and makes it available freely to anyone via the Internet. Of course, having the course material is not the same as receiving the class in person, but this is a gigantic step forward. Having access to world class teaching material is a great opportunity for a large pool of seriously interested students. The move of MIT to make this material available is admirable. Read more about it on the MIT OpenCourseWare site.

Wednesday, September 16, 2009

Gold at US$1,000

Gold has finally reached $1,000 an ounce. But why? Is it inflation on the dollar? An increase in the investment demand side? Here are some current thoughts on gold.

Tuesday, September 15, 2009

Yes We Can

"The Government Can" is a hilarious video. It is funny, but yet so true. One does not know if one should laugh about the humor or cry about its truth.

And if you think the video is far from the truth, here you can see some of the many ways the government is spending your hard earned money.

And if this still does not convince you have a look of how in the able government money just goes missing. People think of countries like Mexico, Zimbabwe, and China when they hear corruption. There seems to be more corruption in the US, with the only differnce that in the US there are better spin-doctors and the marketing, media and public relations department hiding corruption under nice words and images. 

Thursday, September 10, 2009

Backwardation of Gold

Here is a set of interesting articles, all written by Antal E. Fekete. He is of the opinion that we are heading towards a situation where gold will disappear from the market, in particular from the supply side; prices of 6 or 12-month gold futures will continuously be below the spot price; and that gold will become unavailable at any price; and that the gold exchanges and markets will stop functioning.

Read these articles carefully:
Or in Spanish:
I read all these articles at least twice. It was initially kind of hard to understand the logic, but after re-reading a sufficient number of times I think I slowly understand. On initial reading I found contradictions. I thought how can the gold price go down and gold lose value and at the same time gold is unavailable for purchase at any price. That seemed impossible. But I get it now. One has to clearly differentiate the gold future price and the value of gold. The future price might go down while the value of gold goes up. How so? If people are afraid that the future gold cannot be delivered they are not willing to pay a high price because there is high risk, the risk being that there is no physical gold available in the future. At the same time the perceived value of available gold goes up. So, the situation of backwardation of gold and the increase of gold value at the same time is possible.

If paper money becomes to worthless (imagine Zimbabwe-like worthless) nobody will want to sell their gold. The exchange and market close down because there is nothing to trade, there is no supply. Nobody sells gold at any price.

What the article does not say, but what I think is that people while not selling gold, people will be trading gold for things they need or want (food, gas, heating material, etc.).

Wednesday, September 9, 2009

Gold

As the times get tougher, the financial mess bigger, and the US dollar steadily continues to lose its value, politicians and financial decision makers might get desperate. What type of regulations do we have to expect? And how might that affect gold? Here are some possibilities, they seem far fetched, but they are all in the realm of possibilties:
  • Confiscating the gold: The government decides that you have to hand in all your gold at a price conveniently fixed by the government.
  • Making the sale of gold illegal: For example, in the past gold possession and gold panning was legal in Zimbabwe, but, by the Gold Trade Act, the Reserve Bank of Zimbabwe had a monopoly on purchasing and exporting of all gold and silver produced in the country. 
  • Making the possession of gold illegal: Zimbabwe then strengthened their Gold Trade Act making also the possession of gold by regular people illegal. Any gold found will be confiscated by the state.
  • Making Smelting of Jewelery illegal: See Zimbabwe's Gold Trade Act.
  • Artificially fixing the gold price: The government or IMF can set the gold price. This has also been done in Zimbabwe where they have tried about everything for some period of time. In 2007 the price was set to $64 per ounce (today's value on the London exchange is $1000). The conclusion was that all mines stopped working and that all gold disappeared from the market. Nobody wanted to sell gold at this price.