Chinese Gold Imports Through August Surpass Total ECB Holdings, Imports From Australia Surge 900%

Tyler Durden's picture




 

First it was more than the UK. Then more than Portugal. Then a month ago we said that as of September, "it is now safe to say that in 2012 alone China has imported more gold than the ECB's entire official 502.1 tons of holdings." Sure enough, according to the latest release from the Hong Kong Census and Statistics Department, through the end of August, China had imported a whopping gross 512 tons of gold, 10 tons more than the latest official ECB gold holdings. We can now safely say that as of today, China will have imported more gold than the 11th largest official holder of gold, India, with 558 tons.

Yet despite importing more gold than the sovereign holdings of virtually all official entities, save for ten, importing more gold in July than in any month in 2012 except for April, importing more gold in 8 months in 2012 than all of 2011, and importing four times as much between January and July than as much as in the same period last year, here is MarketWatch with its brilliant conclusion that the 'plunge' in gold imports in August can only be indicative of the end of the Chinese gold market, and the second coming of infinitely dilutable fiat.

“China’s near-term appetite for gold appears to be waning as bullion imports from Hong Kong slow,” HSBC analysts said in a note following the data release last week.

 

Anecdotal evidence also pointed to the cooling trend, with one Hong Kong bullion dealer saying the word from mainland clients was that gold inventories are saturated.

 

“What we are hearing from our customers is that they were buying gold rapidly over the last couple of years, but they would now see some of their stocks sold off before they rebuild some of their inventories,” Scotia Mocatta managing director Sunil Kashyap said in Hong Kong.

There is spin, and there is of course, reality. We urge readers to identify where on the chart below is the evidence of Chinese disillusionment with gold:

Furthermore, with the status quo cartel in desperate need of China stepping up its monetary easing, and jumping right into the race to debase, which is absolutely critical to halt the plunge in tech company revenues and earnings, any interim slowdown in purchases is merely a springboard for even more purchase in the future once inflation does come back to China with a bang.

Incidentally, one thing that MarketWatch completely forgot about is that in Q4 Chinese gold purchasing, all monetary else equal, is set to spike in Q4. From the South China Seas:

Fung expects gold imports on the mainland to stay soft this month as prices have continued to remain high.

 

"However, gold consumption is likely to climb again in the fourth quarter, a traditionally peak season when Chinese people buy gold jewellery for weddings and presents," he added.

All rhetoric aside, one unspinnable aftereffect of China's relentless appetite for gold comes from a different place, namely Australia, where gold just surpassed coal as the second most valuable export to China. From Bullionstreet:

Australia's gold sales to China hit $4.1 billion in the first eight months of this year as it surged by a whopping 900 percent.

 

According to Australian Bureau of Statistics, the yellow metal became the second most valuable physical export to China, surpassing coal and only behind iron ore.

 

The unprecedented jump in gold sales, along with continued acceleration of export revenues for other commodities led by coal, up 80 per cent to $4bn, caused total exports to China to rise by 10.7 per cent for the year to August, the Bureau said.

 

Perth Mint supplied most of the gold to China through a variety of banks.

 

Analysts said Chinese buyers are hoarding the precious metal amid a slowing economy, property-buying restrictions and uncertain financial markets as its central bank increases its holdings.

 

China's foreign currency reserves of gold are low and its move to build them up will provide an important base demand for gold, they added.

In other words, take the chart above, showing only Chinese imports through HK, and add tens if not hundreds more tons of gold entering the country from other underreported export channels such as Australia. One thing is certain: China no longer has any interest in buying additional US Treasurys. What it does have an interest in is up to readers to decide.

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Sun, 10/21/2012 - 22:53 | 2908815 ShrNfr
ShrNfr's picture

Ya ever hear of titanium? They recycle the ingots.

Sun, 10/21/2012 - 23:12 | 2908830 jerry_theking_lawler
jerry_theking_lawler's picture

because, how else can they spend their $80/ounce investment (gold/silver ration 16 @ $5/oz silver to 'dig the stuff out of the ground').

Mon, 10/22/2012 - 04:41 | 2908990 Al Gorerhythm
Al Gorerhythm's picture

To do this with it of course. They are producing fake bars and coins that are copies of an Aussie mint's products. Police are involved.

http://au.news.yahoo.com/latest/a/-/latest/15182799/counterfeit-aussie-g...

Mon, 10/22/2012 - 15:58 | 2910505 daedon
daedon's picture

Because you can't print GOLD & besides, you can't eat FIAT money either.

Sun, 10/21/2012 - 16:25 | 2908211 VonManstein
VonManstein's picture

can someone explain the significance of this swap dealer chart to me please? thanks

http://postimage.org/image/i26dxsf8n/

Sun, 10/21/2012 - 16:31 | 2908219 Quinvarius
Quinvarius's picture

When you buy phsyical, you hedge with leveraged paper.

Sun, 10/21/2012 - 16:37 | 2908233 VonManstein
VonManstein's picture

so this large spread suggests large physical buying? and thus hedging?

Sun, 10/21/2012 - 18:37 | 2908451 Quinvarius
Quinvarius's picture

I have no idea what is bank speculation, what is miner hedging, or what is end user/retailer hedging.  I am just saying that is what a normal person would do. 

