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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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As I live in SF, I think grams of marijuana might be fungible enough.
Yeah sure, i'll trade you some of your dried grass for..... oh wait, ill just go and dry my own fucking grass actually.
In the meantime, why dont you go and mine yourself some gold. Its far easier than growing grass, i assure you......
Dope will get you through times of no money, better than money will get you through times of no dope, oh he who is so incapable of taking a joke.
Nice quote - Freewheelin' Franklin of the Fabulous Furry Freak Brothers.
I always liked Fritz the cat.
lol, yes! It is a commodity that has a value, which can rise and fall in value like any other. However, pot does have some actual medicinal values that are useful too. So do certain other plants. It is wise to grow medicinally useful products along with your green beans and tomatoes. Pharmacies and doctors may not be affordable or available. :)
oh trust me, when this government goes bust so will its drug regulations.
Soon we will leave the land of milk and honney and enter the world of grass and crystal meth.
Guns my boy, guns are the path to salvation!
Guns are small metal,wood and plastic clubs without ammo. First brass and lead, then gold and silver.
While the hyperinflation will come suddenly, it is still possible to predict it within some reasonable margin of error.
The first thing to remember is that while the hyperinflation will be driven by printing of money, it is not the printing that will initiate the process.
No, the birth of hyperinflation comes at the death of the productive capacity.
If one looks at the case of Zimbabwe, the hyperinflation came after the farmland was taken from the white farmers by force which led to the collapse of supply. Same if one looks on the Weimar republic, the inflation was driven forth by printing (also a large amount of it came from naked shorting of the currency by England and France...) but it was started by the confiscation of the productive capital after the Treaty of Versailles which at large collapsed the supply of goods.
Thus, to get to my point, if one wants an indicator for the likelihood of hyperinflation initiating is the near future, then do not look at the money supply, nor the production indexes.
What you need to look at is the flow of goods, and to do so I recommend you use the Transport service index (TSI).
http://www.bts.gov/xml/tsi/src/index.xml
But as this index is a few months behind the present, the best way to stay updated is to combine the TSI with the AAR Rail Time Indicators Report from the association of American railroads.
http://www.aar.org/NewsAndEvents/RailTimeIndicators.aspx
When these two indicators start plummeting you better act quickly as the probability of the start of a hyperinflationary sequence will skyrocket
He is precisely correct. Not sure if his indicators are, but the basic idea is 100% correct.
The indicators are not foolproof, but the information they carry is valuable.
The reason to why I consider the transport flow to be the best indicator is that it captures the very essence of hyperinflation. Lack of trust in the mode of exchange.
If one expects the currency to collapse it still pays to produce, actually it will be more important than ever as any stored wealth (currency) will be useless to barter with. Thus, before a hyperinflationary collapse, the production indexes might actually rise as the expectation spreads.
However, what you don’t do if you expect the money to become worthless is ship your goods to the store for it to be replaced by 'soon to be' worthless paper.
In conclusion; as hyperinflation grows nearer one should see measured production staying the same (the few in business produce as much as they can):
http://research.stlouisfed.org/fred2/series/INDPRO?cid=3
Same with business inventories:
http://research.stlouisfed.org/fred2/series/BUSINV?cid=98
While the flow of goods stops sharply:
http://www.bts.gov/xml/tsi/src/index.xml
In my research I analyze the relationship between freight activity and other macroeconomic indexes, where the aim is to reveal any possible relationship between the flow of goods and the flow of money that may be used to predict future inflation.
So far I have yet to find an indicator of more value that the TSI.
It’s not foolproof but it’s the best advice I can give
Thanks, need all the help we can get!
"...the birth of hyperinflation comes at the death of the productive capacity."
I shall remember that. Thanks.
I can't believe Karl said that ... I just can't.
I mean, it's like finding out Einstein said Newton's laws of motion are a bunch of crap...
Ummm...Einstein did say that, for moving inertial reference frames.
Gold is a bet that the authorities and institutions are wrong. A good peasant will never own gold for this very reason. I agree with everything in the article. But yet, I cannot buy gold (other than what is paper gold in Prudent Bear and mining-EFT's which is about 20% of my total). I'm a peasant.
In setting up precious metals strategies, in talking with many people, they seem to think you will be taking your Gold to WalMart or some other store as a means of exchange.
No, this is never the strategy for conversion. Conversion is always done at a Bank for hard physical Gold or Silver.
