→ Washington’s Blog
It is easy to argue that gold is in a bubble.
But as I pointed out last month:
Deutsche Bank's head commodities researcher [Michael Lewis] wrote in September:
Gold
prices would need to surpass USD 1,455/oz to be considered extreme in
real terms and hit USD 2,000/oz to represent a bubble.
Lewis lists as factors driving gold higher:
* A collapse in the US dollar
* Low or negative real interest rates
* Skitish global equity markets
* Coordinated [as opposed to disorderly] central bank gold sales
* Producer dehedging
* New gold investment vehicles
* Falling mine production and rising costs
* Terrorism & rising geopolitical risk
Bloomberg notes:
Myles
Zyblock, chief institutional strategist at RBC Capital Markets, said
last month gold may soar to $3,800 within three years as it follows
the pattern of previous “investment manias.”
Barron's points out:
Louise
Yamada, the eminent technical analyst who for many years worked at
the various firms that have coalesced into Citigroup and now presides
over LY Advisors, last week remarked in a client note that
gold—based on its current trajectory—most likely wouldn't represent a
true bubble unless and until it gets to $5,200 an ounce (from its
$1,317.80 December-contract close on Friday) within a couple of
years.
University of Michigan economics professor Mark J. Perry noted in July that inflation-adjusted gold prices are lower now than in 1980:
Adjusted
for inflation, the price of gold today is 41.5% below the January
1980 peak of more than $2,000 per ounce (in 2010 dollars).
Frank Holmes, the CEO of US Global Investors said recently:
“If you take a look at previous cycles, super cycles, we're far from it,” he said.
“If gold were to go to 1980 prices like most commodities have gone to, gold would be over $2 300/oz,” Holmes commented.
WJB Capital Group's John Roque pointed out in May that the current gold bubble is still much smaller than the bubble in the 1970s when priced against the S&P.
MSN's Money Central noted last month:
Brett
Arends, a columnist for The Wall Street Journal and MarketWatch,
estimated that "individuals bought $5.4 billion worth of gold, and sold
about $2.7 billion, (so) their total net investment comes to $2.7
billion" in 2010, through early summer.
Arends contrasted that with the $155 billion they shoveled into bond funds through July. That may be the real bubble.
Arends
also concluded that "if it continues along the same trajectory (of
past bull markets) -- a big if -- gold today is only where the Nasdaq
was in 1998 and housing in 2003."
In May, Arends wrote in the Wall Street Journal:
Before
we assume the gold bubble has hit its peak, let's see how it compares
with the last two bubbles—the tech mania of the 1990s and the housing
bubble that peaked in 2005-06.
The chart is below, and it's both an eye-opener and a spine-tingler.
It
compares the rise in gold today with the rise of the Nasdaq in the
1990s and the Dow Jones index of home-building stocks in the 10 years
leading up to 2005-06.
They look uncannily similar to me.
So
far gold has followed the same path as the previous two bubbles. And
if it continues along the same trajectory—a big if—gold today is only
where the Nasdaq was in 1998 and housing in 2003.
In other words, just before those markets went into orbit.
Tyler Durden notes:
[JP
Morgan's] Michael Cembalest indicat[es] that ownership of gold in
dilutable terms (aka dollars), as a portion of global financial assets
has declined from 17% in 1982 to just 4% in 2009. And even though the
price of gold has double in the time period, as has the amount of
investible gold, the massive expansion in all other dollar-denominated
assets has drowned out the true worth of gold. Were gold to have kept a
constant proportion-to-financial asset ratio over the years, the
price of gold would have to be well over $5,000/ounce.
(Durden points out that when derivatives are factored in, the percentages are even more dramatic).
Aden Forecast argued in its November 12th forecast:
Debt
is in a mega trend. Eventually, the magnitude of the situation and its
repercussions will become more obvious. That’s also why the U.S.
dollar will continue to fall because more spending and money creation
makes the dollar worth less, and gold will keep rising because it is
real money. This is one main reason why they’re in mega trends too.
***
We
clearly believe that gold and silver are far from being in a
bubble.... The value of the whole monetary system is under question and
until this very issue is resolved, gold and silver will prevail.
