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Bankers and Economists Say Gold is a Bubble. Here’s Why You Should Ignore Them
- Ben Bernanke
- Ben Bernanke
- Commodity Futures Trading Commission
- Comptroller of the Currency
- Federal Reserve
- Fisher
- Fraudulent Monetary System
- Futures market
- Gold Bugs
- Great Depression
- John Maynard Keynes
- KIM
- Market Crash
- Maynard Keynes
- New York Times
- Nouriel
- Nouriel Roubini
- Office of the Comptroller of the Currency
- Reality
- Recession
- recovery
- SmartKnowledgeU
- Yen
It is indisputable thay:
(1) History has much to teach us;
and that
(2) We ignore historical evidence that is useful in predicting the
future far too often, even though history has demonstrated time and time again
that it repeats itself.
With the benefit of hindsight, let’s review the chatter of
the leading US economists before the stock market crash of October 29, 1929
that ushered in the global Great Depression:
"We will not have any more crashes in our time." -
John Maynard Keynes, 1927.
"There may be a recession in stock prices, but not
anything in the nature of a crash." - Irving Fisher, leading U.S. economist,
New York Times, September 5, 1929.
“There is no cause to worry. The high tide of prosperity
will continue.” - Andrew W. Mellon, Secretary of the Treasury. September 1929.
Even after the stock market crash occurred, there was still
no stopping the economic-political propaganda machine.
"[1930 will be] a splendid employment year." -
U.S. Department of Labor, New Year's Forecast, December 1929
“I am convinced that through these measures, we have
reestablished confidence.” - Herbert Hoover, US President, December 1929.
“While the crash only took place six months ago, I am
convinced we have now passed through the worst - and with continued unity of
effort we shall rapidly recover. There has been no significant bank or
industrial failure. That danger, too, is safely behind us.” - Herbert Hoover, US
President, May 1930.
If one studies economic history, one will uncover a clear
and distinct pattern of unbridled and highly unwarranted optimism that defied
underlying, sickly fundamentals during every recession that has occurred in the
last century. Overwhelmingly,
there is a clear and distinct pattern among these egregiously poor predictions,
as they consistently are issued by the world’s most prominent economists and
politicians. In fact, if you follow the financial media, I am sure that you
recognize striking similarities between the propaganda issued before and during
the Great Depression and the propaganda issued during this current monetary
crisis.
Though this is not a warning that another Great Depression
will inevitably materialize, I do believe that the second phase of this
monetary crisis is inevitable, that it is likely to be worse than the first
phase that we suffered in 2008, and that it is likely to challenge the depths
of the prior Great Depression unless our leading governments drastically alter
the banking and monetary policies they are currently choosing to embrace.
At a very minimum, the brief historical record at the
atrocious quality of unwarranted optimistic economic predictions from
politicians and economists alike in the face of dire economic circumstances should
warn us to completely ignore the repeating pattern of propaganda about imminent
recovery that is occurring today. If we do not take notice of the mountain of
historical evidence regarding the close bonds forged between economists, and politicians
and bankers that lead to the deceit of such propaganda, we have only our own
stupidity to blame when the collective wealth of nations are destroyed in 2010
and 2011.
Yes, the cat is out of the bag. There is an alliance between
bankers and the politicians and economists they monetarily support to purposely
mislead the public through well-timed pieces of propaganda. Either this aforementioned sentence is
true, or the people we continually propel to the forefront of the media in
politics and academics are the dumbest people that reside on our planet. One of
these two statements must be true.
Even among the most prominent people that advocate gold and
silver today, I observe a wealth of misguided commentary about gold that
largely has arisen due to the propaganda campaigns that bankers have
continuously waged against gold. And what about prominent economists beliefs
about gold? Today, economists still have not broken their shameful history of
making awful predictions. For this reason, one should ignore every politician
and economist that states that gold is currently a bubble. However, let’s
dissect one case in particular.
A couple of weeks ago, well-known and often-quoted American
economist and economic professor at New York University, Nouriel Roubini,
scripted some of the most inane arguments I’ve ever read in support of the
“gold is a bubble” argument. In fact, some of his arguments were so vapid that
it would not surprise me, if one day in the future, an investigative journalist
uncovered a direct deposit from the US Federal Reserve into his bank account a
few days prior to his writing of the article, “The Gold Bubble and the Gold
Bugs.”
