Mr. Denninger and Gold – Part Deux or: A Rebuttal to All Fiat Money Apologists

Gordon_Gekko's picture

via Gordon Gekko's Blog

The last post saw almost a holy war break out between the opposing camps of paper-bugs and the gold bugs (truth-bugs, really) resulting in a record number of comments1 (645 at last count) the highest for any post on ZH – ever (pending Marla’s confirmation of course. Where are you, Marla?). I wish to thank everybody who participated in the discussion for their insightful comments and feedback. 

In his rebuttal to my previous article - eloquently titled "Listen to the Hucksters, Lose Your A**" - Mr. Denninger raised certain points - ill-informed as they may be (not to mention classic fiat money apologists' arguments)- to which I wanted to respond. I hope that this response will dispel some of the myths and misinformation surrounding hyperinflation, Gold and our paper money system. I must warn you though: it’s going to be a bit longish read (although interesting, I hope), so sit down with your favorite cup of coffee and without further ado let’s get started.


On Anonymity

It appears that Mr. Denninger has an issue with anonymity, perhaps being irritated at not getting the opportunity to engage in ad hominem attacks, as is his custom. Karl conveniently forgets the fact that one of the websites he has frequently referred to, quoted and even praised ever since its inception – ZeroHedge – has the principle of anonymous speech at its very core. In ZH’s own words

Though often maligned (typically by those frustrated by an inability to engage in ad hominem attacks) anonymous speech has a long and storied history in the United States. Used by the likes of Mark Twain (aka Samuel Langhorne Clemens) to criticize common ignorance, and perhaps most famously by Alexander Hamilton, James Madison and John Jay (aka Publius) to write the federalist papers, we think ourselves in good company in using one or another nom de plume. Particularly in light of an emerging trend against vocalizing public dissent in the United States, we believe in the critical importance of anonymity and its role in dissident speech. Like the economist magazine, we also believe that keeping authorship anonymous moves the focus of discussion to the content of speech and away from the speaker- as it should be. We believe not only that you should be comfortable with anonymous speech in such an environment, but that you should be suspicious of any speech that isn't.

(All emphasis mine)

Indeed, anonymous speech is protected by the First Amendment to The United States Constitution, as has also been affirmed by the Supreme Court of the United States (McIntyre v. Ohio Elections Commission 514 U.S. 334 (1995)) – and with good reason:

Protections for anonymous speech are vital to democratic discourse. Allowing dissenters to shield their identities frees them to express critical, minority views . . . Anonymity is a shield from the tyranny of the majority. . . . It thus exemplifies the purpose behind the Bill of Rights, and of the First Amendment in particular: to protect unpopular individuals from retaliation . . . and their ideas from suppression… at the hand of an intolerant society.

(Emphasis mine)

The fact of the matter is that people care more for the ideas expressed rather than who is expressing them. Are you afraid to contest on the strength of ideas and facts alone, Mr. Denninger?

The Metals Forum
Specifically, I got tired (fast) of the incessant and mentally-deficient spamming of my forum with goldbug crap and thus have deemed it off-topic everywhere except in.... surprise.... the metals forum.
That's right, I have a specific place for all such discussions where they're perfectly welcome - even if I believe the people running their particular beliefs are wrong (or worse.)  
(Emphasis mine)

Just because you have a specific forum for the “metals” does not mean that you promote an open discussion regarding them or do not ban people who dare to have ideas different than yours. This is what one of the commenter’s on my blog (and, apparently, a former participant of your "metals forum") “George K” had to say about your “metal forum”:
I would like to note that I am one of the people who got banned from Denninger's forum for daring to question his judgment on gold. Although Karl has a subforum for metals, that does NOT change the fact that he created it precisely so that he could force "gold bugs" into his little gold ghetto, and so that Karl could point to it as a justification for banning anyone who dared to question his judgment on gold when he makes comments denigrating it in his "tickers" or elsewhere on the forum.
“Perfectly welcome”. Right.

On Hyperinflation

Worthless currency eh?  Hmmm... all I have to do is be able to obtain a return that exceeds the devaluation of the currency in question, assuming it does in fact devaluate.
Also, first you say:
Of course what really happened was that gold's price collapsed and the promised hyperinflation didn't occur.
But then you say:
Those who are looking for hyperinflation are about 20 years too late. We already had it. First in stock prices, and then in houses.  Anyone who cares to argue that taking the SPX from 100 to 1500 over a period of 20 years is not "hyperinflation" has rocks in their head.
(Emphasis mine)

Well, what is it Karl? Did the hyperinflation occur or not? Of course, it would help if you actually knew what hyperinflation is which clearly you don’t, or perhaps you deliberately choose to define terms according to your convenience. 


Seriously, I mean that has to be the first “hyperinflation” in history where only two asset classes rose. Not only that, these were financial assets (or investments) and they rose much higher than the commodities and goods needed for everyday living. I mean this has to be the most prosperous “hyperinflation” in the history of mankind! If this is what “hyperinflation” looks like, then I think every country should have one. I mean Zimbabwe should be a freakin’ world superpower right now! Yeah, somebody definitely has rocks in their head.

Clearly, this is NOT what hyperinflation is. Many people tend to think that hyperinflation is simply a higher rate of inflation. Not so. The only similarity between your everyday government-theft enabling inflation and hyperinflation is in the name. There is a phase transition that occurs going from simple inflation to hyperinflation, namely, a “crisis of confidence” which eventually renders the currency worthless. In a hyperinflation we are not dealing with linear functions anymore, but exponential ones. Now I’m not going to go into a detailed explanation of how and why a hyperinflation occurs, in general, and why it will occur in the US, in particular, because excellent discussions regarding both of these topics can be found on Wikipedia and FOFOA respectively, and I’m sure Mr. Denninger will be interested in going through them. Suffice to say that hyperinflation is a currency collapse which occurs when people lose confidence in the currency, i.e. people are not willing to hold the currency for any length of time and rush to exchange it for real goods as soon as they receive it. This results in not only a high inflation rate, but an exponentially increasing one where prices double every few weeks, days or – during the end stages of the currency - even hours.  The inflation rate is reported monthly, even daily, instead of annually. 

In real terms, a hyperinflation is, in fact, a deflationary depression, as even though the nominal amount of currency in circulation might reach multi-trillions, its real value is depreciating exponentially due to the high velocity and subsequent high (and increasing) inflation rate. Indeed, there is a shortage of currency in a hyperinflation as the demand for currency outstrips ability of the Central Bank to create it. Did you realize what just happened!? No matter how fast the CB prints (or digitally creates) currency, people are always one step ahead of the Central Bank2. So even though the CB can print currency, it can no longer steal! The people have finally realized the scam and will have no more of it. 

To give you an idea about what a hyperinflation looks like, here are some excerpts from The Nightmare German Inflation:
By 1923, the wildest inflation in history was raging. Often prices doubled in a few hours. A wild stampede developed to buy goods and get rid of money. By late 1923 it took 200 billion marks to buy a loaf of bread….Millions of the hard-working, thrifty German people found that their life's savings would not buy a postage stamp. They were penniless….By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. Food riots broke out. Parties of workers marched into the countryside to dig up vegetables and to loot the farms. Businesses started to close down and unemployment suddenly soared. The economy was collapsing….Meanwhile, middle-class people who depended on any sort of fixed income found themselves destitute. They sold furniture, clothing, jewelry and works of art to buy food. Little shops became crowded with such merchandise. Hospitals, literary and art societies, charitable and religious institutions closed down as their funds disappeared.
And to give an example as to what kind of inflation to expect during a “currency collapse” a.k.a. hyperinflation, here are inflation rates from some of the worst hyperinflations in history (via Wikipedia):

Is that what happened in the United States in the 20 year period that Mr. Denninger is referring to? No. But it sure as hell IS what’s in store.

