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Roubini Blasts "The Barbarous Relic," Recommends Spam Over Gold
- Ben Bernanke
- Book Value
- Carry Trade
- Central Banks
- China
- Copper
- CRE
- CRE
- default
- Double Dip
- Dubai
- Equity Markets
- Eurozone
- Excess Reserves
- Federal Reserve
- Global Economy
- Gold Bugs
- Greece
- Gross Domestic Product
- Hyperinflation
- India
- Keynesian economics
- Monetary Base
- Monetary Policy
- Moral Hazard
- Nassim Taleb
- Nouriel
- Nouriel Roubini
- Quantitative Easing
- Recession
- recovery
- Ron Paul
- Sovereign Risk
- Sovereign Risk
- Sovereigns
- Volatility
- Yield Curve
In a headline piece on roubini.com, Nouriel Roubini writes an extended article slamming both gold bugs, and the so-called gold bubble, which he believes is far too volatile, and which, contrary to ever increasing claims to the opposite, will likely not get to the mythical price of $2000/ounce, and instead will head lower. The argument presented, as is widely the case, boils down to the trifecta of i)gold having no industrial utility, ii) no intrinsic value (no associated cash flow streams) and iii) costing an arm and a leg to store. While Roubini's thesis is attractive on the surface (if somewhat Keynesian and thus often reiterated by mainstream Economists), we present some counter arguments to Roubini's thesis.
Roubini summarizes the current situation:
In the last nine months, concerns about a global depression have
dissipated and the global economy is recovering from its worst
recession in decade; deflation is still gripping the global economy as
the slack in goods and labor markets persists at high levels. So why
have gold prices started to rise sharply again in the last few months,
in spite of no near-term risk of inflation or of depression? And could
gold prices rapidly rise towards $2000?
On the one hand, the Doctor does see the pro-gold argument, which he highlights in five main points:
There are several reasons why gold prices are gradually rising, but
they do not suggest a rapid rise toward $2000; at most they suggest a
gradual rise with significant risks of downward correction.
- First, while we are still experiencing global deflation,
there are rising concerns that inflation may reemerge forcefully in the
medium term because of large monetized fiscal deficits.- Second,
a massive wall of liquidity—borne of easy monetary policy—is chasing
assets. Some of those assets include commodities like oil and base
metals—the rise of which could eventually become inflationary.- Third,
dollar funded carry trades and a more generalized portfolio allocation
to non-dollar assets (especially EM assets) are pushing the U.S. dollar
sharply down. There is an inverse relation between the value of the
dollar and the dollar price of commodities: the lower the dollar the
higher the dollar price of oil and other commodities, including gold.
The rise of gold in euros has been much more muted.- Fourth,
the global supply of gold—both existing and newly produced—is limited,
and demand is rising faster than supply over the medium term. The
recovery of the global economy has started a revival of retail gold
demand especially in India. Central banks looking to diversify their
portfolios account for further demand—see for instance, the recent
increase in gold holdings by emerging market central banks. Most of the
increase in demand comes from private investors using gold as a hedge
against low probability tail risks of high inflation and another near
depression caused by a double dip recession. Inflation risk and the
risk of a double-dip are both low, suggesting lower gold prices, but
increasingly investors want to hedge against such risks early on. And
given the inelastic supply of gold, it only takes a small shift in the
portfolios of central banks and private investors to boost increase the
price of gold significantly.- Finally, as sovereign risk
is rising—see Dubai, Greece and other emerging markets and advanced
economies—the concern about sovereigns not being able to back stop
too-big-to-save financial system could rise again.
On the other, Roubini, sticking to the Socratic method, lays out the counter argument for a quick drop in gold prices:
- First, the dollar carry trade may at some point unravel, popping the global asset bubble that this carry trade has fueled.
- Second,
central banks will eventually need to exit quantitative easing and
effectively zero policy rates, which will put downward pressure on
risky assets including commodities. - Third, bouts of
global risk aversion may occur as the global recovery may turn fragile,
anemic and subpar, thus leading to a rise in the U.S. dollar that would
drive down prices of commodities and gold in dollar terms. - Fourth,
since the carry trade and the wall of liquidity are causing a global
asset bubble, some of the recent rise of gold is also bubble driven by
herding behavior and momentum trading, pushing gold higher and higher.
But all bubbles eventually crash and the bigger the bubble the bigger
the eventual crash. - Fifth, the effect of rising
sovereign risk on gold prices is ambiguous, as the events of recent
weeks suggest. A risk in such risk could push up the price of gold if
it leads to expectations that central banks will eventually monetize
those fiscal problems. But in practice it has weighed on the price of
gold because it has increased investors’ risk aversion and led to a
rush into a different (and more liquid) asset than gold—e.g. the U.S.
dollar—thus pushing gold prices down. In general, gold always competes
with fiat currencies and anything that is dollar bullish—like repeated
bouts of global risk aversion—tends to be gold bearish.
At the heart of Roubini's argument is a principle that is self-evident when one looks at the price dynamics of various asset classes today: that inflation is still in check. Of course the threshold between reserve accumulation by FR banks (which is now at ~$1.2 trillion) and all that excess money spilling over is all the stands between an environment of muted "disinflation" and runaway, spiraling and uncontrollable hyperinflation. And should the Fed lose control over a runaway monetary train, Gold at $2000 will be a distant memory. But more on that in a second. First, Roubini on why gold bugs' expectations will soon be dashed:
Thus, the gold bugs are wrong—or at least very, very premature—in
justifying buying gold as an attack on fiat currency. The velocity of
money is still low or falling—the opposite of a currency crisis or run
on the dollar. As a further indication of the collapse of credit/money
multipliers, indicators of expected inflation are subdued or falling,
despite governments printing money (excess reserves). The high
inflation scenario may be constrained even if/when easy money gains too
much traction, as the yield curve would steepen sharply, raising the
discount rate for risky private sector debt and for corporate equity,
limiting the speed of the recovery and hence the ability of states to
impose inflation surprises in the context of shortening average debt
maturities.
Finally, let’s assume the global economy double dips and concerns about
near depression and sharp deflation reemerge. Should investors hold
gold in that world? In a true world of near depression, gold bars are
pretty much useless. Keynes referred to gold as a “barbarous relic.”
Unlike other commodities, it has little intrinsic value. Much like a
fiat currency, gold’s value is based largely on the irrational beliefs
of investors. In a depression or near depression, one would be better
off stockpiling canned food and other commodities like oil that are
useful for riding out Armageddon. You cannot eat gold or burn gold.