As I noted last year:
Nouriel Roubini quotes a report from Merill Lynch as follows:
As
for all the talk of a 'gold bubble,' it would take a nearly 625% surge
in gold to over US$6,000/oz and a flat stock market to actually get
the ratio of the two asset classes back to where it was three decades
ago when bullion was in an unsustainable bubble phase."
Merryn Somerset Webb argued in May:
You
probably think gold is in a bubble. After all, it hit new highs in
dollars, pounds and euros this week – and has pretty much quintupled
since its lows of 2001.
***
But look at the
actual price of gold and it is hard to see real evidence of a bubble.
Gold may have hit new highs in nominal terms, but it hasn't come close
to hitting its old highs in real terms. Adjust the 1980 high of $850
for US inflation and you get a price of around $2,400 – a level only
the most bullish are predicting even now.
Then look to the
last few years. The bears would have you believe that the gold price
has somehow gone "parabolic". But, in fact, the price in US dollars has
only risen around 25% in the last two years.
Marc Faber said in September:
Given
all the unfunded liabilities and the money printing in the world and
the size of the financial assets in the world, I don’t think we are in a
bubble.
(although he warned their could be massive short-term corrections.)
Also in September, James Dines said:
This currency bubble is the largest bubble of all time in history. It is the mother of all bubbles.
If you don't have gold.....you are going to be scre@%d.
The same month, Jim Willie claimed:
Calls
of a gold bubble are shallow moronic pontifications, since the
sanctioned asset bubble is the mammoth US Treasury variety. It is the
last bubble before systemic failure. . . .
The Gold bull will
continue as long as the cost of money is negative. Investors flee the
conventional paper vehicles like stocks, bonds, and housing since the
system is failing and paper money in which values are denominated is
fast becoming meaningless.
In September, even Alan Greenspan was singing from the same hymn sheet, saying that “fiat money has no place to go but gold.
In November, Bremer Landesbank chief analyst Folker Hellmeyer argued:
Gold is not in a bubble, silver is not in a bubble, precious metals are in general terms not in a bubble.
***
If
there is a bubble, it's in Triple A-rated Treasury papers, whether
from Germany or United States. Precious metals are in demand for very
simple reasons: We have an inflexible supply due to a lack of
exploration and we have an increasing demand due to various factors.
One
factor is definitely the debasement of the U.S. dollar. The second
aspect is that the global wealth is increasing quickly, in particular in
the emerging-market countries. Five billion of the world population
are having higher living standards and thus are consuming more precious
metals. Thirdly, and that is very important: smart central banks start
to accumulate gold rather than accumulate printed paper from the
United States.
Peter Boockvar writes this week:
According
to Dictionary.com, the definition of a speculative bubble is “a
temporary market condition created through excessive buying and an
unfounded run up in prices occurs.” If there is one asset that commonly
gets described as being in a bubble, its gold but let’s look at its
move over the past 10 yrs in perspective compared to other “bubble’s.”
Gold at $1400 is up 450% from the Aug ’99 low. From 1982 to 2000, the
NASDAQ rose 3000% and the DJIA rose 1400%. From 1978 to 1989, the
Nikkei rose 700%. From July ’98 to the high in July ’08, crude oil rose
1245%. From its low in Nov ’01, copper has risen 605%. I’m not calling
a bubble in Apple but its up by 4850% since 2003 for the obvious
reasons. Thus, just because an asset is higher and has done well for
years doesn’t mean its a bubble, YET, and this gold rally which I’ve
been bullish on for many years, still has room to run.
And Expected Returns argues:
Gold
is not the inflation hedge most people think it is. Here is a data
point that will give you some perspective. In 1869, gold traded at
$162; in 1969, it traded at $35. How gold hedged inflation in any way
over this period of a century is lost on me. It is a fact that stocks
and real estate more closely tracked the rate of inflation.
Price
movements in gold resemble price movements in stocks. Intense bear
markets are followed by spectacular bull markets, which culminate in a
spike move fueled by human emotion. The same 100% moves in real estate
that would signal a bubble of massive proportions are normal moves in
gold. While the price movement of gold in absolute terms is important, the price movement of gold expressed in relation to time is even more important.
