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174 comments:
Gold suppression is public policy and public record, not 'conspiracy theory'
by Chris Powell of GATA
November 11, 2009
"How have central banks tried to suppress the price of gold?
The gold price suppression scheme was undertaken openly by governments for a long time prior to 1971.
That's what the gold standard was about -- governments fixing the price of gold to a precise value in their currencies, a price at which governments would exchange their currencies for gold, currencies that were backed by gold..."
Rob Kirby interview 10/27/09
(mp3 file)
Another tour de force by Jim Willie on 24hgold linking the dots between tungsten-aynrand-financial collapse etc;
http://www.24hgold.com/english/news-gold-silver-zinc-dimes-tungsten-gold--lost-respect.aspx?article=2459973994G10020&redirect=false&contributor=Jim+Willie+CB
Willie has been consistently ahead of this debacle (by years) and operates within a different dimension of understanding than other analysts. He gets the big picture.
www.goldenjackass.com subscription has been an invaluable investment for me.
Reminds me of the quote; "what cannot go on forever will not."
The ice is getting very thin!
idi amin
I love this blog - I keep checking it for the latest post, and am never disappointed. I promise to fill the tip jar a bit on my payday. I am happy to say I just purchased an ounce of gold this week, which is substantial for me. I am curious your thoughts about one thing...Where do you see yourself in 10 years time? I've been thinking of moving out of the country, but then second guess myself. I have been thinking of going back to school, but then think that my degree will be useless when I graduate. Same thing with opening a new business, or franchise - If things will really play out so dramatically, what options are there for the young adults of this world? How would you continue to live and work in a freegold economy?
Mortymer:
Very good, very good, explains a lot.
When I looked at the 10 years curve of gold and I seen latest development I wandered how is it that there are no "big" spikes for so long... First I wandered how is it that it has such rather linear progress... Then, more enlightened I wandered how.
Resembles so much this:
"The Autumn manoeuvres"
http://en.wikipedia.org/wiki/Lapland_War
During the first few weeks the withdrawal of Germans and advancment of Finnish troops was organised jointly by the headquarters of both armies, a fact that was kept secret from the Soviets. The Germans fell back according to a common timetable, and the Finns attacked and fired at the empty trenches. After two weeks the Soviets realised the deception, and demanded the Finns conduct immediate heavy action against the Germans.
In another word: Retreat.
re: ruff, can we say wouldn't touch that with a 50' golden pole!?
re: Willie, i found this particular jab (directed more specifically at Mish, maybe?) particularly humorous:
Where are the Deflation Knuckleheads who tended to dominate the web journals last spring and summer, in incredible dense vapid clueless fashion??? What a tremendously misguided group. They follow religiously the deteriorating economies, miss the twin storm, ignore the power of the unprecedented monetary inflation, and somehow overlook the entire global movement if not revolt against the USDollar in a grand Paradigm Shift. They represent the worst economists in the alternative media on web journals. Their tunnel vision on the falling asset price effect left them vulnerable to missing a tsunami on their own doorstep, incredibly. They still do not offer an explanation of why crude is at the $80 price level again. Supplies of oil are nowhere as great as the false USGovt statistics indicate, but the entire world is hedging at the same time against the US$ with oil assets.
@tablemaker: I have many of the same thoughts, as we all do. Just try not to get too caught up in thinking too much, lest you get setup in a frantic pavlovian paralysis whereby you feel tugged at both ends, but ultimately, you just stand there frozen.
like you, i had these exact same questions and decided to go back to school in health and holistic/ integrative osteopathic medicine (with a detour first through a masters in public health).
I believe that food, health care, and certain connected business (i.e. military tech) is going to be where the money will be flowing in this country as they wipe out the middle class.
I must admit, that I am very tempted to study abroad (esp if she's cute :) ). but am contemplating numerous other countries to finish my education. there will be demand for food and health care the entire world over, even if the system collapses. people still desire to eat and live. hence the reason i went back to study the health sciences and get a second bachelors.
best of luck in whatever you do, and welcome.
one thing I recommend, stock up on the things you need, live as frugally as possible, and save whatever you can in gold coin.
also, in light of willie's comments about oil reserves being vastly overstated, I'm curious to know what any of you, and that goes for you, FOFOA, think about Dr. Tommy Gold's theories about abiotic oil and the invalidation of peak oil theory.
To boot: is peak oil a scam, and there are plenty of relatively easy reserves for numerous decades (assuming no change in population growth)?
Or is peak oil actually much worse (as Willie insinuates) meaning that we could be facing the possibility of a major adjustment in gold and oil due to a double peak?
I'm sure you could write an entire article on this, and, please, feel free to do so. I'm curious to konw what some others think about this. I've asked some geologist friends of mine about some of this theories, and none had heard of them, and none really seemed too equipped to deal with them. they were far outside of their traditional academic paradigm.
comment away.
Satya
Not to sound completely "conspiracy minded", but if one takes in the account the theory of "growing earth", which is (in my mind) making a complete sense, then one has to ask where is the mater comes from?
While I am not aware of a good answer, my theory is that the different kind of matter gets created at different distances from the sun. On earth, it is water, (and, may-be OIL). On Saturn and Jupiter, it is hydrogen (unbound), and on mercury, it is Oxygen (unbound) and Sodium. Therefore, one can see a range from Oxygen, through Oxygen and Hydrogen (therefore bound to H2O), to Hydrogen, with increasing distance from the sun. These are atmospheric elements, and I suspect a similar distribution can be found in the core elements.
Anyway, long story short, yes, I think oil is abiotic, and is produced by earth together with water.
Sounds too crazy for this blog, but you wanted to know...
Hi FAROA,thanks for a new post,I love almost all of them ,also the contributors who comment here.I gotta tell you though,Interviewers and TV show snippets like the one above are un-bearable.Dont soil your blog.To me it is a distraction from the truth and I can do without those on the important matters you elaborate so well on.
@anon 5:05:
personally, i'm open to any explanation that makes sense of the facts as we observe them. I might be slightly more open than the avg individual, being more philosophically-minded, but an interesting narrative, explanation, theory, or creative way of approaching things does not have to be labeled "conspiratorial" or "out there," or anything of the like.
For if it did, we'd all be like Jippy Joe Kernan believes a bunch of goldbug freaks positing crazy conspiracy.
I don't believe in letting the lilliputians define my reality, nor letting it bother me too much when those who dwell in tiny glass boxes cast stones and aspersions that represent their fears, insecurities, and anxieties, not mine.
thanks for your perspective.
satya
btw, i love the word lilliputian...thanks for it (i have never been exposed to swift in any meaningful sense). I think it's my favorite pejorative term since learning "lemming" some 13 years ago :)
Hey all you wackos. Did someone mention the growing earth??
http://www.youtube.com/watch?v=fjMjqsRc3K4
Also, I don't think FOFOA meant lilliputan in a pejorative way. We are all lilliputans. We are all shrimps next to the giants. Oh, and it's FOFOA not FARAH or FAROH.
well, then it was a short-lived connotative interpretation then :)
i still consider myself lilliputian, but may have to remove the pejorative connotation.
is that true PHARAOH? :)
this rendition of "the day the dollar died" had my pulse quickening;
http://johngaltfla.com/blog3/2009/11/18/the-day-the-dollar-died/
there will be a sense of deja vu when it happens... not long now.
Idi amin
cnbc is beneath this blog. leave it to ZH to bash the collection of fools. One does wonder how much physical Kernan and crew have in the garage.
ObaMAO.....good one
Justin_n_IL
Is this better S? :)
Glad to see you finally got a profile.