Sun, 10/21/2012 - 16:29 | 2908214 Joebloinvestor
Joebloinvestor's picture

China intends on becoming the next reserve currency.

The US better get off it's ass as it may take ten years which will pass with the blink of an eye.

Sun, 10/21/2012 - 17:17 | 2908292 LawsofPhysics
LawsofPhysics's picture

Good, I will be only accepting gold from China for future agricultural products they have many mouthes to feed, fucking bring it.

The U.S. needs to get off it's ass and China needs to open it's books and be more transparent if they want the reserve status.  Let's see which happens first.

No gold-backed Yuan, no reserve status, period.

Sun, 10/21/2012 - 17:37 | 2908331 centerline
centerline's picture

I'm as pissed off as anyone else here.  A honest, hard-working, productive person working in a REAL career and have been getting progressively screwed for it.  But, we have to be really careful about what we wish for I think.

If anything happens too quickly, we are set to go mad max as virtually every major urban/suburban area goes full-tilt New Orleans/Katrina and worse.  Is possible that nowhere is safe - even in the country.  Is possible that police state winds up worse for some than not depending on the potential abuse of power.  Who knows.  Roll of the dice my friend.  So many variables.

The real shitty thing is that "something" nasty is inevitable.  And I hate to say it, but the goal seems to be to stretch this out over a long period of time and step up the damage control as needed.  If something unexpected happens, I am pretty sure that all bets are off.

Sun, 10/21/2012 - 17:45 | 2908346 LawsofPhysics
LawsofPhysics's picture

Quit your crying, Nature and the laws of physics make no promises regarding anyone's survival.

Unless the Yaun is gold-backed, it is just another paper fucking promise.  I see lots of junks with not one intelligent response to the contrary.  The entire world is playing a fiat game and greed, corruption and manipulation can be found in every country.  Paper is paper is paper.  Wake the fuck up sheep, the elite in both China and the U.S. have been on the same fucking page for well over 20 years, this is way China has direct access to the treasury auctions you dumb motherfuckers.

Don't get mad, the facts are what they are but paper promises will always  be gamed by those who know what this is really about, power and control.  Money is an illusion, always has been, and every so often societies are made to suffer and re-learn what true wealth really is.  Some things never change and the world is always at war.  Stupid sheep.

Sun, 10/21/2012 - 18:42 | 2908453 fnord88
fnord88's picture

Why do you think it is a good thing for governments to fix the price of gold? Doesn't stop their ability to print, just means they peridoically change the fixed price? Would you support the government fixing the price of anything else?

Sun, 10/21/2012 - 22:25 | 2908779 SpicyTuna
SpicyTuna's picture

He never said that.

 

Commodity backed currency =/= fixing the price of said commodity.

 

You appear to not apply your own "...support the government fixing the price of anything else?" reasoning on credit and money - if you are indeed satisfied with the current monetary system.

Sun, 10/21/2012 - 17:45 | 2908348 DosZap
DosZap's picture

 If something unexpected happens, I am pretty sure that all bets are off.

My $ is on if the EXPECTED happens, all bets are off.

All the new anti Const SO called laws that have been passed, and the build up of .goobers stockpiles, is telegraphing to us ALL what is headed this way.

WTFU.

Sun, 10/21/2012 - 17:47 | 2908353 LawsofPhysics
LawsofPhysics's picture

Expected by those who planned it, unexpected by most sheep.  Good thing I like lamb.

Sun, 10/21/2012 - 21:56 | 2908743 SWIFT 760
SWIFT 760's picture

US Fed doesnt open its books and offers no transparency and those kikes have managed US reserve status. 

Whats the diff should the chinks pay for ag products in gold and or be a gold backed reserve currency? 

Sun, 10/21/2012 - 17:23 | 2908306 Shelby Moore III
Shelby Moore III's picture

Backing the Yuan with gold, will tie China to their failure of being kings of hard resources and suppressors of the knowledge age:

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#StoringIdleSavings

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#FutilityofFinancing

It benefits the kings of passive capital only. The purchasing power of gold is falling way behind the knowledge production value in the economy.

Sun, 10/21/2012 - 17:46 | 2908349 LawsofPhysics
LawsofPhysics's picture

now if only energy production could keep up.

Sun, 10/21/2012 - 18:23 | 2908356 Shelby Moore III
Shelby Moore III's picture

Energy is never created nor destroyed, it is always conserved via transfer.

Knowledge production is potential energy:

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#EnergyofKnowledge

Peak energy is a misconception of reality:

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#WherestheBeef?

Of course the peak oil fanatics and other uninformed fools will not bother to read the above link and learn, and instead they will down vote based on emotion and illogic.

Perhaps these uninformed fools don't know that recently it was peer-reviewed sciencifically proven that the force of gravity derives from the degrees-of-freedom (i.e. knowledge) in matter:

https://groups.google.com/d/msg/scala-debate/vysv97J0xok/l1boM1tvpZgJ

Sun, 10/21/2012 - 18:29 | 2908421 LawsofPhysics
LawsofPhysics's picture

No shit sherlock.

