Monetary Metals's blog

The savings of the people is going into the government bond. This is defined as the "risk free" asset, but can this really be true? What happens if it is not? This video shows the problem from a different perspective.

I asked the question: is Bitcoin money? (It's price sure is rising parabolically like silver in 2011) In brief, I said no it’s an irredeemable currency.  This generated some controversy in the Bitcoin community.  I took it for granted that everyone would agree that money had to be a tangible good, but it turns out that requirement is not obvious.  This prompted me to write further about these concepts.

Some people believe that by imposing losses on investors and reducing the Cyprus banking system liabilities, the European powers have addressed the problems in Cyprus (if harshly). A dangerous dynamic has been set in motion, which will likely bring many unintended consequrences.

Do you think that depositors in Cyprus are being taxed? That their money is being taken from them to go to the government in Cyprus or to Europe? Most analysis of the Cyprus bailout is wrong...

The root of the problem is the manufacture of counterfeit credit. Examples of counterfeit credit include Greek government bonds... Depositors are paid the lowest interest rate of all, and in return are promised to be made whole, even if it means every other class in the capital structure is utterly wiped out. In Cyprus, they were not. This reckless and politically-expedient decision has consequences.

On March 3, we said that Bitcoin is interesting technology, and a useful currency, but it's not money. Yesterday it crashed to $37. What happened??

Backwardation is when there is a (seemingly) risk-free profit to decarry the metal. It is fascinating that it persists. It’s been there for weeks! Does no one have gold to put towards this trade?

Nathan Lewis proposes a "gold standard" which is not based on gold. He argues that since gold's only job is to regulate the quantity of paper, we can just tweak the policy of the Fed. Instead of buying bonds to control the rate of interest, they can buy bonds to control the gold price. This is like trying to steer a car by opening and closing the windows.

Traders read the headlines. They know how the price “should” react to news, and they begin buying. For a while, the prophecy fulfills itself. But then what happens next? It may take an hour or a month, but sooner or later some of the new buyers begin to sell.

Speculators can drive the price quite far in either direction, in the short term. But it is the hoarders and arbitrageurs who drive the price in the long term.

A curious thing happened last week: the prices of gold and silver fell while open interest in futures rose.  This is not how the market has been behaving in recent years.

The Real Bill is quite different from the bond. It isn’t lending at all. It is a clearing instrument that allows the goods to move to the gold-paying consumer before said consumer pays with gold.

Since late January, the February gold contract has been in backwardation.  But today something more serious occurred .

Michael Woolfolk took the anti-gold position and Komal Sri-Kumar defended a gold standard on Bloomberg TV.  Is it true that we don't have enough gold for a gold standard?  Is it true that a gold standard is established by government fixing the price of gold?

It’s curious, isn’t it?  So-called “paper gold” (a futures contract) has a price that is not only very close to physical gold, but it remains locked to it.  This is despite the fact that “paper gold” is reviled in the gold community.  Why?  What is this mysterious force that binds them tightly together?