Roubini Blasts "The Barbarous Relic," Recommends Spam Over Gold

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.

Comments

[Anonymous]

That may be so, but he completely miscalled the cause of afore mentioned event.

[uno]

Roubini must want to get back into the CNBS early morning guest rotation.  This is the easiest way.  Watch for him to be on Monday, especially with the WSJ article on Goldman today.  CNBS must be in full damage control mode over that article.

As far as relevance, the US government policy is to devalue to get export jobs, as is most other countries.  Anything physical has to go up.

[Prophet of Wise]

What profiteth a man if he gaineth the whole world and loses his soul?

The Holy Bible: King James Version. 2000. The Revelation of St. John the Divine 18 The Fall of Babylon 1  And after these things I saw another angel come down from heaven, having great power; and the earth was lightened with his glory. 2  And he cried mightily with a strong voice, saying, Babylon the great is fallen, is fallen, Is. 21.9 and is become the habitation of devils, and the hold of every foul spirit, and a cage of every unclean and hateful bird. Is. 13.21 · Jer. 50.39 3  For all nations have drunk of the wine of the wrath of her fornication, Jer. 51.7 and the kings of the earth have committed fornication with her, and the merchants of the earth are waxed rich through the abundance of her delicacies. 4  And I heard another voice from heaven, saying, Come out of her, my people, Is. 48.20 · Jer. 50.8 that ye be not partakers of her sins, and that ye receive not of her plagues. 5  For her sins have reached unto heaven, Jer. 51.9 and God hath remembered her iniquities. 6  Reward her even as she rewarded you, Ps. 137.8 · Jer. 50.29 and double unto her double according to her works: in the cup which she hath filled, fill to her double. 7  How much she hath glorified herself, and lived deliciously, so much torment and sorrow give her: for she saith in her heart, I sit a queen, and am no widow, and shall see no sorrow. 8  Therefore shall her plagues come in one day, Is. 47.8, 9 death, and mourning, and famine; and she shall be utterly burned with fire: for strong is the Lord God who judgeth her. 9  ¶ And the kings of the earth, who have committed fornication and lived deliciously with her, shall bewail her, and lament for her, when they shall see the smoke of her burning, 10  standing afar off for the fear of her torment, saying, Alas, alas, that great city Babylon, that mighty city! for in one hour is thy judgment come. Ezek. 26.16-18 11  ¶ And the merchants of the earth shall weep and mourn over her; for no man buyeth their merchandise any more: 12  the merchandise of gold, and silver, and precious stones, and of pearls, and fine linen, and purple, and silk, and scarlet, and all thyine wood, and all manner vessels of ivory, and all manner vessels of most precious wood, and of brass, and iron, and marble, 13  and cinnamon, and odors, and ointments, and frankincense, and wine, and oil, and fine flour, and wheat, and beasts, and sheep, and horses, and chariots, and slaves, and souls of men. 14  And the fruits that thy soul lusted after are departed from thee, and all things which were dainty and goodly are departed from thee, and thou shalt find them no more at all. 15  The merchants of these things, which were made rich by her, shall stand afar off for the fear of her torment, weeping and wailing, 16  and saying, Alas, alas, that great city, that was clothed in fine linen, and purple, and scarlet, and decked with gold, and precious stones, and pearls! 17  For in one hour so great riches is come to nought. And every shipmaster, and all the company in ships, and sailors, and as many as trade by sea, stood afar off, 18  and cried when they saw the smoke of her burning, saying, What city is like unto this great city! 19  And they cast dust on their heads, and cried, weeping and wailing, saying, Alas, alas, that great city, wherein were made rich all that had ships in the sea by reason of her costliness! for in one hour is she made desolate. Ezek. 27.25-36 20  Rejoice over her, thou heaven, Jer. 51.48 and ye holy apostles and prophets; for God hath avenged you on her. 21  ¶ And a mighty angel took up a stone like a great millstone, and cast it into the sea, saying, Thus with violence shall that great city Babylon be thrown down, Jer. 51.63, 64 and shall be found no more at all. Ezek. 26.21 22  And the voice of harpers, and musicians, and of pipers, and trumpeters, shall be heard no more at all in thee; Ezek. 26.13 and no craftsman, of whatsoever craft he be, shall be found any more in thee; and the sound of a millstone shall be heard no more at all in thee; 23  and the light of a candle shall shine no more at all in thee; and the voice of the bridegroom and of the bride shall be heard no more at all in thee: Jer. 25.10 for thy merchants were the great men of the earth; for by thy sorceries were all nations deceived. 24  And in her was found the blood of prophets, and of saints, and of all that were slain upon the earth. Jer. 51.49

