Niall Ferguson Explains Why Keynesian Policies Are Dooming The World Economy To Round After Round Of Asset Bubbles

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Sun, 10/24/2010 - 11:53 | 673350 gkm
gkm's picture

A little anecdotal evidence of why the run in gold has yet to begin.  My parents went to an estate auction this weekend where, as usual, jewelery and such were sold first.  A gold coin from the late 1800's which had been appraised in the 1980's (i.e. probably at the height of the pricing then) at around $2300.  It had all of 3 bidders and sold for $225.  So pure gold being almost twice the price of what it was in the 1980's peak hasn't inspired people to want to buy gold.  A very good sign for gold's future.

What was selling?  A used car sold for a stupid amount and antique toys were in demand.  The sheeple were out in droves.

Sun, 10/24/2010 - 13:41 | 673543 doolittlegeorge
doolittlegeorge's picture

let's see.."nobody makes anything anymore."  REALLY?  That's interesting.

Sun, 10/24/2010 - 14:17 | 673614 traderjoe
traderjoe's picture

How much gold was in the coin, i.e. what was the melt value? Just wondering if those sorts of sales are worth attending...

Sun, 10/24/2010 - 17:00 | 673832 Arius
Arius's picture

i suppose you have the answer at the valuation in 1980s...i wondered what state was? perhaps, somewhere mid west?

Sun, 10/24/2010 - 18:32 | 673963 gkm
gkm's picture

Ontario, Canada

Sun, 10/24/2010 - 18:32 | 673961 gkm
gkm's picture

Couldn't say.  I heard the weight was 0.4 ounces but I'm not sure what content a coin of that vintage would have for gold.

Sun, 10/24/2010 - 22:21 | 674224 PeaBird
PeaBird's picture

the standard for coins of that vintage are normally in the 91.67% range for fineness.

Sun, 10/24/2010 - 19:22 | 674015 MeTarzanUjane
MeTarzanUjane's picture

My moms sisters fathers aunt goes to the flea markets in Biloxi Mississippi. She does dig up some gold. She goes at 10 am with her son Kooter. Her name is Dottie. Her daughter is a blackjack dealer at the Beau Rivage in Biloxi and she has a ferret named Marlana.

Dottie and Kooter once came home with a big 14k gold bracelet and she sold it on eBay for $16 before commissions. So I figure most jewelry will bring about $1 a caret. That's good money for one days work at the flea market.

Mon, 10/25/2010 - 00:35 | 674403's picture

Your mother's sister's (your aunt's) father is your grandfather. His sister is your great aunt. Kooter and his sister are your first cousins once removed. Marlana is no relation.

Gold karats are a measure of purity not weight and can not be priced as such. One  might own a one gram chain of 14k gold or a ten gram chain of 14k gold and the price of each would obviously differ by a factor of ten.

Mon, 10/25/2010 - 07:01 | 674606 MeTarzanUjane
MeTarzanUjane's picture

I'm not really sure what you're saying but it sounds good. Ever been to to the flea markets in Biloxi?

Mon, 10/25/2010 - 09:34 | 674797's picture

Haven't had the pleasure.

Sun, 10/24/2010 - 14:23 | 673629 Bartanist
Bartanist's picture

Unemployment for the college educated is <4.5%. For those with advanced degrees unemployment is around 3%

I don't know who goes to estate sales, but my guess is that they are employed and have disposable income or are in the resale business. So, it is debatable whether they feel they need gold as a way to protect themselves.

However, my guess is that the gold coin was a small weight piece and it was not valued based on being a collectable ... or littl extra value was given to it as a collectable.

Sun, 10/24/2010 - 15:28 | 673717 NOTW777
NOTW777's picture

"Unemployment for the college educated is <4.5%. For those with advanced degrees unemployment is around 3%"

incredibly deceptive stat.  many people with college degrees are working for $15/hr;  saw an ad for attorney position in SD recently, requiring experience for $25/hr.  how many college grads are moving back home to live with parents cause they cannot support themselves.  ask engineers, or tech grads what they are doing.

