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The WSJ's Hit Piece On Gold

Tyler Durden's picture




 

The WSJ issues an amusing hit piece on why gold is nothing but a "Ponzi Scheme", ignoring the fact that by its definition the stock market is precisely the very same. Either way, since we are seeing no let up in the currency debasement department of Central Banks, and gold continuing to trade near record highs, it is a good thing to occasionally have a shake out of the weak hands. After all it will merely provide far better entry prices for countries like Russia, which as we disclosed recently, have been buying up all the IMF has to sell in the open market. At the end of the day - the opinion of Brett Arends or of David Einhorn, David Rosenberg, Jim Rickards, Eric Sprott, and, oh yeah, John Paulson.

Some philosophical snippets from the WSJ hit piece. No commentary necessary:

At some levels, gold, as an investment, is absolutely ridiculous.

Warren Buffett put it well. "Gold gets dug out of the ground in Africa, or someplace," he said. "Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

And that's not the half of it.

Gold is volatile. It's hard to value. It generates no income.

Yes, it's a "hard asset," but so are lots of other things—like land, bags of rice, even bottled water.

It's a currency "substitute," but it's useless. In prison, at least, they use cigarettes: If all else fails, they can smoke them. Imagine a bunch of health nuts in a nonsmoking "facility" still trying to settle their debts with cigarettes. That's gold. It doesn't make sense.

Some cherrypicking of facts:

As for being a "store of value," anyone who bought gold in the late 1970s and held on lost nearly all their purchasing power over the next 20 years.

Why gold is a ponzi:

Most of the new supply has come from mine production. Some, though a dwindling amount, has come from central banks. And a growing amount has come from recycling—old jewelry and the like being melted down for scrap. (This is a perennial issue with gold. I never understand why the fans think gold's incredible durability—it doesn't waste or corrode—is bullish for the market. It's bearish.) So if supply has consistently exceeded user demand, how come the price of gold has still been rising?

In a word, hoarding.

Gold investors, or hoarders, have made up all the difference. They are the only reason total "demand" has exceeded supply.

Lots of people have been buying gold in the hope it would rise. But the only way it can rise is if still more people buy it, hoping it will rise still further. And so on.

What do we call an investment scheme where current members' returns depend entirely on new money brought in by new members?

A Ponzi scheme.

We now realize we had it all wrong - it is not Keynesianism that is the biggest ponzi, it is gold, whose price suppression practices by JPMorgan and the LBMA cabal is now the target of a DOJ inquiry... Oh oops, the WSJ forgot to mention that part.

The WSJ's "powerful" conclusion

Yes, as I wrote earlier, gold may well be the next big bubble. And that may mean there is big money to be made in speculation.

But I don't trust it as an investment.

Something tells us that John Paulson, who has 30% of his fund now tied into gold, will read this article and rush to sell, sell, sell. Or not.

 

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Thu, 06/03/2010 - 10:16 | 391594 EscapeKey
EscapeKey's picture

In other words - our friends in the finance industry can't milk you for what you're worth, if you invest in precious metals. So just don't do it, ok?

 

Thu, 06/03/2010 - 10:25 | 391626 SWRichmond
SWRichmond's picture

You are too kind; what they're really saying is: "...when you buy physical gold you place your net worth where it can't be stolen by the government or by the Wall Street market pump and dumpers or by the central bank.  If you do that, we will call you stupid!  So there!  Only stupid heads buy gold!  Please keep your money in our fraduluent system, where we can profit from it!"

Thu, 06/03/2010 - 10:27 | 391630 Hephasteus
Hephasteus's picture

We should all have one purse. Jesus can't save if he's in prison for breaking and entering.

Thu, 06/03/2010 - 11:21 | 391835 Dkizzle49855
Dkizzle49855's picture

+1

Thu, 06/03/2010 - 11:44 | 391920 American Sucker
American Sucker's picture

They can steal it. They've done it before.

Thu, 06/03/2010 - 14:59 | 392443 faustian bargain
faustian bargain's picture

And the peasants can put heads on pikes, they've done that before too.

Thu, 06/03/2010 - 12:23 | 392012 WaterWings
WaterWings's picture

stupid heads!

A Ponzi scheme = GLD

Let's see if he even mentions it in following pieces. This is so hilarious that people will actually believe it.

How can you square this golden circle? I'll tell you in Part Three.

I can't wait!

Thu, 06/03/2010 - 11:57 | 391953 NoLongerABagHolder
NoLongerABagHolder's picture

Gold is worthless as far as wanting to eat or smoke it as the article says. It is only a unit of trade.

When you think about it - the green crap in your wallet is the same thing.

As a unit of trade...... I'll take gold over the green crap. That gold will buy me more cigarettes and food than the green toilet paper in my wallet.

That's why you own gold.

Thu, 06/03/2010 - 16:57 | 392531 akak
akak's picture

I cannot eat the Wall Street Journal, nor can I use it as construction material, or as fertilizer (no matter how much it's content might resemble a certain dark brown kind of the latter), or as a submarine,  so therefore I declare it worthless.

Thu, 06/03/2010 - 14:20 | 392352 Apocalypse Now
Apocalypse Now's picture

Excellent, the finance industry depends on paper and over the last ten years the market and investors/pension fund wealth is lower while firms like Goldman Sachs have been skimming billions from the pool of funds.  It's a zero sum game so it's in their pockets.

Perhaps they shouldn't use a quote from Warren Buffet since he is duplicitous.  In addition to him stating that derivatives are weapons of mass destruction while he made ridiculous derivative bets that didn't involve hedging for his business, he has previously bought roughly $1 billion in silver that had nothing to do with his business.  Warren Buffet turned out to be the mystery buyer for massive silver purchases, and they were for investment purposes when he felt the price was right.  Whatever you could say about gold being dug up and put into a vault can equally be said about silver or any other precious metal. 

Soros recently said gold would be in a bubble while his fund doubled its gold position.  While the media tried to distort the message by their propaganda headline of Soros believes gold is in a bubble, the reality was that you want to invest in asset classes before they become bubbles.  However, because precious metals undermines the banking cartel they actively manipulate prices while hot money flows push up all other asset classes - precious metals may be the only discounted asset class available in a ZIRP environment where we have to be concerned about counter party risk. 

I see the scenario as game theory or the prisoner's dilemma.  If nobody panics, on paper we could all be "wealthy", all the capital would be long stocks, and the whole "wealth/market cap" would be more than the sum of its parts in pixel land or on paper.  If people are more hopeful about the future, prices should increase, if there is low or no growth perceived then prices should decrease.  This ponzi only works with smooth demographics.  When people decide to leave paper then those that panic first win (when the paper financial product prices are highest).  When/if paper collapses it is important to secure hard assets since a crisis of confidence undermines trust and collapses paper promises. 

BB is not diagnosing this correctly, it is a crisis of confidence that is destroying the system (no equation for that)- we need perp walks, enforcement of laws that protect investors, and structural changes to ensure fairness.  Without these actions to restore trust, the game is truly over as we all rush into gold (also not in his models).  We are the frog and they are the scorpion as we try to swim through this downturn.  Although they think they can just keep stealing it will just be battle bots fighting over their liquidity rebates.  If they feel the system slipping from their grip they just might institute a police state to maintain their control of the system.

Thu, 06/03/2010 - 10:16 | 391595 mikjall
mikjall's picture

When will people quit calling anything they don't like a "Ponzi scheme"? It's just a sign of thoughtlessness and stupidity. So is using "going forward" in every third sentence.

