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Guest Post: The Future Of Gold, Oil, And The Dollar

Tyler Durden's picture




 

Via Gregor Macdonald of Peak Prosperity,

The ability of reflationary policy to mute the worst risks of debt deflation has been a source of enormous frustration for stock market bears ever since the 2008 collapse. Yes, the initial moderate rally out of the S&P500’s black hole was perhaps not so surprising in 2009. Bombed-out stock markets can always manage some sort of rally. But the ability of the rally to continue through 2010, and then 2011, and now 2012 has been quite vexing and painful for bearish investors.

Indeed, the entire post-2008 market phase has now produced an era of consistently poor performance for hedge funds. Recent data, for example, shows that an incredible 90% of hedge funds are underperforming the S&P500 through mid-September.

Will the pain continue?

Sentiment readings indicate that fears about the global economy dominated hedge fund thinking as early as 2005. And rightly so. It was clear early on that the first reflationary policy wave, which followed the technology bust of 2000, was doing nothing more than inflating a housing bubble. The return to reality in the 2007-2008 debt bust was a kind of victory for short-sellers -- but the nightmare started all over again in 2009. Incredibly, even the EU crisis of late 2011 was not enough to hold global stock markets down, as the policy of monetary rescue once again powered financial asset prices higher.

One of the more clever tactics of the U.S. Federal Reserve as it gingerly moved towards its third big reflationary program this year (QE3, the third round of quantitative easing), was to let other policymakers move first. Not only did the Fed hold its fire while Europe experimented for nearly twelve months with various forms of crisis intervention, but the Fed also let other policy solutions bubble up to the surface (e.g., nominal GDP targeting), which added thematic pressure at the margin. As each month passed since last Autumn, the Fed kept repeating its claim that it could do more if the data did not improve.

This left observers mystified, given that the economic data and especially employment numbers did not, in fact, improve. Certainly, as many skeptics believed, the Fed would not move right before the election, would it?

 

Bernanke may or may not be an avid chess player, but he certainly understands the concept of zugzwang (actually, Bernanke recounts trying to play chess against Ken Rogoff and regretting the experience.) As the next round of global reflationary policy moved into its endgame, Bernanke likely earned the biggest bang not by moving first, but by moving last.

This lent an element of surprise to the action, and the new policy is still being digested by markets. Various research houses, for example, continue to calculate the size of QE3, with Goldman’s most recent estimate coming in at $1.2 to $2.0 trillion. Moreover, other Fed members in their public remarks have followed up the QE3 announcement with aggressive dovish viewpoints. In particular Narayana Kocherlakota has insisted that the unemployment problem is a battle that must be won.

Now, however, just over a month from the Fed’s QE announcement, the mood has darkened in global markets. There’s a sense that the latest round of QE is already in position to fail (an issue I addressed in August: When Quantitative Easing Finally Fails). This conclusion seems premature.

Accordingly, let’s first take a look at three key markets, gold, oil, and the dollar, which have already had a chance to respond to QE3. And in Part II of this analysis, we will take a closer look at the stock market and some of the reasons why the pan-OECD reflationary policy, from Japan to the EU and the U.S., must have elevating stocks to new all-time (nominal) highs as its central aim over the next year.

More to the point: If OECD policy makers do in fact lose stock markets as the main transmission mechanism for reflationary policy, then trouble of a very serious nature will make itself known in the biggest way imaginable since the 2008 crisis began.

Gold

This summer bore witness to a rather tedious, politicized discussion about the resurrection of the gold standard. But one can argue now that the idea of a gold standard is outdated. Why? The reason is simple: gold, over the past ten years, has already handily and beautifully served its balancing function to the end of growth and the manic attempt of governments to fight industrial decline.

Moreover, “debate” of the kind seen recently between high profile investors such as Warren Buffet and Ray Dalio further illustrates that the discussion of gold remains trapped in identity politics. It is as though mere association with gold confers all sorts of meaning. But none of this actually pertains to gold’s new role, here in the 'era of no growth'.

Interestingly, Paul Krugman has done some of the best (and politics-free) commentary on gold in the past year; I highlighted his views in last Autumn’s essay Gold and Economic Decline. I remain in agreement that the poor prospect for economic growth, rather than inflation from ‘money-printing’, has been the primary driver of gold for the past decade. Gold has, accordingly, outperformed nearly every other asset – especially stocks and real estate – and for good reason. Krugman wrote:

For this is essentially a “real” story about gold, in which the price has risen because expected returns on other investments have fallen; it is not, repeat not, a story about inflation expectations. Not only are surging gold prices not a sign of severe inflation just around the corner, they’re actually the result of a persistently depressed economy stuck in a liquidity trap — an economy that basically faces the threat of Japanese-style deflation, not Weimar-style inflation.

(Source)

While many participants continue to use gold as a call option on future inflation risk – and from a resource and food standpoint, there is substantial inflation risk – the launch of QE3 more pointedly confirms the failure of Western economies to produce growth. It's for this reason that gold should prove to be more sensitive to reflationary policy than industrial commodities over the next year.

Oil

Did oil prices collapse this year due to the complex financialization of oil, as some predicted? No.

Oil prices don’t trend along price pathways simply because oil is the subject of financial speculation. Financial speculation can only take prices outside their fundamental price envelope for limited periods of time. And further, did QE3 cause gasoline to zoom to $5.00 a gallon, as many predicted? No, because quantitative easing doesn’t axiomatically cause oil prices to rise. Instead, it drip-feeds broken economies and mutes the devastating effects of debt deflation. QE dampens tail risk and allows the portions of the economy that are able to recover to muddle forward.

The two great forces currently acting on oil prices are, instead, the migration of demand from the OECD to the non-OECD, and the newly-significant higher cost to bring on marginal supply. That’s it. Neither is mysterious or complicated. As I explained in my recent piece, The Repricing of Oil, an odd stability has appeared in the global oil market that constrains oil prices to a range, defined at the lower bound by marginal costs and at the higher bound by exceptionally slow growth in aggregate oil demand.