Seriously, I would love for Karl to explain how he intends to outrun the exponential devaluation of the currency when prices are doubling every few days or even hours with…umm…LEAP Calls. Even if, for arguments sake, we assume that the rise in the value of your LEAP calls outpaces the devaluation of the currency, at some point you are going to have to cash out to realize the “gain” - assuming, of course, that the counterparty who wrote the calls is still solvent and is actually able to pay up (more likely the exchange will declare a force majure as counterparties go bust left and right due to the exponential increase in price, so now you are left with nothing instead of the rosy profits you had been dreaming about)- you’re still stuck with the damn currency - toilet-paper! What is your “out”? That which the government cannot create at will out of thin air - real goods and commodities, or whatever’s left of them for sale at that point. And what is the best “real good” to hold in a hyperinflation? The one which is the “most marketable”3 of them all - Gold! – which unfortunately won’t be available for sale anymore then. So you would have been better off if you just swallowed your hubris, bought Gold at the outset and gotten with the program [of protecting your savings].

Karl’s LEAP Call Profits - Now tell me this is something you [will] want more of!

(Courtesy Wikipedia)

Moreover, each and every hyperinflation in history – and there have been many, with the US itself having experienced one - has occurred simultaneously with a gold corner, i.e., Gold stopped being quoted in that currency – there was no Gold available at ANY price in the hyperinflating currency, whereas many other goods were (or whatever was left of them). Quite an interesting coincidence, don’t you think? Well, only if you don’t know (or refuse to accept) the fact that Gold is the only real money there is – a fact people quickly come to realize when the fire of hyperinflation starts burning.

Why You Should Stay OUT of the Stock Market in a Hyperinflation

Let’s take a look at what happened in the Weimar Stock Market:
We can say that those who bought a well-diversified list of stocks in solid, well-established companies quite early in the inflation and who held on throughout the period and also through the stabilization crisis saved much or all of their capital. However, there were many pitfalls along the wayside for the greedy, the fearful and the over-clever. Those who did best were investors with a certain unemotional, stolid character, a basic confidence that strong, well-managed companies would come through, and an immunity to excitement, anxiety and speculative temptations.

Many very sharp but brief advances and declines in the market led to widespread speculation, and well-intentioned investors often wound up as traders. Naturally most of them did as badly as amateur speculators generally do. Many decided that speculation was the only sensible approach; when the entire economy and financial structure was visibly crumbling, who could wait patiently with confidence in the long-range value of anything?

So to be sure, the stock market may rise tremendously during a hyperinflation but is not as straightforward as it seems. There is a lot of accompanying volatility – before the system finally becomes unhinged and collapses [into hyperinflation]- as is occurring in the US Stock Market right now –where one wrong move can destroy your life savings. We've already had two spectacular rises followed by two equally spectacular crashes (2000 and 2008) followed by another spectacular rise in 2009 – how many people were able to successfully trade around that? Very few. Buying “protection” with LEAP calls or any other instrument attached to the stock market during a hyperinflation is simply GAMBLING, and we all know how all gambling endeavors end up. Yes, you can buy and hold companies you think are solid, but you don’t know which companies will survive the hyperinflationary storm. Even worse, during times of economic distress when its own revenues are collapsing (again, in real terms), the government can confiscate any company it wants to – often the ones which are most profitable thus rendering your stock holdings in that company worthless. I really don’t understand is why you would risk your life savings gambling in the stock market CASINO when you have a much safer and better alternative which will not only preserve but increase your purchasing power when the government currency falls apart, as has been CONCLUSIVELY demonstrated throughout the various hyperinflations that have occurred in human history so far.

The Dollar, Gold and Exter’s Pyramid

Then Mr. Denninger points to the DXY chart which does not present a very accurate picture in my opinion as it simply reflects the different rates at which various fiat currencies are sinking in terms of real purchasing power. Moreover it is easily manipulated as Central Banks can and do intervene in currency markets all the time. But yes, the dollar has risen in terms of real purchasing power against a lot of things, although not all. Still, both of these phenomena are easily explained as the dollar is still the world reserve currency and is considered to be the most liquid asset i.e. “money” (for the time being anyways) by many people. As I already said:
Initially, of course, many people (such as Mr. Denninger) – mistakenly thinking the dollar to be “money” – will rush to its perceived safety causing the dollar to rise.
Which is what has happened “since the financial crisis in 2007”. But here is the thing – Gold has risen much more in terms of purchasing power than the dollar, i.e., you can buy a lot more real goods, commodities and services including “actual hard productive assets” - ounce for ounce - with Gold than with the dollar - dollar for dollar - since 2007. And this is not simply a coincidence. The model that best describes, in my opinion, what will happen – and is indeed happening - as we move along this [Gold] deflationary depression is Exter’s Pyramid.

Exter’s pyramid

As the higher layers are liquidated – indeed, evaporate (h/t Trace) as the market for them simply stops existing -  in search of the “most marketable good” or the most liquid asset, initially everything will fall against the dollar and Gold. In fact, as I’ve said before, this pyramid is the reason why - as capital accelerates its flow down the pyramid - we can expect more and more instances of the dollar and Gold going up together. Indeed, a final spectacular rise in the dollar – lulling many dollar-deflationists into a false sense of complacency - will be our signal that the show is about to end. It is this collapse of the second-last layer – the dollar or the “Federal Reserve Note” layer - that will manifest as hyperinflation. Many dollar deflationists who realize the truth about Gold think they can time this, trade around it and switch to Gold when the time comes. However, there is no guarantee that Gold will be available at anywhere near today’s prices – or indeed available at all – at that point. Much of it will happen too quickly for many people to even comprehend what hit them. 

Many people will go through the different layers of the pyramid losing chunks of their capital along the way, before they come to the conclusion that Gold is the ultimate “go to” asset – at which point they may not have anything left to preserve. Trading in the rigged paper markets casino will virtually assure that outcome. But those who know what’s really happening will go directly to Gold. They will be the ones who really hit it out of the park.

On “Lawbreaking”

Oh, so now "Gordon" advocates lawbreaking as a means of "safeguarding wealth"?
As far as “lawbreaking” is concerned, somehow I don’t think the people who fled Hitler’s Germany would appreciate your lecturing very much. I mean, after all discrimination against and even killing off certain sections of society was “the law” there, so you would be “lawbreaking” if you helped anybody flee. And guess what they used to hide and preserve whatever was left of their wealth – surprise! - Gold. (In fact, many of them were only able to flee by bribing officials with Gold as that was the only thing they would accept as payment). Slavery too was legal at one time right here in the US. Price controls are also legally enforced. How do those turn out? Empty shelves! You cannot decree people to sell below the cost of production. The point is that just because something is legal does not mean it’s right, neither does it mean that “the market” will accept its fiat as such. When the government’s greed and tyranny reaches a point where people are forced to choose between their own survival and the governments’, people almost always choose their own. This is how and why “black markets” (which are really “free markets” in disguise) arise, as they WILL in the US at some point. 