The economists and politicians that continually rail against
gold do so because gold is the enemy of a fraudulent monetary system that
continually steals the wealth of nations through a silent tax called inflation.
In his article, “The Gold Bubble and the Gold Bugs”, Roubini wrote, “since gold has no intrinsic value, there are
significant risks of a downward correction.” Indeed, today, despite a decent rally in the gold futures
market on Christmas Eve, gold still appears vulnerable to further downside
action, and further downward pressure at the end of this month would not
surprise me, if it happened. However, when Roubini wrote this article in mid-December, a
gold correction had already commenced (thus, there was zero risk in his prediction
of a gold correction at the time he scripted his article).
And here’s where the chicanery of economists like Roubini
emerge if one takes the time to dissect his comments. Note that when Roubini
released his article to the media that gold had already shed $75 to $80 an
ounce from its previous high earlier in the month. At this point, an
eight-year-old could have predicted the likelihood of further short-term
weakness in gold markets. When the gold correction continued after Roubini’s
comments circulated the internet, there were inevitably many people that read
Roubini’s comment that erroneously deduced that Roubini correctly predicted the
current downward correction, and thus, gold must have no intrinsic value.
But let’s break down this statement even further to
illustrate exactly why Roubini’s comments offer nothing beyond what a shill for
the banking industry would state.
Roubini claims that gold has no intrinsic value. If we look up the
definition for intrinsic, this is what we find: “Of or relating to the essential
nature of a thing.” The fact that
people are willing to pay more than $1,000 an ounce for gold, by definition,
grants gold intrinsic value. The fact that people value gold as an attractive
adornment in the form of jewelry and are willing to pay top dollar for gold
jewelry, by definition, grants gold an intrinsic value. If gold had no intrinsic value then why
do people offer top dollar for it? I wonder if Roubini is married and if he is,
if he bought his then fiancée a diamond ring? Using the flawed “intrinsic
value” argument, if gold has no intrinsic value, then surely diamonds have zero
intrinsic value as well. And if so, then why do so many people that accept the
flawed “gold has no intrinsic value” argument willingly buy diamonds? Of
course, the answer is that both gold and diamonds DO have intrinsic value as
indicated by the willingness of people to pay loads of money for these commodities,
whether in raw or processed form.
If Roubini is arguing that gold can not serve as money because it has no intrinsic
value, then has he ever considered the intrinsic value of all fiat money
itself, including not only the US dollar, but also the yen, the euro, and the
pound sterling? The only qualities that grant fiat paper money value are the
numbers and the pretty ink with which governments adorn it. But strip away the
numbers and pretty ink, and how much would someone be willing to pay for that blank
piece of paper? Not even a penny I would fathom. Yet, strip gold from its
jewelry form, or better yet, offer it to someone in its rawest, unprocessed
form, dug up in a core sample from the earth, and you will always find people
willing to pay vast sums of money for this raw metal.
By definition, this gives gold far more intrinsic value than
any fiat currency, and renders Roubini’s argument as almost laughable. It is
even more amusing that the public, en masse, then embraces such silly arguments
and repeats them like mindless parrots. Though this is amusing, it does not
surprise me. This is the fault of institutional academia that has stripped all
young adults of the ability to critically think and reason for themselves. This is why I have argued that business
school is an utter waste of time and money (something I unfortunately did not
realize myself until completing my MBA), and why some of the worst reasoning
about global economics and monetary policies originate from former economic
chairs and professors of supposedly esteemed academic institutions such as
Harvard and Princeton (aka Ben Bernanke).
The public stands far too much in awe and grants far too
much trust to public figures just because they are in a position of authority
or because they might possess a degree from Harvard or MIT or Oxford. I’ve seen
this pattern of gullibility happen over and over again. Commercial investment
firms are able to repeatedly mesmerize and recruit clients by advertising sophisticated
quantitative models developed by some Wharton MBA that grant their clients a
sense of entitlement and superiority. In reality, this is just nonsense because
stock markets are rigged and the only way to guarantee results is to become
friends with the riggers or understand how the riggers operate, which no
quantitative model can effectively accomplish.
Though I graduated from the University of Pennsylvania, I
have met more people on the streets during the course of my life that
understand politics and monetary concepts much more fully than any student or
professor that I have ever met inside the hallowed academic halls of any Ivy
League institution. A fancy degree should never grant anyone a pass as someone
to be respected and it should not grant me one either. Rather, one’s logic, rationale, and track record should be
necessary to earn the respect of masses, though these ingredients never seem to
be essential to the financial media.
