The Phaserl


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

by Steve St. Angelo, SRSRocco Report:

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:

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:

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.

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

  • Randy

    Here’s a little paper that I wrote back in 1996, just after I found out how our fiat paper currency monetary system actually works. Only a couple of words were changed since then to make it easier to read.

    What is Money?

    One of the most esoteric, confused, convoluted and obfuscated subjects that has ever been debated in the history of mankind, is the subject of money. And from money, we go into other subjects such as banking, inflation and finance. But let’s start with money first and get it properly defined, so that we can make some sense out of the whole mess, OK? And after we get money properly defined, we can then use that concept to think with and come up with good answers to some very perplexing questions. When you start to think about a problem with the components of that problem properly identified and named, it will be much easier to see the real causes and effects going on. So here we go now.
    All that money is, is “an idea backed by confidence”. That’s all, nothing more or less than that. And in that word confidence is buried the fact that certain people have agreed upon something to function as a medium of exchange. That medium of exchange is money, regardless of whether it is wampum, diamonds or precious metals. The confidence factor then comes into strong play here and is the whole basis of that medium of exchange. Money acts as a sort of “lubricant” in the dry mechanics of an economy. It’s just not always feasible for a person to haul around his crops, goods or livestock in search of someone who is willing to trade with him somewhere for what HE needs. So what do people do to get around that? Well, they use an intermediary which we call money.
    When people agree that some quantity of the money represents a certain amount of labor, it can then be exchanged with someone else for a similar amount of represented labor. And that’s the main thing that money does. It represents the fact that a person had to do some kind of work to come into possession of that amount of money. Usually. Now when someone either steals goods or money, or creates some “money” through some bogus means, then the confidence factor suffers and it becomes worth less and less over time. When governments print up fiat currency which has no real value behind it, it’s not worth as much as actual money, something which DOES have real value behind it.
    When you have two people, and one of them has to sweat out in the hot sun or work in freezing cold to earn a living while the other one does little or nothing, then there is a disparity and animosity between them. Why should one toil away while the other one is able to loaf and still eat? Welfare programs, and this includes government jobs which produce no real products (almost all government jobs fall into this category by the way!) run by governments with unlimited access to fiat currencies ALWAYS cause at first an “inflation” of the fiat currency, and then a total collapse of it. Now I’m not saying that we shouldn’t look after and care for those who cannot work due to some kind of disability, but it should be done with real compassion, and NOT with the viewpoint of making someone dependent upon the government so that they then agree with all kinds of insane laws just to keep the bread and butter coming in. These economic collapses are always the result of a socialist/communist/fascist type of government. And they never last more than several decades at most. The saddest part of the whole thing is that through the manipulation of the history books, people do not know the true causes of these engineered monetary debacles, and so repeat them with great regularity.
    Let’s look at gold as money. It takes a certain amount of labor and equipment to locate and then collect this metal. Now back in 1925, an ounce of gold would buy a man a pretty nice suit, and today, an ounce of gold will still buy a man a pretty nice suit. Why is that? It’s because back in 1925, the ounce of gold required a certain amount of time and labor to locate and collect it. Today, it still takes about the same amount of time and labor to locate and collect an ounce of gold. Please don’t get confused now over the fact that “dollars” today don’t equate with dollars in 1925. If we were still on the gold standard, the number of dollars that were equal to one ounce of gold in 1925 would still be the same today.
    Because of the fact that our “money” is no longer backed by anything of real value, it takes more “dollars” to equal the one ounce of gold. Why is that? There are several reasons why, so let’s take a look at a few of them now. First off, when these “dollars” are printed up willy-nilly, they lose most of their value right there. A big reason is that the “dollars” are all printed up with the exact same amount of ink and paper to them, regardless of their denomination. There isn’t twenty times more ink and paper in a twenty “dollar” bill than there is in a one “dollar” bill, is there? So with each bill having the exact same value, they all become worth the same as the lowest one. And not just according to what’s printed on it, but what it’s actual intrinsic worth is. As it costs less than 5 cents to print up a fiat currency “dollar” bill of any denomination, that’s about what it’s really worth. And in actuality, these pieces of inked paper are Federal Reserve Notes with no value to them, other than the fact that someone down the street or around the corner may be willing to trade something of real value for them. They are also known as debt bearing corporate notes, because the corporation known as the U.S. Government has been bankrupt since 1933, but not formally acknowledged as such until 1939 with the court case of Erie R.R. v. Tompkins case.
    Another reason that these fiat currency, debt bearing corporate notes lose value is because of computerized electronic bookkeeping entries being used instead of actual money changing hands. Every time that some government agency buys some goods or services with nothing but a change in bookkeeping entries, a bit more confidence is knocked out of the “money” and thus we have “inflation”. All that inflation is, is “a decrease in the perceived purchasing power of a fiat currency”. That’s all it is, folks!! Forget all of these stupid proclamations that inflation is due to an “over supply of money” or some such clap trap. If that were really true, then just by taking money out of circulation we would be able to solve inflation. But it doesn’t. What it DOES do is make it even harder to purchase goods and services, and then the economy really tanks, big time.
    When John and Jane Doe perceive that they will need a greater amount of fiat currency tomorrow in order to maintain their lifestyle of today, they then have two choices. One, they can work more hours in the day, or two, they can charge more for the goods or services that they provide to the society in general. And since they can work only so many hours per week, they must then increase the rates which they charge. And so begins a vicious circle of everyone down the line doing the exact same thing until it comes back around to John and Jane Doe and then it starts all over again. And when thinking of inflation, think of it not in terms of things becoming more expensive, but rather in terms of the fiat currency becoming worth less and less, which is the truth of the matter. The instability of fiat currencies and economies becomes much easier to understand once you can do this.
    When fiat currency is given to people for no reason, or loans are defaulted on, there too, more and more confidence is knocked out of the fiat currency and it becomes worth less and less. This idea that there are “money multipliers” in an economy is just so much hogwash. There is absolutely NOTHING which can multiply human labor, and since money is supposed to be based upon human labor, there cannot be any money multipliers. See how simple this is? Granted, there may be more efficient methods found to do certain things, but they always come with some kind of a cost attached to them. There’s no such thing as a free lunch. Someone, somewhere, somehow is paying for it.
    Let’s go back to gold mining for a moment and look at a few things in more detail. When a person goes out into the wilderness to look for some gold, he must take with him food, clothing and equipment to survive with and make the discovery and collection of the gold possible. And while he is collecting that gold, he cannot possibly be planting and growing food or weaving cloth for his clothes or making a shovel either for that matter. So the prospector come miner must EXCHANGE some of his labor for these items in order to start his new pursuit and continue in it once he has found a place that has some gold in it.
    Mining is not like farming or ranching where the product grows and multiplies itself. It costs pretty much the same to obtain an ounce of gold no matter where it’s found or the process used. The result of a man panning a few nuggets and flakes out of a riverbed by himself, or a huge mine employing thousands of workers which makes several ingots per day equates to about the same overall cost. People must be paid a wage unless they are slaves, and machinery must be bought, powered and maintained in order to get the gold out of the dirt each day. This is why there’s no economy of scale (cheaper due to more volume) in mining and consequently the value of the gold stays on par.
    When Mr. Tailor sells his fine suit for an ounce of gold, it’s because of several reasons, but the most important one is that the sum of the labor involved in the making of the suit from raising the cotton or wool to the weaving of the cloth and then the sewing of the pieces together requires the amount of labor that the ounce of gold represents. With some allowance for a profit of course! If there’s no profit in a venture, it will fail of course. And when governments step in to prop up a failing venture or support one which never had a chance of succeeding in the first place, we again get a lessening of the confidence in the monetary system and that’s our old “friend” inflation coming to pay us another visit. And with friends like that, who needs enemies?
    Where actual gold and silver specie are used, there’s NEVER any inflation, if a free market enterprise economy is used. The reason for that is very simple. If someone gets out of line and tries to get rich quick, someone else will come along and pick up the business that the first person loses due to the price increases. And if the quality level between the two providers is about the same, the first one will drive himself out of business rather quickly!

