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Mr. Denninger and Gold or Why the Dollar-Deflationists Are Wrong
Those who know Mr. Denninger know that he, well, for lack of a better word, hates Gold. It only goes to show the level of disinformation and ignorance prevalent in our society when even smart people like Karl fail to get it. From what I hear anybody even mentioning the word Gold runs the risk of being permanently banned from one of his "forums". In a recent commentary entitled "Ten Things for 2010" he was at it again bashing Gold. Here is what he had to say:
We're not looking at hyperinflation folks, in my view - we're looking at a deflationary collapse…If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them. Why? Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can't eat it. If you try to get around the tax man structure you're going to get creamed; governments can and WILL prevent that from working. My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you're wrong.)
Really Karl? LEAP Calls? In a hyperinflation? That’s a good way to lose 5% your portfolio. I’m assuming you know what hyperinflation is - in a hyperinflation the currency becomes worthless, as in toilet-paper. Why would anyone want to get paid their "winnings" in a worthless currency, assuming there are stock indices and counterparties left who can pay off these worthless winnings when countries collapse?
And the tax structure is FAR more favorable for Gold than ANYTHING else, if only you are not in the habit of bending over. Buy cash and keep your mouth shut – it’s very simple – or just move to another country where the government is not as intent on raping its citizens. I know privacy is a foreign concept in America these days, but still. All your other assets, including stock market profits, are fully open to the government and there is nothing stopping them from taxing them to the hilt. Trust me, when it all hits the fan Gold in your personal possession will be your best friend.
Which brings me to my favorite part:
gold has never performed well on a contemporary basis .vs. inflation
Poor Gold. The thing gave an instant 75% profit when Roosevelt confiscated it in 1933 and rose 24x (yes, that’s 24 TIMES) from $35 to about $850 in a space of 10 years from 1970 to 1980. And even during the past decade from 2000-2010 it has risen 5x outperforming ALL asset classes. Overall, from 1933 till date it has risen about 60x. That is, if you simply held Gold since 1933 you would be now 60 times richer, at least in nominal terms. Yet nobody remembers all that. All they remember is the lousy 20 years from 1980-2000 when the full force of the derivatives market was brought to bear upon it to suppress it’s price (well, that’s a topic for another post), as is being done even now absent which it would have easily crossed 10x (from the 2000 low) by now – which it will at some point in the future as the market cannot be suppressed forever. Indeed, the longer the suppression, the more forceful the eventual price rise as happened when the London Gold Pool collapsed during the late sixties soon after which Gold shot up 24x during the next decade. If you’re not that devoted a disciple of Karl I suggest you hang on to your Gold for a little while longer. In my humble opinion, it will outpace all gains in all other asset classes since the creation of the dollar – in not only nominal, but real purchasing power terms.
And then there was this again:
The last time I checked they didn't take 100oz bars at WalMart, but they sure do take $100 bills
And the last time I checked Karl, they weren’t taking stock certificates and bonds either. Also, there was a funny thing I noticed: there was NOTHING stopping me from getting dollar bills, euros, yen – you name it – for my Gold. In fact, everytime I sold some Gold I got even more paper tickets than the last time – which meant that I could buy even more stuff with the same amount of Gold. How surprising, no?
Well, Karl was definitely surprised:
Precious metals will not be a safe haven: Clean miss. Gold and silver have both performed well.
And talk about reaching wrong conclusions:
Discovery that the metals market has been "polluted" to the point of irrelevance would mean that those around the world who had bought and were holding alleged gold bars that in fact aren't gold had tendered good money for nothing. This would be a monstrous deflationary event - after all, the definition of deflation is the destruction of money, and that's exactly what would have happened, just as if you took a stack of $100 bills and burned them in your back yard.
No Karl, the bills still exist – in the bank account of whoever was paid to obtain the said Gold. It is the Gold which is discovered to be no longer existing, thus causing the apparent supply to be further reduced and spiking the price.
Karl thinks he’ll be safe watching these “fireworks” from the sidelines. Not so Karl. By not buying Gold (and holding dollars), you are smack in the middle of them. You are not simply “missing out” on some investment gain but stand to lose everything as the purchasing power of the dollar is decimated. This is why those advocating holding only paper cash as a “safe alternative” are in fact harming those who listen to them.
Now don’t get me wrong - I agree with a lot of what he says in general – he’s a good reporter (which is why I keep him on my “must read” list) - but when it comes to Gold, Karl simply doesn’t “get it”. First of all, when you talk about deflation you have to ask the question, “In terms of what?”. Most people ala Mish, Prechter, Karl et. al. when they talk about deflation are referring to deflation in terms of the dollar, i.e. they are, in fact, “dollar-deflationists”*. One can’t really blame them since the dollar is considered by most people as “money” today and is therefore their frame of reference. But this is a critical error of perception that will prove fatal to those who hold their life’s savings in dollars when it all finally implodes. The dollar today is just another fiat currency created at will out of thin air by bankrupt and corrupt governments and their Central Banks. It is an illusion of money, not money; which brings us to the question of:
What is money?
