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Gold And The Grave Dancers

Tyler Durden's picture




 

Submitted by Pater Tenebrarum via Acting-Man.com,

The Asset They Love to Hate …

Back in the 1960s, Alan Greenspan wrote a well-known essay that to this day is an essential read for anyone who wants to understand the present-day monetary and economic system (which is a kind of “fascism lite” type of statism, masquerading as capitalism) and especially the almost visceral hate etatistes harbor toward gold. Greenspan’s essay is entitled “Gold and Economic Freedom”, and as the title already suggests, the two are intimately connected.

 

Alan Greenspan

Alan Greenspan in the mid 1970s – although he later turned out to be a sell-out, his understanding of economics undoubtedly dwarfed that of his successors at the Fed (and we are not just saying this based on the essay discussed here).

Photo credit: Charles Kelly / AP Photo

What makes Greenspan’s essay especially noteworthy is that it manages to present both theory and history in a concise, easy to understand manner. There isn’t a word in it we would change. At one point, Greenspan provides a brief history lesson. Yes, the (relatively) free banking era in the United States in the 19th century involved fractional reserve banking and as a result, there were frequent boom and bust cycles. However, since there was no “lender of last resort” with an unlimited money printing capacity, these business cycles were sharp and brief, and the market economy quickly righted itself every time:

“A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World War I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.”

(emphasis added)

Alas, these relatively harmless business cycles provided interventionists with an opening to implement their central planning wet dreams, even though their ideas were based on what can charitably only be called appalling economic ignorance. This economic ignorance informs the monetary system to this day and we have nothing but contempt for these planners and their intellectual handmaidens.

We cannot quantify it with any precision, but we believe it can be taken as a given that they have retarded economic progress by an order of magnitude, for reasons of compounding alone. Based on historical data, we would estimate that average real annual growth would have been at least twice as large since 1913 than it has actually been if the economy had remained free. Compounded over more than a century, this is basically the difference between what we have today and the universe of Star Trek.

 

US-GNP-per-capita-1869-1918 (1)

US GNP per capita in the decades before the establishment of the Federal Reserve: equitable and strong growth, unmatched before and ever since – in spite of fairly frequent boom-bust cycles click to enlarge.

As Greenspan notes:

“But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline — argued economic interventionists — why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely — it was claimed — there need never be any slumps in business. And so the Federal Reserve System was organized in 1913.”

(emphasis added)

At the conclusion of his essay, Greenspan makes clear why the welfare/warfare statists just hate gold with a passion bordering on hysteria:

“Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.

 

[…]

 

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

 

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

(emphasis added)

This always was and remains true.

Bought Off Intellectuals

All the “justifications” for today’s system we hear from the supporters of the centrally planned fiat money dispensation are nothing but propaganda. This propaganda includes a number of historical lies (such as the old canard that “governments had no choice but to abandon the gold standard if they wanted to rescue the economy”), commingled with theoretical assertions that have been thoroughly refuted countless times.

One of the latter is that an economy allegedly cannot grow unless the money supply grows as well (the truth is that any money supply is as good as any other, and in a free market prices would simply adjust). Another is that central banks need to be able to apply their “scientific monetary policy” to make up for the alleged deficiencies of the free market. In reality, central banking and fiat money have slowed real economic growth to a crawl and have produced boom-bust cycles of ever greater amplitude. Something like the “Great Depression” would never have been possible without a Federal Reserve and two heavily interventionist governments coming to power in a row (first Hoover’s and then FDR’s).

The assertions listed above and similar ones are reiterated sotto voce by countless mainstream economists and the entire mainstream financial press at every opportunity. Hoever, this should be no surprise: The Federal Reserve has practically bought off the entire economics profession (incidentally, so have other central banks and assorted state-funded institutions).

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession

 

[…]

 

One critical way the Fed exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll — and the rest have been in the past

 

[…]

 

A Fed spokeswoman says that exact figures for the number of economists contracted with weren’t available. But, she says, the Federal Reserve spent $389.2 million in 2008 on “monetary and economic policy,” money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009. That’s a lot of money for a relatively small number of economists.

(emphasis added)

In a free market, the market value of thousands of today’s hyper-specialized macroeconomists would be a tiny fraction of what they get paid by the State. In an unhampered free market economy, many of them would probably be forced to actually perform productive jobs. There would of course still be room for economists, but only the most committed and talented among them would could hope to receive funding. Absolutely no-one would bother paying for central planning advice or statist propaganda, that much is absolutely certain. Obviously these economists are highly unlikely to bite the hand that feeds them.

As Hans-Hermann Hoppe has noted in this context:

“There are almost no economists, philosophers, historians, or social theorists of rank employed privately by members of the natural elite. And those few of the old elite who remain and who might have purchased their services can no longer afford intellectuals financially. Instead, intellectuals are now typically public employees, even if they work for nominally private institutions or foundations. Almost completely protected from the vagaries of consumer demand (“tenured”), their number has dramatically increased and their compensation is on average far above their genuine market value. At the same time the quality of their intellectual output has constantly fallen.

 

What you will discover is mostly irrelevance and incomprehensibility. Worse, insofar as today’s intellectual output is at all relevant and comprehensible, it is viciously statist. There are exceptions, but if practically all intellectuals are employed in the multiple branches of the state, then it should hardly come as a surprise that most of their ever-more voluminous output will, either by commission or omission, be statist propaganda.”

(emphasis added)

 

HansHermannHoppe

Economist Hans-Hermann Hoppe – a strongly committed enemy of the State, as the following quote illustrates: “[The State is] an institution run by gangs of murderers, plunderers, and thieves, surrounded by willing executioners, propagandists, sycophants, crooks, liars, clowns, charlatans, dupes and useful idiots – an institution that dirties and taints everything it touches”.

Photo via libertarianin.org

Given that intellectuals have great influence – the masses typically follow their lead, whether consciously or not – we shouldn’t be surprised that this “viciously statist propaganda” has become a hallmark of the mainstream press as well. This brings us back to the topic of gold.

Premature Grave Dancing

Readers may have noticed that there simply is no other asset that provokes more intense hatred in the mainstream press than gold. When the gold price declines as it has done since 2011, the press is literally brimming over with Schadenfreude, grave dancing exercises and anti-gold tirades. The lengthy preamble above is an attempt to explain why this is the case.

 

dance-on-grave

Intense grave dancing – the poor fellow at the bottom is Mr. Gold

Engraving by Michael Wolgemut

Simply put, gold is the one asset that provides the most reliable indictments of central economic planning and the abominable monetary and economic system that has been forced on us by the etatistes. In spite of its innumerable failures, socialism and its close cousin, modern-day corporatism (i.e., crony socialism), remains highly popular with the intellectual class, as it provides it with influence and money beyond its wildest dreams.

Unfortunately, it is even more popular with big business. The handful of large corporations that are controlling the press these days are not exactly big fans of the free market and its unfettered competition either. Established big business organizations prefer to keep upstart competition suppressed by means of obtaining privileges from the State. One would think that business should be against the over-regulation that characterizes today’s bureaucratic Leviathan State. This is not the case: Since it harms small emerging competitors more than established businesses, they are actually in favor of it.

Needless to say, the most powerful industry of modern times, the fractionally reserved banking cartel, is one of the biggest beneficiaries of the system and as such provides sheer unlimited funding to keep things right as they are.

When gold’s fall accelerated recently, we have seen an outpouring of doom-saying and thinly disguised contempt in the mainstream press that actually puts everything seen before into the shade. In a way this is surprising; after all, gold is a completely unimportant asset, right? Just think about this for a moment. If another currency, such as e.g. the yen, suffers a big decline, is it subjected to even remotely comparable vitriol in the press? Here are a few examples from the last week or so (with a few comments by us interspersed):

From Bloomberg (Bloomberg belongs to a limousine socialist, and is well-known for its pro-central banking/ pro-money printing and anti-gold editorial line. Some of the most ludicrous articles about gold ever published have appeared on Bloomberg):

Gold Slump Not Over as Speculators Go Net-Short for First Timeapparently Bloomberg’s authors have yet to hear about contrarian signals.

 

Gold Is Only Going to Get Worse (“Our survey shows a majority of traders and investors aren’t optimistic”) – indeed, Bloomberg seems to be blissfully unaware of contrarian sentiment analysis.

 

Gold Could Fall to the $1,000 Mark (video)

 

Good Luck Bargain Hunting for Gold Miners – naturally, gold miners are even more doomed than gold itself…

 

From the Wall Street Journal:

Let’s Get Real About Gold: It’s a Pet Rockactually, as we have previously pointed out, it’s a door stop, not a pet rock. We should perhaps mention here what Jason Zweig, the author of this WSJ article, wrote in 2011 right at gold’s peak. From Mr. Zweig’s WSJ Article of September 17, 2011:

 

“Growing numbers of investing experts have been declaring that gold is a bubble: an insanely overvalued asset whose price is bound to burst. There is no basis for that opinion.”

 

With respect to gold miners (which since then are down by more than 80%) he opined:

 

“But there is one aspect of gold investing where it is possible to make rational estimates of value: the stocks of gold-mining companies. And, by historical standards, they seem cheap—based not on subjective forecasts of continuing fiscal apocalypse, but on objective measures of stock-market valuation.”

 

This is really a textbook example of how market sentiment works.

