So Much For The Stability Of The Centrally-Banked "Fiat" Era

Tyler Durden's picture


According to some economist PhDs, the end of the gold standard era marked by the arrival of the Federal Reserve one century ago ushered in the era of stability, prosperity and virtually unlimited growth (just ignore the two world wars and millions of casualties immediately following). While that is an amusing way of describing a financial system that is now daily on the brink of a financial apocalypse courtesy of a few good central banks propping up a $1 quadrillion house of derivatives cards, whose collapse would mean an immediate "game over", and where (rapidly evaporating) confidence in a failing status quo, must be preserved at all costs, the question of post-Fed induced stability is an interesting one, especially when measured in terms of intangible value (in this case the most basic of indicators - the Dow Jones), compared to thousands of years of a real tangible, store of wealth: gold. In the chart below, courtesy of Cambridge House, we ask readers: in which period was there a more stable relationship between tangible and intangible values, and a less exuberant irrationality vis-a-vis that which is purely based on confidence, if not so much reality.

A second logical follow up question is: where is this ratio of intangible to tangible value going next? The chart below attempts to provide some log-based perspective on precisely this.

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Mon, 04/01/2013 - 23:10 | 3398223 Ahmeexnal
Ahmeexnal's picture

Yet the sheeple no comprende.

Mon, 04/01/2013 - 23:13 | 3398229 zorba THE GREEK
zorba THE GREEK's picture

We are going back to the way things were.

Mon, 04/01/2013 - 23:36 | 3398271 SafelyGraze
SafelyGraze's picture

since lots of people are comparing fiat to bitcoin, a little clarity is in order

one reason people trust bitcoin is that there is a hard limit on the number of bitcoins that can be created

look at the source code, in main.h

line 52 makes this limit obvious

static const int64 MAX_MONEY = 21000000 * COIN;

in order to raise the limit, say by a factor of 2 or 10 or a million, someone would have to literally *edit* the file

which is impossible

and that's one more reason why so many people trust bitcoin versus fiat

the amount of MAX_MONEY is a static const int64

plus, it's open source!

Tue, 04/02/2013 - 00:02 | 3398305 enloe creek
enloe creek's picture

bitcoin bubble everyone is going to be rich investing in bitcoin it is a no risk no brainer way to make easy money

that is just horse shit

Tue, 04/02/2013 - 00:48 | 3398388 TwoShortPlanks
TwoShortPlanks's picture

You will be saddled with the burden like everyone else regardless, so, buy physical Gold, dig a hole, and leverage up to the max like everyone else.

When it collapses, so what, you've got your hole worth 100x more than when you dug the thing.

You cannot beat them, so join them....but make sure you have a hole!

Tue, 04/02/2013 - 02:13 | 3398470 e-recep
e-recep's picture

every man has a hole.

Tue, 04/02/2013 - 05:04 | 3398624 zhandax
zhandax's picture

I just love hearing from my IT department that it is foolproof in the morning!  It just makes my day.  And tomorrow.  And all next week.

Tue, 04/02/2013 - 05:42 | 3398642 Go Tribe
Go Tribe's picture

Good point. Putting IT in charge of the global economy is a really bad idea.

From gold to paper to bits. No thanks.

Tue, 04/02/2013 - 06:24 | 3398670 TwoShortPlanks
TwoShortPlanks's picture

Fiat, just one weapon in the financial arsenal.

This has been another announcement from the team at Agenda21: We have the Gold, we have a plan, and when you’re all poor and desperate, we’ll have your ear too.



Tue, 04/02/2013 - 06:24 | 3398672 markmotive
markmotive's picture

The gold standard wasn't so great either. Guess who controlled the gold in those days? Hint: it wasn't the common man.

Tue, 04/02/2013 - 08:51 | 3398931 PrintemDano
PrintemDano's picture

And Obama loves them all....

Tue, 04/02/2013 - 00:27 | 3398352 greggh99
greggh99's picture

I was trying to decide between bitcoin, Farmville bucks, or tulips. I went with tulips. At least I'll have something real I can put on my windowsill.