[AngryVoter]

Fuck You, You are the devil in a lamb's clothes.

[Sqworl]

HAHAHAHAHAHA

[delacroix]

and the queen of babylons name,  was FIAT

[jm]

The link below provides a view of currency as a social construct, gold backed or otherwise.  It was a helpful 20 pages for me.

http://cowles.econ.yale.edu/P/cd/d12b/d1253.pdf

[Anonymous]

ya had me till "20 pages"

[Anonymous]

At what store can you pay for gasoline with stock, or Spam, or bullets, or some sort of interest in your house or farm?

Sex maybe, but not these other things.

One reason to own gold is to protect the value of your savings, by making it harder for the paper money bankers to destroy that value by printing more paper money. The more gold is owned by the more people outside the fiat-money cliche, the more endangered that cliche becomes. As they say in Hearts, "Smoke 'em out".

[delacroix]

actually you can ultimately get what you want, with bullets, governments have been doing it, since the invention of the gun.

[order6102]

you can pay with bullets in any store... you should try it. works as charm. AK47 is as good as gold... 

[Anonymous]

Roubini realized there was a real estate bubble right after Suzy Pole the realtor did.( she had to go back to turning tricks and that's when she told Roubini)

[exportbank]

If you don't have the gold in your hand (or your safe) then you'll discover an ugly problem. Good Luck when you try to redeem your "Certificate" (you'll see that gold can also be Fiat and Fractional)

[Anonymous]

Paper gold is for traders who like living dangerously, sans insurance. Good luck with that gold derivative.

[Gordon_Gekko]

All those who think Mr. Roubini is an utter and total moron, please let him know how you you feel. I did.

[Trifecta Man]

Supposedly part of the Roubini argument is:

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.

Using the following source http://www.usdebtclock.org/ I propose that the really bigger bubbles are

1) The US unfunded liabilities of $106.5 trillion.

2) The US national debt of $12.1 trillion.

Now how do these two items get honorably paid off?  Our entire US gross domestic product is $13.4 trillion per year.  If the US government were to confiscate the entire US gross domestic product as payment, it would have to do so for over 9 years in a row.  This unrealistically assumes compounding on existing debt, no change in estimated unfunded liabilities, no change in production or services, no changes in demand, no new debt, and people accepting US dollars which were taxed at 100% of income.

There is no way that can ever be accomplished.  It would amount to slavery to the US government for those not owning the debt and/or not receiving funding from obligations, and production would fall. 

So these bubbles MUST burst thru US government default, reneging on entitlements, and/or the printing press.

Plus we risk US government confiscation of what we already have.  Even the military might balk at supporting that.  They would be doing that against their own families and friends.

I don't believe we have a gold bubble.  We have a dollar bill bubble being used to support a bigger debt bubble and a really big political promises bubble.

[delacroix]

what about the intellectual bubble, being blown, by the ego's of economists. lots of hot air. can't wait for that bubble to pop.

[Argos]

I don't believe that the military will open fire on U.S. citizens, but the National Guard, that's another story.  There's no way to plan for the Mad Max scenerio.  Store some food, sure, good idea.  Shot gun?  A must.  I have to believe that some kind of structured society will exist next year.  And in that structure, gold will be worth more than $.