 

From Marketwatch:

The carnage isn’t over in gold, other metals-mining stocks

 

Study predicts gold could plunge to $350 an ounce (i.e., here come the extreme predictions, the inverse of the vast bullish consensus and the extreme bullish predictions that were made at the peak by gold bulls)

 

And all of this was finally crowned with the following pronouncement in the Washington Post:

Gold is doomed

 

Interestingly the author of this article, Matt O’Brian, actually gets one thing right, although his conclusion remains utterly wrong – he writes:

 

“When you think about it, a bet on gold is really a bet that the people in charge don’t know what they’re doing.”

 

That’s exactly what it is Mr. O’Brian. The wrong conclusion he comes to is this one:

 

”But economists do, for the most part, know what they’re doing.”

 

Yes, in some parallel universe perhaps. That people can profess such beliefs after the twin debacles of the tech and housing bust and after yet another giant asset bubble has been blown by these “economists who know what they are doing” is truly stunning. How blind and naïve can one possibly be? This article is a good example of statist propaganda. Our wise leaders know what they are doing! How can anyone doubt it!

Just to make this clear, we are not critical of people making bearish forecasts on gold. This is perfectly legitimate, especially as gold’s fundamental drivers have at best been stuck in “neutral” for much of the time over the past few years. Occasionally, gold’s fundamentals have switched to slightly more bullish, and then have quickly flipped back again to slightly more bearish, while its technical condition wasn’t much to write home about.

Gold primarily has vast bullish potential. The factors that are currently slightly bearish could very easily and quickly flip to outright bullish. Gold bulls have the laws of economics on their side: the greatest post WW2 experiment in global money printing on a grand scale is apodictically certain to fail and will likely result in one of the greatest economic busts of modern times.

Still A Contrarian’s Dream

We find the reactions in the press interesting for the following reasons:

Firstly, as mentioned above, we find it absolutely fascinating that gold is getting so much attention. The etatistes are apparently truly afraid of gold. If it were up to them, it would probably still be illegal (just a guess, mind).

Secondly, we also find it fascinating (and a bit depressing) how woefully uninformed the commentary on gold generally is, and this does not only apply to gold bears, but to gold bulls as well. There is hardly any market about which more nonsense is written than the gold market.

We have discussed this at length in previous articles on this blog, such as “Misconceptions about Gold”. Robert Blumen has contributed two excellent essays on the theoretical background that explain how exactly the gold price is formed (in “What Determines the Price of Gold” and “Misunderstanding Gold Demand”). In a somewhat dated “Update on Precious Metals” we provided a list of the most important fundamental drivers of the gold price (you’ll have to scroll down a bit to the section Fundamental Drivers of the Gold Market). We should also mention Keith Weiner’s frequent “Monetary Metals Supply and Demand” reports, which delve into the nitty-gritty of whether or not the metals are moved by developments on the physical side or the actions of futures speculators.

In spite of all this information being available for free on the intertubes, we notice that even gold bulls are still wasting time talking about things like jewelry demand and mine supply. Others keep going on about central bank buying and gold buying in China, often asserting that “demand evidently exceeds supply”, even in the face of a declining price. Demand and supply are always in balance. Price informs us about the relative urgency displayed by demanders and suppliers, and when the price declines, it indicates that the former aren’t sufficiently enthusiastic. The fact that gold moves from warehouse A (in, say, New York) to warehouse B (in Shanghai) has nothing to do with it.

Thirdly, we regard the excessive grave dancing, and the utter conviction with which gold is declared to be “doomed” as an outstanding contrary indicator. It means that a major trend change has to be very close. This is not to say that gold cannot fall further in the short term – technically it certainly continues to look weak, and the price attractor at $1,040-1,050 presumably still beckons. However, we believe that the long term outlook has greatly improved by the three waves of extreme bearish sentiment we have seen since 2013 (at the summer 2013 low, the late 2014 low and currently).

Even in the short term, it seems that chances are very good that a substantial rally will develop. For instance, the Daily Sentiment Index (DSI) of futures traders has recently fallen back to a record low of just 5% bulls on two consecutive occasions. A recent report by EWI contained the following chart illustrating the situation:

 

DSI

From 98% bulls at the top to just 5% bulls back-to-back – how sentiment on gold moves from one extreme to another – click to enlarge.

 

A similar message is conveyed by sentimentrader’s gold optimism index, an average of the most important gold sentiment surveys and positioning data, which we already shown in Bill Bonner’s recent article “Gold Miners, RIP”. Currently the “Gold Optix” is at its second-lowest level in history, undercutting even the low recorded in the year 2000, at the bottom of a 20 year bear market:

 

Gold Optix

Gold market participants haven’t even been this bearish back in the year 2000 – click to enlarge.

 

As might be imagined, other market positioning and sentiment data all convey a similar message: small speculators hold a large net short position in gold futures, managed money is net short gold futures, Rydex precious metals assets are close to “wipe-out” territory, closed end bullion funds trade at vast discounts to their net asset value, GLD keeps losing gold, etc., etc.

In short, everybody knows gold can only fall further and is positioned accordingly. If there is one truism about markets one needs to be aware of, it is this one: What “everybody knows” isn’t worth knowing. Naturally, all those who have maintained a somewhat positive view on gold in recent years (including yours truly) look like idiots right now – but there is considerable potential that assorted gold haters will be invested with this particular mantle over coming years. Don’t worry, we’ll needle them right back. :)

 

Conclusion

As we have already mentioned in our missive on the recent “Gold Panic”, when everybody in a market is looking in the same direction, it is time to pay close attention. Contrarians should really love the current juncture in the gold market. At the very least, a playable counter-trend move should be close at hand, and perhaps a long term turn is actually finally in the offing. After all, the market has by now finally more or less replicated the mid-cycle decline of 1974-1976.

Lastly, we are actually gratified by the fact that assorted etatistes still seem so preoccupied with gold. This is a sign that gold remains an important monetary asset, one that continues to stand tall as an indictment of central economic planning, socialism and corporatism in all its forms. Even after having declined by roughly 45% from its 2011 high, gold is still up by more than 3,000% against the US dollar since the latter was cut loose from its tie to gold by Nixon’s default in 1971. This means that even with gold under pressure for four years running, the dollar has still crashed by 97% against it since 1971.

There is little question which currency is more useful to preserving value and protecting savers and property rights, and which one is more useful for the depredations of a greedy and insatiable Leviathan State. Hence all the gold hate pouring forth in the mainstream press. It will be interesting to see what happens once the collapse of fiat money against gold resumes – especially as we think it will do so with a real bang.

 

PIC FROM CATERS NEWS - (Pictured the Vault) We might be be in financial woes but dont worry theres still a few pence in the bank, inside the vault of the Bank of England which holds £156 BILLION in GOLD. As bankers are dis-honoured and Europe teeters on the brink of financial meltdown its still nice to see we have a little to fall back on. Deep underground the nations financial heart these piles upon piles of 28lb 24-carat gold bars make for reassuring viewing. Stacked on shelves like some scene from the end of an Indian Jones film the glittering nest egg is kept safe in a massive underground vault. In this image alone there are around around 15,000 bars around 210 tonnes of pure gold, with a value of around £3 billion. SEE CATERS COPY.

What remains of the gold stash of the Bank of England

Photo credit: Caters News

 

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Sat, 08/01/2015 - 18:05 | 6379636 Fukushima Fricassee
Fukushima Fricassee's picture

Long Gold short Green span

Sat, 08/01/2015 - 18:11 | 6379653 SheepRevolution
SheepRevolution's picture

I think we will see a similiar development commodities and stock markets as we did in most of 2008, right before the crash in September and October. They will all go down, so I believe there will be even better buying opportunities for physical gold and silver later this year or more likely next year. So I'm hoping/betting the spotprices for gold and silver will go to approx 850 USD/12 USD. With the stock market going south in Shanghai, it will soon drag the rest of the stock markets and commodities. Once these have reached bottom (or closely),  gold will go non-stop up.

With all the manipulation taking place at the COMEX through naked short selling as explained by Paul Craig Roberts, Wall Street will probably and happily hammer gold when things in the stock and bond markets get ugly. Sort of like a diversion; everybody is looking at the stock markets crashing, and very few will react when the Fed and its agents at Wall Street hammer the price of gold. "Gold is going down because investors sell in order to get liquidity" is the kind of talk we will be hearing from massmedia. Because once the Fed goes QE4-QEX, they will want to have prepared themselves by lowering they price of gold and not scarying everybody away from the US Dollar. This is a major threat to them and their entire structure, so they will do their outmost in their preparations for future QE. I just don't se them not doing anymore naked short selling of gold as stocks and bonds go bust. It's a great oppurtunity for them to lower the price of gold. As for the availability of gold and premiums if prices go to approx 850 USD, well, that's a different story.

For now, I am short paper gold through ETF (DUST) and just holding on to the physical that I already have.

Sat, 08/01/2015 - 18:20 | 6379655 Supernova Born
Supernova Born's picture

Yellen's Ghost Dancers of the Stock Market and Grave Dancers of Gold will prove equally ineffectual.

Sat, 08/01/2015 - 18:32 | 6379679 Diet Coke and F...
Diet Coke and Floozies's picture

Ok, world goes back to gold standard. Businesses need to borrow for leverage. 100% gold backed currency limits this. Businesses will demand fractional reserve banking or fiat to enable the credit needed for leverage and removing the limit. Back to the present situation we go. Changes nothing because your trying to change certain human beliefs.