Legalized persecution was the very reason that the Founders fled Europe and their Central Banks and established this nation. They were also aware that governments can get tyrannical, which is precisely why the Second Amendment protects the right to keep and bear arms:

A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.
If it were up to “obedient” people like Karl running scared of “getting boffed in a prison cell”, America would never have been founded. Rest assured, if the present state of affairs continues where only 21% of the people believe that the US Government has the consent of the governed, we WILL reach a point – if we’re not there already – where “lawbreaking” will be the ONLY means left for “safeguarding wealth”, liberty and perhaps even our lives. 
You're awfully presumptive there "Mr. Gekko"
Am I? Time and again governments throughout history and in many different countries have shown that they will happily loot and pillage their citizens in order to ensure their own survival. You need look no farther than our own shores where FDR forcibly STOLE US Citizens’ Gold and then devoured half their wealth in a step devaluation of the currency. Or just look to the latest legalized daylight ROBBERY that was TARP where the government FORCIBLY took our money and gave to the banksters. Even today the government is considering STEALING retirement monies of American citizens by forcing them to invest in Government bonds and suspending mutual fund redemptions. So no, I’m definitely not being presumptive.
And as for "moving to another country", which one would that be, exactly?  It would certainly appear that the United States for all it's faults is better-situated than the alternatives reasonably available to most of us.  Certainly you cannot believe that any of the so-called "Western Nations" in the EU, for example, are a better choice, yes?
Looks like you don’t get out much Karl.
Gold is, however, a damn good geopolitical instability hedge.
And exactly why is that Karl? Have you thought about it? Why not platinum or silver or any other precious metal? I mean what difference does it make? I’ll tell you why – it is because of what you refuse to accept – that Gold IS Money – the ultimate wealth preserver. 

Perhaps that is why you conveniently ignore the high stocks to flow ratio phenomenon of Gold and the fact that the Central Banks of the world are one of the biggest hoarders of Gold. And to those with selective memories who say that, “Well, they are just part of the herd buying the top”, I will say that CB’s have been hoarding Gold ever since they came into existence. They continued hoarding it even when the dollar’s Gold backing was removed and – even though their overall holdings might have fluctuated over time - they continue to hoard large quantities of it TODAY. And the high stocks to flow ratio is not a recent phenomenon, neither is it solely on account of Central Bank hoarding. It is held by many people throughout the world (except, of course, the brainwashed populace in the US), i.e. it is a market phenomenon, and it has been that way for thousands of years. It was that way when Gold was confiscated in 1933; it was that way when the dollar was “delinked” from Gold (basically a euphemism for DEFAULTING on Gold obligations to other countries); it was that way when Gold “bottomed” in 2001; and it IS this way TODAY when, according to some misinformed people, it is a “bubble”. 

You have to be simply naïve to believe that that these “geopolitical instabilities” have nothing to do with our monetary system.
Prove it.  You conspiracy theorists on this topic have been ranting for three decades about the same tired song - that it's all "price suppression", that "the gold doesn't really exist", and on and on and on.
Prove what? I was simply pointing out the flaw in your reasoning there, not alleging anything – not in that sentence anyways. Perhaps you should actually bother to read/understand what you are responding to. 
Well, when is it going to happen?  Investment forecasts, to be actionable, must include both a price and a time or they are worthless - indeed, often worse than worthless.
Well, in case you didn’t notice, “it” is happening right now! In fact, it has been happening for the past decade. You would have been better off holding simply Gold than any other “investment” during the past ten years. And as time passes I can assure that “it” will continue to happen, only at an accelerating pace. The emperor will soon be fully naked for all to see. 
I also remember the people who were bankrupted by believing that gold was "money" and nothing else was…
Only if you were a casino patron who practiced “buy and hold” using leverage. Even if you bought the very peak, you lost only about 50%, considering the average price over the ensuing 20 years, and were not “bankrupted” as Karl claims. But if you had even half a brain and could see the massive inflation that what was coming down the line - what with the US Government spending money like a drunken sailor on the Vietnam war and the subsequent default on its Gold obligations – you bought Gold as soon as you saw Nixon LYING on national television. How did that turn out? Well, not only did Gold rise 24x during the ensuing decade, it remained levitated 11x (even after the “collapse” in 1980) for the next 20 years, and today is 34x that level, whereas the SPX is only 14x its 1970 level! Even if you go with the “market price” since 1974, Gold has risen 12x till date whereas stocks have risen only 8x.

The 20 Year Argument

Basically, the point Karl seems to be making is this:
The historical precedent is what it is… gold is not a particularly good hedge against inflation…during a period of serious inflation - from 1982 to 2002…gold's price was flat to down. It is thus a massive fail at it's claimed purpose.

First, aren’t you being a tad biased when your “historical precedent” consists of only the recent 20 year period while conveniently ignoring the “historical precedent” of thousands of years of fiat currency failures and of Gold’s acceptance as money? Second, there was a lot of inflation during the 1970-80 period with the CPI rocketing to 16% by 1980, but Gold performed extremely well during that period, whereas stocks essentially went nowhere. So you really can’t make generalized statements such as “gold is not a particularly good hedge against inflation”. But the question remains, what happened after 1980? Why did Gold do nothing while stocks rocketed? Two things: first, the US exported a lot of its inflation to other countries via the reserve currency mechanism. CPI remained flat to down after 1980, as exemplified in the following chart: 

Here is the gold price in Chinese Yuan and Indian rupee – two of Asia’s (and the world’s) largest economies. As you can see, they were experiencing a bull market in Gold even as the dollar price remained “flat to down”:

Second: outright manipulation. They started to gimmick the CPI massively in the 90’s at which point the “strong dollar” policy was instituted, i.e. manipulation of Gold prices (via massive naked shorting of futures as well as fractional reserve selling of bullion by the LBMA) in order to hide the true rate of monetary inflation. It is this manipulation which has started to unravel since the beginning of this decade resulting in rising Gold prices.

On Manipulation
Yes, I know, it's all manipulation.
Is that really so hard to believe? You yourself, along with many others, have extensively documented the shenanigans occurring in various markets today. I mean the Fed is now OPENLY manipulating the Treasury market via “QE”.  But the one market they decide to let trade “freely” – the one most important to maintain the illusion of a “strong dollar” no less - is the Gold market. Do you really expect us to believe that? Indeed, organizations like GATA have extensively documented the US Government/Fed supported long-term Gold price suppression. Alan Greenspan even admitted openly in 1998 that Central Banks intervene in the market to suppress Gold’s price:
Nor can private counterparties restrict supplies of gold…where central banks stand ready to lease gold in increasing quantities should the price rise.
The evidence is out there, if only you choose to look at it.

However, there is a fly in the ointment. The manipulation cannot last forever. In fact, the longer and more persistent the manipulation, the more spectacular the eventual opposing move will be. It is a testament to the sheer force of the market that despite record naked short position of the bullion banks against Gold, it continues to rise. The real rise will be witnessed when the bullion banks and the LBMA go bust. To put it another way, if you were patient enough to hold Gold through the period it went “sideways to down”, rest assured, you will be well rewarded.
Let's define our terms.  "Money" is a convenient catch-all but it's also a bullshit term because it lacks precision.
I already did - precisely. I can’t help it if you choose not to understand it. 