This is a topic which can fill an entire book, but I’ll just quote the best one I found (Mises):
In the marketability of the various commodities and services there prevail considerable differences. There are goods for which it is not difficult to find applicants ready to disburse the highest recompense which, under the given state of affairs, can possibly be obtained, or a recompense only slightly smaller. There are other goods for which it is very hard to find a customer quickly, even if the vendor is ready to be content with a compensation much smaller than he could reap if he could find another aspirant whose demand is more intense. It is these differences in the marketability of the various commodities and services which created indirect exchange. A man who at the instant cannot acquire what he wants to get for the conduct of his own household or business, or who does not yet know what kind of goods he will need in the uncertain future, comes nearer to his ultimate goal if he exchanges a less marketable good he wants to trade against a more marketable one. It may also happen that the physical properties of the merchandise he wants to give away (as, for instance, its perishability or the costs incurred by its storage or similar circumstances) impel him not to wait longer. Sometimes he may be prompted to hurry in giving away the good concerned because he is afraid of a deterioration of its market value. In all such cases he improves his own situation in acquiring a more marketable good, even if this good is not suitable to satisfy directly any of his own needs.
A medium of exchange is a good which people acquire neither for their own consumption nor for employment in their own production activities, but with the intention of exchanging it at a later date against those goods which they want to use either for consumption or for production.
Money is a medium of exchange. It is the most marketable good which people acquire because they want to offer it in later acts of interpersonal exchange. Money is the thing which serves as the generally accepted and commonly used medium of exchange...
(All emphasis mine)
Money was created by the markets; by humans trading goods and services amongst themselves; by the need for indirect exchange. This is one of the major misconceptions of the dollar-deflationists - that money is what the government says it is. Although Governments do their best to convince people otherwise, including putting a gun to their collective heads via legal tender laws, they cannot dictate what money is – not for long periods of time anyways – which is why whereas Gold has been money for thousands of years, you’d be hard pressed to find a fiat currency that has existed past a few decades. The present period is one such short period of mass delusion where the majority has been convinced – including, apparently, Mr. Denninger - that the colored pieces of paper being printed by various men behind the curtains is, in fact, money.
Gold is the commodity that humans chose to be “money”- the most marketable good. It didn’t happen overnight, but over thousands of years of evolution. Billions of trading decisions over centuries made by free men of their own volition – the collective wisdom – installed Gold as money. It needs no government violence to enforce as money because the force of nature that is the market chose it to be money. Indeed, it was the governments who hijacked the free-market commodity money of Gold into “backing” their various fraudulent paper money scams using fractional reserve systems. Why? Because the power to create money is the ultimate power. It is not for no reason that Mayer Amschel Rothschild said:
“Give me control of a nation's money and I care not who makes her laws.”
And why do we know Gold is still money today? It’s simple – Gold has the highest stocks to flow ratio of any commodity i.e. its total above ground stockpile is very large compared to its annual production which is NOT the case for other commodities. The reason for this is that while other commodities are primarily mined for consumption, Gold is not consumed but hoarded. Its primary function is that of a store of value – a wealth reserve. Why do you think the Central Banks keep Gold on their balance sheet even today? Right. Even the Gold jewellery demand in countries like India is, in fact, investment demand in disguise – hidden firmly behind veils of religion and culture to protect their real wealth from the depredations of various rulers and governments that have pillaged her over the many thousands of years of her existence.
Moreover, even though most people don’t realize it, even today the dollar is only acceptable as money because it is indirectly “backed” by Gold (via the derivatives market) i.e. you can get Gold in exchange for paper dollars on the open market. The proof of this lies in the fact that were, for some reason, the convertibility of Gold into dollars suspended today [on the open market], the dollar would instantly collapse.
Gold IS Money – not the dollar, not ANY fiat currency. Period.
As the king of banksters J.P. Morgan himself testified before the Pujo Committee in 1913:
“Gold is money and nothing else”.
The Fiat Money Scam
Throughout history no fiat currency has survived – ever. There is a reason for it. Paper money is inherently a scam – a scheme to loot the people who actually produce the goods and services in the economy. Just because it is legalized and its perpetrators hold fancy government titles does not mean it is not a fraud. The issuer can create unlimited pieces of paper – or computer bits today – at essentially no cost and use them to appropriate real goods and services in the economy. So whereas you and I have to actually do real work to procure it, the printers of the currency can basically print whatever they need. This is why there is a constant inflation of money supply under a fiat money regime as has been the case since the Federal Reserve was established in the US in 1913, as constant theft requires constant creation of new money. The evidence of this inflation is the annihilation of the dollar’s purchasing power since then:
The Dollar's Purchasing Power Since the Creation of the Federal Reserve in 1913
This is why we have legal tender laws making the unconstitutional Federal Reserve Notes legal tender with the monopoly of the private banking cartel (i.e. the Federal Reserve) enforced by the courts enabling the banks and the government to essentially enslave the populace. This is also exactly why the founders of America prohibited anything except Gold and Silver to be used as money, and why the governments go to great lengths to suppress their price. Indeed, America today is the very antithesis of what its founders intended.
