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Did Bernanke Just Do It Again, Asks Bill Gross

Tyler Durden's picture




 

If anyone thought Bill Gross would take what is likely the worst P&L day in PIMCO history without a fight, they would be wrong.

So did Bernanke just do it again?

And incidentally, Gross is of course referring to the following speech:

The brilliance of Friedman and Schwartz's work on the Great Depression is not simply the texture of the discussion or the coherence of the point of view. Their work was among the first to use history to address seriously the issues of cause and effect in a complex economic system, the problem of identification. Perhaps no single one of their "natural experiments" alone is convincing; but together, and enhanced by the subsequent research of dozens of scholars, they make a powerful case indeed.

 

For practical central bankers, among which I now count myself, Friedman and Schwartz's analysis leaves many lessons. What I take from their work is the idea that monetary forces, particularly if unleashed in a destabilizing direction, can be extremely powerful. The best thing that central bankers can do for the world is to avoid such crises by providing the economy with, in Milton Friedman's words, a "stable monetary background"--for example as reflected in low and stable inflation.

 

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.

Oh, and Bill, the answer is no: Fed assets with and without taper. If this is "doing it again" we can't wait to see what selling $5 trillion in securities, or about 50% of all 10 year equivalents, will look like...

 

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Thu, 06/20/2013 - 10:52 | 3675224 Martial
Martial's picture

Bernanke and 'doing it'. Yes that is Gross.

Thu, 06/20/2013 - 10:53 | 3675235 eclectic syncretist
eclectic syncretist's picture

History doesn't repeat itself, but it often rhymes!

 

Thu, 06/20/2013 - 11:04 | 3675290 Oracle of Kypseli
Oracle of Kypseli's picture

I have posted my prediction a few times before, the end of Ben Shalom will come from a self inflicted wound to his temple with his Glock 40.

Sayonara sucker 

Thu, 06/20/2013 - 11:14 | 3675355 SheepDog-One
SheepDog-One's picture

3 shots to the temple....damndest sucide we've ever seen!

Thu, 06/20/2013 - 11:38 | 3675433 MillionDollarBogus_
MillionDollarBogus_'s picture

Sheep,

That is a disgusting comment.  Please remove it.

Thu, 06/20/2013 - 11:42 | 3675443 NotApplicable
NotApplicable's picture

He can't remove it once you've replied to it.

Thu, 06/20/2013 - 11:53 | 3675482 Arius
Arius's picture

back then Bernanke was a food critic ... writing about sausages prepared by other chefs ... now, well he is in the kitchen and can see how sausages are made ... not really nice isnt it?

Thu, 06/20/2013 - 13:08 | 3675698 JimBowie1958
JimBowie1958's picture

He can't remove it once you've replied to it.

Affirming, once again, the briliant insight of MDB.

Thu, 06/20/2013 - 11:59 | 3675506 firstdivision
firstdivision's picture

What time does your mom set your bedtime?

Thu, 06/20/2013 - 21:24 | 3677534 bluskyes
bluskyes's picture

What the hell? Have you never seen the reports on shotgun wounds to the head that were ruled suicides during the Clinton administration?

Thu, 06/20/2013 - 11:05 | 3675298 Skateboarder
Skateboarder's picture

The best thing bankers can do for the world is fuck off.

Thu, 06/20/2013 - 11:45 | 3675458 Bananamerican
Bananamerican's picture

"...is fucking OFF themselves" (fixed)

Thu, 06/20/2013 - 12:07 | 3675525 prains
prains's picture

They're doing a damn fine job at it right now it's just too bad the fuckers are taking the rest of us with them

Thu, 06/20/2013 - 14:33 | 3676008 Midasking
Midasking's picture

tapering is not happening or the entire world will be a smoking hole in the ground. QE will be expanded you can count on that. http://tinyurl.com/mem7o7x

Thu, 06/20/2013 - 10:52 | 3675230 ekm
ekm's picture

It's not Bernanke, it's the White House that rules.

 

The dear leader made it clear when he fired Benny on TV at Charlie Rose.

Thu, 06/20/2013 - 10:59 | 3675256 CrashisOptimistic
CrashisOptimistic's picture

You know what's astonishing about that?

Bernanke started massive QE one month before that somewhat close election, maybe generating a million votes for Obama, MAYBE even winning that election for him.

And about 7 or 8 months later, Obama thanks him thus.

Thu, 06/20/2013 - 10:59 | 3675260 ekm
ekm's picture

Nixon's Fed Chairman:

"If we do not do what the president wants, we'll lose our independence".

 

Is Obama like Nixon or 1000x like Nixon?

Thu, 06/20/2013 - 11:05 | 3675306 Village Smithy
Village Smithy's picture

I think that you're on to something because I can't help but feel Gross has been betrayed. If this is in fact a bloodbath day at Pimco why wouldn't they have been  better positioned for it ? Maybe Bernanke made them a promise and now his overlord has over-ruled it. 

Thu, 06/20/2013 - 11:41 | 3675441 geotrader
geotrader's picture

Gross called for QE on MBS.  So he got so greedy making bank that he lost sight?

 

Greed has no limits!

Thu, 06/20/2013 - 11:50 | 3675473 Bananamerican
Bananamerican's picture

i still can't believe "QE" does...

Yellin or Summers or ? on deck with the MOAREST...

Maybe Ben was lately a gentle voice of reason along the lines of,"QE aint working Mr O."...

It's either that or the world is facing its guillotine moment.

("all the rats in the box CB?... Then throw the switch")

Thu, 06/20/2013 - 13:10 | 3675712 Creepy Lurker
Creepy Lurker's picture

"It's either that or the world is facing its guillotine moment."

One can but hope. May I pull the lever? Just once?

Thu, 06/20/2013 - 15:52 | 3676452 geotrader
geotrader's picture

The only thing Mr. O wants is to destroy.  Goes back to his roots (when his daddy was blacklisted).

Thu, 06/20/2013 - 11:03 | 3675286 Snoopy the Economist
Snoopy the Economist's picture

O-dumbo did thank benny - benny does not want to be there when the collapse happens so now he can leave in Jan.