Thu, 06/03/2010 - 10:20 | 391607 43 Steelie
43 Steelie's picture

Agreed.

But there is no way you can refute the fact that social security is inherently the biggest ponzi scheme in the world. By definition that is what it is supposed to be.

Thu, 06/03/2010 - 10:48 | 391706 mikjall
mikjall's picture

I don't know what work "inherently" is supposed to do in your statement, but anyway, I do deny that Social Security is a Ponzi scheme. It's a fraudulent pay-as-you go pension program. It's fraudulent because taxpayers are led to believe that social security taxes are used exclusively to support pension payments for themselves and for others, which is not the case. Not every fraudulent scheme is a Ponzi scheme. Not every pay-as-you go scheme is a Ponzi scheme. A Ponzi scheme is a certain kind (only one) of fraudulent investment scheme, where it is falsely claimed that returns to investors come from assets owned by the scheme yield interest, dividends and/or capital gains. If you use "Ponzi shcheme" to mean whatever you like, it ceases to have any useful meaning at all. Ditto for "Socialism", "Fascism", the "free market", and so on. I recommend that we all try to talk clearly and to talk sense, insofar as we are able. Orwell explained this very well to all of us, and we had better listen.

Thu, 06/03/2010 - 11:09 | 391789 lookma
lookma's picture

A Ponzi scheme is a certain kind (only one) of fraudulent investment scheme, where it is falsely claimed that returns to investors come from assets owned by the scheme yield interest, dividends and/or capital gains.

Good thing SS isn't a lockbox full of G debt.

Thu, 06/03/2010 - 12:57 | 392106 robobbob
robobbob's picture

Yes overuse can lead to diminishment, however if the handcuffs fit.

Then what is your definition of a Ponzi? In essence, I always thought it was collecting dollars today by promising a larger future payout then the total take in, without providing REALISTIC means of growth,

where as SS collects and spends todays dollars by promising to make larger payouts in future inflated dollars collected from a diminishing labor force with sub-inflation wage growth?

Of course when Ponzi schemers run out of rope they make a dash to extradition free banana republics, where Dot Gov puts a gun to the peoples' heads and demands PAY MORE.

oh yes, I do see how that is different.

Thu, 06/03/2010 - 10:36 | 391663 whydtinogo
whydtinogo's picture

Agreed - while gold has no stream of cash flow and can only be "valued" by what somebody is willing to pay for it doesnt make it a ponzi scheme.

Thu, 06/03/2010 - 11:11 | 391792 Spitzer
Spitzer's picture

bullshit

as FOFOA says, you can lend out your gold at interest

Thu, 06/03/2010 - 12:31 | 392032 Clayton Bigsby
Clayton Bigsby's picture

what's FOFOA?

Thu, 06/03/2010 - 13:56 | 392290 WilliamC
WilliamC's picture

A financial blog.

http://fofoa.blogspot.com/

Thu, 06/03/2010 - 14:15 | 392292 WaterWings
WaterWings's picture

Also, The Golden Jackass!!!

http://www.goldenjackass.com/main5.html

Thu, 06/03/2010 - 11:48 | 391932 mikjall
mikjall's picture

Right. Thank you. And it's rather strange that Buffett - of all people - doesn't see (or pretends not to see) that the principal value of gold, and the way in which we value it, lies in the fact that it can be exchanged for goods, edible or inedible. Its value consists in what, and how much, people are willing to trade for it. In the light of the astoundingly successful exchange-value record of gold over several thousand years, I wonder why this endless debate goes on. If someone doesn't believe in gold, they should simply not buy it. Fine. Buy why maintain this debate which we know, as a matter of experience, convinces no one?

Thu, 06/03/2010 - 13:09 | 392129 GoldBricker
GoldBricker's picture

As Dogbert once said: "Do not pay too much attention to the advice of rich people. They do not desire company."

Thu, 06/03/2010 - 15:47 | 392555 akak
akak's picture

With the pro-establishment gold haters, it is NOT a debate over gold --- as you say, 5000 years of history have conclusively declared that debate won by the gold camp.  This is actually a battle over propaganda, with the political-financial establishment fighting to maintain their control over their corrupt and failing fiat paper regime.  Any resemblance between their duplicitous anti-gold propaganda, misinformation and self-serving lies, and true and honest debate, is just a facade and a ruse to lull and confuse the masses of financially and historically ignorant rubes.

Thu, 06/03/2010 - 16:09 | 392608 nuinut
nuinut's picture

At the root of everything people don't like, and having been shouting "ponzi scheme", is the basis of the fiat money system: the endless issuing of debt.

And it meets all the definitions of ponzi scheme, mikjall.

So it is quite right that people should be acknowledging this. The worlds biggest grifter, and his shills are now pulling out all the stops to avoid this exposure. For example.

Best explanation of how this ponzi will collapse that I have read is here: "It's the Debt, Stupid"

Pay particular attention to the diagrams in the second half, extra helpful for the more visual learners amongst us, like myself.

Thu, 06/03/2010 - 10:17 | 391598 AimlowJoe
AimlowJoe's picture

I got some. And I've got some rice and water and cigarettes. So I'm all good.

Aimlow Joe was here.

http://www.aimlow.com

Thu, 06/03/2010 - 10:17 | 391599 docj
docj's picture

WSJ == Equities uber alles

Thu, 06/03/2010 - 10:18 | 391602 bada boom
bada boom's picture

Hey WSJ,

First take the plank out of your own eye, and then you will see clearly to remove the speck from your brother's eye.

Thu, 06/03/2010 - 10:18 | 391604 The Rogue Trader
The Rogue Trader's picture

You can't eat Fiat either....Fucktard WSJ

Thu, 06/03/2010 - 11:17 | 391819 Pure Evil
Pure Evil's picture

Sure you can. Didn't you see that woman in the Subway commercial eating that 5 dollar bill.

Just make sure you wash the bills first, FRN's are infested with germs, viruses, drugs (especially cocain), and human filth (I'll be you didn't know a large percentage of the human population refuses to wash their hands after visiting the commodus.)

Thu, 06/03/2010 - 14:12 | 392334 Big Red
Big Red's picture

I was waiting for my wife, so I could see the foot traffic, and when she came out of the restroom at the fast-food place we had to eat in that day, she said that whomever had been in there didn't even stop and wash their hands - I told her it was a nurse. I also noted the hospital...

Thu, 06/03/2010 - 12:32 | 392038 Clayton Bigsby
Clayton Bigsby's picture

Fucktard is awesome...

Thu, 06/03/2010 - 10:26 | 391606 Crab Cake
Crab Cake's picture


http://www.sec.gov/answers/ponzi.htm What is a Ponzi scheme?

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

Why do Ponzi schemes collapse?

With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

Gold is not an investment, nor is it a good medium of trade, it is a means by which to store wealth.  Ponzi scheme....meh, what idiots.   If one is going to call gold a Ponzi Scheme, then what does one call the stock market because it fits the above description better than gold? 

Thu, 06/03/2010 - 10:21 | 391612 Postal
Postal's picture

And Murdoch wants to charge for this crap?