And yes, Satya, lemming was a hat tip to you!
beautiful. especially that ObaMao Quintanilla...he's the quickest and slipperiest lemming I ever saw (running off the cliff :) ).
@Satya
If peakoil were a fantasy, the oil-for-gold deal that ANOTHER has been writing about would probably not have been made, or would it?
martijn, your comment seems to suggest it would take a super-sly american/european oil industry with tight lips, and an ignorant banking/bullion industry with loose fingers.
not sure i'm picking up on your "or would it."
I'm not even sure if those invovled in teh business are sure that peak oil may not be true, though from what i've heard over the years, there are plenty of wells that constantly refill in various parts of the world (supposedly not in the Pac NW).
But i see the rhetorical point you make...though i was looking for a bit more geologic one, I also was wondering how that might affect peak gold, if it were not true. I'm not so sure it necessarily does.
@Satya
On the geological aspects I cannot say too much. There's heaps of stories on the topic around the internet, but it is quite difficult to distinguish fact from fantasy, especially when one has little knowledge on the topic.
My comments suggests that if oil were in plenty supply, central bankers are unaware of it if we choose to believe ANOTHER; the would not trade their gold for something that comes in unlimited supply I guess.
How do you guys feel about Jim Willie?
His piece on economic hitmen killing the comex doesn't make too much sense to me. Killing the comex would mean gold trade dies. That would leave those killing the comex without further access to gold while holding worthless dollars.
Would that really be their strategy?
Killing the COMEX = killing the $ = gaining control of the universe..... roughly speaking.
Other than that, he's a little out there if you ask me.
Killing the USD is will create massive chaos. Creating massive chaos is not the same as gaining control of the universe.
Tablemaker,
10 years ago my Mom was telling me I should grow up to be a Mortician or own a funeral home. I thought she was a little crazy then. Now as these aweful events soon unfold I see she new what she was taking about.
Mamma always knows best!
I said ROUGHLY speaking.
@martijn & Raul. I don't find willie so crazy, but i find him very interesting and entertaining to read. He doesn't seem that far off base all the time, but definitely is more of an agitator. Not that this is a bad thing, but i think that makes him come off kind of pompous at times.
I am not expert enough in these fields to critically analyze his contacts or his knowledge.
I also ask the same question some times of Bob Chapman. And even Howard Katz. But i find all these gentlemen all the more intriguing because they're "out there" a bit. because they're willing to go into detail on something that may or may not be true, but informs us of their worldview and how they see things unfolding. the philosopher in me appreciates very much those journeys outside the box.
just think, instead of guys like Willie and Chapman, we could get stuck with box-lemmings like Kernan & Quintanilla. I'll take the former anyday.
also, i just interpret his comments to mean that they want to take all the physical they can off the market so as to make what they already have skyrocket and show the comex for the scam that it (supposedly, but probably) is. Of course that will have profound consequences, but I believe he just wants the crooks out.
then again, his newsletter is dead and gone if that happens, so maybe he just likes to rhetorically rant from Costa Rica on random musings and such knowing many people out there "are mad as hell and are" only going to take just a little bit more (don't step over THAT line....ok...well don't step over THIS line!!).
satya
Wow, that's some volatility on the gold futures. What, are the NY guys rolling out of bed to pee and seeing it up and then selling a bunch of brand new paper before they crawl back in or what?
Find me a country with many needed resources, little debt in relation to the assets and a national pride to lead? Let them price gold at many thousands not only in their currency but also in their resources! The world would buy from them, cheaply in gold but dearly in all other unbacked currencies. The markets would do the rest!
Both Russia and China seem to fit the profile.
If I had a nickel for every time we thought the dollar was finished, I would have a bunch of nickels!
Would Sinclair be feeling the same now?
To Fofoa + others:
I had just a great laugh I want to share with you all...
Running in cycles I started to recheck old entries...
https://www.kitcomm.com/archive/index.php?t-6.html
...and I came to this:
"What is the relationship old-gold? => Nothing. Gold is for wallets. Oil is for gas tank."
OK, now the funny part: You need to pay from wallet to fill your tank. Heheh.
So here we have the correlation.
I pay with a plastic card for fuel with some digital numbers in it -> but isn´t that the same?
And I wander if once in future when I will buy new house, could I use the gold to lower price for purachase to avoid taxes?
(Considering the counterparty accepts the deal)
Right now banks are passing on full price offers from qualified borrowers for REO properties in favor of low-ball cash offers. They prefer a little base money to much credit money. Just wait until they prefer real money over paper. Yes, gold WILL get you a house at an incredible price in the future!!
Thanks Mr. Amin. This was great. The day the dollar died! By John Galt Fla...
http://johngaltfla.com/blog3/2009/11/18/the-day-the-dollar-died/
Concerning peak oil - this Chris Martenson piece from his Crash Course is quite good.
http://www.youtube.com/watch?v=cwNgNyiXPLk&feature=player_embedded
If I had a nickel for every time we thought the dollar was finished, I would have a bunch of nickels!
FOFOA, just out of curiosity, what did you think in the eighties? Would you have had a bunch of nickels?
Do we know how old FOFOA is? For some reason I always assumed he was in his early to mid 30's. He probably wasn't paying much attention during the 80's if that is the case
I was born in 82 so I definitely wasn't thinking anything
I could be way off
Good synopsis of peak oil vs abiotic oil theories: http://whiskeyandgunpowder.com/peak-oil-deep-oil-and-son-of-the-evening-star-part-i/ and http://whiskeyandgunpowder.com/peak-oil-and-deep-oil-part-ii/
I have recently started buying a little gold and silver. For every Krug I have about five SEs. There isn't much there folks but then I came across a guy at work, he told me he had over 600 krugs and 8000 SEs, WHAT?
This seems a little much for one person to have but with what I've been reading is he the smart one?
I get more confused by the day on all this ownership of metals.
Enjoy the reads FOFOA........
Mortymer:
Lets please focus on one from few important issues - which is the derivatives as highlighted in the first 2 links.
For a good reason the BIS issues these reports: http://www.bis.org/publ/otc_hy0911.htm
# optional amounts of all types of OTC contracts rebounded somewhat to stand at $605 trillion at the end of June 2009, 10% above the level six months before,
# gross market values decreased by 21% to $25 trillion,
# gross credit exposures fell by 18% from an end-2008 peak of $4.5 trillion to $3.7 trillion,
# notional amounts of CDS contracts continued to decline, albeit at a slower pace than in the second half of 2008 and
# CDS gross market values shrank by 42%, following an increase of 60% during the previous six-month period.
How well you can read between the lines?
http://stockcharts.com/h-sc/ui?c=$IRX,uu%5Bh,a%5Ddaclyyay%5Bpb50%21b200%21f%5D%5Bvc60%5D%5Biue12,26,9%21lc20%5D
Lets see if they can't rattle a few Inflationist chains as we head into OpEx ...and FND on Au and Ag Dec contracts.
leap2020 has something up again.
If enough people are directed into bonds and away from gold, total collapse might not be eminent.
Bonds seem to be doing ok
Governments print money, lend it to banks, banks buy bonds.
Sort of a closed loop for creating inflation.
U.K. Royal Mint quadruples production of gold coins: http://www.bloomberg.com/apps/news?pid=20601085&sid=a0WZSz84UHjs
I'm guessing him to be in his early 40's.
Justin_n_IL
also intersting links:
Gold to 5000$, Armstrong Economics:
http://www.scribd.com/doc/22417671/GOLD-5000-11-11-09
UBS, the future of the dollar:
http://www.scribd.com/doc/22695029/UBS-Dollar-Decline-Research
Introduction to derivatives by J.P.Morgan:
http://www.scribd.com/doc/6814884/Intro-to-Credit-DerivativesJP-Morgan
Good analysis about Soviet Collapse:
http://www.scribd.com/doc/12796808/The-Soviet-Collapse-Grain-and-Oil
Many read-pleasure!!!