The fraudulent money system today is the source of all the rottenness. The various scams in progress today - the entrenched corruption - can be all be traced back to it. The rot is at the very top of the pyramid from which the fountain of fiat money emanates. It is indeed telling that the two World Wars occurred right after creation of the Federal Reserve. Further, no amount of prosecution will fix the system because the prosecutors themselves have been corrupted. As Ayn Rand said:
"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world? You are.”
It is too lucrative a scam to be given up voluntarily by those owning the printing press while the going is still good. It is like expecting a thief to stop stealing while not only being immune from any sort of legal prosecution, but actually having the power to create laws. The system cannot be fixed - the only way this will stop is a collapse of the existing system so that a new one can be built – and we are in the middle of it right now.
Deflation in Terms of Gold, Hyperinflation in Terms of the Dollar
By its very nature, due to economic control being concentrated in a few hands and fraudulent creation of money out of thin air, the fiat money system creates massive misallocations of capital and resources throughout the economy. The economy under a fiat money system is no different than a centrally planned one, such as the Soviet Union. Moreover, since the entire world is on a fiat money standard today – with the various fiat currencies themselves being “backed” by the fiat dollar - misallocations of capital have occurred throughout the world resulting in malinvestments. These misallocations are both material and human, as exemplified by the skyrocketing unemployment rate. The malinvestments now need to be liquidated i.e. converted to the most liquid form – “the most marketable good” or money - so that the capital can be reallocated to more productive uses. Loans are called in as they can no longer be serviced. This results in deflation, i.e. rising demand for money in relation to everything else, and consequently falling prices and increasing purchasing power of money. Moreover, economic uncertainty means that more and more people want to hold “the most marketable good” i.e. money thus further increasing the demand for money.
Now normally – since a lot of debt-money is destroyed in the process and there is a rising demand for money - this would lead to a rising dollar (in terms of purchasing power, not the meaningless DXY), but that would mean that the whole “theft-via-inflation” scam would fall apart. The government can’t tax a rising purchasing power! They simply CANNOT allow deflation in a fiat money regime as it would defeat its very purpose – that of allowing them to appropriate resources from the rest of the economy. This would threaten their very existence. This is why holes created on the banks’ balance sheets by defaulting loans – which would normally create deflation - are being eagerly filled by the Central Banks. This is why the Fed is now simply printing money out of thin air – both overtly and covertly, with the derivatives market being cleverly used to absorb the excess money creation (so you were wondering why the derivatives monster is increasing exponentially in size?) - to fund the government’s operations as there is not enough money in the market to lend to the government. Hiding under esoteric nonsense terms like “quantitative easing” does not change the fact that it is simply creating money via ledger entries and outright STEALING.
Whether they “allow” it or not deflation WILL take place – not in terms of dollars, but in terms of Gold. It’s simply forces of nature – the market – at work. The dollar deflationists expect the dollar to suddenly reverse its 100 year long drop in purchasing power. Ain’t gonna happen. What the government is doing now – i.e. spending raw printed money into a contracting economy - assures us that we will end up with the hyperinflation of the dollar. The only thing they can do is prolong its demise with intermittent bouts of induced apparent “deflation” to keep the inflationary scam going a little bit longer - remember 2008? (h/t Gary). 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. But ultimately, as more and more people realize that the government will not – indeed, cannot – stop inflating the currency into oblivion, will choose to hold the ultimate “marketable good”, i.e. Gold. This is the reason why Gold is the only asset class at new all time highs. Rest assured, even the big boys are holding Gold in their private vaults, not dollars. Is there any sense in holding something you can create at will?
Ultimately, there can only be deflation in terms of commodity based money such as Gold since it cannot be created out of thin air. Indeed, we have already been deflating in terms of Gold for the past decade. Just look at the various commodities, the stock market, real estate – pretty much anything - priced in Gold – it’s all going down.