Thu, 06/03/2010 - 10:21 | 391613 Turd Ferguson
Turd Ferguson's picture

Let's see:

1) Have WSJ run hit piece on gold the day before the "big" jobs report

2) Issue some insane, census and b/d model-adjusted jobs number

3) Try to scare out weak longs and give cover for JPM and GS to establish new shorts

4) Crash gold market back well below 1200

5) Create impression "seasonality" has kicked in so that more selling ensues

6) Ultimately drive gold back down toward 1100 to buy more time for paper assets

 

This is their plan. Will it work? 

Thu, 06/03/2010 - 10:33 | 391655 tmosley
tmosley's picture

I hope so.  I'm coming into some money in July and want to buy, buy, buy!

Thu, 06/03/2010 - 12:30 | 392030 DoChenRollingBearing
DoChenRollingBearing's picture

I'm in your boat tmosley.  As income arrives, part of it goes to gold.  I had thought that I had enough, but, no I do not.

Buy!  Yes I will.  Besides, having bought gold for decades (small purchases) from $400 and up, my average cost basis is not too high.

Thu, 06/03/2010 - 10:45 | 391696 bada boom
bada boom's picture

Maybe they can replay the tungsten rumor as well.

Thu, 06/03/2010 - 10:21 | 391614 lsbumblebee
lsbumblebee's picture

Harvey Organ is reporting that the Comex is busted:

"The big drop in OI in June was due to the massive standing of longs for physical gold:

1. the Friday OI of 13,000 contracts or 1.3 million

2. the exercise of options by gold holders. They were not fooled by the lowering of the gold price by the cartel banks...and then the subsequent loss of 24000 OI gold contracts due to the fact that these guys stood for and received their delivery slips. Only the almighty will know if these delivery slips have real gold in them or they are just a piece of paper with no gold behind them.

Thus so far, 18,230 contracts of gold have been served upon. If this is not a typo then this is a massive amount and my bet is that this will surely bust the comex."

http://harveyorgan.blogspot.com/

 

Thu, 06/03/2010 - 11:05 | 391774 jesusfreakinco
jesusfreakinco's picture

Good find.  Thanks for the link.

Thu, 06/03/2010 - 10:22 | 391615 morph
morph's picture

Gold is just a traditionalist investment though. Why is gold so valuable, why not something else? There are rarer and more useful things on the planet.

 

Thu, 06/03/2010 - 10:40 | 391671 tmosley
tmosley's picture

Useful for what?  Trade?  Or industry?

Gold is the most useful material for facilitating trade because it is durable, easily divisible, each unit is exactly the same, rare, and has a steady supply.  The closest anything else comes to that is either platinum or silver, and both of those lack the steady supply, being used in industry, and silver is not as durable as gold (ie it oxidizes).

You use gold for savings.  You can certainly invest in other things and get a better return over some time period, but gold is so undervalued right now since it is not used as money.  If you buy it now, and it returns to its role as money, your purchasing power will explode.  It's as simple as that.

Thu, 06/03/2010 - 11:25 | 391851 Mako
Mako's picture

"your purchasing power will explode"

Haha, once the credit system goes poof, production of virtually all items is going to go poof. 

Those gold mines will be shutdown.

Thu, 06/03/2010 - 13:13 | 392148 tmosley
tmosley's picture

Why would I care about gold mines?  I already have gold.

Industrial bases don't turn into vapor when credit disappears, they simply go down in price, especially in terms of gold.  The owners of gold will be the ones who preserve civilization as faith in paper disappears.  But don't worry, even fatalists such as yourself will still be able to get a job working for the (new) man.  You wages will probably amount to something like an ounce of gold a month, if you're skilled.  Otherwise, it may be an ounce every two months, or every three.

Thu, 06/03/2010 - 13:43 | 392244 dumpster
dumpster's picture

mako your constant storm of balony ,,

in the face of what is happening in the  world makes

your forehead glow with B.S

why are European nations now planning a gold backed currency... why is Russia, china,

why does Richard Russell dean of the stock market for 50 years ,, recommend gold ,, out of stocks

it gets so frantic your complete lack of comprehensive understanding of economics ,

savings is the root of growth , productive activity,

sure some credit is necessary to grease the wheels of a productive society ,,

but this debt and credit has to be sustainable ,, and paid for out of the current future  cash flow of sustainable enterprise

Microsoft built a billion dollar company sans credit ;

out of control credit and living beyond the ability of current production to pay for credit , is the Keynesian wet dream a failed system '

get up to date ,.. go read and get some understanding .. Austrian text books,,,

until then your foaming at the mouth and pure disillusioned thinking makes mises roll over in his grave ,, and hayek's road to serfdom a self fulfilling action in your deluded and self proclaimed ignorance of things economic

Thu, 06/03/2010 - 15:03 | 392449 fiddler_on_the_roof
fiddler_on_the_roof's picture

But most who bought PC, used credit to buy , credit provided their employers VC funding, expansions etc...Mako has  logic, it is just that I don't think the world will end. Before that we have to get One World Currency. so Mako has to wait.

Thu, 06/03/2010 - 10:41 | 391675 Anton LaVey
Anton LaVey's picture

True, but Gold is beautiful, rare, and it can be fashioned into jewelry that last a long time.

And this has been the case for a very, very, long time... See here, for instance :

http://www.britishmuseum.org/explore/highlights/highlight_objects/pe_prb...

And, so, Gold has represented incorruptible wealth for a long time, contrary to "rarer and more useful things". This being said, feel free to invest in Rhodium, for instance, I heard the returns were good.

Thu, 06/03/2010 - 12:28 | 392022 Sabremesh
Sabremesh's picture

Gold is "useful" as a store of value - if it were used for other purposes, it wouldn't meet the criteria of an effective store of value, would it? 

Thu, 06/03/2010 - 14:00 | 392303 dumpster
dumpster's picture

 rarer and more useful things

your brain  not being one of them

 

what a  braindead misunderstanding of the role that gold plays,, in the financial area of international trade

where do these ideas spring from ,,, 30 years of intense watching the latest TV sitcom

The next three big big shoes are about to hit the floor. The bang will reverberate around the world. The Spanish, Portuguese, and Italian banks will next go belly up and quickly, as they sink with PIGS debt and other credit assets tied to fallen property. Spain will make the most shrill sounds, for a simple reason. They were the worst offender in holding onto mindless unreasonable lofty property values. Their bank books have the biggest drop to realize, after re-entry to reality. The crises underway in the remainder of PIGS nations will continue unabated, and usher in magnificent events where a legitimate gold-backed currency arrives, urgently needed to provide stability.

willie

  

 

 

Thu, 06/03/2010 - 15:31 | 392516 sumo
sumo's picture

Gold is essential to the electronics industry, to give one example, because of Gold's physical properties: its resistance to oxidation and its high electrical conductivity. You'll find gold plating on connector and relay contacts, gold bonding wires inside ICs, etc etc. Just about every electronics device in your home and office will have some gold in it.

When the price of Gold skyrockets, it becomes profitable to scavenge the gold from old circuit boards for recycling.

If you're a electronics design engineer, the "barbarous relic" is an essential material for component and product design.

Thu, 06/03/2010 - 10:23 | 391619 Al Huxley
Al Huxley's picture

This kills me.  The quality of propaganda is really degenerating lately, although this is consistent with my theory that the elites hold the general population in such contempt that they must now routinely have contests to see who can float the biggest lie without getting called on it.  Look soon for articles explaining why BP's oil spill in the Gulf will actually benefit the environment and/or economy.

