• Monetary Metals
    05/02/2016 - 01:28
    The price of gold shot up this week, and silver moved proportionally. Headlines are screaming for gold to hit $10,000 or $50,000. Does this alleged new bull market have legs?

Guest Post: The Return Of Precious Metals And Sound Money

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Sun, 03/20/2011 - 10:03 | 1078452 snowball777
snowball777's picture

How would sound money bring anything but massive deflation in the face of the black swan clusterflock at this point?

Junk away...but answer the question.

Sun, 03/20/2011 - 10:07 | 1078462 Seasmoke
Seasmoke's picture

so continue going 150 MPH as you approach the cliff is better than hitting the brakes because you may flip over

Sun, 03/20/2011 - 11:04 | 1078637 flacon
flacon's picture

How would sound money bring anything but massive deflation

 

Deflation in terms of what currency (money)? Fiat dollars? Yes. Gold/silver? No. 

We have already experienced hyperinflation - all that is left is deflation (and the central bank will counteract this with money printing because if it doesn't the currency is destroyed, and if it does the currency is destroyed), and if you look at Zimbabwe you can actuall eat gold.

Massive deflation means nobody has any fiat money - which means they will revert to sound money. Massive printing to stave off this central bank "worst nightmare" scenario will lead to the value of the fiat money decreasing to virtually zero which means the citizens will revert to sound money. Bernanke is cluserflocked. He is in a loose-loose situation.

 

 

GOLD FOR BREAD - ZIMBABWE STYLE

http://www.youtube.com/watch?v=7ubJp6rmUYM

 

Read FOFOA.


Sun, 03/20/2011 - 11:18 | 1078704 snowball777
snowball777's picture

I think we all agree that continuing along this trajectory will lead to hyperinflation or at the very least uberstagflation. Asset deflation will be necessary, but the difference is in how fast/hard it hits us...sound money is the steepest and most painful approach we could possibly take and there are other alternatives (e.g. end QE and take our lumps while retaining the Fed, replace the Fed with a US Central Bank that isn't a private corp with zero accountability, etc).

 

Sun, 03/20/2011 - 11:38 | 1078768 Careless Whisper
Careless Whisper's picture

Is whistleblower Andrew Maguire a FRAUD? This guy says maybe, because no one knows Andrew Maguire. Do you?

http://www.youtube.com/watch?v=JlsBgZ_F5yQ

 

 

Sun, 03/20/2011 - 13:05 | 1079001 Fred Hayek
Fred Hayek's picture

Max Keiser linked to that video on his site . . . right next to recounting having had dinner with Maguire.  The guy in the video doesn't know what he's talking about.

Sun, 03/20/2011 - 14:07 | 1079166 Careless Whisper
Careless Whisper's picture

okay, so max had dinner with someone who said he was andrew maguire. is there any other information on mister maguire? anything? well?

Sun, 03/20/2011 - 18:43 | 1079730 NidStyles
NidStyles's picture

How much has Max Keiser made off the whole ordeal? I don't know the guy, so why should I trust him?

Sun, 03/20/2011 - 20:19 | 1079980 Al Gorerhythm
Al Gorerhythm's picture

Whom do you trust? Who can you trust? Financially, what do you place your trust in?

Sun, 03/20/2011 - 14:47 | 1079245 robobbob
robobbob's picture

Is El Presidente Barack Hussien Obama a FRAUD? This guy says maybe, because no one knows Barack Obama. Do you?

Donald Trump asks why is Obama's history so strange and why does anyone asking questions get smeared?

http://www.youtube.com/watch?v=i9ADssjVfK4

You're right, we should demand to see Maguire's birth certificate, college transcripts and passport.  Ohh, wait.....

Sun, 03/20/2011 - 13:09 | 1079012 Creed
Creed's picture

sound money

 

you use the phrase

 

what part of the word "sound" do you not understand?

 

you Ticker Forum devotees have been mostly proven wrong since the 9/2007 Bin Laden thread

yet you guys believe you have something to offer the rest of us with condemnation of soundness

pull my other finger

Sun, 03/20/2011 - 13:59 | 1079148 snowball777
snowball777's picture

I could just as easily use the inflammatory phrase, "inflexible currency".

Sun, 03/20/2011 - 14:40 | 1079236 Creed
Creed's picture

yes, inflexible to manipulation by your banker overlords

 

I see that as a good thing

Sun, 03/20/2011 - 16:22 | 1079439 snowball777
snowball777's picture

You've missed the point about credit being created with or without a Fed...you think bankers didn't rule over people in the 19th century too?