Fresh QE from the EU, Japan, and the U.S, however, serves to place a harder floor under crude oil. QE and other reflationary policy from the OECD tends to flow more efficiently towards the non-OECD, either boosting or supporting much higher growth rates compared to developed world economies. This keeps annual growth rates of energy consumption plugging along for coal, natural gas, and, of course, oil. Much of this trajectory is not, in fact, dependent on robust world trade. Instead, the core trend in energy demand in the developing world simply comes from population expansion and the industrialization process that has yet to complete.

Do a reduction in world trade and less consumption of Asian goods from buyers in Europe and the U.S. mean that the non-OECD will grow more slowly? Of course. We can see the slowdown already, reflected in the soft pricing for global iron ore and metallurgical coal. But that doesn’t affect the ability of the 5 billion people in the developing world to slog forward with steady demand growth for oil. China and India, even in their slower-growth mode, are growing their oil demand by 4-5% per year. Should the global economy find its footing, oil prices will shoot substantially higher – though not because QE3 repriced oil; but because QE3 will have patched enough holes in the global economy to create new leg of growth.

The Dollar

The year-long rally in the U.S. Dollar Index must certainly have been a consideration for the Fed when deciding on new QE.

Why? Since the 2008/2009 low, U.S. exports have been one of the sturdiest sources of growth for the economy, with exports crossing the $2 trillion mark (in value) for the first time and taking up a larger proportion of GDP. As I explained in The Price of Growth, U.S. exports of coal, agricultural goods, and eventually natural gas represent a supertrend that offsets the portions of the U.S. economy that will have a difficult time recovering. Eventually, manufactured goods will also reappear as an export, owing to North America’s very cheap electricity rates, and U.S. labor costs will likely fall.

But the dollar’s rally on the Index, from 72.00 to 84.00, began to bite into export growth over the past year. It was inevitable that the Fed would eventually have to fight that trend. And fight it they have:

 

The market correctly anticipated the onset of QE3, of course, and started to break the dollar’s rally in late summer, as bourses positioned themselves for resolutions in Europe (which were positive for the euro currency) and began to react more confidently to weak U.S. data. For now, the year-long rally in the USD is decisively broken.

While it is certainly a stretch to claim that a weaker U.S. dollar will lead to job growth, the opposite, a strong dollar, would certainly lead to tighter monetary conditions. It is strange, moreover, that many of the same economists and financial writers who have for years decried the poor state of U.S. manufacturing and the super-elevated levels of U.S. consumption would either fear or criticize policies to weaken the dollar.

Do U.S. consumers not buy enough goods from abroad? Do U.S. consumers need to reverse the nearly decade-long trend of declining oil consumption via some policy that attempts to drive oil prices downward through a strong dollar? The fact is, the U.S. is already in the process of transitioning – like the rest of the world – to the powergrid. With its road and highway system in decline and with U.S. oil consumption down 15% from decade highs, the U.S. economy has rebounded, using not oil, but natural gas and coal. These are two commodities that, at current rates of economic growth in the U.S., are in fact quite abundant. The U.S. economy does not need a strong dollar.

Initial Conclusion

Contrary to popular belief, the Fed is much less concerned about the rise of gold as a challenge to their authority than many presume. Moreover, the Fed has come through a learning curve about oil. Bernanke understands (and has said) that there is a constraint on supply and that cheap oil is a thing of the past. Bernanke also understands that a price ceiling is largely operative in a time of weak economic growth, as economies will continue to balk at oil prices above $120. Accordingly, given that gold and oil already underwent spectacular price revolutions in the past decade, it can hardly be the concern of the Fed to “control” them now. No such control exists, and the Fed has essentially given up any pretense in this regard. Instead, it’s the U.S. dollar and the U.S. stock market that primarily concern the Fed.

 

In Part II: Where the Stock Prices are Headed Over the Next Year, we explain why the Fed – and its counterparts in the EU and Japan – cannot afford to lose control of stocks, especially as the global economy appears to be entering a synchronous slowdown. Moreover, just-released data on U.S. exports confirm that the encouraging three-year trend higher is faltering badly. Is it possible also that the Fed acted in anticipation of a new slowdown in the U.S. economy? Despite the controversy and elation over the latest jobs report, there is reason to believe that the U.S. economy may be seeing a four-year cyclical peak. In other words, the same concerns that are now the focus of stock market technicians and historians are also relevant to the U.S. economy.

Click here to read Part II of this report (free executive summary; paid enrollment required for full access).

 

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Tue, 10/16/2012 - 12:57 | 2895174 francis_sawyer
francis_sawyer's picture

