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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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thanks for the informative link.
fun facts:
"While saffron is grown on dry, limestone ground around the world (including France, Italy, Greece, Iran, India, and even Pennsylvania), fully 70% of the world’s supply comes from Spain."
saffron to save spain?
"How much saffron can be obtained from the flowers? The numbers are staggering. With 3 stigmas per flower it takes 75,000 flowers (225,000 stigmas) to make one pound of saffron. It is easy to see why it is so expensive."
wow, it is sorta like gold isn't it? similar color too. interesting.
The spice must flow.
The sleeper has awakened!
(fucking slow website --- another double post!)
Zafferano
for some of my red wine†
move that hand and hold a sign sayin "hi Trav" so we know it's really you
I would be willing to bet some "goled bitchez" that the avatar of velobabe is not representative of the actual velobabe.
As long as Jeremiah, the bullfrog, says its really, really fine wine! Other intoxicants, if not self provided, may be negotiable also. :)
I grow saffron in my yard. I cannot grow gold in my yard. I will take your gold or silver for my saffron. But I would also take chickens, firewood, food I can't grow. I use PM as a hedge, for everything.
kali, quite curious...how quick do the bulbs spread? best to start from one bulb, you think?
They are very easy to grow, in the right climate. They look like a spring crocus (they are actually a member of crocus), only they bloom in the fall, not the spring. They are a bulb. To get any reasonable amount, for home use, ya need to plant a whole bunch. They are a beautiful plant, can be used in flower beds, along walkways, edgings. They reproduce pretty well, you have to thin out the bulbs every couple of years.
You harvest from the flower, you will see the strands. Ya get very little from each flower, that's why ya want a bunch. Dry the stamens ( or is it pistils, I forget proper botanical term, getting senile in my old age), easy to do, I just let them air dry. Then store in air tight(or close to it) container. Unless you have a lot of free time or very cheap labor and lots of land, is not practical to grow in a yard for market. I usually use all mine up, but I like saffron. :) Oops, didn't see below.
gracias kali for the tips...gonna be on the lookout for some pistils (not pistols)
she's generous, isn't she?
by tip e. canoe
overwhelmed a bit tippy†
Kali
Bingo. Or I would refuse to trade for their Gold then rob their starving asses.
Easy Rambo, I am proficient with arms and basic defense tactics, but I would not rob them. If they were pitiful enough, I might give them some food, on the condition they get the hell out of my neighborhood unless they have something to contribute to it. That could come as knowledge or skills that might be useful.
Saffron is expensive due to the detail required to produce it but will deflate with decrease in money supply and/or money velocity. Easy money made saffron reach super high prices, just like the high prices for santorini fava which reached 10 bucks a pound -- for peas!!. You can get santorini fava for $5/pound now, and although I dont know current prices for saffron I am sure it is not moving of the shelves as easily here now that people arnt spending.
Therefore we have deflation in saffron vs gold
I prefer silver and pepper to gold.
Pepper bitchez!
Back to the 1400's it is.
Marco Polo era: 1 oz pepper for 1 oz gold. Wow, we can grow peppers and peppercorns.
anyone ever suffered in South Africa with the WHITE pepper they use?
- Ned
Wow, does apartheid still survive, and extend even to the spices?
Is black pepper really unavailable in South Africa? If so, that boggles my mind --- I always thought of ordinary black pepper as THE most common spice!
I think you better stick with catnip since you apparently have experience in that area.
"Pepper bitchez!" +10 LMAO -
This is iron-clad reasoning Mr. Gekko, however, the trolls will descend on this post like flies on....
Well, you know.
Bring 'em on, but I will not be refuting them. They can hang for all I care. It will be fun to watch the junking!
Perhaps some reasoned discussion can hold sway. That will make good reading.
You do not have the ability to refute them, and never did.
All you do is parrot the gold talking points. It's your MO.
Anybody who disagrees with incorrect logic is a "troll" in your eyes. Yet, you defend the incorrect logic daily.
Rocky, I agree + 100 with you re Gordon's article.
YO, GOLD HATERS!
Please explain why it is not OK to have 5% - 10% of your wealth in gold! We want to know. We're listening...
For the same reason you don't spend 5% of your income on insurance the day AFTER your house burns down.
Your house won't burn down two days in a row, and you will pay ridiculous premiums for the insurance if you wait until after the fire.
Getting gold at this point is like buying condoms after you had sex with the prostitute who had herpes.
After you get herpes, you'd pay any price for a condom. Yet, you can't get herpes twice, and the value of the condom was needed before you got the herpes - not after.
After the economy tanks, people pay a premium for the insurance to protect against it tanking again. Yet it won't tank again very shortly. The insurance only diminishes in value as the economy recovers.
You are evil.
You forgot "stupid".
DoChenRollingBearing
You may have missed the Gold as protection against hyperinflation. Your amount is minimal in that instance.
Gully, the 5% - 10% would grow to be MUCH larger percentage in the event serious financial problems.
Besides, you can give gold away quietly, you know, to your children...
But, thank you for answering that question. You are the only one so far.