Sun, 03/20/2011 - 19:21 | 1079824 naughtius maximus
naughtius maximus's picture

Banks create money as bank credit. The banks in the 19th century even issued their own paper money. But the difference was you didn't have to accept it for debts public and or private.

Mon, 03/21/2011 - 04:43 | 1080907 CH1
CH1's picture

Which would work MUCH better with modern tools, like digital transfer. 

And think about the incentives: They'd have to convince you that their money was your best choice. Quite a refreshing concept!

Sun, 03/20/2011 - 14:53 | 1079254 Al Gorerhythm
Al Gorerhythm's picture

DO you mean, inflexibly honest? Excuse the tautology.

Sun, 03/20/2011 - 16:22 | 1079438 snowball777
snowball777's picture

Nothing to do with honesty or a lack thereof, simply the ability to expand the money supply when it is necessary.

Sun, 03/20/2011 - 18:44 | 1079735 NidStyles
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Why would it ever be necessary.

Sun, 03/20/2011 - 20:11 | 1079965 snowball777
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Gee, I dunno...to properly scale to a growing economy (even if only from extra laborers being born, if not increased productivity)?

Please explain how your static money supply would work in practice. I need a good laugh.

Sun, 03/20/2011 - 20:29 | 1080011 Al Gorerhythm
Al Gorerhythm's picture

Don't hold onto your belief system without thoroughly investigating other ideas. To blithely dismiss other ideas with snide asides, leaves you mired in a static and statist equilibrium. If you are happy with that, groovy.

Sun, 03/20/2011 - 20:54 | 1080085 snowball777
snowball777's picture

I'm attempting to investigate, but it's difficult to see past the handwaving and sophistry.

Sun, 03/20/2011 - 23:09 | 1080488 jeff montanye
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as you know, you bring up a critical point.  yes deflation was endured during the nineteenth century but it wasn't enjoyed, particularly by the working class.  garfield and mckinley weren't assassinated by the cia and william jennings bryan wasn't kidding, nor were his listeners, when he said mankind was not to be crucified on a cross of gold.  maybe not right this second, but year in and year out, the bankers love the gold standard and those who pay interest hate it. (note: gold bug and creditor)

 

Mon, 03/21/2011 - 11:09 | 1081805 MrSteve
MrSteve's picture

Many great physicists have used handwaving solutions to show proof of physical world results. Only a textbook economist / statist / banker-troll would evangelize for continued fiat abuse.

Non-textbook economist like S.J. Homer in History of Interet Rates know that loans were made against gold and silver and even baskets of wheat. Loans of silver were repaid in wheat, no Federal Reserve required.

Mon, 03/21/2011 - 11:11 | 1081806 MrSteve
MrSteve's picture

doubled post

Mon, 03/21/2011 - 04:44 | 1080909 CH1
CH1's picture

The true test of ideas is to compare them directly to reality.

Sun, 03/20/2011 - 21:24 | 1080190 forexskin
forexskin's picture

 arrogant frak...

 

increased productivity + static money supply = increased purchasing power, but statists hate that, because its much more difficult to propogate debt feudalism where purchasing power of earned wealth is growing.

 

learn something before your yap erupts again

Sun, 03/20/2011 - 22:49 | 1080445 snowball777
snowball777's picture

sounds just lovely for actual workers.

/sarc

Sun, 03/20/2011 - 23:22 | 1080512 jeff montanye
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and how desperately sad is it that the elite classes of the world, and not entirely by themselves, have so debased the currency of government (metaphorically even more than literally) that when the poor really need help (and by poor i mean the bottom 60%) in the first deflationary depression since ww2, not only are the treasuries bare, having been sacked in the fat years, but trust in government and its capability is so deservedly thin that this great invention (for it truly has been) is nearly incapable of being part of the solution rather than part of the problem.

Mon, 03/21/2011 - 00:13 | 1080612 forexskin
forexskin's picture

better for you statists (troll)

 

/ignore

Mon, 03/21/2011 - 10:37 | 1081664 snowball777
snowball777's picture

Awww, someone learned a new name (moron)

/backatcha

Sun, 03/20/2011 - 20:32 | 1079991 Al Gorerhythm
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With gold, you don't have to expand the money supply. Gold is a measure of all wealth. If wealth increases, therein goes gold. That scenario is anathema to inflationists.

Sun, 03/20/2011 - 20:57 | 1080096 snowball777
snowball777's picture

"therein goes gold"

A great system, if wealth is only to be accumulated in a small number of hands and there's no need for velocity of money. It is also anathema to progress and meritocracy.

Sun, 03/20/2011 - 23:42 | 1080560 Al Gorerhythm
Al Gorerhythm's picture


"It is also anathema to progress and meritocracy."

