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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

https://github.com/bitcoin/bitcoin/blob/master/src/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.

http://www.planbeconomics.com/

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

ROFL

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

[9.2]

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

WTF?

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

WTF2.0?!

*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 banks...it'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's....how 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;

http://www.thedailybell.com/4048/Ron-Holland-Introducing-The-Internet-Re...

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 https://www.historyshots.com/FinancialCrisis/index.cfm 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):  http://eideticresearch.com/whats-new.html

 

 

 

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 seems...digital 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.

http://ducknetweb.blogspot.com/2013/04/small-business-insurance-options-...

 

Tue, 04/02/2013 - 00:45 | 3398384 bulldung
bulldung's picture

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

Tue, 04/02/2013 - 01:02 | 3398401 Harry Dong
Harry Dong's picture

Is this a serious question? OK, I'll bite.

No. This chart is indicating quite a bit more move in the inverse Dow / Gold pairing. Wait until it hits the bottom descending wedge line....probably when gold hits $4200 OR the Dow goes back to 2000

Tue, 04/02/2013 - 04:38 | 3398608 css1971
css1971's picture

Look for a DOW/gold ratio of about 3-4 by the looks of it before swapping. You could try waiting for 1-2 but those times are going to be both short and fraught; both stocks and gold will be all over the place.

Tue, 04/02/2013 - 04:42 | 3398610 Urban Redneck
Urban Redneck's picture

The Dow is merely a proxy for equity (ownership of productive assets), the scale is money (the flip side of debt).

There are actually thee options present in the chart above 1) owning gold, 2) owning productive assets and 3) owning nothing (money/debt).

The volume/supply of the first is relatively fixed, the volume/supply of second is tied to size of the actual economy, and the volume/supply of the third is controlled by the whims of the central bankers (and currently stuck in CTRL-P mode)...

Timing is everything, since most people don't exist on a long enough time line...

Tue, 04/02/2013 - 01:12 | 3398414 dunce
dunce's picture

Which do you think will help you survive the fiat erupting volcanoes all around the world, and the tsunami deluge of debt and derivatives?

Tue, 04/02/2013 - 01:06 | 3398405 ebworthen
ebworthen's picture

So I'm trying to educate my Son and he says something to the effect of "as long as I have food and XBOX".

Ugh...bread and circuses...the Gubbermint better keep that food and "entertainment" flowing because my kid is decent.

The worse ones will start burning and killing long before he will, but perhaps not before I DO. 

MOTHER FUCKERS!!!

Tue, 04/02/2013 - 04:56 | 3398611 IamtheREALmario
IamtheREALmario's picture

Maybe, the creation of this world, this universe, is the eventual evolution of xbox?!? Think about it ... if we all could live in (choose our parents and be born into) a virtual reality of our choosing, would we?

If we are beings/mind/soul outside of time and possibly outside space, what would we do for entertainment? Or maybe we "sheep" are the NPCs.

Here is the thing, though. This possibility is not quite as interesting to me as the fact that this perception of a possible version of reality as "The Matrix" or the land of TRON is popping (spontaneously?????) into more and more minds as a logical possibility. Think of our universe as an MMRPG and then think of what time and space mean in an untimately evolved MMRPG. It is all how we perceive our surroundings, no? There are too many implications to go into here, including "who is God" under such a scenario?

Tue, 04/02/2013 - 07:08 | 3398713 spinone
spinone's picture

don't over-anticipate.  This could go on for 20 years before it pops.

Tue, 04/02/2013 - 01:36 | 3398436 devo
devo's picture

It's like the steroid era only without the home runs.

Tue, 04/02/2013 - 02:10 | 3398461 q99x2
q99x2's picture

Looks like I'll be heading up to just west of Denver.

China's navy also conducted live-firing naval drills by warships in the Yellow Sea that were set to end Monday near the Korean peninsula, in apparent support of North Korea, which was angered by ongoing U.S.-South Korean military drills that are set to continue throughout April. 