Thu, 06/03/2010 - 10:41 | 391676 Mesquite
Mesquite's picture

> Al #391619

Good humour...Tnx Al..But really, judging from past human race performance, maybe we can understand their plans..Cheers

Thu, 06/03/2010 - 10:25 | 391625 tecno242
tecno242's picture

I agree with 99.9% of what you put out Tyler.  But I don't agree with this part.

The US is deflating.  Inflation will turn negative.

Unit labor costs are falling.

Loss of credit + falling wages > printing

Plus 80% of whats being printed is going down the black hole of defaulting debt and not getting into the economy.

The money supply will ultimately shrink along with wages and massive amounts of defaulting debt.

Gold may certainly hold a large premium compared to how it's historically valued because of the global instability the above will cause.

But the US$ will go up.. a lot.  And from there.. it will either collapse along with the US government or.. we make it through.

It's hard to say how gold will react through all of that.  Certainly at some point it would be foolish to have anything but physical gold in a safe.  Any ETF or electronic paper futures gold holdings would be worse than FRN's.

Thu, 06/03/2010 - 10:31 | 391645 Bay of Pigs
Bay of Pigs's picture

"But the US$ will go up.. a lot".

How do you know that? The USD is critically overbought right now. Deficits don't matter? 

 

Thu, 06/03/2010 - 10:35 | 391660 tecno242
tecno242's picture

because massive amounts of defaulting debt and falling wages will reduce credit and money supply beyond what the government can print because eventually falling wages and tax receipts will raise bond rates as the budgetary picture deteriorates in the US.

Falling wages + defaulting debt + reduced credit is greater than Printing.

Less dollars + Less Credit = deflation = dollar rises in value.

Thu, 06/03/2010 - 10:49 | 391713 tmosley
tmosley's picture

You do realize that they have the capacity to print an infinite amount of money, don't you?

BB won't allow deflation at any cost.  All he has to do is add a few zeros onto the end of the bills and everything is "fine".

Further, debt default is not deflationary.  The money that was borrowed is still out there, and no longer liable to be sucked up by the banks.  Thus, debt default is actually INFLATIONARY.  At least in the short to medium term.  If the banks go out of business, and stop making loans, then the long term may see a slowing of inflation, but as we have seen, banks don't go bankrupt in this country any more.  They are simply eaten up until they become too big to fail, and then they get an unending cash enema.  Eventually, the interest on the cash enema will start pouring out into the wider markets, leading to inflation everywhere, and eventually hyperinflation as the public loses faith and the vigilantes see opportunities for shorting currencies.

Thu, 06/03/2010 - 10:54 | 391731 Bay of Pigs
Bay of Pigs's picture

The USD will retain it's value as long as confidence in it remains. That is questionable going forward. Looks like massive QE is the road ahead to me. That's why I disagree with your argument.  

Thu, 06/03/2010 - 11:01 | 391763 Almost Solvent
Almost Solvent's picture

Query: Hyperinflation leads to:

$50 gallon of gas
$500 gallon of gas
$5,000 gallon of gas
$50,000 gallon of gas

At what point does society collapse?

Thu, 06/03/2010 - 12:04 | 391970 Conrad Murray
Conrad Murray's picture

Things got pretty screwy last time we hit $5

Thu, 06/03/2010 - 11:04 | 391772 tecno242
tecno242's picture

They cannot borrow infinitely.  Falling wages = falling tax receipts and more default of debt.  That will make the US budget picture worse and borrowing costs will rise.

Printing is really just QE.  If you go down the QE road too far,.. you will end up the only buyer of your own bonds and sink yourself.  They cannot do that.. so the power to print IS NOT infinite.

defaulting debt is deflationary as credit is part of the money supply.

you can believe that crap you are saying if you want.

 

 

Thu, 06/03/2010 - 11:20 | 391834 Bay of Pigs
Bay of Pigs's picture

Having ridden the Golden Bull for ten years now, I think I will continue to believe that "crap" until gold reaches a mania phase. We are nowhere near that yet. And you didn't answer my question on CONfidence in the USD. What happens to it's "value" then smart guy?

Thu, 06/03/2010 - 11:46 | 391897 Mako
Mako's picture

tecno242

He's a retard, he thinks humans have infinite power.  He believes Helicopter Ben is coming to save him, he is going to cash out and be rich.  Ben will send him 99 virgins to his door for holding some gold coins.

I had another retard tell me the Zimbawewe government could print infinitely, I told him they have no such power, within a month the government dropped the Zimb. dollar.  I still laugh at these retards.

He has no idea why countries and companies float bonds.  If he did he would be saying the stupid things he continues spew.

Let me see, if I can fund my own credit, why would I need the credit to start with... duhhhhhh.

Thu, 06/03/2010 - 12:38 | 392050 DoChenRollingBearing
DoChenRollingBearing's picture

Mako, although I am a big fan of gold, I also have lots of cash.  Both FRNs and electron cash in the bank.

Hey, I cannot predict the future!  I can surmise and plan however.

A big deflation could bring down gold, sure.  But, then I presume they would PRINT $10,000 Obama FRNs.  I will buy gold even more if it goes down to the $800 or so that gold bears say.

Thu, 06/03/2010 - 13:19 | 392163 tmosley
tmosley's picture

Wow, let's just make shit up, Mako.

Mako gives head to Bernanke biweekly.  Mako believes in the tooth fairy.  Mako can turn invisible, but only when no-one is looking.  Mako turned me into a newt (I got better).

But seriously, the POINT is that central banks can print as much as they want, but that eventually, no-one will take their paper, no matter what the denomination is, at that point, gold buys ALL.  Central banks don't know when to stop.  They reach the point of no return printing at full speed, and they eventually have to abandon the currency, and switch to hard currency.  Zimbabwe switched to dollars, but when the dollar collapses, there will be no viable alternative, except for gold.

Thu, 06/03/2010 - 15:13 | 392468 faustian bargain
faustian bargain's picture

The US floats bonds to give the appearance of borrowing money from the world. The Fed was created partly to ensure that a failed auction never occurs. Yes, the government can 'fund' its own credit via the Fed, but if that dirty secret were widely known, it would be the instant end of the FRN and probably the government as well. I get the feeling that day is coming closer, though.

Thu, 06/03/2010 - 12:41 | 392058 EscapeKey
EscapeKey's picture

As Marc Faber says, printing is politically the easiest solution.

The US will in 2010/11 sell $4.5tn of treasuries - that's the GDP of China or Japan. Who's got that kind of cash to invest?

Covert printing on a large scale is already taking place. Arrange foreign currency swaps with foreign institutions, and get the Cayman Islands to take down an increasing amount of treasuries up for sale.

Furthermore, foreign treasury holdings have only increased by $600bn over the past year. Are you seriously that naive you think "wealthy individuals" have bought the rest?

http://www.ustreas.gov/tic/mfh.txt

Thu, 06/03/2010 - 13:22 | 392175 tmosley
tmosley's picture

Money supply doesn't mean shit when the people lose faith in the currency, sort of like it doesn't matter how much money you have in the bank when the store won't take your checks any more (THIS time I have money, I swear!).

Thu, 06/03/2010 - 11:35 | 391891 Mako
Mako's picture

"infinite amount of money"

Let me see this infinite amount of money, funny the money supply is going negative dumbass. 

Here you show me this infinite amount of money and I will stop posting.  You have no understanding of the system, you should not be posting your nonsense. 

