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The Safe Haven Bid is Bogus
Courtesy of the StealthFlation Blog
It’s not about the current Dollar & Treasury market safe haven bid, it’s about tomorrow’s confidence in our monetary system.
Are you confident?
Have you asked yourself why Gold remains by far the best performing asset class of the entire new millennium. It’s an undisputable categorical fact, and there clearly is a well established and completely understood reason for this. Monumentally excessive irreversible debt loads can no longer be discharged without necessitating the devaluation of the currency. Due to this certitude, throughout this millennium we have experienced an extended period of extraordinary monetary accommodation which is unprecedented in the modern central banking era.
These remarkably irregular measures have allowed governments to issue debt at artificially low, synthetically engineered rates of interest. The crucial and essential time value of money has been aborted, utterly eviscerated. A deliberately lowered nominal interest rate reduces debt servicing costs, while negative real interest rates actually erode the principal value of the government debt. This is the very essence of financial repression, it liquidates debts when accompanied by inflation and can be considered a form of taxation, or alternatively a form of debasement. The bottom line; your hard earned cash is trashed.
This explicit trend is systemic in nature and will invariably continue, as all other remedies to satisfy the insurmountable debt obligations are no longer within reach nor achievable. We quite simply can not grow our way out from under this mushrooming pile of toxic debt. Currency devaluation is the only applicable and singularly available path forward to liquidate the imposing outstanding debt owed.
Make no mistake, the most esteemed of economic thinkers are well aware of this ominous predicament. On the other side of the coin, the mainstream financial industry protagonists and pundits have a paramount vested interest in denying this self-evident truth.
“Money is stored labor. Labor is part of life. To control money is to control life… When the state declares the exclusive right of the issuance of money, freedom is impossible.” – Hugh A. Thomas.
Notably, current policy makers lack actual substantiated evidence to validate the stated and intended objectives of the extreme policy measures they have initiated, nor can they accurately ascertain the unintended consequences of the distorting market interventions they have performed. These are known unknowns. Physical Gold, a long standing historically proven store of value which provides wealth protection with unencumbered counterparty risk, is clearly a judicious and prudent hedge for all investors facing these macro economic realities and policy measure uncertainties.
Precious Metals are inherently the most viable asset class which outperforms all other assets against currency debasement and the ensuing inflation that invariably follows periods of excessive monetary accommodation. Moreover, you can be assured that the deliberate debasement will most certainly bring with it higher interest rates, as all creditors will surely soon demand higher returns to compensate for the programmed systematic debasement of their holdings.
I know, I know, you will all point to today’s 10 year treasury yield below 2% and recent dollar strength to precariously make your case that we are on sound footing. However, In my view, the knee jerk reaction, seemingly at the speed of light, of massive capital flows desperately seeking a suspect flight to safety in the most indebted country of all time, actually highlights the acute distortion and inherent instability of global finance today. Liquidity simply for the sake of liquidity has no intrinsic value in it of itself.
Furthermore, a 70% consumption based economy which routinely and heedlessly runs massive trade deficits will pay dearly for the inevitable devaluation of its means of exchange. You can only print and party for so long before others catch on.
Sound money will always flow to real veritable value. It’s simply a matter of time now, and the trigger that sets off monetary cataclysms is always a function of the perceived confidence in the financial authorities and their monetary system. Deep down inside, are you confident in what they have done?
Gold is the currency without a country. Gold is wealth in itself and needs no nation or counterparty to guarantee its value. Unlike fiat currencies, gold does not need to pay interest. Nothing compares with gold as a safe asset.
Definitive evidence throughout 5,000 years of mankind’s monetary history overwhelmingly confirms that once the cost of excessive debt burdens outpace the gains from productive growth, currency debasement inevitably ensues. Same as it ever was. Got Gold?
Serious about wealth preservation?
This reputable firm offers unparalleled asset protection: GoldMoney.com
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Hey Bruno, you sure have a lot of friends!
Gold the best asset class huh? Tell that to my mine shares trading at all time lows....
Gold may go up and it may go down but one thing is for sure, the US Dollar hedgemoney will last another thousand years or to the end of humanity, whichever comes first.
You can buy /DX and sell anything against it, there is no risk.