Roubini concludes:
Investors should thus be wary of getting the gold bug and being stuck
with this barbarous relic. The recent swings in gold price—up 10
percent one month, down 10 percent the next—prove the point that gold
has little intrinsic value and that most of its price movements are
based on beliefs and bubbles. As an insurance policy against the tail
risk of eventual inflation, it may be useful to hold a small amount of
gold in one’s portfolio, but stocking up portfolios with a fiat
currency that has marginal practical use, a zero nominal interest rate,
high storage costs, and the price of which is subject to volatile whims
and bubbles is totally irrational. If you want to hedge against
inflation, stock up on Spam or other canned food or buy futures on
commodities that have more physical uses and consumer demand.
We disagree with the professor across a few key points. As Dr. Roubini himself will acknowledge, the primary reason for the rapid "improvement" in asset valuations, and the postponement of the double dip/next leg of the depression, is solely due to global central banks having themselves onboarded private sector asset exposure as the very last option to prevent an all out collapse of the financial system: individual sovereigns' taxpayers are now the owners of what used to be Merrill's toxic CRE loan bonanza. Whereas a year ago the collapse of Goldman would have been possible without it also involving an at least technical default by the US, we are now beyond such capitalist flights of fancy, courtesy of the Bernanke Put (let alone the discussion of what the MTM mismatch of the central bank balance sheet is - courtesy of increasingly more lax accounting standards, the spread between fair value and book value, as we have reported, keeps increasing and could potentially be a 20%+ delta). These assets need to produce cash flow, which they do not, or at least not to a point where the Fed's balance sheet is self-sustainable. Which explains the massive money printing, via QE, although as pointed out the actual cash does not hit circulating money, but merely ends up at the banks, earning 0.25% (why not: on $1.2 trillion it amounts to $3 billion a year in absolutely risk-free taxpayer subsidies). The main reason, as Zero Hedge will shortly show, why the dollar keeps getting pillaged versus its main counterpart, the euro, is that while the Eurozone balance sheet has stayed flat, courtesy of a mortgage bubble that never hit the ludicrous size of its US counterpart, the US Federal Reserve "assets" keep rising, and at a rate which is the inverse of incremental dollar devaluation.
In essence the only reason why gold has appreciated less in terms of Euros is thanks to US generosity to assimilate European toxic asset losses, via an osmotic, and nearly 1-to-1 increase in equity markets between America and Europe. In this way, even as the euro continues not devaluing, the implicit Eurozone inflation is still nonetheless occurring, courtesy of increasing equity values, which happen purely on a sympathetic reflex to what the S&P is doing in New York. Another interesting observation are the comparable rates of expansion
of the balance sheets of China and US - once again China is taking
advantage of not only the dollar peg, but of it having even less a
vocal political system to keep the printer in check (i.e., the absence of its own version of Ron Paul allows it print
its way to "9% GDP prosperity" every year). At the end of the day, the Fed can only carry the burden of importing global inflation so long before the need to tighten is the opportunity cost of the Fed Chairman's job (and the ruling party's continued majority in the House and the Senate). And this is precisely the day that gold bugs live for.
Mr. Roubini is wrong on one key argument: gold bug mania is not so much driven by the dream of fiat currency destruction (we all know the race to the bottom is on everywhere except in Europe which as discussed above has it own unique set of circumstances), but by the volatility in the actual reversal from expansion to contraction monetary phases. The Fed is in uncharted monetary policy territory, and way out of its comfort zone. If history is any indication, Greenspan, who was unable to control the runaway train of monetary glutting in the early 2000s, is a perfect case study of what will happen - why would Bernanke, who is Alan "Moral Hazard" Greenspan reincarnated, get it right? Especially, having demonstrated over the past month a complete lack of comprehension of asset bubble existence. And that particular bet explains why all the smartest money is currently accumulating it. Many pundits have said that the one who times the switch to inflationary policy by the Fed will be the richest man in 2010 (or 2012 if Goldman is right). Yet gold is a negative carry-free way to make just such a wager with the broadest possible time horizon: gold's lack of positive carry offsets precisely the theta bleed which one would incur if one was merely rolling S&P puts constantly waiting for the Nassim Taleb moment of six sigma plus singularity. Also, once purchased, there is no need to roll the gold contracts, especially in physical form. At the end of the day, if the monetary skeptics are right, and they most likely are, the Fed will not only be unable to rein in inflation but we will go straight to hyperinflation and not pass go. At that moment the price of gold will hit escape velocity. And as in hyperinflation traditional supply/demand mechanics collapse, especially for such industrial metals as copper, aluminum, and, yes, even silver, gold's lack of intrinsic value will be the main thing in its favor. Furthermore, with gold prices representing a nearly 80% discount on the global monetary base in simple value terms, in a scramble to a makeshift gold standard, the next resistance level will be not $2000, but $6000/oz.
Yet in all honesty, we do agree with Roubini, that at that point in the future, when all non-gold commodities are flatlining, spam will likely be just as valuable as gold. Unfortunately, lead will be in a league of its own. If that is the price to pay for the terminal proof of flawed-from-the-start Keynesian economics, and the failure of the Federal Reserve as the bastion of Wall Street's "second estate" interests, and the subsequent demise of both, it may just end up being worth it.
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Buy Gold...Nou Nou will be buying lots of gold trinkets this Holiday for his "Ladies"....;) He alone will spike the price!
I agree, Nouriel looks to be wrong on this one. Maybe he has never held a kilo bar of gold...? LOL re trinkets for his ladies.
"You can no eat or burn gold." Really genius? A good way to know that a person doesn't know what is the purpose of gold is when they spout this nonsensical line.
Gold doesn't compete with food or oil, it competes with fiat money. You can't eat paper dollars either, and if it comes down to burning the paper dollars then you'll be wanting to own gold anyway.
Actually, I've digested paper.
You can't eat or burn iphones either but that does stop people from trading them on ebay.
It's all about relative value.
You can blend it:
http://www.youtube.com/watch?v=qg1ckCkm8YI
I love when people say gold has no industrial value. Gold is the best conductor of the metals. Really high end cables have gold plating on the tips. The reason for golds lack of use in industry is the value placed on it as a monetary metal is much higher than the industrial value
Gold is NOT the best conductor. Silver is far better. Gold is chosen for its corrosion resistance.
http://answers.google.com/answers/threadview/id/28651.html
End of Keynesianism. Priceless.
Roubini: "C'mon, guys! Keynesianism works! Really! Pay no attention to India's CB buying gold bullion! Those Indians will for sure dump their gold soon, once they realize the terrible mistake they've made! Keynesianism works! In the long run, we'll all be dead anyway!"
