Guest Post: Goons Versus Gold

Tyler Durden's picture

Submitted by Tim Price of Sovereign Man blog,

Credit expansion, wrote the great Austrian economist Ludwig von Mises, is not a nostrum to make people happy. “The boom it engenders must inevitably lead to a debacle and unhappiness.”

That seems a pretty accurate summary of the current situation for the western economies: a debacle, and unhappiness. Von Mises also wrote that “The final outcome of the credit expansion is general impoverishment.”

Again, check.

And, “What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse.”

It seems to us that we may be fast approaching the tail end of a 40-year experiment in money. When President Nixon severed the link between gold and the US dollar in 1971, he opened the floodgates for a credit expansion to dwarf all credit expansions.

The arteries of the global monetary system are now clogged with debt. Since it simply cannot all be serviced or repaid, it won’t be. But our politicians are nothing if not committed to sticking subsequent generations with the bill.

Moreover, the conventional financial media continue to keep central bankers on their pedestal; having fawned over the appointment of Mark Carney as the new Bank of England head, the Financial Times has just declared ECB president Mario Draghi their Person of the Year, for having ‚ “turned the tide in the three-year-old eurozone crisis.”

Such thinking is astounding for the rest of us who know the Emperor’s new clothes when we see them.

Fund managers Lee Quaintance and Paul Brodsky of QB Asset Management have long written with great articulacy about the nature of the problem. Here is an extract from their most recent commentary, “It’s Time”:

“Gold bugs can’t understand how the public can be so unaware, how highly intelligent policy makers can be so immoral, and how the mainstream media can be so incurious. We can’t understand why more men and women in the investment business haven’t joined some of the more successful ones that have come around to precious metals . . .”


“. . . Boundless inflation will become apparent to the public either when: 1) banks begin using their new reserves to try to issue more credit; 2) mysterious “animal spirits” (i.e., when leverageable balance sheets meet common greed) spontaneously combust, or; 3) next Tuesday for no apparent reason.”


“Why all the fuss about what the catalyst will be or when it might occur. . .? Most bonds with any sort of duration and stocks held mostly by levered entities. . . are likely to be losers in real terms. Alternatively, precious metals (physical held above and below ground) and natural resources with inelastic demand properties are significantly under-owned.”

QB’s team goes on to calculate a ‘shadow gold price’ using the Bretton Woods monetary calculation for valuing the fixed exchange rate linking gold to the US dollar: Base Money divided by US official gold holdings… indicating a shadow gold price of over $10,000 today.

As QB take pains to point out, this is not necessarily a target price for gold. But it does suggest that any talk of being in a bubble is absolute nonsense when gold is also a) almost completely unheld by institutional asset managers, and b) trading at around $1700 (as opposed, say, to $10,000).

Shadow Gold Chart Goons versus Gold

(Note: the graph above incorporates the most recent Fed announcement of debt monetization levels of $85 billion per month through to June 2015).

We honestly wanted to round off the year with a more uplifting summary of the investment scene, but a grim combination of central bank insanity and financial media buffoonery would make any such summary an offence against reason and common decency.

Although we would naturally wish for a more benign investment climate, we must play the hand we’re dealt– a world gravely impacted by the monetary and financial distortions perpetrated by doltish control-engineer goons.

And so we stick to a disciplined investment ethos. For while a pessimist complains about the wind, and an optimist expects the wind to change, the realist adjusts the sails.

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fuu's picture

I bury my hams in silver cans. Bitchez.

trav777's picture

another nonsense article

LawsofPhysics's picture

Correct.  No way in hell the commodity complex and supply lines hold until 2015.

oddjob's picture

$200 bbl by next week.

WhiteNight123129's picture

How is your long treasuries position doing trav?

There is some retaliation against the Gold bugs while Treasuries get creamed recently, tit for tat.

Time to cover a bit of Treasuries and buy a bit of Silver....


trav777's picture

what long treasury position?  I ain't got one.  Some agencies and munis is all...the fed is going to buy all the issuance up

Bay of Pigs's picture

And I'm sure that will work out just fine.

Trav n Robo. ZH's master traders. Never wrong...

fuu's picture

Don't forget Slaughterer and Orly.

WhiteNight123129's picture

Why should you care about the Fed, they lost their credibility already, didn`t you get the memo? BOJ, ECB and Fed are zombie central banks, in a not too distant future the market will take away their printing press.


Zap Powerz's picture

Relax, Boner has a "plan B" which will fix everything.