Karl then – instead of looking at the simple facts staring him right in the face - goes into a confused and disjointed theory about money with subjective terms like “wealth”, “credit”, “intrinsic value”, “speculative premium”, “value” etc. and ultimately ends up justifying that “money is debt” (or credit – after all, one man’s credit is another man’s debt); that you need credit (or debt) in order to trade. This is the very same propaganda that the banksters have sold us that “money is debt” – the way it is created in our system today – and Karl seems to have bought it hook, line and sinker. 
The hell it is. Every man has the ability to create wealth and most can create credit, which is the essence of money. When Wimpy promises to pay for that hamburger next Tuesday he has created, in point of fact, both credit and (by common definition) money.
We can? Have the legal tender laws been repealed? Phew! Good thing– I guess we can get rid of all the banks now. Who the hell needs “loans” from Fed-controlled banks when you can pay off stuff with a promise to pay it off tomorrow? Sweet. Seriously though, unless you are telling me that you can print Legal Tender (or dollars) out of your basement, you are WRONG. Every man can create “wealth”, but needs to bend over in front of the banksters to obtain the legal tender denominated “credit”. 
But only government has the authority to use force to extract both from you - that is, to force you not only to turn over current production but to compel you to produce in the future as well.
So what you’re essentially saying is that we are all born indentured SLAVES to the government. And here I was thinking slavery had been abolished in America. BTW, did you think about who controls our government today – that’s right – the banksters. So, in other words, we are all slaves to the banksters. Which is EXACTLY what I meant when I said “ultimate power”.
The convertibility by law was disposed of by Richard Nixon.  The dollar did not "instantly collapse" (although many said it would.)  In addition there was no right of exchange during the period after FDR's confiscation through the repeal of those regulations and laws, and again, the dollar did not "instantly collapse."  This claim is utter and pure horsecrap as the dollar was maintained through forty years of being non-convertible.
First of all, as long as Gold was/is available on the open market in exchange for dollars, it was/is “convertible”. Period. It doesn’t matter if it’s a fixed or floating rate. Sure, the government tried to “dispose of convertibility” (and pretended it was in charge in order to hide the fact that they were defaulting on their Gold obligations), but really it was the market that forced their hand. They simply could not afford to redeem all the flood of dollars coming in Gold at the artificial fixed price! Indeed, if Gold was only money by government decree then it should have collapsed instantly, as many paper-money apologists claimed even then. Instead it rose 24x over the next decade and even after “the collapse” in 1980, it remained almost 11x its decreed price in 1970. The market showed everybody which one was the real money. Also, you conveniently “forget” the fact that even though US citizens were not allowed to own Gold or redeem their dollars for Gold, internationally the dollar remained redeemable which is why it did not collapse. Yes, somebody is definitely spewing “horsecrap” and it is you, sir.
The founders based our monetary system on silver, not gold.
Umm…No.  They based it on both Gold and Silver. Perhaps it’s time you took a look at the US Constitution:
Section. 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
(Emphasis mine)
Even today the banksters would love a gold standard, as it would play directly into their hands.  With the vast majority of production being tied to a handful of suppliers absolute control would vest in just a few easily-bribed persons and corporations.  By being able to control gold supply through such a corrupt system they could easily cause deflationary collapses any time they wished, thus escheating all property carrying debt to themselves literally on demand.  Such was common practice prior to the abandonment of gold-backed currencies.

Gold-backed currency is a banking cartel member's wet dream.

So why don’t we have it now? I mean the banksters practically control Congress and the White House right now and they literally OWN the Federal Reserve – would you agree? So what’s there to stop them? I mean if they can get a law like TARP passed – they can get ANY law passed. Clearly the people of the United States cannot stop them. Or are they just not doing it out of the goodness of their hearts?

Do you really believe that the bankers would want something that is limited in supply by nature to be money over something they fully control the issuance of i.e. paper money? Not only that, Gold’s above ground stockpile is extremely large (compared to its annual production) and distributed widely enough that controlling a “handful of suppliers” would not amount to controlling much. This is the very reason why they engage in all sorts of frauds and misinformation campaigns against Gold. As Ayn Rand said:
“Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, 'Account overdrawn.'”
If you think they want Gold so they need to cause a “deflationary collapse” to own everything, I suggest you take a look around – they ALREADY own EVERYTHING. I mean the level of ignorance you display here is actually quite astounding. I guess that is what happens when you surround yourself with sycophantic “yes-men” and instantly “banning” anybody who dares to have a shred of different opinion. Why even bother having a “forum” when all you want is listen to your own voice. At least try to do some independent thinking and research before blindly accepting anti-Gold propaganda.
Gecko then presents the following outright fraudulent chart. Why is it fraudulent?  Look at his starting point - the end of Kondratieff Autumn in 2000!
Perhaps you should actually read what you are responding to. I clearly mentioned the period I was referring to when I presented that chart. Moreover, is the Kondratieff Cycle an exact science? No! What is exact are the facts and I was simply observing them.
The goldbugs are after a laudable goal - the ability to simply save money (production) over time, take zero risk and wind up with the sum of the purchasing power saved. 
That's the goal that the bugs have, but the goal is unachievable through hard-backed money.  The bugs often point to the period before the 1930s as one where over time purchasing power didn't change much, but they ignore the outrageous swings that took place in the interim, often resulting in 30-50% price changes in the space of just a year or two's time - in both directions!  Catch that wrong and you're bankrupted.
I am not advocating any sort of “backed” money as backed money is always some sort of fraudulent fractional-reserve scheme used by the government/banksters to engage in stealth confiscation - which is also the reason why you get the violent swings you are referring to (even so, I don’t see how losing 99% of your purchasing power over a 100 years is preferable to a short lived violent swing, where if you simply sat it out, you’d still be preserving all your purchasing power!). Gold in the hands of the public freely circulating as money is sufficient to achieve the “laudable goal”, without any interference from the government. I mean I already took the risk when I engaged in my particular occupation and earned that money. Why should I have to take risk it all again simply to preserve my purchasing power?

In fact, Gold doesn’t only preserve your purchasing power, but increases it over time. Let me explain. Contrary to what paper money advocates will have you believe, deflation in itself is not “bad”. In fact, in a society with increasing productivity this will be the de-facto state of affairs because as the production of goods and services in the economy increases and the money supply remains relatively constant – a feature of Gold as it cannot be created out of thin air unlike paper money – the purchasing power of your existing savings increases, which is what matters ultimately. Most people focus on the nominal amount of Gold or currency in their possession. It simply does not matter! The purchasing power of what you hold does. 

Inflation is not the “natural” state of affairs as the statists would like everyone to believe. Imagine not having to gamble in the paper market casinos just to keep even, and instead spending your time and increased purchasing power on doing what you do best further enhancing the overall productivity of the society. This, in fact, would be the de facto state of affairs in the absence of disguised looting and pillaging (via the inflation tax) by the government/banksters in a fiat money system. 

So yes Mr. Denninger, we’re not only after that “laudable” goal, but one better.

On the Federal Reserve System

Also, Mr. Denninger also appears to be an ardent fan of The Federal Reserve System, which is neither Federal nor a Reserve but a private banking cartel monopoly. If it is such a great and beneficial law why was it passed stealthily through Congress in the middle of the night after a secret meeting between the bankster kingpins of those days on Jekyll Island? Indeed, the video “The Creature From Jekyll Island” by G. Edward Griffin explains the truth behind the Federal Reserve. 