Tue, 04/02/2013 - 00:57 | 3398393 LetThemEatRand
LetThemEatRand's picture

Buy real estate after the [coming] collapse.  That's what the Goldmanites et al have in mind I think.  They are going to buy half of Greece and a large percentage of America with soon-to-be worth less (space intended) green backs.  You'll have lots of windowsills, and tulips will still be cheap.

Tue, 04/02/2013 - 05:40 | 3398643 Go Tribe
Go Tribe's picture

The Jews won't be able to compete with the Chinese for our real estate. thank God!

Tue, 04/02/2013 - 00:44 | 3398380 Dapper Dan
Dapper Dan's picture

Remember in the early 80's everyone bought into diamonds for an alternative investment?

Then some brainiac found a way to make perfect diamonds in a couple of hours from peanut butter, lots of heat and a really powerful press.

Have the alchemists found a way to make gold yet?

 I have an old radio so I have not heard.

Tue, 04/02/2013 - 09:28 | 3399110 tetsujin
tetsujin's picture

How do you make gold? it's simple really, just take a star, then blow it up. In the supernova, gold is made :)

Tue, 04/02/2013 - 17:00 | 3400928 Long_Xau
Tue, 04/02/2013 - 06:03 | 3398657 swedish etrade baby
swedish etrade baby's picture

 Why should I use bitcoins as a medium of exchange if it keeps appriciating ?

Tue, 04/02/2013 - 17:22 | 3400959 Long_Xau
Long_Xau's picture

Scared of price deflation? You are conflicted. How do I know? What is this you are writing this post from? A PC? A laptop? A tablet? A smartphone? How come you bought integrated circuit-based electronics when their price deflates constantly at a staggering rate?

You might have to reevaluate your education.

But if you still don't like the price and/or currency supply dynamics of bitcoins, by all means, propose or help create and establish a better alternative to Bitcoin. You can make any rules for increasing the currency supply (inflation), decreasing the currency supply (demurrage), fees, different ways to distribute new currency units - anything you can think of. There are quite a few alternative cryptocurrencies already.

Tue, 04/02/2013 - 07:32 | 3398745 paddy0761
paddy0761's picture

I just wonder what happens to Bitcoins when Obummer flips the internet kill-switch? If the banks fail, there is no reason to keep the internet running as far as "They" are concerned.

Tue, 04/02/2013 - 07:48 | 3398781 Croesus
Croesus's picture

I'll give the BTC crowd props for their passionate defense of the Bitcoin. It's more than can be said for some of the asshole weak-handed PM Longs who are looking to trade it like paper.

In another BTC thread, someone made the comment that "there are lots of things in the financial world to mock, before picking on poor Bitcoin"...and I have to agree.

But Bitcoin ain't Gold. Not yesterday, not today, not tomorrow.

The big, major difference between BTC, and Gold?

The money system as we know it, is changing. Eventually, Gold will be reentering the monetary system as the yardstick against which all paper is measured. The leveraged paper BS in the gold market will go kaboom, as the physical market and paper market disconnect (which we're already seeing the beginnings of).

Comparing Bitcoin to Gold is patently absurd, with respect to the fact that you're essentially comparing the concepts of "Tangible" to "Intangible". Basically you're comparing paper Gold to physical Gold......there's a world of difference.

Bitcoin is an electronic form of MOAR paper, and therefore subject to the same games as any other paper is.

I'm sure I'll get downvoted and whined at for "not knowing as much about Bitcoin as ____", but it doesn't change the fact that my fiat's on Gold, not more fiat, even if it's "eFiat".....

Tue, 04/02/2013 - 16:55 | 3400904 Long_Xau
Long_Xau's picture


I take that as computer programmer humor. But seriously, please don't spread ridiculous misconceptions without making it clear you are not speaking seriously. This does no favor to people who seek the truth.

Tue, 04/02/2013 - 06:51 | 3398696 JPM Hater001
JPM Hater001's picture

"We are going back to the way things were."