For example, for a multinational investor, the precious metals portion of the portfolio, is in the current accepted gold exchange for that country. So if the accounts are in Cananda, for example, the Gold is in the most recognized issue, meaning the central mint of that nation, or for Canada, the Royal Canadian mint and its coin or bar offerings. In the US it is the Eagle, if you need international its Pamp, and so on.
For the estate, conversion is made on the best exchage per currency needs for living. This is planned to spool out in 1/2 month segments, unless there is an unforeseen problem. Then it shifts to weekly administration. But, 1/2 month scewed overlap (between countries) seems to give a good average "fair" price.
So for gold holdings only the amount needed is converted for the projected expenses, and many times of this only very little is hard currency. I plan for the majority of purchases 80% to be electronic, depending on the country and remoteness of the properties. In each one of the countries of interest, the estate uses several banks and and at least two lawyers, usually of different backgrounds, but with some tie to finance (tax) and corporate law. The accounts are routinely administered personally, and regular meetings held with the lawyers to understand the political forces within each country that may effect banking or property rights.
Your relationship with the assayer will also motivate your choice of bullion. If it must be recognized by someone unknown to you, I find common coins are best. If you have a trusted relationship, I like 100 Gram, or 10 Troy Ounce Pamp bars. The costs for conversion are less when you are trusted and known by the bank assayer.
Mark Beck
Great work again GG.
Thanks Rusty.
Great post Mr Gekko. Regarding KD...I have been reading his blog for several years and have come to the conclusion that he is a good mathmatician and he reports that he has made some good quick in/out trades in various assets that have been profitable. A savy day trader, iow.
I do not believe that KD has an open mind, which is required to realize how soverign nations and their currencies will be destroyed. He believes that 'dislocations in bond markets' can occur but that is about as far as he goes down that road. After all, beyond there lie dragons...and it is a pretty scary future.
I think investing in gold is the only way to exit the system that is in the process of collapse and is the only means of storing value that an uncertain future will require.
Just as important!...Having the savvy and moxie to deploy the gold in the unknown future is something that few posters mention, but is as important as owning gold. Gold will increase one's chance of coming through to the other side with some skin but then one's gold must be deployed in the new future in such a manner that one's name is not added to the long list of failed venture capitalists.
Super great summary, all in one place.
I am sometimes amazed at how willingly many persons in other forums accept what Denninger has to say about gold - without even thinking about that the logic of his arguments goes against 100 years of dollar history and the huge rise in the price of gold these last 10 years.
As for hyperinflation, we may have that or some other equally painful malfunction of the financial markets. Imagine what would happen if for example, the oil pollution in the Gulf became so great that tankers would be slowed, delayed, or even stopped by the oil slick. There would be no 'price' for oil in dollars, as the government implemented controls, but there would be a price where you could exchange gold for paper money - if you wanted too.
Gold Panning with Jayda:http://www.youtube.com/watch?v=40fWli81z0k&feature=related
Already panning in n.cali ,people are panning on vacation.
fade the dennenger ,, why waste the breath... life is way to short to get in a pizzing match with the likes of. Life teaches its lessons life is the ultimate decider. Thosewho choose to go the gold way need patience and staying power,
gold with will lay waste the trader ,, But to set tight on a stash of gold letting the winds of zit heads , nobodys , and the constant chirping of those who would be king.
those who bought at 300, 400, 500, 600 have been rewarded.
those who buy at 1000, 1200, 1500 and higher will be glad they did .
at at that stage of the future stand alone. let time teach the lessons for it will be decisive and makes no bones about what is.
Best article I have read on this website thus far. Always nice to see a fellow fan of Mises writing as well.
Great post and comments. Gold is insurance, not an investment to be sold for profit. Treat regular purchases as a premium. Except you own this insurance company, so it's a win even if there is never a claim.
I thought it was interesting to watch last Tuesday, on options expiry, how the moment after the COMEX close of gold and silver the quotes of the EURUSD and the S&P500 started to move with a vengeance.
As to the de-/hyperinflation discussion, Clif High/HPH forecasts in his lates "Shape Of Things To Come" that in the coming months the USofA will experience hyperinflation in food, energy and gold/silver in the same time that the prices of everything else will fall through the floor with eyepopping speed.
It seems reasonable to me that, in times of crisis, the prices of stuff needed to get by that cannot be outsourced to cheap labour rises, whereas prices for useless junk will go down.
