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The Dark Years Are Here
And readers say Zero Hedge is pessimistic. Don't read this if you don't want to break out of your MSM-induced happiness daze. Compliments of Matterhorn Asset Management. Snippet:
All the money committed so far has only achieved two things: Firstly it has created some short term hope which together with totally illusionary sightings of green shoots have generated a small stock market correction (which we forecast in our January Newsletter) and some belief that the crisis is ending. Secondly, all the funds printed so far to save the system have gone to Wall Street but has done nothing whatsoever for the real economy. And what is the government doing about it. They are doing the only thing they know which is to print more money.
This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?
If that were the case we could all go home and write out pieces of paper or use Monopoly money to spend in the shops or repay our debts.
h/t Mark
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WHO RUN BARTERTOWN, BITCHEZ?!?
Seriously, these dudes use the Kondratieff Wave theory without attribution and stole the 35% non-farm Depression unemployment comparison from ShadowStats (at least they attributed the chart).
Hard money = BS. If the crap hits the fan, I mean *really* hits the fan, you'll need fertilizer, ammunition, and that sort of thing. Some intermediate stage where paper money is wiped out but heavy inedible things are still used as a medium of exchange is just a teenaged Ayn Rand fantasy.
Hard money =BS
Tell it to China....you fool.
If its worthless why don't all the CB's just dump it now?
(Grant's Interest Rate Observer, current issue), Jim provided an excellent discussion on this very topic. He began as follows:
"Too much debt got us into this mess, and too much debt will see us out of it. Socialize the risk of a new cycle of open-throttle lending and cling to the monetary system that assures a repeat crisis. Such, approximately, is the global policy-making consensus. Central bankers and finance ministers have achieved an uncommon meeting of the minds. The cure for what ails us is the hair of the dog that bit us, they prescribe, though not exactly those words."
Continuing on, Jim notes another problem with our money-printing "standard" (as opposed to the gold standard): the imbalances that build up, leading to the sort of calamities we experienced last fall and winter: "New under the paper-money arrangements of recent decades is a kind of intrinsic imbalance. The major debtor country loses no reserves even as the creditor countries gain them."
The gold standard is the only monetary system that actually worked over time. Imbalances were self-correcting because when countries got into trouble due to over-consumption, gold left their shores and headed to more prudent countries. Today, it would be on a fast track from the USA to China -- until the "imbalances" were reduced. Were the gold standard to have been in place over the last decade, we would have been forced to rein in our spending/speculating ages ago -- thus preventing the kind of damage that all of this money has inflicted.
If the gold standard "worked", why was it abandoned? And those "5000 years of history" goldbugs are pointing to ... those years mostly SUCKED ASS. For god's sake they didn't even have flush toilets for most of them.
What good does gold in a vault in the Alps do me? Jack shit, that's what.
I would much rather see a legislated funds rate in the high-single or low-double digits. Using gold as a reserve is impractical (very deflationary which is exactly what it was abandoned). You need electronic money in this day and age. Admittedly there has been way too much of it. Can we just clone Paul Volcker and keep him in charge in perpetuity?
The only thing still in the outhouse is fiat currency....they were forced to abandon gold standard because they couldn't keep their(ie US) committment at the window...you know their contract with the other CB's b/c it so worthless!
I agree with you .. by chat greetigns..
You make the common mistake (or intentional false argument) or equating progress with prosperity, technological advances with wealth.
By your logic, all our recent advances were due to getting off the gold standard?
How did those cavemen ever invent the wheel without fiat money? Those primitive apes who first forged iron tools, how did they do it without the Federal Reserve controlling the money supply?
The gold standard was abandoned to help Nixon pay for the Vietnam War through inflating the money supply. You do recall we had awful inflation during the 70s, do you not?
actually, it was only abandoned, because France called the US on its bluff. France demanded gold for the dollars they were holding, but the US could not perform on the contract under the Bretton Woods system to deliver gold for the redeemed dollars.
Andy,
The problem is, there is no such thing as a credible central bank. It is a contradition; the temptation caused by the ability to create money out of nothing is simply too great, and has always proven to be too great; governments always inflate their currencies, for various reasons, typically to pay for wars.
You're spot on re: the Reserve Bank of India and its credit growth targeting. Last year the bank's governor took a lot of flack from the real estate sector for tightening credit in the face of 10% inflation, but stuck to his guns.
The RBI's performance so far is fairly good.
Private sector credit creation FAR FAR dominates the puny amount of money-printing performed by the Fed so far. And the accompanying private sector credit contraction equally dominates all but the Fed's capacity to back-stop the funds needed to service that debt... For a while.
There's a black-hole of money, and it's winning.
but the fed creates those high powered reserves
which in turn drives private credit creation....
thus the fed, which owns lock stock and barrel
the people's money, is at the well head of
money creation....they are at the fulcrum...
right now private credit is sitting in the
federal reserve and isn't going anywhere soon
due to poor bank balance sheets and poor economic
conditions.....once it lets
loose though it will be a wild ride....
Wrong...there's a black hole of credit; you are conflating credit with money, and they are not the same thing. Credit created in a fractional-reserve system is not money, because credit created in this manner violates the "store of value" characteristic of money by being created whole from only a piece of the same whole. If you want to concede that fractional-reserve money is not a store of value, then you might have an argument to make.
Andy I have used this idea to guesstimate a final Fed balance sheet. If $2Trillion of capital has vanished, at 30:1 leverage it took about $60 Trillion of credit with it. If we reflate $60 Trillion worth, but at a more conservative 10:1 leverage, the Fed's balance sheet must expand by $6 Trillion, giving us a final Fed balance sheet of about $7 Trillion, since they started at about $800 Billion or so.
That's what I call dilution. And they'll never get away with it, and that's why I'm a hyperinflationist.
well said....the founders of our republic (long
since dead) saw the perils and plundering
of central banks and stipulated gold along with
the free and unlimited coinage of money as the
foundation of our economic system....it is not
improvable....
Yes, because everyone knows you can build a shelter, start a fire, construct a pair of snowshoes, track down and kill a goat, skin it, gut it, slaughter it into tasty steaks, build a sub-orbital launch vehicle to bring you home once you've gorged yoursellf on your goat steaks, and also fuel it, with fiat paper currency. If you were to be stuck in the Alps. For some reason. Like maybe you took a wrong turn on the way to your AA meeting and ended up on the Italian border (perhaps with $134 billion of bearer bonds on your person) and just didn't realize you were walking headlong into the fucking Alps.