Obama is negotiating in good will.

Our beloved leaders really want what is best for us.



If you have any bad feelings, take some Soma.

crusty curmudgeon's picture

"take some Soma."

The modern equivalent of Soma is the iPhone.

francis_sawyer's picture

I keep trying to offer strippers Mercury Dimes, but all my talk of "shadow prices" doesn't seem to be getting thru...


buzzsaw99's picture

under-owned LMAO!

SgtShaftoe's picture

I wish that catalyst would fly in quickly and take a giant black swan shit on the windshield of the US and hence the world. It's currently a race condition to see whether economic collapse or full fledged domestic tyranny arrives first.  I'm hoping for economic collapse.  

Half_A_Billion_Hollow_Points's picture

full-fledged inverted totalitarianism canaries in the coal mine:   moot, Chomsky, Chris Hedges, Gavin Andresen, Ron Paul (they hurt RP and they'll see why the military branches went all in for him).   Who else?  I'm making my own shall-not-kill-list.  

Oh, and if you were potus, who should you put in your kill list?  I have some suggestions  

jomama's picture

why does kitco run headlines like: " Gold Prices Dip as Politicians Hang on Fiscal Cliff"?

wouldn't hanging on a fiscal cliff be a fundamental to drive commodities up?

Mr Lennon Hendrix's picture


They ran that headline because they didn't know what else to run.

Monied Elite Have Gold Bullion Hogtied as they Flush Paper Gold Down the Toilet


Bernanke is a Ducheface

only get so far with half their readers.  Most people still haven't woken up to the expose, even though it is right in front of their noses and stinks to high heaven.

kliguy38's picture

I had a more intellectual response but I decided this would suffice....."Most people" as you noted are so fochin stupid that they will buy virtually any bullshit fed to them by the MSM so this game today is just for the leverage Hedgees to keep them out of the PM market....let um play.....I'm buying today

The Joker's picture

Patience, grasshopper, 1550 is the majik number.

Al Huxley's picture

I doubt it - try 1660.  Not that I care - complaining when the paper price of gold and silver go down is roughly the equivalent of bitching about gas being too cheap.

LawsofPhysics's picture

not in a world that has been brainwashed into believing that demand for essential goods and services can simply go away for long periods of time.  Interesting times indeed.

toothpicker's picture

Because it´s 1984 all over again. 

Mr Lennon Hendrix's picture

SLV has traded $300M worth of its paper product so far today.

Amazing what a few million dollars will do to a market that has peaked its production and still is very high in demand.

LawsofPhysics's picture

I saw that, apparently a shrinking GDP is doubleplusgood.  In that case, is more shrinkage better?  China/U.S soon to be A++++A++++A++++?

A. Magnus's picture

The markets look like a replay of the pre-2008, chicken choke, monkey hammerdammerung today. I bet someone's trying to ruin the PM decade of superiority streak...

Iam Yue2's picture

There are no prizes for being rational in an irrational world.

hapless's picture

The payoff is invariably quick & dirty.

JustObserving's picture

the realist adjusts the sails.

the realist refuses to sail into criminal, manipulated markets.

Radical Marijuana's picture

"... the realist adjusts the sails."

The possible and probable magnitude of the coming social storms will rip away all sails, and capsize most ships. We are talking about a global electronic fiat money fraud measured in the quadrillions of units of "money" created out of nothing. That is backed by the power of private banks controlling sovereign states that have an abunance of weapons of mass destruction! That overall reality is being pumped up bigger and bigger, automatically, every day!

THERE ARE NO WAYS TO LIVE OUTSIDE OF THE CRIMINAL, MANIPULATED MARKETS! There is nowhere to hide. The fundamental structure of the system is runaway triumphant fraud, backed by force, AMPLIFIED ON ASTRONOMICALLY SIZED SCALES. It has already staked claims to own almost all the productive resources on the planet, and nobody can actually do anything significant outside of that system, which has already asserted some kind of ownership over every possible resource. However, it is almost impossible to have any sane public debates or actions regarding any of those things. The current systems were due to the long history that made War King rapidly transforming to make Fraud King.

THE WHOLE SYSTEM IS BASED ON LEGALIZED LIES, BACKED BY LEGALIZED VIOLENCE, AND THEREFORE, IT IS PRACTICALLY IMPOSSIBLE TO HAVE ANY RESOLUTION OF THAT SITUATION, OTHER THAN FOR IT TO CONTINUE TO GET WORSE, FASTER. More and more energy is constantly being pumped into those systems, in the form of more money made out of nothing, as debts, backed by the threats of violence from governments, and, these days, also more privatized military contractors. As more and more energy is pumped into those basic systems of lies, backed by violence, the overall situation of frauds backed by force are self-organizing into social storms of proportions that have nothing in history to compare them to!!!

