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The Misguided Paperati & Bifurcated 'Gold' Markets

Tyler Durden's picture




 

Submitted by Jesse via Jesse's Cafe Americain,

 

 
There is a short excerpt of a video interview with hedge fund titan Ray Dalio at the Council on Foreign Relations below.

I think it is priceless.   Ray lays out his thoughts on wealth and hedging with gold to the chuckles and sniggers of the pampered ruling class  in a very clear and straightforward manner.

There is also another video interview in which Dalio discusses his views with the smirking chimps from CNBC.   It is almost a scene out of Huxley’s Brave New World,  with Dalio as some kind of monetary savage trying to explain reality to those who have been incubated in an artificial currency regime of King Dollar and know nothing else.

*  *  *

Here is why I think that this is important.

The gold market in particular seems to have bifurcated, or split into two: one market for largely paper speculation and high leverage, and another for the purchase and distribution of actual physical bullion.

Is this a problem?

Yes it is.  Because the attitude towards gold among the status quo in the West has become rigidly dogmatic, supported by years of lazy thinking and a determined the campaign of ridicule and propaganda to try and extend the unsustainable.

You can see it emerge every so often in sites and media outlets and analysts who can be considered as creatures of the establishment, to use an older phrase, for whatever reason they may have.   Some of the economist manservants of the ruling class talk about gold with the same sneering manner that a Victorian aristocrat might have discussed the ‘rights’ of the peoples of India or of China.

And I do not necessarily think they are bad motives, in the dishonest sense at least.  Some may actually believe what they say, although for the most part I don’t think that the fortunate care what is good or what is true, if it serves their own special interests.  This is how they have been taught to be, how life is.

If you have been brought up, bred, and bombarded with certain points of view for most of your life, it is no surprise that you may reflexively tend to adhere to and promote those views without regard to any intervening facts, past or present.  You have been programmed by your education and, dare I say it, class.  I see it all the time.

And it can sometimes lead to odd divergences in reasoning.   This is why certain Founding Fathers found it perfectly acceptable to declare that ‘all men are created equal’ and also own slaves.  Or to seek to curtail the rights of the non-landed and women in terms of ruling and voting.   They are running on what they knew, without proper and rigorous examination.

It is hard for someone who has come from outside that system to understand how they can rationalize such a glaring discrepancy.  But if you put yourself in their place, and honestly examine some of your own habitual thinking, it is not so hard.

Hypocrisy, maybe.  And maybe it is just the unexamined prejudices of the fortunate.   Sometimes even what seems to be an obvious truth can only be seen clearly through tears.  And we have quite a surplus of the exceptionally fortunate these days, who have been pampered and privileged by an order which care very well for them, but that seems to be passing.

A big change is what we are heading for.   We have a financial system that still holds a vast amount of gold in the central banks, including the US and Europe according to their reports at least.  And more importantly, it is on a mad increase in the East with the central banks and the people buying in ever increasing amounts.   Those who serve the power circles of New York, Washington, and London do not want to hear about it, anymore than Winston Churchill had a regard for the thoughts of Mr. Gandhi.

 

And despite the huge change in the global supply and demand for bullion, we have a holdover, a significant price discovery mechanism in New York and London that is increasingly diverging from the physical realities of supply and demand.

There is going to be a reconciliation of attitudes and realities at some point.  And it may be quite impressive.  The longer that the status quo and their courtiers try to maintain their modern aristocracy, like vast tectonic plates unable to move but building greater and greater pressure, the more dramatic that change may be when it finally comes.

And alas, so many of our politicians are servants, although well paid and well taken, of the moneyed interests.  So they will do nothing that would perturb their true lords and masters, if they wish to also become fabulously rich and rise within the existing system.

The thought of the harm that this careless disregard for justice and right reason is doing to a very large group of relative bystanders and innocents, whose proper role is to be protected by those who have been gifted with greater talents accompanied by oaths of office, is almost disheartening.

 

 

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Thu, 09/17/2015 - 18:41 | 6562683 Billy the Poet
Billy the Poet's picture

Blackadder!

Love Hugh Laurie as the Prince Regent but perhaps there's also a place for Baldrick and one of his cunning plans in this story.

