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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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I would agree with you on Karl in his outing of the innumerable criminal actions of Washington and Wall Street, and he is deservedly unrelenting in that regard. However, his fundamental ignorance of monetary history and theory blind him to the fact that it is the SYSTEM that is corrupt, NOT just those currently in charge of it. That is the complaint I have with Karl Denninger ---- that, and his utterly pigheaded refusal to acknowledge that when it comes to central and fractional banking, fiat currency and gold, he is simply wrong.
Boil all his arguments down, and Denninger seems to believe that if only men were angels, everything wrong within our financial and monetary systems would be fixed. And if only we had the "right" person, an absolute dictatorship were be the ideal form of government too.
It's not the criminals running the system who are the real problem Karl --- it is the criminal system itself!
Clearing double posting.
Denninger was once a spook as he admits himself. A friend of mine who also plied in the dark trade, was sent out on a speaking tour to talk about money to the Smithsonian, and propounded the theories of Benard Lietaer.
The whole gold/money thing is where government, spooks, politics, war, and the people intersect.
Given Denningers attitude i do belive he considers himself best suited for the job
Marvelous post, Gordon. Simply marvelous!
Thank you.
And now we have Mr. Denninger's response to the Gecko:
http://market-ticker.denninger.net/archives/2361-Listen-To-The-Hucksters,-Lose-Your-Ass.html
He's literally frothing at the mouth - LOL!
Mr. D.'s argument hinges on one thing: The Fed's mandate is NOT being executed according to plan.
And he would be correct in assuming that PMs would perform as he outlines to a large degree. Problem is the system is corrupted. It's not getting fixed any time soon. So, what should be done in the interim? I'll hold gold, but with very diligent shepherding of one's resources KD's route can be successful. The system is now so complex and interconnected that it is downright dangerous. Gold works when financial systems, governments, and Central Banks stop working, and he states this. It is now, not some imaginary time in history. Pick your poison, boys!
haha, he think gold collapsed because the geopolitical risk was not realized.
What about 22% interest rates Karl ?
Yes, The publicly mouth-frothing, rabid gold haters do seem to be a growing club.
Karl Denninger, may I introduce you to members Jeffrey Christian, Brett Arends and Jon Nadler?
Interesting that Denninger will quote the Federal Reserve Act but not the U.S. Constitution:
http://www.constitution.org/cs_money.htm
I found this to chew on:
http://irwinschiff.homestead.com/TRAFICANT.html
Methinks the fiat-lover doth protest too much.
Just to point out the idiocy of Karl Denninger on one point, he states:
And yet strangely, I fail to see a single banker anywhere advocating a return to the gold standard --- quite the opposite, in fact.
This "argument" is so idiotic, being worthy only of perhaps Jon Nadler, that it is insulting to even have to address it. But for the record, Karl, it is NOT annual mine production that matters when gold is considered as money, it is THE TOTAL WORLD STOCK OF GOLD that matters instead. Annual mine production is only around 2% of the entire world stock of gold, and so even if ALL gold miners withheld ten years of world mine production, that would only make a small difference in gold's potential ongoing functioning as money --- and it should be noted that such a thing, in even the slightest degree, has NEVER happened, as it would require the coordination and cooperation of multiple competing nations such as China, Canada, the USA, South Africa, Russia, and others.
Denninger's argument here is both specious and intellectually insulting. But thank you, Karl, you arrogant and ignorant hack, for demonstrating once again your historical and monetary ignorance, and for further discrediting your increasingly out-of-touch internet rantings.
I wonder,... how exactly is that any different from the present system, absent the fact that the handful of current "suppliers" of money are not even required to first dig the tangible thing out of the ground before actually "supplying" it?
The logic makes absolutely no sense.
He's afraid that a small cabal would control the gold, but somehow a small cabal that controls the unlimited production of non-redeemable paper ticket currency is fine?
WTF?
+10000
Excellent point, Rusty, that I did not fully appreciate the first time around.
As I stated elsewhere, Denninger's rant in reply to GG --- and little more than an inchoate rant it truly is --- just once again absolutely discredits anything Denninger has to say on the topic of gold, or on monetary theory more generally. He is fundamentally and arrogantly ignorant on both topics, an ignorance which he goes to great lengths to demonstrate time and time again.