Gully, you are missing the point ---- DCRB is asking the trolls (metaphorically, of course, as they cannot logically or honestly answer him) why it is not advantageous or prudent to hold AT LEAST 5-10% of ones's savings in gold.
RockyRacoon
Ok, so you got Gold. When do you trade it back for currency to buy things like food?
So you have physical Gold at home. What protects it? You have a gun, maybe a dog, maybe an alarm. So what stops the dedicated villain? Even museums get robbed frequently.
Who watches the Gold when you are not home? The Wife and kids? Doesn't that make them targets? Are they not targets when they leave the house?
Gold in the bank, safety deposit box sounds good. But most fear the threat of creeping Fascism wand want their Gold at hand. You still have the target problem. Matter of fact you have the target problem with any wealth or access to wealth.
I can fully understand Gold as a place to park wealth. How long do you park it. In the end it has to be converted to the medium of exchange prevalent at that moment.
I know a banker. One day he gets a call at work demanding a ransom. The threat is they have his wife and kid. He tries to call home and no answer.
They wind up dropping off the cash. His phone lines had been cut.
His job made his family a target for some criminal who won that round.
I tried to ask realistic questions about real issues.
This fear of getting robbed argument is part of the program to keep the herd grazing on the poisonous fiat. Yet you are robbed of a portion of the buying power of your fiat script every day.
It is way to easy to avoid being a target. Here's some advice for you. For starters, don't be a banker. Conspicuous consumption is ugly in the best of times.
You are correct, BI, this fearmongering about being robbed of one's gold is just Official Storyline #143 of the anti-gold trolls --- I have been seeing it over and over in the last month or two both here and elsewhere, whereas it was NEVER part of the discussion before that. I guess the minions of TPTB received new marching orders, given the dismal failure of all their previous anti-gold propaganda.
Dang, I'd bet we're not cleared into that Compartment. But I'd bet that ZH community can piece most of the storylines together. Worth a try.
- Ned
FOFOA likened it to fox urine, designed to keep the little bunnies from munching the golden lettuce.
OS #143! Awesome.
Some people are rich and they want to protect their fortunes. They have enough fiat to live on day to day. Gold in an investment regardless if there is Armageddon or not.
What keeps anyone from robbing anyone? Law. What keeps people from breaking the law? Only their own conscience, circumstance and ignorance.
Realistically people are kidnapped and their family has no money and never hears from them again. At least the kidnapper was kind enough to only ask for money. And if the banker had been smarter he would have asked to speak with them. How does he know they aren't already dead...or that it's a hoax? That guy would have never been my banker.
You also presume that a wife and kids can't protect themselves. If your wife isn't prepared to die and kill for her family and her rights you married the wrong person. My mother taught me a long time ago, and I thank her all the time, to always be ready for something unexpected; that she'd be ready to kill to save us. My dad didn't even realize what he had.
People are targets. To pretend otherwise is ludicrous. Your argument is weak. When you wake up from your world where everyone is safe and nobody dies you will realize gold (precious metals) are the only things that gives you control over your destiny more than paper valued in promises (and derived from debt).
That doesn't mean you can't have paper currency in banks either. They just must be backed by precious metals, i.e. honest currency, i.e. real money. Silver, copper, these things have real value all the time (platinum, palladium, rhodium...etc.).
The arguments by Denninger lead me to believe he is intentionally being contradictory for argument's sake and is doing a terrible job of it at that.
To answer your question about "When do you trade it back for currency to buy things like food?" The answer is when you trust someone enough to exchange PMs for whatever you need. People around me know me. They know to trust me. I know who to trust. Sorry if your world is so bizarre that you no longer understand trust is a fundamental basis for a working society and market.
Perhaps that is what is all comes down to - trust. Maybe one can already recognize the people one can't trust because they are oblivious to the most honest currency ever known to human civilization.
Temporalist
How many people did your mother actually kill? How many people have you?
No Call of Duty numbers.
Realistically you have no clue what you can and can not due until the time comes.
My argument was honest based on reality. People tend to talk very big until the time comes, then they fall apart.
So get back to me after you or mom has popped a cap in someones ass.
LOL -- thanks for that injection of reality. I can imagine the typical pudgy gold bug riding a bicycle over to the food stand, the one run by some MS13 entrepreneurs. No doubt he'll get fair and equitable treatment and full market value for that Krugerand in the secret pocket of his money belt.
They're going to be pimping you and your daughters, because obviously they're so tough and unstoppable that nobody could stand up to them.
As you don't have any PMs, what are YOU going to trade w/ MS13?
Besides, the gold dealers in all the 3rd world cities are never gangs, they are jews or other banker types. Argentina and Brazil have lawlessness all over, gold still trades for whatever the current local paper is. FACT.
And it could be a painful one for people like Douchinger. Gold jewelry, silverware, etc., survived the cruzeiro real and the argentine peso, as did bullion. FACT.
For Douchingites to be right, REAL madmax has to come, as in zombie apocalypse. If that happens, it won't MATTER what you have! The zombies will overrun and kill you within days or you will succumb to cholera or a minor bacterial infection.