Sun, 10/24/2010 - 17:34 | 673872 tmosley
tmosley's picture

We hire recent graduates with 4 year degrees in the hard sciences for $10-13/hour, mostly at the lower end of that scale, and we can't give a raise for a year.  Every time I post a job, I get at least 30 applicants, and they aren't repeats most of the time.

We're paying pennies for the cream of the crop, and turnover is at a record low despite abysmal pay.  I like to think that it is because I'm a good manager, and that MIGHT be a part of it, but more than likely, it is because they just can't find another job, and this is the only way to pay the bills.  The only reason anyone even thinks about leaving is so they can move back in with their parents, but they have had problems finding jobs where thier parents live.

And this is in TEXAS, which has one of the lowest unemployment rates in the country.

Sun, 10/24/2010 - 17:59 | 673907 NOTW777
NOTW777's picture

California is similar and has even higher cost of living

Sun, 10/24/2010 - 20:02 | 674057 Red Neck Repugnicant
Red Neck Repugnicant's picture

It is no surprise that you're from Texas.

Sun, 10/24/2010 - 23:06 | 674281 nobita
nobita's picture

i am not from texas but your comment is junk.
please post less.

Sun, 10/24/2010 - 23:12 | 674292 chopper read
chopper read's picture


Sun, 10/24/2010 - 21:21 | 674132 Spitzer
Spitzer's picture

Oil rig newbies here in Canada still get $27.50 an hour, no experince, no education. Truck drivers and wire liners get 30 to 40 an hour.

Sun, 10/24/2010 - 21:52 | 674178 Dburn
Dburn's picture

saw an ad for attorney position in SD recently, requiring experience for $25/hr.

No doubt that his services will be billed out at something reasonable like $50.00 per hour? HAHA. It will be billed out at prevailing rate so the partners can take advantage of the current job market. Even govt jobs pay far more than that for Attorneys. I was checking tuition rates for the three year program offered by a university I would put in the C+ status of law schools. $20,000 a semester for in-state students and $49,000 for out of State. That comes to $40 grand a year plus books and living expense because it is pretty damn hard to work at least in the first year. So the cheapest they walk out with is $120G in debt of they are able to pay living expenses. If not and they are incredibly frugal, it will run $170-$200G for a 2nd to third rate law school. The one thing I like about "community" type law schools like this is they are taught by practicing attorneys who give a lot of practical training that theoretical ( expensive) law schools don't give on the assumption you will learn the nitty gritty of a practicing attorney in your first few years as an an associate.

I'm actually considering giving it a run. I think Bankruptcy Lawyers will be busy for years. Plus I am on a slow burn from hell about the trampling of the rule of law. I'd love to be able to get close enough to throw some fucking sand in the faces of even local bankers. At least I can say I tried.

Mon, 10/25/2010 - 08:02 | 674591 i-dog
i-dog's picture

"No doubt that his services will be billed out at something reasonable like $50.00 per hour? HAHA."

I would hope that they would be billing him out at $75 per hour, or more, else they will be out of business in no time!

If enough people junk me, I'll explain why (though it should be taught in high school instead of teaching Socialism 101, Socialism 201, etc). :)

Sun, 10/24/2010 - 16:49 | 673824 RockyRacoon
RockyRacoon's picture

That gold outlook can change with a few more articles like this one:

USA Today of all things!

Sun, 10/24/2010 - 17:23 | 673861 cranky-old-geezer
cranky-old-geezer's picture

"A 5% to 10% position in gold is enough for nearly everyone."

They destroyed their credibility with that statment.  

The statement has no basis in fact, and no facts are given to support it.   It's pure opinion of the writer, and therefore worthless.

The article is more gold-bashing.  It won't stir anyone's interest in gold ownership.

Sun, 10/24/2010 - 18:10 | 673932 chopper read
chopper read's picture

that statement is designed by financial planners to serve financial planners.  Its there way of acknowledging gold whilst minimizing its importance relative to fiat investments from which they get paid in perpetuity.  

Sun, 10/24/2010 - 19:29 | 674022 Cognitive Dissonance
Cognitive Dissonance's picture

that statement is designed by financial planners to serve financial planners.


