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.

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DCon's picture

I advise friend to invest some of his savings in gold (he has healthy savings, no investments and no mortgage).

he asked a banker he knows for his opinion. The banker said stick to cash..

faustian bargain's picture

lol, like asking Ronald McDonald whether to have a salad or a cheeseburger.

nmewn's picture

Anonymty is to liberty as gold is to money...keep hammering GG.


Hdawg's picture

The Cyber Security Act will end Anonymty. 

nmewn's picture

Yeah I've been following that little bit of Fascism also...but in the can't.

For instance, posters on tree's & telephone poles work just as well...people will always seek the truth.

Hansel's picture

Krazy Karl, average spittle-spewing blogger by day, transforms, going full retard as he works up his rebuttal to this post!  Bruce Banner, eat your heart out.  Nice work GG.

Hansel's picture

Like clockwork, Krazy Karl went full retard... again. No one can predict the future, but Karl thinks unless GG can provide the exact day something happens, he has no credibility. Karl has been calling for the collapse of the debt bubble, but I don't remember him setting a day either.

percolator's picture

Yeah, that really bothers me that Karl complains that GG doesn't provide a date.  Yet, Karl makes all these forecasts and never gives a date either, but of course the hypocrite takes credit for being right all the time even though his forecasts are not actionable by his own definition.

akak's picture

As GG has already stated, Karl Denninger is either profoundly ignorant or else blatantly hypocritical in refusing to accept that it is not (just) the specific actors and masters in charge of our current financial and monetary systems who are criminally corrupt, it is much more importantly those systems themselves which are irredeemably corrupt.  Karl seems to think that everything would be OK, if only angels were in control.  This is his biggest stumbling block (other than his ignorance of monetary history and theory, along with his monstrous and insatiable ego).

Bananamerican's picture

"it is those systems themselves which are irredeemably corrupt.  Karl seems to think that everything would be OK, if only angels were in control. " 

Now HOld on a minute there pard'...

Any system man can devise requires men of integrity to staff it. Without them, any system man can devise WILL BE irredeemably corrupt

BumpSkool's picture

...profoundly ignorant

StarvingLion's picture

Gold-Bugs are Truth-Bugs?  Here is some truth for you:  a) The country is built-out.  b)Manufacturing is done by machines. 

Truthsville is a land where 80% of the population is not required. 

The Mighty Monarch's picture

And to whom, exactly, will those manufactured goods be sold if 80% of the population has nothing to exchange for them? Can't make factories profitable when the only people buying are the manager and the guy that fixes the machines.


DoChenRollingBearing's picture

Gordon says buy gold.  As a matter of fact, I just bought another oz today.

Denninger says paper is OK.

Who's right?  Answer above.  Keep writing Gordon!

AVP's picture

Congrats on becoming an ounce heavier! :)

MarketTruth's picture

Agree, great article!

As for Denninger, his ego equals his discussion board handle. Just think of his board like we know about China's internet filters. If you love no TRULY free speach then Karl's board is for you.

WeeWilly's picture

Looks like your money finally rolled in, Do. Good for you!!

lynnybee's picture

I'm a gold believer .... cannot get my friends & family to understand !! 

nuinut's picture

This: Aristotle on Gold, has been helpful for many people, in my experience.

Nictrades's picture

We have held interest rates at zero for two years, we have printed more than a trillion dollars and we don't have inflation ... sorry but it's not happening (yet).

We have deflation, masked by the Governments attempt to reflate the economy.

Is gold a good deflation hedge, yeah it is but its not the holy grail.

Could we get inflation?  yeah if we have QE2 and they print a tonne more money.  But Gold isn't the holy grail, it is trading like a currency.  Its going to be an epic short very soon ...  and then we can buy it again.

Snidley Whipsnae's picture

At some point even the Fed will come to the conclusion that to stop asset deflation money will have to reach people on Main St. When that happens the velocity of money in circulation will increase and this can happen rapidly. Here is what Von Mises witnessed and commented on in Weimar Germany...

"If once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum size. For under these circumstances the regular costs incurred by holding cash are increased by the losses caused by the progressive fall in purchasing power. The advantages of holding cash must be paid for by sacrifices which are deemed unreasonably burdensome. This phenomenon was, in the great European inflations of the 'twenties, called flight into real goods (Flucht in die Sachwerte) or crack-up boom (Katastrophenhausse)"

JW n FL's picture

Gordo... you are no better... you have my information and or questions removed?