Thu, 06/20/2013 - 11:03 | 3675288 Cursive
Cursive's picture

@CrashisOptimistic

Yeah, well, BernanQE has outlived his usefulness.  Cities like Detroit are roting and (fat) Amerikans are starving, so it's time for a fall guy.

Thu, 06/20/2013 - 11:09 | 3675333 aka Gil
aka Gil's picture

Or a fall gal.

Thu, 06/20/2013 - 11:24 | 3675386 Cursive
Cursive's picture

@aka Gil

Accidental sexism!

Thu, 06/20/2013 - 14:34 | 3676015 marathonman
marathonman's picture

I don't know, maybe Bernanke is telling Obama to piss off with the current talks of tapering.  It certainly won't help BO to have the economy tank heading into the 2014 Congressional elections.  He could lose the Senate and then have Republicans 'Bork' his Supreme Court and Appellate Court nominees.  Bernanke's last revenge could get interesting.

Thu, 06/20/2013 - 10:57 | 3675258 ekm
ekm's picture

What's happening is way, way way above Fed Chairman pay grade

Thu, 06/20/2013 - 11:00 | 3675273 fonzannoon
fonzannoon's picture

What is happening is the S&P has made a stand above 1,600.

Crude is getting whacked.

The dollar is getting stronger.

I am not sure why we are deliberating how the fed or anyone else has lost control, other than grandma and her bond fund.

Thu, 06/20/2013 - 11:03 | 3675293 ekm
ekm's picture

The dow cannot drop. It is impossible.

 

it can only crater

Thu, 06/20/2013 - 11:07 | 3675312 surf0766
surf0766's picture

95 for crude is not getting whacked. 65 yes but not 95.

Thu, 06/20/2013 - 11:13 | 3675349 CrashisOptimistic
CrashisOptimistic's picture

Crude's not moving at all.  The dollar is.

Thu, 06/20/2013 - 11:15 | 3675359 fonzannoon
fonzannoon's picture

whatever. Ths dollar is rising so crude is falling. Semantics.

Fine. Let's drop crude $20 a barrell. Get gas prices down to $2.75. Sounds good to me. That sounds bullish.

Thu, 06/20/2013 - 11:17 | 3675365 surf0766
surf0766's picture

The dollar is toilet paper at best.

Thu, 06/20/2013 - 11:21 | 3675377 Flakmeister
Flakmeister's picture

It may well be, but currently it is the softest, strongest and most absorbent of the major currencies out there....

Thu, 06/20/2013 - 12:31 | 3675582 ParkAveFlasher
ParkAveFlasher's picture

And, it's in everybody's bathroom vanity already.

Thu, 06/20/2013 - 11:22 | 3675373 Flakmeister
Flakmeister's picture

You are denying the fundamental relationship between the cost of the materials needed to extract the oil and the value of said oil. New oil supplies have a high marginal cost.  So neglecting some cataclysmic spike downward, oil is not going to be priced below replacement cost unless global demand is crushed faster than the natural decline rate of existing fields (~5% p.a.)....

Thu, 06/20/2013 - 11:13 | 3675351 ekm
ekm's picture

How about $20/barrell?

Thu, 06/20/2013 - 11:24 | 3675385 Bay of Pigs
Bay of Pigs's picture

Oil can't be produced for that, much like gold and silver can't be produced at these prices.

Thu, 06/20/2013 - 11:34 | 3675424 ekm
ekm's picture

Oh I agree. Just temporarily for few weeks

Thu, 06/20/2013 - 11:38 | 3675429 Flakmeister
Flakmeister's picture

Yes, some existing fields can be profitable at those prices, however that only applies to maybe 20% of world production.  Find a way to reduce world consumption by 80% and $20 may emerge as a price. However, no new oil will emerge for a long term average less than ~$90-$100  (Brent)....

Thu, 06/20/2013 - 11:56 | 3675483 CrashisOptimistic
CrashisOptimistic's picture

I know there are goldbugs all over ZH, but that statement won't fly.

Oil is consumed.  Really consumed.  You burn it.  It's gone.  That's consumption.

Gold being bought by someone who makes jewelry of it or puts it in a safety deposit box is not consumption.  You would have to atom smash it and change the proton count to some element other than gold, or launch it into the sun for it to be "consumption".

So cost of production matters for oil, because you HAVE to have it and what you already produced is gone/consumed.

It doesn't matter for gold because you don't have to have it and what you already produced still exists because it wasn't consumed.

Thu, 06/20/2013 - 12:04 | 3675521 Bay of Pigs
Bay of Pigs's picture

"it doesn't matter"?

Are you aware of the costs of gold mining right now per ounce? (avg is north of $1300). And supply-demand "doesnt matter" either? WTF?

It doesn't sound like you understand what's going on here.

Thu, 06/20/2013 - 12:22 | 3675555 Oracle of Kypseli
Oracle of Kypseli's picture

Some countries, rely on newly mined gold to survive due to corruption. First in line South Africa. The ANC has a lock on being elected for the past 19-20 years and the in-fighting has started on who will steal more.

The government offices and Gov agencies parking lots are full of BMW's MB's Range Rovers and Cayennes eyes have ever seen.

 

Thu, 06/20/2013 - 12:24 | 3675560 CrashisOptimistic
CrashisOptimistic's picture

Demand and consumption are not the same thing.

Only in the pseudo science economics are they presumed to be the same.

Every ounce of gold ever extracted from the ground still exists.  It was demanded and not consumed.

With the exception of the SPR, every barrel of oil extracted from the ground no longer exists.  It was demanded AND consumed.

Thu, 06/20/2013 - 12:59 | 3675665 Bay of Pigs
Bay of Pigs's picture

Sure, but if gold and silver cannot be produced at a profit (production then falls), shortages are certain if demand remains high. We are already seeing that now.

Gold is being hoarded now and for very good reasons. There are multiple claims on every single ounce above ground, and most likely on those ounces still in the ground. 

Or you can believe the MSM propaganda. 