He then goes on to quote the Federal Reserve Act:
The Federal Reserve Act says:

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

Really? How about Unicorns s**tting Gold bars (or dollars, if you prefer) while we’re at it? If central planning worked, the Soviet Union would be the wealthiest country on earth right now. The fact of the matter is that central planning has never worked. The Fed does not – indeed cannot – know what “the economy’s long run potential” is and therefore it cannot “maintain long run growth of the monetary and credit aggregates commensurate” with it. In fact, nobody can know what this “optimal” rate of growth of economy or the money supply is; only the market does. The fallacy that Karl (and whoever wrote this idiotic law) is engaging in is that we need “stable prices”, therefore we need a money supply that increases with the growth of the economy. We don’t need “stable prices”; falling ones – as I explained above - are better! 
This [the Federal Reserve Act], if followed defacto, results in zero inflation (stable prices) across the intermediate term… 
A law which has not been followed once since its inception, can be argued, was not meant to be followed (not to mention, the way it is written, cannot be followed). They wrote a bunch of BS platitudes in there to fool the public but, like they say - watch what they do, not what they say. This is what has happened throughout the entirety of the period that the Fed has been in existence:

US Dollar Purchasing Power Since the Creation of the Federal Reserve in 1913

Theft via inflation was their intention from the very beginning and that is, in fact, what they did.  
The failure is not in the structure of the system, but rather is found in the corruption thereof and the utter refusal of the people to hold those elected and appointed officials to account under their black letter legal responsibilities.
So how do you suggest we fix this? By putting everybody in prison? You’ve already blamed everyone – everyone except yourself, that is. Perhaps we should make you in charge of the whole shebang, right? The fact of the matter is that shouting online and elsewhere that corrupt politicians, regulators and law-enforcement personnel be prosecuted and jailed while at the same time promoting the very system that is at the root of the corruption is ignorance at best, and hypocrisy at worst. You want government appropriation that funds your social security checks to continue, yet you want the looting to stop. You simply can’t have it both ways Karl.

Of course, I realize that no matter what I say or what evidence I present, it will never be good enough – especially those who believe in paper money enabled wealth-redistribution schemes. Or perhaps people like Karl are simply envious that those they derided and opposed so vehemently are being proven right by the market. 

The proof of any hypothesis/theory is in what actually transpires in the real world. Events will eventually prove who is right. As Another said:
Time will prove all things.

1. H/t Akak
2. Now many will say, “But currency is created digitally today”. So what? If the CB can print digitally, the people can spend digitally!
3. For an explanation of the “most marketable good” please refer to my previous article.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
akak's picture

On the contrary, I believe it is you who lacks a proper grasp of history --- as well as of morality.

Government's have attempted to call-in gold (NONE have ever "confiscated" it in door-to-door jackbooted searches) only when it was an integral part of their monetary systems.  What excuse would they have for doing it today, when gold is NOT a part of the monetary system, and when 401k's and IRA's, for example, represent orders-of-magnitude greater sources of wealth?

I find your subservient attitude toward rampant state power and tyranny repellant.

Arm's picture

On the contrary Akak. I am a card carying Classical Liberal.  You on the other hand are a rabid facist.  You immediately insult and attack a person that disagrees with you without providing a single counter-argument.

It is precisely people like you who go goose stepping into other people's homes and carry them away for re-education.

A lithmus test.  Volataire had a phrase "I disagree with you but I will defend to the death your right to say it".  If you cannot agree with this, then you are no Libertarian or Austrian.

Incidentally, the argument I have just broken-down for everyday readers is pretty much straight out of Hayek, and De Soto who is one of the main living Libertarian thinkers. 


StychoKiller's picture

I'm of the opinion that Govt agents do have some sense of morality beyond their own self-interest.  If not, well going out in a hail of bullets awaits a lot of people.

Snidley Whipsnae's picture

I suggest you Wiki 'Ruby Ridge' and 'Waco' if you believe govt agents 'have some sense of morality beyond their own self interest.

Govt agents are in a chain of command. If they do not carry out orders they are replaced by someone who will.

akak's picture

That is all very nice, but I judge you here not by your professed political beliefs, but by your implicitly Keynesian, pro-statist attacks on gold, as demonstrated by each of your posts in this thread.  You claim gold is NOT money, gold has NO value, and repeatedly spread the latest pro-establishment, anti-gold fearmongering that it is pointless to own gold as it will just be confiscated by a rapacious, tyrannical and omniopotent government --- so just deal with it.  NONE of that sounds to me like the beliefs or opinions of a self-described "classical liberal". 

I detect a gold-hating wolf in classical liberal sheep's clothing here.  I can smell a covert gold-hater a mile away, Arm, but I don't even need to be that close to detect your subtle but apparent anti-gold agenda.

RagnarDanneskjold's picture

I disagree about gold having no value, but everything up to that is solid. Gold extinguishes debt and is therefore valuable during a deflation, even if its price is falling in nominal terms.

I would add that it's possible that obtaining physical gold during a major deflation will be difficult. The paper price of gold will crumble, but the physical price will have a healthy double digit premium, at least. 


Arm's picture

Thnx Ragnar,

Your raise the single most important and most disputed issue in economics, the relationship between value and price.  What is the value of something and how do we price it?

The Physiocrats from the XVIII century developed the concept of "value in use".  They only believe that tangible productive assets had value.

Classical economists essentially state that something is worth whatever people are willing to pay for it as they alone know their reasons.

Mises basically developed the concept of value as the sum of human action that is mobilized to procure this asset.

This said.  There is no clear answer.  Let me venture my thoughts.:

Gold has no value:

a) Gold is scarcely used as an industrial metal

b) It produces no rent

c) It satisfies no human need

This said, gold is a physical asset that does hold characteristics that make it useful as a CURRENCY.

a) It is indistructible.  Facilitates wealth preservation

b) There is a limited supply.  Thus the currency cannot be inflated

c) It is not industrially useful.  This same characteristic means that this is not a valuable resource that we have to consume; meaning no deflation


Given these characteristics, gold has often been used as a currency to store value and execute market transactions.  This occurs when the members of a society decide to accept gold as standard payment. Economists would say, gold is then monetized.  However, it it important to note that many other assets have in the past been monetized.  Sea shells, cocoa nuts, large carved stones, tullip buds, etc

Until gold is in fact monetized, all you have is a dense pliable yellow metal with low electrical resistance. 

As for using gold to pay your debts in deflation.  As any tangible asset, gold falls in price while your debt in fact stays fixed. 

Inflation = long tangible assets

Deflation = long cash

akak's picture

ARM, you call yourself a "Classical Liberal", but I think you are using the term "liberal" only in its modern statist interpretation, as you argue against gold like a classical Keynesian.  You are a disinformation-spreading bastard, and I will call you out on your gold fearmongering and implicit support for authoritarian oppression every time I see you spout such malicious half-truths and lies as you did above.

Arm's picture

Go ahead.  Knock yourself out.  See you are FREE to do speak as much as you want and to prove to the rest of the audience that you are an intolerant facist. 

I will not even try to argue with you.  Sorry to be disdainful, but there are probably at least 8 years of higher education separating me and you.  Rant on, and from now on I will ignore you.


Back in Spring 09 ZeroHedge used to be such an interesting place to debate and speak to smart people.  Sadly that phase has passed and now we have the Survivalists spilling their hatred with no ideas or arguments.


akak's picture

And let me guess: your supposed eight years of "higher education" are in (Keynesian) economics, am I right?

You might be surprised at the narrow, or nonexistent, gap in education between us.  But great way to demonstrate your arrogance and self-important elitism there, buddy.

If I am a "survivalist" --- a wild and arrogant assumption on your part, by the way ---- does that then make you a death-ist?  It would be an appropriate label for a Keynesian such as yourself.

Oh, and by the way, quite a bit of the rest of the audience here knows of me from my posts, and I think you will be hard pressed to find one of them who would consider me a "fascist" --- which is doubly ironic, considering that that epithet is tossed out by one who consistently sides with the power of the state in his arguments against gold.