Really, Karl, STFU already on gold! If you don't cease and desist your incoherent foaming-at-the-mouth over gold, we are going to have to throw you in the same padded cell as Jon Nadler, with whom you can scribble-up and exchange paper scraps to your heart's content.
Exactly.
Like I've said before, I think he's like an idiot-savant or something. I keep thinking of that scene from Rain Man when they're in the Doctor's office and he's rattling off the square root of certain numbers and doing long division in his head, then the Doc asks him, "How much does a candy bar cost?" and he says "About a hundred dollars."
It seems like Denninger has the same kind of problem with sound money.
He just cannot get his head around the concept.
Perhaps because his professional career and significant wealth are both fundamentally based on and derived from a system in which gold is anathema and the enemy of all the paper promises propping up that system?
The only caveat in my opinion is that since the dollar backs all the other fiat currencies, it *might* collapse last.
I think, in terms of debate, this is where it's at.Everything you write is spot on. But we've been fooled many times by the ability of the Fed to magically pull another fiat rabbit out of their hat. I believe you will know the hyperinflation is coming when the other currencies of the world hyperinflate. Even the Chinese yuan will depreciate against the U.S. dollar. While gold may do poorly in U.S. dollar terms...imagine DXY over 130...it is going to find a bid from European and Asian investors dumping their paper.
In my opinion, the gold rally is going to be over before it begins. Not confiscation, but torschlusspanik (H/T Hendry), fear of the gate closing. If other currencies hyperinflate, many people will be in the U.S. dollar. But once it is the U.S. dollar's turn, the fear will be so mighty, because it will involve the entire globe and all central banks, that it will happen in an extremely short period of time.
The collapse of the U.S. dollar will be a singularity event, we are circling the black hole.
EXCELLENT article, Mr. Gekko!!! I was getting so sick of the "last time I looked they weren't taking gold at Wal-Mart"/"gold is not money" crowd...
DEflation first. But only in debt-encumbered assets: stocks, bonds, derivatives, CDS, MBS, CMBS, CDOs and probably housing, cars, white goods, medical care, college tuition...INflation is on the way in everything that people actually NEED.
We can witness debt deflation with real asset inflation. And...the U.S. is only one small country in a big, big hungry world.
Karl should know better.
Thanks.
You are talking about a guy who did not know the difference between fractional reserve banking and the gold standard, so he is not the sharpest tool in the shed. I am slightly biased of course since he wrote he had never heard of me before, to be fair I had never heard of him and had not gone back to his site since he wrote about Mish and the gold standard thing. Frankly, if you don't get the difference between fractional reserve banking, what Mish was talking about, and confuse it with the gold standard you have to assume the author is somewhat retarded. Just my opinion.
Senor Gekko,
Assume, for the sake of argument, that some clever chap, let's call him Rumpelstilzchen, has managed to find a way to create gold from straw (and that he could do the same with pretty much any other metal, if not element, to which you'd take a fancy).
What would you then claim as a legitimate store of value and medium of exchange?
I think I'd go with water, energy,...or straw.
Would you attempt to sell 'spun gold' and keep your secret?
Or short the hell out gold on the Comex, then announce your ability?
Whereabouts would you place the market cap of StrawSpinner LLC?
Interestin' question snowball and a gold bugs nightmare. Electric Universe Theorists (Thornhill, Perratt et.al) posit that there is a transmutation of elements occuring in the sun's photoshere. Just suppose that some sort of plasma technology could do the same at Los Alamos for instance? Aaargh more lead in the allocation....
Lets call him Bernanke.
Denninger already has a comback rant on his site. I love the guy though, nothing beats his radio show when he is pissed off. He is taking Monday off though dammit. Maybe GGs post will get him off his ass for a radio show on gold tomorrow.
what would we use to exchange of gold disappeared ,
by golly for 5000 thousand years gold keeps appearing . and your thoughtful analysis that gold will be no more lol
a conclusion based on a false assumption
You're clearly not equipped for any form of mental exercise.