Most politicians, economists, bankers, and media personnel
that constantly denigrate gold seem to be embattled in a crusade to paint all
gold owners as crazy, lunacy-tinged, tin-foil hat wearing conspiracy buffs that
believe gold can only rise in a straight line to $10,000 an ounce. In fact,
from my experience, I’ve found almost the exact opposite to be true. In my
encounters with gold owners over the past decade, I have found most gold owners
to be insightful, of above-average intelligence, and much more capable of
independent thought than the average person. Though there is a small contingent
of gold owners that may indeed resemble the mentally unstable character, Jerry
Fletcher, portrayed by actor Mel Gibson in the movie “Conspiracy Theory”, there
is also a small contingent among the investment community, otherwise known as
Chief Investment Officers of large commercial investment firms, that always
believe that the stock market will rise no matter the circumstance.
Even though I believe that gold will eventually top out at a
price multiples of its current price, the truly educated among gold owners don’t
expect this price to be achieved as a straight shot higher to the moon. For
this reason, we have bought gold since it was $500 an ounce and held on (or for
the more sage among us, maybe even at $300 or $400 an ounce). We have acted in
this manner because we understand that not only is it natural for gold to correct
after rapid surges, but that gold also corrects sharply at times due to price
suppression schemes executed by bankers. And we understand that neither
occurrence constitutes a gold bubble bursting.
As one of the themes of this essay has been to learn from
history, I will conclude this article by stating that one of the best reasons
to ignore the gold bubble advocates today is their failure to acknowledge one
of the most important contributors to steep declines in the price of gold that
occur from time to time – the execution of price suppression schemes and free
market interference into gold markets by bankers. To support this thesis, I
will reproduce below a portion of an article I wrote on October 16, 2008, in
which I discussed the enormous anomalies created in gold markets by these
banker executed schemes during the fourth quarter of 2008. Though I wrote this article more than a
year ago, it is worth revisiting to understand the ample evidence of gold price
suppression schemes that one must account for to understand that gold
corrections cannot be a bubble bursting.
“Today (October 16, 2008), there have been four distinctly
and differently priced markets established for gold: (1) Futures markets in
Asia that consistently establish prices $20 an ounce to $60 an ounce higher
than the prices established in (2) Futures markets in New York; (3) Physical
bullion bars that dealers are starting to price at healthy premiums above both
daily spot prices established in Asia and London/New York; and (4) Physical
coins that dealers have always priced at premiums above bars and spot prices,
but that are now selling at soaring premiums above spot prices.”
“Since the July 14th (2008) correction in gold and silver
markets began, waterfall declines have occurred in gold prices in New York
futures markets that trade paper gold where physical delivery of real gold
occurs with less than 1% of all paper traded futures contracts. The differences
in spot prices in Asian futures markets and in New York futures markets for
gold have been staggering for the past 10-12 weeks, so much so that two
distinct and separate future markets for gold have been established, one in
which the gold price is significantly higher in Asia and another, where the
gold price is significantly lower in New York. As they say, a picture can paint
a thousand words so below you can find the daily spot charts in Asia and in
London/New York so you can compare the huge discrepancies between these markets
on a visual basis.”
In the remainder of that article, which you can find here,
complete with all graphs, I presented compelling visual evidence of enormous
discrepancies in the price of gold between Asian and NY/London markets within
the same 24-hour trading day that lasted for weeks on end, and seemed to point
to excessive suppression of gold prices in the NY and London markets. The evidence was so compelling, that when
I forwarded it to CFTC commissioner Bart Chilton, Mr. Chilton promised me that
he would investigate the discrepancies with his team. Given the evidence, I concluded
back then “that something [was] seriously amiss in the futures markets for
gold…and that rampant manipulation for profits by just a few players [was]
occurring in an unchecked fashion. According to data recently released by the
Office of the Comptroller of the Currency, a division of the US Treasury, of
the $135 billion of gold derivatives contracts (including futures and options)
controlled by financial institutions, JP Morgan controls $96 billion
(71.11%) of these contracts and HSBC Bank USA controls $34.4 billion (25.48%)
of these contracts. In other words, just two players control almost all gold
derivatives contracts in the entire United States.”