Thu, 06/20/2013 - 13:15 | 3675734 Flakmeister
Flakmeister's picture

There are only shortages if demand can not met out of existing supply. Can you prove that the rate of of hoarding is greater than the rate of supply? Sorry but we can't do that.

Only when physical premiums exceed a certain amount for a sustained basis can we say that (and you and I know that spreads widen in times of volatility). This is not happening. Check out tulving.com, only Pandas are unavailable...

And while you are correct that there is lot of paper gold out there, I could argue that when the paper gold market collapses, it will be concurrent with other markets and it will be merely a minor sideshow....  

Thu, 06/20/2013 - 13:16 | 3675735 constantine
constantine's picture

Well, if we enter a period of high inflation, I think that we can all agree that demand curve for consumables will be forced to the left even if the rate of fiat depreciation exceeds the demand destruction. At this point, gold shines brightest since its desirability becomes dictated only as an asset that is contra fiat while not being impacted by an industrial demand collapse. Will this happen?; I believe so. Anyway, all indications are that demand for gold (the actual mined stuff) is at an alltime high though that is almost entirely coming out of Asia. The current war against gold is nothing new. It's page 62 in the Autocrat's Insider Guide to Empire Decline. It works until it doesn't anymore.

Thu, 06/20/2013 - 15:57 | 3676480 I Drink Your Mi...
I Drink Your Milkshake's picture

I'd buy that fuckin' dip!

Thu, 06/20/2013 - 11:09 | 3675328 Cursive
Cursive's picture

@fonz

Because we know that they will lose control.  Like all Ponzi schemes, this monetary system was setup to fail from the start.  The only thing left for TPTB is to survive and thrive in the ensuing tmult that occurs when complex systems fail.  TPTB are in survival mode.  Get ready, it won't be pretty.

Thu, 06/20/2013 - 11:12 | 3675341 fonzannoon
fonzannoon's picture

Cursive if you see the 10yr break above 2.75% and move higher fairly rapidly towards 3 percent, and gold turns around and goes up $100 then we got something.

Thu, 06/20/2013 - 11:26 | 3675394 Bay of Pigs
Bay of Pigs's picture

Sure looks to me like gold and silver are screaming at the top of their lungs that a major meltdown and disaster is now here.

Thu, 06/20/2013 - 11:28 | 3675402 fonzannoon
fonzannoon's picture

My ahole lcs still wants $26 for ASE. Unreal.

Thu, 06/20/2013 - 11:40 | 3675428 Bay of Pigs
Bay of Pigs's picture

BNN (in Canada) just announced that "Ben Bernanke's free money train is now over" and that's why gold and silver are going down.

Their TA guy just said there is no support below gold..."maybe $1150".

Goebbels would be proud of Western media now...

Thu, 06/20/2013 - 11:46 | 3675462 Non Passaran
Non Passaran's picture

I like that news channel! It is providing me with a great service!
What's not to like?

Thu, 06/20/2013 - 11:58 | 3675507 Bay of Pigs
Bay of Pigs's picture

Another guy on there just said $1086.

People are throwing it from the rooftops in my neighborhood right now and lighting their hair on fire. 

Thu, 06/20/2013 - 12:59 | 3675666 ironsky
ironsky's picture

If the women were ripping off their clothes that would be Game of Thrones.

Thu, 06/20/2013 - 13:44 | 3675846 Widowmaker
Widowmaker's picture

Gold in the high-700's if not lower.

The world is ripe for a bloodbath across "assets" and humanity alike.

Thu, 06/20/2013 - 14:20 | 3675966 Bay of Pigs
Bay of Pigs's picture

FWIW, no gold miner will be in business at $700 and lower.  

Thu, 06/20/2013 - 11:47 | 3675464 NotApplicable
NotApplicable's picture

I don't think you understand. Even at those prices, for him (whether he knows it or not) it is still a going out of business sale. All these collapsing paper prices do is to clean out any dealer inventory who uses them to price phyz. They will NOT be able to restock with the cash on hand, as the supply chain is about to go dark (evidenced by ever lengthening delivery delays).

Thu, 06/20/2013 - 11:54 | 3675484 Bay of Pigs
Bay of Pigs's picture

"supply chain is about to go dark"

+1 comment of the day.

Edit: people have short memories too (from April 16th)

http://www.silverdoctors.com/10-of-us-annual-silver-supply-just-vaporized/

Thu, 06/20/2013 - 11:14 | 3675357 Quinvarius
Quinvarius's picture

The dollar will never be allowed to grow stronger.  It is going to go to where the CBs agree it should be.  Which is lower.  Much lower.  I would not trade it myself.  But the current level they are pegging it at is obviously way too high for the economy.  Besides.  they would not be beating on gold if they were not planning on dropping the dollar.

Thu, 06/20/2013 - 11:22 | 3675382 Cursive
Cursive's picture

@Quinvarious

Carry trade unwind, scramble for Eurodollars and flight to safety all weigh against your thesis.

Thu, 06/20/2013 - 11:38 | 3675430 Quinvarius
Quinvarius's picture

Maybe.  But the supply of dollars the Fed can put on the market is infinite.  It has been in the same range for 8 years.  My thesis is that there is no market.  Just an enforced exchange rate.

Thu, 06/20/2013 - 11:16 | 3675362 SheepDog-One
SheepDog-One's picture

Yes but the great white shark can't simply 'make a stand', it MUST keep swimming ahead or it dies. This is the real problem the FED finds itself in now.

Thu, 06/20/2013 - 11:54 | 3675491 Bastiat
Bastiat's picture

Scratching a bit deeper, that's also the problem with debt backed currency.

Thu, 06/20/2013 - 11:33 | 3675415 topshelfstuff
topshelfstuff's picture

The "Big Move", as always, is/was pre-ordained (Known by the select Few). Its not as important re: What exactly Bernanke said, its more about the Spin, how its Reported, something already Scripted. If you take Gold for an example and google something like
( Bernanke speaks and gold tanks), you'll find a good 4-5 examples. The results of yesterday were what TPTB wanted.

Thu, 06/20/2013 - 10:59 | 3675262 Dr. No
Dr. No's picture

Who do you think elected our leader?  "Who is being naive now Kaye?".