Read more: http://www.foxnews.com/politics/2013/04/01/china-mobilizing-troops-jets-near-n-korean-border/#ixzz2PHaf2CK8

Bankster arranged controlled nuclear exchange?

I mean why would N.Korea anounce targeting Alex Jones in Austin if it wasn't for the banksters being behind it?

Man even in the 1980's when I worked on the Trident missles it was scary shit to see within minutes 17 simulated warheads going off from just one launched missle. Those fuckers go straight up and then straight down. I'm sure capabilities have increased, on all sides, a thousand fold since then.

Time to practice your duck and cover.

Tue, 04/02/2013 - 04:20 | 3398577 Parrotile
Parrotile's picture

They might be "low yield" in today's parlance, butwe're still looking at 100 - 150kt each.  Mindful of the devastation wrought by 15 kt (Hiroshima) and 21 kt (Nagasaki), you'll understand that these "little warheads" pack one hell of a punch.

I'd suggest that, "in case of Nuclear Exchange", you'll need a somewhat better strategy than duck & cover, unless your "cover" plan involves a deep salt mine!

Tue, 04/02/2013 - 04:57 | 3398620 IamtheREALmario
IamtheREALmario's picture

Sorry to break the bad news, but Alex, whether HE actually believes it or not is part of the controlled dialectic. He is allowed to exist (and subsequently become quite fiat wealthy) by acting within certain rules (just like ZH) and to ensure that people are never united to learn that there are no real enemies.

Tue, 04/02/2013 - 02:31 | 3398488 Edward Fiatski
Edward Fiatski's picture

I like the last chart - interesting correlation with two very tangible instruments, marking the start & end of Depression cycles - we're halfway there, downhill. :)

Year 101 Anniversary of RMS Olympic sinking coming up in a week, and later in the year we have the 100-Year Party for the formation of the FED.

Celebrate like it's 1914, 1929, 1933, 1939, 1945, 1999! TIMMAY, fill up the punchbowl!

Tue, 04/02/2013 - 02:29 | 3398494 Professorlocknload
Professorlocknload's picture

Great post and charts!

I like the premise of this post because it compares the Dow to real value, not fiat. It suggests that one could trade Au for productive assets (bricks and mortar) on the other side of this insanity, even if the present dollar isn't around then.

It also illustrates why Big Ben is attempting to step on Au, because he doesn't even know any more what his dollar is worth.

The Dow hasn't been allowed to really hit clearing range since 1980, judging by historical PE's.  It will again, if the system survives. Mean Reversion and all.

If it all comes down in a paper blizzard, I guess the oz's could be spent somewhere else. Does Galt's Gulch have an equity market?

Tue, 04/02/2013 - 02:45 | 3398507 Rockerchic
Rockerchic's picture

I am beginning to wonder - what if they can just keep this charade going on indefinitely? I mean, Japan has been doing much the same for 20-some years. They have not "collapsed" so far. It seems like the whole world knows the U.S. is monetizing our behemoth debt, and that in and of itself should have caused global mass panic 2 years ago. As long as no one cares that the dollar is worthless and that the whole system is a fraud, it continues to eek along and the welfare EBT cards keep working. 

It's freakin' surreal.

 

Tue, 04/02/2013 - 02:56 | 3398515 Edward Fiatski
Edward Fiatski's picture

"I am beginning to wonder - what if they can just keep this charade going on indefinitely? I mean, Japan has been doing much the same for 20-some years."

Only if you argue from a position that The Traders wouldn't want to take Profit at some point - profit being: the elimination of surplus useless eaters as a consequence of austerity+war+famine+inflation, and the subjugation of the survivors into a coherent Global, political, monetary & economic union.

I would say this whole circus would still be worth it, even if the sole benefit would be the creation of the North American Union on an EU template, and further ceding of Sovereignty of both, core & peripheral states, to a Banking & Fiscal union/Law within the EU itself.