A 100% rise in 5 years means nothing, although a 100% move in 2 months
means everything. Everyone invested in gold should be more focused on
time.
Each asset class moves to its
own rhythm. To say that gold is a bubble merely because it has risen 6x
is just plain ignorant. Gold has always shown that it is an asset that
lies dormant for decades, only to experience the biggest moves in the
shortest amount of time. There is no reason for me to believe that
"this time is different." Gold
has yet to do anything but trend upwards in a classic bull market
formation. If and when the trajectory of the rise steepens, that will
be the time to start thinking about getting out.
For extensive background information regarding gold, see this.
Note: I am not an investment adviser and this should not be taken as investment advice.
![[ROI_100524]](http://sg.wsj.net/public/resources/images/OB-IP413_ROI_10_NS_20100524192106.gif)
A bespoke suit will get you into a Rachmaninoff Concerto N. 2 - I. EnjoY:
http://www.youtube.com/watch?v=ecRu6R3qwV4
Take another look at the bubble graph above. Note that both the S&P and housing did a sharp retracement or 2 on the way to the top.This is typical of bubbles.
Just from the graph it looks like gold is due for such a retracement in the next couple of months. Could be your last chance to load up, if it does.
Which one is the government pimping?
One only needs to follow government money to determine the next bubble, and they leave tracks the size of a T-Rex.
so true!
Does it matter?
If it's not now, it will be.
Historically, one ounce of gold has purchased a bespoke suit on Savile Row.
I hate gold and silver
But I love owning it.
ha, ha. exactly.
China prepares for war 'in all directions' Peter Foster, Beijing
CHINA is preparing for conflict ''in every direction'', its Defence Minister says.
''In the coming five years, our military will push forward preparations for military conflict in every strategic direction,'' General Liang Guanglie said in an interview published by state-backed newspapers in China.
''We may be living in peaceful times, but we can never forget war, never send the horses south or put the bayonets and guns away.''
Koreas on alert
Miners in big trouble, big plunge
thanks for posting.
from Jim Willie: "The Gold bull will continue as long as the cost of money is negative."
this is an important concept to understand for determining when it might be time to move back out of silver and gold
Google "negative real interest rates" and read some of the stuff you will find
the idea, as I understand it, is that "real" interest rates are the difference between the Fed's stated interest rates and inflation - right now stated interest rates are close to zero while actual inflation is about 6% (use John Williams' inflation numbers from shadowstats.com not the BS numbers published by govt) - that gives us a negative real interest rate of over 5%
to get back to positive real interest rates the Fed interest rate would have to be 6% or more - before you say that can't or won't happen, remember that Volker raised interest rates to 21.5% in 1981 which was one of the factors that stopped the gold bull market of that time
bottom line: until we get back to positive real interest rates, gold and silver will be the asset category to own
thanks for the Jim Willie quote. i borrowed it, as it is exactly in line with my thesis (and many others').
http://www.zerohedge.com/forum/fiat-paper-bubble-run-your-lives
look at the "Going Vertical?" chart above - then consider these words from Richard Russell:
"Dear Friends,
December 27, 2010 — I have posted below the year-end price of gold starting with the year 2000, the first up-year of one of the greatest and least appreciated bull markets in history. Take in this series, you may never see it like again.
2000 — $273.60
2001 — $279.00
2002 — $348.20
2003 — $416.10
2004 — $438.40
2005 — $518.90
2006 — $638.00
2007 — $838.00
2008 — $889.00
2009 — $1118.40
2010 — ?
I’ve been around a long time, and I’ve studied many primary bull markets. And now I want to venture a few of my observations.
In markets, I have never seen a series like the above end with a whimper or a fizzle. The end or the wind-up of such a series usually arrives with an upside "explosion," as those who have failed to participate in the series finally rush in to join in the apparent endless advance. This is the wild and wooly speculative phase of a great bull market. Big bull markets don’t end with a sigh, they end in exhaustion.