I am Chumbawamba and you are dumb.
But with Krugerrands, all this is easy?
No, but if we eviscerate you we can use your body cavity as a tent.
I am Chumbawamba.
Good luck getting your Krugerrand to keep a sharp edge.
No problem, I'll use my teeth.
I am Chumbawamba, and I also have a knife.
read a book or two on the subject. I recommend "The Creature from Jekyll Island
I prefer Tragedy and Hope by Carroll Quigley.
creature was excellent and you can watch the
videos by the author on youtube....well worth
the effort.
so much ignorance so little intellect.....
the gold standard was abandoned because the
oligarchs wanted control of money and people...
it's just that simple....someone else below
speaks of france's call on our bluff which is
technically correct in terms of 1971 but the real
story started in 1913....
the gold standard "worked" remarkably well while
in force up until world war 1....however the
abandonment of that standard enabled ALL of the
carnage of that war because the absence of a gold
discipline enabled the belligerents to fight well
beyond their financial means would have permitted
otherwise....
a legislated funds rate in pure nonsense and the
demise of all statist centrally planned economies....
just utter economic rubbish...
gold is NOT deflationary....its abandonment during
the 1930s was deflationary because it removed the
wage fund and social capital on which the world
had depended for a century....thus the absence of
currency to support bills of exchange had a
huge effect on world trade which did not recover
to 1914 levels until the late 1990s....smoot hawley
was not the primary cause of world trade
collapse - the removal of gold per its pre 1914
functioning was....
paul volker was an idiot savant who was merely
present when his had was forced to act in the
mexican debt crisis of 1982....if volcker's policies
had remained in force we would all be living in caves
by now....
the period of the classical gold standard was
the high point in civilization....gold and it
alone is money (yes i know about silver)....
federal reserve notes are nothing but media of
exchange with no instrinsic value whatsoever
and thus are NOT money...
if you want to study the gold standard go to
antal fekete's website which has an enormous
wealth of information on the gold standard....
What is Jim Grant's verdict? Is the system savable?
His book definitely seemed to be rather on the side of gold...
Why is it that every time I hear someone talk about gloom and doom they then try to sell me some gold??
If things are going to be as bad as this guy says it will be, then the only thing that gold will be good for is pounding some thief over the head with. Personally, I prefer my 357 long barrel....
It does not take a genius to realize that things will no doubt be bad moving forward, but I do not agree with the currency collapsing. In fact, history tells us that nations always default on their debts when a substantial event occurs (The UK did in the GD in fact), and I would expect nothing less from US. Meaning, currency stays in place, but the rest of the creditor nations pays the balance.
In short... Dont believe the hype. The largest holders of gold is central banks, and I doubt they will allow gold to to be the savior as their ship inevitably sinks...
1) Default would probably be even worse than printing money. Rates would spike --> Government deficit soars --> Corp. bond yields soar --> Equities crash --> Firms can't raise adequate capital --> Derivatives markets crash --> Real Estate crashes --> All of these effects rub up on each other and magnify
2) Of course the CB would never allow gold to be the savior. The argument is that, since gold has historically been the wealth of 'last resort' of the People (probably since other precious metals are unsuitable as they are too useful in production and too easy to produce from mining) for populations as fiat money collapses.
you hear about gold because it and it alone is
money (yes silver too, sigh)....
when western rome collapsed in part from its debased
currency, the bezant kept civilization alive
and the hope for any economic recovery...
things will never get so bad that gold is worthless
but they will get so bad...roman currency
collapsed
as have all debased and fiat currencies....
modern times have witnessed rolling collapses so
the dollar for special reasons is taking longer
than normal...but for all practical purposes
it is a worthless piece of scrip....gold has held
its value; dollars have not....simple comparisons
with what gold bought in 1900 vs today dispels
the notion that paper currency has not collapsed.
a preference for guns over gold is pure barbarism
I'm not sold on goldbuggery, or doom-mongering, but I do think there are plenty of intermediate scenarios that are more likely than a Road Warrior post-apocalypic future. The Matterhorn paper points to the Great Depression, for example, and while maybe the US dollar didn't do so badly that time, the Reichsmark was another story. Though of course subsequent events also illustrated that putting your money in gold in Switzerland has its risks too.
The dollar was backed by gold and the Reichmark was fiat.
Ha!
Awesome reference to Mad Max III.
"Two men enter. One man leaves!!!!"
"Break the deal, and face the wheel!!!"
"Two men with a belly full of courage and a gut full of fear...Ladies and gentlemen, boys and girls...dying time's here."
i agree.... sounds like something a gold salesman would say. wait, it is. and matterhorn are gold salesmen.
Hmm, it seems the answer to many of these scary articles is always gold for some reason. The gold standard isn't coming back. I'd rather have speculators drive up the price of gold than oil or copper.
for those concerned about wealth preservation
and liberty gold will always be the answer.
for those who love enslavement to the state gold
will always be an enemy.
your wish about gold will not come from speculators
but people who know how to preserve wealth...
holy moly, wonder what Egon really thinks..
Then the LITERAL million dollar question is what is a safe haven investment vehicle if the above dire predictions were to unfold? Gold? Housing? Cash? (Cash I suspect is a no go). Any ideas from the high speed folks here?
-Silence Dogood
Fairly obvious - land , food, water , munitions.
If we're going to implode so badly good luck keeping hold of your gold without govn or society robbing it. And how do you suppose you can trade OUT of your gold should it spike 300%? Elecontrically? At a vendor physcially? Good luck with that.
Land, food, water and munitions are nice, but what really counts (now or during a societal breakdown) is knowledge. Preferably a skill or a trade. As always, your greatest investment is yourself.
I do kind of chuckle at some of the survivalists talking about "outlasting" a major economic downturn with a supply of food and guns. Ain't gonna happen. The people who will survive are those with skills who are willing to cooperate with strangers - not unlike what happened during the Great Depression. The paranoid isolationists we see so often here on the ZH boards won't last more than 6 months.