 

Thu, 06/03/2010 - 12:14 | 391987 Millivanilli
Millivanilli's picture

Hey Mako, 

How is the view with your head shoved up your ass?

Enjoy your dollars, they have more counter party risk than a Tijuana show girl.

Thu, 06/03/2010 - 12:26 | 392020 Bay of Pigs
Bay of Pigs's picture

Mako,

If you are talking to me. I never said anything about printing '"infinite" amounts of money, so don't put words in my mouth. And btw, I've read your posts on gold. You don't know much of anything on the topic so feel free to spew away yourself.

Thu, 06/03/2010 - 13:26 | 392184 tmosley
tmosley's picture

Hey dipshit, how about you pull in the full context of your quote, specifically the "can print" part in front the above quoted?  Did I say "have printed"?  No, I did not.

Bernanke is on record numerous times, and long before he ever joined the central bank as saying that he would simply print his way out of deflation, throwing money from helicopters if he had to.  You think he changed his mind?  If so, buy dollars all you want.  

If we see real deflation, Bernanke will issue Stimulus #17, eventually giving out a million dollars to each citizen.

Thu, 06/03/2010 - 16:42 | 392677 Strider52
Strider52's picture

Please, not to the illegal immigrants.

Thu, 06/03/2010 - 11:49 | 391935 Attitude_Check
Attitude_Check's picture

The "problem" with BB's printing press is that the majority of deflation is in M3, while the printing press really only reloads M0 & M1,  with some spill-over into M2.  So we will get (are getting) BOTH ASSET DEFLATION driven by M3 deflation caused by credit/debt annihilation, AND COMMODITY INFLATION driven by FX weakness and large M1/M2  increases.

Thu, 06/03/2010 - 15:19 | 392478 faustian bargain
faustian bargain's picture

I think this comes closest to clarifying things. Credit contraction, money expansion. Bernanke has little control over the credit problem, but much more control over the money supply.

My RE property value has gone down, but I'm still paying more for gas, electricity, phone, cable, etc. ...and who has gotten a raise in the past few years (assuming one still even has a job)?

Thu, 06/03/2010 - 12:51 | 392090 BearOfNH
BearOfNH's picture

"The fastest way to run out of money is to print more of it."

 

Thu, 06/03/2010 - 13:21 | 392170 gdub53
gdub53's picture

you guys have it wrong about defaulting. Default does not shrink the money supply. Paying back debt reduces it.

Thu, 06/03/2010 - 10:26 | 391628 crzyhun
crzyhun's picture

WSJ editorial page is topnotch....the rest is NYT re HASH = DOPE journalism.

 

Fri, 06/04/2010 - 00:23 | 393751 Tapeworm
Tapeworm's picture

The WSJ editodial pages were taken over by the neocons more than twenty years ago. I quit them when I saw that it was a done deal. The neocons were the ones that put up Dick Cheney and his "debt doesn't matter" crap for the period of 1984-present.

 Eventually, and likely quite soon, the Republican party and their neocons will be seen for the samenes of them and the Democrat party. Good luck to the neocons in co-opting the real people that will dump the tea party when they find that that it is now a shell for the neocon slime.

Thu, 06/03/2010 - 10:26 | 391629 rich_maverick
rich_maverick's picture

Aren't like 80% of all stocks pozi schemes?  They pay no dividends, investors have little or no say on management decisions, and the only way to profit is to sell your shares to bigger idiots than you for a higher price.  Also, managers can dilute your shares at will by issuing stock options or more shares, again without your ability to challenge decisions.  Seems to me that the stock market is a bigger ponzi than commodities.

Rich

Thu, 06/03/2010 - 10:28 | 391633 SDRII
SDRII's picture

Let's see buiter did his hit piece in the ft and he got the top econ job at citi in london. The latest interview tactic make an offering to the lords of keynesianism

Thu, 06/03/2010 - 10:29 | 391637 dwdollar
dwdollar's picture

Words can't describe the lunacy of suggesting Gold a Ponzi scheme.  That's like declaring the Earth is flat or something.

Thu, 06/03/2010 - 10:31 | 391641 GeorgeHayduke
GeorgeHayduke's picture

Gotta love Buffet's comment on gold. Although I am sure a Martian would stand in even more amazement as the Wall Street crowd pulls of their slick stunt of privatizing profits while socializing costs and losses schtick, all while the public stand and watches!! My guess is the Martians would laugh at the serf and slaves more than the folks reburying gold in the ground.

Thu, 06/03/2010 - 11:08 | 391786 thesapein
thesapein's picture

I've never met a Martian who wanted to trade in USD either.

Thu, 06/03/2010 - 11:18 | 391828 Gordon_Gekko
Gordon_Gekko's picture

The Martians will also be amazed that somebody would even consider listening to a hypocrite moron like Warren Buffet.

Thu, 06/03/2010 - 11:22 | 391843 Assetman
Assetman's picture

This, coming from a guy who makes inordinate amounts of money on float income.  He doesn't like gold because he wants to take zero cost float and invest it in financial weapons of mass destruction... or choo-choo train companies, etc..

Gold is anthema to anyone in the paper financial world because it exchanges currency to a store of value.

Warren doesn't like gold because he can't use it to serve his purposes.

Thu, 06/03/2010 - 10:31 | 391646 Anton LaVey
Anton LaVey's picture

And to all these "concerns", the one retort I like best: "If gold is such a useless old relic, why do central banks, all over the world, keep tons and tons of the stuff in secure vaults?" - and that includes paying a lot of people to guard the thing, as Buffett said.

Thu, 06/03/2010 - 10:31 | 391647 tpbeta
tpbeta's picture

Yeah nothing has value unless someone else is willing to trade it for something else. There are no magical fundamentals supporting gold, just a whole lot of really big players who've collectively agreed it's of high value. So what else is new in the free market. Sure they may change their minds if there's a big deflation that lasts for years without a countervailing money printing orgy. But what are the chances? The really big problem with gold isn't that it will lose value - that's just the risk any investor takes. The really big problem with gold is (a) buying it in a way that guarantees your genuine physical ownership and (b) how you avoid getting taxed to hell when you try to tun it back into something useful. Answers on a postcard please.

Thu, 06/03/2010 - 11:17 | 391818 thesapein
thesapein's picture

You live in a fantasy world if you really believe that nothing has value until humans use their power of belief to make it so.

So food doesn't have objective value for our species?

Why don't we just all hold hands and pray together?

 

Thu, 06/03/2010 - 15:49 | 392561 tpbeta
tpbeta's picture

Obviously I meant trading value. No-one here is buying gold for its intrinsic value.

Thu, 06/03/2010 - 10:32 | 391649 poorold
poorold's picture

the simplest example that can be explained via the MSM to show what a joke the stock market is...and anyone who thinks their "wealth" increases are real because the DOW is going up ought to have their head examined:

 

AAPL has just 906 million shares outstanding.

 

over the past 50 days, AAPL has gone up $35/share.  Their market value increased the "wealth" of AAPL shareholders by $31,500,000,000.

The amount of mony exchanging hands trading AAPL during that time is roughly $12,000,000,000.

So, $12,000,000,000 worth of trading activity created $31,500,000,000 of new "wealth."

But the people who sold AAPL took their money out of the share?  Yet such a tremendous increase in "wealth" still left for all AAPL shareholders to delight in and spend...

 

oops...they can't really spend it can they?