Very well written, nice big picture and easy to understand. Thanks Gordon
Time to post or re post this
http://www.thepowerhour.com/news/items_disappearfirst.htm
100 Items to Disappear First
1. Generators (Good ones cost dearly. Gas storage, risky. Noisy...target of thieves; maintenance etc.)
2. Water Filters/Purifiers
3. Portable Toilets
4. Seasoned Firewood. Wood takes about 6 - 12 months to become dried, for home uses.
5. Lamp Oil, Wicks, Lamps (First Choice: Buy CLEAR oil. If scarce, stockpile ANY!)
6. Coleman Fuel. Impossible to stockpile too much.
7. Guns, Ammunition, Pepper Spray, Knives, Clubs, Bats & Slingshots.
8. Hand-can openers, & hand egg beaters, whisks.
9. Honey/Syrups/white, brown sugar
10. Rice - Beans - Wheat
11. Vegetable Oil (for cooking) Without it food burns/must be boiled etc.,)
12. Charcoal, Lighter Fluid (Will become scarce suddenly)
13. Water Containers (Urgent Item to obtain.) Any size. Small: HARD CLEAR PLASTIC ONLY - note - food grade if for drinking.
14. Mini Heater head (Propane) (Without this item, propane won't heat a room.)
15. Grain Grinder (Non-electric)
16. Propane Cylinders (Urgent: Definite shortages will occur.
17. Survival Guide Book.
18. Mantles: Aladdin, Coleman, etc. (Without this item, longer-term lighting is difficult.)
19. Baby Supplies: Diapers/formula. ointments/aspirin, etc.
20. Washboards, Mop Bucket w/wringer (for Laundry)
21. Cookstoves (Propane, Coleman & Kerosene)
22. Vitamins
23. Propane Cylinder Handle-Holder (Urgent: Small canister use is dangerous without this item)
24. Feminine Hygiene/Haircare/Skin products.
25. Thermal underwear (Tops & Bottoms)
26. Bow saws, axes and hatchets, Wedges (also, honing oil)
27. Aluminum Foil Reg. & Heavy Duty (Great Cooking and Barter Item)
28. Gasoline Containers (Plastic & Metal)
29. Garbage Bags (Impossible To Have Too Many).
30. Toilet Paper, Kleenex, Paper Towels
31. Milk - Powdered & Condensed (Shake Liquid every 3 to 4 months)
32. Garden Seeds (Non-Hybrid) (A MUST)
33. Clothes pins/line/hangers (A MUST)
34. Coleman's Pump Repair Kit
35. Tuna Fish (in oil)
36. Fire Extinguishers (or..large box of Baking Soda in every room)
37. First aid kits
38. Batteries (all sizes...buy furthest-out for Expiration Dates)
39. Garlic, spices & vinegar, baking supplies
40. Big Dogs (and plenty of dog food)
41. Flour, yeast & salt
42. Matches. {"Strike Anywhere" preferred.) Boxed, wooden matches will go first
43. Writing paper/pads/pencils, solar calculators
44. Insulated ice chests (good for keeping items from freezing in Wintertime.)
45. Workboots, belts, Levis & durable shirts
46. Flashlights/LIGHTSTICKS & torches, "No. 76 Dietz" Lanterns
47. Journals, Diaries & Scrapbooks (jot down ideas, feelings, experience; Historic Times)
48. Garbage cans Plastic (great for storage, water, transporting - if with wheels)
49. Men's Hygiene: Shampoo, Toothbrush/paste, Mouthwash/floss, nail clippers, etc
50. Cast iron cookware (sturdy, efficient)
51. Fishing supplies/tools
52. Mosquito coils/repellent, sprays/creams
53. Duct Tape
54. Tarps/stakes/twine/nails/rope/spikes
55. Candles
56. Laundry Detergent (liquid)
57. Backpacks, Duffel Bags
58. Garden tools & supplies
59. Scissors, fabrics & sewing supplies
60. Canned Fruits, Veggies, Soups, stews, etc.
61. Bleach (plain, NOT scented: 4 to 6% sodium hypochlorite)
62. Canning supplies, (Jars/lids/wax)
63. Knives & Sharpening tools: files, stones, steel
64. Bicycles...Tires/tubes/pumps/chains, etc
65. Sleeping Bags & blankets/pillows/mats
66. Carbon Monoxide Alarm (battery powered)
67. Board Games, Cards, Dice
68. d-con Rat poison, MOUSE PRUFE II, Roach Killer
69. Mousetraps, Ant traps & cockroach magnets
70. Paper plates/cups/utensils (stock up, folks)
71. Baby wipes, oils, waterless & Antibacterial soap (saves a lot of water)
72. Rain gear, rubberized boots, etc.
73. Shaving supplies (razors & creams, talc, after shave)
74. Hand pumps & siphons (for water and for fuels)
75. Soysauce, vinegar, bullions/gravy/soupbase
76. Reading glasses
77. Chocolate/Cocoa/Tang/Punch (water enhancers)
78. "Survival-in-a-Can"
79. Woolen clothing, scarves/ear-muffs/mittens
80. Boy Scout Handbook, / also Leaders Catalog
81. Roll-on Window Insulation Kit (MANCO)
82. Graham crackers, saltines, pretzels, Trail mix/Jerky