How much money is Roubini managing again? Right. When some of the best traders in the world ala John Paulson, Tudor Jones et. al. are buying Gold and putting their money where their mouth is, why should I listen to a total LOSER like Roubini?
BTW, somehow those bashing Gold almost always happen to be total losers managing/making ZERO amount of money and are big on lecturing/producing hot air (Bob Prechter anyone?). Hmmm...I wonder why...
Paulson also buys a ton of BAC, so we also buy BAC? Poor argument pal.
If someone bought it at the right time, not a bad deal at all.
Another irresponsible professor.
Yes. but your offsprings will be living in a different world
Why do these economists insist that something popular isn't popular? It's like telling teenagers not to have sex...
Also in a credit contraction with declining money supply GOLD is just as liquid as the dollar. You can swap it, it's fungible and universally accepted. Industrially, it's used in computers.
What a rant...
"Also in a credit contraction with declining money supply GOLD is just as liquid as the dollar. You can swap it, it's fungible and universally accepted. Industrially, it's used in computers."
Please cite your source.
eBay.com
@ cocoa Roudini is lookin for headlines. He's become irrelevant. Max Keiser intervieved William Black. Very insightful.
http://maxkeiser.com/2009/12/11/ote31-on-the-edge-with-max-keiser-and-william-k-black/
At an often substantial premium to market at that
Anon,
Gold is EXTREMELY easy to exchange in localized currencies in many places around the world. Sadly, Americans do not realize this yet Europeans and Asians are well aware of this fact. Gold in indeed used in industry as connector coatings and other mission critical wiring and covering/plating. Gold is also an excellent heat reflector and used by NASA, top professional race teams, etc..
For what it's worth, when India had restrictions on foreign currency exchanges, you were allowed some piddling sum like maybe $200 converted before you left the country. People used the other network of international money lenders, or they wore 24k gold jewelery. When you reach your destination, you check into an indian jeweler who would charge you $10 dollars over spot price for any transaction. Buy or sell. You can find them in most major cities. They generally won't mess with you. They know you know what you have. They don't play the Cash for Gold stuff. They don't buy 14k.
No it's not:
This guy's approach sucks, but it's hard to refute that these rich ***** have little idea of what is going on:
http://www.youtube.com/watch?v=BYcXTOto-LM
- and further proof that this falls on deaf ears:
"Hey, I'm practically giving away Maple Leafs, too bad you ***** don't know how to evaluate a counterfeit!"
Gold is not liquid because our government does not follow it's own constitution anymore - and the citizens are hyper-specialized, hyper-clueless, overweight, and indebted. A gold-backed paper currency, not fiat!, is the only solution (as a compliment to a standard (weight and purity) coin) - because the paper itself is liquid, portable, and immediately redeemable for the real thing.
But, wait, to be fair, I have to agree that if you are willing to take a loss you can trade gold very easily. Just go to Detroit - a fi dolla ho will love you long time.
Okay, wait. In foreign locales I cannot provide experience. So, I may be off my base.
Source? Just look around you. CB's are swapping gold-there's a gold ETF-there's a mutual fund in Switzerland that converts to physical gold. EBAY,coin shops, Craig's list...
and the mint keeps running out
...out of tungsten.
I'm no paper apologist, but to claim that Au is as liquid as the dollar is a bit misguided. I dare you to go to the gas station and try to pay for a gallon of gas with a krugerrand, or to the grocery story and buy a loaf of bread with a gold American Eagle. Ain't happening. Gold will only be as liquid as the dollar as soon as its legal oppressor - legal tender laws - are compromised. Absent the abdication of legal constructs, the dollar is exponentially more liquid than gold.
Yes, absent legal tender laws gold is certainly as liquid as fiat trash. But given that deflationary episodes tend not to cause civil unrest and legal dislocation to the extent runaway inflationary episodes do, the claim that gold is as liquid as the dollar doesn't really hold up.
You forgot to say that you can't eat gold. Seriously, how hard is it to sell gold for money, then buy what you want with money?
Or you could, you know, hold money to begin with and forego jumping through hoops B and C (particularly if you're paying >0.00001% above spot, which would leave you with less than what you began with). Perhaps you can put me in touch with these merchants who are accepting Krugerrands for their wares?
Look, I hold a significant amount of metals and am as bearish as the next ZHer about the dollar and ultimate solvency of this country. But to say that, TODAY, gold is as liquid as FRNs is simply incorrect. Do you really dispute that?
I will sell you a generator, or a quad, or a motorcycle, or land for GOLD
Exchange it or what money? You goldbugs are seriously retarded.
He also forgot to say that he can't wipe his ass with it, which, BTW, he can with the dollar. Hence the dollar is more valuable...er..."liquid".
How did you two manage to turn my response into being anti-gold? I hold plenty of it (and other metals and commodities).
Few can see the writing on the wall - let alone read what said writing is actually saying. I consider myself lucky that I'm among those who can. This country's - nay, world's - finances are rotten, and it's clear that something's got to give. But the when and the where, not to mention the nature of the ensuing fallout, are all completely unknowable. As a hedge against such extreme uncertainty, only fools talk themselves out of holding things which will be liquid in the aftermath of TSHittingTF. The key in such a scenario isn't JUST gold; it's liquidity and flexibility.
But in the IMMEDIATE aftermath of such an event, and until every J6P comprehends the utter worthlessness of fiat junk, some of our less-knowledgeable peers will for a time still attempt to transact in FRNs. It is for those transactions, and those fools, that I'm reserving a small collection of FRNs. Like it or not, FRNs are for today and the immediate short-term the most liquid monetary instrument.
liquor is a pretty liquid asset maybe we should stockpile rum, and spam, and cigarettes, and condoms, along with our PM's.
You think you're being funny, but actually you're right.
+1
Uh, actually, the grocery store and the gas station are required by law to give you face value, $50, for your one ounce American Eagle coin. It's US legal tender, "legal for all debts, public and private."
In a depression or hyperinflationary situation, those who want to unload land and real estate will only accept precious metals. The Kennedy's made huge basement RE deals for silver in the 30's.
There are also legal or underground places which exchange PM's for cash as you need.
Again 25% of your total assets in gold and silver will protect you from such case. If nothing happens, your dollar assets will make up the other way even if gold goes to $350.
Just a hedge. I just don't see that anyone should argue one way or another. This is a settled argument since the Babylon days.
Keep in mind that Roubini has become the banker's pet contrarian.
I don't know what to think of this guy anymore. I think he is a tool.
Please keep your stored labour in our highly dilutional-and-expected-to-blow-up fiat currency so that we can offload all the deals gone bad on your ignoramus holders and enrich our mistake-prone and greedy friends.
