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Shorting The Federal Reserve
Submitted by Michael Lebowitz of 720 Global
Shorting The Federal Reserve
“I’ve never let my guard down by saying, I do not need to be hedged” - Paul Singer
Preservation of clients’ wealth is the most important fiduciary duty guiding investment managers. This obligation tends to be under-appreciated in the midst of financial asset bubbles when recency bias blunts the desire to sacrifice the potential for further gains in exchange for protection against losses. Inevitably, this is made painfully clear when a bubble pops and those once popular assets lose value and the manager’s clientele suffer. 720 Global has repeatedly urged caution as valuations are currently stretched on the back of reckless Federal Reserve monetary policy and poor economic fundamentals. This article presents the case for an asset that can help managers protect their clients and uphold their fiduciary duty owed to them.
Gold - \?g?ld\ AU #79 - A heavy yellow elemental metal of great value
Gold is neither a claim on the promise of future earnings like a stock, nor a liability owed by a public institution or a private party like a bond. It also lacks the full faith and credit of most governments, like a currency. Gold serves little industrial purpose, unlike all other commodities and is most commonly revered as a shiny metal used in ornamental display or jewelry. It is precisely these failings that make gold a unique and valuable asset and one that can play an important role in portfolio construction.
Gold is one of the few stores of value that is limited in supply, transportable, globally appreciated and not contingent upon the faith and credit of any entity. It cannot be manufactured or debased. Gold is the only time honored currency or in the words of John Pierpont Morgan (J.P. Morgan), “gold is money, everything else is credit”.
History
Thousands of years ago trade between people began through a system of barter. This method of payment was effective but very limiting. Trade could not occur unless both parties had the goods or services demanded by the other. If a metalsmith, for example, did not need wheat, a farmer seeking a new sickle would have to find alternative goods or services to offer the metalsmith.
These stark limitations and the growing desires to conduct trade with parties over further distances required a more robust system. Accordingly, trade graduated from the barter system to that of a common currency. Aristotle stated the rationale for a common currency eloquently:
“When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use”. At first, in almost all cases, the currency was a commodity. While eliminating some of the problems associated with barter, this system presented new ones. Carrying gold or other commodities such as silver, grain, shells, or livestock can be cumbersome and difficult to properly measure for weight and purity. Dividing most commodities into fractions for ease of exchange produced additional difficulties. Paying for an acre of land with a quarter of a cow must have presented quite a quandary.
The next step in the advancement of currency was the use of sovereign issued, standardized currency typically made with gold, silver, copper and bronze. The first known instance of such a currency, the Greek drachma (pictured to the left) dates back to approximately 700BC. The benefit of this commonly accepted currency was that the supply of money became regulated and standardized. Additionally, the limited availability of the metals made it hard to increase the supply of currency in any significant manner. These currencies held their value well as the worth of the coin was always tied to the weight and the price of the metal used. That said, there are instances where governments abused their authority by decreasing, or shaving, the metal used in each coin, temporarily unbeknownst to the public.
While coins were a big improvement from the days of barter, they could not fulfill the pressing monetary requirements of escalating global trade. To fill this need national banks introduced bank notes. Bank notes are essentially paper IOU’s, as we have today. The dollar bill, for instance, is backed by the full faith and credit of the United States. However, prior to the last 50 years, full faith and credit was rarely acceptable and accordingly most bank notes were backed by a commodity, typically gold or silver. One holding a bank note backed by gold or silver could always exchange the note for a fixed amount of the metal backing the currency. In 1792 the Mint and Coinage act authorized the Bank of the United States to establish a fixed ratio of gold to the U.S. dollar. While the fixed rate fluctuated over time, there was always gold and silver backing the currencies. Below is a picture of a $20 gold certificate.
On May 1st, 1933, President Roosevelt issued executive order 6102. This action ordered U.S. citizens to turn in their gold coins, gold bullion and gold certificates to the government. The order essentially made holding gold, in those forms, illegal for private citizens. The government set a rate of $20.67 per ounce for anyone exchanging their gold for cash. Surprisingly, and still deeply entrenched in the memory of many, personal bank vaults were raided in search of gold. 7 months later, having accumulated a significant amount of gold, the Gold Reserve Act was passed which raised the fixed rate of gold per ounce to $35.00. While rarely discussed in mainstream economic text books, this simple act was a massive devaluation of the dollar. With one swipe of a pen the amount of gold supporting the dollar was increased by 70%.