As a Certified Financial Planner I actually take great risk when I recommend to my clients that they hold Gold and Gold miner positions of 20%, 30% and even more for the younger clients. Why? Because it's so far from "conventional wisdom" that if a client were to complain to the SEC, FINRA or even the CFP board, I could be in genuine trouble for violating my "fiduciary duty".

Of course, holding 50 or 60% in stocks is perfectly acceptable unless the client is in their 70's or 80's and I can't justify it, which isn't that hard if they have a decent income without touching their investments. The deck has always been stacked towards paper assets.

Sun, 10/24/2010 - 19:41 | 674029 chopper read
chopper read's picture

i hear you.  imagine if some 'rogue' fiduciaries overseeing a public pension plan invested in physical gold 10 years ago.  of course, it never would have happened because they are scared shitless of getting sued on the basis of 'studies' presented by the Wall Street Industrial Complex. 

ironically, if there is a collapse of fiat, Joe Sixpack may finally get his revenge on the system.  it is much easier to opt out of an IRA or 401(k), take the penalty, and buy gold and silver online within days.  He has no 'fiduciary responsibility' other than to save his own ass. How nimble are public pension plans by comparison?  Pension fund trustees are damned if they do buy gold, and damned if they do not!  By the time they get the investment policy statement changed because gold is at $3,000, old Joe is sitting in a fat winner. 

Sun, 10/24/2010 - 22:16 | 674221 prophet
prophet's picture

Not to mention that lead along with a few other assets classes did even better than gold. 

I think 4% is a good base allocation to an "asset class", 8 is pushing it and 12 is a hard top.  25 good ideas at 4P, 12.5 ideas at 8P, or if you are dead certain then perhaps 8.5 ideas at 12.5P.   


Sun, 10/24/2010 - 18:21 | 673946 TheGreatPonzi
TheGreatPonzi's picture

Agree. The figure of 5 or 10% is completely arbitrary and ridiculous.The same journalists would recommend you to place 95% into stocks when the economy is 'growing'.

According to the mainstream medias, betting on economic growth therefore deserves more money than betting on economic or monetary downfall.

And of course, 5% of your 1000 dollars savings will only buy you 1 gram of gold (15 days of food), when 5% of your 1,000,000 dollar savings will buy you 1,171 grams of gold (48 years of food). In very troubled economic times, it can mean that the first will die, and the second will live. If the first had increased his stake from 5% (15 days of food) to 50% (150 days of food), his chances of survival would increase by the same amount. Thus, advocating 5% in gold means that the probabilities of an economic downfall are only 5%. And even if this were true, the law of assymetrical risks recommends you to have more than 5% of your $1,000 savings in gold.

Summarized: one should not recommend gold buying on the basis of a percentage, but rather in absolute grams. 145 grams is, to my mind, sufficient for surviving during 6 years without ever lacking food. After that, the grams you add to your portfolio are comfort grams, which will be able to be used for another mean than survival.

Sun, 10/24/2010 - 18:36 | 673969 chopper read
chopper read's picture

thoughtful viewpoint!

Sun, 10/24/2010 - 22:19 | 674223 prophet
prophet's picture

Yes, the 145 grams would be what is known as an emergency fund in financial planning parlance.  It is distinctly separate from the investment portfolio. 

Mon, 10/25/2010 - 11:51 | 675122 RockyRacoon
RockyRacoon's picture

That summary is at today's food prices, of course.  A correction would be made to correlate with food costs.

BTW: I was posting that USA Today article as a note that the discussion of gold has gone to some main stream discussion.  It's crap, but relevant in that sense.

Mon, 10/25/2010 - 12:24 | 675222 MsCreant
MsCreant's picture

Agreed. I have a colleague asking me about gold. I gave him a big heaping scoop of reality (HFT, front running, bid stuffing, potential confiscation of IRAs and 401ks). He is a statistician, he followed everything with one explanation. He told me he wasn't going to be able to sleep tonight. 

Folks are starting to wake up. The thing is, they are waking up and reacting without enough information. Here is more of the problem, for anyone here afterhours reading.