Gold is not the ultimate money. It's supply is not dictated by the scarcity of natural limits and hence undoes and prevents our monetary mischief.
Yes please continue using our monopoly of printed pledges against your neighbor's future labour. Also disregard the fact that we have shown neither good government, budgetary fiscal discipline, nor spending restraint.
Please buy our bonds, machine traded round-trip transacted and over-the-top bubbly equities, or real estate whose present glut was over-incentivized by widespread, unregulated fraud and whose price must still fall at least 40%.
In other words, dump good money after bad chasing a return that is systemically no longer there; or, if you choose to hoard, hoard in OUR cash.
All the better to eat you with.
Roubini the Houdini. There is no economic law which I cannot escape from.
"Tool" being the operative word. Read Ted Butlers' commentaries on naked shorting of gold and silver by Goldman and JPM. He obviously chooses to ignore a fact that is based on Commitment of Trders report and physical supply, and to the benefit of those that would be at a loss to cover on $2000 gold. With a fiat dollar perhaps their only concern are costs based on ink to gold ratio. The ratio is well in their favor considering the value of the entire US gold reserve (8000 tons)is around $300 bil, and just in backing the 1.8 bil rise in debt ceiling would be a 6 fold increase. If the dollar was based on gold relative to the national debt the price would be around $40,000 - so if inflation ticks up a point which is cheaper; paying the extra .1% interest on $12 Tril or shorting a few hundred bil in the gold futures market.
When the disparity between physical gold and the paper market finally unravels, Goldman is betting on 2012, it would be well advised to have a seat when the music stops.
Contrary to Roubinis claim, gold has value as a currency - maybe he should read the Constitution, it may be hanging by a thread, but it will still be around long after the New World Order is past tense. Its too bad that The Powers That Be are intent on covering the truth with lies and testing the resolve of the populace, because if one understands the simple truth in an issue, they are not likely to be dissueded regardless of degree, credential or religious facade.
- Good Article, Thanks.
Gold's value is constant.
It's just that the fiat currencies are in constant limbo of liquidity and/or trustworthiness.
In rough calculations, a 1923 Lincoln was sold for $520 or 18 Oz, of gold. Today, a similar car should cost you the same. But the similar car is priced at 35K or more, therefore gold should be at $1800-$2200 an oz.
You can make the same comparison with shoes, food or whatever other need.
Just more hopium.
Look at the value of a car in 1932, versus what you get on your car today.
There is much more value in a car from 2009. That doesn't mean that gold is worth more, but the car is.
1923 Lincoln= $75,000
http://www.prewarcar.com/searchresults.asp?make=Lincoln
Cars are indeed better today and the government uses your argument (called hedonics) to supress the inflation number.
Same with the steaks. If the price of the filet mignon goes up, the goverment substitutes with skirt steak to hide the uptick.
Most economists though disagree with that theory.
1 lb of coffee, 14 ounces of coffee, 13 ounces of coffee. Labled 13 ounces but only 12 ounces in it.
It's all about hiding inflation.
that's right. he is. he is of turkish or iranian jewish extraction, teaching, and working and living in new york. what else needs to be said. he is working for the other side. besides if he doesn't play the right notes, and considering what a tiger woods kind of playa he obviously thinks he is, it would be no problem for his supply of shiksas to shall we say dry up real fast, if he doesn't do what is wanted by his puppeteers.....
I don't defend Roubini's perspective, but your silly racism detracts from this conversation.
Shake yourself out of it. Race doesn't matter here.
+100
ms. c, i like the cut of your jib, lady! (both for this and your many quality comments here on ZH).
+100 I concur, Ms. C is one of my favorites on ZH along with Marla.
Nou Nou should be discussed based upon merits and not race!
While were here posting, he is St. Barts with his harem enjoying the fruits of his labour!
This is a great compliment coming from Sqworl.
Marla is deadly awesome and a sight to behold in action. Graceful predator. I have learned a great deal from "her."
I'll just go sit and grin for a while!
:-)
+1
I made a stupid race over generalization about Arabs on a thread a while back which I regret, so take some points off the +100. However, it is one thing to be an ignorant dunderhead and another to be stewing in hatred without questioning the logic underneath it. That one takes pleasure in hurting. To be honest, I don't get this kind of thing. Your parents or friends taught it to you and rewarded you when you replicated it? You had a bad experience with one person (or three?) and over generalized it? Or maybe you lived in a neighborhood where everyone explained things this way? There is a reason for it though. But that does not mean it should not be challenged.
Thanks.
academic capture. can't see that the dollar IS a risk asset
Amen He conveniently visited the IMF prior to the stock market crash and bailout.
Roubini is both right and wrong.
I have always wondered,also, why people just blindly give a certain value to gold like many do to the $.
Minus perception, gold is basically worthless.
And thats where Roubini is wrong. People perceive gold to be quite valuable, and perception is really the only thing that matters.
If people perceive our economy to be doing well, it does well, even during obvious bubbles. However, as soon as people preceive the economy to be doing poorly, it crumbles.
Now if these inflation hawks, and the like wanted the $ pegged to a commodity of actual value, say oil, I think they would have a much more credible case.
Oil or any other expendable and finite commodity would be a ridiculous peg. The reason why gold has been used for thousands of years is because it is rare and does not get destroyed through consumption. All of the gold ever mined is still in existence.
"All of the gold ever mined is still in existence"
Interesting thought. Even if a fraction was combined irreversibly with another element into a compound for some use, most gold is mined just for use as gold.
The gold argument will go on forever.
People are not the fools their gov't believes them.
They see all the presumptions upon their future tax payments by voracious but impaired financial institutions which must be made whole. They see the mountain of income streams required to service interest payments which can never be met. They see rapidly expanding gov't services, gov't salaries, gov't pensions & healthcare and the money printing which supplements the borrowing which dwarfs the real possible gov't income from the physical economy.
They see an overleveraged private, corporate, public sector which cannot pay down principal and seem hellbent on borrowing until the creditor is out of funds. They see a debauched dollar as a furtive means of stripping their purchasing power and looting any savings.
In short, they see a bankrupt gov't that forced them into an unequal partnership. And wisely, they are unloading all financial instruments with claim on that entity's value before the collapse leaves them with nothing.
Therefore they choose Gold. Not because it is not without volatility or manipulation or problems, but because it is the best choice between two imperfect widely accepted commodities: paper money and Gold.
95% of the silver ever mined, has been consumed. silver is the ticket, and much easier to exchange, in lower denominations. don't go out and buy a bunch, yet. let me get some more, before you help to drive the price, closer to gold.
Re: perceptions and the real value of Gold.