Agreed on some level... but, all a trade skill will guarantee you is a share-cropper's wage. When the shit hits the fan, everyone doesn't get reset to zero... the ted turners of the world have millions of acres... and the chinese own the rest (indirectly).
I'm lucky enough to have old men in my family who are too mean to die and who remember the depression very well... my grandfather was on the farm during the depression and "although we didn't have much of anything, we had everything we needed." Contrasted to my grandmother who knew trade skills, but none of her family managed to earn much of a living other than her father who was lucky enough to land a job with the CCC... whose wages went back to the family, much like the $40b flowing back to mexico each year.
I agree knowledge is incredibly important... the problem is that only a few know how to do the tasks that would be necessary to stay alive if things got bad enough. But yes, you WILL have to get out of the survivalist shack and seek civilization before this is over... the only question is, what will be staring you back in the face when you do? Hell, it might even be too risky to head to town...
but I think there's a happy medium in there somewhere and I'd rather at least have the land and guns and food just in case... if there isn't anything to worry about, then I'll eat the damn food anyway... it's got a 20 year shelf life.
Land, food, water,munitions and knowledge are nice, but for me what really counts (now or during a societal breakdown) is community. You need friends and folks around you who you can trade stuff with on a day to day basis, be it trading food, water, knowledge, guard duty. Without community you are isolationist.
To quote Ben Franklin "We must hang together, gentlemen...else, we shall most assuredly hang separately."
that community is going to lead to little more than gang violence... I agree it is necessary to rebuild, and necessary for safety, but tell your neighborhood to get the fuck out of mine because we shoot first and ask questions later... and there isn't enough money for police, so you know they won't find out.
rodney king had this perspective... look at what happened to him. No, we can't all just get along.
the credit bubble actually fueled our aversion to community... and I don't think we're going to magically make up for it during armageddon. We've grown apart from everyone (although using them as benchmarks for the worthless shit we buy)... or maybe we were never that close to begin with... we do have a 3 foot rule that other countries just can't fathom.
I don't remember running into any paranoid isolationists at zero hedge. I have heard from some people that are prepared for the inevitable with extra food and ammo.
Not many chumps like you either, luckily.
it would be good to hold a good portion of gold and more silver so after the years of chaos you will have a head start on the new society as it starts to use it again but nothing more than you can carry swiftly
there will be more important things for a long while than money changing
I'll be going into stasis until the investment banking system can be safely reestablished.
OK - read it. Tired , old "analysis". Biggest problem - even if this (fairly common) line of thinking is right about the long run - is making predictions about market movements in the next few weeks based on it.
Kind of like - even if global warming is happening - predicting next weeks weather.
Trade this type of galactic view at your own risk!!
DISCLAIMER: Matterhorn Asset Management specializes in "wealth preservation with particular emphasis on gold and silver bullion stored safely outside the banking system."
By the way this view of the world - collapse of US empire etc etc - was quite common in the aftermath of the Oct 1987 crash. Paul Tudor Jones among others, was on this track - based on elliott waves and what not.
As I vaguely recall - the 1990's turned out pretty OK.
Read Woodward's book on Greenspan. Greenie admits we came within a gnat's eyelash of losing the system There was no bid on the market the morning after the crash. Liquidity "mysteriously" appeared that afternoon and people started buying. That card has already been played. I, for one, am not falling for it again. Are you?
then hopefully, you will recall that during the 90's we had this crazy "innovation" thing, as well as "increases in capacity utilization" and "growth not due to tapping home equity lines a.k.a. increasing wages".
HAS NO ONE EVER HEARD OF CONTEXT?!?!?!?! ARRRRGGHHGHGHGH FUCK!!!
DOES EVERYONE REALLY THINK HISTORY REPEATS ITSELF JUST BECAUSE? DO CIRCUMSTANCE AND PREVAILING CONDITIONS HAVE NO IMPACT ON OUTCOMES?!?!?!?
We can quibble about the assumptions and conclusions, but the TONE was the important part of the document.
That some "Change We Can Believe In".
From Moody's
"Let's say you have one of the REITs, especially shopping center REITs, and there are competitors in the same market. Their leasing guys are running to all the competition and going tenant-by-tenant, door-by-door, and basically just poaching tenants for other centers. At the end of the day, I wonder where this musical chairs is going to end up."
http://finance.yahoo.com/news/REITs-Rating-Changes-twst-3848787987.html?...
The article is completely wrong.
The federal government is only a fraction of the total US credit market which now stands at $52.9T (end of Q1 2009).
Heck, I don't the federal government either but this article is complete nonsense.
The system is coming to an end because the consumer is no longer able to request the commercial banks to create the needed credit to sustain the system.
When you build a system on the need for exponential growth than fail to deliver that growth it collapses. It's an unsustainable system, the article is trying to pass on blame... I am sorry but there is nothing anyone can do to save the system for more than 60-100 years. It's pure math.
What has been done to date has only effected the rate of decline... the conclusion has been known for 65+ years.... collapse and then liquidate. It's not a choice.
I favor Mako's leanings, but not without a few caveats.
Looking back to Kevin Phillip's 2007 book "Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism" (which, btw, seemed to get precious little MSM attention) he draws some simple historical parallels that fit my sense of logic perfectly.
In a nutshell, Phillips says the game was up when we moved from a manufacturing-based economy (where we built things of value) to a finance-based economy (where we produced debt).
I still find it odd that people believe we could become an egalitarian society by selling services to one another. Dog groomers, weight loss consultants, realtors, insurance salespeople, investment bankers -- they add NOTHING to our standard of living; they produce NOTHING of lasting value.
We built an economy whose growth depended on innovative ways of extracting value from the system, rather than producing value. Why is anyone even the least bit surprised that it is failing?
Ditto and ditto.
Adding this: Never underestimate the importance of free energy in all this. For 150 years we had all the fossil energy we could burn, virtually free. That era is coming to an end; certainly, the "free" part was over 20 years ago once the US became oil-energy-constrained and had to turn to the charity of others.
Further, there are no alternatives to oil that will even come close to sustaining the UNEQUALED grown seen during the era of free energy (this from someone who rides an eBike 30 miles to work each day, 300 miles a week.)