Tic Tac [Dough] bitchez!...

~~~

http://www.youtube.com/watch?v=_YmRlQS8TeY

Tue, 10/16/2012 - 13:23 | 2895257 Ahmeexnal
Ahmeexnal's picture

Bhopal alert in the heart of Deutschneyland:

http://www.thelocal.de/national/20121016-45575.html

 

Around 2,000 people were evacuated from their houses on Monday night after a chemical accident in a food factory in Lower Saxony sparked a catastrophe alarm.

“At around 1 pm a tank of sodium hydroxide solution was by mistake filled with nitric acid,” said Heike Hauerken, spokeswoman for Kraft Foods, at the factory in Bad Fallingbostel, between Bremen and Hannover. The chemicals are used for cleaning.

A reaction started while fire fighters tried to pump the nitric acid out of the tank, producing a poisonous cloud of nitrous gases considered extremely harmful if they come into contact with skin or are inhaled.

The 250 or so people working at the factory were evacuated, as were around 800 people living in the immediate vicinity – but shortly afterwards the risk zone was enlarged to around 500 metres in radius and a further 1,000 or so people were told to leave their houses.

Next time you buy industrialized food, please check on the ingredients list and remember that if you recognize harmful chemicals used to elaborate that item, something, somewhere, does not compute.

*********

Switzerland supreme court rules in favour of changing Swiss flag: It will now sport a half crescent instead of a cross.

http://www.thelocal.ch/page/view/swiss-makes-muslims-cross-over-billboar...

Swiss International Air Lines is raising hackles among Muslims over a slogan used in a recent German-language publicity campaign.

Alluding to its logo, taken from Switzerland’s national flag, the slogan says in German, “Kreuz ist Trumpf”, literally, the “cross is trumps”, or the “cross is a plus”.

The words are used in a billboard campaign, launched within the country last month, that highlights the white cross on the back of one of its planes.

Muslims in Switzerland have responded negatively to the advertising, which they believe promotes Christianity over other religions.

When "moslem leaders" were asked why they promote iSlam over other religions in their madrassas, they dug a hole in the ground and played the ostrich game.

In a related note, Apple legal representatives have sued the prophet Muhammad for infringing copyright laws by using the trademark moniker iSlam for which Apple holds all legal rights.

 

Tue, 10/16/2012 - 12:58 | 2895184 LawsofPhysics
LawsofPhysics's picture

More garbage.  The central bank's "control" over markets will be just fine.  The problem will be when the price paid for any physical asset of real value is considerably different than the paper price.

Stop talking about paper fucking solutions when it is abundantly clear that the moral hazard is still not being addressed, paper is gamed to the benefit of a few at the expense of many and no monetary system will survive unless there are real consequences for bad behavior at all levels of society.

Let's see, look at today's news, Pandit destroys a company in under 5 years and earns 160 fucking million in compensation.  please wake the fuck up.

Tue, 10/16/2012 - 13:01 | 2895198 Flakmeister
Flakmeister's picture

In all fairness to Pandit, CITI was dead-man-walking when he signed up, he merely got to feast on the carcass...

Tue, 10/16/2012 - 13:07 | 2895224 darteaus
darteaus's picture

"...he merely got to feast on the carcass...", as will the next parasite.

Back in the '80's, you took over a company and made money selling off the pieces.

Now, you just attach yourself to the host and suck out the vital juices until satiated.  When fully engorged, you drop off.

Tue, 10/16/2012 - 13:06 | 2895226 Ahmeexnal
Ahmeexnal's picture

He did the job he was hired to do. There are no accidents or coincidences.

Tue, 10/16/2012 - 12:58 | 2895189 econprof70
econprof70's picture

If anyone is interested in how the dollar, gold and oil track over the long term, check out this chart: http://www.macrotrends.org/1334/us-dollar-index-gold-and-oil

Tue, 10/16/2012 - 13:00 | 2895192 bigdumbnugly
bigdumbnugly's picture

Contrary to popular belief, the Fed is much less concerned about the rise of gold as a challenge to their authority than many presume

No such control exists, and the Fed has essentially given up any pretense in this regard. Instead, it’s the U.S. dollar and the U.S. stock market that primarily concern the Fed.

 

 

coulda fooled me.

i guess then that those lovely waterfalls are just natural occurences after all, huh?

Tue, 10/16/2012 - 14:04 | 2895486 Lore
Lore's picture

 

 

The author has a strangely clinical / textbook / 'pigeon-holed' view that ignores Kleptocracy.

Idealistic narratives don't hold water in light of what we see every day.

Tue, 10/16/2012 - 13:05 | 2895197 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

fuck this shit....ive had it. cant get a fucking job, worthless econ degree, COL skyrocketing. Who's going to pay?

Tue, 10/16/2012 - 13:15 | 2895236 darteaus
darteaus's picture

"Who's going to pay?"

 You are!

Did you actually believe all that crap everyone told you as you were handing over your money (tuition, SS, taxes...)?

Then, welcome to the big city pal!

 

Just consider it part of your education.

Tue, 10/16/2012 - 13:19 | 2895272 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

you ignorant little fuck......how is an 18 yr old kid going to understand any of that? blaming myself for getting an education is blaming the bullet, pal....you smug little prick

Tue, 10/16/2012 - 13:39 | 2895350 ParkAveFlasher
ParkAveFlasher's picture

"Who's going to pay?" 

I think you had that question answered as soon as you took out the loan.

Who's the" ignorant little fuck" in this equation?  Nice of choice of words, btw.

Sorry to interject on a fight.  Just wanted to get my elbow in.

 

Tue, 10/16/2012 - 14:17 | 2895420 darteaus
darteaus's picture

Whoa!  Keep that tone of voice for your mother, may she soon divorce her brother.

 

You think anyone told me? 

You think I'm in a different position?

You think you are not on your own?

You think you can depend on politicians, bankers, realtors, stock brokers, etc.?

 

Sorry you are getting a tough wake up call, but pretty much everybody does.

My wake up call:  USMC - U Signed the Mother f---ing Contract

Tue, 10/16/2012 - 17:56 | 2896259 silverserfer
silverserfer's picture

how does an 18yr old "kid" get an econ degree?

Tue, 10/16/2012 - 18:30 | 2896320 Overfed
Overfed's picture