Thu, 06/20/2013 - 11:01 | 3675279 ekm
ekm's picture

There is inter-lobby infighting.

 

big banks and pharma against big oil and military complex fighting for gov funds.

 

Somebody has to win

Thu, 06/20/2013 - 11:04 | 3675294 fonzannoon
fonzannoon's picture

I see a bunch of traders fighting and the winners will buy the losers prime rib and chianti at Sparks later.

This is bullshit. No offense ekm, I am not nitpicking your overall thesis. But what is going in right now is crap.

 

Thu, 06/20/2013 - 11:06 | 3675310 ekm
ekm's picture

fine, fine

Thu, 06/20/2013 - 11:08 | 3675326 fonzannoon
fonzannoon's picture

Hear me out. You say the dow cannot drop. It can only crater. The problem with that thesis is.....it's dropping.

It just seems so manipulated. Steer it down 5-10%. Then announce the taper dip is over. Then ram it back up.

You don't see that?

Thu, 06/20/2013 - 11:11 | 3675338 ekm
ekm's picture

https://www.google.ca/finance?q=INDEXSP%3A.INX&ei=RxvDUaiKFMaTqwHFmQE

 

Set it on year to date.

Where is the drop?

Thu, 06/20/2013 - 11:13 | 3675350 fonzannoon
fonzannoon's picture

we are what...3% off the highs on the dow the last few weeks? I am saying this looks like a rigged 5-10% drop that we are in the midst of now.

Thu, 06/20/2013 - 11:14 | 3675356 ekm
ekm's picture

Oh I see.

Ok, we'll see.

Ultimately as far as timing the future, we're all speculating

Thu, 06/20/2013 - 11:52 | 3675444 Ham-bone
Ham-bone's picture

Fonz - a Fed coordinated smackdown of equities is intended to likewise smackdown T yields.  That both are being sold is a sign the Fed is no longer in charge.  "invest" accordingly.

The only means for Ben to save housing, CRE et al is to put the yields back into a sub 2% (and going to 1%) is to destroy the currency.   Not a nice choice.  The CRE market will explode as they can no longer roll over to lower yields...REITs blowing up in 3, 2, 1.  30yrs of lower yields have hidden so many problems...but the tide is going out (been so long people forgot it could/would) and naked swimmers everywhere.

Thu, 06/20/2013 - 11:54 | 3675487 fonzannoon
fonzannoon's picture

I just see it different. Everyone thinks that yields had to drop if equities sold off.

This shit sandwich is being sold as the taper dip. Yields go up. Equities have a nice calm correction. Then it gets bought. We shall see if that is the case or if the fed is no longer in charge.

Thu, 06/20/2013 - 11:17 | 3675363 Everybodys All ...
Everybodys All American's picture

One man's crater is another man's drop.

Thu, 06/20/2013 - 11:07 | 3675314 SheepDog-One
SheepDog-One's picture

Whenever I hear 'traders' the mental image I get every time is a couple of Arabs haggling over a camel.

Thu, 06/20/2013 - 11:07 | 3675317 CrashisOptimistic
CrashisOptimistic's picture

Traders?

Isn't HFT still north of 50% of volume, despite recent declines?

What's a trader?

Thu, 06/20/2013 - 11:13 | 3675332 fonzannoon
fonzannoon's picture

I was out with a few last night. They work for huge banks, and they run a shit ton of money.

Thu, 06/20/2013 - 11:18 | 3675366 Cursive
Cursive's picture

@fonz

Good luck to them.  The future is not filled with money.  Did you ask them if they ever considered making homemade soap?

Thu, 06/20/2013 - 11:24 | 3675388 gjp
gjp's picture

curious, when you're out with people like that, do you go all ZH on them?  if so, what's the response?

Thu, 06/20/2013 - 11:43 | 3675408 fonzannoon
fonzannoon's picture

I do not. I let them talk. If you assume the game will continue then they tend to have a pretty good pulse on things. It's an incredibly different look at things then I get on here. I find it really important to listen to both sides.

You never know how long this can go on.

 edit....dear junker...you want me to waste my breath telling a bunch of traders making 750k a year that the dollar will collapse...the markets will cease to exist and they need to load up on food and ammo?

Give me a break.

Thu, 06/20/2013 - 11:49 | 3675470 Flakmeister
Flakmeister's picture

Pretty much sums it up...

Thu, 06/20/2013 - 11:49 | 3675471 Bay of Pigs
Bay of Pigs's picture

You would be wasting your time anyway fonz. They would never believe you.

 

 

Thu, 06/20/2013 - 12:04 | 3675517 gjp
gjp's picture

I can understand your rationale for holding your tongue, but I can never hold mine.  The affront to reason, fairness, and truth gets me worked up every time.

I can understand why they play their machiavellian games and the internal logic of how they play, but they should still be reminded of from what counterfeit degenerate system (and whose peasant backs) those 750k salaries and attendant lifestyle are derived.

ps I didn't junk you, never would, your comments are always highly valued

Thu, 06/20/2013 - 10:54 | 3675242 ThunderingTurd
ThunderingTurd's picture

Damage is done.  Chinese overnight funding makes the 'honking' sounds of a gaggle of swans.

Thu, 06/20/2013 - 10:57 | 3675245 SheepDog-One
Thu, 06/20/2013 - 11:13 | 3675347 CrimsonAvenger
CrimsonAvenger's picture

Wow, and I thought there was no video from Obama's childhood!

Thu, 06/20/2013 - 10:56 | 3675251 OnceandForever
OnceandForever's picture

Leading indicators:      Three of the 10 indicators in the leading index contributed to the increase, today’s report showed. The positives were stock prices, a credit index and the interest-rate spread between the federal funds rate and 10-year Treasury notes.

 

 

So I guess that means the indicators are not up after all.

Thu, 06/20/2013 - 11:00 | 3675268 SheepDog-One
SheepDog-One's picture

Now they're trying to dig for nuggets of hope in a mountain of propped up garbage markets. DOW should realistically be at around 4,000 or so to reflect real world conditions. Removing the trillions of fluffy fake paper filler will happen quickly. Of course in the grand timeline, the last few years are but a microsecond.