Never let a crisis go to waste.

Tue, 04/02/2013 - 06:35 | 3398525 Doña K
Doña K's picture

That's the thing, We don't know how long it can take. So be prepared. Save your money, Buy gold and a small farm if you can and live a normal life. Don't forget to hug your kids and love your spouse.

If it crashes, you're at least ready psychologically and resourcewise. 

 

Tue, 04/02/2013 - 07:25 | 3398730 falak pema
falak pema's picture

"the market can stay irrational longer than you can stay liquid."

Quote from the most villified economist here on ZH : JM Keynes.

In fact a very good speculator and investor of his day!

Market irrationality is oligarchy power play :  "we make the invisible hand of market meme for the people we keep the manipulation for the happy few. Even then we fall off the ledge...cos we are so Great Gatsbyish deep inside."

Hahaha! Oligarchy hubris. As that lady who ran hotels said : "taxes are for the common people, not for us!"

 

 

 

Tue, 04/02/2013 - 07:37 | 3398754 Acet
Acet's picture

Look at the size of the cycles: it takes about 40-50 years from peak to peak and a single leg down is more than 20 years. The length of the cycles is just enough for most people to forget about the last crash, which explains why why the cycles are not dampened, rather they keep on increasing in amplitude.

As something point out above, it looks a lot as a positive-feedback cycle in action and in the physical world those usually end up in catastrophic failure when the system in question simply can't take the increasing stresses anymore and just breaks apart.

So that last graph is seriously scary.

The only question left to answer is when will the current system collapse - at the end of the current cycle (in 5-10 years) or at the end of the next one (in 50 -60 years).

Tue, 04/02/2013 - 08:31 | 3398869 andrewp111
andrewp111's picture

There are other indicators that say the "war cycle" will have a peak about 6-10 years from now.

http://www.moneyandmarkets.com/very-serious-stuff-war-cycles-hit-this-ye...

If the system can't take the stresses and tears itself apart, the mechanism to do so is world war. It kind of makes sense also, that the end of the fossil fuel era will be marked by a vast struggle for resources and a great expenditure of excess people.

Tue, 04/02/2013 - 08:54 | 3398934 Shizzmoney
Shizzmoney's picture

RE:

The only question left to answer is when will the current system collapse - at the end of the current cycle (in 5-10 years) or at the end of the next one (in 50 -60 years).

I think it's both...and it will take about 10-15 years.

Bubbles always burst at the end of presidential terms, been happening since the 1970s, with each one being worse that the last. 

In 2015, sovereign bonds will be the bubble that burst (UK, Japan, Southern EZ countries).  This contagion will put pressure on the USD.  The vilgilante bond holders (aka TBTF investors) will start to crush governments for their ZIRP policies.  A sell off will begin, austerity will accelerate, and oil will jack up to $5-$6 a gallon in the U.S. 

Also, another reason why these bubbles tend to burst around election time tables, IMO?

It's a way for the financiers, bankers, and yes, even the people (manipulated via propaganda) to hold the system hostage (some of it due to instability of people not knowing the tax rates due to election results).  Remember in 2008, when Paulson held the gun to the bunny's head.  Congress said no, and the DJIA had a record -777 selloff. 

This was at end of Bush's term, and many of the Congressman who were up for re-election, were now pressured to do something: bailout the finance sector. 

The People said no. 

The bankers (who fund the politicians' campaigns) said, "you better say yes". 

Congress choose the ladder, and even STILL in 2009 and 2010 those who voted for the bailouts got kicked out (while GS posted record profits in 2009).

Basically, 2015 the sovereign bond pressure begins, central banks react, stall, and the Market will have a 50% sell-off.  They'll prop it up again, but by 2020-2024, it will be too late, and then hyperinflation of the price of gold and silver will begin.

That's when the party (i.e. real social unrest) happens. 