My colleague, after hearing all this, says to me "Can I pay you to manage my money for me?" Do you get how bad this is? I am a nobody who trolls these and a few other sites, and reads a lot of alternative (sometimes garbage) news. I look up charts on my own here and there. It is the knee jerk reaction of my adult male colleague to look to someone to figure it out for him. He is a smart guy. What of the rest of America who do not have Ph.D.s in Demography? This is what we are dealing with.

Mon, 10/25/2010 - 12:31 | 675250 i-dog
i-dog's picture

You are not a nobody!

Mon, 10/25/2010 - 13:18 | 675412 chopper read
chopper read's picture

scary point.  of course, the simple answer is that he does not need your help to sell everything and buy physical gold.  But how was this not his first reaction?  great observation.

Sun, 10/24/2010 - 18:04 | 673920 RabidLemming
RabidLemming's picture

Numismatic value and melt value are very rarely related. 

Sun, 10/24/2010 - 11:53 | 673351 TheGreatPonzi
TheGreatPonzi's picture

Instead of seeing Keynesian policies and debt/monetary bubbles as policies which could have been right, but are not, people should start to realize that these policies were profoundly ridiculous and nonsensical since the beginning.

And I do think that the FED is very aware of that. A 5-year-old child can understand that you can't create real wealth with debt, printing presses and idiocy. It's like saying that a bum who owes $200,000 to a coke dealer is rich.


Sun, 10/24/2010 - 12:05 | 673370 Sqworl
Sqworl's picture


It's like saying that a bum who owes $200,000 to a coke dealer is rich.

Sun, 10/24/2010 - 12:19 | 673398 sushi
sushi's picture

+ 2000

The debt to the coke dealer represents an asset so he is richer by $200,000 as is the houseowner, er, cokehead, who is also up by $200,000. A rising tide of blow lifts all boats.

Sun, 10/24/2010 - 13:00 | 673467 masterinchancery
masterinchancery's picture

A perfect example of stimulus.

Sun, 10/24/2010 - 18:10 | 673933 kathy.chamberli...'s picture

no i have a perfect example of stimulus.

not telling you, though.

Sun, 10/24/2010 - 14:44 | 673658 Spitzer
Spitzer's picture

Keynes expalined in under 30 seconds

Sun, 10/24/2010 - 12:26 | 673413 chopper read
chopper read's picture


Keynesian economics = over the long-term, everyone can have a free lunch.

Austrian economics = over the long-term, there are no free lunches.  


Sun, 10/24/2010 - 12:33 | 673429 TheGreatPonzi
TheGreatPonzi's picture

"Keynesian economics = over the long-term, everyone can have a free lunch."

Is it a joke?

Sun, 10/24/2010 - 12:40 | 673443 chopper read
chopper read's picture

keynesianism is to economics what astrology is to astronomy. 

no joke - it's true!

Sun, 10/24/2010 - 12:51 | 673456 snowball777
snowball777's picture

Then the Austrian school plays Tarot to economics' Poker.

Sun, 10/24/2010 - 13:30 | 673484 chopper read
chopper read's picture

probably true, too.  one thing is certain, there are no free lunches.  sorry, Keynesians.


keynesianism = centralization of power

austrianism = decentralization of power


is there really still a debate about which one is better? 


keynesians = smarmy elitest twats

austrians = lovers of liberty

Sun, 10/24/2010 - 13:49 | 673561 snowball777
Sun, 10/24/2010 - 14:27 | 673635 Red Neck Repugnicant
Red Neck Repugnicant's picture

Most of the comments about Keynesian economics on ZH...


people who have no fucking clue what Keynesian economics is.

You brain-washed morons are twisting, bashing, thrashing, manipulating and distorting an economic theory without having the slightest clue what it truly is.

Palin/Disinformation 2012

Sun, 10/24/2010 - 15:31 | 673722 NOTW777
NOTW777's picture

red neck, your name calling is so erudite, so convincing, - not.

tell george soros - name calling doesnt work anymore. rome is burning. your koolaid days are over.

your time of accounting is due

Sun, 10/24/2010 - 16:40 | 673809 chopper read
chopper read's picture

keynesians = oppressive British Empire circa 1775

austrians = industrious revolutionary colonists circa 1776


...its so simple!

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