Thu, 06/20/2013 - 10:57 | 3675255 apberusdisvet
apberusdisvet's picture

Hmmm. I wonder if Gross and El Arian have their suicide pills handy?  Hard to imagine that the world's biggest bond fund is in jeopardy of not meeting any return targets.

Thu, 06/20/2013 - 10:58 | 3675257 Cursive
Cursive's picture

Hubris.  Pride goeth before the fall.  Also, could someone please give Bill Gross a testostrone prescription?  His girly man voice is too much to take.

Thu, 06/20/2013 - 10:59 | 3675263 Village Smithy
Village Smithy's picture

We're puzzled.

Thu, 06/20/2013 - 10:59 | 3675267 Spitzer
Spitzer's picture

 

Looks like the Freegold camp seems to be right again.

 

This is a (paper)gold centric selloff. The DOW is just having a modest 1% +/- correction day

 

The anti gold crowd is running out of things to say.

Thu, 06/20/2013 - 11:01 | 3675277 SheepDog-One
SheepDog-One's picture

Without a firehose of free paper inserted full blast into the bubble, they got nothin.

Thu, 06/20/2013 - 11:15 | 3675329 Flakmeister
Flakmeister's picture

I am not anti-gold but I am starting to worry that gold purchasing power may have peaked...

When the paper gold market cracks, i.e. when the system collapses, the physical gold you have left over will not buy as much of the stuff you *need* as it did when it was priced at $1800... So while you will be left with something of real value, it will not be as valuable relative to what it once was...

In other words, even if gold hits a nominal $5000 an oz but a "bag of groceries" is $1000, it is clear that you have lost big time. This is my fear and it appears to have been slowly coming to pass...

Edit: The upshoot of this is that there is nowhere to hide as global growth expectations become unlevered and assets/markets collapse one by one...

Thu, 06/20/2013 - 11:18 | 3675369 adr
adr's picture

If you lose the paper market, it doesn't matter what goods are priced in dollars.

Honestly, if I've got a storehouse full of food, and you've got a bag of gold and you're hungry. How much gold would you trade for some food?

I've got a decision to make as well. If I trade some food for a bag of gold, what am I going to do with the gold? Obviously the bag of gold didn't do you any good.

In times of strife all money, even gold is essentially worthless. The only thing worth anything is skills. If you can cook, farm, or build things, you have worth.

If you can only figure out ways to scam people out of cash and analyze bullshit stock markets, well you're pretty much only worth your weight as food, or heat for a fire. Humans actually burn very hot, especially fat ones. If a group of people need to heat up a blast furnace to try and make tools. The bodies of banksters will really help get that fire up to strentgh.

Thu, 06/20/2013 - 11:27 | 3675397 SmallerGovNow2
SmallerGovNow2's picture

in times of strife gold has historically retained its value as currency or medium of trade...

Thu, 06/20/2013 - 11:33 | 3675412 Flakmeister
Flakmeister's picture

Yes, no argument but retained its value relative to what?

Thu, 06/20/2013 - 11:48 | 3675467 honestann
honestann's picture

You forgot one thing about food.  It goes bad... rots, gets stale, etc.  So anyone who produces more food than they consume will be quite willing to trade for something that does not degrade for billions of years.  Thus gold will always remain a reliable vehicle of trade.

Thu, 06/20/2013 - 11:50 | 3675478 Flakmeister
Flakmeister's picture

Fine, Au is a great medium of exchange. That was never under debate....

Thu, 06/20/2013 - 21:01 | 3677480 bluskyes
bluskyes's picture

Fresh food anyways. I like the idea of keeping 45 gallon drums filled with different grains, and kept in a cool, dry location. When things are bad, you can grind, and make bread. When things stabilize you can plant it.

Thu, 06/20/2013 - 11:22 | 3675379 Bold Eagle
Bold Eagle's picture

What's the alternative? Your gold would still buy 3 times more than $1000 that's laying in the bank. Gold may lose purchasing power only if severe deflation is coming and if it is, your "bag of groceries" won't cost $1000. 

Thu, 06/20/2013 - 11:32 | 3675409 Flakmeister
Flakmeister's picture

Thats the dilemma, there is no alternative that is not time dependent. You have to guess which asset collapses next... 

There is a paradigm shift going on in the worlds economy and all previous "logic" could very well fail. The only real absolutes are food and water, all else is a creation of man. There will be inflation in the things you need and and deflation in most everything else. I should have said, that bag of groceries will cost 1/5 of a oz of gold to remove reference to an artificial construct, i.e. the dollar...

 Look, don't get me wrong, I have taken it up the ass on a good part of my PM holdings and am starting to worry that the above may be playing out...

Thu, 06/20/2013 - 11:55 | 3675438 Dr. Engali
Dr. Engali's picture

"The only real absolutes are food and water, all else is a creation of man."

 

You adressed your own concern with that statement right there. Gold and Silver are absolutes themselves. Their quantity is finite, and they are not a creation of man. Don't worry your buying power will be fine. You are falling into the trap of the dollar matrix that makes you want to doubt your own judgment, which you know is right.

Thu, 06/20/2013 - 11:59 | 3675510 Flakmeister
Flakmeister's picture

But once again, you miss the point. It is not that Au/Ag cannot be exchanged, it is that the value of Au/Ag is being deflated against those things you need.  It could well be that Au is near the bottom vis a vis cost of production but that does not imply that it will return to its loftier heights relative to food and energy anytime soon...

And Historicaly if you use the Black Death as a proxy (admittedly one cannot carry it too far) for what may be in the offing economically, i.e. collapse, one finds that gold deflated then...

Thu, 06/20/2013 - 12:12 | 3675532 TheEdelman
TheEdelman's picture

How many pirates died clutching gold in the caribbean?  They had strong hands...  

There will be many with similar fates soon.   Gold well below 1k coming.  Better hold on tight for the long ride 

Thu, 06/20/2013 - 12:21 | 3675554 Dr. Engali
Dr. Engali's picture

If we find ourselves in a nuclear winter you will be right.