But if you really think that you can interupt certain biological cycles and shift the energy from certain areas to another without  any real consequences, you are beyond stupid.  For example, you cannot exchange all the bacterial mass for additional human mass.  Sorry, there are many critical ecosystems that are using chemical and solar energy to do all kinds of essential chemical conversion (as critical elements like carbon, nitrogen, sulfur, etc, are cycled though various oxidation states).

Shut down any one of these cycles and life on this planet will not be recognizable and it certainly won't involve humans.  Same as it ever was.

Go ahead though, keep fueling the mis-allocation and mal-investment of capital and resources. The latter is all the really matters anyway.

Sun, 10/21/2012 - 18:30 | 2908432 Shelby Moore III
Shelby Moore III's picture

Knowledge production is about finding Coasian routes around insufficient degrees-of-freedom.

I don't think I ever wrote that we can increase energy transfer exponentially with the debt as we do now and not expect to have failure.

What we can do (as I showed in my article has been done since beginning of recorded history), is to use knowledge production to increase efficiency of production w.r.t. to both manual labor and energy forms.

Heck iron was a precious metal 332 B.C.!

Sun, 10/21/2012 - 18:36 | 2908440 LawsofPhysics
LawsofPhysics's picture

There have been numerous extinctions throughout history as well (just ask those folks on Easter Island).  Shit, fresh water will be precious for many in the near future.

Sorry, did you actually have a point?  if your point is to simply quit complaining and actually do something, well then I agree.  Just don't infringe on my current way of life when disovering your "knowledge" as I may have a few good ideas of my own.  I don't see any peer-reviewed work in your links either.  Cite the journal properly.

Sun, 10/21/2012 - 19:55 | 2908485 Shelby Moore III
Shelby Moore III's picture

I went jogging, just got back.

I did not downvote your comment to which I am replying. Someone else did.

Emergent theory of gravity:

http://en.wikipedia.org/wiki/Entropic_gravity#Erik_Verlinde.27s_theory

"On the Origin of Gravity and the Laws of Newton. The paper was published in the Journal of High Energy Physics in April 2011."

I find Erik's explanation in the following video makes it easier to understand.

http://www.youtube.com/watch?v=yk_Yy6TqgJs#t=675s

My point and I argue in my paper that finance is the problem, because knowledge can not be financed. Knowledge can not even be transfered with a store-of-value. This is an incredibly profound realization.

So yes, I am saying that people are focused on the symptoms (and not the cause) and thus the wrong solutions.

I have no qualms with preparing for a potential meltdown of the global economy. Indeed it is possible. Especially when you consider that the vested interests of passive capital can not continue to own the earth, if knowledge is allowed to flourish. See the math for that in my paper. Thus they have an incentive to cull the knowledge producers. Apparently, "they" (or maybe it is just a natural result of finance) want want a world of subservient (mindless) labor, but this is the antithesis of resilency and survival.

So in that respect, we are on the same page. Exponential debt is very dangerous. Nevertheless I think the human species is very resilient and knowledge production will prevail, even if the kings of passive capital reach for their nuke button and underground bunkers, as a last defense of their power.

Mon, 10/22/2012 - 10:27 | 2909384 BooMushroom
BooMushroom's picture
Knowledge can not even be transfered with a store-of-value. This is an incredibly profound realization

Isn't a library a knowledge transfer store of value? Hell, isn't ZH?

Mon, 10/22/2012 - 16:36 | 2910659 Shelby Moore III
Shelby Moore III's picture

If others have downvoted before understanding the subject matter, then it shows the voting system here does not represent a measure of quality or factual correctness.

Try again to read what you quoted. That quote doesn't state knowledge can't be shared. And in fact, if you read the article I wrote, it states that knowledge gains value by being shared:

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#FinanceabilityofKnowledge

Now read again what you quoted. What does it say?

It says that knowledge can not be transferred by transferring money. We can share the knowledge, but we can't transfer it into someone's brain with money. Only the person can decide if they want to be knowledgable. Money is even a poor incentive to acquire knowledge, as most people know, we work best on that which we find interesting. The more important point, is that an instant transfer of money can not transfer the knowledge instantly from one person to another or from one group of knowledge producers to another group (with an expectation of return on investment at an interest rate starting immediately).

Sun, 10/21/2012 - 18:00 | 2908380 kliguy38
kliguy38's picture

 "The purchasing power of gold is falling way behind the knowledge production value in the economy."

REALLY??? what about the purchasing power of all that fiat USD they've got??? Betya they'd like ta get a lot more of that chit in their coffers.....(sarcasm off)

Sun, 10/21/2012 - 18:19 | 2908396 Shelby Moore III
Shelby Moore III's picture

This is non-intuitive and it will take some study and effort to wrap your mind around the reality of the world.

Think about who is the "they" in your statement. It is the rich and vested in China. The working class of China are being suppressed by the Yuan peg. Even the middle class end up in speculative bubbles such as real estate, because the of this Yuan peg trap. I explained this in more detail at my link below.

The last thing China needs is to move even deeper into the hard resources monopoly at the cost of destroying their knowledge production (China suppressed it so much that every year millions knowledge producing graduates can't find jobs):

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#FutilityofFinancing

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#WherestheBeef?

