Dust flux, Vostok ice core

Dust flux, Vostok ice core
Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

Sunday, October 12, 2014

Gold is stronger than it appears.

Gold's recent plummet has been fuelled entirely by the rising US dollar, itself a result of the falling yen and euro. The US dollar is the least sick old man in the ward.

The above (weekly) diagram shows a sudden break-out of the USDX-gold system from the area (near $1300 and 80) where it had been confined for much of the past year. Despite the drop in gold price, the value of what non-US-based gold companies are receiving for their gold (gold price x USDX) has not declined all that impressively over the same timeframe.

The gold price has reached current levels three times over the past sixteen months. Last week's price corresponded to the highest USDX level in that time.

For a mining operation outside of the US, the number of dollars received per ounce of gold is back at the same level as in December, but the dollars being received are worth about 7% more (in terms of the local currency). Yet GDX is at the same level as it was in December.

Last year we started plotting the product of the gold price and the US dollar as an indicator for the economics of gold mining. Are we in an uptrend or a downtrend? Well, it depends on whether you look at the recent highs or recent lows. We look to be getting close to an important inflection point where we are going to see a large move.

A move down would most likely be a reversal of the recent gains in USDX, with a relatively small increase in the gold price. A move up could due to a continuation in the gains in USDX, with a decline in the rate of fall of gold.

If the move in USDX is exactly matched by gold, the trajectory of the system follows one of the blue hyperbolae ("isoquants"). A move along an isoquant (the present move occurs within the yellow ellipse) should be relatively neutral for most companies, but the recent move may offer some political advantages. With the gold price falling, cannot these companies show their empty pockets to local governments and ask for tax breaks/benefits for infrastructure? They shouldn't feel too ashamed, for if the trend were to reverse and gold were to rise to about $1400 with the USDX falling to near 70, wouldn't governments look to apply "windfall taxes" even though the economics of the mining operation would not have improved?

Most of the movement is along the blue hyperbolae. But the real money is made (or lost) in moves that cross the hyperbolae--as through early 2010, and much of 2011, and the first half of 2013. The set-up in the goldxUSDX is for a similar move.


  1. Log-log graph makes iso-quants strait lines.


    ln x*y = ln iso
    ln x + ln y =ln iso --> gives strait line.
    lny = ln iso - ln x Y=mX+b, Y=ln Y and X=ln x

    If you had y/x it works too.

    1. This was a bit of a blind spot on my part. I didn't want to use log-log graphs because the ranges of the data are so limited.

  2. oops. correction Y=ln y.

  3. RE: tweet " The World Complex @TheWorldComplex

    Just woke up from a dream that gov't came up with a way to impute economic "value" & tax everyday activities

    Sorry to let you know this but they already do that. Were you taught accounting?*

    Here is how. Corporations pay tax on pretax profit=revenue - expense. So many big companies book profits arround 5% of revenue. So they pay tax on 1/20 of revenue or on the whole of pretax profit.

    So if people made 10% profit but paid tax on the whole of revenue they pay tax on an amout of 10 times profit. Or, on revenue.

    People should be able to pay tax on their profit, after expenses. Don't you agree? If we paid on profit we would be able to deduct the value of our time! Sence time is spent thus an expense. But, people pay tax on the whole of their revenue, and pretty much the whole revenue of their labor.

    It would be easy to make a case that people should be able to deduct at least 1/2 of the expenses for humanities biological needs including theirs and their total children's expenses. Children are tomorrows work force and capitalists. Use the, sustainability, buzzword and all that. Now that would actually be capitalistic!

    Capital pays on profits, most people pay on revenue not profit. Profits are revenue - expenses.

    But much of capital is owned by people.

    People pay about 12 times more taxes than corperations in the U.S.A. It is probably universal.

    *Accounting is a very valuable technology to have, and can be self taught from books and practice. Accounting counts value flows value levels of things and intangible things in addition to money (cash flow).

    ** Do you want data? Here is data from the flow of funds report, flow tables F.104 and F.105 on p.22~23. F.104 State and Local Governments and F.105 Federal Government. The quarter data is anualized (x4). For simplicity I would say look to the left at 2009 near the titles, but lets take 2012 as it is further from 2008.

    We will sum the recieps of the federal and state governments of the United States of america in 2013. Line 1 in both tables the sum of its components in the indented lines below, "1 Current receipts." I point out line 4, Taxes on corporate income. And claim that the most significant lines are not paid by corporates but people.

    So dividing the sum of federal and state revenues by taxes on corporate income gives rougly the ratio of taxes people pay to corporate taxes. (3113.0+2125.6)/(384.9+55.3)=11.8. The aproximation pretty good because the largest taxes are Personal current taxes and Contributions for govt. social insurance, which are from people.

    Jim Rogers says that the country you are now in is very capitalistic in reality inspite of what the government is called.

    1. It probably makes more sense for them to do it that way, because if they sent you an itemized bill for every time you vacuumed your floor or cooked a meal, people would rise up.

      This country has certainly been an eye-opener, in terms of taxes paid, which so far has been near zero (apart from what might be incorporated into purchases). I may have to keep more of my money here when I return to Canada, or West Africa.

  4. Now how to become a capitalist?

  5. Since you put so sesinctly that way. Ugh.

    Near zero taxes paid except purchases? : ) So cool. Is that for real? Maybe that is more prevalent in more countries than we think? After all we haven't been every where.

    I heard the statistic bandied around that people in China and Asia save save %30 of their income. (The broadness of that claim seems to make it questionable or our tax expense questionable.) Wow, if the USA didn't have income tax we might be able to save 30% and have more industry and private capital that isn't crowed out by congressional spending.

    1. You either build your own temples or you fund those of the state.


      But not to worry--the neoliberals will fix everything. One day soon, every "indolent" part-time farmer/fisherman on the coast of West Africa will be a real estate agent or a hedge-fund manager, commuting in his shiny Benz two hours to work every day, where he can develop ulcers and pay taxes like a proper citizen of the "developed" world.

  6. So, I made a wrong assumption. It is not universal.