SPX priced in Gold (2000-2010)
As capital goes down the liquidity pyramid in search of the most marketable good, all the money derivatives – including the dollar – will collapse returning all capital to where it came from: Gold; a global reset, if you will, with only holders of Gold left standing when the dust settles:
Exter's Liquidity Pyramid
You Cannot Eat Gold, But You Can’t Eat Dollars Either
That has to be one of the lamest arguments against Gold – ever. It is the sign of a closed mind. It shows that you don't know ANYTHING about human history, which is not surprising considering the sorry state of our government controlled "education system". You cannot eat FRN’s either – why not just burn them? The function of money is not to be eaten but to be used as a medium of exchange and store of wealth i.e. to get what you want to eat at an indefinite time in the future. And while with Gold you are assured of getting at least something in return in the future, whether it is an edible product or not, it is not so with dollars. Fiat money has a problem in that it lasts only as long as the government enforcing its use does. In times of economic uncertainty, such as today, when the very survival of various governments is at stake (yes, that includes the US Government) do you want to hold Gold or their worthless colored paper tickets? Gold is the only money that has outlasted empires and governments - no fiat currency has. Think about it - what will your dollars be worth when there is no government to enforce it as legal tender? Yup – zip, zilch, ZERO. And to those who say that we will not need Gold (but something else like food or guns) in such extreme circumstances, I say that empires and governments have constantly collapsed throughout history but it did not mean the end of the world. As long as you believe that human society will exist and there will be division of labor, you need money (i.e. Gold) – because:
a) You cannot store indefinitely all your needs especially perishable items such as food.
b) You do not know with 100% certainty what you will need in the future.
c) You cannot produce/manufacture everything that you will need today or in the future by yourself.
Even if the government does not collapse there is nothing stopping it from devaluing the currency at will in a step function thereby instantly appropriating a vast amount of your savings, as has already happened not once but twice with the dollar since the creation of the Federal Reserve. I mean really, the facts are so obvious that you have to be either be in total and complete denial (perhaps due to having already put all your eggs in the dollar basket) or in collusion with the people promoting the paper money scam.
Gold is the currency beyond Governments. It is the most liquid form of money accepted throughout the world – the true reserve currency of the world - whereas Dollars, Yuans and Euros etc. are only guaranteed to be accepted within their own respective countries, and as long as their respective governments last. Why would you want to tie yourself down to the paper currency of a particular nation, especially in times of such turbulence? It points to a very limited sphere of thinking when you advocate that holding only dollars is the best strategy. It is a fallacy to believe that there is no refuge outside the system; that you have to be trading paper tickets all the time to “keep up” with the dilution of your purchasing power or just stand by idly holding dollars while the government rapes you. Gold is your refuge outside the system.
Got Gold, Mr. Denninger?
*In general we can state that they are “fiat-money deflationists” since the process of money creation is same in all the countries i.e. money is created as debt and the collapse will follow a similar route. The only caveat in my opinion is that since the dollar backs all the other fiat currencies, it *might* collapse last. Also, to keep things simple, for the rest of the discussion, we’ll simply use the term “dollars” with the understanding that it can be used interchangeably with the general terms “fiat currency” or “fiat money” since it is one itself.
For an excellent discussion refuting the dollar-deflation theory and why the dollar WILL eventually hyperinflate, please refer to "No Free Lunch".
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Nice point well made GG.
Im an equal opportunities investor and believe $ and gold both make compelling cases at this very moment in time but youve laid out a strong argument for gold in the medium term.
The 3 big dangers for me are
1) continued price suppression. Guessing when gold will take off is like guessing how long is a piece of string. Its not impossible for gold to be manipulated for many more years to come (unlikely but not impossible)
2) confiscation (less plausible than in the 30s but still a danger)
3) debt deflation liquidity trap. defaults and a true clearing price for risk assets being found in markets would see alot of painful margin selling in gold , phy and paper.
1. Physical gold should not be viewed as a trade. Put in 10% of your assets and hope that you lose money on it. If you lose money on your gold, then chances are the other 90% will make money. Gold is a hedge against bad governance.
2. Many others have responded to this. If you can't get out of the US, deal in cash and stay off the radar. (In Europe, where I am, gold was only banned by the Nazis, Fascists, and Communist countries; others did not ban it, even during the Depression.) You can also try a near-gold substitute, such as another precious metal. Silver will be the most liquid and good for barter, if you have the space to store it.
3. Even in deflation, gold will hold its purchasing power in terms of other goods, if not in terms of local currency. You can hedge this risk with a fiat instrument like govt bonds.
GG thanks for a well reasoned and informative post. For all those that can't see the decline in purchasing power of fiat - food prices are continuing to rise - maybe not luxury items (which often have "special offer" status) but staples - including fresh fruit & veg.
Gold is the wise money
Silver is the smart money
And owning both amounts to genius
Thx GG
Considering my next purchase of gold/silver. Money is at the Perth Mint awaiting instructions. Looking for some bounce in the AUD that may not come.
Is a bit more difficult to buy gold here in Australia, because everything here seems fine, the economy seems fine, all is good with the world, so the case for bullion seems counter intuitive. The papers mostly tell us how good things are going.
Never the less I have looked abroad and seen that all is not at all well and that there are enough short medium term risk factors about to warrant using gold as a hedge, one way or another. So have to go against the grain and stock up on bullion.