Maybe you can save this economy -- go ahead and give it a shot -- but you won't bring back free energy. And if that was 50% of the growth engine then the rebound we can expect going forward is meager at best.
cougar
I dit your ditto.
You illustrate one of the things I've been really concerned about as I casually measure up today's debt deflation spiral against the Great Depression: we had an abundance of cheap energy to fuel the recovery from the Depression. Today, world-wide petroleum production peaked at 85 million barrels/day, and new sources of investment for oil in those "hard to reach" places has gone away like smoke from the tailpipe of a Buick Skylark.
..which is really odd that more focus on the advances of energy storage isn't getting more hype. Now that MIT figured out how to store solar energy in water and get it back out like a plant, you would think that at least HALF the last bucket of gov stimulus should of went to that
we could lead the world again but we are a bunch of sellouts at the top
There are countless things we *could* have done with the last bucket of oil, and the energy wealth contained within it. Predictably (for humans) we burned up our flagging resources frantically trying to maintain BAU.
We are stubborn. Or perhaps we are lazy. They are not the same thing (stubborn people can be quite industrious and clever) but somehow we ended up with stubborn, lazy people in excess abundance.
*headdesk*
cougar
Sadly, we're ALL sell-outs at the top and mostly sell-outs the rest of the way down . . . otherwise the daily crime wouldn't have been kept under wraps.
Pretty much the only people who didn't sell out got left out . . . by those on the take.
And I don't think they're gonna forget it when the shit hits the fan. They'll beat you to death with your own gold.
They'll even see it as justice, I would guess.
Whoa, slipping into a little apocolyptic vision there. Sorry, guys!
I haven't read that one yet but it sounds as if it picks up where Kevin Phillips' other book "American Theocracy" left off.
The game was changed forever when congress, at the behest of it's corporate overlords, bought into the globalization nonsense, and created favorable conditions for corporate america to ship jobs offshore en masse. Now what do we have left? We don't even get the corporate tax revenue.
Is your truck driving or construction worker uncle willing or even able to retool himself for a data entry desk job making a fraction of what he used to earn with no bennies?
What went with the jobs overseas, that congress failed to see and greedy investors never cared about to begin with, was state and federal income and business tax revenue and the American middle class way of life. Now if anyone even considers trying to stop it or even slow it down you're labeled a Marxist.
The tipping point came and went long ago where the savings realized from access to cheap imported goods from overseas was negated by the loss in income of the middle class. We are well and truly fucked. Period.
Eat the rich. I hear they taste like chickenhawk.
Great point Fulcanelli. I went to a business school for undergrad, did my time in I-banking, worked for a HF, and will be attending an MBA program in the fall...in essence, I should be front row at the free trade rally. And yet, I still can't get over how people think globalization is good for America. Yes it provides cheaper goods, but it is at the cost of our nations productive capacity. I can't wait till school starts. I want one of my profs to explain to me how globalization isn't primarily just a way for businesses to capitalize on the wage differentials between developed and third world nations. If someone here can present a compelling argument, I will honestly consider your thoughts...
-T Dubs
The "globalism is good for America" meme is a riff on the "What's good for GM is good for America" brain fart from WAAAAY back in the day.
Any more, I get the feeling that corporations are in it for themselves and "the country" is just a quaint concept; any country will do for their purposes, it's just a place to hoist their flag. Best to go with the one with the fewest obstacles to growth (no environmental regulations) a free market (no minimum wage, no unions, monopolistic practices embraced) and the easiest access to government (a lax approach to bribery). Their purpose is generating "shareholder value", nothing more.
Not much room for sentiment there. Oops, but we destroyed the global economy somehow in the process. No matter, the shareholders did OK. Oh hey no they didn't, that's really sad. No matter, the upper management did OK. And there you have it.
cougar
What will keep it going until its last breath/death rattle is those who mindlessly worship at the altar of "Capitalism."
Excellent synopsis.
Oh boy, can't wait! Glad I don't have much to lose.
This reads like something I would find on UrbanSurvival or OfTwoMinds (i.e. one of those quasi survivalist websites). Most of what he says is more of a rant than actual analysis.
Anytime someone starts tyrading about the gold standard, they lose all credibility in my book. Hate to break it to you kids, but gold is only valuable because it is rare. It serves no productive purpose, and it was a relatively arbitrary choice to backstop global currencies in the 1700s and 1800s.
From "Money of the Mind," there is a quote from Charles de Gaulle from February 4, 1965 that is a very succinct explanation of why gold will always be money:
"It is difficult to envision in this regard any other criterion, any other standard than gold. Yes, gold, which does not change in nature, which can be made into either bars, ingots, or coins. Gold has no nationality, which is considered, in all places and all times, the immutable and fiduciary value par excellence. Furthermore, despite all that it was possible to imagine, say, write, or do in the midst of major events, it is a fact that even today no currency has any value except by direct or indirect relation to gold[my emphasis], real or supposed. Doubtless, no one would think of dictating to any country how to manage its domestic affairs. But the supreme law, the golden rule . . . is the duty to balance from one monetary area to another, by effective inflows and outflows of gold, the balance of payments resulting from their exchanges."
Yes, the GOLDen Rule. Which as an expression, as far as I am linguistically aware, has not yet been supplanted by the much more modern "Fiat Paper Currency Rule".
I am Chumbawamba.
Sounds like some people have profoundly stunted--though wonderfully self-serving--imaginations.
"but gold is only valuable because it is rare"
That is the whole point.
"it was a relatively arbitrary choice to backstop global currencies in the 1700s and 1800s."
That comment is so wrong it isn't even worth responding to, except to say you must be a product of the American public education system whose history lessons start in 1776.
Yeah, FUCK gold! That yellow piece of shit! It is entirely useless. I would prefer it if we were to be typing our blog messages on vacuum tube mainframe computers that were ensconced in a second garage attached to our modern houses sucking up its own equivalent of a pebble-bed nuclear reactor, and I would still be cranking up the ring generator whenever I wanted to call downtown to complain about the shitty reception on my CRT television in glorious standard NTSC.
And I love this genius statement: "Gold is only valuable because it's rare." YOU JUST BLEW MY MOTHER FUCKING MIND.
I am Chumbawamba, and I am here to tell you that you should not comment when you are under the influence of your morning farts.