Yann
Also good book about the Soviet Collapse:
http://www.scribd.com/doc/21372181/The-Rise-and-Fall-of-the-Soviet-Union-1917-1991
(Warning: this book is very fat to print it, go to copycenter...)
Topaz! Welcome. I look forward to once again seeing your words. I will put your blog (http://time-currency.blogspot.com/) on my reading list.
Ender
@tablemaker:
thanks for the link, but I honestly had to stop watching at the 6 min mark as the guy is just giving way too simplistic coverage. he leaves out way too many important facts that don't fit in with his conception. that's ok. I did like his margarita comparison, as i didn't realize what they pull out of the ground was so slushy.
I guess i was more wondering about whether oil is abiotic in nature. theoretically, peak oil might still exist under such a scenario, but it would probably never be seen in the lifetimes of any of any person we'll ever meet, or in the lifetimes of any person those people would ever meet, since abiotic theory has it that oil is made by the earth as some sort of lubricant and has biological material (extremophiles) which feed off the carbon-dense material. I encourage anyone to check out Gold's Deep Hot Biosphere as a good starting point.
In any event, as for FOFOAs age, I'm going to have to be broad here in my guess and say 45-58, with a particular guess at 52.
back to reading...
satya
divercity, thanks for those links, i will check them out.
Anyone hear this from Jim Willy?
http://www.contraryinvestorscafe.com/player/player.php?utype=PU&pid=62242&aid=345
So, yes, let us see if they can drive the price down for the shorts as per Topaz.
divercity, that was a great read, thanks. much more along the lines of what i was looking for. still is some interesting points from Gold that I remember reading, but am not knowledgeable or utilize the info often enough to recall.
but definitely a great resource, thanks!
satya
Gold 4k?
http://www.cnbc.com/id/15840232?video=1336090735&play=1
They get so befuddled at the mere mention of gold. It's hilarious. And then when the guest speaks intelligently about $11K gold, they don't know what to do with their lemming selves.
satya, you got big bunns? Why did you change your name?
Any thought on my comment about the t-bills?
here is some more, it might be interesting.
Martijn, pre-existing bond values are the last bubble that will pop and kill the entire system. Negative yields are not directing people into bonds and away from gold. You think all that bond buying is "people"? Guess again.
When interest rates are falling, bond values rise. This has been happening for 30 years. It has finally reached its peak as the official interest rate reached its nadir. What do you think happens next? Deflation? Dollar's purchasing power heads higher? Sure, the dollar will buy you more old junk bonds than before, but that's about it.
The Fed's reaction as bond values start freefalling will be hyperinflation. The Fed will start buying all kinds of bonds outright, with cash. California munis, important corporate bonds, anything held by big pension funds like Calpers, older Treasurys from China, the Fed will have to buy them all to slow the freefall. Hyperinflation.
Dollar hyperinflation will be contagious to all those developing nation currencies as well, killing their bond markets.
That bloomberg article said "From Angola to Belarus, emerging- market governments are planning first-time debt offerings to take advantage of the biggest bond rally in at least 11 years."
That's the beauty of paper. No matter the demand, supply can always exceed it.
Thanks for the welcome Sir Ender.
It is shaping up as the week to end all I'd reckon.
I'm excited!! ...in an apprehensive sort of way.
You're welcome, Satya. I think Byron King's undergraduate degree is in geology. He writes well on the subject of peak oil in an understandable manner, much like FOFOA on gold. Also, he's not condescending toward those who adhere to abiotic oil theory.
yean, i was on a diff computer which is logged into a diff gmail acct. i think i have some 30 accts, so that might happen from time to time.
and it's amazing to watch those guys on CNBC when they're told they can bully someone they go all out; but fo some reason, and this is the 2nd major snippet i've heard from rickards, they don't give him shit at all, and that's kernan/quintanilla sitting right there. that doesn't make sense to me. is rickards just untouchable? he makes the same arguments that the so-called "goldbugs" make to which they just pejoratively referred yesterday. but they shut up like they were rickards' bitches (no offense to any women or dogs). something is strange about that.
and yes, divercity, he is very good. well-articulated, and yet, there is still something not right. but it helped me get a much better insight into the geology of it, even though some of it was far over my head.
thanks a lot!
@Martijn:-
Negative bill yields are anathema to the System as they imply the numeraire (Buck) will be "more valuable" 3 mth's down the track, than now ...which in turn compensates for having to pony up loot above parity.
Why then not simply hold $Cash?
People (etc) the world over are asking themselves that very same question as I type IMHO.
So T-bill rates cannot be negative because people prefer not being in cash?
I thought that is what it signaled.
If people are afraid of holding cash, that could be because some large bank is about to blow up. Perhaps one that has been shorting gold?
Another option could be the market is expecting deflation.
Currently credit is falling and prices are falling also for most things other then stocks, commodities and banker's salary.
Or maybe there is no market anymore. Just manipulations. Maybe this is an erroneous PPT overshoot?
Or maybe it is channeled inflation as I said before: fed prints, banks receive, banks buy treasuries, fed prints.
Might be the way to improve banks balance sheets without getting the liquidity in the streets yet.
Or maybe there is no market anymore. Just manipulations. Maybe this is an erroneous PPT overshoot?
Wouldn't rule it out just yet, but I wouldn't believe the ppt would overshould like that.
Customers who purchase T-bills at banks that later fail become concerned because they think their actual Treasury securities were kept at the failed bank. In fact, in most cases banks purchase T-bills via book entry, meaning that there is an accounting entry maintained electronically on the records of the Treasury Department; no engraved certificates are issued. Treasury securities belong to the customer; the bank is merely acting as custodian.
@Ukraine - do you have a comment on this story and the video linked therein?
Microbiologist nabbed by FBI after warning us that vaccine is a bioweapon deployment
i've got my israeli sources looking into this, to see what they can dig up.
for most who don't know, there was a plane of worldclass microbiologists, virologists, and immunologists going from israel over the black sea when a missile went astray numerous years ago, killing a good crop of some of the best minds in the field (being too lazy to find a link now, but can if needed, or provide more of an inside report).
it's (way f-in' beyond) interesting though that this guy broke the news on the radio and the extent to which the FBI pursued.
I'd like to see a report or link on that Satya, sounds interesting.
here you can see the Fed's been loading up on toxic stuff.
Mortymer:
Wandering again about backwardation as a clear indicator being postponed...
Fofoa, Ender, Martinj, others,...
What is your estimation, where are we at the moment?
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x1074297
there's one referencing it more recently
And off course there is Britain.
@Mortymer
I recently asked FOFOA how he felt in the eighties when there was also lots of talk about the dollar collapsing and drastic hyperinflationary scenario's. Back then it didn't happen although it was expected by many.
At this moment the straits seem to look even more dire, but I still wouldn't be surprised by a couple of surprises.
Credit contraction makes a strong case for at least a short-lived deflation and that is already creating quite some dynamics in the financial world.
As indicated before, I do not see any real reason for a big retraction of gold and silver prices and remain invested in PMs. In the mean time the path to total collapse might be laid, but I wouldn't expect that just yet, although the pressure seems to be building. I do not yet see it coming next year, although I will continue to update my opinion.
@Satya
Interesting story, although a bit to deep for me to formulate an opinion. Something does however smell fishy about it.
Perhaps the Fed is buying treasuries through banks.