The governments and banks around the world know this, hence why they are building police states around the world.

Earth will end up being just one huge gated community - and most of us will be outside the gates.   The only question is where will the fires be?

 

Tue, 04/02/2013 - 07:18 | 3398726 Izznogood
Izznogood's picture

'Japan has been doing much the same for 20-some years. They have not "collapsed" so far."

 

That sounds very much to me like the guy who fell off a very tall building. Half way down he said "oh well, so far so good" ...

Tue, 04/02/2013 - 03:45 | 3398548 savagegoose
savagegoose's picture

basically the cost of fighting a war and winning , is too  prohibitive, that  they must be on a  fiat  money supPly to  afford  war. Now there is constant wars,  we must be on a a constant fiat system.

BRING BACK GOLD AND END WAR!

Tue, 04/02/2013 - 03:58 | 3398551 chindit13
chindit13's picture

Do I need glasses?  Am I reading this chart correctly?  Is this an April Fool's joke?  Correct me if I'm wrong, but it seems to show the Dow crushed gold since 1913 (Dow/Gold of 4x in 1913, vs 9x today---not even counting dividends).  I don't think that was the intent of the chart's creator.  I've got to look again.

Frankly, the other thing it shows is that if one stops fixing the price of one asset, then it will fluctuate vs. the price of other assets.  That is kind of tautological.

People who want to believe in gold will believe in gold, and such charts and articles will serve to reinforce their belief, even if it actually gives a message contrary to what they think they see.  Dramatic spikes produce confirmation bias.  For those who are agnostics with respect to gold, and view its "value" as merely another illogical faith, those charts just reinforce the view that gold is an asset class, that sometimes outperforms equities and sometimes does not. Over 100 years, according to the chart, it did not outperform the Dow.  It got its butt kicked.  Who knows about the next 100?

Money is faith.  That's it.  Those who say "gold IS money" simply adhere to that particular faith.  All sorts of prayers, chants and incantations arise around any faith, but many do not survive close scrutiny.  Fortunately for faiths, the faithful fail to scrutinize.  The comments championing gold under a chart that shows gold dramatically underperformed the Dow proves that.

We are all somebody else' sheeple.  As a pathological agnostic, I refuse to belong to any faith that would accept me as a believer.  Like everyone else, I've got some finite number of years, and need only match my time above ground with the prevailing and dominant faith of the time.  Timing is everything.  Any second now must be some sort of Metric Time, because a whole lot of sand passes through the hourglass while we all wait.  I can hedge against Armageddon without getting that glassy-eyed stare of the newest cult member, that would make me prone to misreading charts. 

I can never forget Nelson Bunker Hunt, who saw his dream fall 93%---and wipe him out completely---by the time his clock got punched, and even if he had lived he would still be down a nominal 42% from 33 years ago this month.  What is that in real tems?

The term "healthy skepticism" is almost redundant.

Tue, 04/02/2013 - 04:17 | 3398571 fiftybagger
fiftybagger's picture

I'll tell ya what.  Let's mark it right here, a million dollar bet,  and you can talk to me in five years.  My million buys me 35,714 ounces of silver.  Yours buys you 68.6 shares of the Dow. I will haunt you on this forum with this until my dying day chindit13

Silver For the People

Tue, 04/02/2013 - 05:50 | 3398626 chindit13
chindit13's picture

You are a perfect example of someone so caught up in his faith that he goes blind to reality.  My comment referred to that chart, this article, and the last 100 years.  (Notice my line "Who knows about the next 100 years?") The chart was ostensibly put up to show gold was a superior investment since 1913, when in point of fact it show quite the opposite over the whole range.  The spikes let folks like you see what you want to see, not what actually happened. Don't go getting yourself all riled up like I'm a Danish cartoonist or something.