[Cui Bono]

Roubini is a fuzy little man peach! aka a possible werewolf.

Ben- clearly a werewolf

Tim- Renfield (see Dracula: dead & loving it)

The solution is Gold Britches!   http://www.youtube.com/watch?v=bCwVT7IY2RQ

and silver bullets.......

[Anonymous]

I'm trading gold fut..HIMO gold found a (ST ?) bottom @1115 area...I shorted but now I'm long on that price.

GDX daily 11 Dec
http://www.flickr.com/photos/valeriobr/4179345657/sizes/l/

Spot Gold Mini (10oz) 4hours 11 Dec 09
http://www.flickr.com/photos/valeriobr/4179345655/sizes/o/

[Anonymous]

i've noticed lately that every post regarding gold on zh gets more comment posts then any of the other posts during the day.

for a hunk of junk that is worthless to mr roubini, it sure does get a lot of unusual attention, i wonder what everyone else knows.

[delacroix]

In a rigged casino, you always go for the safest bet, or you have to not play the game anymore

[Anonymous]

Roubini ia a two-legged red herring bought and paid for.

[svendthrift]

Larry Summers was a partner at Roubini's RGE. The same Larry Summers who had been the intellectual fatass behind the gold price manipulation. Roubini is just helping his boy Larry out.

http://online.wsj.com/public/resources/documents/disclosure-LSummers0403...

[Anonymous]

oh these guys dont care about gold...cough,cough bs#$....

"The article 'Gibsons's Paradox and the Gold Standard' by Lawrence Summers, currently chairman of the economic advisory board of President Obama, is another example. In this article Summers explains the connection between low key lending rates and the gold price.

"Paul Volcker, former chairman of the Federal Reserve (1979 to 1983) and currently a member of the economic advisory staff of President Barack Obama, pointed out, 'Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.'

"And James Mofett, CEO of Freeport McMoRan, said, 'The central banks are the OPEC of gold. They will control the price of gold by selling until they change their minds.'"....

[cocoablini]

Gold, in larger denominations, is very liquid. You can take the value of your McMansion in gold in a backpack and head to Switzerland-WHERE they will GLADLY ACCEPT it.

Gold has Real value against other currencies and commodities and assets. It's real purchasing power only degrades when governments handle their finances like grownups. When has that happened lately?

You can measure gold against yen, dollars or whatever but it's real buying power against OIL,silver,copper,wheat, 3 wives,hookers is getting stronger everyday. 

It's fungible as it's meltable-you can pound it as thin as you want-it's not brittle. 

It's just a dumb rock, but it's as real as money is ever going to get. All money is FIAT, even gold. It has perceived value over the ages. All non-metal money is based on LABOR and obligations. So its a ponzi scheme which is ultimately unpayable. Read: Japan. 

[Lndmvr]

As for confiscation, I might believe the govt  would look in deposit boxes and take it, but to come to my house, knock, and say what? The same thing goes for this health care crap. Throw me in jailed cause I cant/won't buy in? Me thinks alot of Gmen will be found in the street.

[Instant Karma]

I like 1oz gold coins and try to find those with potential collector premium going forward. I prefer Canadian Maple leafs as they are .9999 fine as opposed to the 22K US Eagles. I have a few .9999 fine US Buffalo's too. I also have a few platinum coins. I have hundreds of silver Eagles and Maple leafs.

It's about diversification. I have too many US dollars earning nothing in the bank. Stock market worries me. Regardless of what the idiot policy makers in the USA do my precious metal is valuable everywhere. It is a true international currency.

[order6102]

One more interesting argument for gold is unflexible supply. I.e. unlike Oil and Copper, there increasing price of the gold doesn't translate into more supply. Supply of gold stayed constant at about 2500 mt, despite huge swings in price. As alternative example, there are very little $12 oil, but at $90 there are as much oil as we can drink, as oil sands and marine oil become very valuable options.