Here in Alaska, we also do not see many of the signs of economic depression that the rest of the USA is feeling (aside from the slumping tourist industry, which does hurt), but one really has to look at the entire worldwide situation I think in judging where to put one's savings today. I suspect that when the financial and monetary situation really turns bad, most if not all of the world will feel it in a very real and significantly painful way, even if some countries and areas feel it less than others.
1 oz gold has always bought a fine men's suit throughout history? Sounds like a pretty stable store of wealth I would say. Better than that empire's currency with the eagle for it's symbol..Rome.
The next crash will dump the AUD as it did last time, so no loss for me with respect to gold/usd holdings if there if there is an intial sell off of gold.
If gold holds up and the AUD dives it would be hard to resist selling off to take the profit.
There is so much uncertainty out there now and into the future that you would have to think that gold will continue to maintain a reasonable level of support. There will be enough fear generating bombshells over the following years to keep interest in it.
If nothing else gold is 'the' hedge against fear. Maybe because fear blinds vision of the future and it is known that gold will always have value.
"Even today the banksters would love a gold standard, as it would play directly into their hands." - KD
yeah right, the current system is what they want, if this wasnt the case they would change it.
"Even today the banksters would love a gold standard, as it would play directly into their hands." - KD
yeah right, the current system is what they want, if this wasnt the case they would change it.
Enjoyed the debate that Denninger and Gecko authored. I like that Gecko is so consistent and an avowed goldbug--he has been correct.
I like that Denninger addressed a core issue; that being that men wish to preserve the overabundance of past labour and production is some stable, immutable form for consumption at any later time. Freedom consists of just such things. Liberty in ideas and body should not be ever changeable, and certainly not mutating from greater to lesser degrees.
One should be able to preserve one's wealth day-to-day, century-to-century. Modern economy demands that savings be delivered for sacrifice to the alter of expediency. That hoarded capital must be smoked out to spur even greater abundance in the production process. Supply and velocity must ever increase. And the central banker's and gov't's silent share must be parted out.
It is oppressive. It is in opposition to freedom.
One should be able to secure an inviolate and constant proxy for one's dead labour. One should be able to hold a certificate which guarantees the holder to time-immune quantities of desired necessities and luxuries. He or his descendants should be able to tender that security and have no diminishment through all ages of time.
The economy of heaven promises the same. Man is only the one who constantly introduces dross into this pure cup.
No such proxy has ever been available. Every commodity or exchangeable device has prove susceptible to corruption or extinction; none serves as a perfect "money". Gold has just consistently presented itself as the "best of breed" among a host of flawed possibilities. Were there a better, we would be discussing it instead.
Everyone wishes to participate in the creation of wealth and the EXPANSION of human possibility and comfort-making. When CONTRACTION; however, is the inevitable result of long insults to the general marketplace, few wish to assume the unavoidable losses which MUST be borne. The true invisible hand mandates that those who authored the economic mistakes must endure the just consequence. The prudent wait for a settling out that delivers goods of weak folly into the hands of strong foresight.
Central banks try to intercede. They wish to make every man his brother's keeper. They wish to dispense the righteousness of the few throughout a system to cover the evil-doing of the many. In order that some virtue erase a multitude of sins. But that benevolence is borrowed or, rather stolen. It is not theirs to give. Bankers wish a special mercy to mitigate the hard requirements of balance sheet justice and the right to deprive some to bestow upon others without restraint of rule of law.
Gold only imperfectly strips them of that assumed and ungranted ability. But it is all we have.
Could we devise a better, we might be on the cusp of a true New World Order.
Good comment, well done. I see KD's problem as being slave to the ideal. It would be great if all the corruption and manipulation would stop. He would be dead right then. Things are not as they should be -- they are what they are. Hence, the need to hold precious metals as a store of past labor.
Well yes. He preaches "Realize the market is a rigged game, don't try and fight it" but gets angry when you equate the market with politics..
"Even today the banksters would love a gold standard, as it would play directly into their hands." - KD
yeah right, the current system is what they want, if this wasnt the case they would change it.
Yes, that was indeed one of the more ridiculous and patently untrue statements in a long string of them that Denninger spouted in his little diatribe against gold.
I really must repeat this quote --- because it is so frequently the case, and applies here once again:
"Because gold is honest money, it is disliked by dishonest men."
When 80%+ are so convinced of the same thing, then you know a top is forming. As Prechter say's, the Market's job is to fool you and the laws of maximum destructions requires evangelistic like frenzy's to fool as many as possible. I'll even go so far as to say the same bugs today were probably Nasdaq Players in 2000 and Real Estate Hotshots in 2006.
I'm with KD on this one and predict gold between $600-$800 by the end of the year. Purchasing power-unaffected.
Yeah, but you won't be here at year end to eat crow for your shitty prediction. That;s my prediction.