If by this you mean candles and poverty...yes.

Mon, 04/01/2013 - 23:26 | 3398257 Prisoners_dilemna
Prisoners_dilemna's picture

Such brilliant eloquence. Maybe you should write for zerohedge. Surely they have a childrens version.

I didn't want to just downvote your worthless comment which doesn't contribute shit. I wanted to particularly knock you off your high horse and back to the gutter you crawled from.

Were you a sheep once or were you born omniscient?
Did you compose this essay and compile the data for that awesome chart or did someone talk about fight club outside of fightclub in your presence and you stumbled in one day.

Keep your brilliance to yourself, Sheep who reads zerohedge.

Mon, 04/01/2013 - 23:52 | 3398297 fuu
fuu's picture


Tue, 04/02/2013 - 05:08 | 3398628 zhandax
zhandax's picture

Such brilliant eloquence. Maybe you should write for zerohedge. Surely they have a childrens version.

Christine, you orange slut, is that you?

Tue, 04/02/2013 - 05:41 | 3398646 Go Tribe
Go Tribe's picture


Tue, 04/02/2013 - 06:03 | 3398655 TwoShortPlanks
TwoShortPlanks's picture


*yells*....C_A_T    F_I_G_H_T!!!!!

Tue, 04/02/2013 - 15:29 | 3400580 rotagen
rotagen's picture

Gold, gimme a break...I see it as a distraction from the only permanent solution, elimination of the privately owned "federal" reserve.  Greenbacks and Public's what presidents got killed for.

Mon, 04/01/2013 - 23:12 | 3398225 zorba THE GREEK
zorba THE GREEK's picture

I think the end of the derivative era will mark the beginning of a new gold standard era.

Keep stackin my friends.

Mon, 04/01/2013 - 23:12 | 3398231 Ahmeexnal
Ahmeexnal's picture

A world war will probably take place before that golden era arises.

Mon, 04/01/2013 - 23:17 | 3398239 kliguy38
kliguy38's picture

If you think these psychopaths want to take on Russia and China......think again......little North Korea and a few kilotons makes these neocon scumbags freeze

Mon, 04/01/2013 - 23:24 | 3398254 RockyRacoon
RockyRacoon's picture

Interesting charts ... by these guys ...

Tekoa Da Silve, Contributing Editor

Tekoa Da Silva is a resource investment traveler, writer and entrepreneur. He has been investing in gold since his late teens, and has built and sold a successful gold trading company.

Jeremy Martin, Editor

Jeremy Martin has been involved with both precious metals investing and event co-ordination since an early age.

A lot more was going on other than "the DOW".  Too many factors to draw an analogous chart.

Mon, 04/01/2013 - 23:25 | 3398256 denverdolomte
denverdolomte's picture

These are the kind of charts that signify the change that I have been seeing in both my friend and professional circles. People coming around to the ideology that two parties are one, and that for those familiar Bearney, that there is a shadow force behind it all guiding our way. Though each day, I hear more and more and more people starting to question the why or hows of everything that is happening, the questions about the media not making a lick of sense....and mind you these are people in the 25-35 ages from a diverse background and cultures. Just yesterday at a friends Easter Dinner I asked a round about question of "how can you all sit here and bitch about gay marriage, gun rights, GMO regulationlessness, and whathaveyou' can not a single one of you ask yourselves or eachother, where is my voice? where is my choice? while you idly sit by allowing the statist to determine, decide, and deliniate every aspect of your lives..." 

I don't know, maybe I'm just a dumb young adult, but I have noticed a vast arry of people coming around to reality, that debt has enslaved us, each any every day. 

Tue, 04/02/2013 - 00:39 | 3398374 Hengist
Hengist's picture

Excellent post and as someone who is related through marriage to at least junior level shadow forces be afraid be very afraid these are not nice people.  If you upset them they can destroy you in more legal ways than you can imagine which is why I want nothing to do with them and keep my distance they seriously scare me and this is the nicely nicely branch of the shadow forces.  They have a darker branch.