Haunt me all you wish, if that will give your life some meaning.  Seems a little pathetic, but up to you.  I'm just a poor man without two Trillion Dollar Coins to rub together, but I kind of get by.  Just lucky, I guess.  And whoever gets 'there' first buys drinks for Nelson Bunker Hunt.  He's a little short of wealth, even if he could take it with him.

Tue, 04/02/2013 - 05:53 | 3398651 Go Tribe
Go Tribe's picture

Good sober posts. Who woulda guessed they would create a Fed in the days when most were farmers. Hard to say what genius concept they'll come up with 100 years later. Gold and silver are just assets, as you say.

Tue, 04/02/2013 - 07:10 | 3398717 Mr. Hudson
Mr. Hudson's picture

They will sell time shares in the FEMA camps.

Tue, 04/02/2013 - 08:15 | 3398828 andrewp111
andrewp111's picture

The spikes show that it was profitable to sell gold and buy stocks in the late 1970s and to do the reverse in 2000. It also hints at an upcoming opportunity to sell gold and buy stocks.

Tue, 04/02/2013 - 07:12 | 3398720 spinone
spinone's picture

More important and valuable than gold or dow shares are practical skills, good decisionmaking and like minded friends you can rely on.

Tue, 04/02/2013 - 04:29 | 3398598 Doña K
Doña K's picture

Most people agree with you and most people advise that a % of your assets goes to gold.

The degree of faith in gold determines whether you allocate 10% of your assets or 90%.

My take is that as the system becomes unstable and fragile and investment options are limited and risky, then these percentages of physical gold holdings move proportionately higher.

So then, each one of us can make our own assessment based on faith, point of view, whose opinion we respect or believe, some guessing and more other influences. Barred CNBC and individuals whose business model relys on stocks going up all the time. 

My final thought is that Bernanke may serve his cause and intent better if he actually prints money and throws out of helicopters as he himself noted. Meaning that he passes some of that 85Billion/month directly to the people. He will then definitely start seeing velocity. That's what he needs, VELOCITY

BSB, if you read this just do it.  

Tue, 04/02/2013 - 08:12 | 3398822 andrewp111
andrewp111's picture

The Bernank does not have the authority to throw money out of helicopters directly to the people. Only the Congress can do this. Bernanke can finance the Congress.

Tue, 04/02/2013 - 09:15 | 3399018 agent default
agent default's picture

This was never about money velocity or about stimulating the economy.  This is and has always been about asset expropriation via the use of fiat currency and fiat values.  They have devised a specific way of systematically striping people of their assets.  If you are in cash or bonds they have the printing press.  If you are in PMs they have the Futures Contracts, which are another form of printing in order to manipulate the market.  And if somebody picks up on it, they can always appoint some 89yo, judge to rule that "you have not been materially hurt" , he didn't rule on weather there actually was any manipulation mind you. /rant

COMEX just like clockwork today BTW

Tue, 04/02/2013 - 04:30 | 3398601 css1971
css1971's picture

You're missing the point. Buy and hold anything in an exponentially growing credit bubble world and you are asking for beggary.

These are credit bubble growths and collapses, don't get on the wrong side of it. Just let the great big macro trends carry you up whether it happens to be gold on the way up or stocks, or bonds.

Tue, 04/02/2013 - 05:29 | 3398630 IamtheREALmario
IamtheREALmario's picture

Yes, the Dow (under whatever incarnation and balancing scheme) does kick gold. The assumption is that productive assets in a growth environment (increasing population and technology) will be able to grow, while gold, not having a significant productive use, remains a static asset.

The importance of the chart (for anyone with even a small bit of statistics or quality control training) is that prior to 1913 the entire system is under control (meaning that the variation from the mean is within statistical control limits) by virtue of the "unseen hand" effect. After 1913, INTERVENTION causes instability ... which people, who understand statistics and quality control, would expect. It has been well documented by Demming and others that if every time the result varied from the mean one makes adjustments to the machinery, the system goes "out of control". Are the central bankers so clueless that they do not understand the basics of SPC (statistical process control) or are they intentionally creating wide swings for more nefarious purposes? IMO, most likely the latter to accentuate wealth redistribution. The charts are proof of either crime on a grand scale or incompetence on an even grander scale.