Here you can see that the amount of treasuries on its balance sheet is not that big in comparison to '07 and even seems to stabilize. It has however continued to load up on (toxic) MBSs. So perhaps the deal is that the Fed buys toxic waste of the banks, and banks buy Treasuries for the money received.
That might also explain the negative interest on short term treasuries.
Satya,
I havnt been following the flu story real well. But a few months ago my Mom, of all people told me about how lots of really important bio-scientists had been dieing or had become missing in mysterious manners around the world.
Really I dont think the flu is real now, just from what Ive seen and experienced here in Ukraine. I do how ever see how powerful psychologically this story is and how it can really panic people. We know the world financial system is broke and is about to collapse, its so convenient that there is this epidemic flu going around at exactly the same time.
The fake flu is going to take the rap for the system going down and the politicians and banks who caused the problems will be our saviors.
Maybe Im wrong, but I see nothing in West Ukraine right now that concerns me. Now if I start seeing them giving vaccines and they come near me with one, thats a different story.
Personaly I think the hungry collective will except being enslaved by martial law if its for health purposes to save their lives, rather than if they wake up one day and cant get money out of the ATM machine.
What amazes is me is how the US middle class seems to be so out of it that they are going to do nothing while TPTB strip them of their wealth through the nose-diving dollar, inflation and taxation.
I mean, at least the Venezuelan middle class made violent protests before Chavez managed to steal their wealth and Argentina got violent after Kirchner had stolen theirs.
Obama, Geitner and Bernanke seem to have a coordinated game plan of slowly turning up the inflation burners through QE and deficit spending on looters and lobbyists. Meanwhile, the middle class buys into the partisan spin and just worries about their own private bail out. Now the students are demanding theirs:
Protesters gather at UCLA to oppose UC fee hike
snip...
"We are bailing out the banks, we are bailing out Wall Street. Where is the bailout for public education?" asked UCLA graduate student Sonja Diaz.
I'm quite sure the fed is monetizing through banks as I've posted above: the Fed and banks basically trade MBSs for short term T-bills.
However, as long as that money remains in the loop (fed buys MBSs for cash, banks use cash to buy Treasuries, Fed uses cash to buy MBSs) it will not hit the streets outright.
As banks however start holding less MBSs, and more Treasuries, it would be time to reverse. Now that is when the trouble starts:
-The fed will have difficulty financing, unless sufficient trust has been restored to lure in investors other than banks
-Banks will start using their cash for other investments and might begin blowing more bubbles. It would be less bad if they managed to re-inflate housing, but I doubt that will work.
-In the meantime the economy seems to continue to deteriorate
However, as long as the MBSs/T-bill trade remains intact some time might be bought.
One could however also argued that the loop described above has a bit longer to go, as ever more loans are turning sour. Those sour loans will keep bank balances under pressure and prevent them from lending money into the economy at large. The only thing that can save them is the Fed buying the sour loans, by effectively replacing them with Federal paper as I've described above.
In that case the end would be the Fed collapsing. That might however take some time as the loop might survive for a while.
Martijn,
I agree that is exactly what is going on.
But if enough of the giants take gold out of the market because they are finely waking up to all the corruption, COMEX could break.
And then where would we all be with a broken COMEX, hmm?
Dec 8-15 should be an interesting week;-)
Mortymer to Martinj:
For a long time I trying to think about inflation/deflation/~flation and I try to model my thoughts around the idea that these are rather defined in a stable currency system which we are not...
More than that, we have a system where the capital flows are fast and could change direction or place in a very short time.
So how do we really measure if there is so much of derivatives and paper wealth and those ~flations could be camouflaged?
Oil and gold (could be good for measuring but price of these is still under control) are very high compared to when I was a student. Something like 32 and 295.
I remember back then it went up to 35 I had to write an essay when gold will go back under 25 dollars per barrel. I started going deeper but never finished as it was too hard for me so I got different easier subject to write about. :o)
Another my little thought:
Have you realized how almost everyday on those "calm days" the move in price of gold in dollar fluctuates much while in Euro it just adds bit by bit? Could this be just a natural increase of price based on something else than buy/sell like change of leasing percentage or something?
I also think that releasing more paper gold does not work to suppress price anymore.
Once I mentioned here (after reading some Thoughts of Another) that `gold is being bought by many´, I changed my mind and I think that it is now a game of few big players.
The price increased so small investors are scared out looking into past and seeing the present value too high worrying it goes down. So we see some steps of big players and those move the market by big steps.
I also think that many liliputans/lemmings will miss this event as there is so much disinformation, contrary opinions and those with lot of money and knowledge are already in.
Could this be the reason why there is no backwardation?
Last; Many speak about future dollar rally and rates up and other stuff what should push the gold down. But give me a break (it all has been tried I think and during last 10 years there was no big pull back so it does not work why should it now?) and how it will be better to wait for that to buy gold later as the price may drop, I look back and see how the price of dollar goes inevitably down.
I write a lot of silly things but they help me to shape the base stable stones for thinking.
FOFOA,
You have a certain opinion of the Euro because of its unique architecture.
So what is your opinion of the Eurozone breaking into a Northern Eurozone and Southern Eurozone like many are speculating will happen.
A strong currency is killing the P.I.G.S, and the stronger producing countries (I.E. Germany) are getting tired of bailing them out.
Will the Euro survive in its current state of being?
But if enough of the giants take gold out of the market because they are finely waking up to all the corruption, COMEX could break.
A broken COMEX might very well end it. However, I reckon there is some slack. Extra money could be printed and a double cash price or more could be offered, as was rumored has been tried recently. Central banks could also step in. I therefore would not expect the COMEX to break down a soon as this December.
Have you realized how almost everyday on those "calm days" the move in price of gold in dollar fluctuates much while in Euro it just adds bit by bit? Could this be just a natural increase of price based on something else than buy/sell like change of leasing percentage or something?
Didn't study that extensively enough to state anything sensible, but it could be oil shifting into the Euro a little. The Iranian oil exchange has started trading in Euro's I believe.
I also think that releasing more paper gold does not work to suppress price anymore.
Perhaps not. Maybe paper dollars will work however, at least for a while.
Could this be the reason why there is no backwardation?
Please explain what reason you are referring too?
Mortymer:
Ref: "Please explain what reason you are referring too?"
=> I wander about the present liquidity of gold market.
- If big players buy off the market (not counting small proxies, kind of HFT inverted)
- If small players are off the game
=> Then there is no need to have big liquidity and we do not realize that we are close to backwardation.
Mortymer:
About the Iranian oil shift - that could be it, nice catch you made perhaps - it has to show up somewhere, right?
Ref: "Perhaps not. Maybe paper dollars will work however, at least for a while."
-> If it was so, how is it that they can not reverse the trend?
It just slows down the ascent but as mentioned the natural gravity of gold is instoppable and the trend irreversible. So I should rephrase myself:
"Releasing more paper gold does not work to suppress price anymore, IT JUST SLOWS DOWN the process"
Mortymer:
Ok, in other words, it would make sense that there are not too many traditional outside dollar zone couterparties willing to accept paper gold deal unless it is "well" guaranteed by some extra bonus. CBs backed off, Asia got clear signal from China that they will not recognize those, ME moved their gold home. So left are those who play with the dollar carry trade - ETFs. One already went down I think. So yes, there may be more of paper gold but it just does not work anymore the same way like it was so more of this paper gold or higher quality one is needed.
It is just my speculation, not backed anyhow. Just simple thoughts.
Mortymer
@Anonymous November 20, 2009 5:02 AM
- It may start sooner:
http://www.bis.org/statistics/relcal.htm
Mortymer to Martinj:
How big chance do you see that there is something implemented in Comex, LBMA which catches big deals and does not allow them to go through so they could be taken care off record?