83. Popcorn, Peanut Butter, Nuts
84. Socks, Underwear, T-shirts, etc. (extras)
85. Lumber (all types)
86. Wagons & carts (for transport to and from)
87. Cots & Inflatable mattress's
88. Gloves: Work/warming/gardening, etc.
89. Lantern Hangers
90. Screen Patches, glue, nails, screws,, nuts & bolts
91. Teas
92. Coffee
93. Cigarettes
94. Wine/Liquors (for bribes, medicinal, etc,)
95. Paraffin wax
96. Glue, nails, nuts, bolts, screws, etc.
97. Chewing gum/candies
98. Atomizers (for cooling/bathing)
99. Hats & cotton neckerchiefs
100. Goats/chickens
From a Sarajevo War Survivor:
Experiencing horrible things that can happen in a war - death of parents and
friends, hunger and malnutrition, endless freezing cold, fear, sniper attacks.
1. Stockpiling helps. but you never no how long trouble will last, so locate
near renewable food sources.
2. Living near a well with a manual pump is like being in Eden.
3. After awhile, even gold can lose its luster. But there is no luxury in war
quite like toilet paper. Its surplus value is greater than gold's.
4. If you had to go without one utility, lose electricity - it's the easiest to
do without (unless you're in a very nice climate with no need for heat.)
5. Canned foods are awesome, especially if their contents are tasty without
heating. One of the best things to stockpile is canned gravy - it makes a lot of
the dry unappetizing things you find to eat in war somewhat edible. Only needs
enough heat to "warm", not to cook. It's cheap too, especially if you buy it in
bulk.
6. Bring some books - escapist ones like romance or mysteries become more
valuable as the war continues. Sure, it's great to have a lot of survival
guides, but you'll figure most of that out on your own anyway - trust me, you'll
have a lot of time on your hands.
7. The feeling that you're human can fade pretty fast. I can't tell you how many
people I knew who would have traded a much needed meal for just a little bit of
toothpaste, rouge, soap or cologne. Not much point in fighting if you have to
lose your humanity. These things are morale-builders like nothing else.
8. Slow burning candles and matches, matches, matches
I'm going to shit all over this list.
Only the people *without* gold have to stick around to endure this life.
Those with are the types who bribe their way across the border and run. Almost NONE of this stuff is portable. In a crisis you only own what you can CARRY with you.
Good list!
I would move all the food/water/shelter items to the very top of the list. If you have a ton of the basics, you can always barter for the rest.
primus
The list refers to what disappears first in a crisis.
Uh... Yeah...
That is why you would want to stock up on said items. I was just pointing out that I think foodstuffs, water and clothing would likely sell at a premium to some of the other items, even though they run out faster.
You know, if your looking for 'a trade' in the war zone.
(i can hear Karl now)
But if the market followed the law and people who break it go to jail and the Fed stopped doing illegal activities and they went to jail and if the banks actually marked their assets to market and foreclosed on homes in a timely manner and the Wall Streeters followed the law and if everyone did as i want them to and everyone followed the law all the time and stock brokers were honest to their clients and the USA government was honest and the CFTC and SEC did their job then the world would be like happy puppy kitty perfection with pony unicorns and Almighty King Dollars for all but those who break the law and game the system and those law breakers would go jail and clients would be made whole without the need to costly litigation because the government is honest and helps honest hard working people.
--- signed
Karl Denninger ;-)
----------------------
Karl lives in his own little bubble. Call it circa 1993 on the Internet discussion boards (newsgroup) alt.reality
+1000
Leave Karl alone. He's the enemy of our enemy.
Who gives a rat's ass whether he's for or against gold.
I think it's still a free country.
Besides, he clearly states that it's not investment advise.
He's hard on Timmy and Ben and all the other masters of the universe -- that's a public service.
Turning on Karl makes you look suspect moreso than him.