Thus, if we tackle all flawed arguments against gold on the
basis of logic and from the perspective of understanding that from time to
time, bankers execute artificial schemes to depress the price of gold to serve
their own purposes, then it should be quite simple to ignore your local
politician and economist when they tell you that you shouldn’t buy gold because
it is a bubble.
JS Kim is the Founder & Managing Director of
SmartKnowledgeU, LLC, a fiercely independent investment research and consulting
firm.
»
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A few logical points:
1. Just because your "uncle" manages a supermarket doesn't necessarily make him wrong. Maybe he's right. What are his reasons?
2. If an asset has greatly appreciated, it does not have to retrace to previous levels. Future perfomance does not depend on past history. Amateurs made that mistake in 1995 saying that tech was overpriced. They missed out on 5 years of huge potential gains.
3. Ad Hominem against the goldbugs. Not every member of the group is guilty of wild remarks and bad judgement. Your last paragraph implies this through sarcasm.
Get your own remarks in order before lecturing the entire board on logic.
Holy shit, did you just use tech stocks in 1995 to imply gold isn’t in a bubble?
Gwnyplaine, I don't care if you think I am using Ad Hominem against goldbugs, because I AM going Ad hominem on them.
I figure one good Ad hominem (see original article) deserves another :)
Seriously though, you are right, not all goldbugs are wackos. But relative to other investors, gold investors do seem to have a disporportionate share of tin foil hat types.
As for my uncle. He pays attention to lots of late night infomercials. Late night gold bug ads are flooding the airwaves these days in case you haven't noticed. But I'm sure you're going to call me out because "there might be some good info in those ads" right?
As for your point 2, where did I say gold would retrace? I have no idea what gold will do - I only play the odds. And from a risk-reward perspective, buying at the top is always riskier than buying at the bottom. I AM a gold investor and I just sold my paper stuff. Call me an idiot or amateur, I don't care. If gold goes to $5000, congratulations. I'm not going to chase it. I'm more interested in risk management and not losing money rather than chasing the next tech or gold fad.
But relative to other investors, gold investors do seem to have a disporportionate share of tin foil hat types.
Well, that's you OPINION, with no fact to back it up, now isn't it?
Consider that the fervor is in response to (and probably not matching, cause it's clearly got the upper hand in the propaganda department) the hysteria over fiat currencies. When one considers that there's really no sane reason why fiat currencies continue to exist given that they are born to go out of existence (do people really think that they can get out of the game before that happens?), wouldn't this constiture a GREATER irrationality than that presented by your "tin foil hat" types?
Insanity is doing something over and over and expecting different results. Again, we KNOW where fiat currencies are going to get us. Further, because of how they are maniuplated they vastly surpass (through their ability to be inflated) any ability to establish sustainable economic practices. Infinite growth and infinite printing go hand in hand, but will, in the end, fail miserably. Gold, at least, places a physical check on growth (doesn't gurantee that we won't destroy the planet, but it'll keep us thinking more in line with the physical world, which at least gives us a chance to pause and reflect, to contemplate more along the path of reality than virtual fantasies as fiat currencies have helped bring).
Seer, that's all fine and dandy and I actually agree with you. Fiat currencies are doomed to fail at some point. Just like the sun will one day go black and life on earth will cease to exist.
The problem I have is timing. You tell me when this will happen and then it will become relevant to me. I have an aunt who got all tin foil after the 70s recession and Nixon took us off the gold standard. She built a cabinet in the mountains and has been preparing for the apocalypse for 30+ years. She is in her 70s now and pretty much missed out on most of life. You tell me, is that good life strategy?
Tell you what, you give me the date and time of the world ending, and I'll build us the bunker, stock up on the gold, ammunition and M60s. But if you can't give me a time frame, I'm not going to spend the rest of my life preparing for one scenario. The shit can hit long after I'm dead.
And P.S. I do own physical gold. But to me, it's insurance not the end all and be all of investments.
It pales in comparison the "religious fervor" regarding tech stocks. Go try telling AAPL cultists that their common stock is overvalued.
Yeah the AAPL folks are nuts. Both the investors and the MAC users.
Am I the first to add? -- Bitches! It's slow here this morning. People must still be sleepy from the holiday.
What "intrinsic value" does a holiday have, by the way? "Intrinsic value" is a phrase for idiots, signifying nothing. Sound and fury.
Economically, anything is worth what somebody will pay for it. That is all, the alpha and omega of the subject.