I am still missing big spikes and wandering how they are polished.
I mean, look at the Mauritius case, I was wandering why (they perhaps had the desire to buy much sooner, such big decision is not made overnight) why they have not bought those 2t on the open market slowly?
I don't know what sort of deals countries made with each other. Perhaps those IMF deals are made to keep them off the COMEX.
For a really large investor to buy physical would probably kill the COMEX. That would probably kill the rest, including the dollar and, more importantly, international trade.
It might just be that nobody wants to start that chaos just now.
Ukraine might also be the cause of the negative interest on short term T-bills.
martinj:
You mean this?
http://tinyurl.com/ygzvjov
Peak Oil = Peak Paper.
The ever increasing paper scheme for hundreds of years has relied on an ever expanding world economy. Now that peak oil is here the economies can no longer expand and the upside pyramid will continue to contract. Oil is the biggest bubble yet seen (well unless you want to consider Roman civ. a bubble)
@mortymer:
someone more knowledgeable than I am can probably provide more insight. But I believe it was not Fekete who made the following argument.
nevermind the ramble, i found it. it's from Kirby. his argument is as follows from Central Banking: A Blight On Humanity :
To summarize: Banks like J.P. Morgan Chase and Deutsche Bk. - who sold endless amounts of gold futures at prices of 950 – 1025 and then tried to make “side deals” with the folks they sold the futures to – offering them spot + 25 % [let’s say 1,275 per ounce] to settle in fiat – only after their counter parties demanded substantial tonnage of physical gold bullion.
Stunningly, if accurate [and there is absolutely no doubt in my mind that this is not], this means that gold is already in SEVERE backwardation and this fact is being hidden from the public.
Then, to protect the “integrity” of the futures market as a ‘price discovery mechanism’ – Central Banks – aiding and abetting - plunder the sovereign assets of their respective countries to bail out their agents / friends in an attempt to ‘sweep the whole bloody mess under the carpet’.
So, it seems he's suggesting that backwardation is already here. again, i leave the debate of whethere this is true or if this evidence actually suggests that to other less-"lilliputed" minds here :)
Satya
The Ukranian bond story this am is interesting if only becasue it follows on comments for days and weeks about the rumors about plague release etc on the conspiracy sites. Again, Ukraine is a very interesting country as an East West land bridge. The election is coming and the Russian lackey is leading. Russia wants the port issues and transit issues "resolved." It is a huge Ag country. Perhaps more critical than all is the bank debt situation across CEE. The BIS report has it at 1.7T EUR total (see link): http://ftalphaville.ft.com/blog/2009/02/23/52767/cees-western-exposure/
IF Ukraine were to go , there woudl ahve to be triage immediatly. Already happening in latvia. A takedown of the Euro banks would be one fantastic way to rally the DXY, no? DXY is 56% EUR. Ukraine may not be the end; perhaps, just maybe, it is a tipping domino for CEE and western European banks?
If one were to subscribe to the Mosaic theory, the flu, the bond issues, the rusiian port issues, the russian transit issues and the election rancor give multiple parties every reason to be interested. Ukraine has become a kind of the cauldron for co-opition for the competing power blocks. Perhaps this sums it up 9cribbed from ZH this am)
"When you have eliminated the impossible, whatever remains, however improbable, must be the truth. It is stupidity rather than courage to refuse to recognize danger when it is close upon you." -- Sir Arthur Conan Doyle:
FOFOA, all,
I came across an interesting thought in my head today. Inflation basically transfers wealth from one party (savers) to another (lenders) by a mechanism I'm sure we all understand.
Now what we see happening today is basically the same. The guy in the streets is not able to get the credit he used to, and sees his assets decrease in value. At the same time other people (banks and the lot) are seeing there wealth increase.
This is a type of redistribution that is in a sense similar to inflation, as it is also accomplished by running a printing press. It's just not the textbook kind of inflation people tend to look for.
Any comments?
At the same time inflation is happening on an international scale. I think that we should watch that level playing field a bit more. The dollar is the world reserve currency, and it seems to be in competition with some other currencies and gold.
As the fed expands its balance sheet and sells of ever more treasuries, those holding treasuries from before experience inflation as well.
Fyi, I've discovered another bubble today: it's in contrarian thinking and bubble calling.
@Satya/ Kirby story
It's rumors again. If true, backwardation may have arrived and even worse (or better) the financial and paper market are getting separated.
However, over the past year we have seen quite some shocking stories based on rumors, which in the end did not move the world to much - at least not visibly.
Uncertainty will always prevail and this story might very well be true, but I am not buying it outright.
Off course, as I'm long PM for a substantial part of my portfolio I don't have to.
..the financial and paper market are getting separated..
should read: ..the physical and paper market are being..
@ S;
Fantastic analysis on Ukraine. Thank you very much. Hoping to hear more analysis from you.
Best Regards;
Tekin
According to this one - and its important if true - all US banks are insolvent.
We basically knew that already, but once it materializes, things might get out of hand.
Goldman is quite staggering int the statistics, but I guess that's because they basically run the derivatives market.
What is interesting is that - besides Wells Fargo, Mastercard, AIG, the Euro and Exxon - Goldman is betting against Barrick(!).
Mortymer:
SatyaPranava - thanks for that one, I was off at during that period of time so I missed it.
S - Ukrain makes sence, think about the previous encounters between big powers - they happened in the noman´s land where sphere of influences meet... Vietnam, Korea, etc.
Once the world bank, IMF goes and gives some investment loan the country is doomed, exploited by applying different fast policies and tanks. If you drive the new cold war wall where it will go?
Mortymer:
So, if the backwardation can not be seen in the Comex and LBMA unless there is some unexpected issue like last winter then I would say that what drives now price up is the demand of courageous lemmings, not the paper gold issuers.
- If paper gold still somehow pushes the gold down
- If work of many small investors asking for gold bars and coins put price up
=> then we see the real fight on mints who are overhelmed by the mount of people who want physical and those coins, small bars rarely go back as these first time investors see the price going up and they are enthusiastic about it and will want more.
So I will be checking how the new companies selling coins in this business are doing with their deliveries. How many not available items they will have.
=> India case was also the signal for the internal market, I wander what will happen after the gold seazon is there over and the jewelry producers will want to refill their storages.
@S
Ukraine is interesting indeed. Nice analysis, thanks.
@martijn:
i quite agree, that's why in 2003, when I saw the housing bubble in the north west part of the country, and asked myself how come the economy hadn't yet tanked (after the market crashes in 2000-1), I figured it out. It was a pump n' dump that I then dubbed the "Bush Land and Wealth Redistribution Act."
When Katrina happened, it became apparent to me (correctly or not) that this was the model that was going to be used throughout the country (not the specific type of destruction, but the post-destruction mechanisms of transfering wealth). Katrina was a nice dry run for them. Detroit seems to be one as well.
my point, is that looking at history as to the consolidatoin of wealth and power that happens during depressions, where selected companies/institutions can buy things for pennies on the dollar, is that form of redistribution, or theft.
Little did I know back in 2003, however, that it was on this grand a scale. I had no idea about derivatives until 2007 or so (as I was studying nutrition and health during those years).
does this line up with what you were thinking?
satya
@martijn, i see your point about the rumor, I guess my point was simply that we might be in full backwardation and not even know it because of the paper shenanigans.
so theoretically speaking, that game can be played where we never get to backwardation officially, until the entire markets collapse. in such a scenario, like people not knowing about many thigns bc of various statistics being a lie, one would perceive everything to be ok, until the very moment it's not. then, the SHTF and there's not much that many can do.
hope that clarifies my thinking somewhat.