This is all planned of course. China will be toasted at the end and the kings of passive capital come out smiling while the masses suffer an implosion under the gold discipline (given they don't hold any gold).

It is your choice if you want to continue to be fooled or read carefully the links above and educate yourself.

Sun, 10/21/2012 - 19:40 | 2908525 HungryPorkChop
HungryPorkChop's picture

Shelby, your above links don't even have an author willing to sign their name.  This piece appears to be more of an opinion than anything else.

If you want an education by someone that has been correct then I'd suggest you visit this website:

http://www.trendsresearch.com/gerald.php

 

Sun, 10/21/2012 - 20:14 | 2908546 Shelby Moore III
Shelby Moore III's picture

I wrote it. It is rough draft, that hopefully will be published this week with my name properly on it.

I will assure you that Celente agrees with my article. Ask him.

Sun, 10/21/2012 - 20:21 | 2908587 HungryPorkChop
HungryPorkChop's picture

Please send me the link when it's published.  I'm probably not the only one on this link that would like to view after its been approved and printed.

Sun, 10/21/2012 - 21:36 | 2908711 Shelby Moore III
Shelby Moore III's picture

Where or how do I send it?

Mon, 10/22/2012 - 00:59 | 2908919 Snidley Whipsnae
Snidley Whipsnae's picture

Celente??? The guy that got ass raped by MF Global stealing customer accounts and actual physical PMs???

I would pick a more savvy source to back up my comments/articles.

Mon, 10/22/2012 - 16:36 | 2910685 Shelby Moore III
Shelby Moore III's picture

I did not pick him. I was replying to someone who picked him.

Sun, 10/21/2012 - 19:53 | 2908542 JustObserving
JustObserving's picture

The last thing China needs is to move even deeper into the hard resources monopoly at the cost of destroying their knowledge production

Buying all the gold bullion in the world ($4 trillion) will hardly put a dent in China's wealth. Why do you think it will affect their knowledge production?  Maybe the US should sell all its gold so it increases its knowledge production 

Just the value of land in Beijing is worth $20 trillion.  So why should the Chinese not diversify and move some of their wealth to gold? Or do you think that holding US treasuries will increase their knowledge production?

And why do you think that Chinese have a monopoly on hard resources? Indians have a lot more gold than the Chinese.

Sun, 10/21/2012 - 21:53 | 2908553 Shelby Moore III
Shelby Moore III's picture

Where did I write that selling our gold is a solution to the knowledge supression problem in China?

I advised buying gold in my article, if you don't have a good knowledge production investment opportunity.

The point of the article is that financing is mathematically incompatible with knowledge production.

Everything we see happening that is misallocation (even cultural effects that make us want to puke) is a because humans want a guaranteed fixed income return, i.e. they want insurance figuratively and literally too. Passive capital is trying to sustain itself via a global ponzi bubble. China is complicit (is in a passive capital bubble) as I explained the metrics that prove it is and show how weak it is as a result.

But knowledge production is mathematically incompatible with this.

All the financial misallocation will eventually come crashing down, and knowledge production will provide the future growth (in spite of passive capital will be able to avail of very high interest rate returns after the coming implosion and new gold discipline, but these returns will pale in comparison to the ROI on knowledge production in the new world order).

Passive capitalists will lose their relative net-worth (and China will collapse horrifically since it is the most levered to the global passive capital bubble). Gold will do the best of the worst, i.e. of the non-knowledge based investments.

Those masses who stay mired at the passive capital and hard resources level, will be enslaved under this new system. Those who move into knowledge production, will be prosperous.

The value of real estate in China is in a bubble, 64 million unoccupied apartments that the masses can not afford to live in:

http://www.youtube.com/watch?v=pngdQo205fM#t=41s

India has no where near the hard resources subsidies and monopolies that China has. China is off the charts (3 - 5 times greater than any other country's history) in per-capita use of iron, portland cement, copper, etc..

India's preoccuption with storing idle savings in gold is not really relevant to my point, other than they are idling some of their savings, that would bring more growth if they would shift it into knowledge producing, if they can find such opportunities. So far, I am not impressed with their software capabilities-- mostly low-end copying and not cutting edge quality. Typical laziness and lack of attention to quality that we see in China too. People are not motivated when you pay them to be manual labor slaves.

Sun, 10/21/2012 - 18:35 | 2908441 ArrestBobRubin
ArrestBobRubin's picture

Hey Kli, great to see you bro.

Mon, 10/22/2012 - 02:53 | 2908966 SpicyTuna
SpicyTuna's picture

Seems like convoluted bollocks that link.

 

"Unfortunately, gold is also an enslavement mechanism."

 

He also apparently has taken a disliking to 'neo-malthusians' (whatever that is supposed to mean - he links to wikipedia for definition). But I wonder if the bronze age collapse, the disintegration of the Roman empire and the Medieval collapse [just to name a few prominent examples] has just disappeared from his analysis of history??

 

What I really thought amusing though was "Since recorded history began, the knowledge production share of the economy is inexorably increasing", with no evidence or reasoning provided to substantiate, just an example of iron becoming more common and further down the citation of GDP (which i'm sure most on ZH need no explanation as to how fallacious macro metrics are).