 

yeah, yeah, I know all your stock valuation models and all that other crap on why AAPL may or may not be worth what it is today.

 

That's not the point.  The point is the extremely misleading nature of "wealth" as represented by the stock market.

Thu, 06/03/2010 - 10:33 | 391651 Coming Down in ...
Coming Down in Powdery Sparks's picture

You know what I find head-scratching?  People dig up carbon allotropes out of the ground in Africa, or something...then they cut and polish them to a nice shiny finish.  They then purchase these allotropes for anywhere between $2000 and $50,000 depending on the size.  They then give them to a female in a tacit agreement for exclusive use of her pussy.

These allotropes - called diamonds - generate no income and require money to insure!!!  Crazy!  Expecially considering these EXACT same atomically identical allotropes can be created in the lab for around $500.  It's fucking nuts.  Yet it continues unabated.

Thu, 06/03/2010 - 10:40 | 391672 koaj
koaj's picture

debeers is a crime family

Thu, 06/03/2010 - 10:42 | 391683 bada boom
bada boom's picture

Its called prostitution and that is the form of payment they request.

Thu, 06/03/2010 - 10:43 | 391688 Anton LaVey
Anton LaVey's picture

Not to mention that people store said carbon allotropes in vaults and pay other men with guns just to stand there and guard them.

Hmmm... You may be onto something, here.

Thu, 06/03/2010 - 10:49 | 391714 chindit13
chindit13's picture

Perhaps you are not aware of this, but the inherent value of a diamond is that it can be used to cut the glass window of a home so that you can break in and steal the owner's gold and silver.

Thu, 06/03/2010 - 11:26 | 391858 thesapein
thesapein's picture

Diamonds are more like art collecting.

If you can understand why a painting auctions off to a high bid, then you can understand the rates on diamonds. This would be more like collector coins over bullion.

 

Thu, 06/03/2010 - 12:09 | 391980 Thisson
Thisson's picture

Except that paintings are available in limited quantities and each is unique.

 

Diamonds are not rare at all - they are just held off the market by a cartel that is increasingly losing control over the supply of diamonds as new mines are found in places like Canada and Australia.

Thu, 06/03/2010 - 15:24 | 392488 faustian bargain
faustian bargain's picture

The correct analogy would be to use 'college dormroom posters' instead of 'paintings'. Perfect jewelry-grade diamonds can be produced industrially for a fraction the cost of mined diamonds.

Thu, 06/03/2010 - 10:35 | 391658 GoldmanBaggins
GoldmanBaggins's picture

It is funny how people react to gold. Some love it and some hate it. Those that are indifferent are usually eager to learn about it. But there is no denying the fact that there is something about holding bullion in your hands that feels good. The idea that it is timeless money is comforting, but something else happens to people who can hold gold bullion and ponder the relationship of man to this so called "barbarous relic". I think that is precisely what the gold haters want to avoid. That is why THEY created GLD and other paper gold products. To satisfy the investors curiosity without having you hold that metal.

Thu, 06/03/2010 - 11:20 | 391833 Miss Expectations
Miss Expectations's picture

If you're trying to give away a puppy, the surest method is to put it into someone's arms.

Thu, 06/03/2010 - 11:30 | 391873 thesapein
thesapein's picture

Silver, not so much though. Holding silver isn't the same feeling. I propose showing someone a solar panel built with silver. Oh, wait, or an iPad!

Thu, 06/03/2010 - 10:41 | 391668 Mako
Mako's picture

All so called assets are built upon the global credit system are ponzi schemes.  All the lies will eventually collapse.  The credit system was built so people could get what they want.

Thu, 06/03/2010 - 10:40 | 391673 Kurtieboy
Kurtieboy's picture

I guess humanity has been wrong for the last 4000 years............

Thu, 06/03/2010 - 10:42 | 391685 Mako
Mako's picture

The financial system have been going bust since before the time of pyramids, gold and/or silver and cooper have been the center of nearly all of them.

Thu, 06/03/2010 - 10:48 | 391708 Anton LaVey
Anton LaVey's picture

On the other hand, you could also say that one ounce of Gold is still worth a lot, even today. And it was worth a lot since the time of the Pyramids.

Heck, even when an ounce of Gold was worth USD$ 300, about 10 years ago, it was still worth a lot: I have 1oz coins here and they are not that big.

I don't consider Gold, right now, as part of the financial system: I consider it as the ultimate form of insurance. Because, unless we all go back to the Stone Age, it will conserve (at least) some of its value.

Make of that what you will.

Thu, 06/03/2010 - 10:55 | 391722 Mako
Mako's picture

It's not worth a lot, it's worth whatever someone is willing to give you for it. 

Eventually once the credit system collapse, production of all items will nose dive, as the spiral continues you will get less and less. 

There were plenty of people in Europe starving to death the last time, and they were the largest holders of gold at that time.  Didn't matter.  They resorted to dumping grain at sea in the hopes that would raise prices, but at the same time people were starving to death on shore.

Eventually they got sick of slow death, they hired Hilter to speed the process up.  The tanks started rolling and the ovens started heating up. 

Good luck with everything.

You guys take this path and think there is a way out, I have to admit it's fun watching all the rats trying to find a way off the burning ship.

 

Thu, 06/03/2010 - 11:07 | 391780 Anton LaVey
Anton LaVey's picture

Hmmm... I am tempted to apply a Godwin point here, even though you were not referring to me specifically.

On the other hand, I don't think you have read anything I have said.You are simply resorting to emotional arguments, that are pretty much devoid of content.

Anyway, I also wish you all the best. Have fun!

Thu, 06/03/2010 - 13:05 | 392120 WaterWings
WaterWings's picture

The problem is he's right. Rats trying to find their way off a burning ship - all of this talk of economics is only good for promoting understanding now with the hope that the vigilant will understand, preserve, and teach the truth. We have such unprecedented access to information yet the crabs in the pot, the majority that chooses titillating placation, ensure mutual destruction. Guarantees of survival are none.

Your reductio ad Hitlerum is funny; when a society fails to remain watchful external violence is the only way to wake them up - the third generation is the most fatally naive. The march of history...a cycle. Human nature exhibits less change then a glacier. 

Thu, 06/03/2010 - 11:14 | 391811 Crab Cake
Crab Cake's picture

"You guys take this path and think there is a way out,..."

For worse, and hopefully for better, there is no way out. 

Long live the forest, let it burn.

Thu, 06/03/2010 - 11:29 | 391868 Mako
Mako's picture

It will burn, it always does and always will as long.

Thu, 06/03/2010 - 11:34 | 391888 thesapein
thesapein's picture

That's the money trap, thinking real things have no objective value. 

Thu, 06/03/2010 - 11:41 | 391910 Mako
Mako's picture

That is result of using the equation and at the end of the cycle the system goes poof.  It's like spring trap door. 

Thu, 06/03/2010 - 11:56 | 391951 Assetman
Assetman's picture

You should write a history book, Mako.  It would make for good entertainment.

Thu, 06/03/2010 - 12:00 | 391960 Mako
Mako's picture

There isn't much too it, people want to sugarcoat stuff.  Its very simple

- system starts

- system expands at the rate needed

- system fails to expand at the rate needed

- system peaks

- system collapses

- system liquidates

- choice, up to this point rinse and repeat

Thu, 06/03/2010 - 13:33 | 392214 Assetman
Assetman's picture

But see, that's where you get to 2nd, 3rd, 4th editions... the possiblities are endless.  Just be a little more verbose to fill up those pages.