I agree. It is just surprising that he can make the assumptions that he does. It seems so fake.
karl isnt selling any thing lol
he sells a false interpretation of gold , a naive attitude toward the way to fix a ponzi system
and in time gold will find willing buyers and sellers on the market place ,
just now sears and K-mart have set up buying stations in their stores to take gold for merchandise /
and the people buying you got it the Chinese,
gold in the future will be a necessity for international trade . nations and large banks will be buying gold to survive and become players on the stage of commerce/
gold has no counterparty risk .Has instant value world wide ... and needs no dennenger to give it value with some text basis on law,
and what will he say as the new currencies will be backed with a gold portion. he will be like the king standing on the shore of the ocean waving the wave to not appear,, and set their all wet and even drowning ,
gold in the future will be a necessity for international trade . nations and large banks will be buying gold to survive and become players on the stage of commerce/
Gets to that point dumpster, maybe I can send over 5 Eagles for a CONTAINERLOAD of bearings... :)
just send a bill of exchange backed by real gold .. and the bearings are on the way lol
this bill of exchange is good for real gold .. not just another bill of exchange ,
so if you want to get your value out of a twenty take it to the bank they will give you 2 tens
Believe what you want about gold but I think Denninger's message is too broad to pidgeon-hole hims as some kind of "gold-Judas".
It could be that you've all convinced yourselves that gold is the answer. I think you're all in your happy place believing that.
I don't see why all the venom is being loosed against someone who's a high-functioning (and prolific) educator.
By the way, people like yourselves who silence dissent typically lack confidence.
It was DENNINGER who fired the first shot here, by repeatedly declaring intellectual war on gold --- a war in which he is hopelessly outgunned, has lost every battle, and was doomed to lose from the start. His arguments are and have been patently absurd and lacking in logic, and have made him nothing but a laughingstock in the eyes of everyone aside from his rigidly-controlled and cultlike acolytes.
And enough with the insultingly specious "silencing dissent" bullshit --- challenging erroneous arguments and facts, disinformation and outright lies does NOT constitute "silencing dissent"! That is one of the most feeble and yet most common arguments of those who know their position is weak or flat-out in the wrong.
who is sliencing dissent .. and people like me lack confidence ,, go ask sinclair why he lacks in confidence because of hs stance on gold
the venom comes from the lips of dennenger ..
as a monetary unit gold is an answer ,, you think the ponzi stuff going on and the economy in general is in a good position
i find that people like you who take this position have not a pot to pizz in
+1000
I have thought on more than one occasion that Karl is naive.
All his screed 'but, but, but... They CAN'T keep breaking the law!!!'
'Stop the looting, Start the prosecuting'
Of course they can, and will keep on breaking the law and hosing everyone. Come'on Karl, these are world-class fraudsters we're talking about here. Politicians, corporate executives and central bankers, not just your run-of-the-mill felons and con-men.
Karl's problem (and he openly admits it) is that he thinks the system can be salvaged.
Myself, and many others, don't.
Got banned once from TF for saying the Fed *would* "put the gun in their mouth and start some form of QE/printing." He said they wouldn't.
I sent him an em sayin "i was right, you were wrong, gonna unban me?" Of course not. lol.
He's a paper pusher who doesn't work, depends upon "capital markets" for his trading livelihood. Made his money in of all things the fucking .COM BUBBLE. Dude's entire LIFE revolves around the bezzle.
Great post!
I think this pretty much sums up all we really need to know about Karl Denninger.
I wonder how much of his rage against the current Wall Street crowd is just envy?
Not only are they world class fraudsters, they are world class fraudsters who are officially sanctioned by the US Government. Anybody who writes as much as KD does and still can't grasp that simple point is not worth reading.
No, Karl's REAL problem is that he fundamentally believes in the paper Ponzi system (having benefitted greatly from it), and merely feels that it has been corrupted. He does not realize, or is unwilling to accept, that the current financial and monetary systems are INHERENTLY corrupt and unsustainable, and were so long before the present era of excess greed and corruption --- they were so from the very beginning.
Get real, at the end of the day you will unload any assets you have to procure food, shelter, clothing. If that's Gold, then so be it.
I'm just glad there are people out there like Karl that have a different opinion than the Gold pimps. The emotional reaction that any negative opinion of "Precious" generates is comical at best. It took one of the longest posts I've ever seen on ZH to get the point across. Great, but I can refute with one sentence: Gold is too expensive right now.
Bingo! Gold is a fucking joke and these people who love it so much will find out the hard way when they are stuck with a worthless piece of shiny fucking metal, or worse, a paper representation of what they think is "gold".........
FARCE!