@Mortymer
Although related to national issues, the Vietnam-case (Vietnam is to import 6 tonnes of gold) is also related to individual investors demand.
so theoretically speaking, that game can be played where we never get to backwardation officially, until the entire markets collapse
Yes, I could very well be. I referred to that above as well.
("I also think that releasing more paper gold does not work to suppress price anymore.
Perhaps not. Maybe paper dollars will work however, at least for a while.")
my point, is that looking at history as to the consolidatoin of wealth and power that happens during depressions, where selected companies/institutions can buy things for pennies on the dollar, is that form of redistribution, or theft.
Yes, this matches my thoughts quite well.
MTL:
So, after the new year I will try again to add a brick or two to the effort of all and hope others will do so as well.
Motrymer The Lemming
It's the stress and the dynamics of a depression that allow people to transfer wealth.
It's a bit similar to turning of the lights in a metro-station and picking peoples pockets in the resulting commotion.
Mortymer:
I would explain this part differently:
"On a final note, I wanted to point out Goldman is also shorting a Euro index (betting against that currency) as well as two gold mining companies (Barrick and Agnico Eagle Mines)."
Since USgov = GS +FED (more or less)
=> Then they represent the US policy/wishes
=> It does not need to mean that they know more, it may mean that they try to hold Euro on 1,5 and gold down
So, after the new year I will try again to add a brick or two to the effort of all and hope others will do so as well.
That is the spirit. If all the lemmings buy the physical they can, the comex won't survive. It's the choice of the people exactly as FOFOA has been describing it all along.
@Mortymer /GS
It might indeed be the wish of the US. Perhaps we will see a battle between Europe and the US as things heat up.
Martign,
"Fyi, I've discovered another bubble today: it's in contrarian thinking and bubble calling."
Very witty. Agree with you.
@MTL (mortymer the lemming):
MTL, i hate to see you go, but if you really must sacrifice yourself for the good of the rest of us, i have a list of select people at the top who have put us in this mess, that you can take with you on your plunge...just let me know!
MOrtymet
S - taking euro down, that also may be a wish, do not forger what happened with Iceland (I am still not sure who took it down but I think it was kind of "Aurora shot")
-> Many EU banks did not go down, only Scotland, Ireland, which are under the dollar influence.
-> EU banks are not too big to go down, banks do not play here such big role as in US, ECB has surplus and can bail them out.
-> I actually think that you are partly right in that US policymakers try to make EU weaker and try to sink it - Latvia, Hungary but without the effect. Gold in Eurozone works like a great shield.
-> If you think about Spain being down, yes, well, they have quite big exposure to South America so that is perhaps why. Same with other southern states but northern are conservative. The rules for lending are much harder, investments not so risky.
Mortymer:
S - You mentioned Sir Arthur Conan Doyle, you know the Mortymer was from one of his books, heh, a friend chose that as my first email many years ago as I was unhappy that I could not use my name as all combinations were taken. Desperate I asked him to choose whatever unusual name he chooses.
Lemmings are of many breeds
- There is the Joe the Lemming who has other issues to think about.
- There are the lemming who work hard, who think deep, who search for wisdom or just for a safe place, who hate this system and try to escape it. Some are on this page and others are getting it slowly, reading bit by bit. The knowledge will make the difference. You should see the number of people who seek for answers, you see how the traditional media have problems as people choose cheaper, more reliable sources.
- Then there are Informed lemmings (bad or good) who will take this system down willingly or not. The funny part is that these greedy ones will be so blinded that they will think only about themselves not realizing that if they stop buying they may keep the system still alive for some time.
Mortymer to FOFOA
Have you ever thought about having a nice page in Wikipedia?
I believe that you have a lot to offer to the general knowledge, if true or not your thoughts should be considered for wider audience.
Fekete is in there, why not you?
I do not know who are editors but it should be checked. We have internal wiki at my job and it is hell of the improvement of info sharing.
Please consider.
Mortymer:
I believe that if Another could see the power of wikipages he would choose that media as well.
"Freegold" theory should get more shiny place and get to daylight. It is not hard to link it to other gold pages then.
Today I am posting a lot, I appologize for the nonsence ones, I am not a big thinker, I just try to see through the fog where are we going.
Anyway, if you look at the kitco page and click on picture of "Daily gold chart" you see that last two days moves are almost identical. I have noticed that for some time already (this is what I was speaking about before) and I call that "a peaceful day", if I had the data from last two months it would show up more brightly how the gold is taken up slowly steadily.
This is very good. It's a couple days old, but a must-see video if you haven't seen it yet. It's 26 minutes total and you have to see the whole thing as he really gets to the inevitability at the very end.
Denninger - MUST WATCH: Glenn Beck And The Dollar Carry
... also @ Martijn, I had no ideas about currency or economics in the 80's. I have only been studying this stuff for two years now. And yes, my age does fall somewhere in the range of those guesses!
@moonmad.nomad 11/18 09:27
You wrote:
“Competing currencies
I predicted long ago on the USA Gold forum that the game would evolve to selling large quantities of currency for usage at a discount. This makes the payment of interest obsolete read as "the death of debt" (but not the settlement thereof). … Competitive discounting anyone?”
Can you point us to a link that might describe this in a little more detail? There have been lots of swaps lately and they have all been assumed to be ‘at market’. Could these swaps be discounted to encourage usage? Very interesting, it’s work more investigation.
Thanks in advance,
Ender
@ Anon (November 19, 2009 3:17 PM),
Re: Gold 4K? Thanks for the Rickards link. Very good.
http://www.cnbc.com/id/15840232?video=1336090735&play=1
Jim Rickards seems to have CNBC's respect. He only recommends 10% gold allocation in a portfolio, but he likes to throw out price projections ranging from $1,500 to $11,000, something that usually gets ridiculed on CNBC.
Here are a couple of his other recent CNBC appearances...
Sept. 25, 2009: Rickards says ""When you own gold, you're fighting every central bank in the world."
http://www.cnbc.com/id/15840232?video=1275511738&play=1
Aug. 17, 2009: Rickards talks about the IMF SDR's and the dollar.
http://www.youtube.com/watch?v=Hpb85UfoSFw
Ha. "When you own gold, you're fighting every central bank in the world." That is, if they do not market to market their gold.
Another must-see! Bernie Lo interviews Bill Murphy of GATA on Bloomberg last night. Unfortunately it seems that caryc108 needs a little more practice posting YouTube videos. It looks like these are his/her first three, the picture is squished and the sound is REALLY low. I recommend plugging in your speakers and cranking up the amplification. With my amp set at 11 I got some reasonable audio. Also, don't forget to adjust the audio on YouTube and your computer to max. In any case, these videos are worth the effort.
http://www.youtube.com/watch?v=rw4T6IdHJ3w
http://www.youtube.com/watch?v=06_NMci4xnw
http://www.youtube.com/watch?v=OYiQZzbzeXo
Gold in a Deflation vs Inflation
Re-reading an essay at GATA by Peter Millar (founder of Valu Trac) from 2006. I think his summation of gold's response to Deflation or Inflation is succinct and lucid.
"If, however the current Monetary inflation gives way to Deflation because of the Debt burden, it is as certain as anything can be in the world of investment that Gold would then enjoy a secular "bull market" either in "nominal price" terms (inflation) and/or in "real price" terms (deflation)."
I interpret "real price" terms to mean purchasing power.
http://www.gata.org/files/PeterMillarGoldNoteMay06.pdf
raptor:
http://en.wikipedia.org/wiki/FreeGold
Nothing here ? FOFOA can you "fill it" :)
Then we will have the task to advertise it.