The essential question is in what people will pay for a U.S. dollar next year, and the year after, and into the future. The clear answer seems to be "less." The question that follows is, how much less? - as the Federal Reserve fabricates a huge "dollar bubble."
We shall see. Bitches!
The essential question is in what people will pay for a U.S. dollar next year, and the year after, and into the future. The clear answer seems to be "less." The question that follows is, how much less? - as the Federal Reserve fabricates a huge "dollar bubble."
BINGO! That's all there is to it, it's really, really this simple!
Very interesting information, thank you for posting this. I think going forward gold is going to remain one of the best investments because of the Federal Reserve's top priority of avoiding deflation by printing money and keeping interest rates near record lows. And I just saw another m&a story in the gold mining sector at http://www.goldalert.com/gold-price-blog.php
Penmont trumped Goldcorp's offer for Canplats Resources for the 2nd time in less than a week. With all of the money printing the govt is doing, I think gold will continue to do well, which is gonna lead to more deals like this where the big gold miners acquire the smaller gold explorers
Very interesting information, thank you for posting this. I think going forward gold is going to remain one of the best investments because of the Federal Reserve's top priority of avoiding deflation by printing money and keeping interest rates near record lows. And I just saw another m&a story in the gold mining sector at http://www.goldalert.com/gold-price-blog.php
Penmont trumped Goldcorp's offer for Canplats Resources for the 2nd time in less than a week. With all of the money printing the govt is doing, I think gold will continue to do well, which is gonna lead to more deals like this where the big gold miners acquire the smaller gold explorers
"Roubini claims that gold has no intrinsic value"...First of all Mr. Roubini....I get the "feeling" you may be lying. Here are the reasons why.
So let's look at the intrinsic value of a piece of toilet paper called the dollar and any other paper currency:
1. It's a piece of paper.
2. It has some ink on it.
3. It has to be manufactured.
As an owner of a printing company (not any more, sold it), I can honestly say the cost to print one of these pieces of toilet paper is in the realm of 3-5 cents each, no matter what the denomination is. To back this up, I read some time ago that the Fed pays the Treasury a tad over $20 for 1000 FRN's (Federal Reserve Notes), regardless of the denomination. So that equates to around 2 cents per FRN. So we now know what it is really worth.
As for the intrinsic value of Gold:
1. At it's lows, the cost to mine it was in the realm of around $200 per ounce (2000 or 2001 time frame).
2. It's used in electronics and other industrial areas...it is needed for these "real" and not "make believe" functions.
3. It has stood the test of time as a store of value.
So, if gold is needed for industrial purposes, someone is going to have to generally pay what it costs to mine and process it. That process is considerably higher than the process to print toilet paper...I think most would agree.
Further, if history teaches us just one thing...there has never been a paper currency that has survived...not one. If you disagree Mr. Roubini, prove it. But, you know Mr. Roubini, I still see some gold floating around...all the way from the beginnings of recorded history. But, I presume, from your statement, that doesn't mean anything.
Even further, if gold has no intrinsic value, then why do the central banks have it? You know and I know....end of story. Bottom line....whatever the government says, meaning any representative of same (direct or indirect), I will fade what your lips say, and so will many others.
To put this in some hypothetical perspective, let's pretend that a fiat currency goes bust (and they all have...no one empire has ever stayed on top forever...that is a fact). So if their currency goes bust...it's worthless, right? Ok... now let's suppose I have some toilet paper and a few of those worthless FRN's. Now let's suppose I have to go to the toilet. On one hand I have a roll of toilet paper and on the other hand I have a roll of FRN's. Which do you think will work better when I have to wipe my butt? Those FRN's are kind of stiff and won't do as good a job. They'll still work, but not as good. So in reality, under these circumstances, I will be able to sell TOILET PAPER for more than FRN's. Got that Mr. Roubini?
oh another one for shiny stuff... i am all for it, assuming its WHITE shiny stuff... (PT, PD, RH)
The crib notes version:
- politicians and economists blow smoke up our ass,
always have and always will.
- central bankers actively supress the price of gold
to silence the canary in the fiat coal mine.
- Roubini's 20 minutes of fame are about to end.
Michael
Arghhhhh, poor Irving... everyone will look at his quotes prior to the crash and ignore his works before and after the crash, all of which are priceless in the information they possess.
And yes, I'm an mathematical economist and yes, I think gold will reach $2k+ (at the VERY least), but perhaps not as soon as most believe.
Oh and as for your belief that people on the street understand more than the so called "professionals".... here's a quote you'll love.