ROFL!
thanks GG†
You're welcome.
market cap of a strawspinner ,, five bales of hay , and ten twigs of straw
Assume, for the sake of argument, that everything was free.
Would people need money?
What if water and energy were able to be created in home for free too? Dehumidifiers draw water from the air. Solar and wind if efficient enough eventually will be more than enough energy.
Assume that you can ask any question at any time and think it proves you right.
You might was well just say "assume that anything can be created from nothing" and move abord the Enterprise.
The question is about the transition from one set of economic assumption to another and how they would be handled. I could've asked what you would use as a medium of exchange if all the gold disappeared too; the point being that gold has value because we've agreed it does, just like fiat.
And everything WAS created from nothing...learn some physics.
And you know that how? As far as I remember, theoretical physics says more matter than antimatter survived after the big bang. We don't know what came before that. Are you god?
Who wants to know? ;)
I fancy the theory that the universe began as a time loop instigated by quantum mechanical effects...no belly button required.
http://vinkovic.org/Projects/PopularScience/Gott_interview/J.Richard.Got...
Great!
Even our fucking UNIVERSE started with inflation!
(I wonder if Ben Bernanke was there to help the process along?)
Of course, as Lord B of GS said, "we are doing god's work"!
That's a nice One-Two, akak and Kali. Take that show on the road.
Yes, that is a beautiful theory, in another thread, I said that I never knew how my theoretical physicist friends stayed sane. Frankly, I would end up just getting freaked out in those classes. Better than doing acid.
I came up with this theory when I was in college and struggled to explain it to anybody. The end is the beginning....the necessary consequence of this is that all things, even god, must face oblivion in the end
snowball777
That single fucking electron!
Physics also says that you can dissappear and reappear somewhere.
Don't let the wormhole hit you on the ass on your way out!
Hoo ha, I prefer the time travel myself! :)
That is an interesting hypothetical question, but it is only that, hypothetical.
The only possible physical method for creating gold from some other substance is nuclear transmutation, and it has in fact been used already in certain very limited applications --- the radioactive source in your home smoke detectors consists of artifically created americium, and technetium (which is not found naturally in the earth) and plutonium have been produced in multi-kilograms amounts. However, even in the best case scenarios, these are almost mind-bogglingly energy-intensive reactions, and the price of such transmutation-produced elements is in the hundreds of thousands if not millions of dollars per ounce. Until mankind becomes capable of harnessing energy sources on the order of a significant fraction of the entire output of the sun, it will never be economically practical to try to produce naturally-occuring elements such as gold --- the laws of physics make it impossible.
Full disclosure: I own physical gold and silver...just illuminating that even gold is a theoretically debaseable commodity.
Next hint: 1/r2 makes a big difference. Not impossible...just expensive, but I'm not the one claiming gold will be valued at $50k/oz or more. There's cross-over point somewhere...now load up on Bismuth while it's still < $1/oz. ;)
Actually, I read in a nuclear chemistry book once, years ago now (don't have it on hand), that the potential cost of various transmutationally-produced elements varies by many orders of magnitude, depending on the particular nuclear reactions and pathways available leading to that element as the desired final product. But ironically, while some elements (such as the aforementioned americium and technetium) can be relatively inexpensively produced (on the order of thousands of dollars per ounce), others would necessarily always be much more expensive due to the inherently more complicated or energy-intensive reactions required to produce them ---- and gold was near the top of the list of such elements.
In any event, I would not overly worry yourself about transmutative gold swamping the market anytime soon.
Diamonds, on the other hand...
Yes, theoretically, there is no fundamental thermodynamic reason why diamonds could not be produced as readily as say glass. I expect that someday they will be.
Diamonds are able to be produced at present. Yellow diamonds via CVD (chemical vapor deposition) at that:
http://news.cnet.com/Synthetic-diamonds-still-a-rough-cut/2100-11395_3-6...
http://www.diamonds.net/news/NewsItem.aspx?ArticleID=30909
How about we rather assume, that some clever chap, lets call him Bernanzhicen, has managed to find a way to turn your hard earned dollars into toiletpaper by pushing one fucking big button.
WTF would you then claim as a legimate store of value and medium of exchange?