Sat, 08/01/2015 - 18:43 | 6379721 Deathrips
Deathrips's picture

They have all that gold accompanied by laminated posters?

This is gold abuse...the rips protective services will gladly care for that gold!!

It could sit right next to mine at the bottom of the river.

 

Another interesting thing is the way they stacked it to make it look bigger with hollow in the middles of stacks of bars.

 

RIPS

Sat, 08/01/2015 - 18:51 | 6379745 mvsjcl
mvsjcl's picture

Alan Greenspan = JAP. Just Another Psychopath.

Sat, 08/01/2015 - 18:55 | 6379755 Captain Debtcrash
Captain Debtcrash's picture

Alan Greenspan’s life is a contradiction personified, without knowing all the ins and outs its hard to know if he’s the good guy or the bad guy.

Sat, 08/01/2015 - 19:58 | 6379920 SafelyGraze
SafelyGraze's picture

funny that the article mentions graves and dancing

the afterlife

why you are not supposed to have that shiny metal

https://en.wikipedia.org/wiki/Crown_of_justification

now you know

Sun, 08/02/2015 - 02:36 | 6380633 Four chan
Four chan's picture

i have the original printing of the objectivist where greenspan wrote that most amazing and perfect defense of sound money and gold in particular, he turned me into a gold bug in 1985 and i haven't stopped since, and yes the stack is righteous.

Sun, 08/02/2015 - 17:06 | 6382526 Dame Ednas Possum
Dame Ednas Possum's picture

Respect.

Sat, 08/01/2015 - 20:02 | 6379930 Captain Debtcrash
Captain Debtcrash's picture

Sometimes a system must be broken to be rebuilt correctly.

Sun, 08/02/2015 - 10:18 | 6381100 New_Meat
New_Meat's picture

"We had to destroy the village in order to save it."

Sun, 08/02/2015 - 01:05 | 6380541 RaceToTheBottom
RaceToTheBottom's picture

You have to judge him by his actions.

He is an inauthentic failure'

Sun, 08/02/2015 - 01:58 | 6380591 old naughty
old naughty's picture

A Tale of Two 'Greenspans'...

the roadtoroota hero, on the outside looking in;

or the banker-economist, on the inside looking out?

So let them dance on graves (who's?)

Sat, 08/01/2015 - 19:00 | 6379727 ZerOhead
ZerOhead's picture

"Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”


The legal creation of money out of thin air through the issuance of private debt is the primary pathway of confiscation.  The quantity of money created this way far eclipses that of sovereign borrowing (from these same private bankers btw...) to finance a nations deficit. 

Don't even get me started on the fact that most of those historical governmental deficits were created to finance wars started by those same bankers so they could  dispossess and debt-enslave even more nations on the planet...

Sat, 08/01/2015 - 18:46 | 6379728 blueRAP
blueRAP's picture

A Gold standard doesn't limit the businesses' abilities to borrow for leverage, but the bankers ability to loan at astronomical leverage with no accountability.

Sat, 08/01/2015 - 19:05 | 6379779 johnlocke445
johnlocke445's picture

Your whole theory falls apart with point 3. A gold backed currency does NOT limit business borrowing needs.

Sat, 08/01/2015 - 19:43 | 6379832 Diet Coke and F...
Diet Coke and Floozies's picture

True, but at what cost. Few (Edit: People in the first and developing nations) can live their current lifestyle with no / cheap credit available.

Sat, 08/01/2015 - 19:50 | 6379894 Diet Coke and F...
Diet Coke and Floozies's picture

From Wikipedia (I know, not the greatest resource to quote):

 

"Some economic historians, such as Barry Eichengreen, blame the gold standard of the 1920s for prolonging the economic depression which started in 1929 and lasted for about a decade.[30] Adherence to the gold standard prevented the Federal Reserve from expanding the money supply to stimulate the economy, fund insolvent banks and fund government deficits that could "prime the pump" for an expansion. Once off the gold standard, it became free to engage in such money creation. The gold standard limited the flexibility of the central banks' monetary policy by limiting their ability to expand the money supply. In the US, the Federal Reserve was required by law to have gold backing 40% of its demand notes.[31] Others including former Federal Reserve Chairman Ben Bernanke and Nobel Prize-winner Milton Friedman place the blame for the severity and length of the Great Depression at the feet of the Federal Reserve, mostly due to the deliberate tightening of monetary policy even after the gold standard.[32] They blamed the US major economic contraction in 1937 on tightening of monetary policy resulting in higher cost of capital, weaker securities markets, reduced net government contribution to income, the undistributed profits tax and higher labor costs.[33] The money supply peaked in March 1937, with a trough in May 1938.[34]

Higher interest rates intensified the deflationary pressure on the dollar and reduced investment in U.S. banks. Commercial banks converted Federal Reserve Notes to gold in 1931, reducing its gold reserves and forcing a corresponding reduction in the amount of currency in circulation. This speculative attack created a panic in the U.S. banking system. Fearing imminent devaluation many depositors withdrew funds from U.S. banks.[35] As bank runs grew, a reverse multiplier effect caused a contraction in the money supply.[36] Additionally the New York Fed had loaned over $150 million in gold (over 240 tons) to European Central Banks. This transfer contracted the US money supply. The foreign loans became questionable once Britain, Germany, Austria and other European countries went off the gold standard in 1931 and weakened confidence in the dollar.[37]

The forced contraction of the money supply resulted in deflation. Even as nominal interest rates dropped, inflation-adjusted real interest rates remained high, rewarding those who held onto money instead of spending it, further slowing the economy."

Sun, 08/02/2015 - 11:21 | 6381303 New_Meat
New_Meat's picture

pretty much, ya gotta' read Friedman and Schwartz to get the right read on the extension of the Depression into the GREAT DEPRESSION.

And the befuddled Morganthau.

- Ned

Sat, 08/01/2015 - 20:15 | 6379954 laboratorymike
laboratorymike's picture

Look at it this way; Some of my aunts and uncles over in China bust their ass every day and see very little of their productivity returned because our money printing system makes it artifically expensive for them to buy and artificially cheap for us. When their government prints to maintain the yuan-dollar peg, they get inflation, seen recently in their stock bubble.

Over here in the US, the few productive workers left work 50+ hours a week to get $40,000, perhaps in multiple jobs, while middle-aged bureaucrats I knew at the university were pulling 6 figures with 6% annual increases to professionally whine about income inequality. Ironic.

Why are these people working so hard for so little? Hint: it's the wealth transfer. The transition to sound money will be painful at first, but long term bad habits will be forced out of existance, and with better economic habits meaning less/no consumer debt, most debt being for business/productivity only, and perhaps less reckless consumption fueled by cheap credit. The environment might be better of too ;)

Sat, 08/01/2015 - 20:22 | 6379965 F22
F22's picture

Diet Coke....

But the world will not go back on the gold standard...you're right that 100% gold backed currency limits necessary monetary expansions.  There is however another alternative....  The next system after the collapse of the dollar will separate the functions of money.  Fiat currency will remain to lubricate the economy and will still be able to expand and contract as needed.  It will continue to function as a MoE (Medium of Exchange).  It's absolutely necessary that fiat remain to provide this essential function.  It can no longer, however, function as a SoV (Store of Value).  In the future system, gold will provide that function!  Gold will not be tied to currency as it would be in a gold standard.  The market will determine its value relative to the various currencies of the world.  In order for this to happen, the paper market for gold must die!  In the future, the market will be for physical gold only.   Paper derivatives will be worth the paper they are printed on.  Physical gold will have to be revalued to unimagineable levels when the COMEX crashes.  Freegold.  It represents the complete separation of gold from fiat.  People will save in fiat for things they need in the near future, but will save in gold for their retirement and to pass wealth on to the next generation.  Owning physical gold will protect you from a government that overspends and devalues their currency!  Fiat will be devalued in countries that run a trade deficit....conversely, it will gain value in countries that run trade surplusses!

Buy physical gold now...while it's on sale....while it's still availalbe.

No MdV...these are not my sisters.

Sat, 08/01/2015 - 22:30 | 6380024 Diet Coke and F...
Diet Coke and Floozies's picture

No disagreement here F22. However, taking into account human beliefs (behavours stem from beliefs), it will corrupt again and we will be right back to where we are right now. It may be a long time and be electronic or whatever, but look at the past. Roman government devalued by reducing PM content of coins, countless other examples, etc... My point is that changing the monetary systems will not change people. If it wasn't the current "elites" it would be a different set with the same result.

Sun, 08/02/2015 - 09:53 | 6381028 paddy0761
paddy0761's picture

That seems to be the consensus, which means it probably won't happen. Everyone seems to think we are in an echo of the 70's x 10.

$192 Top = $1920 Top

$103 Bottom = $1030 Bottom

$875 Top = $8750 Top 

Only difference is timeline which is a 20 year bull as opposed to a 10 year bull, so the X scale is stretched.

There will be too many peeps waiting to buy at $1030, so it probably won't get there. The bull will always ride with the minimum number of peeps on its back as possible.

I'll probably be wrong, but I wouldn't be surprised if the bottom is already in.

Sun, 08/02/2015 - 11:48 | 6381383 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

What caused Greenspan to "change his spots"?

Being Tribe I suspect that his essay back in the '60's gave the Zio's a stroke, so he was the recipient of an "Arthur Jensen Moment", to wit: Mr. Greenspan, you have meddled with the primal forces of Zyonism, and you will atone!
He was promised the Fed chairmanship and had a leash put on him ( his 2nd wife, NBC newswoman Andrea Mitchell).