We are looking at the established systems being runaway triumphant frauds, backed up by force, storms EVENTUALLY causing genocidal wars, along with democidal martial law. Of course, one is sane to attempt to prepare for the range of smaller disasters that may happen. However, it is NOT possible to "adjust the sails" for the kinds of social storms that are coming. Those social storms have been brewing on the horizon of history for quite a while. When those social storms break, we are talking about things amplified to ASTRONOMICAL SIZES, by science and technologies billions, trillions, and quadrillions of times more powerful than anything previously in known human history!

It is plainly IMPOSSIBLE for the majority of the masses of muppets, and certainly not for the puppet politicians, to understand any of those new realities. The muppet and puppet masters have social habits which have led them to prepare for war and martial, law, in order to back up their huge lies, with lots more violence, in order to keep their already established basic systems going.

THE GOONS HAVE WEAPONS OF MASS DESTRUCTION! Although preparing for minidisasters, including by possessing commodities like gold, makes good sense, we are looking at realistic chances of there being MEGADISASTERS, for which there are no possible preparations, and anyway, the world afterwards would be changed off the scale of anything we currently imagine as our taken for granted frame of reference.

In theory, the transformations that we should go through are paradigm shifts in political economy that are comparable to those which have already happened in things like physics and biology. In theory, we should change the ways we think about economics as much as we have changed the ways we think in other sciences. We DO have global electronic fiat money frauds, backed by weapons of mass destruction, and that REALITY is deliberately not understood, and not wanted to be understood, by the vast majority of people who are the victims of it, as well as by most of those who actually make that system continue to do what it does.

mayhem_korner's picture



I thought by the title this post was a commentary on the Jets and the Niners...

devo's picture

Gold is driven by demand. It doesn't matter if money supply suggests a 10k price because nobody follows that except a few nerds. If the dollar collapses, then yes, it's extremely undervalued. The people who believe Mike Maloney, that they'll be trading in gold coins for real estate, stocks, etc, are the fools born every second. Disclosure: i own gold, but just as insurance.

mayhem_korner's picture

If the dollar collapses...


Show me a mathematically robust argument that suggests the dollar will go on ad infinitum.  The only question about the dollar's demise is when, not if.  I would be interested to hear views of the dollar being sustained for anything more than 10 more years.  That, to me, would be a four-sigma outcome.

devo's picture

Collapse is all relative, though, and all CBs are debasing. I think it's more likely we don't see a collapse in any currency, just a lower standard of living everywhere. That kind of thing is too subtle for most people to realize, so they won't flock to gold or silver. They'll just take it on the chin and apply for food stamps. Not saying this is good, but people are ignorant. The rich and CBs have high gold demand. Anyway, I do think gold will keep rising over the next decade, but I don't think people will be trading maples for homes, stocks, etc like some people think. Gold is simply insurance. The fact that ZH is paranoid about the price suggests they're pimping it for the wrong reasons. It's insurance at 1700 or 200. If you buy gold for the right reason, you store it away and forget about it.

mayhem_korner's picture



I would not make broad brush statements like "ZH is paranoid about the price" of gold.  I think many (maybe most) here who hold physical gold, like me, never give a second thought to the paper "price" of gold.  It is irrelevant to why we hold it.  The "price" is just an manipulated implement of the string pullers who are working overtime to keep a veil over the truth.  But the laws of mathematics will not allow it to go on forever.  The other currency dilutions eventually won't matter either, because there is only one reserve currency and, importantly, only one fiat currency on which oil is exchanged globally. 

A slow degredation of living standard, as you suggest, will lead to unprecedented violence; abandonment of the reserve currency will create upheaval, but at least paves the way for a reset.

devo's picture

It just seems like every time the gold price drops there's an article here suggesting why everyone should buy it. Yet, they criticize Buffet and the mainstream media shills for doing the same regarding equities. It's hypocritical. The skeptic in me doesn't believe anyone gives good information for free, so the fact they want us to buy gold, equities, etc means they have an agenda. Now, since I don't want dollars, I do it, but otherwise I would not. Also, I still think the Mike Maloney crew is bonkers. It will not play out like that.

Folks, buy gold as worst-case-scenario insurance and forget about it.