 

Mon, 10/22/2012 - 16:47 | 2910729 Shelby Moore III
Shelby Moore III's picture

Sadly your IQ is insufficient (or perhaps you skimmed and didn't really apply your full mental capabilities). I will dumb it down and address your misconceptions.

Let's address your second point first, since it is easier to unravel your muddled thought process in this case. The article explained that production never increases without some advancement of knowledge. Common sense will tell you that is unarguable. The only other possible way to increase production would be to apply more manual labor or energy, both of which are finite. So if you are going to increase production beyond which your economy is already producing, you need some new knowledge, e.g. a way to get more energy, a way to produce more efficiently, etc.. I provided the example of producing a net to produce more fish catch.

Okay so now hopefully you can get a little glimpse of how dense you were. It is not obvious to you yet that production can not increase without knowledge increase?

You present the argument that the collapse into the Dark Ages is an example that refutes my argument that we don't have peak energy, peak metals, nor global warming peak of industry.

Well duh! Was it a peak? Obviously not dimwit.

Mon, 10/22/2012 - 22:14 | 2911519 SpicyTuna
SpicyTuna's picture

Owie looks like I touched a pompous nerve. Nasty ad homimens and emotionalism left, right and centre... duck for cover!

 

"It is not obvious to you yet that production can not increase without knowledge increase?"

 

I never claimed to the contrary. Woops! Looks like someone needs to refresh their reading skills.

 

"You present the argument that the collapse into the Dark Ages is an example that refutes my argument that we don't have peak energy, peak metals, nor global warming peak of industry."

 

Damn, you're going to have to re-read what was written, again my friend. How embarassing that a "dimwit" with an "insufficient" IQ has spoken simple words that you've repeatedly misunderstood.

 

You know, if your posts weren't so verbose, they would be less embarassing when they are so utterly wrong [as we all are, from time to time].

Tue, 10/23/2012 - 00:13 | 2911787 Shelby Moore III
Shelby Moore III's picture

The claim I was refuting was that the evidence was not presented and that is was not clear.

I never claimed to the contrary

Liar here is what you wrote:

with no evidence or reasoning provided to substantiate

Trying to squirm out of your errors. Not even man enough to admit you were full of sh8t.

you're going to have to re-read what was written

Maybe you need to:

But I wonder if the bronze age collapse, the disintegration of the Roman empire and the Medieval collapse [just to name a few prominent examples] has just disappeared from his analysis of history??

I never argued that collapse could not happen. In fact, I mentioned that it could happen, both in the article and in my comments on this blog page. So a person with high IQ will reason the second order logic, that the only possible argument you could be making against my article is that I am wrong about peak resources being false. You could only be arguing that resource constraints caused collapse in the past (not that I would agree). If you were only arguing that collapse can occur, then you did not read carefully my article, because I never claimed that it could not.

So who needs to read more carefully again dimwit?

Woops!

You forgot the "h".

Tue, 10/23/2012 - 01:39 | 2911886 SpicyTuna
SpicyTuna's picture

"Liar here is what you wrote:

with no evidence or reasoning provided to substantiate

Trying to squirm out of your errors. Not even man enough to admit you were full of sh8t."

 

It's not me that you need to be re-reading, it's actually your own quote:


"...knowledge production share of the economy is inexorably increasing."

 

Whilst absolute [so-called] 'knowledge production' has no doubt increased over the ages, you haven't proven its relative share in economic activities has increased. [My speculation on this undefinable metric is that different periods have seen this share increase and decrease]

 

I'll further speculate, but not assert as fact, that the so-called 'post-industrial' services economies [increasingly characterised by labour dedicated soley to "knowledge creation"] of the late 20th century onwards contributes to your erroneous thinking. But this state of affairs - this current share between "labor without knowledge creation" and labor dedicated soley/primarily to knowledge creation - is neither original nor inexorable.

 

Just to re-iterate, I'm well aware of the absolute increases in knowledge production required for increasing "hard resources production". That's not the point of contention.

 

As for my commentary on "neo-malthusians" - I never argued that you were arguing "that collapse could not happen." I was simply pointing out that you do not understand the fundamental cause of such a potential collapse [granted I should have made that a bit clearer].

 

Really, enough prattling on about I.Q's. It doesn't mean that you have sound reasoning ability; in many cases it simply indicates an extraordinary capacity in memory and rote learning. Which is funny considering you have some familiarity with formal logic.

 

Now lets see, you were saying something about being man enough to admit to one's errors??

 

P.S. "woops" is an acceptable variant of "whoops".

Tue, 10/23/2012 - 19:20 | 2914134 Shelby Moore III
Shelby Moore III's picture

Whilst absolute [so-called] 'knowledge production' has no doubt increased over the ages, you haven't proven its relative share in economic activities has increased.

That is illogical. In your prior comments, you agreed already that it is unarguable that production has only increased because knowledge has, and since production and knowledge are the only fundamental components of the economy, then it follows that knowledge share of the economy has increased. The only way this could not be true, is if demand was increasing faster than production (supply), i.e. that the standard-of-living did not increase throughout history. Think about it, if supply increases faster than demand, then price declines and standard-of-living increases. Thus if we base share on price, then knowledge share took the increase in efficiency.