Will he revert to his former self? If he tries, he will probably end-up like Howard Beale.

Sat, 08/01/2015 - 18:10 | 6379650 davidalan1
davidalan1's picture

This fucking Magoo clown and his gargantuan ego is what brought us to the abyss in 2008 with his previous testimonies before congress about  getting to 70% homeownership..dropping rates to Zero, whilst feigning it was good for the ecomony... Totally sending the signal to Fannie. freddie, mortgage bankers, loan officers that all is well....Sell those worthless tranches bitches...

What an idiot... His opinion about anything financial including gold is null and VOID... Gold wont be fooled by fools and the manipulation of idiots for long...

Sat, 08/01/2015 - 18:55 | 6379752 ZerOhead
ZerOhead's picture

He is not an idiot. HE is a GLOBALISTS tool.

WE are the idiots...

Sat, 08/01/2015 - 18:18 | 6379665 cpnscarlet
cpnscarlet's picture

Thank you Pater, very nice article, however...

1) We've heard it all before;

2) We're not impressed with charts at this point;

3) The FED has a printing press and we don't;

4) The banks that control the gold fix s**k FED c**k

5) 119 owners of the same COMEX ounce can't be wrong.

So

Wake me up when China pulls it's golden Yuan card, DC is nuked; or when LA is turned to dust by an 8.3 mag (or some other black swan disaster).

Sat, 08/01/2015 - 18:42 | 6379720 Tinky
Tinky's picture

So in summary, you begin by taking the author to task because "We've heard it all before", and then make several points that we've all heard before.

Excellent.

Sat, 08/01/2015 - 18:55 | 6379756 cpnscarlet
cpnscarlet's picture

Yes, but my list was to emphasize the uselessness of this article. We are not in control; all the lucid, well-informed, and reasoned writing is for naught until greater events shake the financially repressed loose.

Sat, 08/01/2015 - 19:18 | 6379808 r00t61
r00t61's picture

For those already well-informed, what you say is true;

But there are plenty of people reading this article who up until now had never before heard of Greenspan, or gold being used as monetary reserves.

Sat, 08/01/2015 - 22:13 | 6380053 Prisoners_dilemna
Prisoners_dilemna's picture

The veterans here recognize the value in refreshing the narrative.

"know your enemy".

 

FWIW I toom umbrance with this line;

"Simply put, gold is the one asset that provides the most reliable indictments of central economic planning and the abominable monetary and economic system that has been forced on us by the etatistes."

I suggest anyone open fiatleak.com,   let it run for 2-4 hours, then tell me gold is superior to Bitcoin in ability to indict currency debasement.

Every time I read "gold" I couldn't help but also read Bitcoin.

I like both.

Sat, 08/01/2015 - 19:53 | 6379837 Tinky
Tinky's picture

As touched on by the other commenter, there are plenty of people reading ZH who are not as well informed as you, and other 'veterans'.

To your "we are not in control" theme, I would point out they they aren't either, and that the collapse is already in progress, and accelerating.

Sat, 08/01/2015 - 21:35 | 6380132 cpnscarlet
cpnscarlet's picture

We can ONLY WISH that more newbies are coming by...I hope you're right, but I'm solidly pessimistic.

"...already in progress, and accelerating." - Again, I hope you are right. If things aren't demonstrably different by Christmas, I think we are facing the SSDD scenario until about 2020. There's still a genuine "helicopter drop" to the masses in the way of a "tax rebate" or other such nonsense that hasn't happened with this administration. There is also a welath tax confiscation of the 1% that can be transerred to the prols as well. Still a few more aces up Yellen's sleeve to keep the Ponzi going.

Sat, 08/01/2015 - 18:19 | 6379667 Tinky
Tinky's picture

Pater Tenebrarum is, in my view, the best of the currently active economic observers/bloggers, and undoubtedly better than many who charge plenty for their "insights".

Sat, 08/01/2015 - 18:21 | 6379672 kchrisc
kchrisc's picture

Keynes sold out to the Zionists as well.

Now the only question is: Will Greenspan make his "return" or will the guillotines catch up with him first?

Stay tuned.

Liberty is a demand. Tyranny is submission.

Sat, 08/01/2015 - 18:27 | 6379686 ebworthen
ebworthen's picture

Of course the banksters hate Gold, it is a tangible asset that can be held by individuals off of the ledger sheet and out of their control.

Sat, 08/01/2015 - 18:30 | 6379690 Conax
Conax's picture

This is powerful stuff, thanks for posting it. 

It ought to be required reading at Starfleet Academy, or even in high school.

Sat, 08/01/2015 - 18:48 | 6379691 Ms No
Ms No's picture

I thought this quote was great:

  “[The State is] an institution run by gangs of murderers, plunderers, and thieves, surrounded by willing executioners, propagandists, sycophants, crooks, liars, clowns, charlatans, dupes and useful idiots – an institution that dirties and taints everything it touches”.

Except for the use of the word taint because you just cant use that term anymore.

This right here is why it is becoming so difficult to debate anything science is producing these days; global warming, GMO and the rest of it.

 "There are exceptions, but if practically all intellectuals are employed in the multiple branches of the state, then it should hardly come as a surprise that most of their ever-more voluminous output will, either by commission or omission, be statist propaganda."


 


Sat, 08/01/2015 - 18:32 | 6379694 Mini-Me
Mini-Me's picture

Gotta love the quote about government by Hoppe.  He's spot on, as usual.

Keep stacking, folks.

Sat, 08/01/2015 - 18:39 | 6379716 Bay of Pigs
Bay of Pigs's picture

This is the best opportunity to buy gold and silver since 1999, 2001 and 2008.

A double or triple in price from here appears inevitable, and probably much higher than that.

Sat, 08/01/2015 - 19:00 | 6379768 cpnscarlet
cpnscarlet's picture

BOP - We've had differences in the past, but I always enjoy your posts.

I just hope that enough of the status quo is intact when gold is unchained and we can enjoy the fruits of our long-suffering patience. On the other hand, if enough of the status quo is up-ended, things might just get better.

Sat, 08/01/2015 - 19:21 | 6379818 withglee
withglee's picture

A double or triple in price from here appears inevitable, and probably much higher than that.

Written circa 2011.

Sat, 08/01/2015 - 21:32 | 6380123 29.5
29.5's picture

You very well might be right in a sense, but I'm not in au/ag to "make money" as others say, because gold (money) doesn't replicate itself over time. I'm in it to preserve my wealth, something that history has shown is 100% certainty over long periods. The hardest part about the gold show is (myself included) keep reminding myself that money is gold and cash is dollars. Even when I hear friends and family talk about dollars being money I try to educate them. I don't refer to dollars as money anymore, I refer to it as simply cash. 

Sun, 08/02/2015 - 00:19 | 6380468 slimycorporated...
slimycorporatedickhead's picture

It doesnt matter what the price of gold measured in US$ is.. the only thing that matters is what you can exchange that oz of gold for.. if nobody knows how many US$ exist (100 trillion? 1 quadrillion? 100 quadrillion?) then nobody knows what the value of $1 is, thats where we are today and many people do not think in those terms, gold just is gold, and you cant print it, only use human labour to get it out of the ground.

Sat, 08/01/2015 - 18:57 | 6379762 moneybots
moneybots's picture

"Alan Greenspan in the mid 1970s – although he later turned out to be a sell-out, his understanding of economics undoubtedly dwarfed that of his successors at the Fed..."

 

What difference does it make if Greenspan's understanding of economics dwarfed, when he turned out to be a sell out?  It is the same outcome, as if he was an idiot.

Sat, 08/01/2015 - 18:58 | 6379767 johnlocke445
johnlocke445's picture

I have an email address list of all of the anti gold writers and journalists. When precious metals rise from the future inventory squeeze I plan on hounding them into their graves. I'll be in touch with them on a daily basis to remind them to check the price of gold and silver. Everyday they will have to deal with me. Daily. Daily. Daily. Daily. Daily. Daily...

Sat, 08/01/2015 - 20:26 | 6379972 SolarSystem1932
SolarSystem1932's picture

JohnLocke,

Sir, please park that list on a website and make its address public here.

The desired affect would be greatly multiplied.

Dailyx1000, Dailyx1000, Dailyx1000, Dailyx1000, ad infinitum

Thanks in advance.

 

Sat, 08/01/2015 - 19:02 | 6379772 withglee
withglee's picture

From Greenspans essay:

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

I would so like to have a conversation with Greenspan.

Sat, 08/01/2015 - 19:47 | 6379881 Latitude25
Latitude25's picture

Go ahead and tell us how a hunk of concrete is a great medium of exchange. 

Sat, 08/01/2015 - 19:56 | 6379912 withglee
withglee's picture

Go ahead and tell us how a hunk of concrete is a great medium of exchange.

I don't think it is so I can't tell you.

Sun, 08/02/2015 - 02:09 | 6380602 Ms No
Ms No's picture

I think they missed that. 

Sat, 08/01/2015 - 19:07 | 6379782 withglee
withglee's picture

The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.”

In a farming operation, the period between harvest and new crop planting is only about 5 months. Some farming operations even allow a winter planting.

Sat, 08/01/2015 - 19:10 | 6379790 Joebloinvestor
Joebloinvestor's picture

Feynman wrote in his book,"Surely You're Joking" about using a hemisphere of pure gold for a doorstop.