[Anonymous]

Wasn't it last month that Nouriel said "maybe gold will hit $1100 but that's it.". It hit $1200 about a week later. Roubini was very late to call the housing collapse. For some god awful reason, he gets credit like he's the messiah. By the time he even opened his fat mouth, we already had thousands of people on blogs or message boards calling the collapse of housing and later banking. Roubini has been 100% wrong on everything this year. He was a 1 trick pony.

[order6102]

Spam is good, MRE is even better... But assume you have MRE, Glock and M2. Whats next? Gold...

[laughing_swordfish]

Time for me to weigh in here.

The "gubmint" will get my gold after they overrun my fortified position and pry my belt -feeding hands off my 7.62 -firing MG43.

What looks to them like an ammo box that I'm sitting on actually contains a safe inside which are the two 400 oz. non-tungsten .999 fine 24K bars that constitute  survival value plus assorted trading silver.

The balance will have been scuttled with U-96. Good luck finding it.

KptLt laughing swordfish

9er unterseeboote Flotille

[order6102]

7.62? expensive no?

[Anonymous]

Inedible gold...

We sometimes get so swept into the currents of contemporary thought,
so fixated on the races, the games, and their measurements.

So many arguments about gold.
So many ignore the basic essence of gold.
It is just gold.
An ounce of gold mined in 1300 B.C. is an ounce of gold today.
All arguments about value and utility are secondary to this basic truth.
And, as men connive and scheme to make something else of it,
gold will hold it’s truth.

Long after we are dead and buried, the gold will exist.
Cold, inert, aloof, and continuing.
The pyramids crumble, empires rise and fall, wars rage endlessly,
and gold just sits there and watches it all.
Dynasties rule and then collapse, governments pass as quickly as daylight,
countless seasons change, while gold does not.
Currencies are passing fads to gold.
Although it is the most malleable metal, it will still be gold
no matter the shape it is contrived to.

I think it is this eternal, uncaring, and unapproachable character of gold that
makes many hate it so.
Gold is incapable of returning love or a return on investment.
Gold will outlast any need to prove itself.
Gold has no loyalty except to itself.
We may temporarily hold it, exchange it for profit or loss in
whatever the currency of the day is, but the gold is unchanging,
always looking for it’s next resting place.

In terms of the discussions here today, I would suggest that
while it may not be edible, neither are digital treasuries
or options on other paper assets.

When you consider the exigent circumstances requiring access to
your digital representations of value to be exchanged for food,
I think you will find that all “systems are inoperable”;
pleas for access to your funds will be ignored.

So, please, quit the blah, blah, blah about profit/loss/eating and
decide if you want to grab a piece of something that is probably as
close to immortal that you will ever see, and try to pass it on to your children.

What if your great-grandfather had done this for your family?
Would you still have it, or would it have long since been exchanged
for something of ‘greater value’?

[Anonymous]

you've really posted no counterarguments. truth is, the fed is supporting banks with huge cash infusions. that money does NOT go to lending to fuel inflation, it simply helps pretend insolvency is not here. inflation will begin to take hold only after the fed injects additional money that can be circulated in the economy.
everyone is waiting for the marginal buyer at those high price levels in stocks, bonds, houses, commodities. no one is coming everything is way overpriced to anyone who has not partaken in tha last credit bubble. everyone who has partaken is with a severe headache and still underwater.
expect a few years of seesaw market movement while people build up cash reserves so they can buy on leverage again, but this time with some skin in the game.

[Anonymous]

Would Rubeini(sic) still chime the same tune if he had bought gold when it was $250?

Which brings up the obvious. Why DIDN'T Rubeini buy at $250 if he's so damn smart?

Is he stupid?

Me thinks he's a one-trick pony. He got it right once now he thinks we should think he'll get everything right.

I think he's just dumb-lucky.

[ft65]

Roubini has now obviously been bought by "the powers that be" He is now spinning the political lies, perpetuated by corrupt politicians, spread by MSM for their big corporations masters / owners.