 

https://www.youtube.com/watch?v=AsXKS8Nyu8Q

Thu, 09/17/2015 - 20:12 | 6563021 Baldrick
Baldrick's picture

I might have a cunning plan, but I don't think it's prudent to share it here. Have a cappuccino.....

Fri, 09/18/2015 - 02:27 | 6564028 Zero Point
Zero Point's picture

Is it so cunning you could pin a tail on it and call it a ferret?

Fri, 09/18/2015 - 08:01 | 6564417 medium giraffe
medium giraffe's picture

As cunning as a fox who's just been appointed Professor of Cunning at Oxford University?

Thu, 09/17/2015 - 18:40 | 6562704 mademesmile
mademesmile's picture

I just saw an ad on Craigslist St. Louis for my local coin shop begging people to sell them American eagles at $2.50 over spot. Never seen that before.

Thu, 09/17/2015 - 18:48 | 6562735 Bunghole
Bunghole's picture

ASE's are selling between 31 - 40% over spot.

LO fuckin L

Thu, 09/17/2015 - 19:35 | 6562903 BKbroiler
BKbroiler's picture

I know it, it's crazy... Spot is 15, and a monster box is 10K.  Feel like selling the car..

Thu, 09/17/2015 - 20:51 | 6563184 mademesmile
mademesmile's picture

I'm assuming he might be having a hard time obtaining them at any price that leaves room for mark up. IE - his usual channels ain't selling.

Thu, 09/17/2015 - 18:40 | 6562705 hairball48
hairball48's picture

And so I'm still stackin'

Thu, 09/17/2015 - 18:42 | 6562716 kliguy38
kliguy38's picture

Buffet's NOT making a big mistake Ray........he's fochin' lying, calculating shill for the scumbag rulers.........

Thu, 09/17/2015 - 20:09 | 6563010 TheEndIsNear
TheEndIsNear's picture

Buffet still has the 130 Million Ounces of Silver he bought back in 1998. It's stored in London.

Fri, 09/18/2015 - 09:03 | 6564661 Immortal Flatulence
Thu, 09/17/2015 - 18:46 | 6562729 MonetaryDigitalis
MonetaryDigitalis's picture

You cannot patch the holes in the boat of float with paper gold.  Stand and deliver!  COMEX is fraud, I believe.

Thu, 09/17/2015 - 19:09 | 6562821 Bay of Pigs
Bay of Pigs's picture

The other frauds being CB leases, swaps, derivatives and of course the fraud ridden ETF's like SLV and GLD.

Thu, 09/17/2015 - 19:45 | 6562944 gonetogalt
gonetogalt's picture

Let me get this straight... "whose proper role is to be protected by those who have been gifted with greater talents accompanied by oaths of office, is almost disheartening."

 ALMOST???

Average:
Thu, 09/17/2015 - 18:46 | 6562731 Kaiser Sousa
Kaiser Sousa's picture

we will soon see who will be laughing last....and best...

There are only 2 forms of real Money...Physical Gold and Silver....

DEATH TO THE MONEYCHANGERS....

Thu, 09/17/2015 - 19:20 | 6562857 TuPhat
TuPhat's picture

This is why I don't read Jesse's web site; 'Or to seek to curtail the rights of the non-landed and women in terms of ruling and voting.'  The founding fathers had good reason to restrict voting to those who had a vested interest in good government and an education so they would know what good government is.  Allowing the FSA to vote has not done any good for the US.  Jesse fails to understand the history of our nation and therefore does not understand what lies behind the real problems we have.

Thu, 09/17/2015 - 19:26 | 6562872 Jstanley011
Jstanley011's picture

Their public snickering is a ruse to keep everybody clueless about what's actually in their personal vaults.

Thu, 09/17/2015 - 19:32 | 6562873 Latitude25
Latitude25's picture

My LCS has krugerrands in stock for 4% over spot so no bifurcation in price there however there seems to be a different story with larger quantities although information is scarce about this.  This article does not help since it does not show any data where there are clearly 2 different prices for gold.  The author wants us to take his word for it.