  • If “Peak Oil” is a fraud, then how does this bode for SRSRocco’s EROI thesis?

  • Moishe

    Wake up my Judeo-Christian dupes Usury to Goyim permitted by your god.

    Unto a stranger thou mayest lend upon interest, but unto thy brother thou shalt not lend upon interest, that the Lord thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.

    Deuteronomy 23:20

  • Millicent

    The Code? APPLE?

  • Tony Australia

    How Many Gallons of Water to Produce a Single Ounce of Gold
    How much Acid required to produce an oz of Gold

  • Craig Escaped Detroit

    The Holy Book of ZIRP (Zero interest rate policy)=

    Thou shalt not lend at interest to everybody at Zero interest (except for credit card). And you shall destroy the economy with your policy.

    The “NIRP” Testament.

    Thou shalt charge NEGATIVE Interest rates and watch how much faster it destroys both the stranger, your brother and yourself.

    The Gospels of Money Printing.

    Thou shalt print endless quantities of paper fiats, and watch the inflation soar and destroy the economy and many lives.
    Doesn’t it make you question the “Wisdom” of an all knowing God, to see how “ZIRP” is just as destructive as “positive” interest? If “He” is so “All knowing” then how come he could never come up with a workable interest rate policy?

    Kind of ‘schizophrenic interest rate policies’, eh? (No interest to your “kinsmen” but real interest to the “non-tribal” members?

    It seems that the ONLY “religious” based teaching that does NOT destroy economies or nations, is GOLD & Silver COINAGE with an honest and NON CHANGING standard of “weights and Measures”. That is one piece of TRUE WISDOM we can ALL agree with (but NOT the Banksters or Governments.)

    And lending it “at POSITIVE interest” is the only thing that keeps people honest and things growing ok. (But perhaps the interest rates need to be CAPPED at about 3% tops to keep it from creating DEBT SLAVES.)

  • Tony Australia

    The Mines of South Africa can descend as far as 12,000 feet and reach temperatures of 130°F. To produce an ounce of gold requires 38 man hours, 1400 gallons of water, enough electricity to run a large house for ten days, and chemicals such as cyanide, acids, lead, borax, and lime. In order to extract South Africa’s yearly output of 500 tons of gold, nearly 70 million tons of earth are raised and milled.b

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