He is so right, and so wrong. Gold has always been useless, other than a decoration, and convenient instrument of barter. Why should that change?

When all countries sell off their gold, (and the "expensive" vaults) I may start to listen to him again. Meanwhile individuals can store their gold by burying it in the back garden, at no cost!

Why else do governments keep this expensive, useless, relic from the past?

The rabbit hole just gets deeper and deeper. I hate these bastards who are playing with us.

[Anonymous]

My opinion is that gold will do fine both in case of inflation and in case of deflation (even I think that what happened is disinflation). And if you ask me why here is the answer:

a. In case of inflation or even hyper-inflation gold will be hedge until the fed put the situation in control;

b. In case of deflation the fed will flood the economy with more dollars and the case a will occur, but with delay.

The only scenario for gold to fall is if there is nor inflation or deflation, if I want to say it with manners of Roubini with probability of 30 percent.

Andrej

[Anonymous]

Tyler, I don't understand how such a well reasoned article can provoke this level of repugnance in the comments section. Professor Roubini may be wrong about the future of gold, but he is anything but a moron or loser.

What is the purpose of a blog if not to stimulate reasoned discussion which may lead to reasonable action. Please give Marla a free hand.

MarcoPolo

[Anonymous]

reading the overwhelming support for gold here makes me smile as my gold shorts is making my best investment year ever, even better. buy gold buy gold bye bye gold :)

[Anonymous]

So your short something of limited supply to total financial assets worldwide...smart?

Everyday the radio,tv, magazines, etc promote financial assets 24 hrs/day 7 days per week but the 2 commercials to buy gold is a top?

GFY...

All the gold ever produced will fit into a 20 meter cube.

Also gold has limited supply. World annual production is around 2,500 tons and declining. This means that only $80 billion of new gold is produced every year which is miniscule in today’s financial markets. There is only about $800 billion of investment gold held privately currently. This is only 0.5% of world financial assets. Central banks worldwide are now net buyers with China and Russia buying whatever they can lay their hands on without pushing the price up too fast.

[Anonymous]

"my gold shorts is making my best investment year ever"...
are you one of those guys they let take bonuses on positions you get to mark yourself? GFY

[CB]

and this is from the guy who has plaster vaginas installed on his walls

http://nymag.com/daily/intel/2009/03/nouriel_roubinis_wall_vaginas.html

[Anonymous]

maybe he's spiderman?

[Brett in Manhattan]

I hear these gold commercials on the radio which claim that gold will shortly be going to $2000. What I can't figure out is why the guy is so anxious to sell me his at $1200.

[Anonymous]

i HEAR THESE MONEY MANAGERS ON CNBS AND BLOOMBERG THAT WANT ME TO BUY STOCKS AND GOVT DEBT...AND TO KEEP ADDING TO MY 401K SO THAT THEY HAVE MORE MONEY TO KEEP UP THEIR BUYING AND TO SKIM OFF A % FOR THEMSELVES...WHAT I CANT FIGURE OUT IS WHY PEOPLE KEEP SENDING THEM $

[Anonymous]

Read this before you follow Rubeini

Martin Hutchinson, business and economics editor for United Press International and regular contributor to PrudentBear.com, writes in his new commentary there, headlined "Sliding Back Towards a Gold Standard," that the Federal Reserve could regulate the dollar's value by buying and selling gold.

Hutchinson might have added that currency intervention also could be accomplished by leasing gold or by buying and selling gold futures, options, and gold derivatives.

Hutchinson's commentary is encouraging for acknowledging gold's centrality to currency intervention, and discouraging for failing to acknowledge that for years gold has been used largely surreptitiously by Western central banks for this purpose and indeed is being used for this purpose even now. But maybe he's just not yet aware of a few things -- like, for starters, the Fed's recent admission to GATA that it has gold swap agreements with foreign banks and that these agreements must be kept secret:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

Maybe Hutchinson could address this secrecy in his next revelatory essay.