Roosevelt’s actions highlight an important distinction in the gold debate. Most critics of a gold standard today argue there is not enough gold in existence to back the current monetary regime. The truth is that the amount of gold is irrelevant, it is the price of gold that matters.
While the gold standard no longer applied to U.S. citizens, foreign nations were still able to exchange U.S. currency for the gold or silver backing it. In 1971, President Nixon signed executive order 11615 which suspended this right of exchange. The act officially took the U.S. off of the gold standard. Most other nations have since taken similar actions.
It has only been the last 44 years where gold plays little to no role in the backing of any major currency. Although there is still gold stored in Fort Knox and other vaults, it only represents about 7% of our monetary base at current prices. The nouveau logic surrounding this fiat currency regime states that confidence and trust for a piece of paper backed by faith will always trump the desire for people to hold something tangible.
History is littered with financial crises and other disturbing events resulting from reckless monetary policies. Part II of this piece, soon to be released, will chronicle one example of the ills of uncontrolled money printing, namely the actions that ultimately led to the French Revolution (1789-1799). This example is not as well-known as recent money printing schemes such as the Weimar Republic in 1923, Argentina in 1981 or Zimbabwe in 2008, but the lesson it provides is invaluable. The scale of money supply growth today is enormous but far from those achieved in the aforementioned countries. Nonetheless, all investors should have an appreciation for the path we are on and the fate that befell others that took similar paths.
The Era of Easy Money
Without a mandate for gold or silver to back a currency, most nations can freely increase or decrease the supply of money with few restrictions. The Federal Reserve (Fed) and many other central banks have done just that. Central banks now use their ability to manipulate the money supply to help them decrease interest rates, incent borrowing with the intent of spurring economic growth. Consider the stark differences in the annual growth of the money supply before and after Nixon’s removal of the gold standard:
- Post WWII era (1950-1970): +3% annualized
- Removal of gold standard until the financial crisis (1971-2008): +19% annualized
- Period since financial crisis (2008-today): +29% annualized
It is important to highlight that the Fed has quadrupled the money supply since 2008, dwarfing the 100% increase in the money supply during the great depression.
This “get rich quick” mentality generated limited shots of synthetic economic growth instead of fostering productivity to nurture and support lasting organic economic growth. This strategy is not without cost. In the words of Aldous Huxley: “One can’t have something for nothing”. Laying in the wake of money printing and extraordinarily low interest rates is an unprecedented accumulation of public and private debt, the decline of productivity growth and a fragile economy. These costs have been mounting for years, requiring higher degrees of central bank intervention to avoid paying them.
It is becoming more and more apparent that the so called “era of easy money” is quickly coming to an end. Debt levels are at a point where they challenge the economy’s ability to grow them, let alone service them. Interest rates have been lowered to zero with some countries now targeting negative rates. As stressed earlier, the U.S. money supply has quadrupled since 2008 and those of other economic powers have done likewise. Productivity growth has ground to a halt in the U.S. and is in decline in most major economies. To put the situation in blunt economic terms: the Minsky moment has arrived. The saying, derived from the works of Hyman Minsky, describes the sudden collapse of assets values which were driven higher by the gross misallocation of capital. Years of easy money and unregulated money printing has created this condition today.
The graphs below help visualize the enormous growth of central bank balance sheets and total U.S. debt outstanding. The table following the graphs show the stunningly low current level of short term interest rates of selected major economic powers. 5 of the 7 countries in the table have interest rates below zero.
Growth of Central Bank Balance Sheets
U.S. Total Debt Outstanding (Public and Private)
Why Gold
Gold is denominated in US dollars meaning it is quoted as the amount of dollars required to buy or sell one ounce of gold. The price of gold rises and falls with supply and demand for gold however a big determinant of its price is the value of the U.S. dollar.
Commonly, the U.S. dollar is quoted as an index or ratio. For example, the closely followed dollar index (DXY) is currently trading at 96.00 and the dollar’s exchange rate versus the Euro is 1.12. These are valid price indicators, yet also misleading, as they solely describe the value of the U.S. dollar relative to other currencies. If another country debases their currency more aggressively than the U.S., the dollar may rise in price but has it truly gained value? The exchange quotes and pundits may say yes but the answer is clearly no.