(1) Most great primary bull markets last longer and carry farther than the majority of investors (even the bulls) expect.
(2) A great primary bull market is an expression of something changing in a very fundamental and meaningful way. Following a great bull market, the world is never quite the same."
~
what Richard is saying is that, yes, gold is going vertical - it happens in every financial bull market and gold will be no different
Richard also makes this point about bull markets: they have three phases - phase I is when the smart money gets in - phase II is when the institutional money gets in - phase III (he calls it the 'speculative phase' above) is when the man-on-the-street finally recognizes the "new" bull market and gets in
we are in phase II now and phase III is somewhere in front of us
and, as Richard says, "There is no fever like gold fever!"
~
"A great primary bull market is an expression of something changing in a very fundamental and meaningful way. Following a great bull market, the world is never quite the same."
what's changing IMO is that fiat currencies are dying
perfectly put, bronzie.
http://www.zerohedge.com/forum/fiat-paper-bubble-run-your-lives
USA is broke, 33% population living on food stamps
ok dave we get the message,
no need to put it on every thread.
China is increasing interest rates by 0.25 basis points and Bank CRR by 0.50 in January 2011 before Chinese New Year
China is increasing interest rates by 0.25 basis points and Bank CRR by 0.50 in January 2011 before Chinese New Year
Pilbara faces cyclone risk
A tropical depression over Australia could develop into a cyclone over the next few days and bear down on offshore oil and gas installations, and iron ore shipping zones, Australia's Bureau of Meteorology said today.
Gale-force winds may develop along the Pilbara coast in Western Australia by Saturday as the storm makes its way out to sea, though flooding was not expected due to the storm's steady movement, the bureau said in a warning notice.
BHP Billiton, Rio Tinto and Fortescue Metals export hundreds of millions of tonnes of iron ore mined annually from inland Pilbara deposits via coastal terminals at Port Hedland, Dampier and Cape Lambert.
Also Cockatoo Coal ceases operations as mine flooded , Anglo American AAL has closed few mines
Anglo American plc Declares Force Majeure
Be Careful with longs of miners
I've updated my monthly gold chart for anyone interested:
http://stockmarket618.wordpress.com/2010/12/30/thurs-dec-30
Australia Floods Cover Area the Size of France, Germany
All the miners, AAL, Rio Tinto, BHP etc. are in real very big trouble but Corporates & Media will never report any bad news as they all work with Fraud Street gang with the support of FED
http://www.bloomberg.com/news/2010-12-31/gold-advances-poised-for-10th-a...
bubbles
bytches...
we're in a fiat paper bubble. run for your lives.
http://www.zerohedge.com/forum/fiat-paper-bubble-run-your-lives
This subject can be re-formulated several ways:
- reality versus fiat, fake, fraud, fiction, fantasy.
- gold versus fiat, fake, fraud, fiction, fantasy "money".
- reality versus fraudulant "fractional reserve practices".
- producers versus predators-that-be and predator class.
- honesty versus lies, fraud, deception, smoke-and-mirrors.
------------
Without a doubt, the mother-of-all frauds (which is called an "experiment" to cover its true nature) is:
- fiat money
- debt money
- central banks
- endless debt financing
- fractional reserve practices
All the above is fraud, unhealthy and destructive. Yet just about the entire world has caught this disease, and almost no predator-that-be wants-to... or has any freaking idea how-to... extract his country or the world from this inherently unworkable system.
Let's be clear. In this system, the predators-that-be, the predator-class, and the clueless parasite-class who vote the the predators-that-be into office benefit big time. And honest, ethical producers are royally screwed.
This system doesn't work. This system is almost exactly like the system that brought the USSR down, and is now taking the USSA down the tubes - with the rest of the world chained to its ankles.
However, NOBODY with any power is willing to "just say no". The one man in government who fundamentally disputes this system (RonPaul) is marginalized, and even if somehow he managed to get elected as president, his mild mannered ClarkKent personality could not withstand the infinite pressures applied by the predators-that-be (much less bullets fired by assassins hired by the FederalReserve and gangster banksters).