Thu, 06/20/2013 - 12:33 | 3675590 Flakmeister
Flakmeister's picture

It won't have to be nuclear winter, any catabolic collapse will suffice me thinks... Or more correctly; me fears....

Don't forget that all this QEing is not resulting in increased buying power to drive up the price of gold except for those balance sheets that have a vested interest in gold not appreciating... Almost  a Catch-22....

Thu, 06/20/2013 - 12:41 | 3675607 texas sandman
texas sandman's picture

Your points are well taken, as they are the same ones I use with a couple of gold bug friends.  They are constantly badgering me with the "buy physical and take delivery" meme.  

My rebuttal to them is as you say; "ok, tshtf comes about, fiat $ worth zero.  What is your gold acfually worth, and specifically who makes that determination, you or the person you're dealing with"?  Yes, it has intrinsic value, but that intrinsic value at a time of total collapse may be a pbj sandwich and nothing more.  

So I buy things people will want to barter for.  I have a very large stock spirits, whiskey, bourbon, gin, wine etc.  Also such mundane things as soap and toilet paper, not simply as a "prepper" stockpile, but as a barter stockpile.  Again, in answering my friends as to why I don't put my money in gold, I ask them whether they'd rather trade a gold coin or a bottle of Jim Beam for that pbj.  Which one had the lower initial cost, thereby giving you the best trade value?  Not to mention that no matter how bad things get, people still retain their vices, so if there are two of you competing for one sandwich, what do you suppose the seller would rather have?

Of course, what I dont mention Iis that I do buy physical, only my preference is silver.  I bathe in it regularly.

Thu, 06/20/2013 - 12:50 | 3675635 Flakmeister
Flakmeister's picture

No real argument, but having $200,000 worth of Jim Beam is an asset class fraught with its own perils...

To summarize, those holding PMs (including my self) may well be left with something of value when the smoke clears, but that value may not be much when measured in terms of real needs....

Thu, 06/20/2013 - 11:53 | 3675489 Bold Eagle
Bold Eagle's picture

Gold holds value better or as good as anything long term. If you are holding gold for this reason, you will be fine. If you can buy 3 bushels of wheat for 1 oz of gold today, you'll be able to buy same 3 bushels 10 years from now. It's no possible to see the future, but gold did fine during wars, revolutions and times of prosperity and peace. I don't think this is going to change.

Thu, 06/20/2013 - 12:41 | 3675514 Flakmeister
Flakmeister's picture

You are assuming that it will hold its value. You cannot prove it. I posit that the world economy is crossing an event horizon and no one knows what the rules are on the other side...

You forget that in the past, throughout history food and energy per capita was rising or at worse flat. That is no longer the case.

Thu, 06/20/2013 - 13:30 | 3675798 Apply Force
Apply Force's picture

Once crossed, the event horizon will favor those with skills (as someone mentioned above thread), knowledge and tools.  No need for a huge stockpile of whiskey if you have a still and supplies, and know how to run it.  No need to barter for all of your food everyday if you can purchase 10 hens and a rooster plus some seeds for one or two gold coins - or trade some moonshine for animals and seed... then you can create most of your own food.

You are correct that aside from food and water (and I would add a temperate, dry, safe abode) are all one "needs."  It seems crazy to me that any stacker would not have a gravity-fed water filter and access to water other than a faucet.  There is NO amount of gold I would trade that for in a shtf scenario.

Tools and the skills, knowledge and energy to work them... all go hand-in-hand with water, food and dry, safe shelter. 

Thu, 06/20/2013 - 14:00 | 3675909 Flakmeister
Flakmeister's picture

No argument from me re: skills and what not...

So after about 70 years and a few billion deaths (your thesis implies a mass urban dieoff) we might just reach some kind of steady state subsistence existence... 

Beat the rush, start living like a hillbilly now....

Thu, 06/20/2013 - 14:41 | 3676048 Apply Force
Apply Force's picture

Things collapse slowly, and then all at once.  You are on target with energy info, so I read your posts regularly... I think you are off on a 70 year time frame, correct on a declining energy per capita theme.  And I'd prefer to think of it as living like a hippy rather than a hillbilly - but to each his own.  I can live with a water filter, a still, some chickens and seeds, here at my home without a massive culling.  I have axes and saws for firewood, nails for repairs... board games, books, etc for entertainment... Everyone should have a full hurricane/tornado/disaster survival kit at the least, yes?  My thesis just builds on that.

There will be an urban die-off, I think, though... Have water and food production means?  A way to access your fire hydrant to put out a house fire yourself?  A means to defense of family and dwelling (think the Goonies more than Rambo - but perhaps a bit of both...)? 

And as for gold - would you rather pay $ and hold a coin now, or pay time and hold chickens now...?  Either way it is a gamble - go with your intuition.  I'll wait a bit on the chickens myself.

Thu, 06/20/2013 - 14:56 | 3676125 Flakmeister
Flakmeister's picture

Agreed, the difference between being a Hippie and a Hillbilly is slim to none, but as a rule Hippies tend to prefer non-distilled  comestibles when it comes to getting bent out of shape...

It will take a long time to reach that steady state though, longer than you think and I and  quite possibly my kids will be long gone by then....

And if it does indeed take only a few years, it is a crapshoot to determine whether you can whether the storm as being obviously prepared makes you a target. I for one have never had any romantic illusions about defending the ranch from swarms of marauders...

Thu, 06/20/2013 - 15:36 | 3676366 Apply Force
Apply Force's picture

Aww, c'mon Flak!  Defending your home is just like Judo - use your opponent's momentum against them.  My house appears to be one of the least in my hood - keeping our head down in our own community.  Aggressors, however, will be chummed : )

I have the ability to run and roam, but will surely set my fair share of booby traps prior, should the conditions arise.  I don't think there will be swarms of marauders.  Perhaps small packs, though, and none that want to lose more and more members to violent, invisible defenses of our not-the-prettiest home on the block.

In the mean time we are fine where we are - I can only hope that neither me or mine will see teotwawki - - and we will be prepared with some survival skills, tools and knowledge none-the-less.  Wealth is subjective, anyway... I prize health, happiness, time and freedom.