Yes you are Chumbawamba and you make to much sense ...:D
Not as a production commodity but as a store of value or even a method of transaction, it has no intrinsic value.
The only value associated with it is that derived by our cumulative expectation of the value given by our peers.
Of course it has proprietary value, such as to make circuits or apologetics for getting caught in someone else's bed; but as a standard of contract or a true store of future excuse of laziness ("value"), it serves no purpose beyond any other method of trade - except that it's sparkly color has captivated minds for centuries.
It stands that the choice of gold is a completely arbitrary choice save for the strategic advantage of it's rarity and historic difficulty to source, refine, transport, and trade in significant way. We would be better to use a commodity which required sufficient technological capability to refine and produce to mimic the barriers to production witnessed through the turn of the 20th century, though it is still a fundamental argument of control - namely, who has it and who doesn't.
so perhaps you should heed your own advice?
huh? my car runs great on my gold rims and i eat fine with my gold crowns and my ass feels fine on my gold toilet
make that stuff out of paper ok?
No, it is not arbitrary, and if you truly knew what you were yammering about you'd know that there are intrinsic properties of gold and silver that make them suitable as a medium of exchange, a process which evolved over thousands of years of free market activity. That people don't understand this inherently is not surprising, as it requires reading and study to understand. And that people continue to refuse to see that now is the time for gold, just as the last 20 years have been the time for the dollar, is also not surprising. Inertia is counter-acted with an equal and opposite force, the same force that is bearing down on you like a ton of gold falling as God's tears as he cries over the collective ignorance of his stupid little hairless ape children.
I am Chumbawamba.
Double entry.
Chumbawamba, gold was the original fiat currency. Its special status was established by decree and enforced at the end of spears, swords and guns. Nice that the Big Ballers all agreed.
Watch how well that holds up in a world where everyone is armed.
You are Chumbawamba: A Goldbugger. Let's quit pretending that there's any way to ever agree on this, man. Best of luck.
I don't think we can even agree that you are actually "Bob"--because I know Bob, and you ain't he--anymore than we can agree that you have written something very stupid.
I am Chumbawamba, and don't try to school me with your pop culture history.
Yes, gold does have some valuable uses. And despite all of the productive uses you mention, you know what accounts for almost 80% of gold consumption each year?...jewelry. Much of gold's value can be attributed to people who want it because it is pretty, or because it is perceived as a way to store value. Point being, from a productive standpoint gold is not very rare. From a psychological standpoint, yes gold is rare (and this is what dictates prices).
Hmm...something is valuable mainly because people all "think" it is valuable. Seems to have a lot of parallels to the dreaded fiat money system you despise so much.
The corollary to the "gold is rare so I want it" rule of value is Cougar's Maxim of Absolute Value: "A rare thing is only valuable to people with the spare time and resources to collect rare things for the purpose of ostentation, namely the rich. Everyone else collects things that are valuable as food, clothing or building materials, and only collect the rare things the already-rich collect in preparation for those rare moments in life when they must operate in the same theater as the wealthy. Which outside of marrying off one's female offspring is... almost never."
cougar
Well, with that attitude, you will definitely be collecting food and building materials because everyone with gold will be buying the shit still in the stores that are still open once the currency collapses.
I am Chumbawamba.
What stores?
If you wanna talk about the end of the world as we know it, you gotta have a better imagination than that.
cougar
Let's see:
In 2000BC, there were "stores" (dudes in a pelt hut selling shit).
In 1000BC, there were "stores" (dudes in a stone hovel selling shit).
In 0, nothing happened, because there was no time, apparently.
In 1000AD, there were "stores" (dudes in brick edifices selling shit).
In 2000AD, there were "stores" (dudes in steel buildings selling shit).
Ergo: there will be stores in the future.
I'm not writing a novel for your entertainment, I'm trying my damnedest to save people, while you try your darnedest to counteract my efforts. You are a fucking piece of shit. And...
I am Chumbawamba.
My confirmation bias leads me to agree with this article.
The intellectual rigor of a Britney Spear's fanclub meeting ..
Good stuff. Wish I could print
it is attached to the post.
Ignore the “cavaliers of credit” at your own risk. Everything is time-period dependent.
Both 1000% p.a. and and zillion% p.a. represent hyperinflation, yet only in a second case paper currency is completely abandoned. In the first case it is still used as medium of exchange, but apparently not as a storage of value even in a short-term.
Physical gold is good, but not for everyday use. Not to mention it is not safe to keep gold at home or anywhere - it will just attract unnecessary attention and criminals as well. Foreign currency could be an option, but that crisis can leave all currencies destroyed, so maybe not an option.
Real currency during hyperinflation is not the gold, but much likely either alcohol or cigarettes. Both things have value, both things are easy to keep and unlikely to attract badass criminals. So if you really believe in hyperinflation - keep both of these, that might help.
Yes, gold just attracts unwanted attention when you sit out in front of your house and wave it around and announce it to any criminals within earshot that you have gold in your house.
Or perhaps you choose the much more elegant and efficient demonstration of having the Brinks truck pull up to your house and having the driver cart large bricks of gold into your garage, after you've sent out a mass mailer to everyone in your city announcing this event, and also published an op-ed in your local newspaper complete with your address, where you store your gold, and how to push that window in the back of the house that needs fixing so that you can slide it open when you forgot your keys at the bar.
I am Chumbawamba, and yes, I am also stocked up on hard liquor. Hard money and hard liquor for hard times.
Criminals don't need to know that someone has gold to go looking. If the story is that prudent people in general are in gold, then they go looking for prudent-looking people.
Sure they'll crack open a lot of empty shells on the way, but then they'll get lucky. Criminals ain't in it for the efficiency, just the eventual promise of gain.
And they have no problem with destroying 90% of everything if that shiny 10% ends up in their pocket. This is why the end-game goes so badly so quickly.
cougar
You are Chumbawamba and, were it possible for me to worship anything, today you would've become my god.
LOL, Chumbawamba, you're making yourself a legend! But I'd take a lower profile with all that gold!
I am not Chumbawamba.
http://en.wikipedia.org/wiki/Chumbawamba
No, you are telling people that you have gold by making transactions in gold. Easy as that. Don't expect criminals to be stupid, I'd say you should expect them being smarter than you.