Frankly, the world is totally screwed. Absolutely the ONLY viable way out is total collapse, followed by millions of furious people armed to their teeth with lists of names, addresses, photos and contacts of the former predators-that-be and predator class. And that is the BEST case scenario... in fact, the only positive scenario.
The only other positive scenario has been rendered impossible by the predators-that-be the past 41 years (since man landed on the moon). And that is... a "new frontier" where honest, ethical, dedicated, rugged individualists could go and start a "new way" for humanity. A "new way" that lacks the 100% guaranteed unworkable aspects of the world today that is dragging the world down. The point is... when mankind refuses to throw off the fraud that is destroying them, the only possible solution that remains is to throw off a probe to a totally new frontier, and see whether they make it. To some extent, that's what america was, and indeed it did re-vitalize the world in many ways... but has now been taken over by the predator, and is thus having exactly the opposite result - destroying the world.
If only humans weren't completely insane and stupid.
If only most every human clearly distinguished producers from predators (and parasites).
If only... but that's not the way it is. And the predators have total control of "the system", so the only possible course is now painful, destructive, deadly collapse.
Fact is, humans are a failure. They're too stupid to survive much longer. Good riddens.
Well make it. Time only knows good.
Well make it.
Time only knows good.
honestann, ideally we go back to how things were before the fed:
http://www.zerohedge.com/forum/private-federal-reserve-bank
realistically, we have a currency default and, after all the riots, wars, and overall bloodshed, debt-based money is reinstated for more rounds of booms and busts all over again.
at least we can teach our children how it works, and how to avoid the deathly 'risk-off' destruction that is now heading our way. ...keep a journal by your rifle.
blah blah blah
#in real terms and hit USD 2,000/oz to represent a bubble.
whats is point of saying this ??? real question is
HOW MUCH MONEY IS FED GOING OTO PRINT ?? apparently nerxt year
deficit will hit 2 trn $.. next year same...
revenues uo a bit 2-3 % y/y, but expenses 5% y/y up...
so SUCKERS FROM Deutsche Bank's JUST PUBLISH REPORT HOW MUCH MONEY FED
GOING TO PRINT NEXT 5 YEARS FROM NOW ???????
alx
Gold price is ballooning much faster than M2 money supply is expanding. Therefore gold is in a bubble.
Good point. I follow the arguments that are being laid out and I understand where they're coming from, but I wonder to what extent these forecasts are just a shot in the dark. Who knows what insane policy they'll roll out next? I guess time tells all...
The money printers aren't selling gold.
The Chinese floor under gold is pretty firm.
What's not to like?
I'll throw in with you here.
As soon as they decide to stop destroying the unit that is paid for my labor, I'll consider holding the unit as savings of my past labor.
Judging by every other fiat invented it doesn't look likely.
Except that it is impossible to save in irredeemable currency. Even if governments 'tighten' irredeemability still means a promise to pay you nothing.
As long as it had perceived value it's fine. A finite fiat money is really no worse then a finite commodity money. The problem is in EVERY case the fiat money is debased. The governments and the central banks simply cannot help themselves and have to institute the inflation tax. The dollar has perceived value now, so it can be converted into goods and services. This is dispute the fact that the dollar is a pretty piece of cotton or electrons in a computer, it's all about perceptions. Which is why trust is important, when trust is lost in a faith based currency the bottom can fall out pretty fast. I'm worried we'll see the crack up boom in 2011, the rise in commodities is already pointing to it.
A finite fiat money is really no worse then a finite commodity money
No, that presupposes the quantity theory of money, to wit, that as long as the government does not print to much of it, it is ok. This is erroneous, the value of 'debt money' is given by the quality of the asset the issuing bank holds to match its liability.
A promise to pay nothing is worth nothing. It is impossible to save nothing. Converting dollars to goods & services is not saving money.