Thu, 06/20/2013 - 20:59 | 3677476 RockyRacoon
RockyRacoon's picture

I waited until my least liked neighbor was outside piddling in his driveway before I popped the trunk and unpacked a new Mossberg 500. Made a slow show of checking it out real well, tucking a couple boxes of 00 buck under my arm and hauling it all into the house.  No words needed to be spoken.

Thu, 06/20/2013 - 11:58 | 3675505 Spitzer
Spitzer's picture

This is a joke man.

Do you think central banks and billionaires are concerned about starving? We are shrimps. We are just going to piggyback the giants as their multi trillion dollar game of musical chairs comes to an end. We are in it for raw gains. We are not in it to barter to keep food on the table. 

Thu, 06/20/2013 - 12:04 | 3675519 Flakmeister
Flakmeister's picture

Re: Raw gains, well it would appear that the joke has been on us... Unless you are impressed by nominal gains...

Thu, 06/20/2013 - 11:01 | 3675275 Element
Element's picture

bill just lost his fav tit ... allegedly ... so talks the book

 

Thu, 06/20/2013 - 11:01 | 3675282 thunderchief
thunderchief's picture

Bill Gross...
If he could sell all his bonds and buy thirty years of youth, he surely would. Then he would bake it all with a head full of acid following the Greatful Dead.
Bill Gross for president! You can't do any worse at this stage.

Thu, 06/20/2013 - 11:01 | 3675283 Tenshin Headache
Tenshin Headache's picture

Perhaps someone should have asked Bernanke for his definition of a "stable monetary background." It would have been useful to know that deliberately blowing sequential asset bubbles was part of the package.

Thu, 06/20/2013 - 11:01 | 3675284 Clam McCain
Clam McCain's picture

Silver gone

i wonder what the excuse will be when it hits 10 bucks?

Thu, 06/20/2013 - 11:03 | 3675295 SheepDog-One
SheepDog-One's picture

I'll probably buy some if it does...I don't think gold and silver are any magical panacea, but I do like gold and silver coins I think they're pretty cool.

Thu, 06/20/2013 - 11:05 | 3675304 joego1
joego1's picture

Do you honestly think they can make an once of silver for $10? Think about it.

Thu, 06/20/2013 - 11:26 | 3675396 Winston Churchill
Winston Churchill's picture

If industrial demand collapses it can.Think copper in the 1930's before rearmament..

We are in a a full out slow motion deflationary collapse in spite of the CB's

luntatic printing.All they are doing is delaying it ,and that is wearing thin.

The system is becoming more, and more unstable.

Thu, 06/20/2013 - 11:39 | 3675435 Non Passaran
Non Passaran's picture

I was told here at ZH that it costs $5/oz to dig it out of the ground!

Thu, 06/20/2013 - 20:45 | 3677432 bluskyes
bluskyes's picture

I personally like the prospects for silver, but isn't it mainly a by-product of copper mining?

Thu, 06/20/2013 - 11:03 | 3675289 Turin Turambar
Turin Turambar's picture

Benny studied the wrong book.  He should've read "Amercia's Great Depression" by Murray Rothbard.  Had he done so, things might not be screwed up as much as they are.  Then again, had he taken Austrian economics and Rothbard to heart, he'd have never ascended the statist ladder for economists and never achieved his current position.

 

 

Thu, 06/20/2013 - 11:04 | 3675291 yogibear
yogibear's picture

Obama didn't like Bernanke's answer. So Obama told him to leave. Good time to annouce it.

Thu, 06/20/2013 - 11:04 | 3675297 Dr. Engali
Dr. Engali's picture

Bill you better be averaging down on your treasury buy. You're going to be underwater a long time.

Thu, 06/20/2013 - 11:11 | 3675339 CrashisOptimistic
CrashisOptimistic's picture

ZH headlines notwithstanding, Gross' interview was sophisticated.

Bottom line: Bernanke's presumption of 3% GDP growth later this year is bizarre, per Gross.  Gross and PIMCO are looking for 2ish%, and likely less.  Treasuries are made for low growth environments and that's where he wants to be.

Thu, 06/20/2013 - 12:34 | 3675586 Turin Turambar
Turin Turambar's picture

It's not that bizarre considering the conflation of growth with inflation in light of the underreporting of true inflation.  IMO, it should be a very EASY thing for the liars to mathematically put forth, since they are monetizing garbage to the tune of at least $85 billion/month.  For what it's worth, I think that numbers a lie too.  Statists never tell the truth, especially when their arses are on the line.

Thu, 06/20/2013 - 12:40 | 3675606 Flakmeister
Flakmeister's picture

Buddy, thanks for the input, but the situation is far beyond the point where ideological claptrap has any relevance... Sorry, but you sound like an modern libertarian version of a early 20th century Bolshevik intellectual... 

Thu, 06/20/2013 - 12:54 | 3675645 Turin Turambar
Turin Turambar's picture

Ideological claptrap?  Please enlighten me, oh wise one.  Do you swallow hook, line and sinker the reported CPI numbers as an accurate reflection of the impact of inflation in light of the admitted fact that the Fed is monetizing $85billion/month?  If you've managed to choke that down, then I guess the exclusion of food and fuel from the calculation is no problem for you.  After all, it's only food and fuel.  How often do the sheeple buy that stuff anyway?  Much better to focus on automotive sales that are subject to channel stuffing, eh?

 

Maybe you were referring to Austrian economics.  If so, then you have a problem with intellectually sound and logically rigorous praxeologically based economics.  If that's the case, this format is not conducive to epistemological instruction in praxeology, so you'll have to find somebody else to teach you the basics.  Regardless, your statement speaks volumes regarding your ignorance. 

Thu, 06/20/2013 - 13:29 | 3675795 Flakmeister
Flakmeister's picture

Hee, hee, hee...

You just proved my point by bringing up praxeology....

I can point out the intrinsic mental masturbation of Austrian economics and intellectual void that is Rothbardian libertarianism without buying hook, line and sinker government CPI numbers. You really should figure it out that just because I don;t agree with you doesnt mean I agree with them...