You name call, me? which eludes to your inability to answer the arguement with fact?

So how are you any different? other than the information you offer is more accurate? but that does not excuse your behavior matching douche bags!

Let me know when you can and will stop behaving like Douche Bag and I will come back and chat.

Until then Gordo... I know you for your ego that matches the idiot over yonder!

Gordon_Gekko's picture

you have my information and or questions removed?

I have NEVER removed ANY comment from my blog EVER.

JW n FL's picture

It was removed here... Gordo!

But I give you points for shifting the blame early on...

Even with Points given Gordo... Cencorship ='s Nazi... and Nazi ='s Cencorship...

You wanna Bitch about how idiot boy removes real questions?

From real people?

With real Concerns?


...and then hide behind you have never Censored ANYTHING from YOUR Blog? EVER?!

Let me guess Tyler did it? sure he did... Mental Note ***** call Danny Boy and ask him why he is all of the sudden a Censor? Oops... Yeah! Becuase Gordooo said sooo! Blue Horseshoe doesnt like Censors... ****


Al Gorerhythm's picture

GG. You say in foot-note#2 that currency can be created digitally and that we can spend digitally. Can WEALTH be produced digitally?

Adam Selene's picture

I suggest you could ask Bill Gates about that.

DavidPierre's picture

 "Gold Bug"... what a derogatory term, right?

For years and years mainstream Wall St. and the media would brand anyone who "questioned authority" and even mentioned Gold as a Gold bug, it was sort of a way to "brush off" a lunatic that just wasn't thinking right. The term Gold bug was equated with donning a tin foil hat or a conspiracy nut, it was used to demean without ever addressing any questions, statements or theories that these "whackos" had. "Oh, he's a Gold bug" was reason enough not to give the time of day because Gold was such a ridiculous investment and everyone knew that the road to wealth was through real estate and "growth funds".

The Gold bugs were even laughed at many times on CNBC and would rarely if ever be invited back again as Bill Murphy can attest to.

For the most part these "offensive human beings" were mathematicians, logic freaks or maniac "seekers of the truth" that had thesis' that could not be proven without the passage of time.

For instance, you could have said back in 2005 or '06 that real estate on a national level was going to deflate because of the poor underwriting standards, too much debt and no down payments and you would have been spot on, but a year or two early. Since you were early, you were laughed at (it had never happened before so it could NEVER happen) right?

Good logic and analysis, timing was a little early (better early than too late) yet you were a whacko idiot bordering on...the oh so dreaded label... GOLD BUG!

I can remember back in the very late 90's when I began building a Gold and mining share position at A.G. Edwards, several brokers in my office were running around town saying "he's a Gold bug" or even "he's not quite right mentally" (the worst thing is that I was the "whacko" branch manager ).

I had to build this position somewhat "under the radar" because the precious metals analyst retired in '93 or '94 and was never replaced. As time passed people were referred to me and I had to get unsolicited letters signed because "no one in their right mind" would buy Gold much less a mining company! Compliance called me a minimum 10 times asking me "what the hell are you doing?", The early years (late '97-2000) were like a living hell for me, every time something would happen that should have absolutely sent Gold higher, didn't. In fact Gold would get smashed which made things even worse because the mainstream would point to Gold and say "see, Gold can't go up under ANY conditions...therefore Gold bugs are idiots"!

I must say it sure felt that way and I would question my logic each and every day to the point where I looked at it from probably 100 different angles as did other beaten down and depressed Gold bugs. But no matter what angle I went at it, I still came up with the same answer time after time. The logic always ended up at the same final location, Gold was money and Dollars were not. Back then I did not think of myself as a Gold bug and surely did not like the stigmatism attached to the term, I only thought of myself as a logic freak who wanted the truth because ...

"God damn it! Something's just not right here".

I, as many other Gold bugs, was ravenous for information. I wanted to know how it was possible for Gold (money) to trade below the cost of production? Where was all the supply coming from at such ridiculously low prices? Why would Britain be so stupid as to sell 60% of their Gold at these levels etc. etc.