Who the fuck did you think was gonna pay back that loan when you signed on the dotted line, dude? And seriously, an eCON degree? Shoulda went to beauty or culinary school. Now you're pissed 'cause the party's over before you got to become a little Jamie Dimon or Ben Bernanke protege'.

Do what the rest of us do when the gravy train runs out of track; get a job doin' whatever you CAN do, suck it up, and pay your bills. Or fake an injury or fibromyalgia and go on SSI. Or marry a fat girl who has rich parents.

Tue, 10/16/2012 - 14:00 | 2895464 CPL
CPL's picture

Why would you shit in another man's corn flakes unless they deserve it?  He's broke, bereft of options and scared shitless.  Picking on someone in that position is shitty.  Morally and ethically.  You are acting no better than the governments of the world.

 

I'm not one to go Pollyanna on people.  If you are an older lad, our job is to make sure the younger ones don't fall off a cliff.  I would bet money you've got five ideas on the tip of your tongue to offer to someone with a stronger back and shoulders than the old farts do.  

There are limits to his professional development as an EconGeek we can provide.  But that isn't important, making sure he doesn't starve to death.

So again.  

I dare you to name five things a young lad can do to make money providing his health is good.  You name five and I'll match five.

Tue, 10/16/2012 - 14:30 | 2895656 HurricaneSeason
HurricaneSeason's picture

He could mow lawns in the union for the local city or county union and retire in 20 years and get future education paid for.

He could join the military

He could sell drugs

Sell stuff on ebay

Don't do any work that someone can email in from Malaysia for $3 a day.

 

Tue, 10/16/2012 - 14:44 | 2895717 CPL
CPL's picture

Things that men can do that don't require specialized skills and with less than 200 in startup capital.  aka shit I've done in the past to avoid going batshit crazy from boredom and avoid starving myself and my family from picking my ass.  Don't have many options at 22 with a kid.  You just work and hope the wife is on the same page of insanely frugal.  As you can see I survived and thrived.  Anyone else can to

 

Car Detailing

- Soap, water, map to find client, flyers, walking time handing out flyers/marketing

Dog walker

- If you like dogs, 10 bucks an hour.  

One of the folks I know leaves her cat with someone when she goes with her mum on cruise ships, she pay's 40 a day...per cat...and there's a waiting list at the Cat Ranch.  

Furniture restoration

- Sand paper, and wood worker tools.

- need to be good with your hands and have decent spacial ability.

- Pick up old wood pieces on garbage day and dress them up.

Furniture reclaimation.

- You are looking for white oak, birch, teak...anything that the human race has caused the extinction of.  These are the hardest and toughest of wood, everything else on the market and in home depot is garbage.  You find it, it's literally worth as much as gold.  

- skills needed, looking skils and you'll gain knowledge of wood.

 

Yardwork

Your dad hates doing it.  I hate doing it.  Most men over the age of 30 with a yard would rather pay a guy (here it's 40 an hour in Ottawa) than run around on a weekend doing something we've been doing for 30+ years.

- strong back

- get paid, get in shape.

 

 

Tue, 10/16/2012 - 14:35 | 2895680 darteaus
darteaus's picture

The name of the game is marketable job skills.  Get one or two.

1)  Join the military, and become a helo pilot, mechanic, etc.

2)  Go to community college and pick up a skill: IT, A&P mechanic, welding, auto mechanic, etc.

3)  Move to an area that is hiring - North Dakota?

4)  Take a job - ANY JOB.  Then get another.  You may need 3 jobs to make ends meet until you pick up a skill.

5)  Change your attitude to positive.  A change of attitude is free, makes a world of difference to a hiring manager and takes no time at all to acquire - once you make up your mind.

There's my five.

Tue, 10/16/2012 - 15:01 | 2895755 CPL
CPL's picture

Places you can start working tommorrow without a degree and minimal paper work.

 

1) Taiwan - English Teacher

You can start right after highschool, nephew did it and made good bank while figuring out.  He sat in a class room and played all day with kids speaking english.  not great money, cost of living is low and you will get very laid.  Bring rubbers is one thing that the nephew mentioned.

2)  Fort McMurray

Don't have a skill, sell your soul to the company store for two years.  They'll stick you where you are needed and on the job training.  Welders, truck drivers.  The baby tar sand miners make around 100k a year.  Place to stay, three squares.  Very dangerous though, stick close to the seniors to help you figure out how not to die on a mining site and you will do fine.  Word to the wise.  Don't drink at all while in camp.  Smoke dope after shift.  You'll need your wits.  

3)  Listen with your ears and not your mouth, like Darteaus mentioned.  It's point that is strong enough to restate.

Talk back from a whippet to a silver back is NEVER tolerated until you get your stripes.  It might pass mustard with your parents.  But we are all slightly less forgiving on first impressions in the real world.  Make it count.  Borrow a suit and use a mirror to get your patter straight.

4)  Fruit picker.

Fast hands = big paycheck.  none of your peers care to pick fruit, therefore know nothing about the farming universe or the potential for money making.  Faster the rythum, the more fruit (strawberries, apples, pears) picked.  Cant really do machine harvesting with fruit unless you are making jam.  It is very labour intensive and always short of hands.  It is NOT an hourly wage thing.  It is on weight picked.

Get caught loading a bucket ever and that would be the end of you.  Stay straight and honest when picking and you'll make some great friend, learn more spanish and Jamacian patois...plus if visiting either of those places, you have people to crash with and enjoy company with.

5)  Farm hand

Bail hay, move livestock.  15-25 an hour.  Usually comes with a shared house with other farm hands.

 

All 50-70k a year jobs that don't need anything more than a strong back.

Tue, 10/16/2012 - 15:47 | 2895947 HurricaneSeason
HurricaneSeason's picture

I like that Taiwan English teacher gig a lot better than walking cats. You should get some of these ideas to Obama before his debate, he's probably struggling to come up with new green jobs.

Tue, 10/16/2012 - 17:00 | 2896133 CPL
CPL's picture