Common sense would also tell you that it is ludicrous to assert that knowledge share of the economy is not increasing. Just look around you, did the masses have computers a century before. In my article, I provided a link to the Steve Jobs video about how the Computer is the Bicycle of the Mind, i.e. the tool that amplifies our mental abilities. Humans are not as efficient as Condors with locomotion, but we are more efficient than Condors when using a bicycle. This is all about knowledge dude.

this current share between "labor without knowledge creation" and labor dedicated soley/primarily to knowledge creation - is neither original norinexorable.

It seems you are referring to the share of people creating knowledge and those not. You miss a very important fact. Knowledge creation is an activity that is worth orders-of-magnitude more than manual labor (because it increases the efficiency of production). And the gap in value is accelerating, as the industrial age increasingly automates everything. Even Foxcom the maker of iPhone is spending $millions to eliminate manual labor jobs with more robotics.

Thus economic value is near zero of the majority of people you might see not doing knowledge production. In fact, this is one of my main points in the "Where's the Beef?" section. Where you are another example that am correct to assert that investors are being fooled by the debt bubble, which is able to misallocate capital and keep a huge # of people employed doing uneconomic activities (this is why China's companies have very low or negative profit margins, and they do lie on their accounting books to hide it).

I was simply pointing out that you do not understand the fundamental cause of such a potential collapse

Yes I do. In my article, I explained that collapse is always due to the human demand for guaranteed quality of life (guaranteed return on investment and insurance of all things), without risking their knowledge. And if you want to ask me some questions or state why you believe I am incorrect, I can reply and explain the logic that applies to those collapses that you mentioned.

It doesn't mean that you have sound reasoning ability

That is apparently what you thought, because your logic was not up to speed, as I have explained. This is what makes it so difficult for a very smart person to discuss or debate with someone who thinks they are smart. The person with the incorrect logic thinks they are correct, and will ignorantly blather it. I must commend you for finally (in this latest comment) taking the time to explain your point-of-view in sufficient detail, that I could debate sanely with you. We can try to anticipate the various misconceptions, but we can't possibly anticipate all the possibilities for muddled logic.

This doesn't necessarily mean that you are not smart. As I said from the start, it can be hubris where you assume I haven't spent years researching and thinking (or otherwise think I am not worth respecting or you've grown lazy and want only soundbites...american culture), and you skim the article and jump to conclusions without thinking deeply about how the author is able to come to the conclusions that he did. Or at least, you did not present your disagreement in an intellectual way, wherein it was clear what you were disagreeing with and why. And an intellectual debate doesn't begin with accusation of "this is convoluted" without an explanation of exactly what is convolved.

It is quite normal that a concept to which you are unfamiliar will seem convoluted when you first start studying it. The author can try to make this process easier for you, but it is impossible to anticipate all possibilities of biases and mental blocks that people have. As an author, we have a finite amount of time to produce something, and it is then up to the reader to learn or not, depending on the reader's choice. But it is not intellectual for the reader to choose not to understand and then blather about it.

The reason I got so pissed off, is because of the many comments (not just from you) of flippant blather, without any respect or intellectual response. In addition to the blather responses to my comments on this page, you find more here which preceded this blog:

http://www.zerohedge.com/contributed/2012-10-18/shipping-news-and-bit-more#comment-2903512

I was fed up with being respectful when others were not and said "fuck it".

I am very respectful to those that are respectful to me. And I am very helpful to those who want to have an intellectual discussion and all my life I have tried to share and teach, as well as learn from others who present correct logic. But if I see people persistently acting like disrespectful idiots, then "fuck it".

Note it is extremely disrespect to waste someone's time, especially when they sit very high on the knowledge production food chain. So if you are interested, then make the debate intellectual and productive.

P.S. I typoed the spelling of genius earlier :)

Tue, 10/23/2012 - 23:04 | 2914794 SpicyTuna
SpicyTuna's picture

"That is illogical"

 

No it isn't. I went to great length to bold the words "share" and "absolute" to indicate the difference between a relative increase within the economy and an absolute increase. You still do not understand. There is no reason to expect our current state of affairs to prevail inexorably; there been periods of urbanisation and de-population of urban centres and cities throughout history; this has obviously changed economic activity away and towards more sendentary 'knowledge creating' labour. Or in other words: the balance between manual labour and 'knowledge creation' labour has shifted up and down at different periods.

 

"Common sense would also tell you that it is ludicrous to assert that knowledge share of the economy is not increasing. Just look around you, did the masses have computers a century before."

 

No I never denied it is [currently] increasing, hence "...that different periods have seen this share increase and decrease". Perhaps I should spell it out as clear as I can possibly make it: it is NOT an inexorable linear upward trend.

Think about the implications of your words: if this were an exorable trend there would be literally NO manual labour. Until we somehow evolved into some incorporeal energy lifeform, i'm not even going to entertain this ludicrously speculative notion.

 

 

"Yes I do. In my article, I explained that collapse is always due to the human demand for guaranteed quality of life (guaranteed return on investment and insurance of all things), without risking their knowledge. And if you want to ask me some questions or state why you believe I am incorrect, I can reply and explain the logic that applies to those collapses that you mentioned."