Best performing asset class of the Monetized New Millennium, please be sure to let us all know just as soon as that changes................until then, it categorically speaks for itself.
The whole "lose confidence in the monetary system" is bogus.
Money is lent into existence.
There is not only debt equal to principle created within society, there is interest bearing debt that concentrates the interest payments into the corporate front banks that make the loans.
That means: $$$ IN MAIN STREET < DEBT OWED BY MAIN STREET'
There isn't enough money on Main Street BY DEFINITION - so how is Main Street going to lose confidence in their inextinguishable debt?
Why would the lenders bail out the debtors to their own detriment?
It.
Makes.
No.
Sense.
That is, until the Debt Money Monopolists have gutted the economy via a deflationary spike pit and they are all into hard goods and out of most of their money. Then they may hyperinflate but, by that time, most folks will own nothing to protect from the inflation.
Maximum.
Muppet.
Pain.
Expect it.
Just as soon as the economy stalls outright for the duration, the misguided reflaltion will be seen for what it really is, an unproductive inexcusable short term panacea, then the confidence in the monetary authorities disintegrates day by day, until the fiat based system is left exposed for what it truly is, an unethical, ignoble exploitative fraud.
That my friend is when the confidence goes..................and the existing unhinged system collapses of it's own dead weight. This is nothing new, it's as old as monetary history itself................same as it ever was.
You can only print and party while others work and weep for so long, people do eventually catch on.............
They will Reflate>>>>>>>>There won't be Growth>>>>>>>>There will be a Reset
"We are all going to pay a terrible price for all this money-printing and debt."
“Money is stored labor. Labor is part of life. To control money is to control life… When the state declares the exclusive right of the issuance of money, freedom is impossible.” – Hugh A. Thomas.
Here's what I wrote 14 months ago, and I believe we're fast approaching a greater realization of our fictitious narrative (i.e. 3x the % of the population that is awakened, whether the previous baseline % was 2%, 5% or 8% - remember, it doesn't take a huge spike in loss of confidence to tilt such a massively debt levered system into chaos) that will present the next major crisis (even as the MSM attempts to pump out soothing "explanations" for the growing wealth divide and rapid - and accelerating- destruction of the formerly meaty portion of the curve that once represented the middle class):
No government agency or business association spokesperson is ever going to speak of the truth of how bad things are in the present, unless they have no choice because incontrovertible proof has already been released to the masses that would otherwise and obviously demonstrate their insincerity.
As long as "official datum" as published by the various governmental and quasi-governmental agencies/bodies allow governmental and business association spokespeople to understate the severity of our real economic crisis, they will, whether Democrats, Republicans or the chief economist for The National Association of Realtors.
No governmental employee (and especially no politician) will voluntarily relay how dire things may be (again, given a backdrop of "official" statistical datum that is inaccurate and relatively misleading they can fall back on) because they wouldn't want to upset the apple cart, cause further distress or even panic amongst the populace or within the "markets," and no business association spokesperson, whose very jobs entail, at least in significant part, a public confidence-building role, will do anything to further dampen the confidence that ... hope remains amongst potential consumers of their products (e.g. would a spokesperson for the NAR really come out and say that existing homes are selling quickly because inventory is being artificially constrained by GSEs and federal reserve policy and also due to federal reserve monetary policy that has a huge % of listed homes being purchased by investors for cash in an attempt to produce yields in a yield-starved economy - BECAUSE of federal reserve monetary policy? What impact would that have on the confidence of conventional, prospective existing home purchasers, who might then realize there is no true present price discovery and that another leg down is more than possible?).
In other words, they lie because our economy is dependent, in quite a large degree, on an illusion that is often referred to as the "confidence fairy."
If those people who still have the means to purchase a particular service or good feel confident about the security of their own jobs and the current & likely future state of the economy, they're more apt to go ahead and dig themselves into more debt or pay cash to purchase that service or good, regardless of the accuracy (and realism) of their "confidence level."
Conversely, if they don't feel confident about the security of their own employment situation and/or the current and likely future state of the economy, they're more apt to refrain from purchasing that good or service, and save instead, in preparation for what may lay ahead.