And include pictures.  I love pictures.

Thu, 06/03/2010 - 10:42 | 391681 futureb
futureb's picture

First - anytime someone says "no comment necessary" I'm suspicious.  Why not?  Please explain why exactly Gold is a great long-term investment.  And the argument that "currency is not" is insufficient.

Second - just because John Paulson is speculating on Gold makes a good investment?  I think not. 

Thu, 06/03/2010 - 10:46 | 391691 Mako
Mako's picture

I figure my rifle and tractor are going to be a much more valuable investment when the TSHTF than my coins. 

These people that think they are going to cash out and live on the beach in the Bahamas are in for a rude awakening.  Those people in the Bahamas are going to be starving to death and hacking each other up for the last grain of rice on those islands.

Thu, 06/03/2010 - 11:46 | 391927 desgust
desgust's picture

Makp, is gold your obsession?

Why is it only gold to catch your attention?

 

Thu, 06/03/2010 - 12:01 | 391940 Mako
Mako's picture

I have no hardon for gold either way... it might of limited use if the system collapses, or it might not.  Eventually you will get less and less because production will take a nose dive.

These people that spread lies, this tmosley guy is about dumb as they come.

- First he says no gold standard ever failed

- Then he says we need a gold standard... huh

Well if no gold standard ever failed then they all still exist.  The guy so stupid he doesn't even know what he is saying.  He thinks people can fund their own credit.  He just like Cramer, buy, buy, buy, buy!

Thu, 06/03/2010 - 12:22 | 392010 Assetman
Assetman's picture

One point on here to highlight is that financial system collapses have been a fairly steady occurence throughout the course of history.  And there's always been a new and improved currency and financial system to replace it (which again fails after 80 years or so).

When we get to the point of financial collapse, there is likely to be a period where bartering replaces currency as a medium of exchange.  Gold may be a good substitute-- but it may not be, either-- it all depends on how those with the essential supplies value it.  Hence, the tractors and rifles that Mako makes mention have merit.  And I don't disagree with that at all.

The central question is how long that period lasts, before currencies become an acceptable medium of exchange again.  The big difference I see this time is that The Oligarchy sees this collapse as a global opportunistic event-- and will move as quickly as possible to bury old currencies and create one new global currency molded to their liking.  Given that they likely already know the endgame, the planning is likely well in place to introduce new demoninations and exchange menchanisms (your USD won't be worth much, but neither will your debt).  It's in The Oligarchs' best interests to make this process appear seamless... and quick.  Otherwise the weapons are pointed at their heads.

Of course, all commodities will adjust to the new currency adjustment process.  And it's very likely one of the first conversions will be gold to the new currency, as central banks across the globe have at least some material amount in storage.

Nevertheless, there is likely to be a period where there is a dramatic drop in production due to financial system collapse.  Governments across the globe will find it essential to get production and commerce back on firm footing as quickly as possible-- for the longer the wait, the greater the chance for rioting and mass violence.  My guess is that it's likely to be weeks.  But you best plan for a year or more, just in case.

And as it stands, we don't have people in government here in the US that could handle such as mess if it were to occur today.

But that's for another day... I don't even want to scratch the surface on the politics of it all.

 

Thu, 06/03/2010 - 15:37 | 392528 faustian bargain
faustian bargain's picture

There's a difference between 'failing' and 'getting hijacked'.

Thu, 06/03/2010 - 12:50 | 392088 DoChenRollingBearing
DoChenRollingBearing's picture

Mako I figure my rifle and condo (wait, scratch the latter) will do just fine.

Actually your point that gold alone is not enough if/when the system crashes.

Diversification into smart asset classes seems to be your point.  Next up for me is storing more ammo and food.

And if we do not crash?  I have plenty of assets to do well in good times too.

Thu, 06/03/2010 - 15:19 | 392477 dumpster
dumpster's picture

futureb

all you have to do is leave the TV long enough ,, and read why gold is an investment ,, how gold is now being considered  as backing for several currencies

waiting for some one to spell out the why of gold ..

is such a brain dead attempt to excuse your lack of serious attempts to find out why.

their are so many places to go.. what is with you zit kids .. water water every where and you refuse to read the qualified experts .. or even attempt ,

just stay in your pavlovian world,, eat the gruel provided .. and bask in ignorance ,

 

you do have a computer ,, do some  serious looking . google Austrian economics why gold .. the history of gold as a store of value , yadda

why listen to the scrum of illiterate and scamming

folk tales and two bit economic thought .

some  of the opinion here on zero hedge by the posters .. are largely monday morning zero wealth to protect ,, and the cursery knowlege about gold as a pimple on the hairy ass of a toad,

go read the sinclairs , the russells , the dines , the austrian economists , mises , reisman , ,take more than fifty five seconds during the commercials of some baseball game ,, or an opinion based on zero undersanding ,, just spouting spit

 

Thu, 06/03/2010 - 10:45 | 391694 Monty
Monty's picture

Well, I can think of advantages gold has over rice, beans, oats, or even cigarettes:

1. Gold doesn't rot, waste, or degrade. Gold is, for all intents and purposes, eternal. I don't think your prison cigarette is going to be worth much in 50 years, much less 100 or 1000.
2. Gold has a history of several thousand years of retaining value. Past history is no guarantee of future results, granted...but it's the way to bet.
3. No fiat money scheme in the history of the world has ever succeeded in the long-term.
4. Gold has a history. People understand it, understand how to work with it, and how to exchange it.
5. Raw gold in the ground in Africa isn't worth anything because it hasn't been quantified. When you dig it out and assay it, it's quantified and qualified and is now worth something. That's why you put guards on it. (A corn seed is in the ground too; it doesn't start to become worth something until it matures and you can harvest the corn.)

Thu, 06/03/2010 - 10:49 | 391705 Mako
Mako's picture

Actually no gold standard system has succeeded long-term, no financial system has survived long-term. 

"now worth something"

It's only worth what someone is willing to give you.   Eventually production will nose dive when the credit system collapse, eventually you will get less and less for your gold coin because less and less is being produced.

Thu, 06/03/2010 - 10:55 | 391742 Anton LaVey
Anton LaVey's picture

Actually no gold standard system has succeeded long-term, no financial system has survived long-term.

What part of: "On a long enough timeline, the survival rate for everyone drops to zero" don't you understand? (Said firmly tongue-in-cheek, of course).

(As an aside, I have always found it hilarious that ZH, that den of libertarian Austrians, has a Keynes quote for its masthead, but I digress).

It's only worth what someone is willing to give you.   Eventually production will nose dive when the credit system collapse, eventually you will get less and less for your gold coin because less and less is being produced.

But in that sentence, you assume some form of deflation. As I have said on ZH many times, deflation will be bad for Gold, but it will be absolutely horrible for everything else (cash excepted).

If you assume stagflation, inflation, or even hyperinflation, then Gold will play its role as a waelth preserver perfectly.

As for me, I am an agnostic: I have cash in case of a deflation, Gold and Silver for everything else. Make of that what you will.

Thu, 06/03/2010 - 10:59 | 391752 Mako
Mako's picture

I don't hate gold/silver and I don't love it either, eventually the credit system will collapse, credit makes the world humans have put together.... eventually chaos, starvation, war, fighting, etc.  There is no avoiding it once this path was taken, it happened last time and ever time before that. 