“I have a great respect for orthodoxy; not for those orthodoxies which prevail in particular schools or nations, and which vary from age to age, but for a certain shrewd orthodoxy which the sentiment and practice of laymen maintain everywhere. I think that common sense, in a rough dogged way, is technically sounder than the special schools of philosophy, each of which squints and overlooks half the facts and half the difficulties in its eagerness to find in some detail the key to the whole. I am animated by distrust of all high guesses, and by sympathy with the old prejudices and workaday opinions of mankind: they are ill expressed, but they are well grounded. My philosophy is justified, and has been justified in all ages and countries by the facts before every man's eyes; and no great wit is requisite to discover it, only (what is rarer than wit) candor and courage. Learning does not liberate men from superstition when their souls are cowed or perplexed; and, without ‘special’ learning, clear eyes and honest reflection can discern the hang of the world, and distinguish the edge of truth from the might of imagination.”
~George Santayana, Preface to a New Philosophy
Thanks for your comment.
I greatly respect Fisher's work. He seems to
be an honest man who was caught in his own
beliefs, but then worked to revise those beliefs.
I like your quote and put it in my rotatiog
read list.
Fisher absolutely did sell out in the end... If anyone's read Booms and Depressions, you'll know that Zimbabwe Ben's been acting off his playbook. I don't think the story of any person in history has ever made me so disappointed. If there is a life after death, I think Fisher paid for his betrayal of the common labourer and came back poor and destitute rather than the son of a silver spoon.
Thanks for the compliment on the quote, Santayana is an amazing philosopher, but the quote was made known to me thanks to Hank Pruden's intro to the 2001 Journal of Technical Analysis that the MTA publishes. I would recommend you all take a look at that particular issue as well, there's an exceptional article in it by Jordan Kotick called The Metaphysical Implications of the Elliott Wave Principle.
http://64.211.220.8/EWEB/DynamicPage.aspx?webcode=journal-2001-summer
Which is why I was a little disappointed to see the estimable Jesse refer to Palin as a "brainless Bimbette". It is to discount all those qualities that separate her from both Obama and "the Decider".
Palin represents the most cynical element of human nature- hatred. If she was worth something (which she is not) she'd be proposing a movement completely away from the existing system, not some idiotic strength-through-exhaustion energy policy (drill baby drill!). She is just another nationalist shill pushing the next Christian Crusade.
I'll take Twain over just about everyone else:
"But it was impossible to save the Great Republic. She was rotten to the heart. Lust of conquest had long ago done its work; trampling upon the helpless abroad had taught her, by a natural process, to endure with apathy the like at home; multitudes who had applauded the crushing of other people's liberties, lived to suffer for their mistake in their own persons. The government was irrevocably in the hands of the prodigiously rich and their hangers-on; the suffrage was become a mere machine, which they used as they chose. There was no principle but commercialism, no patriotism but of the pocket."
- Mark Twain (writing about the consequences of imperialism tor democracy in a future America in the wake of the American conquest of the Philippines)
And my favorite:
"When you find that you are on the side of the majority, it's time to pause and reflect."
- Mark Twain
Brainwashed by the MSM. Sorry, but you're an idiot or a college student.
Which is why I was a little disappointed to see the estimable Jesse refer to Palin as a "brainless Bimbette". It is to discount all those qualities that separate her from both Obama and "the Decider".
Humpty dumpty sat on a wall....
Humpty dumpty had a big fall....
And....
....................................
Once upon a time there was a $70 Trillion economy....
Much of which was credit in various forms....
Many of these forms have been eliminated....
ie credit cards....securitization.....small business loans...
Now there is a $40 Trillion economy....
One can believe this....
ALL PRICES WILL ADJUST 40/70....
This includes anyting....including gold....
Nothing will have much upward pressure....
The US can print all the money it wants up to
the previous 70/70 economy....and have no overall
upward effect past 2007 numbers....
Think about it....
...................................
What should be happening is a total restructuring
of taxes to favor businesses and their valuations....
Then stock and private company valuations ....being that they are levered multiples of cash flow and assets.....could most quickly replace the 70/70 economy....and beyond....
Unfortunately.....The current set of Poly parasites will do the opposite in a panic to increase taxes from a diminishing base....
THEY should be planting more trees ....
IF THEY WANT MORE FRUIT....
S F'S.....