He noted that it was probably the most expensive doorstop in existance.

Sat, 08/01/2015 - 19:10 | 6379791 davidalan1
davidalan1's picture

AT minute 4;45 Alan admits he found a flaw in his model...You cant make this sheeeit up... *2008"

 

https://www.youtube.com/watch?v=WJaW32ZTyKE

Sat, 08/01/2015 - 19:23 | 6379809 withglee
withglee's picture

“Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset.

That's what the Mises Monks want.

But the credit instrument is actually "a promise to complete a trade". It allows trade even before any tangible assets exist. And a constriction of tangible assets does not disrupt the trade. A failure of a trading promise has no cascading effect seen with an asset backed scheme. There are no runs on the bank. Savings has no effect on trade. The only thing that affects trade is coupling of agreeable trading partners and their reliable delivery. No capitalist is needed to bless the promises of reliable traders. And mitigation of defaults with immediate like amount interest collections assures a pure objective negative feedback mechanism for stability. It can't be gamed. It can't be farmed. There is no contrived business cycle.

A properly managed MOE recognizing that money is "a promise to complete a trade" (and not a pork belly) cannot be beat. It can only be tied.

Sat, 08/01/2015 - 20:16 | 6379956 r00t61
r00t61's picture

Keep posting your Greenbacker Garbology.

It is amusing to read on a slow news day.

Sun, 08/02/2015 - 02:17 | 6380611 Ms No
Ms No's picture

I'm not sure if I am retarded right now (I did have to read a couple sentences repeatedly) but that is not at all what he is saying.

Sat, 08/01/2015 - 20:24 | 6379971 Latitude25
Latitude25's picture

I'll take reliable delivery of concrete.

Sat, 08/01/2015 - 22:11 | 6380230 OC Sure
OC Sure's picture

 

 

It appears you may have misunderstood the statement that you have quoted. 

 

He is saying that the tangible asset must already exist before any loan can be written. The statement means that money comes from something and not from nothing.

You then have said the opposite, and identified correctly but out of context of the quote, that [counterfeit] comes from nothing and not from something.

This goes to your ongoing posts that an MOE can just be "created" ex-nihilo to facilitate the mediation, which is quite nonsensical. 

Greenspan, whom I will defend as a brilliant man who simply shrugged in plain sight, is saying that money comes from productive work! 

God bless him. 

Sun, 08/02/2015 - 02:25 | 6380619 Ms No
Ms No's picture

God bless Greenspan?  I don't remember him walking the talk.  I have to get out of here shit is getting out of control. /S

Mon, 08/03/2015 - 09:25 | 6384477 withglee
withglee's picture

He is saying that the tangible asset must already exist before any loan can be written. The statement means that money comes from something and not from nothing.

And I am saying he is wrong.

I base that on a simple examination of trade: (1) Negotiation; (2) Promise to Deliver; (3) Delivery.

In simple barter (2) and (3) happen simultaneously on-the-spot. "Money" allows (2) and (3) to happen over time and space. Thus money is obviously "a promise to complete a trade".

Show me anywhere in the above that it is necessary to (1) have an asset; (2) loan an asset.

Your view of money is a contrivance of capitalists. While capitalists are not necessary in a trade at all, they have injected themselves as being absolutely necessary. Plain and simply, assets are not required in trade at all. And in fact, a trade could be service for service and thus no asset even exists or is referenced in such a trade.

I can agree to paint your house while you agree to mow my lawn all summer. Where's the asset?

Introducing money: You can pay me now to paint your house. I can pay you monthly to mow my lawn.

Sun, 08/02/2015 - 00:24 | 6380479 slimycorporated...
slimycorporatedickhead's picture

The Mises Monks would read your post and just be like... fuck off..?

Sun, 08/02/2015 - 00:56 | 6380532 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Um hello you're talking about trade...you're not talking about money, d'oh. Of course I can take someone else's IOU...but what is it denominated in? Why do people have such a problem with this. A piece of paper with a DaVinci sketch on it is priceless, a trillion pieces of paper with Davinci sketches on them are...confetti

Mon, 08/03/2015 - 09:13 | 6384443 withglee
withglee's picture

Um hello you're talking about trade...you're not talking about money,

Um hello...

Money is obviously a "promise to complete a trade". Examine trade to see this: (1) Negotiation; (2) Promise to Deliver; (3) Delivery.

In simple barter trade (2) and (3) happen simultaneously on-the-spot. Money allows (2) and (3) to happen over time and space. Thus money "obviously" represents "a promise to complete a trade".

Sat, 08/01/2015 - 19:26 | 6379831 lordbyroniv
lordbyroniv's picture

to many people waking up.

 

we will all be bludgeoned soon with war.

 

sigh.

Sat, 08/01/2015 - 19:29 | 6379839 dust to dust
dust to dust's picture

 Not to worry Gold Bugs and holders of physical, Gold will shine as bright as our SUN. It is just a matter of time and a short time indeed.  

Sat, 08/01/2015 - 19:44 | 6379859 Supernova Born
Supernova Born's picture

Our Sun actually isn't "bright" enough.

The creation of gold requires the supernova of a far larger star than the Sun.

Sun, 08/02/2015 - 02:26 | 6380627 Ms No
Ms No's picture

Okay, everybody here is into gold but that is just creepy.  ( =

Sun, 08/02/2015 - 02:32 | 6380629 farmerbraun
farmerbraun's picture

I'm not into gold: I'm into fertile land,preferably river bottom, in a far away land.

Sun, 08/02/2015 - 11:22 | 6381304 northern vigor
northern vigor's picture

I like farmland but lets look realistically at how your plan will work out in a shtf situation.

If you own a thousand acres of farmland...how will you work it, protect it, or pay taxes on it? If the hordes see a prosperous farm, it will be the first place they come in and rob, probably after killing the owners. 

If you own ten acres, and the army comes through, and you are not on the right side, you will have to move, or die.

If you live in a far away land...you will be an outsider...and will be expendable, or targeted first.

So...if you have to move fast to escape...how will you move your wealth if you have no gold? You will be no better off than a billion landless,refugees.

Sat, 08/01/2015 - 19:38 | 6379842 Oldrepublic
Oldrepublic's picture

from an old ZH post

http://www.zerohedge.com/article/howard-buffett-said-human-freedom-rests-gold-redeemable-money-called-return-gold-standard

Howard Buffett Said "Human Freedom Rests On Gold Redeemable Money", Called For Return To Gold Standard

 

 

Sat, 08/01/2015 - 19:34 | 6379856 Herdee
Herdee's picture

The Treasury Department of The United States Government says that Gold is a currency.A lot of those that are too stupid to understand this should also read The Constitution.

Sat, 08/01/2015 - 19:34 | 6379857 GRDguy
GRDguy's picture

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."  Greenspan was absolutely right on.  Makes me wonder how TPTB turned him; LSD, money, women, blow, or all of the above.

Sat, 08/01/2015 - 19:40 | 6379871 Conax
Conax's picture

They gifted him a long life via the blood of the living.

Sat, 08/01/2015 - 19:38 | 6379867 proLiberty
proLiberty's picture

The first restraint upon government is by a limited budget, and thus by limited funds. But when government gives itself power (enabled by Keynesian economics) to create near-infinite money out of thin air, then it has near-infinite funding of near-infinite bureaucracy by which to create and enforce near-infinite regulations each having the weight of law.

Government also buys favor and support by funding enough “benefits” that almost half of all households in the US receive some form of direct government money.

The first order of business of an Article V convention of the States must be to restrain government’s ability to create more money than the citizens want to send in the form of taxes upon themselves. We must stop near-infinite money so we stop near-infinite government.

Sat, 08/01/2015 - 19:40 | 6379872 GRDguy
GRDguy's picture

[The State is] an institution run by gangs of murderers, plunderers, and thieves, surrounded by willing executioners, propagandists, sycophants, crooks, liars, clowns, charlatans, dupes and useful idiots – an institution that dirties and taints everything it touches”.

Geez, I wish I could write like that.

Sat, 08/01/2015 - 20:05 | 6379936 negative rates
negative rates's picture

Plated tungstun, it's now useless.

Sat, 08/01/2015 - 20:12 | 6379949 withglee
withglee's picture

Even after having declined by roughly 45% from its 2011 high, gold is still up by more than 3,000% against the US dollar since the latter was cut loose from its tie to gold by Nixon’s default in 1971

Gold was already trading at twice the official price at that time. The tie of the dollar was a fiction for the whole period after that myth was made up at Bretton Woods. There wasn't enough gold for such a tie then ... and there's not now.

It's amazing how these myths live.

If you want to see the real scam, go back to the late 1800's and the bi-metal wars. That proves the real motives. If you've got silver, that's the commodity you want backing your money. If you've got gold, that's what you want. If you've got oil, that's what you want. Back to Rothschild ... give me control of money.

All are wrong. You never want a commodity as a reference to the value of your money. You only want traders perception to value money. And you want that to be a constant.

Take a child. From the moment they get their first allowance until they start getting brain washed by economists ... they never perceive money value in relation to any commodity. Traders don't either. Only economists serving holders of the various commodities do. It's a myth that suits their needs.