Tue, 04/02/2013 - 06:32 | 3398684 Doña K
Doña K's picture

<<<<<The charts are proof of either crime on a grand scale or incompetence on an even grander scale.>>>>>

I believe your conclusion is correct. However, there is also a third option. Not an "either or" but both.

Tue, 04/02/2013 - 08:10 | 3398817 andrewp111
andrewp111's picture

Even though the DOW kicks gold most of the time, there are still times when gold is high and the DOW is low, and peaks at the reverse.  A moment to sell your gold and buy stocks might be coming up in the next 10 years or so. When everyone in the world is panicing and buying as much gold as they can at any price will probably be the time to sell.

Tue, 04/02/2013 - 04:15 | 3398569 lemarche
lemarche's picture

GREAT LINK ! GOOD ONE ZH

Tue, 04/02/2013 - 04:33 | 3398605 css1971
css1971's picture

BTW these charts indicate another 5-10 years of down to go.

Tue, 04/02/2013 - 05:17 | 3398635 Edward Fiatski
Edward Fiatski's picture

Could be time-compressed due to modern telecommunications & extreme overleveraging in all sectors, but yeah - a World War is a given by the end of this decade.

Tue, 04/02/2013 - 05:23 | 3398637 Cstrupp4241
Cstrupp4241's picture

Where is John Galt? ...or(Gold)

Tue, 04/02/2013 - 05:56 | 3398653 world_debt_slave
world_debt_slave's picture

Alas, the creation of the Fed Res was not about stability but how to extort and rob the productive citizenery to amass wealth and power for the few.

Tue, 04/02/2013 - 06:22 | 3398667 CDNX fan
CDNX fan's picture

AStounding how a two-year downtrend in precious metals prices can turn a really cool site into a bunch of teeth-gnashing, angry, bitter "stackers" trapped on the wrong side of a "trade" while all of Manhattan is long the S&P and making huge coin. Must drive you guys nuts that we can trade our "Worthless Fiat" into a lot more gold and silver coinage today versus two years ago (if we want to).

Tue, 04/02/2013 - 06:30 | 3398681 Dr. Engali
Dr. Engali's picture

Some of us use the Wallstreet casino and turn the fiat proceeds into real money.

Tue, 04/02/2013 - 06:53 | 3398697 hooligan2009
hooligan2009's picture

yep...keep growing the stack, whilst taking the one way bet via money printing...and its free to play the fiat game too. to quote

"we will lend you 1 million euros/dollars for every 200,000 in your margin trading accont at 2% for one year. check our dividend scanner for stocks yielding more than 5%"

its a free game, no skill, no experience and no quality; courtesy of central bank ZIRP. central banks are telling everyone that they don't need to work or pay taxes because they will print all the fiat that is required for people to live very well. not as well as fat banksters who got to the game early (lipstick on piigs?) but you get the picture.

spartacus: taking profits in gold since march 6, 2009

i know a lot of people won't be reinvesting their bonuses in their employers 401k's following lehmans.

i wish you all the cubicle/dealing/cheating desk/open plan office luck in the world and hope you don't put all your eggs in those baskets.

Tue, 04/02/2013 - 07:08 | 3398708 Mr. Hudson
Mr. Hudson's picture

I have a question for those who are heavily invested in gold. Let's say gold makes a serious "correction". How low would the price have to go for you to sell? $1,000 an ounce? $500? $300? $100?

Tue, 04/02/2013 - 07:34 | 3398755 Debt Slave
Debt Slave's picture

Sell? I'd back up the truck like the Chinese have been doing.