Why? You assume any backing. Ok what is the value of the backing of gold? It looks pretty and it's heavy and just so happens to be somewhat rare and immune to aging effects. But what VALUE does the gold have? Only the value that people ascribe to it. If the world as one mind thought that gold was ugly and a terrible asset it would tumble in perceived value. It's this perception that is all important. Look at the housing debacle, built on the perception of value. Fiat is so dangerous because it has no limit of issuance and people tend to ascribe a value to an object an then be loathe to change the mental image of that value. Even now as the prices of everything is changing in fiat terms people see it as all prices rising not their currency falling.
If I opened a shop that only dealt in Shameful Pesos my own fiat currency I might be able to get some suckers to buy in at some favorable measure of exchange. Hell Disneyland used to have Disneyland Dollars. There is no objective VALUE to any asset, it's all subjective. Furthermore fiat need not be debt money. At Shameful's Shop of Horrors I could trade the Fun Bux as a unit of exchange/measure and assuming I did not print more of them they could take on a store of value.
The problem with money that is not convertible into an asset is the eternal temptation to which all fall prey. Even under a gold standard, they simply print more gold certificates then can be redeemed. Every currency owner has an incentive to cheat their own system. So even under a convertibility system one in the long run is best served holding onto the base commodity not the certificate for said commodity. Human nature says the system will always be debased no matter the system so long as monopoly power if given over to one group to dictate what is money. At least with competition it forces more discipline to not rob the till.
The whole point that you and so many other brainwashed humans simply refuse to admit is this:
Only one honest system exists. In that system, producers of goods exchange the goods they produced for other real, physical goods. Period. End of issue. This is the fundamental, necessary, central point.
Now, everyone (fiat lovers, gold lovers, and everyone else) wants some easy, convenient way to find out what is the usual, nominal exchange rate between the goods they produce... and all other goods.
Since there are thousands if not millions of goods that humans produce and trade (exchange), the number of exchange rates between all goods and all other goods is simply astronomical (about 1-million squared == 1-trillion exchange ratios on the list). That's just too big and too cumbersome.
By FAR the easiest and most convenient solution is to create a million-line list with one line per good, with its exchange rate to gold (or some/any other common and highly stable). Then anyone can compute the nominal/usual exchange rate between the goods they produce and any goods they need or want by looking up the two goods in question:
exchange rate of gold to good #1.
exchange rate of gold to good #2.
The exchange rate of good #1 to good #2 is easily calculated as exchange rates "#1 divided by #2". Simple!
Humans often want to insert a time delay between exchanging away the goods they produce for other goods they need and want. Sometimes they must do this, because they need to exchange a large quantity of the goods they produce to reach a sufficient value to exchange for some goods they need or want. For this and other strategic reasons, people exchange the goods they produce for gold... accumulate gold... then later exchange their gold for goods they need and want.
First notice the FUNDAMENTAL, NECESSARY POINT.
Everyone has always exchanged real, physical goods for other real, physical goods.
In other words, no break in the "value chain" exists. This is crucial, because predators and scam artists have been working for millennia to lie, cheat, steal and defraud everyone the moment that any break in the value chain exists. They are experts at their craft, and have had thousands of years to concoct tricky ways to practice their craft (deceit and theft).
You should also note that the "gold standard" described above only dictates "which standard good" is chosen for the "list of exchange rates".
The gold standard absolutely, positively does NOT require that anyone exchange their goods for gold. Everyone is free to exchange their goods for any other goods they wish. Thus, everyone is free to exchange their goods, or their gold for ANY real, physical goods... and hold their wealth in that real (but non-gold) form for as long as they wish. And if they see an opportunity to convert their wealth into goods that appear to have temporarily depressed prices --- more power to them. The gold standard has NOTHING whatsoever to say about how you hold, save or exchange your goods or your wealth.
What an pure and honest gold standard does that fiat scams do not do is:
#1: never leaves honest producers holding the bag.
#2: never lets predators gain control of the world.
Well, the predators HAVE gained control of the world, and they have done so via "fractional reserve practices". Question: What is the essence of these practices? Answer: They substitute fiat, fake, fraud, fiction, fantasy worthless paper... for real, physical goods.
And this is why "gold == money" is necessary.
Otherwise, predators rule the earth. Which they do.