Sppeaking og gold, funny how the DXY "rebounds" to lower levels and the bear raid on gold ensues. Every time they press it down is a buying oppt. Sentiment agnostic.
True, gold was quasi-arbitrary... rarity and ease of verification and malleability arguably had something to do with it to but what's backstopping us today? the full faith and credit of the us govt? how arbitrary is that, especially to the other 5.7b people on the planet? If this ship be sinking what govt's faith and credit will back those pieces of paper? in who or what do we trust not to render our store of wealth worthless through batshit spending on vietnam, star wars, iraq, etc. etc. One thing you can learn from history is that govt's hate gold standards because it constrains their war-making ability. Therefore, lovers of true liberty should favor what governments hate.
The other thing Egon has right is that hyperinflation is a currency event, not a macro/micro economic event. The chinese are swapping their dollars for assets wherever they can. When people stop accepting new dollars, i.e. incremental US govt debt, we're in for a world of pain regardless of whether factory capacity is idling at 50% or bursting at 110%. Ya dig?
Well put, and yes they did have a good point about hyperinflation being a currency event. the deflationists among us like to spew out stats on money supply, etc., but when you are a net importing nation, especially one dependent on foreign sources of energy, hyperinflation will happen when your currency is no longer accepted, and/or at an increasingly declining rate.
Whether or not you have wage/price pressures in the domestic economy is irrelevant.
One interesting thing about currency these days is that - since none are backed by hard assets - they are all priced in relation to each other.
If Dollars are priced by a basket of euros, yen, and other (fundamentally) irrelevant stores of value (sdr's anyone?); than all governments could feasibly print the exact same proportion of new paper without affecting the perceived change in value of any single unit.
The result? Currency exchanges stay the same, but real prices increase - for those at the bottom that is.
It ensures mobility for the rich and immobility for the poor. Those of us at the bottom are locked into our current situations, while those with the means may transcend borders and operate beyond the establishment of conventional laws and social contracts.
I believe our collective state powers are acutely aware of this fact and are engaged in an orchestrated waltz of systematically destroying the purchasing value of all currencies world-wide while maintaining the status quo. In essence, we are all being priced out of our own hard-earned lifestyles.
Or a 10 mile wide meteor could hit the Yellowstone volcano.
Sigh. How many times do we have to go over this? Ok, class, gather round. It's time for another lesson in Economic Armeggedon 101.
Step 1: Divest yourself of dollar denominated assets. It could be anything: stocks, bonds, your IRA or 401K, actual dollars stuffed between your boobset, etc. Cash all that crap out and get yourself into greenbacks.
Step 2: Buy your ass some gold and silver. Silver will likely outperform gold to the point of being a much better investment. But we aren't trying to invest here, we are trying to survive, so don't go overboard. A 60/40 (gold/silver) allocation would be good.
Step 3: Go to the gun store. Find something cheap and versatile. The best fit for this description, one that doesn't require too much training, and one that has the least likelihood of you killing yourself or a loved one, is a security shotgun. Try to get one that holds at least 3 shells. 20 gauge is recommended for those of a less stern stature. Otherwise, 12 gauge.
Step 4: As I always admonish, DON'T FORGET THE AMMO. You want to get yourself a bunch of cheap game rounds (whatever is cheapest will do...they all blow holes in the wall quite adequately), but you also want to stock up on a good supply of slugs and sabots (only use sabots in rifled barrels).
Step 5: Go to a range or somewhere in the country and fire off a few rounds to get used to the power and control you will feel when you fire a round into someone's ass who comes trying to steal your gold!
Step 6: On the next moonless night, go out into your backyard, late at night when everyone else is asleep, and dig a hole at least a foot deep. Put your gold and silver into an airtight cannister (mostly to keep the silver from tarnishing, the gold will do just fine) and bury it. Remember to keep some sort of mental map of where it is, and be sure to tell someone trusted in case you don't pull the trigger fast enough in one of your face offs with the savage hordes that will soon be descending upon your neighborhood.
Step 7: Bide your time.
I am Chumbawamba.
Gold will turn out to be another scam when shit hits the fan.
better yet, buy some chickens, they pay nice dividend, and once they stop nesting eggs, you can make a nice soup.
Step 6.5: Get yourself some methhead friends who know how to cook the stuff and lots of ingredients, cuz you're gonna lose a whole lotta sleep guarding your shit. You'll need to be alert at all times. Good luck with your friends.
I'm gonna just get me a metal detector and some matches. Good luck with that gun.
Just kiddin, man! Gotta luv you for your rock-solid faith and spirit.
I am not Chumbawamba.
You can't feed 6-7 billion people with gold. You ran out of gold in the system in the 1930s. Without a credit market billions will have to be liquidated, unfortunately for some the credit market is unsustainable due to the need of exponential growth.
All these buyers of gold and silver when they try to it, they will be reamed in their arse with comissions + X + Y that they will then figure out the scam they bought into.
I was wondering why my food tastes so unsatisfying. We've been eating paper currency since the 1930s! Wow, how come no one else figured this out already?
I am Chumbawamba, and you fiat currency sheep are really starting to fucking annoy me.
I am actually enjoying the beat down of the gold bugs this afternoon.
Amen.
Gold doesn't feed you. It doesn't cloth you. It doesn't warm you. It doesn't keep rain off you head. It doesn't protect you from thieves.
The mistake people make is talking about gold based on the past. IF the shit hits the fan we are in a world we have never experienced before.
If the capitalist economy ends, I think wealth would be:
- land for shelter
- land for growing food
- land for raising animals
- tools and machinery to service all of the above
- friends
- defense aids (guns, dogs, etc)
Land is the only real wealth. People created money because real estate has no "velocity" and cannot transport or exchange. But the land never went away.
Land has value... why? Because it is the original solar collector. You cast seeds on land, they grow under the sun, you (and your working animals) eat. Food was the original gold, and having land and sunlight was printing money. Land also provides for the concept of "boundary" within which most animals are emboldened to defend. Without a boundary, animals (and humans) flee. With boundary, they struggle a bit harder and maybe survive a bit longer.
You have land, you have some prospect of eating and some notion of place. If enough people are of a like mind, you have a village. Right there you got about 80% of civilization worked out. Only thing missing is specialist craftsmen; you can't have civilization without shoes. No scratch that, you need wine more than shoes.