Tue, 04/02/2013 - 07:49 | 3398785 Mr. Hudson
Mr. Hudson's picture

So, you would never sell your gold? If gold continues to go up, at what point would you sell it? $3,000 an ounce? $5,000? $10,000? $100,000?

Tue, 04/02/2013 - 08:20 | 3398836 Debt Slave
Debt Slave's picture

I plan to sell when I retire and want to pay for things like food, gas, and taxes. So far, gold has done a good job of protecting my savings from the theft of inflation. I don't care what the price in fiat dollars is at the time. It buys the same basket of groceries now as it did in 2002. That's all I care about.

Tue, 04/02/2013 - 08:44 | 3398907 Diogenes
Diogenes's picture

I'll happily sell my gold when governments turn honest and the Ponzi ends. I don't like gold, it is not a good investment, but it is a safe haven.

Tue, 04/02/2013 - 09:00 | 3398955 Chump
Chump's picture

Under what circumstances would gold go to those prices?  And why would it then be attractive to trade the metal for the fiat?

I think you're mixing the ideas of trading vs. relative protection from an insane government.

Tue, 04/02/2013 - 08:28 | 3398819 Croesus
Croesus's picture

Christ, if Gold went to $300.........I would sell off everything I own (house, cars, toys) to buy MOAR!

I've been in for a long time, so it's got a lot of room to fall before I'm in the red.

To answer your question with some seriousness though:

The concept of relative value comes to mind. In other words, what are the measured prices of other assets doing, while Gold is falling? I'm looking for figures expressed as percentages....

In other words, if Gold falls by 50% today (so $800/oz.), what are home prices doing at the same time? How about high-end art and antiques? Rare firearms? Rare wine?(What my interests are....)

This may be presumptive on my part, but I get the feeling that you're new to Gold, and looking for easy answers, or someone to do your homework for you. Again, maybe I'm wrong, but that's the impression at the moment.

If so: one of the cardinal rules of investment is to "know what you're invested in". So, I can tell you what I'll be doing....but that doesn't mean it's what's right for you.....

Also, Greed is dangerous: If you're looking for a short-term, "easy way to make money", Gold and Silver may not be for you. There are a lot of dynamics to the metals' markets (and just as many opinions both good and bad). These aren't things you can readily learn overnight, and nothing will keep you awake at night like the constant propaganda against metals, or the fluctuations in the paper prices of them.

 

 

 

 

Tue, 04/02/2013 - 07:08 | 3398715 A82EBA
A82EBA's picture

I like that chart so much I made it my wallpaper 

Tue, 04/02/2013 - 07:10 | 3398716 hooligan2009
hooligan2009's picture

heh...multiples of the same chart? maybe matching toilet paper too?

Tue, 04/02/2013 - 07:13 | 3398721 bustdrs
bustdrs's picture

Mary had a little lamb, 

its fleece was full of Cyprus exitors , 

but everywhere that Mary looks

she cant find fleece or thread!

 

Just curious, even though 28 for an ounce of silver is ridiculous.

Unfortunately, the fate of its move too much higher is too much tied to the Morgue.

 

Tue, 04/02/2013 - 07:33 | 3398749 JackT
JackT's picture

So we are heading back to the 1870s. Well, at least this time we'll have plenty of fiat for toilet paper.

Tue, 04/02/2013 - 13:34 | 3400151 Ludwig Van
Ludwig Van's picture

"The Crime of 1873" -- The demonetization of silver in the United States...

...cycle out... soon cycle in?

.

Tue, 04/02/2013 - 07:38 | 3398759 noless
noless's picture

I look forward to quintillions.

Tue, 04/02/2013 - 08:21 | 3398841 Shizzmoney
Shizzmoney's picture

"Stability is inherently destabilizing." - Minsky

Tue, 04/02/2013 - 12:14 | 3399859 FecundaGoat
FecundaGoat's picture

Take a good look at the chart....It runs off the right side with gold up and stocks down.....The opposite is true....

Am I missing something or is this already reverting to the mean.....

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