Being Prechterized is dangerous to your financial health, oil going to $4? Deflation will prevail for a short while IMO, but just like 1934, 2004, inflation will take over, the CRB/$20yryld ratio has been on an uptrend since 1939. It is currently well above a trendline dating to 1946.
Just when sheeple like this guy thought they had this bubble thing figured out.......along come Ben Bernanke and the fiat bubble.
.
gold at 600 to 800 by the end of year lol
and your penalty if your wrong ... how about you and bravo eating a hat ,
the bugs today were those who sold nasdaq at 5000 bought gold at 280,, hui index at 40.
sold gold jan 1980 for 800 bucks
ran a business for 20years sold at the top for good coin to fidelity
sold at the very top housing ... renting now.
a gold person does and can chew gum and walk at the same time . .
we will find that those who come out against gold are living from paycheck to paycheck ,, with nary a pot to pizz in .. so they pizz in the wind . hoping to make a splash ,
OK just relax. You can buy me a beer come December 31st. I'll be at Tom's Oyster bar in Royal Oak. I expect you to be wearing a sandwich board with the words, NOT TO THE MOON THIS TIME ALICE.
and your recognitionbadge .. a large hat chewed in various places , // with a large picture of a ding bat . attached to said hat.
Great --- a metro Detroiter, speaking from "The Capitol of Conformity" itself.
So glad I escaped that particular wing of the shallow, hyper-materialistic, consumeristic, soul-sucking insane asylum years ago.
I'll bring the hats...
And 80+% of <1% is how much exactly?
You mindless gold-haters are SO entertaining in your ludicrous and hysterical denial of reality!
Predict away your fantasies, you idiot --- it will only be your loss.
Actually it was my gain when gold first hit over $1200. Cashed out to a coin dealer who thought he was ripping me. Rest assured AKAK, gold may reach it's 5th wave frenzy up to about $1500 but it's the anticipated rapid drop that scares me too much to touch it. Let's compare notes in 6 months.
PS gold is not hitting all time highs on fundamentals. By that I mean, fundamentally, Oil, NG, Silver etc should be experiencing the same thing but NO NO.
gold will rise to meet the balance sheet liabilities of the nation... 5000, 7500 3500.. like water finds it own level
this time because of a gold backing of internation currencies ,, gold will find its level and not depart from that.
and rest assured gold 1500 will be the buy point for the international banks and nation states . the common man at this point in time will be locked out of the gold buying .. as it will be bid up .
silver then takes its place as a monetary metal . and a rush to buy silver into the 50-60 dollar range
gold into the 5000 -range
the buck a history of failed money schemes . a blight on the folly of endless printing , wars poverty unemployment .. the keynesian economic model the laughing stock of the world ,
Ah, "fifth wave" --- do I detect an Elliot-Wave obsessed Precherite?
All your charting does not mean squat when the entire financial and monetary system are going through a paradigm shift, and are very likely to be "reset". Garbage in, garbage out.
In over 30 years of reading about gold, it never ceases to astound me how many people are both woefully misinformed about it, and violently and obsessively hateful of it and its owners. What is it about those who hold gold that so enrages you? Is it the implicit challenge to the sociopathic financial and monetary systems of which you are a part and a defender? I would really like to know.
(Not, of course, that I would expect any honest answer from you.)
Honesty? You've got it. I don't hate gold or those who hoard it as an investment for their greed or security for their fear. It's just that the emotions surrounding it today are driving it's price above it's intrinsic value. To me, intrinsic value equates to liquidity meaning that it's only worth as much as someone is willing to pay for it on demand. As Denninger pointed out, unlike silver or platinum, gold has no real use but a hedge against uncertainty. Uncertainty is more of an emotion than a quantifiable measure. As much as Fiat currency can be manipulated, so can the news.
Is supply and demand driving the price? I believe 90% of all gold even mined still exists. This is not to say that we have actually mined a major portion of what exists. Deepest mines are 3-4 km's, radius of earth is about 7000 km's. The diamond industry used to use the same argument but now resort to marketing of guilt and inadequacy so dickheads can throw a few grand in fear of getting clocked over the head by their demanding spouses.
But go ahead and do what you feel is right. After all, you're accountable to yourself. Just because I don't agree, doesn't mean you're right.
Diamonds, although they have value, do not have the quality of currency because they are varied in variety and size, clarity, etc.. Also, they have no value to some people that aren't taken by them, I suppose similarly to gold.
Also unlike gold diamonds cannot be reformed, resized, and reconstructed.
Gems and jewels are certainly like currency in that you can transport a large amount of wealth on your person.
For both diamonds/jewels and precious metals they have value for their perceived value even it one doesn't appreciate the same value of it. Anyone can find a way to exchange something of value when they need it.
If anyone on these boards that doesn't like gold but found a 1oz coin on the street would they just sell it or would they keep it? If you kept it would it be for the hope that it goes up or just sentimental because you felt lucky? Or if you sold it is it because you hate it and would rather have cash in hand for that worthless metal?