 As time passed we all (those of us who want to and can face the truth) learned and discovered the true story, Gold as well as the rest of the markets have been manipulated completely in Orwellian fashion!

Yes I can hear Nadler, Christian, Klapwjik, Prechter, Denninger and all the rest of the mainstream apologists who have been WRONG ...WRONG ...WRONG for 10 plus years screaming at the top their lungs cussing at me. Do you know what they are calling us? I bet you do, they are screaming "you whacko GOLD BUGS! You don't know what you are talking about! Crawl back into your storm cellars and eat your Gold YOU JERKS!".

They believe they are insulting us yet in reality they are complimenting us. They can no longer do this nonchalantly and brush us off because we have been right and they wrong. Now they squeal like stuck little pigs loudly and publicly as if more volume will correct their faulty logic.

Yes, in retrospect we have been right but more importantly for the right reasons. We weren't "lucky" and just threw a couple darts that hit the bullseye while our eyes were closed.

If you go back and read the ruminations of the early Gold soldiers you will find some but not many disagreements as to the path this Global Financial Crisis would take and the reasons why. This was not about a "love for Gold" in any way shape or form. This was always about the collapse of fiat (fake) money, this was about bubbles that were being blown up and our recognizing the fact ahead of time, this was about governments entering the end game because they wanted more and more power and were willing to destroy themselves in their quest to squash liberty (real money).

The thing is, each and every rocky road LED to the ownership of Gold for your personal liberty and financial protection.

Bottom line, it is good now and has been for nearly 10 years to be one of those creepy crawly GOLD BUGS! It is now "cool" to be a Gold bug because it is no longer STUPID to own Gold even in the eyes of Joe the Plumber and his wife Jane (no offense to them intended). Finally our theories and arguments are receiving some coverage and thought because the "powers that be" can no longer hide the truth even from the mentally challenged.

Slowly and now more rapidly the truth is finding it's way out of the dark shadows, as well it should and eventually had to. So the next time someone labels you a "Gold bug" smile and say "thank you" because it is a compliment. If you were an "early one" all the better but it does not matter now, the destruction of fiat is imminent and there will be only one place to hide. Enjoy the company because the previously "empty room" will fill to capacity and THEN SOME with late comers seeking refuge! 

Bill H. @ LeMet

AVP's picture

I loved this post! Thanks for sharing the struggles "gold bugs" had to endure. I do imagine in these pitiful economic times, more people will wish that they could be called gold bugs!

Gold= Freedom

FRN's= Slavery

akak's picture

Outstanding comment David!  My hat is off to you!

Yes, I have also noticed how the vitriol and maliciously hate-filled propaganda is increasingly being levelled at gold and its advocates, usually in the most ad hominem and irrational of manners --- as witnessed by Karl Denninger's disingenuous and off-topic attempted rebuttal to GG's first article addressing KD here.  The defenders of the current politico-financial paradigm and its fiat currency bastard offspring know they are on the losing side of history, and like other cornered rats, they must resort to lashing out in fear and desperation.  Their plight elicits not a shred of pity on my part, however.

Snidley Whipsnae's picture

Well said indeed Gordon!

I would like to add the last two paragraphs of a paper written by Alan Greenspan in 1966 for Ayn Rand publication. Many have seen this already but for some it may be a revelation about what Greenspan thought prior to becoming head of the Fed. Recently when Greenspan was asked if he had an opportunity to write this article again if he would make any changes to it; Greenspan replied: 'Not one word'. See complete article at link...

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

'Alan Greenspan
[written in 1966]

This article originally appeared in a newsletter called The Objectivist published in 1966 and was reprinted in Ayn Rand's Capitalism: The Unknown Ideal'

Bananamerican's picture

"he was never anything other than a sycophant in Randian circles... a bigger collection of self-congratulating fatheads would not be seen again until the Strauss claque at Chicago"

well, there it is then....

GeoffreyT's picture

Hey there Snidley,

I am constantly amazed by folks who dig out this quote.

My amazement stems from a wonder as to why any sentient being give a rat's arse about what Greenspan ever thought or wrote, since about the only person who is wrong more often is William Kristol.

Greenspan was so hopeless as a private consultant that he had to fasten himself to the taxpayer's nipple for the last half of his life: his consulting firm couldn't even make money in Washington during the Cold War, for god's sake.