Land, boundary, excess production, wine, shoes. Check. Only then do you get around to inventing money.
cougar
"Gold doesn't feed you. It doesn't cloth you. It doesn't warm you. It doesn't keep rain off you head. It doesn't protect you from thieves."
And paper money does?
"If the capitalist economy ends, I think wealth would be:
- land for shelter
- land for growing food
- land for raising animals
- tools and machinery to service all of the above
- friends
- defense aids (guns, dogs, etc)"
you left out pets. for comfort and, if necessary, sustenance.
the poster who referenced land was the most accurate, with regard to wealth.
Everything in the article sounds ok.... apart from the fact that we are in the last 20 year cycle..
The 20 year cycle ended in 1999.
It is more likely we are in the middle of a series of 13( 1 year ) cycles..starting 1999 and ending around 2012...
maybe but then the next 13 year cycle will start and then another and another.
unfortunately it seems like the cycles become extremely short after the 13 year cycle..probably more like 20 day cycles and then to 20 hr cycles...and so on...
once the critical number of people realizes that the concept of linearity is not supported in reality,just in mathematics, and that everything is circular, then and only then will economy, politics and everything else become sustainable ... let me paraphrase my old professor of quantum physics : " Make no mistake my boy, that there will be a universe in which their will be no planets, but only giant stuffed elephants with some sort of life on them, and that life will contemplate about the universe which will come after them. And that universe will do the same. And the same process will be repeated ad infinitum. " and let me contribute something to that thought. It is not the question of will something happen, but the question of when will it happen. and when you eliminate time; you are only left that it will happen ...
Your professor was a half-man imbecile. These are the same people that think a tornado can rip through a junkyard and create a fully functioning 747 or monkeys with enough time and typewriters will create the entire works of Shakespeare. Our bodies are 100 trillion cells perfectly put together, the solar system movements are like that of a finely tuned watch, DNA is a language, there is perfect harmony and symbiosis between plants and animals (carbon dioxide & oxygen), and the earth is perfectly positioned in distance from the sun to sustain life (think of even the temperature extremes between the arctic & death valley). I am here to tell you there is design and a designer. Einstein didn't believe in a beginning to the Universe, he believed it was outside of time and always existed. I wish intellectuals had common sense. The element of chance is human free will - choice.
If this guy thinks there will be hyperinflation, why does he think that Dow will go below 6400? If there is hyperinflation, shouldn't the nominal value of indices go up? Would someone please answer this?
because this guy is just trying to sell you gold. look at his firm's website.
Youre quite right. The author has blatant contradictions and conflicts of interest.
There are far more erudite writings on economic collapse that this.
"The author has blatant contradictions and conflicts of interest."
I love it. Thank you captain obvious. I think that used car salesman has a conflict of interest, he is out to sell me something and he may not be doing it solely for me.
Doesn't everyone talk their book?
I am a survivalist, but I advocate buying the biggest home closest to the worst areas of urban decay in major cities. Sell anything tangible and instead hold dollars. Don't waste your money on gold, food or weapons.
There would be a man with no conflict of interest!
Read this article:
http://www.bloomberg.com/apps/news?pid=20601085&sid=a6_D.jvgUmFA
Highlights:
Icelandic Stocks Drop 77% as Trading Resumes After 3-Day Halt
By Jakob Lindstroem
Oct. 14 (Bloomberg) -- Iceland's benchmark stock index plunged 77 percent, the biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country's largest banks.
Investors demanded a higher premium to hold Icelandic government bonds, while the price of the country's currency remained ``undetermined,'' according to TD Securities.
Hows having foreign denominated debt whilst your own currency goes down the toilet relevant to this discussion?
Please dont compare Apples and bricks.
OK, I'm bearish. Really bearish. But I think the author really overstates the case, and underestimates the coercive power of government to maintain illusions. Do we really think the ratings agencies are going to go as far as to put the US on negative watch, much less actually downgrade Treasury debt? Please...
And on that line, if the global economic situation is so dire, then won't the dollar remain the lesser of two evils?
I agree that this is a head-fake rally, but seriously, it seems that a forced bottom has been put in. Hal9000 isn't going to let it crash, it seems. I've been betting against this rally for some time, and at some point, you quit betting in a game whose results are skewed beyond your view.
The UK is on a negative watch isn't it?
The US is on a negative watch from the Chinese. Either they are over here, or Geithner/Clinton is over there. Notice that for reasons of 'space', press coverage of the Treasury/China meeting is pretty highly restricted.
"And readers say Zero Hedge is pessimistic"
I always thought you were a cockeyed optimist!
We're doomed, I tells ya!
To 100PercentProle
Post number #16923
"If the gold standard "worked", why was it abandoned?"
If you knew your history you would know why - it was abandoned because it worked. De Gaulle wanted French holdings of US Dollars redeemed in Gold because he sensed that the USA was printing more Dollars (backed by Gold at that point) to fund the Vietnam War than it had backed by Gold. Nixon took fright and took the Dollar off the Gold standard.
I'm not making a case for or against Gold, merely stating what happened.
DavidC
That is not what happened at all.
You have a credit system and you have money system, the credit system has already expanded much larger than the money system when the credit system collapsed because of the failure to expand it in essence caused a run on gold, the problem is the credit system was much larger than the gold market.
It has nothing to do with printing. I swear people read way too many nutty websites and books. You ran out of gold to support the credit market, simple as that.... and of course that was going to happen at some date... you can't exponential growth the credit market nor can you the gold market forever.
If humans decide to build a system based on exponential growth than it is doomed to fail it need not matter if gold or paper is involved.
Again, the discussion turns to fractional banking & the gold standard. There are other areas worth considering.
http://video.google.com/videoplay?docid=-515319560256183936
Sounds twisted, but godspeed to the $US collapse and inflation. The CRT-medicated masses 'may' rise when they have to pay $7 gas and 2x [too much already] for Tour of Duty 17. Seriously, no really.
Sarcasm aside, my deepest wish is for the people of this once great country to take a collapse as an opportunity to start something real, it will be hard, it will be painful, but in the end we could have a chance to live on our feet rather than muddle through, medicated on knees...