I agree with you that the "real" value of gold is more a matter of perception than anything else. But then, so is everything else. As an example of this, ask yourself the question: if it rained hamburgers, what would be the effect on the price of food?
However: Gold is rare, it has certain interesting physical properties (oxidation, ductility, and so on) and it makes nice bling, as it is very beautiful to look at. The combination of these three characteristics make it a very valuable metal, indeed. It's not just a matter of perception. Scarcity, of anything, confers value.
Remember that economy is supposed to be the science of managing scarcity. Gold is probably one of the ultimate scarce resource. Hence, its value, even if the valuation of gold can be somewhat problematic in a fiat currency system.
What effect would Raining Hamburgers have on vegetarians?
The whole debate boils down to answering the question, inflation or deflation? No one's crystal ball appears yet to give the answer.
WEIMAR REPUBLIC STYLE "SUPER INFLATION".IT IS NOT IF, ONLY WHEN. THE FRN IS HEADING FOR A UTTER AND COMPLETE COLLAPSE. WHAT YOU HAVE WITNESSED IN THE LAST FEW MONTHS IS MERELY A DRESS REHEARSAL, FOR THE COMING FINANCIAL CALAMITY.
HOPE FOR THE BEST, PREPARE FOR THE WORST.
Hi Rubberduckie.
As far as I am concerned, we already are in a world-wide deflation, one that has been cleverly hidden by manipulating the numbers in most countries.
When the trillions and trillions of fiat currencies printed to "save" the economy finally reach the market, then, and only then, will we have inflation. Remember that inflation is based on the amount of money available in an economy at a given time. Price rising are a consequence of inflation.
In other words, gold is cheap today because of deflation, and it is going to go ballistic as soon as inflation (or hyperinflation, Zimbabwe-style) starts. Keep in mind that inflation, or, even worse, total economic meltdown, is (as far as I am concerned) pretty much a certainty.
One last possibility is stagflation: general stagnation in the economy, combined with high (or very high) inflation. See economy, USA, 1970s. But that's more or less inflation that's going to be the decisive factor anyway.
And one effect of raining hamburgers on vegetarians would be to lower the price of food across the board... Except maybe for poor vegetarians. There are always two sides to the same coin, and your vegetarian example is a great counter-example to my raining hamburgers example. Well done.
Uh??? Gold has intrinsic value because it is INDESTRUCTABLE, comprende?
Now theres a question. Indestructible? Canadian bank lost millions oz of gold.
After belatedly calling the mounties, they reported erroneous double counting as one culprit. Funny for a bank to not COUNT properly!!?? lol
And they stated some gold was lost to melting procedures in the making of coins. I did the math , and it turns out theres an excellent chance it was the 400 oz bars that melted and left a profound amount of tungsten in its wake!
Gold does not disappear during melt. I bet if you ask, most in the business will with pride declare a positive return. After all it cannot dissappear unlike burned paper. Perception alone is not what gives it value.
History , difficulty of finding and obtaining and scarcity give it value.
Where else would we park our profits? Land would be a good alternative were it not in decline. Nor is land free of counter parties, taxes , keep up and the possibility of eminant domain being used agains it.
Silver is even scarcer if reports are correct. In my small city thousands of ounces were bought in the last few weeks and supply is dwindling as fast as bullets. The home town silver rallies have inspired shotgun sales as well.
Long on personal home security. Long silver, hi ho
Ummm...no. He's just wrong.
Marla, is that you?
The timing's the thing....
Repost from above (in case you missed it - lol):
BTW, Roubini's post is so full of idiocy that I won't even bother with a rebuttal.
No response Gordo? Why? Because you bought at $1225 / oz and have no credibility?
I didn't but if I did (and I will the next time it hits $1225) it wouldn't have been too bad of a decision because eventually it's going way above that.
Agreed.
I watched that recent jump, saw it for what it was, waited until a couple days ago. And as someone who started buying at about $300, I'm not too psyched about pay >$1k, but I don't have a doubt that it's going higher. Someday.
Honestly, I buy to hold, perhaps forever. I'd much rather pass on precious metals to my descendants than a deteriorating consumable like a house anyway, so I'm not too worried about price.
I just get a little personal kick out of recognizing dips and when to hold.
Yup it's a barbarous relic. It's going to rip your head off and shit all over your fake math and the fortunate will become unfortunate. But don't worry. You'll all have super computers that you can play super fiat pong against each other. Hope you get the high score!!!!
Deleted
WTF does Roubini know? Where does he invest his client's money? He is an academic.
Keep your eye on the supply chain collapse. It's already heavily undermined shipping, and is progressing in agriculture. In the race to the bottom--which you mention--demand gets there first, supply chain gets there second, currency gets there third, inflation gets there fourth, revolution gets there fifth.
TD, paragraphs make long winded thoughts easier to read.
+1
Ugh--Yeah! Can you also include some pop-ups and pretty colors, TD? I just love pretty colors.
in 2007 and 2008 we had a bout of hyperinflation already. 150 dollar barrel of oil? $5 gas? $5 cappucinos? 550,000 dollars average home in California?
A credit run up=inflationary as there is more fake money sloshing around. People get into debt and kaploww! DEFAULT. Hyperinflation leads to credit expansion which leads to depressionary deflation as defaults rise and "credit" is wiped off the face of the earth.
We have a decrease in money supply, not an increase. The government can't print money, it has to create credit in the form of bonds which is monetized by the FED. Even with their bullshit, they can't make up for the 100 trillion lost in credit and asset value.
Meanwhile, gold can't implode or explode in REAL VALUE. HAving gold go to 100,000 an ounce is a gold bug's wet dream but that's only against a fiat obligation. Look at Japan-they have zero prayer of meeting their obligations but the YEN is strong. Why is that? They will never, ever pay off those debts.
Because all have waltzed up to the cliff of confidence and now the ground is fracturing beneath them. The export cooperation capital repatriation game is stillborn and the next western inspired enlightment on the climate is being rubuked in the east for what it is: (1) a paradigm to manage growth coupled with a high margin traidng business for the western banks. And one wonders why the Chinese and Indianslook askance.
Suppose we use Jim Grant's definition of inflation as too much money and deflation as too much debt.
It looks like we have more debt than money in the US at the moment, and CRE and state governments are bringing us even more debt.
For the time being, deflation is winning. But what happens next year and the year after that?
Amen!
If the money printing were truly inflating right now then gold should be at inflation adjusted highs ~2300. This move has been a head fake like the rest of market trading with the expectation of inflation. I look at the same as you oil housing and even food prices are coming down. Washington makes speeches about getting banks to lend but there is NO VELOCITY. The new cash is not competing for assets... yet.