You can find Hutchinson's new commentary at PrudentBear.com here:

http://www.prudentbear.com/index.php/thebearslairview?art_id=10318

[Anonymous]

Right. What does Roubini know? He only called the recession, and unlike a lot of other perma-bears, called the end of it, too.

Where was Tyler Durden during all this? Not calling the recession. Since the recession started, if you've put your investment dollars where his mouth is, you've lost a hell of a lot of money.

But, let's go with the frat boy who doesn't even have the sack to identify himself, over the economist who puts his name behind his predictions, and has a track record of being right. Nice call, worker drones.

Oh, and for all you clowns waiting to jump on me for posting anonymously, I used to login to post, until ZH started censoring me for having a dissenting opinion.

[Anonymous]

Do you mean the end of the "bankers" recession or the nations recession?

Average pay this recessionary year for the 30,000 staff is expected to be a record $700,000

http://tinyurl.com/yfh2d3f

Ilene: Do you think the recession is over?
Mr. Solomon: No, we will be in it for a number of years. Assuming the GDP is up in the short term, it doesn’t matter. It’s due to more debt expansion. The real world debt must eventually decline. It’s a government induced blimp that cannot go on, it’s not sustainable.
http://tinyurl.com/y87ov65

Food Stamp Use Soars
http://tinyurl.com/ygy5mye

And is it the monetization of the market or actual economic activity?

Volcker: ... We had a quarter of increased growth but I don't think we are out of the woods.

SPIEGEL: You expect a backlash?

Volcker: The recovery is quite slow and I expect it to continue to be pretty slow and restrained for a variety of reasons and the possibility of a relapse can't be entirely discounted. I'm not predicting it but I think we have to be careful.
olcker: ... We have not yet achieved self-reinforcing recovery. We are heavily dependent upon government support so far. We are on a government support system, both in the financial markets and in the economy.
http://tinyurl.com/ydunqsp

[Anonymous]

I think you are all wrong.

Gold started rising since the Chinese opened the gold market to their folks. And it increased its speed when the Yuan started to increase in value.

No one needed Gold. Except for the Chinese: their government punishes everyone putting money into a bank because of their negative real interest rate policy.

I wonder how many barrels of oil or gasoline the Chinese folks have stored in their backyards because of that...

[Anonymous]

i guess the central bankers bought roubini also.....

buy gold
take your cash out of the big banks
stop spending money

[Anonymous]

Roubini:

Please show us the freakin' trade you have backing this up ... instead of your perpetual self promotion ... short the metal .... 50% of your net worth .. the futures market will settle up in 5 years ....

[Anonymous]

Roubini fails to understand that:

a)You can't counterfeit gold

B)While US dollars on the otherhand:
"But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost." Helicopter Ben Bernanke

[Trifecta Man]

Someone (or government) made those tungsten bars with the gold paint that were sent to Hong Kong.  Counterfeit gold.

[Anonymous]

Haha, the gold bugs on this website are going to be so crushed during H1 next year, their crying will not even be funny...

[Anonymous]

Russia c.bank to buy Gokhran gold next week –source

MOSCOW, Dec 11 (Reuters) – Russia’s state repository will sell 30 tonnes of gold worth $1 billion to the central bank next week, a source at the body said on Friday, keeping the metal inside Russia after rethinking a plan to sell it on the market. Central banks worldwide are building up their gold reserves as the metal trades near record highs. Gokhran, the Russian repository, cancelled plans to sell the gold on the open market after information about the sale leaked.

