hi doma,
my post registered the supply side. no one said gold pops out of the ground free of charge. so you are arguing against a point no one has made.
but to your point.
the costs of extraction don't impose a price on buyers. if the price of extraction, processing and distribution exceeds the market price, the supply side is out of luck.
the strength of demand varies. the jewellery market has considerable continuity. the demand for a hyperinflation hedge based on a weak economic theory can pop with the theory.
so yes, prices can diminish below the supply side costs. but more importantly, they can go down a long way regardless of supply inputs.
by the way, like oil, gold costs different amounts to extract depending on the density of the deposit, its accessibility etc. so cheaper sources of supply will likely continue to mine when more expensive mines close.
re the euro: it was me that said the euro currency is a mistake for precisely the reason the cypriots just discovered. their problem arises because they cannot depreciate a local currency to suit the needs of their economy.
the euro currency area is fine if its policies support your economy (eg Germany) but it is disastrous if your needs are peripheral (eg Greece, Cyprus).
austerity economics during a crisis is a hopeless stance. but i have said this repeatedly.
i happen to think the federal reserve has done a good job. part of the job they did was to perform qe. you imagined that would generate hyperinflation. it didnae. as expected by those who understand that deflation was the issue we have been facing.
this was a good period for governments to spend, loosen the money supply etc. those that didn't have suffered considerably.
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