So faced with living in a dumpster, he did what a parasite will always do - abandoned the principles he claimed to espouse. It makes sense since he was never anything other than a sycophant in Randian circles... a bigger collection of self-congratulating fatheads would not be seen again until the Strauss claque at Chicago). Also Rand worshipped the US and was a fat-headed ignorant correct-line ideologue whose oeuvre is the biggest pile of shit since Keynes. There is not a single original idea in anything she ever wrote, and she wrote badly.

Rand reminds me of French economists who think that translating Ricardo and Marshall into French constitutes a contribution to economic theory.






JohnG's picture

This article pertains to gold, not Greenspan.

"why any sentient being give a rat's arse about what Greenspan ever thought or wrote"

We can learn from mistakes, he had a large part in inducing the current crisis.

"he had to fasten himself to the taxpayer's nipple"

Agree on that point.  In fact he promptly changed opinion after CFR membership.


The rest is just an attack on Ayn Rand.


I call red herring.

What_Me_Worry's picture

I think the quote is amazing because it can show how a man who obviously devoted his life to economics can become part of collective once they join the dark side.  Here is a man who once probably was idealistic and open-minded about many issues but decided to walk the company line the second they would let him in the club.  His only job at that point was to make the people pulling his strings happy.

It shows just one layer upon what happens to all those that reach the ivory tower are able to make decisions to benefit their collective friends/bosses without any regards for what damage it might bring to the world.  Be it CEO's of large banks, GS minions that get high-end treasury jobs or even presidents who may have once been idealistic.  Power is ever corrupting.

History has a way of repeating.  Next stop is our next Reagen-type president after the unthinkable might happen (Obama re-elected).  If only Dr. Paul were a little younger and better liked by the masses.  Dr. Paul would have saved us all from the path we are now forced to march upon.  There is zero question about it.

For the record, silver is money, too.  Silver has been money, throughout civilization, for almost exactly as long as gold.  Silver ratio above 50 is just being mis-priced, plain and simple.  Gold is in style right now, no one is barely giving a second glance at the ugly step-sister.  Either way, both gold and silver physical holders should benefit greatly.  One may just benefit just slightly over the other.  Only time will tell which one wins more from this point.

Dollars are the poison.  PM's are the antidote.

akak's picture

People continue to dig out that essay of Greenspan's because it brilliantly and succinctly summarizes the case for gold as the money of liberty, and why statists of all persuasions hate it with such a passion. 

The fact that the man later sold his soul does not negate in any way the wisdom of what he wrote in that particular piece.

Cheeky Bastard's picture

Denninger threw me out of his forum numerous times in the past when he was either a) unable to answer my questions b) participate in the discussion further because he lacked the knowledge about the subject which was being discussed c) because he goes apeshit insane when his self-perceived infallibility is questioned.

He can rot in his idiocy and uphold to his dogmas all he wishes. No matter what; he will always be known as Douchinger.

That said; keep up the good work Gordo; most of us know who has won/is winning this debate.

trav7777's picture

You too?  I got banned half a dozen times.  Shit I ghostwrote on gold members' accounts ended up in his tickers.  Dude had never heard of Cantarell before I said it, next thing you know its decline rates as cited by me were showing up in tickers.  No attribution.

The people whose accounts I used were always very afraid that he'd ban them; it was known that you simply DID NOT argue with him or else he'd cut your account off or prohibit your posting.

The worst part is the last time I was there, he didn't even participate in a monetary discussion.  His acolytes did, and referred to the "host" having a deflationist mentality and did I really want to be disagreeing with the host.  In fact his kissasses over there are trying to HELP people get banned so that they can get more nut time.  No's a strange forum that has really gone past its shelf life and utility.

MOST posts over there with substance reference - you guessed it - ZH.  I knew Douchinger had lost it when he threatened to put TOD on the list of sites that linking to would get you banned.

Bananamerican's picture

bounced thrice myself....

Gordon's created quite a little shitstorm amongst the 3 remaining sycophants at Il Douche's lair with this golden bough.

KD was obviously abused as a kid (seriously)...all those references to anal rape and the odd fixation/cavalry charge against ANY story having to do with child abuse (Palin's kid, the laptop school surveil scandal)

he's a messed up savant as i've said...learned a lot about econ from him

akak's picture

"Gordon's created quite a little shitstorm amongst the 3 remaining sycophants at Il Douche's lair with this golden bough."