Sat, 08/01/2015 - 20:12 | 6379950 withglee
withglee's picture

Even after having declined by roughly 45% from its 2011 high, gold is still up by more than 3,000% against the US dollar since the latter was cut loose from its tie to gold by Nixon’s default in 1971

Gold was already trading at twice the official price at that time. The tie of the dollar was a fiction for the whole period after that myth was made up at Bretton Woods. There wasn't enough gold for such a tie then ... and there's not now.

It's amazing how these myths live.

If you want to see the real scam, go back to the late 1800's and the bi-metal wars. That proves the real motives. If you've got silver, that's the commodity you want backing your money. If you've got gold, that's what you want. If you've got oil, that's what you want. Back to Rothschild ... give me control of money.

All are wrong. You never want a commodity as a reference to the value of your money. You only want traders perception to value money. And you want that to be a constant.

Take a child. From the moment they get their first allowance until they start getting brain washed by economists ... they never perceive money value in relation to any commodity. Traders don't either. Only economists serving holders of the various commodities do. It's a myth that suits their needs.

Sat, 08/01/2015 - 20:22 | 6379966 Latitude25
Latitude25's picture

If you've got concrete, that's what you want.

Sun, 08/02/2015 - 02:35 | 6380632 Ms No
Ms No's picture

withglee,

Would you please clarify that you are describing the scam as you see it and that you are not promoting it because I think there is some confusion here, or else I'm confused.  Regardless, could you clear that up, thanks.

Sun, 08/02/2015 - 10:42 | 6381165 withglee
withglee's picture

Would you please clarify that you are describing the scam as you see it and that you are not promoting it because I think there is some confusion here, or else I'm confused.  Regardless, could you clear that up, thanks.

As I understand it, "they" argue that money cannot be created out of thin air. That it must be "backed" by something equal to the value it represents. Of course this means being able to exchange it for that commodity at any time and any place under any circumstances. So it seems the reason for this backing is to give money credibility.

That being the case, it shouldn't matter what backs it as long as something of real value can be demanded in exchange for it. Right?

In the 2nd half of the 1800's silver was discovered in the west. It was of real value. And the westerners wanted to use it to back the paper money (which was more convenient to use). So the westerners had silver. But the easterners had gold so they wanted the certificates to be backed by gold.

Since the supposed reason for backing was to give the certificates "real" value, it should not have mattered if they were backed by silver, gold, or pork-bellies. But it did matter. It mattered alot. Why? Because it was about control, not about backing.

There was a huge political fight over it and William Jennings Bryan was in the middle of it. As it turned out, the eastern gold bugs won out over the western silver bugs and the bi-metal money backing was rejected. It wasn't about backing at all ... it was about control.

To me, that's as big a red flag as WTC7 falling down. No matter what they say, it's better to look at what they do.

Sun, 08/02/2015 - 12:06 | 6381416 Not My Real Name
Not My Real Name's picture

Since the supposed reason for backing was to give the certificates "real" value, it should not have mattered if they were backed by silver, gold, or pork-bellies.

Oh, come on. If it doesn't matter what the currency is backed by, then you have to assume that the value of silver or gold, for example, is on par with, say, seashells. FFS

Think about it: Would you have more faith in the MOE if it was backed by gold or seashells? As the number of certificates you're holding increases, the more important it becomes that they are backed by something of real value. THAT'S human nature.

 

 

Sun, 08/02/2015 - 12:31 | 6381563 withglee
withglee's picture

Think about it: Would you have more faith in the MOE if it was backed by gold or seashells?

I'm thinking. Gold would be my choice. Now give me the choice between gold and silver. Given that choice, it doesn't matter to me.

What's your point?

My point was that since gold and silver (and pork bellies really) supposedly serve the function of backing, why were the easterners so determined to see that the westerners didn't get what they desired ... a bi-metal system where silver was equally powerful?

To me, the answer is "control". And if I'm right (that it's not about backing at all ... for of course 1oz of gold per person on Earth doesn't really allow it to back anything), then this whole gold-bug thing is about control. It's not about "sound" money or "non-fiat" money.

What's the answer to you?

Sun, 08/02/2015 - 12:57 | 6381662 Ms No
Ms No's picture

I think that is a very interesting perspective.  For the sake of argument, agreeing that metal backed currencies may be imperfect, would you not agree however, that silver or gold backed currency would be preferable to what we have now?  I would also be willing to guess that you own gold and silver in this current circumstance, no?

Sun, 08/02/2015 - 17:19 | 6382558 withglee
withglee's picture

For the sake of argument, agreeing that metal backed currencies may be imperfect, would you not agree however, that silver or gold backed currency would be preferable to what we have now?

Since I know "exactly" how a properly managed Medium of Exchange process should work, it's hard for me to vote on which defective process is better. Why settle for an obviously flawed process when you know and can have the obvious and correct one? But to answer your question anyway ... I see no difference. In both cases "backed by something that really isn't providing backing" and "backed by nothing" are the same.

I would also be willing to guess that you own gold and silver in this current circumstance, no?

When the QE (i.e. monetization) stuff started it was obvious to me we were quickly going to have hyperinflation. I bought gold as fast as I could (and so far have had my ass on a platter).

Then it became apparent that they were brilliant manipulators and liars and were going to bring us a slower delayed collapse as they moved the pieces on the board ... so I started buying junk silver coins. I knew they would be a good item of barter to obtain substance after the collapse. I remember when they were in use and what they traded for.

I now have enough of both, and am buying double-jambs, cement powder, and anything else I can think of with a good shelf life that will be needed after the collapse and subsequent looting (but not toilet paper which most of the short sighted think is an essential item).

But ah ... how to protect it? The next thing on the agenda has to be a good mobilization communication and cooperation plan in my rural area. For that, I spend lots of time in honky tonks.

Wouldn't it be neat to just be able to grab the bull by the horns and put in the immediate fix? The fix I know will cure, not only this ill, but a huge number of ancillary ills as well.

The more I think of a world with "guaranteed zero inflation", the more I see how disruptive it would be ... to the perps I really think need to be disrupted ... and how good it would be for everyone in the end. My life would have been so much easier and more enjoyable and rewarding with zero inflation and zero interest load ... the government never could have grown to the ridiculous size it has or finance the continuous wars and foreign adventures.

I also think I know how to solve this ridiculous "democratic" government problem we have ... or at least a process towards the solution. With that solution, no amount of money could be directed to corrupt and coopt the governmental organization.

Sun, 08/02/2015 - 13:30 | 6381784 Not My Real Name
Not My Real Name's picture

I would prefer my MOE to be backed by gold AND silver. 

As for my point: It was that your original claim that it "doesn't matter" what an MOE was backed with was utter rubbish.

 

Sun, 08/02/2015 - 18:03 | 6382616 withglee
withglee's picture

I would prefer my MOE to be backed by gold AND silver.

Perhaps you should run the numbers. The value of all the silver in the world is about 1/5th that of all the gold. So instead of 1oz of gold per person on Earth, you have 1.2 oz. Does that change your perspective any?

As for my point: It was that your original claim that it "doesn't matter" what an MOE was backed with was utter rubbish.

And again you miss my point. If it's backing you need, both silver and gold should have been allowed. But they weren't. Only gold was allowed. It was obviously about control, not backing.

Anything you have backing money has to be available if someone wants it. Thus, the value in backing of all "in-process trades" has to be on the sidelines ready to deliver into a "run on the backing". That, in itself is pretty (actually enormously) wasteful. But when you consider gold is one of the most valuable objects on Earth, and there is only 1oz of the stuff per person, you quickly realize "you can't get there from here".

Further, you've got the enormous problem of keeping the backing in perfect balance with the in-process trades. If you don't do that, the value of the trade varies with the value of the backing as it proceeds towards delivery. It causes you to do all this ridiculous estimating of what economic activity is and how much money to add or restrict in the process. It gives the banker the knobs he needs for his farming operation ... the business cycle.

Mon, 08/03/2015 - 12:18 | 6385270 Not My Real Name
Not My Real Name's picture

The value of all the silver in the world is about 1/5th that of all the gold. So instead of 1oz of gold per person on Earth, you have 1.2 oz. Does that change your perspective any?

I reject your premise. Value as measured by what yardstick?

Anything you have backing money has to be available if someone wants it.

Real money like gold and silver don't need anything to back it. You mean currency. 

But when you consider gold is one of the most valuable objects on Earth, and there is only 1oz of the stuff per person, you quickly realize "you can't get there from here".

Gold and silver are divisible. There are 480 grains in 1 troy ounce. That's plenty good if you decide to allow gold to double as a currency. If you are using gold to simply back a paper currency, then price can be adjusted high enough to assure there is always plenty of gold.

If it's backing you need, both silver and gold should have been allowed. But they weren't. Only gold was allowed.

Sounds like we are in violent agreement here, Glee.

 

 

 


Mon, 08/03/2015 - 17:31 | 6386864 withglee
withglee's picture

I reject your premise. Value as measured by what yardstick?

The only one redily available ... the dollar. In this case we're comparing the value of gold with the value of silver using the same yardstick ... and then relating it to gold ounces ... thus the 1.2oz result. If you do that valuation using the same yardstick at the same instant, you get a fair approximation. Especially when we're talking about backing money which would require several orders of magnitude more gold real value than exists. 

Real money like gold and silver don't need anything to back it. You mean currency.

Gold is not money ... real or otherwise. Money is a promise to complete a trade. Once created by a trader it is just stuff like gold (actually the most desired stuff in simple barter trade) until it is destroyed when the trader delivers on his promise. I don't mean currency. I mean money. Most money is just accounting entries.