And this is why, without exception, throughout history, the masses do not understand there is a crisis until well after it has already begun, and they've already committed to many purchases, indebtedness and other forms of dis-saving, that they wouldn't have committed to had they known accurate information sooner.
Hence, the "confidence fairy," which governmental employees, politicians and business spokespeople all actively perpetuate in their own methods and by various tactices, is a serial and mass killer of efficient markets and rational economic behavior (as it severely distorts essential economic information that is relied upon by economic and market participants)
Excellent synopsis.
Thanks.
The true marker of real wealth is possession. To have someone else 'just hold it for you' is another layer of risk. What if gold drops and at the same time physical can't be found? This is possible with a 99% paper market. Gold goes so low that an emergency gets declared and you find yourself settled in cash at the worst possible moment. (Think MF Global too, but that was a different type of crime). You scream and yell but legally cash is what you get maybe $400/oz. Later that week all derivative markets fail and physical gold is trading for 24 times what it was (this happened over 4 years or so beofre the 1980 peak).
I'll take mine physical and in close proximity to my defenses.
One more thing. Today's gold market is very different that the market of the last century. So much paper is traded that real physical buying doesn't budge the needle. Someone (wonder who) can sell 200 tons and down goes the price. Wait till they sell 2000 tons and the old force majeure trump card is played. Think about the final act in this play. The large entities selling paper can sell all they want. They can drive gold down, down, down. Then whaamo. Games over, there is your cash...we'll keep the metal...did you not read the fine print? No? So sorry.
Precisely why your physical bullion should be allocated, segregated and registered directly in your name, and held strictly outside the banking sustem so as to virtually eliminate counter party risk.
The big boys have it vaulted in 2-4 countries to diversify risk, in nations that have no historical incidences of asset confiscation.
As far as holding your own Gold, that's fine in smaller denominations, but the risk of theft goes up exponentially with the amount owned. Why do you think the big boys choose state of the art high security vaults?
Hey, bruno, face it, you can lead some to "gold" but they'll never understand!
keep on, keeping on
I like hedging RE investments with PMs. If one goes up the other goes down (so far) and they're both tangible assets.
The truth doesn't require confidence
My lessons learned the hard-way is that inflation tends to jump-out of the hat. It feel like the bully just slams you to the floor. That's the primary reason for hedging your portfolio.
I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because investors are pouring such a large percentage of wealth into intangible products or goods. This includes currencies.
If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.
The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas.
It is important to remember that debts can go unpaid and promises be left unfilled. If this happens where does it leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years. More in the article below.
http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos....
You might want to rethink your lack of inflation meme. Fuzzy numbers for over 40 years.
http://www.youtube.com/watch?v=kpNt2JdCcFA
I have some dry powder set aside for my first gold purchace along with my monthly silver purchace.
I got my dry powder ready for my first gold purchase.
Sorry, but 10% is WAY to small for me. I'm at 75% with 25% left to add to the stack when it's on sale. Also, I am starving the BEAST and will no longer participate as a productive person. Good luck to you all.
Nice article, I like gold for sure but prefer agricultiral land. That is however much more difficult to obtain for a good price. I bought my first gold in 2003 right after the FED introduced negative real rates for the first time that was a great indicator.
Could we not see some kind of gold confiscation scheme ? For instance in good old France there is now a 8% sales tax. If gold really becomes a serious issue I am afraid we can see this kind of trouble no confiscation but a 30% sales tax or so.
Agee with the land angle except for one thing.... taxation and the brown shirts know where to find you. Many land owners had their land confiscated during the depression ..... couldn't pay massa his protection money...er, rather, taxes
If you perform the proper legal incantations and dark arts when purchasing it it's essentially un-confiscatable. Make sure at least a portion of the sum is paid in "Lawful money" (that includes United States postal service money orders specifying same), have the deed signed over to XXX YYY, "a living man", formally "accept" the grant deed and file that acceptance, get the original land patent brought forward (still to do that myself). You can also shuttle it off to a common law trust.
Now, another thing, is pick your battles. It so happens that my assessment on 640+- acres is about $32.00, so I'm not going to "poke the beast" to make a point over something I can pay from picking up cans on the road or metal detecting a sand lot for a few hours. It's also in a state where I can pay 5% of assessed value and have a state allodial title declaration until the youngest person on the deed passes away (i.e. no taxes until then and they don't accrue).