 

I woudn't even bother disputing whether this observation is accurate or not, but assuming it is correct: it is not the fundamental cause of collapse, there is a greater causality at play. Just ask yourself the question, why do humans have "demand for guaranteed quality of life", why is this behaviour an aspect of human nature. You might shock yourself to discover the validity of some of Malthus' ideas.

 

"...it can be hubris where you assume I haven't spent years researching and thinking (or otherwise think I am not worth respecting or you've grown lazy and want only soundbites...american culture)"

 

Oh believe me, I do not assume that at all. Quite the opposite actually; and it shows in your article. I don't think it is something you should be pointing out, considering the content you've written.

Thu, 10/25/2012 - 19:50 | 2915221 Shelby Moore III
Shelby Moore III's picture

A recent example of knowledge production (and China did not create it):

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http://www.technologyreview.com/news/429722/a-bandwidth-breakthrough/

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This may be my last reply, because I need to get some closure on this and move on to some other work. I may forget to come back here and check again for your reply. So you may get the last word if you reply. I do feel the discussion ended up being more productive.

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I had to insert quoted hypens below to break up the paragraphs, otherwise ZH mashes all my paragraphs together.

No it isn't. I went to great length to bold the words "share" and "absolute" to indicate the difference between a relative increase within the economy and an absolute increase. You still do not understand. There is no reason to expect our current state of affairs to prevail inexorably; there been periods of urbanisation and de-population of urban centres and cities throughout history; this has obviously changed economic activity away and towards more sendentary 'knowledge creating' labour. Or in other words: the balance between manual labour and 'knowledge creation' labour has shifted up and down at different periods.

The only way you can get a reversal of the trend of increasing knowledge share of the economy, is to reverse the increases in the efficiency of production (i.e. forget and reverse the past knowledge production) and thus a decline in the standard-of-living. Period. It is a mathematical relationship and thus there is no other possibility.
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Note what I did not assert above. It is mathematically plausible to get a decline in the standard-of-living without necessarily reversing the increases in efficiency of production, e.g. war or debt collapse. In other words, a decline is the standard-of-living does not necessarily mean the knowledge production share of the economy decline. However, the vice versa is always true, that a declining knowledge share will mean a declining standard-of-living.
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I must guess how we would get a decline in knowledge production share. I don't think it has ever occurred? Some may have thought it occurred in the Dark Ages, but I've seen accounts that say knowledge was increasing throughout the Dark Ages too. I suppose a debt collapse could temporarily cause people to fight for survival and be unable to do knowledge production, but this would not be the end of the inexorable trend. Humans simply will refuse to erase knowledge and go backwards. Women refuse to wash clothes by hand after having experienced a washing machine. Men refuse to ride horses, once they have driven a car. Etc.. Humans will inherently struggle for the knowledge production, because otherwise their lives get much more difficult. I suppose if we killed all the people with an IQ over 100, perhaps that might stop the trend. Totalitarian regimes have attempted to burn the books and exterminate the intellectuals. Do you realize that the poorest today live a higher standard-of-living than the kings of yore. For example, even people in slums of the third world have access to generic antibiotics at low prices. Kings of yore died from bacterial infections.
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There is a valid point you might consider which is that a pause in knowledge production, would not by itself require a loss of existing production efficiencies, and thus in theory the knowledge share of the current economy could be zero. If the population growth rate was 0 or negative, then one might think the standard-of-living could be static or increase. But realize that the value of the economy would shrink too, as all the ongoing knowledge production value would be lost, thus no one could afford to buy any production, and the economy would also shrink to the value of the manual labor remaining the economy (which is nearly zero value-added at this point in the knowledge age). Indeed you would need for Malthus to be correct, in order to break the inexorable trend of increasing knowledge share. As far as I know, he has never been correct. We have only seen misallocated debt and socialism implode numerous times in recorded human history, which was enabling knowledge share to take its rightful place of increasing value in the economy. The implosions were eliminating only the nearly worthless manual labor and center of the bell curve demand. Note I do not view humanity as one bell curve, rather an infinite number of bell curves, because every person has some special value. Socialism hides the special values and incentivizes people to emphasize their least common denominators.