You just commited a rookie error of logic, but not surprising given how you have obviously lapped up claptrap in past...

Thu, 06/20/2013 - 14:18 | 3675937 Turin Turambar
Turin Turambar's picture

"You really should figure it out that just because I don;t agree with you doesnt mean I agree with them..."

You really should go back and take a remedial course in reading comprehension.  Your mistaken assumption was never posited.  I specifically asked, "Ideological claptrap?  Please enlighten me"

What part of that don't you understand?  I specifically asked what you considered ideological claptrap.  And your response?  To claim that I asserted that because you don't agree with me that you agree with them.  LOL!  That is a total failure in basic reading comprehension on your part, Einstein.

"I can point out the intrinsic mental masturbation of Austrian economics and intellectual void that is Rothbardian libertarianism..."

Yawn.  Saying you can do something and actually doing it are two distinct things.  What exactly does "intrinsic mental masturbation" mean specifically?  Please elaborate, oh wise one; otherwise, you're just a common troll who fails at basic reading comprehension and can't seem to distinguish assertion from proof.

Thu, 06/20/2013 - 14:18 | 3675962 Flakmeister
Flakmeister's picture

Any socio-political ethos that is left tongue tied by resolving the well established "Tragedy of the Commons" and moreover is completely oblivious to other empirical observations is most certainly "mental masturbation".... Don;t even get me started on the myth of a "free market"....

Hey, if the world and its resources were infinite, Rothbard et al might have been on to something...

Thu, 06/20/2013 - 14:35 | 3676004 Turin Turambar
Turin Turambar's picture

Wow, you really are a moron.  Tragedy of the Commons?  Tragedy of the Commons only exists in a world with the coercive power of the State dictating some nebulous concept of "public ownership."  This is most certainly NOT libertarian and NOT free market.  In a world with just, initial homesteaded private property and private property rights this is not an issue, so your issue with libertarianism is misdirected.  Your problem is actually with the coercive power of the state, NOT the free, peaceful, voluntary interaction between consenting individuals.  Oh the horror of people making voluntary, non-coerced agreements between themselves!  LOL

 

"Hey, if the world and its resources were infinite, Rothbard et al might have been on to something..."

 

Again, here is a totally ignorant comment.  Praxeology, Human Action, fundamentally recognizes that resources are scarce.  If there were an infinite number of ALL resources, then there would be no need to subjectively assess and order the satisfaction of wants.

Thu, 06/20/2013 - 14:36 | 3676026 Flakmeister
Flakmeister's picture

As I have said, if the world had no limits, then libertarianism might have been a cute little idea...

My god you are naive. And let me guess, you think AGW is liberal hoax? Of course you do, you just admitted it in no uncertain terms with the above nonsense...

PS Stop giving yourself up votes, it really is tacky and fools no one...

Thu, 06/20/2013 - 14:44 | 3676069 Turin Turambar
Turin Turambar's picture

Your thinking is completely muddled and undisciplined.  You freely conflate praxeologically based economics with libertarian political philosophy.

"As I have said, if the world had no limits, then libertarianism might have been a cute little idea..."

 

The NAP (non-aggression principle) is the basic principle of libertarianism.  Your statement/restatement about the necessity of a world with no limits is a ridiculous non sequitur.

Thu, 06/20/2013 - 15:03 | 3676145 Flakmeister
Flakmeister's picture

Yep, that NAP is empirically bourne out, sounds like some rehash of Marxist idealism... How many people does it take to turn NAP on its head?

Look if you deny the existence of "The Tragedy of the Commons" you clearly haven't really thought about humans and their relationship to the envirnoment upon which they rely for their existence. Or you think God is going to come and clean up after the Kochs...

Thu, 06/20/2013 - 15:30 | 3676310 Turin Turambar
Turin Turambar's picture

Okay, last round of correction here, and I'll let you get back to sniffing glue.

"Yep, that NAP is empirically bourne out, sounds like some rehash of Marxist idealism..."

It appears that you are a fan of empiricism.  Okay, I get that.  It works perfectly well in physics because it is possible to study a homogenous class of events.  It doesn't work too well with human action because of free will.  Imagine making accurate predictions in physics if atoms had a mind of their own and could change their direction on a whim.  You'd be wasting your time.  This is exactly the issue with praxeologically based sciences.  Driving your car to the gas station 100 times is not like spinning a roulette wheel 100 times.  Each instance is not a member of a homogenouse class of events.  One time, you might go to use the restroom, another you might pull in to make a phone call, another might be for gas, one for oil, one to check tire pressure, etc...  Empiricism is a misapplication of one tool of investigation.  Just because you have a hammer doesn't make everything a nail.

"How many people does it take to turn NAP on its head?"

 

NAP is a principle.  An arbitrary number of people have no bearing on the NAP.  One either abides by it or violates it.

 

"Look if you deny the existence of "The Tragedy of the Commons""

 

Here we go with basic reading comprehension again.  I never denied its existence.  As a matter of fact, I explained the basis for its existence - the coercive power of the state dictating via force "public property."

 

"Or you think God is going to come and clean up after the Kochs..."

 

This is completely out of left field.  I'll leave it at that.  You have commented sufficiently in reply that what you say pretty much speaks for itself.

 

Have a good day.

Thu, 06/20/2013 - 16:10 | 3676535 Flakmeister
Flakmeister's picture

Another  fine example of word salad on your part...

And sorry, your refutation of the TotC is utter horseshit... Humans can influence their envirnoment wittingly or unwitingly, state or no state...

Re: the Kochs, do you really think that greedy pricks care about who cleans up the mess they left?   

The problem is that you somehow deny the existence of a class of 5% or so that are sociopaths... Not a very robust philosophy me thinks...

Thu, 06/20/2013 - 11:07 | 3675301 thismarketisrigged
thismarketisrigged's picture

the real fun should start at 1130 am eastern when european markets close. then will have a better feel for just how far this market will fall today.

 

europe is down 3 percent plus across the board, we have a lot more selling, this is nothing so far.

 

i am waiting for the major crash, the depression, not here and there selling. we need like 5-6 weeks straight of real blood.

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