The world as one mind will never think that gold is a terrible asset because, due to its physical properties, has the highest utility of any commodity - it can be exchanged for any other - it's not just some irrational perception. Gold is the only thing that will extinguish all debt, it is the highest form of money.
Therefore, a security which matures into gold is a quality asset. A 'security' which matures into another 'security' is worthless & cannot be saved.
The biggest threat to gold is fiscal responsibility of central banks and governments. If one believes that ones government and central bank will tighten their belt and do what is right for the people of the nation then worry not. Buy bonds or other fiat based assets. However if one thinks that their government and central bank will act in their own best interest and against the best interest of the people then it's wise to hold gold and not their currency or assets based on their currency. Simple as that, trust.
I happen to think that responsible governments and central banks are the exception and not the rule. We'll see if I'm right or wrong. I do know that if gold does take off and the dollar is openly becoming a joke that Bernanke cannot pull a Volker. He would destroy the entire system and force a default on the US which is also not dollar bullish. The Fed is in a corner and I don't see away out. Zimbabwe Ben would have to be more like Houdini and less like Greenspan.
"Bernanke cannot pull a Volker. He would destroy the entire system and force a default on the US which is also not dollar bullish"
agreed - we currently have negative real interest rate of at least 5% - the Fed would have to raise its interest rate to at least 6% before we would have positive real interest rates (which might stop or slow the movement into precious metals)
imagine what would happen right now if the Fed raised interest rates from 0% to 6% - that would mean mortgages would go to 10% or more which would collapse the real estate markets
real estate values underpin the western world's financial system so a collapse of real estate values means a collapse of the entire economic system
ie, like you say, ""The Fed is in a corner and I don't see a way out"
Agree. This is already a one way trip.
If there was an acceptable option out there for a WRC the USD would already be gone.
Don't think they can pull it out now if they wanted to.
The other options being considered out there all have some component of gold:
Plan B gold standard USD w/ our 8100 tonnes
Plan C IMF Bancor WRC basket
Plan D BRICs form a WRC probably
West wants fiat, East wants gold. Big fight. We're collateral.
If anyone thinks that the US gov still has all the gold they are either shockingly naive, or totally insane. Who in their right mind would think this band of looters would leave 8000 tons of gold sitting around for 50 years? With no audit? I'd bet my life that the amount of gold held on account belonging to the US is closer to 8 tons then 8000 tons. I can assure you that if I was told I would have 50+ years to move 8000 tons of gold I would have it moved. Even if was just me, a forklift, and weekends...who am I kidding I would haul it out on my back brick by brick if I had to :)
So plan B is right out. When this thing goes the US goes 3rd world.
C. No way unless it is gold weighted. The worlds creditor nations are not going to sign up for a ride with the Devil himself (the IMF) on a fiat train. And will point out the IMF has been a gold seller.
D. They don't trust each other. With good reason. So unity in this is unlikely.
What I see as more likely is open floating daily exchanges, and possibly large debt/trade transactions being recorded in gold and then cleared in the local prices at that weight of gold. It's not even gold that needs to be the measure, but stability would help. Though really could just have naked floating exchanges, just would make long term accounting interesting.
"IMF has been a gold seller"
maybe
recent articles are making it sound like the IMF sold India 200 tons of gold but kept the gold in an allocated account - ie, the physical gold did not get transferred to India
for some reason I'm reminded of a Steve Martin skit about Fred's Bank:
"You got $1500. I'll put it here in my white suit. White suit, left-hand pocket - you remember that ..."
The value of human labor is on a downward trajectory to zero. Modernization, outsourcing, globalization, technology, automation, and corporate control of the political process will insure that the human condition will decrease over time.
In a fiat system, currency is a claim on human labor, as it is a debt instrument that encumbers the future. If human labor is increasingly becoming less valuable, then wouldnt debt instruments become less valuable over time?
"If anyone thinks that the US gov still has all the gold they are either shockingly naive, or totally insane."
Google "gold deep storage"
there has been some interesting changes in the verbiage that is used to categorize the US supply of gold
some people suspect that the 8000 tons of above-ground gold have been sold/leased/stolen and replaced with "deep storage" gold meaning gold that has yet to be mined