OK guys I was asking myself for some time, why would Bernanke want to get second term ? Really why ?
If he don't get second term he will get with almost untarnished reputation at least from the media pundits point of view ?
I can see two possible reasons.
1. To hide what he had done up until now ?
2. He really think he can make it work OR blame the crash on somebody else and they will believe him ?
The other reason which makes more logical for him to get out now is that with untarnished reputation he can land some cushy place..
WHY ?
For Geither I can see easily it is written on his face "CROOK".
Ben looks more like self-righteous idealist, blinded by his own prophecies
more like Greenspan.
Raptor, we can only guess a man's personal drive. Perhaps Bernanke thinks of himself as a man with honor and wants to finish what he started. Perhaps he likes being in the center of the dynamics, who knows.
Referring to those Glenn Beck vids: the Cloward Piven strategy
I guess in a sense the US is to big to fail, or at least, that might be what China and some others are contemplating right now.
Hello Martijn,
I think you will like this post. See if you can pinpoint the flaw in his argument.
http://rangerider.blogspot.com/2009/11/are-we-living-in-zero-hour-now.html
Sincerely,
FOFOA
Fofoa,
Nice post, I do like it indeed. Still reading.
One question that already popped in my a couple of days ago. It concerns the fifth chart in the post (debt to gdp). When you look at the debt/gdp ratio and the balance of the fed, it shows an exponential curve that is undoubtedly nearing its end. However, around 1933 debt/gdp ratio somehow got rested, and the exponential growth could start again. Now my question is: what exactly allowed that to happen, and would it be possible to do that again? If not, why not?
Still reading, more to follow.
That GDP formula seems incomplete. GDP off course is not a complete measure, as it only measures the amount of money changing hands and not actual production, and besided money velocity is missing. However, the formula also doesn't show the influence of the banking industry: the expansion of the money pyramid.
Still reading.
It lasts as long as people are buying treasuries, specifically, the Asians. And please understand, this is the only thing keeping the system out of a deflationary spiral at this point.
I believe these days people with beards suffice. Being Asian is no longer a requirement.
China has had a massive reduction in money coming from the American consumer, and other consumers around the world. Their ability to recycle dollars back into the American economy has dwindled dramatically.
Nobody knows what Bernanke is swapping to them. Perhaps they print CNY and swap for USD the same way Bernanke swaps USD for MBSs.
What this guy is saying is a bit contradictory and incomplete. Incompleteness is a guarantee for flaws. However, he also manages to say that disorderly implosions are likely, and at the same time inflation is unlikely, while the latter could be easily be triggered by a lack of trust.
I guess I should have said fundamental flaw. One which he states quite boldly. One which is wrong.
Understand that all money is debt?
There is no magic printing press or helicopter drops of money as is popularly believed.
Nice. I did not know that.
Still I wonder how the debt/gdp ration got so drastically reset after 1933.
GDP must have fallen a lot in a deflationary period as I am led to believe it was. Did the national debt fall too? How? Did gold have anything to do with that?
What gave it away? The word fundamental? Or the word boldly?
I would say that 1933 had something to do with the dollar being devalued against gold by 70%. From one of my posts...
"First the government defaulted on 41% of its outstanding international gold obligations by devaluing the dollar 70%. (The world DID take notice of this 41% default!) Second, it called in the local gold to establish a fresh hoard for backing the international dollar."
The word fundamental made me change the way I was reading it. The first read I was looking for a logic flaw.
So devaluing the dollar it is...
I recently noticed that my historic perspective is lacking a lot of color.
In trying to devalue the dollar, are there big differences between then and now? Could it be done again without the drastic scenario's people often mention in the blogsphere?
Since there is no direct gold-backing for the dollar anymore, a devaluation against gold cannot take place in the same manner as before.
Mortymer:
Check this one around 2:50 - strange things in oil market... DB withdrowing itself from very long contracts.
http://www.youtube.com/watch?v=lLxoxGkuHPs&feature=related
Mortymer:
To Martinj;
Isnt carry trade of reserve currency indirect devaluation against gold? If you have control of daily max top and down on gold then you have the way,...
Downgrade of Mexico's credit rating:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKajo_MvkWoU&pos=7
Fofoa,
That post is nice.
The most important thing to keep in mind during this discussion is the macro, or global economy. The US is but one global player among many. This is not a simple story about stupid US politicians versus helpless US citizens. Instead, it is a grand story of giants.
So it remains.
It is a story about the US government versus the rest of the world.
Although the rest of the world is not unified.
Still, as hyperinflation would destroy the dollar and a destroyed dollar would seriously hamper world trade, I don't think both the world at large and the US are hoping for that.
In the crisis of the early 1930's, too many people went into the banks to withdraw their gold. And fulfilling their duty to provide gold or die trying, many banks died.
They were withdrawing there paper money from their savings account I believe?
The dead of banks led to the burning of savings and a deflation in the money supply if I'm correct.
The universal way fiat currencies are measured for value is by how much gold they can be exchanged for.
Does that really still hold, to all?
A dollar collapse would be defined by its inability to be exchanged for true money, gold, at any reasonable price.
Perhaps so, I'm not sure if this is the only way to define a collapse of the dollar, but it seems reasonable.
Back in 1933, the dollar DID default on its contractual gold obligations. In essence, the US government kept the gold that its citizens had loaned it and told the citizens to eat the loss. The government told them to simply keep the paper promissory note and pretend it was still "as good as gold".
That is true. Was this inflation???
First the government defaulted on 41% of its outstanding international gold obligations by devaluing the dollar 70%. (The world DID take notice of this 41% default!)
How did you come to those numbers? I find a value loss of the dollar of 43 percent..
How did the dollar do against other currencies? Did they all devalue against gold with the dollar?
Then, in 1971 the US did it again, this time defaulting on 100% of its gold obligations to the rest of the world.
Why did gold not spike on the open market back then?
Apart from that, how come the devalue of the dollar against gold resulted in an improvement of the dept/GDP ratio (both measured in dollars I believe) in a deflationary environment?
Total US debt/GDP
National debt/GDP
Was that much private debt destroyed in the 1930s? Is that why the debt/gdp ratio improved?
Federal debt/GDP
Historically seen, exploding debt levels just do not mean the world will end...
Read this:
http://www.examiner.com/x-28973-Essex-County-Conservative-Examiner~y2009m11d19-Hadley-CRU-hacked-with-release-of-hundreds-of-docs-and-emails
And Martijn, nice sites. I added it to my favorites. Here is also good site for charts: http://www.chartsrus.com/
A lot of people are saying "devaluation" of the dollar. I'd just like to note, that this is erroneous. The dollar has zero value, domestically from 1933, and worldwide from the second default.
You all know that. And yet, most of you still think dollar has value. What value, I ask you? That of the ink?
There is no value, but the confidence. So, when trying to predict the manner in which it will fall, do not think of value, think of confidence only.
From zero value and some confidence, to zero value and zero confidence. Which path will it take?
In a healthy society, it would take a second. You only need a rumor to move your assets away from risk. But, we do not have a healthy society. We have millions and billions of "human beings" that neglected on their nature given obligations to watch out for their own interest. They now believe that someone else is actually watching out for them. Yes, they are this stupid and gullible.
So, how will they lose confidence in their own stupidity?
I think that they best represent a heard of sheep. (I know, sheep do care for themselves, but this is the closest approximation).
Because of this, they will believe anything that becomes a movement. This means parabolic growth with very slow initial stage. But, a stampede at the end. In the wrong direction mostly, so that many will die.