Another plus is to get a place where most people will die of exposure trying to get there if SHTF :-)
The UN and it's Agenda 21 program doesn't believe in private property rights. PMs are more mobile than land.
Great analysis. Well thought out and pertinent.
Bought my Gold coins for $600 per oz. (Krugerand) more than 20 years ago through local Bank. Over time does not represent a good investment. Stock market did much better. As a measure against financial collapse, 2 % more than adaquate.
Best performing asset class of the New Monetized Millennium hands down, let me know when that changes my friend.
Will agree when stock market collapses, which I think it will. In meantime, many I know bought gold at 1500 + and do not consider it a best performing asset class of new monitized millenium so far. Would agree everyone should own some gold/silver depending on your survival strategy. Many other asset classes will retain value under stress such as shelter, food, energy, chocalate bars and silk stockings ala WWII.
Gold is the currency without a country. Gold is wealth in itself and needs no nation or counterparty to guarantee its value. Unlike fiat currencies, gold does not need to pay interest. Nothing compares with gold as a safe asset.
People who have seen a bit of the world know this to be true. Many have not traveled and do not understand this.
is it safe ....?........is it safe.....?
they're drilling a hole in your front tooth without a pain killer huh?
I think that the apparent strength of the USD is a symptom of its death gurgle.
We are living in a profoundly dangerous time because the PTB will do ANYTHING to prop up the USD. There is no asset that they won't manipulate, there is no person they won't kill, there is no war they won't start.
It's actual desperation time and the little numbers on our screens are telling us this. The USD will continue to get stronger and stronger and stronger and then will cease to be.
Gold will get "weaker" (in USD), bonds will get "stronger" but the shit will come unraveled, and I think it's happening right now.
Must. Get. Real. Assets. NOW.
nice bit a work, could do without the plethora of big words, great for a debate with william buckley,not so great for a reader perusing 40 articles a day
Bruno, agreed. 10%, and if you are wealthy 20% is a prudent allocation. I also recommend 1st Trust deeds in income producing properties for another 10%.
Is there danger in Gold because it is subject to supply and demand factors and is not used for purposes of trading other goods, consumer items on day to day basis. What happens, for instance, if a global recession hits and demand for jewlery tanks world wide ? What if GLDX and others cannot redeem in gold---does everyone sell stock driving price down or will it increase demand for gold. Just asking
"Is there danger in Gold because it is subject to supply and demand factors and is not used for purposes of trading other goods, consumer items on day to day basis."
I assume this is a question without a question mark, so I'll answer. No, there is not "danger in gold" because of supply of and demand for gold. Gold will always have value as money. The danger lies in holding paper and digital USD or any other un-backed currency. There will come a time in our lifetimes in which a backpack full of USDs will not buy a cart of groceries or a tank of fuel. This will never be true for gold. If you're stupid enough to believe otherwise, continue stacking dollars and good luck to you.
"What happens, for instance, if a global recession hits and demand for jewlery tanks world wide?"
Then fewer douche bags will be walking around adorned with baubles and doodads around their necks and wrists. The effect of your scenario on the inherent value of gold will be nil at most.
"What if GLDX and others cannot redeem in gold---does everyone sell stock driving price down or will it increase demand for gold?"
Then shit gets real interesting real fast. A lot of people will realize that the emperor has no clothes and will also realize that maybe gold isn't just for lunatic fringe types like me. Again, the effect on gold's inherent value as money will be nil. Owning gold is not about selling it in the future for more pieces of paper than you paid. It's about keeping and maintaining the value of your labor and investment of time, talent, and skill. Storing that value in USD and other manipulated paper currencies is a fool's game. If you value your life's investment of time, talent, and skill, then you'd be well-advised to protect it with the best-proven method of the past 5,000 years.
Good luck to you. At least you're asking the right type of questions.
I couln't agree more and I did just that. I am completely OUT of the banking and/or monetary system apart from a couple of grand for the daily needs.