You are completely clueless. I hope you don't have any dependents.
great article mr. g.
comment section...( randomness included )
markets are conceptual and infinitely tangential. i think the words are misallocation
of "capital" where capital is just a key stroke and a nod, no failure possible for the elect few.
transactions touch the physical. markets are
conceived from numbers of transactions , so, are tangential to
the function which is of the "real economy", real "life" function. markets, therefore,
will always exist in the speculative, bubble, realm. virtual/fiat ....and rife with
fraud / virtue-less speculation. as gambling, like which fly will land first. ? or which
flies will fornicate first? some may study the fornication habits of flies but for
the information gleaned to improve their own speculative powers in the
fly fornication market. the flies become commodities and are replaceable as
their behaviour is only valued as the determinant of the settlement of
an important financial concern. but what about the flies?
and what about the sea life and the oil? the financial impact? another story...
decanted from the physical inasmuch as they leverage upon the physical.
the unhinging
of the financial sector from the real sector of the economy has
been exaggerated or completed because we have "progressed" into
treating conceptual speculation as if it were a real market, embodied by
fiat currency and reserveless debt with fraudulent lending as money, which it
has become but wholly divorced from any reality or real economic
unit, then become it's own reality. enter fiat civilization. now squared.
1984 and all.....term reversals and mind manipulations to maintain open
and broad daylight robbery and slavery.
power, money as an instrument to exercise power,(force / leverage)
would like no limitation, thanks for not playing/playing/not being able to play
but have provided needed services, yes, you can go now. where? away.
and the derivative virtual shadow system runs to the guns
of government for it's salvation.
.
we see printing. bonds. sold for what? money and other toxic junk/debt!
debt baked in fraud. trade it in.
junk fraud for interest free money, kept aside and bearing interest.
bonds /will/ buy themselves in the petroleum/debt-cash money tsunami.
where the golden life boats? or yellow submarines?
apparently necessitated by the creation of the derivative, no reserve, shadow
cds system of global fraud against all peoples and gifted to sovereigns, in their
hour of need, suffering under ridiculous asset pricing, residential, and chained
to the system that demeans work and production to the status of human slave.
exported and unreported and out of view, thanks.
was a time when a currency, fed note, was justified by
possession of precious metal. no questions asked in polite company
how did one come by said metal. murder? if you had it it was assumed you
did so lawfully, presumption of innocence for some, hewink henod. good enough.?
more metal being "found", more money being justified into existence,
more production and bodies in the "economy". the limitations becoming
prohibitive to expansion and speculative , market making, production.
but gold = store of value and insurance, yes. currency/money, no.
it is too precious, the holder will hoard it but will not spend it easily. not liquid?
no velocity and maybe that is the point in deflation, the rate of real transactions
diminish.
and what manner of murder lie beneath the surface of great horded stashes
of the precious...metal? polite company, today, wants to know.
(note: if you find your accountant is a fraud and thief and can't add or subtract
do you do away with all accounting?) probably not.
what if he has bankrupted you and now owns you?
anyway..
how about time as a basis for currency. work hours = work dollars.
never work, its fair and just and would result in equity and liberty and
prosperity. ( balance ). the enemy of empiric globalization.
i think gold implies time (expansive) and it is the physical embodiment of
principles that make gold precious but it is upon mankind to realize those
principles. the idea of money is a fiction that has outlived it's usefulness.
we need currency and human activity that supports the idea of community
and liberty and if they are exclusive ideas wwee ill will have war. by ignorant
choice after ignorant choice all based on confusion, flawed assumptions,
speculation and fear.
imo.
http://maxkeiser.com/2010/05/30/ote56-on-the-edge-with-rick-ackerman/
.
check the verbewarp. new good....
apologies in advance where needed.
ps. great article again but what happens to 5 or so billion people
who have no gold. no soup? do they create their own currency?
and how does the law and law enforcement treat them. and who pays
for law and it's systems. abolished? are they paid in gold? or do they
just take all the gold? and then what? ........
and how much must a people/ people pay to have a "money" system?
apparently, everything in the world! all life exists for money! that is where
we are or are headed! and the ocean has become the primary container
for our ubiquitous petroleum needs.
or .. the mind of men, the Mind, is the gold that is the money. word.
.
http://market-ticker.denninger.net/authors/2-Karl-Denninger
.
k.d. does make some valid points. and it is interesting considering that
the government is of,by, for the people here in the usa and some of this
discussion/argument centers around the execution of that principle but we don't
require citizinship of the powers/persons who influence/purchase our
politicians and laws and run our money system. it is curious. and blatantly
treason. by supreme law. odd.
m1 x 100 spent into the world markets; now who can pay the notes?
ps. i saw a ibanez guitar, a beauty acoustic, for 179$, today. made in china.
may have been cheeper, on sale. is that great or is that awful?
it is incomprehensible and it is the norm in the usa. the thing is
many who would want the item can't even afford that. $179.