My grandparents had gold/silver during the last one, did it help, not really I actually have some of the coins.  They were just lucky the chaos was contained to Europe and Asia.

 

 

Thu, 06/03/2010 - 11:05 | 391776 tmosley
tmosley's picture

No REAL gold standard has ever failed.  That is, when people carry only gold and silver coins.  The problem is when governments issue paper and claim that it is backed by gold, and then issue more paper than they have gold (basically, overspending). 

No gold standard has ever failed, they only become fiat, and then fail.  The US will be another example of this soon, though the fiat part lasted a surprisingly long time.

Thu, 06/03/2010 - 11:32 | 391884 Mako
Mako's picture

Every one of them collapsed, you are a nutbag. 

"they only become fiat"

So you are going to not allow borrowing and lending?  They were all based on lending and borrowing with an attachment of interest, they all failed.  PERIOD, END OF STORY, stop reading stupid Peter schiff books.

 

Thu, 06/03/2010 - 13:32 | 392209 tmosley
tmosley's picture

I'm sorry you you don't understand kindergarden economics.  Your mind is shut.  You will never think a new thought for the rest of your life.  I pity you.

Thu, 06/03/2010 - 17:18 | 392595 akak
akak's picture

This Mako has a completely closed mind on the subject of economics, and is  utterly ignorant when it comes to gold and its history and value within the monetary system.  His stubborn repetition of the patently false "every gold standard has failed" just highlights the fact that he understands not a whit about monetary and poltical history.

Mako, please stop feeling that you are infallible and all-knowledgeable when it comes to financial and monetary matters --- I assure you that you are not.

Thu, 06/03/2010 - 13:36 | 392225 gdub53
gdub53's picture

since 1971.  Is that a long time?

Thu, 06/03/2010 - 15:45 | 392552 faustian bargain
faustian bargain's picture

1971?? No, it began the minute the government started funding itself with printed paper, instituting a 'central bank' that operated with fractional reserve lending. That was at least 1913.

Thu, 06/03/2010 - 10:55 | 391743 Trundle
Trundle's picture

Gold has been money for more than 5,000 years.  It is money as per natural law and a ballast against the second law of thermodynamics.

"Gold is money and nothing else"

-J. P. Morgan

Thu, 06/03/2010 - 11:43 | 391918 thesapein
thesapein's picture

Caution: Money trap ahead.

 

Thu, 06/03/2010 - 12:56 | 392102 dumpster
dumpster's picture

j.p. morgan was a dumb nitwit go with mako the tractor driver

mako smarter than russell , sinclair , dines , the collective nations buying gold .

wait mako loves credit ,, so does J.P. Morgan

so does the fed ,, microsoft bulit a pretty big business with internal cash flow .and no debt .. credit was limited to 30 60 days bills of exchange .

the usa has now beome the largest creditor in the world this is good ,, may be they can double it ,

 

 

Thu, 06/03/2010 - 15:52 | 392571 JohnG
JohnG's picture

One cannot use cigarettes for barter in jail anymore.  They have all banned smoking.

The new currency is tins of mackerel (not a joke, it's true).

Thu, 06/03/2010 - 10:45 | 391695 keating
keating's picture

Gold is extremely important over the long haul. Since 1900, gold has done

far better in real value than the dollar by  a factor of 20.

 

That GLD and other paper gold creates more demand for limited hard metal

supplies makes gold even more valuable

 

That banks manipulate the price to limit price increases makes gold even more

valuable yet.

 

As paper currencies are overcome by the power of the printing press, gold will retain

more value than paper.

 

What WB says is true. The value of gold is entirely in its preception. There was a time when

Roman soldiers were paid in salt, and atime when spices were money as well.

 

But, having a safe with gold coins in it is far more secure than any paper.

Thu, 06/03/2010 - 10:46 | 391699 JW n FL
JW n FL's picture

"the opinion of Brett Arends or of David Einhorn, David Rosenberg, Jim Rickards, Eric Sprott, and, oh yeah, John Paulson."

All trend followers, all executing based on client demand... and all Johny come lately's...

Have Physical Gold is you think you need to hedge yourself, if you dont worry about things or if you have no real responsibilities... no worries!

If you are buying Gold, you should buy ammo and dry foods and plant a garden and get a pet cow (for milk and veal) and sharp knives and sell all your stock and bonds and pray for the rapture and spread the word about the rapture and hope the FED runs out of paper and hope that everything being done to keep the lights on fails.

 

Thu, 06/03/2010 - 11:00 | 391761 spartan117
spartan117's picture

I wish I were a Johnny come lately like John Paulson - all $8 billon dollars worth.

Thu, 06/03/2010 - 11:18 | 391829 Double down
Double down's picture

Get yourself a bull as well, otherwise, you know it won't work.

Thu, 06/03/2010 - 10:49 | 391710 Thoreau
Thoreau's picture

The puppet-masters are desperately trying to knock PMs down so they can snatch them up for better gains. At the same time, they're doing the opposite with the markets - drive 'em up so we can get the hell out! All the more obvious each and every day.

Annie get your gun.

Thu, 06/03/2010 - 10:49 | 391711 SilverSurfer
SilverSurfer's picture

 

You can't create Gold or Silver in the lab, nor on the ledger!

 

 

Thu, 06/03/2010 - 10:54 | 391735 Hephasteus
Hephasteus's picture

Watch the part about the goldsmiths. It will tell you how to create gold on the ledger.

http://video.google.com/videoplay?docid=-515319560256183936#

Thu, 06/03/2010 - 11:06 | 391779 tmosley
tmosley's picture

And eventually get lynched for your trouble.

Thu, 06/03/2010 - 11:47 | 391925 Hephasteus
Hephasteus's picture

Not recommending the continuation of the scam just reporting that it's been going on forever. You don't want to become repulsive to billions of people. It's kind of like being loaded into a rail gun and shot to a very far off lonely place.

Thu, 06/03/2010 - 10:55 | 391739 Mesquite
Mesquite's picture

> SilverSurfer #391711

Bingo !!!

Thu, 06/03/2010 - 10:51 | 391718 Kreditanstalt
Kreditanstalt's picture

Obviously buyers' propensity for "hoarding" does not indicate any "demand" in the eyes of this twit.

 

Thu, 06/03/2010 - 10:52 | 391725 junkyard dog
junkyard dog's picture

They forgot the most important problem with gold. If people continue to buy gold, it will result in bank runs on these big banks and could further destroy the recovery. I learned that from Bernanke.

Thu, 06/03/2010 - 10:54 | 391734 Trifecta Man
Trifecta Man's picture

I'd rather speculate in gold than invest in the thievery of the government.

Thu, 06/03/2010 - 11:11 | 391793 dogbreath
dogbreath's picture

Who are the hoarders as pointed out by the author.  For the most part they are not the commenters on ZH.  Outside of India which hoards one third of annual global gold production(+/- 800 tons) the rest dissapears into private hoards.  This and the fact that there has never been a lack of demand according to Dr A. Fekete begs why the price isn't actually higher at present as such a supply demand situation would predict.  We here at ZH know the answer which is the simple part; that it is the wall street game.  The other question is who is hoarding the other 1600 or so tons of annual production.  The WSJ author doesn't try to answer this but the answer is " the smart money".  Price suppression is not there to disuade buyers but to keep prices low for the primary accumulators.  

Fuck the gold trolls and just follow the smart money. 

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