There do seem to be 2 prices in the silver market but as near as I can tell that is due to huge demand for silver coins and the inability of mints to meet that demand due to a limited number of blanks being supplied to them by blank manufacturers like the Sunshine Mint.  The question really comes down to whether there is a wholesale supply defecit for the blank manufacturers or whether there is simply just a limit on the number of blanks and coins that can be produced with the machinery in existence.  If you listen to silver pumpers they tend to avoid discussing this issue and conclude that wholesale silver must be in short supply simply because not enough coins are produced which is not necessarily true.  I welcome anyone to show me ANY data showing wholesale supply deficits in 1000 oz silver bars.

Thu, 09/17/2015 - 19:38 | 6562911 Jstanley011
Jstanley011's picture

Before the Fed lost its mind and began destroying the return on savings in favor of blowing up asset bubbles and forcing anyone with money capital to chase yield, 10% gold was the standard for a diversified portfolio. Now the thought gets smirks from chimps that were yet to be a gleam in their daddy's ape eyes when the bull market in bonds began. 

Thu, 09/17/2015 - 21:45 | 6563383 38BWD22
38BWD22's picture

 

 

Latitude25

I agree with your two main points.  Re paper gold vs. physical gold, we will have to just wait until the very stretched gold markets snap.  Then we will see the price differences.

Your comments re silver also agree with what I have been reading.  Plenty of 1000 oz silver bars, shortages of 1 oz coins because the mints cannoy get enough blanks.

*   *   *

But, The Central Bank of 38BWD22 cares not, as it is stocked with gold and even highly-engineered 52100 streel products.

Thu, 09/17/2015 - 22:00 | 6563448 Latitude25
Latitude25's picture

My central bank also has a well stocked branch in S. America.

Fri, 09/18/2015 - 04:26 | 6564140 CHX
CHX's picture

Word is that silver is in backwardation in London. That would indicate some tightness in the big white bricks market, no?

Thu, 09/17/2015 - 19:29 | 6562888 q99x2
q99x2's picture

The only problem is that everyone or some will buy paper contracts, take delivery and sell physical at the higher price and buy more paper and sell phys at a higher price and so on until there ain't no gold or silver left.

And if you own a central bank you can exchange freshly printed fiat for GOLD bitchez. There ain't gonna be no more gold.

Fri, 09/18/2015 - 02:59 | 6564061 TeaClipper
TeaClipper's picture

Take delivery? You are funny, hahahahahahahahah

Thu, 09/17/2015 - 19:35 | 6562907 Moe Howard
Moe Howard's picture

The Central Bank of Moe doesn't conduct business on a "fractional gold" or "paper gold" basis.

Thu, 09/17/2015 - 20:03 | 6562974 cowdiddly
cowdiddly's picture

Word. Cowdiddly Ass National is on a cash on the barrel and carry basis, no margin needed. and ixna on the ounterpartyca

Thu, 09/17/2015 - 21:46 | 6563386 38BWD22
38BWD22's picture

 

 

Great Central Bankers think alike!

Thu, 09/17/2015 - 19:36 | 6562913 justdues
justdues's picture

Any stackers in south east UK looking to score , there is a guy at a Saturday street market in Brighton selling British "junk" sterling coins i.e pre 1920 money at 10% over spot,by the gram/kilo . Upper Gardner St ,not far from the train station.

Thu, 09/17/2015 - 20:49 | 6563176 Dark Daze
Dark Daze's picture

It's like bursting a pimple. Tough and painful, but then all the shit comes out and you feel better. 

Fri, 09/18/2015 - 02:43 | 6564044 SMC
SMC's picture

LOL - ‘all men are created equal’ does not imply that all men must remain equal.

Fri, 09/18/2015 - 03:00 | 6564064 TeaClipper
TeaClipper's picture

And so the Friday slamdown begins.

I love "Stacking Friday"

Fri, 09/18/2015 - 04:18 | 6564136 CHX
CHX's picture

"Over the longterm it (gold) is a little better than cash..." HAHAHA good one Ray. How a bout  30+ times better than fiat cash, aye? But you can't tell that the muppets on MSM, can ya? 

Fri, 09/18/2015 - 04:29 | 6564144 CHX
CHX's picture

Gold will ultimately repair the impaired balance sheets of the CBs. And when it does, you better have some. Till then, happy stacking.

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