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P.S. I suppose from your comment below, that you are correlating increased urbanization with increasing manual labor? Do you have data supporting that? Not that would make any difference to my points, see below for why...
it is NOT an inexorable linear upward trend.
I know of no natural process that is linear, and I not asserted that increasing knowledge share is a linear trend. I asserted that it is never ending towards increasing share. It appears to be exponential (as far as I know is every natural process in both directions, rise and collapse). Perhaps the greatest failing of the human race, is the inability to comprehend the exponential function, e.g. not until the lily pond is almost fully covered on the 29th day:
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http://en.wikipedia.org/wiki/Exponential_growth#The_water_lily
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http://www.youtube.com/watch?v=umFnrvcS6AQ
Think about the implications of your words: if this were an exorable trend there would be literally NO manual labour
Mathematically incorrect.
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It seems that you again did not grasp the mathematical point which I made before. It is erroneous to equate the relative value of manual labor to the relative quantity of manual labor. Mathematically manual labor could be quite large in relative quantity, but it could still be quite small in relative value, and thus small in relative share of the economy. This is because knowledge production is generating all the efficiency gains that lead to higher standard-of-living. For example, we can hire 100 people with spoons to do the work of one person with a backhoe. The increased quantity of manual labor does not mean value was added, it means capital was wasted.
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For example, China has 1.2 billion people and significant percent of them employed doing manual labor. But the value is quite small and is being subsidized by printing Yuan, thus transferring from what would have been an external rise in purchasing power (appreciation of Yuan) in a market forex environment, i.e. there is almost no international value-added to that manual labor. When I say there is very low international value of that manual labor in China, my logic is that if there was they wouldn't have needed to subsidize exporters with a Yuan peg to prevent consumers from having rising purchasing power for imports. You see the great volume of manual labor in China is due to charging nearly nothing for it in terms of international trade, i.e. a huge trade surplus with insufficient imports. This is non-intuitive and hard for most people to grasp mathematically.
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So manual labor could rise in quantity (due to debt bubble misallocation of capital), yet still falling in share, as the knowledge production is generating all the efficiency gains that lead to higher standard-of-living.
I woudn't even bother disputing whether this observation is accurate or not, but assuming it is correct: it is not the fundamental cause of collapse, there is a greater causality at play. Just ask yourself the question, why do humans have "demand for guaranteed quality of life", why is this behaviour an aspect of human nature. You might shock yourself to discover the validity of some of Malthus' ideas.
It is a behavior of the center of the bell curve wanting to have more than their capability to produce. Ignorant animals have the inability to reason about the derivative effects of entitlements (and I mean not only state welfare, but all forms of guarantees, where risk of individual knowledge is absent from the equation of the guarantee). You will always find that socialism is an attempt to make the center of the bell curve equal to the outer ends. You will see in any socialism, that there is an attempt to make the society equal and fair. For example, I knew the USA was reaching severe socialism, when I saw that every strip mall looked the same, and everybody had an SUV and shopped at Walmart. I didn't need to know that it was mindless consumption, I only needed to know that there was rampant equality, to know that there was massive misallocation of capital.
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The most fundamental cause is ignorance, and insufficient use of the pre-frontal cortex. This is why the elite view the masses as "useless eaters" and "cows to be harvested". The banksters (kings of passive capital) only exist because the masses desire them to, by their very animalistic choices.
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As far as I know, the fundamentals have nothing to do with anything Malthus wrote. Of what I know of his theories, he was a charlatan.
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You might be interested in my take on Hitler and this new proposal circulating "The Chicago Plan":
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The Chicago Plan, Hitler tried that, China is trying it too http://goldwetrust.up-with.com/t44p90-what-is-money#4748
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Read the following first, as I refute some of it in my comments at the above link: http://www.radicalpress.com/?p=1389
Sat, 10/27/2012 - 18:09 | 2924464 Shelby Moore III
Shelby Moore III's picture

 

Subject: Re: FYI:  Interesting - blogger comments on C.A. Fitts'  observations

Well that is what the theory that I presented predicts.

Again the elite will control the hard resources, but hardware is declining in relative share of the economy. Software is where the action is. Although I find the linked article to be a bit hysterical, I think it is correct that the elite know they are losing, and so they have desperate plan B if they feel they can't maintain slavery, they can resort to a scorched earth policy in order to keep hard resources at a premium. (this is why we are going to need software to outsmart them and defuse their systems... the elite don't understand software, heck very few people understand what I am working on for example)

Today if you want a PCB (printed circuit board), you can upload a design and the hardware is shipped to you for $10 (3 boards). The 3D printer is not a reality.

The mass produced stuff will get so cheap, that it will be a very small percentage of the economy. This is the Achilles heal of the elite and finance.

> Not exactly well written, still, worth a quick look.......some interesting

> nuggets.

> http://www.infowars.com/catherine-austin-fitts-there-is-no-fiscal-cliff-...

> "The following is her take on [the elites'] long term strategy. She knew

> before the passage of the North American Free Trade Act that jobs would be

> shipped overseas. (12 million jobs and 56,000 manufacturing plants to be

> exact.) Her take was that the manufacturing jobs were being sent overseas

> to make money in Round One. In Round Two those jobs would be eliminated by

> robotics. A contact of hers in the Navy said America needs to produce

> 400,000 robotics engineers in 10 years. That means those Asian jobs will

> be going away too. America has a competitive advantage in that her natural

> gas is abundant and several orders of magnitude cheaper than in China and

> Europe. The combination  of cheap energy and robotics will reduce American

> productions costs in 2020 to be far less than Asia’s."

 

Sun, 10/21/2012 - 16:29 | 2908216 nmewn
nmewn's picture

Clearly a barbarous relic.

Sun, 10/21/2012 - 19:44 | 2908528 HungryPorkChop
HungryPorkChop's picture

Plus you can't eat it.. 

Sun, 10/21/2012 - 16:29 | 2908217 Quinvarius
Quinvarius's picture

If the commercials were right, they would have been able to cover and OI would have gone down.

Sun, 10/21/2012 - 16:36 | 2908229 Bay of Pigs
Bay of Pigs's picture

Meanwhile, back in the USA we have JPM and other bullion banks monkeyhammering the paper gold and silver markets for all to see.

What a bunch of bullshit this is...

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