Gold and silver are divisible. There are 480 grains in 1 troy ounce. That's plenty good if you decide to allow gold to double as a currency. If you are using gold to simply back a paper currency, then price can be adjusted high enough to assure there is always plenty of gold.

First, you can't say it simply backs paper currency. It must back all forms of money ... most of which is just accounting entriesl.

The issue isn't divisibility. It's cost of production. It costs less than $2,000 in current dollar terms to create a new ounce of gold. In the steady state, its value will be pretty close to that.

Similarly, if you declare that a whole tomato must be in everyone's daily diet, in the short term the price of tomatoes will rise dramatically. In the steady state (when supply meets the artificial demand)  it will be about what it costs now.

Same is true of gold ... except supply can never meet the steady state demand if it means backing all in-process trades ... i.e. all money. So a few miners will become fabulously wealthy ... more people will go into mining and grinding computers ... more manufacturers will find a substitute for artificially expensive gold ... people will flood to their dentists to have gold fillings, crowns, and bridges melted down ... and the traders will be strangled. They will quickly abandon gold ... even before they begin to accept it. They've done it many times before.

I have finally gotten a Mises Monk to openly and explicitly reveal part of the stupidity underlying their religion. They usually just call me an idiot without ever revealing (and certainly never admitting) the flaw in their reasoning.

If it's backing you need, both silver and gold should have been allowed. But they weren't. Only gold was allowed.

Sounds like we are in violent agreement here, Glee.

There are other more obvious things to be in agreement on. This one proves that it's not about backing ... it's about control. So why do you still favor backing that just enables elite control? I am perplexed by the disconnect.

 

Sat, 08/01/2015 - 20:31 | 6379985 Latitude25
Latitude25's picture

Yes you can buy bread to eat with gold.

https://www.youtube.com/watch?v=Jt15F21jpN8

Sun, 08/02/2015 - 18:52 | 6382846 withglee
withglee's picture

Yes you can buy bread to eat with gold.

Vividly illustrates the falacy of any commodity backed Medium of Exchange. People are wasting real effort for something to trade with rather than using that effort to deliver on a trading promise.

What if, rather than wasting time scooping dirt out of the river and sifting it for gold flakes, they were spending that time irrigating and cultivating a field? Wouldn't that more efficiently yield the intended result ... i.e. sustenance?

Sat, 08/01/2015 - 20:42 | 6380010 chosen
chosen's picture

The problem with gold is pretty simple.  The gold market is very small and easily manipulated by any moderately sized central bank.   Central bankers hate gold, so they will try to drive the price down when the opportunity presents itself.  The only time gold might pay off is if all the central banks themselves collapse.  If that happens, guns and ammo would be preferable to gold.  In fact gold wouldn't really be all that useful in such a situation.

Sat, 08/01/2015 - 21:08 | 6380066 bluskyes
bluskyes's picture

the gold market is not small, and easily maniplulated. It is the futures (promises, faith and credit) market that is easily maniplulated. It is mostly paper, and the only role that physical gold plays in it, is to offer the patina of legitimacy to an otherwise complete charade.

Sat, 08/01/2015 - 20:42 | 6380011 VW Nerd
VW Nerd's picture

Know the truth.  Ponder that....

Sat, 08/01/2015 - 21:18 | 6380093 Zoltan
Zoltan's picture

Greenscam will surely rot in hell.

Z

Sat, 08/01/2015 - 21:23 | 6380104 Latitude25
Latitude25's picture

<< Greenspan's a sinner and will rot in hell

<< God forgives Greenspan since he has seen the light for the second time

Sat, 08/01/2015 - 21:53 | 6380183 pigs-n-space
pigs-n-space's picture

Im stuck on 350 an ounce,  awesome bring the rain. Nice thought but we are too close to being  outright  fucked, the system is held together with the  best water resistant,  vibration, ultraviolet,  and chemical  resistant  glue . But it feels different this  time. Time will tell, let the  shit show start so we can get to putting things  back together. ...

Sat, 08/01/2015 - 22:26 | 6380261 Fred C Dobbs
Fred C Dobbs's picture

Has everyone here read Bix Weir's view of Greenspan?  Where Greenspan purposely caused all of this mess to get us back on the gold standard?  I find it hard to believe.  Any one here think he is right?

Sat, 08/01/2015 - 22:57 | 6380315 Latitude25
Latitude25's picture

Trump says gold is better than cash and closes business deal using gold.

https://youtu.be/2_kJKrM_Mxg

Sat, 08/01/2015 - 23:56 | 6380431 quasi_verbatim
quasi_verbatim's picture

Poor old Greenspan. Fifty years of gold-denial and cognitive dissonance -- no wonder he looks careworn. The harm that men do, in the years between prattling childhood and dotage.

Lovely pic of the (alleged) BoE gold. Looks like gold, might even be gold. Where's the pic of the American gold?

Sun, 08/02/2015 - 00:45 | 6380518 Badsamm
Badsamm's picture

Since i have reached my silver goal that i never thought possibble, Im treating myself to a very nice high powered rifle with all the fixings.

Thanks everybody for the hard work.

Sun, 08/02/2015 - 00:45 | 6380519 Badsamm
Badsamm's picture

Since i have reached my silver goal that i never thought possibble, Im treating myself to a very nice high powered rifle with all the fixings.

Thanks everybody for the hard work.

Sun, 08/02/2015 - 03:03 | 6380653 Manipuflation
Manipuflation's picture

All I want to do is preserve some wealth that I worked for.  I don't want to put fiats into the stock market.  I do not want to buy bonds.  No ETF's here.  That shit is not my game.  I want physical metal and I buy metal of all different sorts.  I don't really care what someone thinks about what I am doing.  I really do not obsess over my gold other than I want moar.  I just don't know how it will all play out but having some metal will be good in the future.

Should I have sold at $1900?  I thought about it.  I could have used the money but I couldn't do it.  I have owned gold for a long time now and I have never once sold any of it.  I like to buy it. 

Sun, 08/02/2015 - 04:18 | 6380696 damicol
damicol's picture

Why are there no articles on how to actually use and profit from gold? 

To me and I have been banging on about this for years now, SME’s and many other small businesses, and even to some extent individuals are missing out precisely because they simply do not understand gold and are so set in a mindset that precludes any thoughts that mean a deviation from their thinking locks on the currency they use and allows absolutely no lateral thinking.

 Let me put it this way.

Gold can create wealth faster than stocks bonds or currency.

Gold can enable you to accumulate wealth tax free

Gold although it pays no interest can grow in quantity faster than other currencies.

You should from an early age think of gold as your primary currency, think of the dollar in terns of gold, think of the yen in terms of gold or the euro, the fascist plastic fake ponzi scam voucher, if you must, in fact all currencies anywhere in the world.

Now I know I am aiming this at business, and I have a business, but gold is the basis, of everything I do, and ALL income is turned into physical gold.

But how do you use this.

First, if you are a small business and have staff, then you should seriously consider as a first step setting up an offshore corporation, which is duly registered and to be operated as an outsourcing company.

Mine is based in Quezon City Manila; in fact I have many now.

It is cheap, easy to do and all you need are the services of a good local Law Firm.

The important thing is that this outsourcing company is 100% under the jurisdiction of the country it’s registered in.

You can own virtually 100% of the shares, and even be a director, (Philippines) without setting foot there. But ensure that the shares are owned by the individuals and NOT the company you own. Otherwise it could be classed as a subsidiary.

Put in place an outsourcing agreement, between your business in the US and the new company. You will be the one and only client, and the SLA, can be made to tailor exactly what you need.

I have an outsourcing company that under its SLA (Service Level Agreement) means I have to pay it a minimum each month for 50 staff employed; even though not a single employee has ever been hired.

It also allows the outsourcing company to waive any payment at its discretion.

Next, work with a gold broker that is very reputable in HK SG or even Manila, and set up another offshore company, this time as an outsourcing and Management Company, and this tasked to charge management fees on behalf of the shareholders of the outsourcing company say in Manila (you), and to invest the proceeds into physical gold.

In this manner, your entire business income gets flushed through the system and into physical gold held offshore.

Never sell any gold, It is very easy to arrange that the gold is collateralized and any bank in Asia will issue you with the currency of your choice.

I buy gold every quarter and in 10 oz bars and store still sealed with original certification. Mostly Perth Mint, and as a regular customer get very good treatment, I also store in two places now and collateralize the gold through a private finance company, that has no banking licence.

If you get enough gold you will soon find the right people in HK or SG to help you out on that.

All gold purchase are allocated as stock purchases, including metals, electrical cables, plastic and aluminium forms and tubes, and metal and plastic casings together with circuit boards and semi conductors.

The list is not broken down to identify quantities, and under the contract, the purchase orders are at the sole discretion of the buying department of the management company and they are not disclosed under a strict NDNC agreement.

As a final step I have a UK company off the shelf, no bank account, one director, one shareholder, under $25 to set up, no telephone, no website, no email address, non trading, no dividends paid no shares bought or sold, files non trading accounts each year and has one asset.

A contract to control all the above and if deemed necessary to set in motion the disposal and liquidation of all gold and companies and have the entire proceeds sent to UK. And not living in the UK, there is no tax to pay.

Result is that since 2007, after setting this up at the beginning, I have now seen physical gold quantity grow at a compound rate of 14.3% per quarter up to June 15.