You write like Cormac McCarthy. Anybody ever tell you that? You do punctuate a little more, however.
no, no one, ever.
.
"Listen to me, he said, when your dreams are of some world that never was or some world that never will be, and you're happy again, then you'll have given up. Do you understand? And you can't give up, I won't let you."
— Cormac McCarthy (The Road)
.
thanks for the reference.
Lots of empty talk here, but after reading the main post and the KD rebuttal, Denninger has the pimp hand. His analysis and definition of wealth need to be refuted if GG expects his arguments for gold to have any credibility.
The "pimp hand"? lol Nerd
Economic and financial reality, and especially monetary history (which Denninger is either profoundly ignorant of or unwilling to acknowledge), both refute Karl Denninger and his explicit support for the corrupt, predatory and unsustainable monetary system of today, with its reliance on elitist and parasitical central banking, fiat currency, fractional-reserve (read: Ponzi) banking, and ongoing and never-ending inflation that continually steals the savings and wealth of the average person. He goes to great lengths to expose the crimes within the system, but refuses to see that by far the greatest crime is the system itself!
Of all available asset classes, I like gold most, but that doesn't make me believe that another market crash won't drag it down along with everything else. Losses in leveraged long positions in tech, emerging markets, and whatnot will force liquidations in every sector, safe haven or not. That being said, I should re-phrase. I hate gold least of all, but dislike it a little more now that Cramer likes it.
I have repeatedly disagreed with you Mr. Geccko..... and this is another one of those times. Really you sound like a big idiot here.
Hey, clown dude, the internets must have eaten your cogent and well-reasoned comments. I'd love to hear what you have to say. So, say it.
Is that it? Surely you can do better.
Karl, is that you?
The pic looks about right, anyway. But shouldn't you be wearing a swastika armband too? And where's your "I Heart Fiat" Tee-shirt?
Don't you paper pimps have ANY sense of fashion?
I heart your heart fiat t-shirt joke
Take a look at this article:
http://www.gold-silver.us/what_silver_gold_buys.html
Once you get passed the tiresome "stop the looting and start prosecuting", Douchinger's arguments haven't advanced one iota for 2 years now.
It's a currency crisis Karl, wake the fuck up.
Great stuff GG. Very well done.
Thanks taraxis.
I'll short ya at the top ;)
Karl's response is ridiculous.
Earlier he talks about trying to pay with gold at Walmart, now he proposes to buy land, houses, commercial buildings, and industrial equipment?? How liquid is that?
And by the way, of which investment amounts are we talking here!
Given, if I had $3 million I would also buy land and houses for 60 to 80% of that.
But if I am a thrifty middle-class guy and $200,000 is all my net worth and most of that my retirement money, I for sure am not going to use all to buy a house -which value will likely fall further, even in real terms- or 2 pieces of farm land, without farming knowledge!!
About tax laws and breaking them: First lets see how the capital gain tax on property will evolve over the next years. Second everys gold owner can decide on that when the time to sell comes. If I have made a gain in real terms, I will be happy to pay 28% CG tax on that. Third, law abiding citizen KD has surely always, in his whole life, declared everything correctly, including sales on craigslist and ebay, bartering with neighbors, or out-of-state buying on which you would need to pay your local state tax when "importing" it? I am choked with emotion when KD declares to be more catholic than the pope.
And fourty years of non-collapse backs it will live forever?
While I do agree it is not a good idea to put all your net worth into gold, Karl cannot refute the idea to have ~20% in physical gold, and the nice thing is every beginning saver, with about $5000 or so, can accomplish that without too much markup.
Now THAT was a good chuckle!
The hypocrisy and moral posturing of Karl Denninger is getting to be a bit thick, IMO.
Douchinger is a fool.
Re-read the Bosnian's take on it. Farm...check. Guns...check.
Got RAN OFF OF IT by superior numbers and tanks. Karl is in the Redneck Riviera...he may find his outfit uninhabitable due to an oil slick!
This is why I tell people if you *really* expect TSHTF, follow the HEAT rule: do not invest in anything you cannot walk out on in 30 seconds flat if you feel the Heat around the corner.
I was curious so I checked out KDs 'responses' to GGs article...about 60 total. Really sad. Lot's of 'way to go Karl'! Little in the way of intellignet response...
KD has the best of both worlds...an open forum but only if you agree with Karl...Not very different from bobble head tv. What a hoot!
Karl can rant about pols, bankers, scammers, till the cows come home. He can send zillions of faxes to lots of congressmen...But what did he accomplish? Not a damn thing.
Why doesn't Karl simply advocate everyone pull their money out of the banking system? That action would get more attention from tptb than whinning.