America's greatest advances were when there was true capital based endeavor, which was of course when gold and silver were the currency of the day. Assets grow cheaper and cheaper when the stability of gold, in flow terms, measures increased productivity. Velocity of gold grows and merit is rewarded by being met with increased profits from sales volume.

That's a big statement you made there which needs a bit more expansion from you to be absorbed as a game changer. You can't change a persons mindset with unsupported statements like that. My chasing of the (we all were sold) dream was set on its head when I retired. I found that the nominal amount of my savings couldn't purchase their implied promise of value when advised to save them. This outcome is the common denominator of all paper currencies, even when considering the included interest through compounding hocus pocus.

The scam of paper savings is the implied promise of a greater numbers of credits, gathered through the magic of compounding interest, which will supposedly make you richer when you retire or when your savings plan matures. The lie is cemented in schools, where they teach that an increase of money through interest earned is an increase of value in that account. The reality is; the increase in supply has an inversely  proportional loss in value. All commodities and financial products are the same. Supply and demand. Extrapolate that out to the low flow of gold to the hugh flow of products and gold rises in value or products get cheaper to purchase in gold. Gold therefore can be divided into smaller and smaller units to pay for goods. There lies the velocity of money in gold.

Mon, 03/21/2011 - 10:55 | 1081747 snowball777
snowball777's picture

I'm not sure what you consider the great advances of the 19th century, but they are almost exclusively related to the industrial revolution, not some monetary policy genie. We would have seen those advances even if we were still trading puka shells for barter.

I'm familiar with the Taylor rule, but you're basically upset that you can't continue to earn without working, right? Somehow, everyone younger than you is beholden to slave away so that you can enjoy a retirement funded by interest income? Where's the meritocracy in this?

I was born after the gold window closed, so I've basically been running on an increasingly steep nominal hill since the time I entered the workforce. I harbor no illusions about a retirement or what I'm owed by a savings plan or any kind of government 'entitlements'.

The problem with your 'flow of gold' theory is that labor as well as the fruits of same are devalued in terms of gold, which is great for people who have gold, but a world of shit for anyone who doesn't. It's the same steep hill, only the ratio is adjusted by the numerator in the one case and the denominator in the other.

 

Sun, 03/20/2011 - 19:31 | 1079849 DosZap
DosZap's picture

FLACON,

I just have one MAJOR issue with this article.

And it's huge.

" But, as communities and states begin the acceptance of metals based trade and the issuance of gold and silver currency, you will see the manipulations by big banks begin to unravel."

 

Ok, say they went/want to go that way, WHERE do they get Physical to back it up, or any other currency thry were to design, IF it was legal?.

They cannot..............without the 2 majors going to multiples of 25-45,their is no metal available for backing anyone's NEW money.

What am I missing?.How do these states make themselves better off, or solvent,or pay their bills?.

Mon, 03/21/2011 - 04:46 | 1080913 CH1
CH1's picture

The only problem is the 'legal' issue: Armed men forbidding it. Consider:

Almost ANY commodity can be monetized. Store it, insure it, issue digital recipts against it, and trade them.

Mon, 03/21/2011 - 11:17 | 1081832 MrSteve
MrSteve's picture

There are church records from the Middle Ages showing loans in silver and wheat, one repaying another.

Sun, 03/20/2011 - 11:20 | 1078680 Mark McGoldrick
Mark McGoldrick's picture

The big mistake by most people (including so-called libertarians) is they equate money to wealth. Allow me to quote from For the Common Good, by Herman Daly and John Cobb:

  • The First step to a proper understanding of money is to return to the fact that money is not wealth; it is no longer even a commodity (like gold and silver). It is a token. A token of what? We are tempted to say a token of wealth, but that is not correct because the value of wealth at any time is much greater than the value of the total stock of money - i.e. there are many more coats in the cloakroom than claim tokens.  Money is a token of indebtedness - a debt.  Money is a form of community or national debt owned by the individual and owed by the community, exchangeable on demand into wealth by voluntary transference to another individual who is willing to part with the wealth in exchange for the money.  The value of the total stock of money is not determined by the stock of wealth in existence (or by the flow of new production), but in a curious way by wealth that individuals think exists but really does not exist - what Frederick Soddy called virtual wealth.   Page 420 
People need to realize that wealth (and the preservation of wealth) is not a god-given right, nor will it just manifest itself if you labor for 40 years.  If you are expecting to increase or maintain your wealth in the form of increasing paper supply that represents debt, you deserve to loose it.  I would think that all the anarcho-capitalist, survival-of-the-fittest, purist libertarians would embrace this harsh reality because it provides yet another filter to weed out the weak in society. Being actively involved in one's wealth preservation surely would create a smarter more financially vigilant society, rather than a society that labors 10 hours a day and then willingly, blindly and ignorantly hands the fruits of their labor to others (Wall Street) to invest/manipulate and slowly skim down to zero.  Creating wealth requires more than just labor; it requires due diligence, something that everyone ignores.  Where do you store the fruits of your labor? Keeping it in tokens of debt is stupid.  Do you put it in gold at $1400?  Silver at $35?  APPL?  Oil? Cotton? Real estate in Dubai?  Farms in Peru?  Chemical companies, train companies and soft drink companies like Buffet?  Your choice.  Choose wisely, and stop accusing others of robbing you - that's not the hallmark of libertarianism. That's whiney. It has the stench of someone who is loosing in the darwinistic society that they so emphatically endorse - perhaps someone should create an ETF for irony.   In short, attempting to tether money/debt to gold is stupid.  Allow the paper tokens that represent debt to flame out (that's a good thing!), and learn to diligently move your wealth to other assets. The plutocrats have been doing this forever - now it's your turn.  Or just go watch TV, and believe in wealth-entitlement.   

 

Sun, 03/20/2011 - 11:29 | 1078738 snowball777
snowball777's picture

How is 'wealth preservation' anything but a manifestation of the illusion that you can 'take it with you'?

Entropy reigns.

Sun, 03/20/2011 - 12:10 | 1078852 Mark McGoldrick
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It's all an illusion, but some illusions are more prosperous than others. 

Do you want to know the biggest potential scam of all time? 

The plutocrats take America off the gold standard. Money (otherwise known as public debt) is wantonly printed into the tens of trillions to serve the plutocrats and their sphere of friends. Aggregate public debt is racked up into the hundreds of trillions. Everyone panics and starts buying gold.  Then, rather than all the debt going up in smoke, the plutocrats take the US dollar back to the gold-standard (as libertarians want), so that all the debt - its interest and dividends - get anchored into the "world's currency" and continue to get paid to the plutocrats forever and ever.  Hilarious!  

Tethering the US dollar to gold at this stage in the scam, keeps our debts alive forever.  Or it will crash gold to zero.  And THAT is the great irony of the libertarian drive to bring the gold-standard to the US dollar. It would keep the fucking game going forever. 

Here's some advice:  do NOT advocate putting the US dollar on the gold-standard, when the US dollar represents hundreds of trillions in debt.  

 

 

Sun, 03/20/2011 - 12:23 | 1078914 tmosley
tmosley's picture

You really are a silvery tongued whore aren't you?

What kind of idiot thinks that a gold standard does ANYTHING to prevent default?  All a gold standard does is prevent government overspending.  Anyone that tries to tell you anything else is a whore for the system.

Sun, 03/20/2011 - 13:09 | 1079007 Mark McGoldrick
Mark McGoldrick's picture

silvery tongued whore?

I don't know why I even bother with libertarians, anymore.  It's pointless.  All discussions that question your policies are immediately driven into the ditch with insults.  You guys are like fanatical organized religions, allowing no room for debate, and if someone dares to question the validity or credibility of your ideologies, you immediately start throwing knives.  Absolutism doesn't get you very far.

All a gold standard does is prevent government overspending...

*LOL*

Really?  That's all it does?  It would have no consequences to the debt attached to that same currency?  What sort of magical, one-dimensional fantasyland is that?

Public debt will suddenly be collateralized with gold, rather than paper.  And that has no consequences regarding default?

*LOL*

Good luck, everyone....

 

Sun, 03/20/2011 - 13:21 | 1079039 Creed
Creed's picture

And that has no consequences regarding default?

 

straw man build your air castles elsewhere

debt will be repudiated as it always has, same as it ever was

false assumption- melding gold standard with current consequences of fiat regime

Sun, 03/20/2011 - 13:38 | 1079088 Mark McGoldrick
Mark McGoldrick's picture

The economic growth of our country cannot keep pace with the growth of compounding interest on our debt, especially when that debt is serviced with more debt with more compounding interest - all of this within a sphere of finite energy.  

I get it.  I know what the end looks like.  We all do.  

However, collateralizing our debt with gold will keep the music playing longer, and those that hold our debt (the plutocrats), in power for longer. 

The debt needs to flame out.  It shouldn't be collateralized with the "world's currency" so the game can continue until gold is driven to zero.   

A gold standard on a new currency is a different story, one which has infinite other problems that are for another discussion. 