All tax free, bureaucracy free reporting free and not a fucking damned thing IRS or anyone else can do to stop me doing my way. It is out of their jurisdiction. All invoices are issued and payments collected and handled by our outsourced invoicing department.

45% of the gold is now collateralized to provide cash flow in the form of unsecured loans to me and the outsourcing company, I take no salary, dividends or cash from any company I have or control. I pay no taxes nor do any companies.

The US $ has risen against a basket of 58 currencies I use at a compound rate of 7.2% since Jan 2013, and a compound rate of 7.75 % since Jan 2014 and 11.7 % since Jan 2015.

Since 22 May 15 $US is rising at 12.8% PA

Since 16 Jun 15 rising at 14.4% PA

Since 25 Jun 15 rising at 15.8% PA against a basket of 58 currencies.

Its accelerating, but gold against other currencies ex $ is 19 % lower than against the $US since Jan 2013.

So where is the gold price crash?

On the other hand, it means I now favour US for all business and being paid in $US as that now buys me far more quantity of gold, which accounts for my gold holding rising at fastest pace ever. I don’t care a flying fuck what the $ is against gold, I just buy every quarter using every cent of income and I never sell, ever.  No bank anywhere will refuse my collateral and my collateral only rows larger and never shrinks. Its value per unit never changes, only the ponzi fiats change.

Remember, all fucking bankers are committed to devaluing your labor stored in fiat by inflation. They can’t print gold

If you need help, can help you get up your offshore set up running. Let me know

If you are a private individual, set up a corporation to manufacture widgets, and outsource the design and manufacture and to try to claim tax relief against the investment you make into your widget making company. The rest is the same, you just buy stock offshore (gold) and the design is taking forever.

Fuck the IRS and Fuck the Bankers

 

 

Sun, 08/02/2015 - 05:50 | 6380761 Tinky
Tinky's picture

Interesting – thanks for the details.

Sun, 08/02/2015 - 08:44 | 6380884 Latitude25
Latitude25's picture

It's not clear to me.  Is your gold paying interest?  If so how?  

Sun, 08/02/2015 - 09:44 | 6380995 damicol
damicol's picture

No Gold does not pay interest,,

 It acts like a bank. like currency stored in my own private bank.

I borrow against it in whatever currency I want , the gold stays put untaxed and not subject to capital gains or any other taxes. i never sell, i only accumulate.

I use a private lender but any bank will do  too and borrow cash against the gold to finance all business operations, Everything from buying pencils to salary's to everything in between.

All cash coming to the business gets converted  to gold, all invoices  and every cent of income gets converted to gold and as a result, the quantity of gold ceaselessly increases.

Personally I borrow unsecured from the same lender, a personal loan I renew every year.

Therefore i pay no personal taxes, in fact haven't for over quarter century now.

think of gold as a portable easy to build and easy to increase  kind of a house, you can build bit by bit unlike a house you have to increase its size in chunks like an extension or move to a bigger house, gold you can add a brick as small as 10 grams.

But it is just as good collateral as a house, even better and easier to use and  used right can finance everything you need without sacrificing a singe brick in it makeup.

 

 

Sun, 08/02/2015 - 11:12 | 6381265 WarPony
WarPony's picture

Fascinating!  I would certainly appreciate knowing more.  And as I'm not savvy re: international law, I wonder how - 

"All cash coming to the business gets converted  to gold, all invoices  and every cent of income gets converted to gold"

- and this business not be considered a hobby, having no taxable gain?  Sure I missed something.  Thanks!

Sun, 08/02/2015 - 12:47 | 6381617 withglee
withglee's picture

I borrow against it in whatever currency I want , the gold stays put untaxed and not subject to capital gains or any other taxes. i never sell, i only accumulate.

Doesn't the first phrase of this sentence conflict with the rest of it? Are you like the government? You just keep rolling over your debt? How does that differ from selling what is collateral for that debt?

Sun, 08/02/2015 - 23:37 | 6383632 damicol
damicol's picture

Its like an overdraft, in any currency I need, or even multiple currencies, secured to maximum of what currency or combination of currencies to a maximum of 45 % of the gold. The gold only increases in quantity, it flustutes in value up or down only gainst which currency tou decide to measure it by.

On a given day it will be up against some and dowwn against others,

Makes no difference, gold is my base currency and all others are converted against the gold quantity.  If I need less cash in the business or personal ise the "overdraft" goes down, if I need more it goes up, but always with a limit to the valuse of 45% of the gold, which at a compint qyantity increase of 14.3 % a quarter  is more than sufficient to mean that whatever I draw  against it the level of gold collateralized is always faling as a percentage. and I have never actually reached 45 % of the gold being secured. currently less that 30 % down from 33% the previous quarter despite a bit increae in spending. because quantity rose 16.9 in the last quarter

 

Mon, 08/03/2015 - 17:43 | 6386904 withglee
withglee's picture

Makes no difference, gold is my base currency and all others are converted against the gold quantity.

Fine ... but that's not the issue. When you borrow against your gold you give up control of that gold. It's no different than selling it, except you can "buy it back" at the exact same price you borrowed against it. Further, if the value of it goes down (as it has in the last 4 years), the entity taking control will demand more to make up the deficit caused by the price drop ... i.e. you'll have to give up control of more of your gold. All your percentages are fictions and irrelevant. It's little different than selling calls or shorting stocks on margin. You give up control.

Sun, 08/02/2015 - 04:24 | 6380699 JerseyJoe
JerseyJoe's picture

No mention of manipulation...you know, like when someone dumps $2.7B worth of gold at market during a holiday in Japan, minutes before the Shanghai open (ie when no one seeking to maximize the value of the sale would sell...during the absolute most illiquid time of the trading day.)...and the CME can't find out who placed the trade...

Quoting Greenspan while at the Fed:

"...where central banks stand ready to lease gold in increasing quantities should the price rise."

Sun, 08/02/2015 - 14:29 | 6382038 Consuelo
Consuelo's picture

 

Good catch, JJ.

 

Mr. Blasnik is however, aware of the 'tarnish', so to speak, if one dares touch the 3rd rail of 'manipulation'.   Not that there isn't ample truth to the matter, but if one is at a level of 'respectability' as Acting Man, there is a reputation to protect - nay, perhaps even a $living.   Therefore, best to nibble around the edges - which he has done here admirably, and let the audience come to their own conclusions.

That said, I would add perhaps what is even more important than the 'manipulation' itself, which is why such efforts are employed in the first place.  First & foremost being, the absolute and imperative necessity to protect confidence in the $USD and the image of stability projected by the institutions tasked with running the economy that issues said currency.

Recall the scene from an old 'Planet of the Apes' movie from the 1970's, whereby an organization of masked, white-robed humanoids are able to 'project' visages of large, imposing/threatening beings.   This succeeds until one day a governing leader of the Apes figures out that it is but all but a mirage, designed to instill fear and compliance, and he decides to charge forward on his horse, right into the 'image', thus vaporizing it and then leading the remaining army of apes on horseback to the final siege.   Good metaphor for what is going on here with gold, me thinks...

 

 

Sun, 08/02/2015 - 05:00 | 6380725 Manipuflation
Manipuflation's picture

I pick up pennies in parking lots hoping that they are dated 1981 or earlier.  Just saying.

Sun, 08/02/2015 - 06:02 | 6380766 Able Ape
Able Ape's picture

Gold works and has lived for 5,000 years; Paper plays and quickly dies....

Sun, 08/02/2015 - 06:37 | 6380783 quasi_verbatim
quasi_verbatim's picture

Througout a long history gold has been used for coinage (the store of value and means of exchange) for domestic and civic ornamentation and for human decoration.

Stacking large ingots underground is indeed a barbarous manifestation of this relic.

These precise piles of metal might as well be gold-plated tungsten. What difference does it make?

Sun, 08/02/2015 - 08:22 | 6380858 Latitude25
Latitude25's picture

Fron the article:

"Secondly, we also find it fascinating (and a bit depressing) how woefully uninformed the commentary on gold generally is, and this does not only apply to gold bears, but to gold bulls as well. There is hardly any market about which more nonsense is written than the gold market."

"In a somewhat dated “Update on Precious Metals” we provided a list of the most important fundamental drivers of the gold price (you’ll have to scroll down a bit to the section Fundamental Drivers of the Gold "

Yes it's somewhat dated all right because not one of those fundamental drivers is listed as manipulation.  Uninformed commentary indeed.

Mon, 08/03/2015 - 18:06 | 6386949 withglee
withglee's picture

It should however be noted that mine production has historically tended to be negatively correlated with the price of gold, which is the exact opposite of what one would normally expect. There are two reasons for this superficially strange behavior.

In your link I saw nothing to suggest over many cycles that the price of gold is not strongly related to the cost of producing it ... which of course it is.

A sine wave and its 90 degree shifted cosine wave do not correlate well ... and its 180 degree shifted sine wave correlates in the negative. But the RMS value of all are identical. And that's the crux of the matter at issue here. The value of gold is ultimately and tightly related to the cost of (i.e what goes into) producing it.

Sun, 08/02/2015 - 13:35 | 6381828 maxamus
maxamus's picture

Considering ZH has now pretty much been wrong about the stock market and commodities for years, I don't see gold moving up.

Sun, 08/02/2015 - 13:41 | 6381841 1stepcloser
1stepcloser's picture

So ZH should be cheerleading instead of warning?  That's CNBS's Job

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