A job is a job is a job.  Once a upon a time when you turned 15 and you are given the options of getting one or finding a place to live.  Ethier way no choice in getting a job.  My father's generation, working at 10 to provide for the family was a requirement.

 

Someone needs something done, has money and you can do something about without physical trauma...get her done.  

  • Want to know why boys don't grow up to be men today?  
  • What makes them beta as fuck?

 

Easy.  Work defines us as men.

  • It gives confidence.  
  • It gives clarity unlike education to what you really like doing.
  • It creates friendships that are more than lip service.
  • It puts money in your pocket, well mostly.

 

Meet a man that judges you by your job.  Wish them well.  

If they persist in judgement of what gets the bills paid.  Destroy them without hesitation or mercy.  

They will not be missed by anyone.

Tue, 10/16/2012 - 15:12 | 2895794 RafterManFMJ
RafterManFMJ's picture

Sorry Darteaus, you have it all wrong.

No, here's what you do; move back into Mom's basement. Get food stamps, welfare, any freebies you can; enough mouths on Leviathan's teats, eventually it will die. Get an APT as soon as your HUD vouchers come in; sublet it, rent our rooms. Get a job tending bar, delivering Pizzas - under the table. Pocket that sweet sweet income.

Buy a deer liscense. Shoot a deer. Skin. Cook. Eat.

Kill wild hogs - tasty and all farmes want them dead.

Join the military? WTF for? To lose yet another war, get your fucking arms blown off, just so the feral incompetents in DC can play Global Chess with you life, and reap nice fat military contracts?

Remember, your only as fucked as you allow yourself to be; the way to win is do not play. 

Tue, 10/16/2012 - 15:15 | 2895812 darteaus
darteaus's picture

Yup, my era is long past!

Tue, 10/16/2012 - 15:19 | 2895824 RafterManFMJ
RafterManFMJ's picture

 

Edit.

It's amusing the number of recommendations you get to 'join the system and work hard' after the system systematically and intentionally FUCKED YOUR ASS, and all those in your generation, with malice aforethought. And the remedy is, get another degree, work hard, pick fruit by the pound, a cold exile to a Canadian mine, join the .mil to get some trigger time in on some brownskins..?

Tue, 10/16/2012 - 17:10 | 2896157 CPL
CPL's picture

Actually all the jobs I listed are cash jobs and I've held all of them at one point in time except for the Oil sands and Taiwan english teacher.  A job is a job is a job.

 

Although appearently your prescription for welfare is feasible.  It kind of all goes away once it collapses though.  Greece is a good example.  Italy.  Spain...soon France.  Next summer USA and Canada.  So what you offer is another day scraping by, it won't change the fact he's up to his eyeballs in debt.  Then again...not sure why he's paying the student loan if things have become that tight.

 

Become cash and carry.  All the jobs listed should help him dodge the collector for seven years until the statue of limitations runs out on the loan...neat trick huh?

Tue, 10/16/2012 - 18:36 | 2896333 Overfed
Overfed's picture

Just looking at the Worksource web listings for entry-level work in my small town yielded 16 positions for someone with no experience.

https://fortress.wa.gov/esd/worksource/SearchResults.aspx?CurrentPage=Se...

Tue, 10/16/2012 - 13:14 | 2895249 CPL
CPL's picture

Are you handy and have tools?

Want hard assets like gold, rare earth metals but don't have the bread for the hedge?

Looking for something to make some coin to avoid getting booted out of your place?

 

Then the exciting world of scrap is for you /b/rother!

 

  • Only skills needed looking skills.
  • Picking skills.
  • craigslist/kijiji posting for Metal Waste Disposal and Recycling.
  • Something to move stuff around.  Truck, car, whatever

People will drop junk off for you to tear apart.

 

http://www.scrapmetaljunkie.com/

 

What else were you doing otherwise?

Tue, 10/16/2012 - 13:59 | 2895461 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

I bought phys gold in may just before graduating, but i had to sell it to pay stu loans

Tue, 10/16/2012 - 14:23 | 2895619 CPL
CPL's picture

Good, you've learned an important lesson of cash flow and having a fall back point.

So as an overview of your skills:

 

You know how to count (econ),

Very handy for managing the only economic reality that all humans need to know regarding cash flow, you've even been introduce to a real example.  Believe it or not you are now half way through the battle of running your finances and your own business.

You know how to use a computer and a complex UI

You posted here

You are literate,

You read the message and it was recieved...sort of.

 

Now, understand that you are now more prepared for any type of business on the planet in any country.  All you are missing is a service to sell.  In your case, that product and service is yourself.  Since I've never been asked if I know any Junior Econ guys for a job, I do get requests for my boys to go haul shit around for $20-25 bucks an hour.  So how do you make that bank?

Can you borrow $200 bucks?  

If you can get the following.

- Work boots, a good pair will start at 120.

- Work socks, do not EVER wear regular socks in work boots, you will end up wanting to hack your own feet off at the end of the day, 5 pack of thick work socks costs 10 bucks for a five pack

- Pair of medium leather gloves.  Protected leather palm to avoid losing a hand.  They run at 50 for a good pair.  Spend the money, lose a finger on a job, you will have lost that finger forever.

- Ad space.  Kijiji, eBayClassifieds, Craigslist, Angieslist.  $20 bucks is a good start but unnecessary in your first month.  

 

In all of them there are people looking for RFI's and RFP's (Request for information and Proposals).  In layman's terms, you are going to sort the wanted int he services section of the sites.  you don't have to advertise.  Pick what you think you can manage.  Yard work.  Bush work.  Carrying 30 tonnes of cement in bags.  Hauling bricks.  Running up and down ladders.

 

Again...lots of options Lad.  Your youth is your asset.  Don't ever forget that.  Just remember to do something with it.

Tue, 10/16/2012 - 14:02 | 2895471 TealDrops
TealDrops's picture

ROTFL, love that pic of 4chan.

Tue, 10/16/2012 - 14:31 | 2895663 CPL
CPL's picture

4chon? chan?  what is this chan place?  Is the menu good?

Tue, 10/16/2012 - 14:23 | 2895616 exi1ed0ne
exi1ed0ne's picture