 

Sun, 03/20/2011 - 15:15 | 1079302 BigJim
BigJim's picture

I don't mind ignorance. Monetary theory is a big subject, and takes a while to get your head around. But you are achingly clueless on this subject, and arrogant to boot.

Your quote from Daly and Cobb about money being debt, and conflating this with sound money, is just embarrassingly stupid. Yes, money is debt now, because it is created via fractional reserve banking - the more debt there is, the more money there is.

What we call 'money' now is actually currency which everyone is forced to use as money because the government demands tax paid in it. In the case of the US dollar, it is backed by a commodity (oil now - you need US dollars to buy oil - whereas, up until 1971, gold) If it weren't for these (government imposed) reasons, FRNs would drop in value to nothing overnight.

But with sound money, money isn't debt, or a 'token', but a form of barter, where the money is a form of wealth in itself - which is why people are happy to trade other forms of wealth for it. Gold and silver have always taken labour to find/mine/purify, and thus, like every other form of wealth, cannot be instantly conjured - unlike fiat currencies. The fact that money doesn't represent all of extant wealth is a red herring; and there will never be a shortage of money, because people can always barter with a different metal or material. The same is not true of currencies, the amount of which is determined by central planners.

Gold can never be 'driven to zero' no matter how much currency is floated off its back. Your ignorance is breathtaking. Go read some Rothbard, you awful human being.

Sun, 03/20/2011 - 16:35 | 1079407 Mark McGoldrick
Mark McGoldrick's picture

Go read some Rothbard, you awful human being....

Once again, another typical libertarian defending his echo chamber with his predictably poisoned tongue.

What is so fucking special about gold?  You guys act like its magical, impervious to devaluation. Your worship of it is as spooky and loony as the cans of ham buried in your backyard.

In reality, it's just another token.   Just because it has a deep historical precedent does not mean its feasible today with economies of our current scale, our interconnectedness and our rate of population growth worldwide.  How do you anchor gold to a quadrillion dollars worth of derivatives in dozens of currencies without totally fucking up the scale of everyday commerce, and/or pushing the world into the dark ages?  For hundreds of years, business contracts were sealed with handshakes and ink-dipped feathers - do you think we could revert to that just because it was done for hundreds of years, too?  History is not a mandate.  Try walking into the 21st century. The world is different, now; our debts are beyond the event horizon.  

If our government announces tomorrow that a few hundred trillion in US debt (currency, public debt, unfunded liabilities) will be sliced and diced into gold reserves, our plutocrats - and you can bet your fucking ass - would begin the slow dilution of gold to zero by continually adjusting the scale of how much money/debt one ounce of gold represents; it doesn't matter if its mined or printed, the plutocrats can dilute any token they want.  

..........and the world would find the next token to worship.  


Sun, 03/20/2011 - 17:18 | 1079552 Edmund Dantes
Edmund Dantes's picture

You sir, speak with a "forked" tongue..... You understand nothing and suffer from an involuted logic. Gold IS in fact "magical" and therefore has never, in 5,000 years, been devalued at the whim of the ancient enemy ( try as hard as he may). WEALTH, must above all, be  DURABLE. Can you suggest anything else that has served as well for centuries?... " The world is differnent now"????? dangerous words, the game and the enemy are the same, gold IS the TRUTH and the solution.

Sun, 03/20/2011 - 18:13 | 1079611 Mark McGoldrick
Mark McGoldrick's picture

No, Sir....  the world is vastly different, especially over the past 30 years.

How would you anchor gold to the $4T in FX transactions each day? They didn't have that issue in the 1800s.  How do you scale gold into the quadrillion derivatives market in multiple currencies? We barely had that issue 15 years ago.  How the fuck could you do anything, ANYTHING involving modern, multi-trillion, international commerce on a gold-standard?  The world is massively different, and the models you're relying on are as archaic as your mentality.    

That is the difference between libertarians and everyone else: everyone evolved, except you guys. You guys live in the past, and you think a financial infrastructure from 200 years ago is appropriate for the unthinkably complex economies of today. Just yesterday at ZH here, someone responded to one of my posts by saying we need to return to the Articles of Confederation, because that's when America experienced a lot of growth.  *LOL*

The world is different today, and your 5000 year old paradigms won't work.

Evolve and adapt, or die.  

 

Sun, 03/20/2011 - 18:45 | 1079736 piceridu
piceridu's picture

Your whole logic is based on false religion. I don't profess to know what will become of "money", but what I do know is that all of the things you mention above (derivatives, FX swaps, etc.) are completely based on a phony fractional ponzi economy. When this current system implodes, and I'm sure it will, the toxic derivative market, insurance markets and the whole giant counterfeit financial market created to fleece the common man will get flushed along with FRN toilet paper.

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