Jimmy: The CRU scandal is indeed pretty interesting. The leaked e-mails show some leading climate scientists are willing to go to great lengths to hide data that may or may not disprove their theories.
You may also be interested in this summary of the controversial e-mails: http://bishophill.squarespace.com/blog/2009/11/20/climate-cuttings-33.html
Martijn,
Re: 1933
CPI: 1929 - 1937
Inflation Rates: 1932 - 1933
...Yet, the United States did break out of the deflationary cycle, as illustrated in the graph above. After rapidly plunging for about 30 months, with the CPI seemingly in free fall and not able to find a floor – there was an abrupt turnaround... The nation turned essentially “on a dime”, from unstoppable deflation to inflation instead. A cycle of inflation that has continued until this day.
What happened?
March 9, 1933
President Franklin D. Roosevelt was inaugurated on March 4, 1933. He came into office with a mandate and agenda to stop the Depression, and that meant breaking the back of the deflationary spiral. His actions were swift, beginning with a mandatory four day bank holiday imposed the day after his inauguration. Five days after Roosevelt took office, on March 9th, the Emergency Banking Relief Act was passed by Congress. This was the first in a series of executive orders and bills that would take place over the following weeks and year, and would cumulatively take the United States government off the gold standard – and would also effectively confiscate all investment gold from US citizens at a 41% mandatory discount.
When you get worried about monetary deflation – take another look at March of 1933. Remember as well the one near universal lesson from the long and convoluted history of money: every time the rules governing a currency lead to a problem that causes too much pain for a government to bear – the government just changes the rules. The bigger the problem – the bigger the rules change (and the bigger the wealth redistribution, as discussed in the full version of this article).
So, when we look not at near irrelevant gold certificates, but the dollar we have today, what the Great Depression of the 20th century in the United States historically proves is not the unstoppable power of deflation, but the opposite: that a sufficiently determined government can smash deflation at will, virtually instantly, even in the midst of depression, and replace it with inflation.
Indeed what March of 1933 shows is that the value of money can turn on a dime when we are using a symbolic currency.
Source
"..what the Great Depression of the 20th century in the United States historically proves is not the unstoppable power of deflation, but the opposite: that a sufficiently determined government can smash deflation at will, virtually instantly, even in the midst of depression, and replace it with inflation. "
Very true. Also note, that it is inevitably and always the saver who will have to pay, as he is the one, de facto storing the purchasing power that will have to be claimed by the state. I conclude, that the biggest lesson that can be taken here is "DO NOT SAVE" until such time that these rules are not in place anymore (unless your savings are not approachable by the government).
Their 1933 inflationary efforts were confounded in 1937 with the second dip of the depression. So in the end their efforts were futile. The inflation from WWII finally ended the depression.
FOFOA,
"Remember as well the one near universal lesson from the long and convoluted history of money: every time the rules governing a currency lead to a problem that causes too much pain for a government to bear – the government just changes the rules."
... and only a select few get a phone call (or carrier pigeon) before the Govt acts.
To Others,
Re: Comparisons between current events and the Great Depression.
What caused the initial deflation?
1. Govt. policy - the "good 5 cent cigar". The Republican policy was to reverse the inflationary impact of WW1.
2. Part of the debt build-up during the 1920s involved the sale of foreign Govt bonds to retail investors. Most, if not all, Govts defaulted. This contributed to a cascade of defaults and payment suspensions on other debts.
3. Around 4,000 banks failed during the Great Depression. The banks were fractionally reserved + No deposit insurance = 100% loss for their depositors.
The combination of earlier Govt policies, default by borrowers and loss of savings deposited with banks drained cash from the system.
Given the distribution systems of the time, rapidly re-supplying the system with a PURE fiat currency would have been a herculean task.
Imagine how much harder it would have been with a gold-backed currency.
.... then try to imagine the challenge of re-supplying a system built on a gold COIN backed currency.
.... then compounding the challenge 4,000 links in the currency distribution SYSTEM itself were disappearing.
None of these constraints apply to the present situation. If the PTB want inflation it is inflation we shall have.
Haven't Ben once answered the deflationistas by saying that he could drop new money from helicopters, if needs be?
Amazingly, the deflation side argues any kind of technicality or a rule, as if government ever cared for any rules or had any technical problems changing them.
I find deflationists to be mostly consisting of 80 percent of those not requiring the clarification in terminology (I.e., are you speaking of price deflation in this instance?), and 20 percent of scam artists who actively use the proliferated terminology to defraud their followers into this "contrarian" "thinking". Most if not all deflation arguments are constantly mixing monetary, credit, debt, and price deflation terms, obviously, intentionally so.
Still nothing firm from anyone re: the Joseph Moshe situation, but one of my israeli sources told me he's skeptical, but looking into it. he didn't provide more information.
Enjoy:
http://blogs.telegraph.co.uk/news/jamesdelingpole/100017393/climategate-the-final-nail-in-the-coffin-of-anthropogenic-global-warming/
Another brick in the wall...
rootcho:
I very much like his idea of China issuing bonds which then are bought by companies borrowing dollars (via $ carry trade) then chinese using money they received to buy treasuries.
But from what I know it is may be more like chinese printing money to buy ty's ?
Somebody have more info on this ?
I also agree with the idea that gold is not inflation hedge, but financial crisis hedge OR if i can prephrase it "accumulated-inflation-hedge" :)
The main error of deflationists in general (as this guy too) is that they look at the system as pure mathematical system.
I see it more like the base of the system is composed of the currencies ($ in this case) on top of it we have the whole thing deflationists use to make their conclusions. As long as it is stable deflationists are on target.
But once we are in $ declining vector they start to get wrong...and so on you get the idea.
The other mistake they make is that they tend to look at USA like a black box where Fed has full control. They forget that international market is the one that will have the last say.. about the "value" of the $, not the Fed.
since we're into paradigm busting here, I thought I would share some of my own thoughts about things that are essential:
anthroecology a term which many have coined, but I use it often quite differently, referring to our bodies' ecology. In other words, we can't live w/out the very complex and intricate forest ecology that is our bodies. Bacteria, "viruses", parasites, fungi, and other things which make up our intestinal micro-flora and fauna. too often we think that we are these autonomous beings based on our external observations, and too often forget that this is simply a nice myth that has been inculcated in all of us since very young. Different people might debate the ramifications for how important what is overlooked actually is. It is important to remember that out of the 100 trillion cells we have in the body (and this number is constantly going up every few years in what researchers discover) 90 trillion or so are bacteria, and are at the core of helping "each of us" live.
Because of many of the diets we choose to eat, and the stresses we put on our bodies (and the stresses put on our body by various particular interests, as well as natural environmental stresses), as well as the genetically modified foods, anti-biotics, the acidic diet, chem-trails, polluted air, water, soil, and food, in addition to sooo many other things, we destroy much of that biotic "supply" unnecessarily (and often without understanding that have and its impact on us) most of the time, and often are left under-supplied not from a life sustenance/maintenance standpoint, but from a life-thriving standpoint.
food / plants are stored sunlight (among phytochemicals, and many and other things)
@Fofoa,
Nice info. I believe I should work on my historical perspective a bit. Bashing Bernanke because he can run a money printer just doesn't do it.
I actually believe he is far from stupid and that given the few options our financial system has left him with he might actually be doing a rather good job.
I truly wonder how much time he will be able to buy.
I think it's time to pay attention to the new bubble... that being the stock market, which is apparently being fueled by "carry trade" fanatics. If you study German inflation after WWI you will note that currency manipulators were more responsible for the runaway inflation than the government. The printing of money was defense move.
allen, don't you think that a 0% interest rate is like leaving a parking meter in front of cool hand luke?
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