Don't seek a job, seek betterment.  Seek knowledge and an understanding of your fellow man.  Look at the trades.  Volunteer.  Meet people in the community and develop a network.  Be visible.  There is ALWAYS work to be done, but people have to know and trust you to be able to provide it.  It might not be sitting in an ivory tower dreaming up papers like "Inflation Dynamics with Search Frictions: A Structural Econometric Analysis", but you'll have beans and butter on the table.  Go ahead and try it - you are aparently not doing anything else anyway.

Wed, 10/17/2012 - 05:35 | 2897482 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

if you actually learned anything, you might get a job with the bitcoin startups.  Ask for payment in bitcoin and get unemployment benefits.  Save the bitcoin, or trade them for PMs in coinabul.

 

If you go all moral on me, the one thing you have to understand is that *ALL PROMISES ARE NULL AND VOID**.  You will learn this, wether you want it or not.

Tue, 10/16/2012 - 13:02 | 2895201 Nothing To See Here
Nothing To See Here's picture

Okay, one can assert that gold moves up when growth prospects decline. But one should also explain his reasons for endorsing this krugmanesque logic.

I for one will admit that I can't figure out why declining growth should mean gold up.

Tue, 10/16/2012 - 13:03 | 2895203 orangegeek
orangegeek's picture

The US Dollar remains the key.

 

http://bullandbearmash.com/chart/usd-index-daily-october-08-2012/

 

For the dollar to fall, the Euro, British Pound, Yen and Franc must rise (amongst others).

Europe has been such a dominating economic success over the last 5 years - so these currencies are only bound to go higher....well, not really.

Tue, 10/16/2012 - 13:03 | 2895209 mark mchugh
mark mchugh's picture

Hey, I really liked the "War Games" graphic!

Because I made it. 

You're welcome

Tue, 10/16/2012 - 13:06 | 2895221 SilverDoctors
SilverDoctors's picture

Apparently the future of gold is headed west, as the US is now EXPORTING A RECORD AMOUNT OF PHYSICAL GOLD to Switzerland, Hong Kong, and London.

Got phyzz?

http://www.silverdoctors.com/the-u-s-suffers-huge-gold-deficit-as-record...

Tue, 10/16/2012 - 14:09 | 2895508 LawsofPhysics
LawsofPhysics's picture

Wouldn't be east then?  

Tue, 10/16/2012 - 14:43 | 2895708 knightowl77
knightowl77's picture

If you go West far enough...you eventually arrive in the Eastt

Tue, 10/16/2012 - 13:11 | 2895238 ParkAveFlasher
ParkAveFlasher's picture

<< Apmex

<< Kitco

Tue, 10/16/2012 - 13:33 | 2895327 seek
seek's picture

Tulving.

Tue, 10/16/2012 - 13:12 | 2895239 TrumpXVI
TrumpXVI's picture

I'm a gold bull and a Peak Oil adherant; one of the best articles I have read.

My only criticism is that I'm very doubtful the U.S will become a nat. gas exporter of any great volume.  The so called "new supply" will prove ephemeral once the gas companies run out of venture capital suckers to keep fueling their unprofitable drilling ops.  The only people really making any money on nat. gas are the ones who have the contracts to actually drill all the holes; Schlumberger, et al.

Tue, 10/16/2012 - 13:34 | 2895335 francis_sawyer
francis_sawyer's picture

Once we strike a TUNGSTEN lode on this continent we'll be home free...

Tue, 10/16/2012 - 13:11 | 2895240 Sixdeuce062
Sixdeuce062's picture

paul krugman urg, hes like the village idiot who runs in the town up next to the friefighters , who are fighting a house fire and saying the the house is on fire you should throw gasoline on it. man can point out the obvious but can solve a problem to save his life that i have th strange urge to punch him in the face every time i see him

Tue, 10/16/2012 - 13:16 | 2895258 DavidC
DavidC's picture

I think the various Central Banks have become target focused on keeping the stock markets up and there will be an exogenous event that precipitates a fall, because their eyes are off all the other balls. None of them are operating in a vacuum although that appears to be the way in which they are working.

DavidC

Tue, 10/16/2012 - 13:21 | 2895275 Quinvarius
Quinvarius's picture

Gold is how the US government becomes solvent again, just like in 1981, when they ran it up to the correct price to make our debt asset backed.  Despite the hibbity jibbity talk, the easiest path out of this global mess is to let gold rise, as they have been doing.  No one benefits from gold being underpriced anymore.  It is destabilizing.  Once they play the 1981 card again, we can all go back to having a real economy. 

Tue, 10/16/2012 - 13:44 | 2895377 LULZBank
LULZBank's picture

This time it will happen globally, not just in US and will raise quite a few eyebrows. Sheeple might catch on.

Gold will have to be sold at those prices and who will be buying?

Tue, 10/16/2012 - 14:16 | 2895535 oddjob
oddjob's picture

Gold is the money and it will be the paper that needs selling.

Tue, 10/16/2012 - 13:24 | 2895285 Gene Parmesan
Gene Parmesan's picture

Have we even seen the full effect of these various forms of QE yet?

Tue, 10/16/2012 - 13:25 | 2895290 disabledvet
disabledvet's picture

The idea that the Fed "moves the economy forward" is so ridiculous I wish I could say I was surprised YET AGAIN that it gets repeated here. PRODUCTION moves the economy forward. INNOVATION moves an economy forward. Federal STIMULUS moves an economy forward. Interest rates? Sure...they obliterated Wall Street in 2008...and can make even the idea of recovery stillborn should the Chaiman "do a 180" and start raising rates. But at best "the Fed can create confidence"...such that credit is extended freely and Government need not worry "from whence comes the next bailout." Clearly the Chairman has failed in this last regard.

Tue, 10/16/2012 - 13:26 | 2895292 rlouis
rlouis's picture

Interestingly, Paul Krugman has done some of the best (and politics-free) commentary on gold in the past year; I highlighted his views in last Autumn’s essay Gold and Economic Decline. I remain in agreement that the poor prospect for economic growth, rather than inflation from ‘money-printing’, has been the primary driver of gold for the past decade.

This can only be considered valid if the government's calculation of CPI is accurate. If the government's CPI calculationis bull, then the conclusion is wrong. 

 

Contrary to popular belief, the Fed is much less concerned about the rise of gold as a challenge to their authority than many presume.

 

The average Jane and Joe have no clue about central planning, psychotic power trips, and how essential controlling the price of gold is to central bankers fiat aspirations. 

Tue, 10/16/2012 - 14:39 | 2895697 ebworthen
ebworthen's picture