If all that money were in the system competing for assets then earnings would be stronger, commodities would be at new highs. Indeed, when velocity kicks in you will see this sick amount of money being spent. Until then the banks are only papering-over the insane losses. Cash is still king and it will become painfully obvious with sovereign defaults and unwinding the dollar-carry trade. I expect more deflation in 2010.
+1000000000000000
Agreed. Look at MULT. All their reflationism, all the QE, all of it didn't even get MULT above 1 again. It's all sitting where we know it is (look at RSBKCRNS). Commercial Real Estate still has most of the way to fall. Homeowners have only lost 1$ of the 3$ they can expect to lose. Demand destruction? More like demand DESTROYED. Shipping by boat? By train? By truck? Flat.
Oh, and FAS 140 amendments go into effect in 2010. Banks are looking to have to take on all that off-balance shit. Look at the bond market the last week. They're scrambling to store their cash, all in the short end and they are willing to take a loss to do so.
When it does kick in, the inflation will be glorious to behold. But it is not now, nor is it soon. I see mass deflation. This is the time to stomp your debt flat, and I am doing so. Believe me, when it's time for the inflation to kick in--when we reach that point of inflection--I'm reversing in all ways.
Luckily, PMs are hedges against both outcomes.
Why do you think the DJIA is > 10,000? Real investors?
'Mericans think some of these guys are boring and out-of-touch with modern times, but I posit that their brilliance was achieved in the understanding and protection of their estates from the scheming nature of their fellow man - TJ is ******* timeless:
Homeless? TJ knew that word? History is cool, man. They sound just like us!
And you're way off when talking about gold in relation to current inflation. Question of the day: 'What is inflation?'
It is a mistake to try to use logic as a tool in an illogical situation.
You will never read this but I had to stop to say I think your statement is the key to the whole thing. If we could break out of our need to make sense out of this we would be well ahead of the game.
Gotta love the "paper bugs"...
Personally, I'd like to see gold drop more so I can trade more of my inevitably worthless paper for some more of that "barbarous relic".
Amen, brother.
+1
Please, please go down another $100, I will be ready with the truck! Bash it down another, I'll do it again!
I think for what we are seeing out there (and while I certainly plan for long term gold rise) I think gold is looking ripe to drop right after EOY09, but perhaps not for long. I'm not saying we'll see 700 or anything (don't I hope) but I think if we end the year right at or right around 1200, it will drop soon after.
I'm holding out on any more gold right now until I see how that one works for me.
Til then, I'm all about silver.
The reason for the rise in gold is not fear of inflation or deflation, but rather there not being a currency deemed "safe". I was long gold via GLD until gold was roughly $1,000/oz. Too many people are talking about it, especially you people. The ultimate store of value argument is flawed. There is ultimately not a fundamental way to analyze gold - much like housing was, the price of gold advancing is dependent upon someone buying from you at a higher price. People seem to arrive at the desired conclusion and then make the assumptions to reach them. Gold will ultimately be worth more than it is presently, but it is going to unravel before getting there.
The dollar is a one hit wonder compared to the "perceived" value of gold that has endured 1000 years & why central banks still anchor their balance sheets with it. Hatchet job fail; epic. Where is the hit piece on copper - inventories rising 30 straight days; price a 2.8x cost of production and near term supply constrained against gold at 2.1x marginal cost and long term supply contrained?
Anti gold: Roubini = summers = Geithner = Rubin
Gold: 10 yr CAGR returns 20% vs. S&P? = Einhorn = Paulson
If I am to be inevitably ruined, which seems the only course for the future, I would rather be ruined with gold coin than with paper money.
At least then in 1000 or more years, I can leave a tangible legacy of mankind's folly in this 20th Century.
If nothing else I can at least mash them into a ball for use in a lethal sling or load a modern musket.
I'd choose einhorn over roubini any day inflation= higher gold price deflation= credit default= higher gold price, and I didn't even take 1 economics class.
Gold has had a parabolic move up and is now extremely overbought.
It's chart now has some bearish patterns
AND the DXY rally I forecast has begun.
http://www.zerohedge.com/forum/market-outlook-0
It is NOT "extremely overbought", as the RSI is way down to 43.9 and much of the "extremely overbought" is old data.
I pretty consistently do the polar opposite of what Grand Supercycle suggests in these comment threads and am making a pretty good profit, overall. Just sayin'.
Ignore the village idiot...
OK, "GrandSuperCycle" so you have a US$/DXY rally. Big deal.
The problem with keeping your nose firmly in the day-to-day charts is that you lose your perspective on the big picture, the long-term prospects.
And while the DXY may rally today (and tomorrow, and the week after that), the truth is, the long-term picture is simply, overwhelmingly against the US$, or any other fiat currency for that matter. Re-read what our Dear Grand Leader, Mr Tyler Durden himself wrote above.
That's why I bought gold. That's why I'll keep on buying gold as soon as it gets below US$1,000/oz. Because I am focused on the long term.
Hey, don't pick on Grand Supercycle.
I've been waiting for his dollar rally to come for the whole past 6 months he's been calling for it.
This may end up being the biggest gift that BB has ever given the American citizen. (those who back up the truck to APMEX I mean)
Ehmmnn... are you stuttering or something? It seems that every single thread I read, you sit here swaying back and forth chanting the same three lines.
Maybe I can help you to exit your trance - at least according to my humble perception of things.
There will most certainly be rally in the dollar at some point. This will happen when the carry trade unwinds and even worse when the world starts dumping the US Treasuries for real (in world reserve currency volumes).
The real question to me is, what will happen after that.
If the Treasury wants to prevent interest rates from going through the roof, it will have to buy the treasuries to stem the flood. That means MASSIVE money printing, because noone will buy US debt in that environment - hence hyperinflation.
If those who have sold the Treasuries want to keep their moneys value, they will have to convert their dollars into something else real quick. Other currencies including Gold would be the first stop.
It would be catastrophic, and the first step is a rising dollar and falling long treasuries. (Now?)
If/when the rest of the world gives up on the US policies, I would not be surprised to see central banks using a tumbling US stock market with massive capital flight into Treasuries being used as a great T-bill selling opportunity.
In the latter case I would look out for a rising dollar, flight to treasuries but with flat or falling prices on extreme volume, and after that a hard falling dollar.
Should this play out in full - it will be the end of the world as we know it - for all of us - not just the US citizents.
In that context I find your "I told you so" chanting with your silent diabolic laughter quite ugly to be honest.
Shut the fuck up Grand Supercycle.
The USD is not ready to ramp yet.
You're early. be very, very careful.
I guess Nouriel got the memo from his old business partner Larry Summers.