OR spend all that paper fiat on shit, and non-shit. at this point in time you can atleast say i have non-shit to get by with. now you are broke trying to unload shit on craigs list for dwindling value of dollas to buy non-shit. ok, here is the kicker, if ya got some gold you will now emerge with some gold"en", and be able to get a whole lot moar non-shit and tons of shit if you are foolish enuf to trade gold for shit...
Be wary, alert, and wery, wery, nimble.
Gold gold gold. Gold only has the value that a buyer assigns to it. Nothing prevents gold from going down temporarily - even going down a lot. Perhaps gold will be the safe haven as the dollar is eventually inflated away, but there is nothing that says buying too much at today's prices makes a lot of sense. I would buy some, but hedge my bets. The price trajectory of gold in dollars will depend a lot on what happens in other countries, and there are great possibilities of a future big discount in the gold price.
It's a very interesting discussion. you think gold is a commodity; but it isn't. it's money. The probability of a future big discount in the gold price is zero or as close as nevermind. The "gold price" measures the currency, not the other way around.
Yes, gold is money; however; people's preferences for holding money changes, affecting its price.
Gold prices are highly sensitive (inversely) to real interest rates. This article fails to include this essential element in the discussion. Anyone who thinks, as this author does, that real rates will rise should not be recommending gold.
Notably, current policy makers lack historically substantiated evidence to validate the stated and intended objectives of the extreme policy measures they have initiated, nor can they accurately ascertain the unintended consequences of the distorting market interventions they have performed. These are the known unknowns. Physical Gold, a long standing historically proven store of value which provides wealth protection with unencumbered counterparty risk, is clearly a judicious and prudent hedge for all investors facing these macro economic realities and policy measure uncertainties.
Moving forwards, it's all about the confidence in the monetary system , are you confident? Wealth protection is the name of the game today. Bonds and Equities at these levels, no thanks.
5-10% of your potfolio is crucial.
30 ~ 40% of your potfolio is crucial to be invested in precious metals, easy liquidable cash and if geopolitics and other extreme adversities were not as prevalent, maybe 28 ~ 30%.
Bear-in-mind that sound investment strategies include gaurding against catastrophic loss (market manipulated, man-made or otherwise) and un-accessibility to access those reserves when needed most, must be apart of that strategy.
Yes, I personally agree. But, for those that are not entirely comfortable with the hard asset class, 10% is a more platable portfolio allocation and crucial for them.
Without a doubt what will be key is that the BRICS people stop enabling this statist quo and start trading amongst partners who bring actual value to reciprocate, and not accepting fiat paper for their valuable goods. Right now these emerging markets etc all go off mercantilism and this is vendor financing and not sustainable because ultimately trade requires both sides bringing value to the table. Debasing a currency makes goods cheaper for others' to buy, but what you get paid in is worth less and imports go up. Just ask the stagflated Japanese.
The Fed is basically a monopoly auctioneer bidding for its own items or having banking system cohorts do the bidding (a la the mysterious 'Belgium' buyer of bonds); this is what QE is. They need low rates obviously to monetize debt as the national liabilities are 100 trillion, and also because low rates means future cash flows are discounted by a smaller denominator so PV stays higher and collateral gets to have an illusion of 'high quality' so leveraged trades/repo/carry trade can continue.
You misspelled "status quo" as "statist quo," but that, Dr. Freud, describes our dystopian society so much better. I will steal that phrase from you, if you don't mind.
was intentional, and yes, feel free to use said phrase. Just like I call it the Bureau of Lying STATISTicians.
Interesting next couple months, what with the gold vaults being empty and all.
Maybe China gold exchange takes over gold price discovery and doubles gold over night?
How much? What form? How do you diversfy your portfolio?
How much physical is available? ....When do we have a failure of delivery?
I know you don't know answers with any precision. But what are your thoughts? Got Gold...Yes, but I am interested in your insight as deep as you are willing to go!
....When do we have a failure of delivery? If you ask the Germans, it has already happened! Where is the gold they had stored in New York? That is a better question.
Under a fractional reserve system with gold backing, a dollar price around $2K is practical. At 100% reserves, the price per ounce is $45K to $62K depending on your measure of choice for total debt. Regardless, the best price ever for gold is the price now because the world has never before printed so many fiat currencies which by definition and historical record has always been a last-resort scheme.