And the FED knows that if push comes to shove outlawing or punitive taxation of precious metal sale and purchase will do the trick quite nicely.

After N.D.A.A. and the Supine Court's raping of the Constitution and the rights of the individual, confiscation/elimination of PM transactions and a move to all digital money would be nothing.

Tue, 10/16/2012 - 16:07 | 2896006 Vooter
Vooter's picture

"And the FED knows that if push comes to shove outlawing or punitive taxation of precious metal sale and purchase will do the trick quite nicely."

Oh, really? Like the outlawing of marijuana has stopped marijuana smoking?

Tue, 10/16/2012 - 17:43 | 2896232 ebworthen
ebworthen's picture

Pot is meant to be consumed, stinks to high heaven, and is flammable.

A fine ocular pressure reliever, aphrodisiac, and flavor enhancer.

A store of value has to be exchangeable for goods and services.

Certainly PM's would be used in the black market, but their value would be depressed and the goods and services you could exchange it for would be extremely limited.

I'm a PM believer; have just seen enough of Washington and Wall Street skullduggery to be fairly certain that this is in their playbook as it would force many into digital (taxable/track-able) fiat currency.

Tue, 10/16/2012 - 13:31 | 2895317 rosethorn
rosethorn's picture

The US Treasury reported on May 31, 2011 that US gold holdings amounted to 261,498,899 troy ounces.

Per the Federal Reserve website this gold is valued at roughly $42 per ounce for reporting purposes.

At $1770 per ounce(today's price roughly), US gold holdings would be worth $462.8 billion; however at the current "book value" of $42 an ounce used by the Federal Reserve the valuation would be only $11 billion.

The US should clearly raise its "book value" for its gold holdings to at least a three digit number; the current book number is absurdly low.

Tue, 10/16/2012 - 14:21 | 2895558 hidingfromhelis
hidingfromhelis's picture

Methinks the inventory "shrink" might just offset that little accounting adjustment.

Tue, 10/16/2012 - 13:31 | 2895318 ATM
ATM's picture

You suck Gregor. anyone who posts anything by Krugman and agrees with it is a dumbass.

This: 

 

"For this is essentially a “real” story about gold, in which the price has risen because expected returns on other investments have fallen; it is not, repeat not, a story about inflation expectations. Not only are surging gold prices not a sign of severe inflation just around the corner, they’re actually the result of a persistently depressed economy stuck in a liquidity trap — an economy that basically faces the threat of Japanese-style deflation, not Weimar-style inflation."

 

is utter bullshit. No one with a brain wants to own dollar denomiated assets with negative real rates of return. They are negative because the fucking dollar is being debased via money printing. If we were in a deflationary envrionment wouldn't we all want to just hold onto our dollars so that we could buy all those wonderful plastic toys from Walmart later at a lower cost?

 

Gold is being bought because those of us that see what is happening is that the unit of exchange is being debased and it's store of wealth capacity is being diminished by the second. 

Tue, 10/16/2012 - 14:44 | 2895714 ebworthen
ebworthen's picture

Perhaps what he is saying is that even a Keynesian Potato like Krugman can have a moment of lucidity.

Gold does well in deflation as well as inflation; it only suffers when the lies of debt spending and a fiat currency fool a majority into the black hole of equities.

The Potato with a Beard (Krugman) would probably argue that we need inflation to "reduce" the debt and "stimulate" growth and that when a majority believe that things are "better" and "healthy inflation" arrives gold will go down in value (Keynesian wet dreaming).

Tue, 10/16/2012 - 15:16 | 2895816 WhiteNight123129
WhiteNight123129's picture

It is not totally bullshit, the hoarding is a result of no good financial investment alternative and negative real rates.

The real rates can be negative at 2% inflation if you have 0% nominal or 8% inflation when nominal rates are at 6%.

What we need is 3% negative real rates for 10 years, it can happen at a 3% inflation or 10% inflation, the fed will adjust the nominal from 0% to 7% that is it

As for Krugman, where he is wrong is that if the Fed was letting deflation happen, real rates would become massively positive, that would make the burden of debt increase first, and later we would have to do debt discharge (bankruptcies). Bankruptcies is a a way to get rid of the debt without sacrificing the currency. The other way is inflate away (what we are doing now with negative real rates).

Krugman is wrong in the sense that we do not have positive rates like in true deflation without Fed backstop.

If the Fed had let deflation happen without printing back in 2008 and take the adjustment of debt to GDP by bankruptices (debt destruction), we would have a very strong dollar today, a very very sharp decline through 2010 likely. If we then start to print after bankruptcies, we might need to print less, and the recovery might be stronger because we have flushed the most idiotic business models. So Hoovers and Keynes were correct. Flush the most idiotic guys doing leverage everywhere first, and then print to relieve the guys who managed to survive three years into the mayhem by printing. But since a lot of bad debt has been erased already, you do not think to inflate away that much, because less debt is gone. The current solution does not promote Darwinian businesses. So a good bit of bankruptcies first, and then we need to print less after that, we need to destroy less debt from teh second mean which is inflate away. The problem is that we rely to much on the printing today, not enough on the bankruptcies, and that the regulation let RRR go very low, the prudential lending practices go by the window, we let usury happen. Some paper currencies are good (Hong-Kong, Singapore), but they ahve strict loan to deposit, strict reserve requirements, and littel gov debt, and limits on usury practices. 

So what is correct is that hoarding comes from negative real rates (lack of real investment opportunities), but those can happen at any level of inflation it is the difference that matters. What is incorrect from Krugrman is that if we had let the deflation taken its course, Gold would have been wiped-off in a responsible debt restructyingin 

 

 

Tue, 10/16/2012 - 13:39 | 2895352 WhiteNight123129
WhiteNight123129's picture