What should be happening is a total restructuring
of taxes to favor businesses and their valuations
No, there should be NO "favoring!" "Favoring" is just another word for subsidzing. If we really want to establish whether a thing will be able to stand and bring about a sustainable environment (not lead us over the cliff), then nothing should be favored (except fair play).
But, you're absolutely right in that we should be planting more trees (as in the literal sense- I'll take trees over today's businesses that primarily produce owrthless crap).
End the income tax for five years in this country for the citizens. That would be a start. Big business should actually pay their taxes. What is it 67% pay no taxes? And the income tax only covers 1/3 of the budget. Let the government also tighten their belts.
Everything has an intrinsic value, even garbage (to an incinerator operator, for example). However, gold has no intrinsic value against a fiat currency, and that is precisely the point, which pisses TPTB off.
I am on the record that COMEX will be blown out of the water by March at the latest, not on price, not on volume, but on physical settle force majeure.
And by the way, good nick Nout, hahaha! For those not in the know, Nout Wellink is the Dutch Bernanke.
The COMEX will NOT be blown out of the water by March, or by any other month you may choose.
They have already declared that contracts may be settled in cash, rather than physical delivery, if they choose to do so.
You can't blow them away if they can deliver fiat paper instead of having to deliver the real goods.
Gold may be a bubble but the finance system for sure is a Ponzi scheme. Pick your favorite.
The Rental car bubble is more impressive.
http://stockcharts.com/h-sc/ui?s=DTG&p=D&yr=0&mn=10&dy=0&id=p81585585523
http://stockcharts.com/h-sc/ui?s=car&p=D&yr=0&mn=10&dy=0&id=p81585585523
http://stockcharts.com/h-sc/ui?s=htz&p=D&yr=0&mn=10&dy=0&id=p81585585523
Which is also a save the car companies throught he back door operation. Fleet purchases are HUGE to auto industry.
Careful with "intrinsic value"...
Von Mises said that gold has no intrinsic value because the concept of "intrinsic value" itself cannot exist. That all things have value to some people at some times for purposes which each individual attributes, individually, to them.
A refriderator has little intrinsic value to an Eskimo. Likewise a sandbox to a Bedouin. Many twits come up to me and spout that gold is a useless metal precisely because it serves little or no industrial purpose. They'd rather, they say, trade with barrels of oil or even apples. Never mind the practicalities, the lack of fungibility, or durability. The idea seems to be that something MUST have a clearly demonstrable industrial use to have "intrinsic value".
Nonsense. What rubbishy utilitarianism. (Anyway, gold's role, as it is, is as MONEY.) Does artwork serve a useful purpose? No? What about my wife's sexy underwear? What about my dog? Intrinsic value is, quite simply, relative. It is different things to different buyers.
Intrinsic value as an absolute doesn't even exist.
Incidentally, another argument I hear is that gold is NOT money because you can't buy stuff at Wal-Mart with it. Don't tell this to the uber-wealthy, or to bankers, or to central bankers in particular. If gold were not a functioning private money, why would Hugo Salinas Price have explicitly stated that precious metals are the ONLY money that can finally and completely settle any contract? Something that has NOT been happening since 1971, as useless cheques and IOUs flood the globe...
Sometimes the answers to common everyday situations are so very "right before our eyes" that perhaps the over-educated can't see them...
That's true. If one looks at the problem from the Austrian point of view, then actually NOTHING has an intrinsic value, because value doesn't exist as an inseparable property of the things and created only in the process of exchange between economic agents.
Simple example, two people got stuck in the desert and one has one ounce of gold and the other - 1 litre of water. Question: what is the value of one litre of water in that kind of circumstances if measured in gold? What is the value of gold in that kind of circumstances if measured in litres of water? Both questions don't have definite answers as it is, of course, a subject to negotiations between two individuals, but one can be sure that it's likely significantly different than the value of both in other circusmtances - say, when both individiuals got stuck somewhere near to a river (which represents a case of virtually unlimited supply of drinking water vs limited supply of gold). So, the key thing here is not an 'intrinsic' value of both gold and water, but relative supply and demand situation for both.