"The primary aim is to make sure this gold doesn’t hit the market and influence prices," said Olga Okuneva, metals and mining analyst at Deutsche Bank in Moscow. "It’s also a way for the Russian central bank to diversify more into gold."

http://tinyurl.com/y8t35vl

[Anonymous]

I don't see gold being a bubble. There is simply not enough people buying gold period. If it's a bubble, it's a very small one, and gold is real money. Roubini insists that the carry trade is involved in the "gold bubble." I don't get what he is talking about. Nothing suggests that people aren't buying gold with upfront cash. Of course Roubini, being a Keynesian thinks inflation is just a rise in prices, and that equals wealth. Well is commodities are rising in prices like Gold, isn't that a clue of inflation? Falling dollar is not a result of inflation? He also talks about the monetary policy reversing when a healthier economy. He actually believes Keynesianism will fix the economy. Well if you look at the portfolios of the bankers, they are still atrocious. The guy obviously hates gold like many who worship paper money.

[Anonymous]

Richard Russel snippet December 14,2009

http://www.321gold.com/editorials/russell/russell121409.html

[Anonymous]

Gold is money. If and when the s*** hits the fan, those with commodity currency will have an absolute advantage in any transaction over those who do not. Roubini = Wrong-dini.

[TumblingDice]

If the argument is whether gold is the ultimate money, and Roubini is actually trying to refute this fact, then Roubini is an idiot.

The question to ask to further this premise is whether money is the best investment at anytime. The distinction I would like to present is that money is only used to trade, to turn timing and liquidity for profit. Investments are made with a different goal in mind, to present capital that bring a steady flow utility. An investment is always done with a longer timeframe in mind, because it is reliant on taking advantage of the flow of utility, which when made liquid is called cashflow. The choice comes down to whether you want to trade the market or make an investment. The policymakers, both private and public would prefer you trade the market instead of making an investment to help blow the bubble, because they want a larger share of the investments. They want to provide a service that people rely on.

This is why, when even when trading, I would focus on the assets that can at least serve as a foundation for investments...higher intrinsic value rather than lower: oil, land and copper. And if you had to make the ultimate extrinsic hedge, I would agree with Tyler and make it lead.

[Anonymous]

Roubini is a Keynesian. He is brilliant at times and he has had a good run the last couple of years. But the fact remains that he is Keynesian. He is not Austrian, nor does he understand or want to understand the economy like Adam Smith or Frederic Bastiat. He understands it as he has been taught to understand it, either as a Keynesian or Friedmanite.

He is also brilliant at leveraging his view points with rethoric. Hence why he has such a great following and why he is a stimulating read or why we listen when he speaks. If for a moment we forget that he is a Keynesian, then we may go astray and find ourselves destitute after the socialists have walked away with our purse and us thanking them for helping themselves to our capital. He is not alone, most journalists have this trait because they are trained in the socialist ideals, they understand rethoric and they are trained in using it. They have no training in Economics, they understand little of how the economy works according to the Austrian school and they have very little exposure to ideas that give critique to the Keynesian and ultimately socialists ideas or those that totally steam roll and extinguishes the socialists with much better rethoric and common sense thinking (Frederic Bastiat).

Austrian Banker

[Anonymous]

My God. Did I really lose my time with this page, written by the lunatic fringe of the trading world, completely untainted by the most basic knowledge of economics and monetary policy?

[Anonymous]

Roubini is hoping to get a job with the NWO. However, gold & silver is real money to them but they don't want the masses to catch on.

[Anonymous]

Americans will be over-joyed when all their fiat US$ comes back to them in a tsunami. Then they will have true wealth and Roubini will be on CNBC to explain the good aspects of their new found wealth.

[Anonymous]

Even professors can lack supposedly common sense. At one time almost all thought the Earth was flat and today evidently some still do.

[Anonymous]

Hey Roubini is just doing his job as the federal reserve as defined it. They needed a doctor doom to provide plausible deniability during the 'good times' (of massive casino gambling with easy money) that the collapse nobody BUT dr doom saw coming and then Roubini has to earn his 'keep' with the fed by bashing gold. Its all part and parcel for economists on the federal reserve dole. Any other economist who doesn't tow the line for the federal reserve (as they designed their 'economic punditry model') has to work at walmart.

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