EDIT: I just found this disingenuous SOB agreeing with JohnnyBravo in the thread under GG's first Denninger article of a few weeks ago --- enough said about Arm's true pro-Keynesian, anti-gold sentiments.  He is just another gold-hating troll trying to spread his pro-statist disinformation.

Arm's picture

I know I said I would not dignify you with a further reply... but look at yourself man!!

You are accusing somebody of being a "statist" (whatever that means) while you immediately attack him for agreeing with ideas that differ from your own.  Are you serious?  So people are only pro-freedom if they fully and unconditionally agree with you?  Do you even realize the contradiction or are you that far gone?

I actually feel sorry for you.  You are deeply confused, bitter and full of hate.  Please seek help with family, friends, priest or a therapist.


PS: Before calling people troll check their history.  I have been on ZeroHedge since March 09 (I think earlier, but did not register till then).  You've been here just 4 months.  I don't post anymore precisely because of crazies like you that have taken over this forum.  Pity, ZeroHedge used to actually be full of hedge fund managers, bankers and traders... now we get Aka and Gordon Gecko.

akak's picture

Oh wow, the CLASSIC troll argument --- "You attack me because I don't agree with you!"

No, I attack you because your arguments are false and disingenuous.  There are hordes of posters here with whom I do not agree, but I do not challenge them, because they are honest and sincere in their arguments, not spreading lies and disinformation as you have done throughout this entire thread.

You may (possibly) have (slightly) more higher education that I, but your reasoning and debating skills are pathetically weak.  And if are a "classical liberal" as you claimed to be, it is highly curious that you do not even recognize what the word "statist" means.  A liar AND a poor debater.  Back to the university for you!

Arm's picture

You sad wreck of a man.  Name me one lie.  Just one.

What argument of mine have you disproved?  What fact have I misrepresented?

I gather you only have tried to discredit me because my arguments were solid unlike most other posters who simply post one liners.  Incidentally probably the same reason you attacked that Johnny Bravo poster; the guy is smart, you should learn from him. 


Aka, we are not debating.  A debate is an orderly exchange of arguments and points of view.  This is you ranting.

akak's picture

Yes, there is no debate, because like JohnnyBravo (a known and universally-recognized gold-hating troll here, who you interestingly now defend), you have refused to address or acknowledge the points raised by both myself and others in this thread.  Your arguments were mostly specious and superficial, and I have seen you address none of the objections to them raised by others here tonight.  Again, just another gold-hating troll who attempts to drag the argument into personal attacks and distractions, and who reacts with fury and hate at being called out.

And as for "just one lie", you claimed to be a "classical liberal", what today would be called a libertarian, yet did not even recognize the most fundamental political term of "statist", which is the antithesis of a classical liberal.  You really should be rather embarrassed at this point.

Arm's picture

As I thought.  You could not name a single lie or misstatement.  Just more Ad Hominem attacks (that's Latin for attacking the person instead of his arguments) mixed in with Red Herrings (that's the debating technique you are using of throwing in unrelated matters so that hopefully the audience will not realize that you could not answer the arguments)

I am very curious also.  What points exactly do you say you addressed that I did not answer?  I must be blind but it all seemed like those personal attacks.  Please do post again your points and reference where you originally posted them to me.  I promise to answer each of your points.  Come on I dare you.  Show the forum that you are not just full of shit



akak's picture

What a classic troll technique --- challenge the challenger, deny reality, and project your own logical and rhetorical weaknesses onto others!

"As I thought.  You could not name a single lie or misstatement."

You disingenuous asshole, I JUST DID!  You claimed to be a "Classical Liberal", and yet admitted you did not know the meaning of the word "statist", which would be like an economist claiming not to know the meaning of the word "money".  Yet like all the arguments raised against you, you conveniently ignore it.  There is no point in trying to logically converse with such a hypocrite and liar.


The objections l and others raised to your disinformational attacks on gold are all posted here in this thread.  I am not going to accomodate your lassitude by trying to summarize them all right here, right now --- go through this thread and read them, and answer them, for yourself.  If you can.

Arm's picture

Ok.  I guess by now it's clear to the entire forum that you are full of truck  loads of crap.  My job is done.

I won't torture you anymore. It really is unsightly to see you squirm like this.  It is also not very charitable of me to keep showing you up in front of the entire forum and your goldbug buddies as you clearly are emotionally and intellectually weak. 

Have a nice day/night. Whatever works in your time zone

akak's picture



I laugh at your pathetic inability to respond to meaningful challenges and logical rebuttal.  You have only made a fool of yourself here, and exposed yourself for the liar, coward and statist shill that you are.

Arm's picture

Ok, parting shot.  Funny you should use the example of "money". If you knew anything about Economics you would know it is the single most controversial definition. You really make it too evident that you are uninformed on the matters you discuss.  Really, be quiet and stop putting yourself in evidence.

PS: It seems you are fixated on the term "statist".  First, I never stated I did not know its meaning.  Second, it is very standard English, but it is a politically charged word that whose meaning is malleable (that is elegant English meaning that you are bending the term for whatever self-purpose you have)

Note to self:  Fucking insomnia, must visit the doctor so that I can sleep instead of spending my time answering high school dropouts.

dumpster's picture

a long tortured look at gold   arm

three words .. you have not a clue , make it 5,

you rant like a sound bite from a Keynesian lecture . and i suppose your age is under 40,

so you have to post this long diatribe about gold

1) to show ignorance

2) to profess a sadly deficient understanding .

3) may be you need to read Sinclair ,, and his resume and particulars.

gold is money ,




GeoffreyT's picture

I'm at a loss regarding the depth of the invective levied at Karl here (and I'm quite good at invective and I'm a snarky arsehole a lot of the time).

I don't agree with his view on gold - I have been long Gold on and off (mostly on) since January 22nd 2002 (when it formed part of my "2002 SuperTrade": long Euro at 0.84, long Oil at $19, short S&P at 1110 and long Gold at $268). But I DO agree with his view on "The Bezzle", and he has done some interesting work on corruption more generally.


The thing is, he set up his forum, and it's his. One of the things about owning things is that you get to control the way it operates. I am a free-speech dude, so if I ran a forum I would open up the floodgates and let everyone crap on until they went blue in the face. (I don't run a forum: I did, but it is simply too annoying for words... and they are a prime source of ingress for site-wide hackers).

As I was saying... I would have a hands-off approach: but I would also have the right to change my mind anytime I felt like.

Some gold 'bugs' behave like Israeli settlers if their views are ever questioned, and they think they can come into someone else's territory - hosted at someone else's expense - and write tirades about how the author is a fuckhead because they hold a different view.

And to declare that Denninger doesn't have the right to make recommendations about his back yard? That's just fucking dumb and makes whoever says it look like a complete tool. If my region was in the middle of a crisis and the government - having arrogated sole right to administer things - was specifically preventing the use of the BEST technology for the cleanup... well, I would be screaming the house down as well.


All y'all have to lighten up; for me, TickerGuy is among the 4 sites I have on RSS feeds: it's ZH, TickerGuy, Mish, and myself. Throw in MaoXian (no RSS that I could find, sadly) and Hussman (ditto) and an aggregator like FinancialSense or PrudentBear, and you're set.


And I say this even though I vehemently dislike Karl's view on immigration - and I get a sense that he has a 'my country right or wrong' view about the US's fucktardery in Afghanistan and Iraq (I might be wrong).

I likewise deplore his acceptance of the view that being incarcerated includes - as a default - being ass-raped... and that that's funny. But on nett, his contribution is really important.