Only a FOOL would look at the present economic climate and the US's debt sheet and NOT see a REAL risk of impending sovereign default.
Some moron here says don't buy insurance while the house is burning...it's not really afire yet.
Ah, so now goldbugs are "typically" pudgy, and ill prepared. Funny, but I can read for myself, and based on the postings here at ZH, I would readily throw in my lot with the folks here who don't have massive blindspots. But then again, in a currency crisis I'm sure you can leverage your rapier wit as a commodity. "Will crack wise for food". Great plan!
Get back to me on discussing the many merits of holding gold when you manage to remove your cranium from its present deep insertion within your rectum.
You've hit the proberbial nail on the head. The issue with all systems-even barter and gold based-is trust. And its difficult to trust strangers without the "rule of law" which is the foundation of freedom. In the event of a complete loss of trust and societal collapse I'm under no illusions that my ample stores of food, guns, tools, medicines and ammo would put me in control of anything. But its the ultimate insurance policy since it requires the least amount of trust. Certainly FRNs require more trust than gold because as Gordon pointed out and I quite agree:
"assuming there are stock indices and counterparties left who can pay off these worthless winnings when countries collapse?"
Yes. well put.
Most with PM's do not put a sign in the yard to that effect. Appropriate strategy is one of being beneath reproach, i.e. low profile. Second, idea is NOT to trade PM's for currency, then buy food, but to trade PM's for food, should the need arise.
If collapse scenario does not play out, fine, we get our paychecks, we buy our food, and enjoy retirement on our social security. So, things go bad, we are fine, things go good, we are fine. Why are people so animated in their repulsion to some people sleeping a little better with PM's?
To update an old line, that is indeed the 64 gold ounces question!
Do any of you gold advocates go trolling any "mainstream" financial blogs, ridiculing the sheep who continue to trust fiat currency, rigged-casino equities and US Treasury debt as "safe havens"? I know I have never done any such thing, nor even considered it except within the context of framing this hypothetical question.
And yet we see such people here, who loathe gold and attack any discussion of it, not just in a casual manner, but in an obviously purposeful, driven, and relentless manner. Now WHY might that be?
Any goldhaters here care to answer that question?
Jory? JayBayBaker? JohnnyBravo? Anyone?
I attack the holders of gold because they are wrong, flat out.
It is more fun to disagree with somebody than it is to say "Nice post! Gold bitchez!"
I've made a lot more money playing the "rigged casino" than anybody here has made holding gold. Sometimes in a casino, you can bet with the house. The house is JPM and GS.
JPM and GS are short gold. Will you bet against the house and lose your money? You can if you want, but I'd rather try to mathematically mimic their algorithms and bet WITH them.
You don't buy insurance after your house is on fire. Yet, that's what goldbugs are doing.
You buy insurance when there is no threat of fire whatsoever, because the insurance is low in price.
If you buy insurance after the fire (which is where our economy is right now), you always pay a premium and rarely reap value from your decision.
The house is being rebuilt after the fire as we speak. What are the odds that the house will catch on fire again in a reasonable amount of time? A lot slimmer than they were when there were no fires.
You don't buy insurance the day after a housefire, because the costs are much higher than if you bought when there was no chance of a fire.
This lesson applies to gold, again and again throughout history.
Yet "this time is different."
Dang Johnny, if you're short gold, and these stupid guys keep buying, then you are taking their money. You should be happy and encourage them.
I'm having a bit of fun thinking through some of your comments. Since I was around in 1980, I'm starting a two part list of "How are conditions the same?" and "How are they different?" That will take a bit, but I'm sure you'll be around to crow over the crowd as you book your profits.
First difference that comes to mind is that Milton Friedman isn't around now, although he was hugely popular and widely viewed/read in 1980. Let's see... "Inflation is too much money chasing too few goods." Yep, sound right from the Laureat's own words. So, just printing money (or digital equal) ain't the same as an inflation-causing event. I'm betting that Ben is arrogant enough to think that when the velocity of money gets marginally above zero that he thinks he can slurp the liquidity back up. Sorta' like Morgenthau in 1936-37 when they tightened.
I don't know if you are familiar with Friedman. His books might have not have survived the Farenheit 451 scenario in your location, but American Book Exchange should fill the bill. "Free to Choose" is quite good and, after 30 years, you can judge the quality of his and Rose's judgement.
How does velocity of money fit into your analysis?
Best Regards,
- Ned
"I've made a lot more money playing the "rigged casino" than anybody here has made holding gold."
You are an idiot. Seriously, the shiznit makes me giggle. When I bought gold, I felt the fool, and nobody even knew where to get it. I think it was the day after the last gold analyst retired. It's a fucking mountain of money now. If I stood next to a guy like you when I was in the pit I would have left to go upstairs and phoned orders down to the Morgan broker to pick you off all day long without you ever knowing it was me. Then I would come down and take my spot and listen to your lies for the rest of the day until your clearing firm pulled your badge overnight. Blowhard.