Now, when one looks at gold vs fiat money (be it dollars, euro or anything), then what is a key difference between the two? Leave alone demand situation, because it can vary greatly, but on the supply side of the equation it is good old replacement or production costs. In case of gold, replacement costs correlate closely with a level of production and if you produce say 1000 ounces, then it is going to be roughly 1000 times more expensive than producing 1 ounce of gold. In case of fiat money, can you say that creating 1 trillion dollars would be 1,000 times more expensive than creating 1 billion dollars? No it's virtually zero in both cases, especially when 'printing' is done electronically. As a result, there's no natural cap on the supply side that prevents it from growing indefinitely and that's the key thing in the whole 'gold vs dollar' debate. You can be pretty much sure that the supply of gold will not multiply ten times in the next say 10 years, can you say the same about the supply of fiat money?
THIS.
Absolutely the concept of "intrinsic value" is impossible to define.
Gold has "intrinsic value" to all those who value it at the point in time during which it seems to provide utility.
As a result, I think it's fair to say that YES, it IS a bubble, but the question is - how long will it be a bubble?
Honestly, the answer is this - when the currency management of nations becomes realistic. Which is to say, no time soon.
I agree, Gold has value now because people recognize the debasement of currency undermines the overall economic system. This means gold has portability between other systems, particularly during periods of economic transition (as we are clearly going through some kind of transition).
Gold will lose that value as the transition completes.
In the meantime, it will continue to "bubble" up.
Do clean drinking water and food have intrinsic value?
I think I understand what the 'no intrinsic value' crowd is trying to say with gold, but they are missing something enormous.
To those people I would ask that they go through a simple 'process of elimination argument' with, well,...everthing in the world. Here goes: If you accept that a paper money must be backed by at least something tangible (as I believe you must accept...It has to be anchored to the real world by something), what is the best thing to use? Go ahead, start with a list of everything in the world, and begin to cross items off one at time as you become aware as to why they abvioulsy couldn't be used. I'll give you a head start: you can cross off lawn chairs, bricks, ipods, and jars of applesauce.....In the end all there will be on your list is gold.
If we were to really get down to it we'd be trading pelts and such... Gold became a convenience trading agent. But using your "strip it all down" approach gold would also be cast away; however, at that point we wouldn't be typing away on computers...
We're setting new floors (lower) and one of those floors will be gold, but eventually even gold will be passed by on the further decline.
The Weimar government ended its hyperinflation by issuing new currency backed by real estate.
The US owns many millions of acres of land. It would be interesting to do a comparison backing scenario of land vs gold for a rejuvenated dollar. At current money levels (circulation), gold would need to be valued at nearly $6,000 an ounce to fully back the dollar.
@Kreditanstalt
"Intrinsic value as an absolute doesn't even exist."
Certainly value is, like beauty, in the eye of the beholder.
Clearly there are forms of value which are pretty universally acceptable in exchange ie 'fungible'.
Domestically the use value of location/land is universally acceptable, and in fact this value underpins over two thirds of bank credit = money, which was created as mortgage loans.
Internationally, energy use value (eg Kilo Watt Hours or equivalent in carbon fuel use) is almost universally acceptable in exchange.
The other form of generic use value in circulation is that of knowledge - which is what adds value to unqualified Labour (aka manpower). Knowledge may be both subjective (what is between our ears, and dies with us) and objective (intellectual property etc)
But the above fungible (currency) forms of Value (or 'money's worth') IMHO must necessarily be priced in relative terms by reference to a unit of measure, or 'Value Standard'.
I can't see how (say) 1 gramme of gold - AS gold - can be related by the average guy to his everyday experience. It appears to me that the only absolute standard of value which could make sense to the average person as a reference point is an energy unit.
Very good article. As the author points out, Gold market manipulation is fairly obvious when you compare the price movements of the Asian markets vs the price movements of the US markets.
Always have a contrarian view towards bankers and economists. They want to play their game, so they'll tell you the opposite of what you should do. The more they spit on gold, the better I know it is time to get more. With the dollar, euro and sterling crushed, they want all the gold. But don't let yourself be fooled.
Kondratieff would still be alive when he would have written 'capitalism will destroy itself, leave it to the bankers'. There is nothing more destructive than bankers.
>There is nothing more destructive than bankers.
How bankers destroy £7 for every £1 they create: Hospital cleaners are more valuable to society, say researchers
Source :
http://www.dailymail.co.uk/news/article-1235576/How-bankers-destroy-7-1-...
>There is nothing more destructive than bankers.
How bankers destroy £7 for every £1 they create: Hospital cleaners are more valuable to society, say researchers
Source :
http://www.dailymail.co.uk/news/article-1235576/How-bankers-destroy-7-1-...