For those interested in the gold topic, there are some excellent debates on Youtube from the early 1980s featuring Ron Paul. Love him or hate him, he had well thought out points in these pieces. One debate is with a Fed governor at the time. Worth checking out.
Totally agree with above comments about fallacy of gold. Exactly the point, its worth something because it was rare and for some reason deemed "elite". It easly could have been some other metal. It has no inherent "value" other than some marginal purposes outside of jewlery. If we were really in an armageddon scenario, food, water, ammunition would be the stores of "value" and any material that supports their manufacture.
I guess there doing this b/c it has no inherent value?
Silly them............
Bank of Korea Likely to Buy Gold for 1st Time in 11 Years
http://english.donga.com/srv/service.php3?biid=2009070411578
If you miss shooting at me I will attemt to lug my bar of gold bullion close enough to your head and pummel you to death. You may have to oblige by falling down and slamming your head into the gold bar, but...
Just joshing with ya...
I agree - we are well stocked with ammo and things to project them - working on the other important stuff you mention.
Pete
Here is an experiment you can try at home to determine the inherent value of gold.
First, take a gold coin and shove it up your ass. Keep it there for a full day (24 hours). The next morning, excrete it out and wash it. You will still have a gold coin.
Now, on day two, take $939 (it could be coins, but I recommend paper bills for the sheer lack of capacity in your rectum for coinage) and shove it up your ass. Again, try to keep it in there for 24 hours. The next morning, fish around and pull out each bill. Now try to wash them. You will not be able to get the smell out.
I am Chumbawamba, and you can literally shit gold, but you cannot shit paper currency.
Thanks for spamming this board about 30 times (so far) with all of your brilliant gold observations. This one is the most insightful yet.
If I carve my name, Chumbawamba, into a gold ingot, and carve my name, Chumbawamba, onto your forehead, then put both you and the gold into a container and bury you into the ground, in a thousand years they will still be able to read my name, Chumbawamba, on the gold. Ergo, you are worthless.
I am Chumbawamba.
Oddly that actually reinforced your argument that gold is valuable.
"For those who believe, no explanation is necessary. For those who do not, none will suffice." - Joseph Dunninger
“My personal belief is that Enron stock is an incredible bargain at current prices, and we will look back a couple of years from now and see the great opportunity that we currently have,”
Kenneth Lay quote
Sigh.
I get so tired of the gold standard talk. There is not enough gold in the world to backstop the size of the world economy. There isn't enough to backstop the US economy. So what would the goldbugs have us do? Simply (by fiat!) declare a value of gold:dollar commensurate with our economy ("Henceforth people, the value of gold shall be $15,000/oz! Let it be so! Ta-da!").
A fiat system is fine if managed properly. "Properly" means WITHOUT A PRIVATE CENTRAL BANK. The US government must seize back the Constitutional imperative that IT prints (coins) money, NOT private bankers. We must eliminate the nonsense that has the US paying interest for "borrowing" on our own money! Madness!
Private banks should borrow money from the US government and pay interest to the government. Let the private banks help fund government rather than having government (taxpayers) fund private bankers.
I agree. I fundamentally disagree with the author in two ways.
A. The idea of the gold standard is just simply not practical.
B. We are likely, IMO, to have a deflationary environment for at least the next 5 or so years, probably longer.
Nothing has inherent value. Every value is based on the subjective values of people. Gold was selected due to its specific properties, not due to an "inherent value" which no object has.
Money represents productive output or real assets. It used to be I'd actually have to trade a pig to buy a keg of beer, but now money represents the productive value I've added to society. (Some people just take value created by others, but the point is that someone did the work.) Gold as money makes sense because it required work to get it as well. At the very least, someone at some point had to dig it out of the earth. Not so with fiat dollars. If someone shows up with a fistfull of greenbacks, we assume it is backed by productive output or real assets, but since the 1970s this is not always the case. The more that is printed, the less this is true.
Mentally, most people still have the idea of a gold backed currency in mind, they assume the money represents productive output. Key to the "gold standard" argument is a mental change. If people come to view fiat money as having no added value, then its value rapidly collapses to its instrinsic value.
It isn't so much a question of a return to the gold standard as a failure of the fiat standard. And fiat systems have been tried throughout history, and every single one failed. It's possible this paper system is replaced with a new paper system instead of gold. But if the system is to be replaced, do you want to hold the existing paper or gold?
Millar's study is titled "The Relevance and Importance of Gold in the World Monetary System" and you can find it in PDF format here:
http://www.gata.org/files/PeterMillarGoldNoteMay06.pdf
clearly iphones are greater than gold. Iphones will be the new currency of america - mark my words
Don't forget coffee.
Phase I of GD 2.0 has been limited to realms of finance and economy. Phase II will add socio political and socio economic events that at this point cannot be forseen.
I would advise you people to have your households ready for a hurricane come this Fall. That means 60 days of food, water, medicine, operating cash not in a bank, guns, gasoline, generators, etc...
Most people don't have the depth of resources to look at the whole host of possible scenarios, but if you are ready for a hurricane (no matter where you actually are) then you'll be more prepared than most.
The key will be to keep your head low until the craziness passes, and then having the resources at hand to subsist on while adaptation occurs.
Good Luck, and please remember to treat others the way you want to be treated.
So what you're saying Anonymous 16994 is that we need AT LEAST a ton of gold to last through a disaster?
Oh, wait, you meant things that are actually useful.
Ammunition is the new hard money. Actually that would be a fairly effective deterrent to violence. Make your ammunition so much more valuable for trade than violence that your gang of mutant thugs can't afford to actually shoot anyone.
Do you own a gun store?
Good Luck, and please remember to treat others the way you want to be treated.
That is the best advice uttered so far. Everyone talks of guns and ammo, like they're gonna start blasting anyone that steps on their property. Any strategy which involves killing as a fall back plan is doomed for failure.
Yeah, the simple truth of numbers there.
In order for commerce to take place, one must use a currency, unless bartering is more attractive to you. Zimbabwe is a great example that is fairly recent that is a good study on how gold becomes the commonly accepted currency when faced with hyperinflation, even when times are really bad. People are foolish to say, "if we were really in an Armageddon scenario, food, water, ammunition would be the stores of 'value' and any material that supports their manufacture."