All assets move up in monetary printing when nominal rates move down (financial assets) and real rates become negative (real assets and commodities). WHen inflation start to show up, nominal rate will move up but real rates will keep being negative. Then you have bifurcation.

As long as the rates are negative in real terms, regardless of the prices, and regardless of the level of inflation you have hoarding. IF you want dishoarding you need real positive yields. If the Fed was to do that now, 20% of the US population would starve.

The Gold trade is both a printing trade (moving all assets up) and a negative real rate trade (hoarding) at this stage. For now equities and bonds move up along with commodities. But for different reasons. The financial assets move up because nominal rates have been wacked by expansion of medium. Commodities and Gold move up for a different reason, they move up because at the same time that nominal rates are down (financial asset bullish) real interest are negative.

 

At some point the nominal rates will increase when nominal wages increase --non adjusted to inflation, just nomina-- . The Fed will move the nominal rates a tiny bit higher in order to prevent the yield to get too negative in real terms, while the real rates will keep being deeply negative. This is where the long commodities short financial assets will be the most interesting. Commodities keep moving up when rates are negative even if nominally those are high (1970s).

High positive rates (2009), act as a lid on prices, and of course the Fed fought that by flooding the system with money which represses the rates, the rest is history.

So for those wondering why the commodities and the financial assets still move higher together, it is because we had at the same time nominla rates down and negative real rates.

When the Fed stop printing, a lot of Gold bugs will be baffled because too many of us think the Fed will print to infinity. Re-acquire the baffle sell-off because the rates will be negative for years to come even if the nominal rates move slowly to the moon (finanical asset bearish), they will be behind inflation as long as nominal GDP to debt is low.

When nominal GDP to debt is high again, the Fed can re-engineer a new high real rate increase and change of direction of the economy clockwise again as opposed to counter clock-wise, then circulation start to be flowing back into financial assets (clockwise) and we start a new leveraging cycle (it will take years to get there). Do not hold Gold at that time (years away anyway), for now we are in counterclowise move where monied capital gets converted into circulation slowly (deleveraging).

 

 

Tue, 10/16/2012 - 14:52 | 2895733 ActionFive
ActionFive's picture

I always like to see someone explain/commodities/rates/without state manipulation.

Just real rates.

 

Tue, 10/16/2012 - 13:55 | 2895445 emersonreturn
emersonreturn's picture

the US needn't concern itself with inflation?  food prices may be escalating globally but the USA in spite of drought shall remain unaffected, alongside Japan...oil will drift with global expansion rather than suffer increased demand (not in the least contradictory)...gold according to Krugman has seen its best shot...really?

Tue, 10/16/2012 - 14:04 | 2895484 TealDrops
TealDrops's picture

Interesting link to Krugman. Indeed, as skeptics tend to claim about about the Austrians, a broken clock is right twice a day.

Tue, 10/16/2012 - 14:35 | 2895682 ebworthen
ebworthen's picture

QE(X) = Nuclear Bombs

Stimulating nuclear activity for bankers wallets, nuclear fallout for future generations.

Tue, 10/16/2012 - 15:21 | 2895838 WhiteNight123129
WhiteNight123129's picture

Gregor you have it backwards, if the Fed has managed to reflate, they would have stopped printing, the nonimal rates would have moved higher (but still negative), that would have hurt the bonds and the equities. The bears are looking for wage increases to pan-out.

Wage increases are bearish for hte market and bullish for the economy.

The economy expanding is only bullish for stocks in a leveraging cycle. In a deleveraging cycle increase in economic output means increasing nominal interest rates (stock and bonds bearish) while negative interest rate still stay negative at the same level (commodities bullish).

So the long commodities short equities is frustrating for as long as wages are not increasing. When wages start to increase then the bifurcation between bonds stocks and commodities happen.

 

Tue, 10/16/2012 - 15:44 | 2895938 DowTheorist
DowTheorist's picture

We can derive the following practical conclusions from stagnation:

 

1)     It will not be time to buy and hold. During the nineties, one just had to buy a stock index and ride the trend. No need for timing. Just buy and hold. These times are over.


2) Timing will be essential to survive financially or, for those excelling at it, thrive.

3) Thus, it will pay off to pay attention to cyclical bull and bear markets.

 

4) Gold as a “secular” investment theme should belong generously to one’s portfolio. More on gold and its different “flavors” here: http://bit.ly/R7pAjs

 

We have an example right now: While maybe the economy will crumble, the SPY is clearly up for the year. What should have done the investor? Pass the investment on zero growth? Or follow some kind of timing device like the Dow Theory and align her/himself with the prevailing trend and make money?

 

More thoughts on how to thrive in challenging times here:

 

http://www.dowtheoryinvestment.com/2012/10/jim-rogers-and-dow-theory.html

Tue, 10/16/2012 - 15:53 | 2895966 CuriousPasserby
CuriousPasserby's picture

The best plan I heard was to not go on the gold standard, but to let gold and silver circulate along side fiat and let the best man win.

Tue, 10/16/2012 - 21:07 | 2896658 Acidtest Dummy
Acidtest Dummy's picture

That sounds like a funner better plan, which is the best plan I've heard.

Tue, 10/16/2012 - 16:35 | 2896073 Vooter
Vooter's picture

I hope the market collapses, and I hope Ben Bernanke puts a pistol in his mouth and pulls the trigger. And I hope everyone gets all weepy-eyed about it, just like they did after 9/11, when poor America was attacked because those mean brown people who we've never bothered and who are sitting on OUR oil "hate us for our freedoms"--LOLOLOLOLOLOL!!!

Tue, 10/16/2012 - 22:55 | 2897122 nastaking
nastaking's picture

The Ainol Novo 7 Crystal Reviews II hasn't officially been released in Australia, but you can purchase it through online store , who supplied our review unit.

Do NOT follow this link or you will be banned from the site!