Il Douche!  I LOVE it!

That's gold, Jerry, gold!

akak's picture

"KD was obviously abused as a kid (seriously)...all those references to anal rape and the odd fixation/cavalry charge against ANY story having to do with child abuse (Palin's kid, the laptop school surveil scandal)"

Wow, you may just be on to something there!  I used to read his blog religiously for most of a year, and in that time I too was struck by the constant references to anal rape ---- I mean really, it is in virtually EVERY one of his posts!  That is not normal, not by a long shot.  The man either was abused, as you say, or is a repressed homosexual.  Given his frequent flights of wild emotionalism and his demonstrable narcissism, I would bet on the latter.

economicmorphine's picture

He seems to have a stiffie for Dennis Kneale too, which sort of proves your point.

MountainHawk's picture

Denninger is one of my Facebook friends! Lol...

GeoffreyT's picture

Hey there Cheeky,


I'm surprised that folks have had that sort of reaction from Karl; ordinarily I find it easy to get up people's noses, but I have not ever experienced any 'rougher than usual handling' from TickerGuy. I need to try harder: one of my main raisons d'être is to test people against the Chomsky idea that people must believe in free expression of ideas that they despise.


One thing I would point out to both GordonGekko and Karl (GG only re-used the error), is that one is not 'presumptive'; one is presumptuous. At least, that is the way we talk in the English-speaking world (where one thing is different from another, not different than).


That aside, GGs post is a bit

And like I was like "No way" and then he was like "Way" and then I was like "ZOMFG" and he was all "Shut UP"... 

John Hussman has written a few sensational pieces on the root causes of hyperinflation (which Hussman reasons is a manifestation of market disgust towards ownership of government liabilities).


As to my personal thoughts on the possibility of hyperinflation: I think the risk is remote for the main reason that the US political-parasite class can't gain anything from it. In a world with genuinely deep, liquid bond markets and flexible long bond yields and even a modicum of forward-looking behaviour, the  bond market would drive up interest rates faster than prices (because the bond market would price in future hyperinflation).


And lastly: although he is free to have the views he holds, Denninger's views on immigration are those of the left tail of the redneck-squared distribution, and bordering on economically illiterate.

Don't get me wrong - I'm as racist as the next guy, but for a member of the race that thieved its way across America to lecture folks about 'legal' immigration is just ludicrous... if the Red Indians ever get a SIOUXPAC started in China and a bunch of Chinese converts claim the land based on what the Great Spirit once said, Yankees will wind up living in Gaza-style conditions.





chumbawamba's picture


As to my personal thoughts on the possibility of hyperinflation: I think the risk is remote for the main reason that the US political-parasite class can't gain anything from it.


However, hyperinflation is not something that one can control.  You can't flip the Hyperinflation switch on and then off again when it has fulfilled its purpose.  Hyperinflation is completely out of control of TPTB because it is out of their hands.  In a way, it is economic democracy in action: hyperinflation is when the animals in the human ecology check out.

Once again, hyperinflation is a psychological event.  It is when the dominant currency is rejected by the marketplace and an alternative is sought.  Those still willing to trade in the crippled currency will demand more and more of it to satisfy the unwillingness of other participants to accept it in return as payment.

It also helps to think of it in commodity terms: currency is a commodity just like anything else.  When there's little of it out there, the price (in terms of goods it can buy) is high (i.e. more purchasing power).  When there's a lot of it then the demand goes down.  Supply and Demand has a definite psychological factor to it as well.  In fact, one could argue it's all about psychology.  Right now we are seeing a (relatively) strong dollar because there aren't enough to satisfy current demand as investors cash out their holdings in a shaky market.  Once they start to divest themselves of dollars and into other assets you will see the value drop precipitously as most people will be looking for anything but the dollar to put their wealth into and not many people looking for dollars.  If it looks to the market like the dollar doesn't have a bottom and confidence wanes to the extreme then at that point the hyperinflation begins.

Love the last part of your comment.  If we all just made an effort to examine our ideas for any signs of hypocrisy before we committed them to speech or writing then we'd live in a much more thoughtful and polite society.  Perhaps.

I am Chumbawamba.