Not gold but government debt and perceived wealth are the bubbles.
http://fofoa.blogspot.com/2009/12/gold-ultimate-un-bubble.html
What about the confidence bubble , lol
Or the masses of unemployeed with no jobs coming. Period. Now theres a bubble.
How much do we owe in derivatives. Is that a bubble or black hole?
What really SUCKS about gold and silver is only this one thing...
I cant show it off, like my crew cab diesel,paid for. Invite my friends over and show of my silver collection? Sure. Its fine, i chose cremation .
So , no you cant, shouldnt show it off. Friends transform at most inconvenient times . And to do a utube show is just so vain. But it does suck when you cant show it to your friends. Now thats solved by by having Puggles!
Disclaimer.....word "friend" used here implies casual friendships as most americans view it.
Gold, britches.
Barbaric Gold, Bitches!!!
A splendid idea! Oh, how I would love a pair of gold britches.
And a copper hat, silver tunic, and platinum pantaloons.
And a Rhodium foil hat!
I've been selling tungsten ones online - fools I tell ya!
There seems to be a lot of talking down Gold recently. Could it be because Dec 17th is next week and the COMEX will have have to ante up with physical delivery?
He's right on one thing: The whole "you can't eat gold" argument.
Gold: $1100ish an ounce
Spam: about $3/can
I'd hate to pay $1100 for a can of Spam I could have gotten for $3.
Bottom line: If you haven't stocked up your pantry like a Tribulation prepper, plus some lead to protect it, plus some camping gear to deal with austere conditions, and a car you can live in if push comes to shove, you are a fool to buy gold.
I've got everything but the lead, because I'm clueless about guns, being a spoiled suburban girl and all. But I do have a year's worth of vittles can camping gear to protect. Maybe: Is there a "men with guns" dating site? Maybe I should get a dog.
Don't ask me about my gold and silver though: I won't tell you. What gold and silver? (shh)
German shepherds are good solid friends. Very protective and smart. But theres nothing like a shot gun. Just the sound of it scares most off even before you pull the trigger. But to get real about it , this is no time to be stuck to your home unless you are in a secure environment. Surround by seniors in your community is way different from living amongst the working class unemployed.
It will certainly be safer in a small town or isolated farm than in the cities.
yep, pump it once, then click the safety off. even if some thug is high on pcp, he will know that any further movement in your direction will make him go to that place of whaling and nashing of teeth, very fast.......
...there really is no sound more menacing, imho, than the sound of a round being chambered in 1 of my 2 AK-47s with 75 round magazines.
Is that sound really different than a 30 round magazine?
30 * 2.5 = 75.....So mathmatics (a.k.a. Denninger) proves that it must be 2.5 times louder.
I have two German Shepherds and both are great shots with my Mossberg, Bushmaster & Glocks. They are trained to shoot first and bite later.
Better sound, coming from your mouth, authoritatively, just before the clickety-clack:
"You are in my home. I have called the police. I have a loaded ________ (just not BB gun)."
Few individuals realize the freedom of having the intruder flee so that you don't have to shoot, get arrested, harrassed, hire a lawyer (all depending on your state laws) and generally feel sick to your stomach after having taken the life of another human being.
You should explain more about the 'stuck in your home' part - a lot of these over-educated finance peeps have no idea what happens when crack addicts and prescription pill poppers have to stand in line for food after their 'supply' has been interrupted for a few days.
Enroll yourself into an accredited
gun training school, get trained,
and then choose your weapon, something
along the lines of a 9mm semi-auto
Oh, captcha was easy today!
Send Pictures of the food.
Hi - if you happen to have checked back, Google "Mossberg 50359". It is a 410 shotgun (smaller, less kick) designed specifically for home defense and, imo, for the ladies. Has a nice hand grip up front for pumping the shells (and hanging on if you're nervous), and still has that trademark "shotgun" sound that strikes terror into the hearts of bad guys. Take it out into the country with your camping gear and shoot it - lots. Then learn to clean and oil it on YouTube. You will get confidence quickly.
hi-point 9mm semi-auto pistol. $160 small, easy to use, cheap enough to throw away, if you had to. or if things get better, you could sell it later
Easiest gun to use for a small-handed novice: Ladysmith (or other small frame Smith & Wesson) stainless .38 special with Crimson Trace laser sights.
I have one. Bit of a kick for me (I always bleed [tiny] after practice) and it only has 5 rounds.
Glock 19, 9mm is kind to me. 15 rounds.
Ooh baby, let's play House, er, campsite. Gold is singularly useless, until it isn't. Handy stuff at times, though. Camping gear is handy stuff to have around, I love the peace of mind inherent when a power outage or similar doesn't mean I'm cold, wet, or hungry. I'm single too, and of course planning my post-apocalyptic harem, but for now just one sensible girl would be fine. :)
Back when I used to comment very regularly on Roubini's blog, I used to get asked for investment advice. The only stock I ever recommended was Hormel, on the basis that Spam would ensure it would outperform in the recession/depression to come. I've never been a fan of gold, knowing that it deflates as surely as everything else in a deleveraging spiral.
I'm pleased to see that not only has Hormel outperformed for several years now, but Roubini has taken to Spam over gold as well.
London Banker,
May I refer you to latest edition of Roy W. Jastram's The Golden Constant: The English and American Experience 1560-2007 with updated material by Jill LeyLand.
In a nutshell, Jastram quantifies that the value of gold is constant regardless of government intervention, regardless of inflation, and most surprisingly, regardless of deflation. Jastram identifies six periods of gold flux:
1. 1560-1700 Gold and commodity prices rise, diminishing gold's purchasing power.
2. 1701-1792 Gold stable but commodity prices fluctuating above and below gold.
3. 1793-1821 Napoleonic Wars
4. 1822-1914 Gold stable but commodity prices fluctuating above and below gold.
5. 1915-1930 Commodity prices wildly fluctuating; gold also fluctuates, but in a much narrower range.
6. 1931-1976 Soaring gold prices; Commodity price revolution. [Fiat money effect.]
Most surprising, Jastram observed that "operational wealth" of gold appreciated in major deflations.
He noted that gold was ineffective (sometimes backwards) as a year-to-year hedge against commodity price increases.
And he saw that gold maintains it purchasing power over the long periods because inflated and deflated commodity
prices return to gold's price.
As demostration it was noted that in the last 2,000 years there have been five great coins that have held their
value:
The Roman solidus which became the Byzantine nomisma,
the Islamic dinar,
the Venetian ducat,
and finally, the British sovereign.
If it were not for Gresham's law of bad money pushing out good under legal tender laws, these coins could be used in trade today.