JohnG's picture

So many disjointed comments there I don't know where to start.


1) Are you smoking anything stronger than weed?

2) Are you Karl?

Contradiction after contradiction of your own comments?

Wierd man, just fucking wierd.


PS.  The article and comment sections are about gold.

Bay of Pigs's picture

Sorry, KD is the one who ripped GG, so he can stand or fall on his own merits. I don't care what you think about him. His diatribe on gold is both intellectually dishonest and historically inaccurate. The facts have proven him wrong over the last several years. Why cut him slack on this? Makes no sense to me to when his head is up his ass on the topic of gold.

Trifecta Man's picture

Which will be rarer in year 4010?

1) Gold

2) Dollar Bills

3) Fossilized Pop Tarts

AVP's picture

It's a toss-up between 2 or 3, hard call.

Gold has been cherished for five thousand years, what's another two thousand!

Trifecta Man's picture

I would basically agree.  What we want in money is a something that will retain some value thruout many years.  Gold does not deteriorate.  It will last much longer than most dollar bills.  The only way the dollar bill will retain value after two thousand years is as a collectible.  A few may be stuck in a museum, and they may become very valuable then to some collectors, but we won't live long enough to see it, and it will not be used as "money" then.  Pop tarts will also deteriorate over time (at least I think so), so their usefulness as money or a store of value over time is very limited.

We need money that transcends governments, since all governments are "force", and the people behind them almost always are ethically challenged.  Gold is the people's money.  It has value that transcends governments and their scam artists.  Silver is too.  There is a historic basis for both metals as money.  And it's right there in the Constitution.

Arm's picture

Great illustration to use.

  • There will be the exact same amount of gold as there is today
  • There will less than 1% of current dollars, as all electronic/credit dollars will have evaporated with the credit collapse.  Only PHYSICAL dollars will have survived
  • 100% of pop tarts on shelves will survive and will be just as insepid, chewy as they are today.  =)
demsco's picture

I said it before and I will say it again, this is a guy who confused the gold standard with fractional reserve banking. He is too full of himself to think rationally and, frankly, he isn't that smart, IMHO. He was wrong on so many occasions, like last November's employment report, quote; "This is an honest to God good report, nothing wrong here." Shit like that, OK Karl. Hyperinflation may or may not happen, it also depends on how you define it, yes there are definitions. He just doesn't understand things, hell Obama said I WANT TO DOUBLE EXPORTS OVER THE NEXT 5 YEARS. How do you do that with the highest paid work force in the world, hmm, devaluation maybe? God, Karl is a dumbass he can't even read what the President says.

Rainman's picture

GG and KD.....I think both you guys are right, just in different time periods.

Presently I feel the spot gold valuation is frothy and will eventually give way to the strengthening dollar mixed with other manipulation gimmicks ( as unpleasant as it is, there still ain't no other logical " reserve currency " to go to outside the FRN ) . This all goes out the window if the fear index rises and/or the massive government(s) fraud is revealed. However, this current economic state may very well last 2-3 years as deflation and financial deleveraging continue.....let's face it, these boyz are good with the props. That emergency powers shit is a market making MOFO.

So buying into a 900 range makes more sense to me....beyond that now requires a more extended holding period, which is okay. All I know is that a bunch of quarter ounce eagles I bought in '90 ( cost one Benjamin ) are worth over 200% more than what I paid for them. I could kick my own ass for not having more if I could get my foot back there. 

In 1980 or thereabouts, gold topped at $ 850 ( about $ 2200 today ) .....amidst astronomical interest rates and on the end cusp of the hyper-i. People were selling gold fillings.

Personally, I can see a mid 2k for gold coming at some time, but I'll gamble a little on a pullback and probably miss my entry mark anyway. 

Thanks for the debate.....keeps things lively.

LeBalance's picture

The hard part for many people is to understand the nature of government.  Until one understands that, it is impossible to recognize what fractional reserve banking is.

Simply put, if my total wealth is $0.5M (the total system having $100T) and the Bank prints $1T into existence each year for ten years the new total supply is $110T.  As that money finds its way into goods prices they will increase by 10% (on average over time).

My entire net worth has been decreased (transfered, stolen, etc) by 10%, the same as the amount printed.

Secondly, fiat money is debt as KD indicates, it belongs to another and means (as GG says) that you are beholden (the slave) to another.  Gold has no such attachments, it is freedom.

That is anathema to the Bankers as they will never give up power over others.  It is not in their contract.

The math is very simple.  The concept of government (seen by many as Apple Pie) as Shylock, is hard.  It is impossible for some.

Just see that duality for what it is.

Thanks, GG.

Kreditanstalt's picture

Karl Denninger is, along with many others (Lou Dobbs, Paul Craig Roberts come to mind) calling for "punishing the banksters" and "protecting the middle classes", an Uber-Patriot.

The United States IS its government!  Good Americans don't evade, break laws or disobey.

Gold ownership is, on the face of it, almost treasonous - which is why super-government types don't like it...  

akak's picture

"Good Americans" don't break the law.

Real Americans frequently have, and do, and will.


Kneejerk obedience to authority, no matter how tyrannical, is the mark of the moral coward and willing slave.


Nacho.Libre's picture

you're right, that was long!


Everything is true, but the guys with the guns that say "this is legal tender" still call the shots.  We still have to do things their way and live in their system. 

I would think that any country that went back on a gold standard would soon see all the gold sucked out of their country by other countries trading their fiat for the gold standard currency and then cashing it in for gold.  Free Gold!

nuinut's picture

No one is going back to a gold standard. It really is a barbarous relic. As will this current fiat system soon be too.

This is Freegold

zen0's picture

Disclaimer: I have physical gold. It is easy to get where I am.

If things get really bad, the one ounce units will be a big deal to trade with. You know that people used to cut gold up into pieces, like pieces of eight?

So silver looks easier to use as money during the coming holocaust, unless you are a drug dealer or something.'s picture

Wow, you sure go on and on about a worthless fellow who is not worthy of you. As the Emperor told Mozart. Take a few notes out of the tune.

RockyRacoon's picture

That is a nice, timely, and relevant piece of work.

In an age when deflation is widely feared and the threat of deflation serves as a justification for radical policy proposals, Bordo and Redish have done a great service in showing that deflation is not harmful to the economy, at least on the gold standard.  However, they find an anomaly—a teaser—in Canada during the latter stage of the classical gold standard where positive monetary shocks led to positive shocks of increased economic output.

Nomisma1's picture

Fantastic Piece!

Long Overdue!

I was banned a few years ago from the HamiltonianIDIOTS Throneship after interestingly enough being preposterous enough to, not even take a position but to posit historic similar records from the great founders. LOL

Even more peculiar is after posting similiar historic assertions as presented here, in addition to posting the great work from here:

Thank you Mike!

A Magical Copyright pretty colored Chart all of sudden appears out of nowhere!

For the third time in US History the HamiltonianIDIOTS or correction Alexander LEVINE's have perfected their insolvency!

When is enough a enough?


Keep up the great work and open debate ZH!

Snidley Whipsnae's picture

Karl has been busy designing booms and fueding with his local pols about how to protect his near by waterway from the oil spill.

He thinks that if he raises enough hell with local/state/fed pols, they will protect his little corner of Florida.

Karl, wise up...they don't give a rat's azz what you think, how many faxes you send, whether your favorite dive site is free of oil, or if you go broke day trading in a rigged casino.

You are not something special because you have a blog where you have weeded out any that do not agree with you. BTW, love the way you segregated the 'gold bugs' in their own little forum. What a hoot!