Tue, 04/02/2013 - 01:07 | 3398406 Professorlocknload
Professorlocknload's picture

Agree. Anthony Wile's "Internet Reformation" seems to be at work here. I've noticed the same evidence of enlightenment among my friends and relatives.

Perhaps of interest;

Mon, 04/01/2013 - 23:27 | 3398258 akak
akak's picture

Now really, who are you going to believe here --- the central banksters (and their political and media lackies), who altruistically have only the common man's best interests at heart, or your own lying eyes?

Mon, 04/01/2013 - 23:45 | 3398287 Legolas
Legolas's picture

It's an oxymoron to refer to banksters as altruistic, isn't it?  Unless of course you were using <sarc>.


Tue, 04/02/2013 - 06:59 | 3398703 Burr's 2nd Shot
Burr&#039;s 2nd Shot's picture

Banking and altruism go hand in hand. Once you accept the idea of self-sacrifice as noble, it is only a question of who gets to sacrifice. I am sure that you are disappointed that it is constantly you, but then, you didn't come up with the idea in the first place, did you?

Mon, 04/01/2013 - 23:44 | 3398285 rehypothecator
rehypothecator's picture

Why isn't there ONE journalist who can present either of those charts, or the "Visual History of Financial Crises" graphic to a central banker and ask whether they have accomplished their mission of ensuring 'stability'?  

(Now, is that a moronic question or what?)

Tue, 04/02/2013 - 00:02 | 3398304 FecundaGoat
FecundaGoat's picture

Great Chart....I will study it tomorrow...

Doesn't it look like the risk is declining since 2010? (% of global GDP affected is declining)

Tue, 04/02/2013 - 00:29 | 3398355 Vint Slugs
Vint Slugs's picture

The increasing amplitude of the 5 swings since the 1930s high (label it #1) is typical of a critically, and perhaps terminally, destabilizing supply/demand imbalance.  The author’s projections toward the (?) point on both graphs is completely logical within this framework.

That's why these guys' (who have been pretty accurate on their precious metals calls) $4200 area gold forecast look reasonable (not certain if they have a paywall in force):




Tue, 04/02/2013 - 00:38 | 3398375 TBT or not TBT
TBT or not TBT's picture

Positive feedback.

Tue, 04/02/2013 - 01:03 | 3398403 bonin006
bonin006's picture

yes, unfortunately, few people other than engineers know that positive feedback is dangerous at best and catastrophic at worst.

Tue, 04/02/2013 - 02:28 | 3398490 Leto II
Leto II's picture

Spot on. Resonance is good thing, right?

Tue, 04/02/2013 - 07:40 | 3398763 StychoKiller
StychoKiller's picture

Let's ask the designers of the Tacoma narrows bridge...

Tue, 04/02/2013 - 08:36 | 3398885 andrewp111
andrewp111's picture

Galloping Gerdie was fun until a storm was too big and the bridge got too much gallop...

Tue, 04/02/2013 - 00:37 | 3398373 bulldung
bulldung's picture

Does this mean time to sell gold and buy the Dow?

Tue, 04/02/2013 - 00:41 | 3398378 spine001
spine001's picture

These are bifurcations of a fractal system. Sad to say... Chaos follows...

Tue, 04/02/2013 - 00:43 | 3398382 MedicalQuack
MedicalQuack's picture

Good points made and I have been saying the balance between tangibles and intangibles has been lost.  The eonomy has been trying live off of algorithms and manufacturing where jobs are gets the brunt of the deal. 

What aggrivates this even more is the "data selling epidemic"...I have called it an epidemice as companies and banks just buy and sell data versus pursuing tangibles as it's easy, nobody sees it, consumers have no transparency to see what gets sold and to who either.  Government is bliss and ignores it illiteracy in here too.

Government is over  their head with IT Infrastrucutre and can't catch up, today small business only will have one choice for group insurance...they can't write the code fast enough and get "big business" who controls all of this to get all their data together in time either.  Big business screws little business.


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