Half_A_Billion_Hollow_Points's picture

> I think the Mike Maloney crew is bonkers. It will not play out like that. 


hmmm.... very interesting:


i) do you have an argument or just really bashing the guy?  Cause I'd *really* like to see an argument against keeping on stashing, or against whatever you mean by "it will not play out like that". 


ii) and if you're really think buy gold for the *worst case* scenario, WHAT THE FUCK DO YOU MEAN?  What is the best-case scenario for you?  What is the most-likely scenario for you?  wtf

Xanadu_doo's picture

"...think many (maybe most) here who hold physical gold, like me, never give a second thought to the paper "price" of gold.  It is irrelevant to why we hold it. ..."


Except when it goes on sale. =)

Marigold's picture

Trading physical gold for real estate is exactly what's occurring in Vietnam for the last two years as the value of the Dong imploded relative to Gold. The CB of Vietnam is openly intervening to dissuade trade in gold and Vietnamese gold trades at a significantly higher premium than world gold. The Indian CB is also intervening to curtail trade in gold in the second largest gold market in the world. Sound familiar !

Mike in GA's picture

Hard to believe 10 more years of money-printing.  Like watching the inflation spring get coiled tighter and tighter.  Just can't see 10 years of this relentless grinding down of what remains of our standard of living. 

This will end with blood in the streets here and abroad in less than 10, IMHO.


Half_A_Billion_Hollow_Points's picture

This will end with blood in the streets here and abroad in less than 10, IMHO.


Yes, it's "the fourth turning".

trav777's picture

gold serves a couple of purposes.  Sure, you can trade for other things with it.  But, if the USD collapses, they'll just come up with another note, like they already HAVE in the past and like other countries all do when the present note crashes.  Paper isn't going away.

But gold also has some advantages for when the inevitable "wealth tax" shows up.  It will be comparatively easy to get all the IRAs and 401s and stock account brokers to provide balances for all customers.  These companies already provide IRS with trade info, 1099s, cap gain and loss info, divs, etc.  Really not hard to tack "account total" onto that on an annual basis.  Then IRS can send you a bill for 1% or whatever.  Gold and such things can be hard to find, art as well.  The sticking point comes when you go to sell it, but you can defer taxation for a prolonged period of time.

The Joker's picture

IMF SDR revised, perhaps backed.

devo's picture

I agree, that's why I said the wealthy and CBs are the big buyers right now.

If Joe Sixpack ever wakes up from his beer and porn induced coma, he'll go into silver, and it should outperform.

Boston's picture

The sticking point comes when you go to sell it, but you can defer taxation for a prolonged period of time.


Sticking point?

My "friend" buys gold with cash and sells (rarely) gold for cash. Something tells me he won't have any sticking points.

Al Huxley's picture

Gold is mispriced because at the moment a large percentage of the buying population doesn't differentiate between paper gold and the actual physical metal, held in personal possession.  In the short-term, it's different in this way than stuff like energy or food (where the actual, real commodity is at some point demanded by at least some of the purchases), so most don't get the real point of owning it, and think it's just a way to increase their supply of paper money. This makes it possible for those who both understand the difference and have the financial clout to manipulate the price and accumulate the actual metal.  At some point, a currency crisis of some sort will help everybody understand the difference.

Bastiat009's picture

A little less conversation, a little more action please.

Opinionated Ass's picture

Wahh, wahh..why don't politicians read Mises and see they should stop printing money.


Simple. You're a politician. You love the perks. You have to get re-elected. The kid you're handing stolen candy to has the Vote Weapon in his fist. Are you gonna stop giving him stolen loot?


The kid is democracy.

David99's picture

ZH is only doing good job and reporting correctly. Tyler is a real true person though I have never met him. FED+BOE+ECB+BOJ are the biggest manipulators and JPM +GS +20PD's act on their behalf in this Ponzi Casino. It is all rigged Ponzi Casino. JPM & GS do maximum manipulations from London as no regulators are looking what is going on daily. London is the best place to manipulate Ponzi Casino as no regulators as they are watching porno. Manipulations of highest order without any regulations as every one has been purchased and regulators watching porno. In last 10 trading days, Rio Tinto manipulated by +25% gain and regulators watching porno. JPM doing it. It is just Casino and nothing else. Regulators are watching porno, don't know how Rio Tinto is manipulating daily. On LSE, there is no checks and balances and maximum manipulations daily by Rio Tinto. The market is Casino and the biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London