BTW, what came of the thousands of dollars that you blew on faxes to various members of the house and senate when Tarp was up for a vote TWICE? Maybe your rants are what you need to keep from going over the edge? Whatever works to maintain your sanity is ok by me. On the other hand maybe after all these years of rants and failures it's time you reevaluated your tactics?

calltoaccount's picture

I've had private email exchanges with KD re political matters-- and he can be very difficult, indeed. But give the guy credit for trying to help people to understand that our political/financial systems have become totally corrupted-- and that the crises we face today are the product of massive corporate sponsored/government-enabled criminal FRAUD; things these mthrfkrs would be locked up for if the laws already on the books were enforced.  The bought-off see-no-evil pretend journalism msm almost never goes there-- which is why the general public still remains substantially in the dark; with almost no idea as to just how badly they have been/are being economically disemboweled by TPTB.

I hope KG keeps faxing, and broadcasting, and calling out the criminal scum who have taken control of the game (even though I totally disagree w him about gold).  

joneog's picture

I'm not sure why people still argue with Denninger.  He's a wannabe guru who is trying to figure this stuff out as he goes.  If you can get past the sanctimonious indignation and unrelenting pomposity that spews from his jeremiads you'll find there's not much there; to wit, everyone's a crook and we're all doomed(unless you do exactly - exactly! - as I say).  How novel and refreshing, especially for the internet! 

It's not very often you find someone who knows so little yet is so eager to tell others how little they know; to say he's a supercilious dolt would be too kind, a quixotic blowhard an understatement. 

As for gold he's just being obstinate.  He's been bearish on gold for as long as I can remember and CAN NOT admit he was wrong and  doesn't understand gold as a monetary metal.  You can't even use him as a contrarian indicator at this point because I'm convinced the world could re-monetize gold or watch it trade into the stratosphere and he'd still prattle on. 

This, of course, is why they  say a little bit of knowledge can be a dangerous thing.  In the hands of an "internet expert" who commands a cult-like following  it's more pathetic than anything else. 

Gotta love the internet...

StarvingLion's picture

I'm not learning this worthless financial garbage.  I'm taking the most esoteric mathematics courses in University.  Then I'm going down to visit my local mayor and the rest of the ex-real estate agent maggots on council and plunk myself down in his seat and ask him where the fuck is his credentials to understand Public-Private arrangement.  The rest of you guys are going to stare at the gold ticker for the rest of your lives.

hack3434's picture

Credentials and nice Brioni suit will get you far in life...Just ask

mliu_01's picture

Why bother waste time argue with him. He does not deserves it.

Here is a forum that started by people banned from his forum.

Karl is a self centered, selfish, tremendously flawed individual.

VK's picture

A hypothetical question; You have one tonne of Gold on a deserted Island, 1 Kilogram in Somalia and a few ounces in NY City today. Where is your gold going to be useful? Substitute Gold for Fiat paper in the same quantity. In both cases the answer is NY city.

Why? Real wealth = Complexity. The deserted island has no internet, no insta-communication, no NASCAR or American Idol, no fancy restaurants, beer or fine wine. We are facing global collapse, the system is going down via deflation then hyperinflation, but we have never ever been as vulnerable as we are today. In previous depressions, most people lived in rural settings and had faced prolonged hardship and had experience with farming, growing their own, doing their own thing.

Today? Entirely dependent on credit systems that power just in time systems across the world, be it Walmart or Boeing. Credit powers google and NASCAR. Remove it from the system via deflation or hyperinflation and in both cases you get a systemic collapse from which there is NO recovery, ever. Peak oil and the global population bubble, which must deflate by 50% at the least given that we are in population overshoot will happen.

Billions of people are going to die over the next decade. More important then Gold is your family and community. What skills do you have to barter with? Can you grow crops by yourself or in a communal setting? Can you keep goats for milk and meat etc etc. Can you cope with the psychological shock of a total collapse. The Roman empire crumbled and we had a dark age for 1000 years, when the Japanese collapsed in the 11th Century they didn't recover for 400 years.

Also Gold is not the only option within your local community, you can set up local currencies such as the one the Austrian's set up during Great Depression 1, it was called the Worgl and allowed for trade, commerce, development through the use of negative interest rates and thus fast velocity and was used for local tax collection. The era of globalization is coming to an end, with it the way of life you are used to will decline by 90-95% regardless of how much Gold or how many dollars you hold. Complexity is real wealth and that is being utterly destroyed by fraud and the marginal costs of maintaining a dying system.

Good luck to you all.

Anton LaVey's picture

A hypothetical question [...]

You say it yourself: this hypothetical, and, therefore, irrelevant to the real world. I am getting seriously tired of the fear-mongering and apocalyptic fantasies so common on ZH these days.

Billions of people are going to die over the next decade.

Says who? Of course, billions of people are going to die in the next decade: they are going to die of hunger, disease and old age, just like the billions and billions of people who have died before them ever since men have become sentient creatures.

You are suggesting a major catastrophe is going to happen tomorrow, right? Here is a reality check: this is a paranoid fantasy. You are deluded. Get a grip on yourself, and you will notice one very important fact: billions of people did not die because of the Great Depression of 1929 - only 70 million people died during WWII, and I suspect the death toll of WWIV won't be much higher. Most people outside the combat zones (for instance, most of Africa and South America) did mostly OK during WWII, surprising as it may seem.

What skills do you have to barter with? Can you grow crops by yourself or in a communal setting? Can you keep goats for milk and meat etc etc.

Again, this is a Mad Max scenario. Won't happen anytime soon. I am also pretty convinced you have never ever seen a goat in your life, let alone milk it.

Can you cope with the psychological shock of a total collapse.

What makes you think this is going to be a "total collapse"? You have no argument for or against, you are presenting your own paranoid teenage wet dreams as a fact. Here is another reality check: you can't predict the future!

And, to get back to your question: no, I don't know if I can survive total collapse, because I have never been through one. I suspect you would answer "Yes", because you are such a clever little boy.

Now, I would advise you to do this: go ahead and read the two or three blogs below, the whole lot of it, then come back and participate in the ZH discussion like an educated human being, and not just a deluded little boy:

You are welcome.

akak's picture

Anton, I agree with you completely on this oft-repeated fallacious and insidious apocalyptic meme of "Mad Max" and total chaos descending on the world in the event of a financial and monetary crisis.  I think it is important to point out, however, that this message has NOT for the most part been peddled by the advocates of holding gold, but by the pro-establishment, anti-gold defenders of fiat currency and the status-quo power structure.  It is they who over and over are positing the absurdly false dichotomy that either things remain more or less as they are (with NO significant challenges or reforms of  TPTB), or else we see the roaming cannabilistic zombie hordes.  Jon Nadler, just to name one, has been egregiously guilty of disseminating this vile fearmongering theory.

The hypocritical and irrational lackies for the present power elite love to denigrate gold's advocates as "gloom and doomers", yet it is THEY who are the ones who continue to spread visions of the Apocalypse should their corruption and crimes come to an end.

Anton LaVey's picture

akak: precisely. And thank you.

StarvingLion's picture

Its the Financial Derivatives Peoples versus the Oil Derivatives (Gasoline Burners) Peoples..hahaha.  Shit, every night I watch Jeopardy and Wheel of Fortune and just gawk in amazement at the fact these people are fundamentally RESOURCE BURNERS and nothing else.  One night, two fucking librarians and a newspaper reporter.  I'm like, these jobs still exist? Ha, not for long.