So Let's see how the Spam analogy holds:
Hormel was $18.20 in 2000 and now it's approaching $40, not bad 100% gain.
But gold was $300/oz in 2000 and now it's approahing $1,200, even better 400% gain.
We all know that gold is not an investment, it's a protector and I am sticking with physical gold. Since I know you are a "prepper," I know you are holding gold as well.
Happy to see many regular Roubini readers here. It's a small world. :)
We have been undergoing deflation for a year now, but you haven't noticed because although CB's have been spewing fiat, the supply of gold has been decreasing (hoarding) and prices in terms of grams of gold have been decreasing rapidly. You have gold price deflation before your eyes, but refuse to recognize it.
http://anonymousmonetarist.blogspot.com/2009/12/unbearable-brightness-of-doing-nothing.html
Charts are from Nathan at economicedge.blogspot.com
The top is 1929-30The middle is 2008-2009
The bottom is the onset First Great Depression
My recollection is that it was not until 1934 that the term Great Depression was in wide use. Think about that for a moment.
If you click on the link to the right called Rhyming you can read reports from 79 years ago. The similarities smack you right in the face.
Mom asked me the other day if the markets were going to go up or down. I said yes. I'm confident that I am right.
The markets are a riddle, wrapped in a mystery, inside an enigma; but there is a key. That key is the Amerikantura's (copyright applied for) interest.
On the one Hand are the forces of darkness; if you have read past entries on this blog it is clear that empirically, per employment levels, we are in the Second Great Depression.
On the other Hand, there are the dark forces, namely THE HAND ... determined to sawtooth the markets through the midterm elections, liftng asset values with a gentle wind - an upward trend that is the lubrication of debasement.
The 'regulatory put' is a spigot of liquidity that fills the Nancy Capitalists' chalice of confidence.
Intellectually, giving both the deflationista and debasionista camps their due, it seems to me that we are at a stalemate, that we are stuck in a moment.
Graphs supporting this can be seen to the right at Thought Offerings in the posting entitled : 'Deadlock! Total Borrowing Has Stabilized at a Mild Contraction Rate as Private Debt Reduction Stops Increasing and Government Borrowing Stays Steady.'
Do not envy the folks that over the next few years either manage money or will be held accountable for their financial advice.
FWIW,I sold my local phone company in 2000. My current enterprise was predicated in part, on the expectation of a Great Depression.
If, gun to head, had to offer in a nutshell the investment theme for 2010?
It would be The Unbearable Brightness of Doing Nothing.
Opting out, once again.
Hey LB, nice threads and sunglasses.
You still da man.
Mr monetarist you speak well and have me wishing i had gone to college.
Those charts are scary. One has the impression of cresting the first rise of a rollercoaster track.
Nice post.
The expression Depression came from President Hoover.
When asked by a newsman if the American economy had entered a 'slump' Hoover responded that it was not a slump, just a slight 'depression.'
Subsequently the term hit the pages time and again.
By 1934 the term of art had morphed into one of scorn: the nation was in a Great Depression.
///
Before this era all business contractions were referred to as SLUMPS. That tabooed term fell completely out of use in the 30's.
And now you know.
Incorrect.
Did some digging.
James Monroe, for example, during the Panic of 1819, referred to the onslaught of bank failures and a depreciating currency as “the depression.” In 1874, during the Panic of 1873, Ulysses S. Grant expressed his concern over “the depression in the industries and prosperity of our people.” Rutherford B. Hayes similarly remarked during his inaugural address in 1877, that “the depression in all our varied commercial and manufacturing interests throughout the country... still continues.”
In 1934, after Hoover’s tenure in office, Lionel Robbins wrote the book, The Great Depression, which contains what some historians, notably David F. Burg, consider to be the fist usage of the phrase we now use to to describe the economic meltdown on the 1930s.
None the less, if you dig into the contemporaneous media the term depression was NOT used.
Perhaps it's because SLUMP uses less letters.
BTW, Hoover made his comment on film and it was replayed on the screen nationally.
The morphing of slight depression into major depression and then ultimately Great Depression, with caps was noted by M. Friedman many years age.
As my grandfather told me, until it happened in the 30's, he'd never heard the term depression -- and he graduated with William O. Douglas. ( Twelve in the class IIRC )
In 1930 the common man's bug-a-boo was a SLUMP.
Today if you told someone that we were in a terrible slump they'd ask you what the hell you're talking about. Slump as an economic term of art has completely fallen out of use.
BTW, recession was invented as a term of political art to stay away from the word depression.
It was all ever spin, political spin. Politicians came up with these terms -- never an economist.
The markets are not a mystery wrapped in a riddle. They are wrapped in bacon.
No wonder 'Mericans are fat! They can't get enough of the lies!
"in spite of no near-term risk of inflation or of depression"
The Roubini analysis is too narrow. Professional economists, all of whom learned at their mother's knee the great untruths and half truths of this discredited discipline, remain unable to recognise behaviour that is not foretold in the discipline's tomes.
GET THIS STRAIGHT ECONOMISTS: gold has gone up because people want INSURANCE - that is, they think/feel/reason/intuit/fear/ that paper/currencies/shares/bonds/annuities/ savings/pension funds/ etc etc may soon be TOAST because they think/feel/reason/intuit/ fear/ that the economic performance of western economies has been and will continue to be totally shafted by a political/financial elite that are either corrupt, incapable, stupid, paralysed, or any combination of these things.
So now you know professional economists. In a world of trillion dollar/pound/euro debt, monetisation and outright forgery of asset prices and balance sheet valuations, quite a lot of people don't give a monkey's about their measly 0.75 of 1% (after tax) missed-out-on "return". They just cannot think of anything else likely to preserve its worth after the collapse that seems quite inevitable to all but the political officer-classes steering the ship.
+100:
Amen, brother.
(Twice in a row in a ZH discussion: a record for me).
Well said. Roubini is definitely one of these ignorant "professional economists" or "Fed minions" as I like to call them. I would not trust them with my money if my life depended on it. Perhaps the moron Roubini will learn better when the only people with enough capital left to employ anyone are the gold bugs.
Hey! Look! Post-pitchfork economists!
http://biomesblog.typepad.com/photos/uncategorized/tentacle1.jpg
doctor doom doesn't get it. never will either. i knew it all along.....
Back when I used to comment very regularly on Roubini's blog, I used to get asked for investment advice. The only stock I ever recommended was Hormel, on the basis that Spam would ensure it would outperform in the recession/depression to come. I've never been a fan of gold, knowing that it deflates as surely as everything else in a deleveraging spiral.
I'm pleased to see that not only has Hormel outperformed for several years now, but Roubini has taken to Spam over gold as well.