The only proper measure of the value of a dollar is its purchasing power. In the 1950s, $1 bought a couple a full meal at McDonalds including a burger, fries and a shake. Not only that, but the couple walked away with change. Today a similar meal at McDonalds would run the couple well over $10. The easy conclusion from that example is that prices have increased. However, one could more accurately state the value of the dollar has diminished. Had one been able to preserve those burgers, fries and shakes for over 60 years they would have retained the original purchasing power of their dollar bill (currently $10+ at McDonalds). Although storing food and most every product/commodity is fraught with risks and complication, one takes the additional chance that there may not be demand for such goods in the future. Had one bought $1 worth of gold in the 1950s, they would have $33 worth today.
Therein lies the value of gold. While theft of gold is a risk like anything else, gold doesn’t spoil or rot, it is relatively compact and easy to store, and it is not easily destroyed. Most importantly though, one can have about as much confidence as this world offers that someone will be willing to buy their gold in the future as has been the case throughout the history of civilized human existence.
Brazil and Turkey provide us with current examples of the virtues of owning gold. Year to date the Brazilian Real has dropped 25% and the Turkish Lira 30% versus the U.S. dollar. Despite the significant depreciation, Brazilians and Turks holding gold were able to retain their purchasing power. In both countries gold is trading at all-time highs offsetting the depreciating effects of their respective currencies.
This article should not be mistaken as advice to increase your allocation to gold to 100% and sell all financial assets. What it does imply is that in periods of economic strength, central bank credibility and dollar strength that the need to hold gold for protective purposes is minimal. Conversely, in times, like today, when debasement of currency is the Fed’s last remaining policy tool of any significance, one should retain some protection. Holding gold is simply recognition that the Fed’s actions over the last 30 years have potentially severe consequences that pose threats to the value of most financial assets, the almighty dollar and ultimately your clients’ purchasing power. Owning gold is in effect not only a short on the dollar and on the credibility of the Federal Reserve, but most importantly a one of a kind asset that protects wealth.
“Gold, unlike all other commodities is a currency… and the major thrust in the demand for gold is not for jewelry. It is not for anything other than an escape from what is perceived to be a fiat money system, paper money that seems to be deteriorating.” - Alan Greenspan 2011
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10x as much silver in the world. Can't be as easily controlled by a... small group.
Just saying.
Love that silver, but oh my breaking back... and if you thought gold sinks boats... try a load of silver. Or craft a boat out of silver?
Ah, quitcherbitchin. Here's money for free.
https://www.listia.com/auction/19181982-2001-dollar-bill-commander-bush-...
How to be a ZHer:
Own Gold & (preferrably) silver.
Own a barely-seaworthy leaky canoe or similar.
Be a really good boat-scuttler.
Yawn....
Haven't you guys gotten tired of having your face ripped off...
I still kick myself that I didn't sell $700 ago...
No one who bought gold as insurance has had their faces ripped off.
Furthermore, as pointed out in the article (and by me and others many times on this very forum), viewing Au through a USD prism results in a distorted understanding of it.
Agreed. If you live anywhere outside of the US and own gold you will be sleeping pretty soundly.
Some are still above water at -$700 from here. And will likely remain above based on that buy-in. But I feel your pain. Beginning to wonder myself where the bottom will turn out to be. But again, valuing AU to fiat is not the point of having AU in the long run.
Gold really has two purposes imo: 1) a hedge on financial armegeddon, and 2) an investment with a 10-20 year outlook. Trying to make a quick buck on gold in a short window is a bad idea. I own it for those two reasons and no other.
It's nice to have you back Flak.
I really mean that... At least you attempt to do your homework.
I disagree with you most of the time, but at least you balance the discussion.
It's going to be an El`Nino winter, so we're sure to get all sorts of global warming facts.
Nice to know it takes $20 USDumbo's to buy a $1.00 ASE delivered.
Chart that inflation curve...
YAWN, sigh. silly maniacal giggle. (me)
most of the gold I retain was purchased between 1995 onwards. So my base price for much is (rough math) $300/oz. I truly do not care the day to day machinations. Right now, with my poor tiny nest egg...I am not worrying much. Bought at $300...bought at $450 bought all the way up. Largest price paid is maybe $1200 because that was the price. Average cost= $600/oz.
But I digress. Now compare this to the cost of a pound of lean ground beef.....which is now $14.99/kg in my store. Back in 2000? was maybe $4.99?... Is my gold preserving purchasing power? Of course it is. Is toilet paper money doing this? Well if it was then lean ground beef going 3X increase should also reflect in my wages? do you not think? So minimum wage of $8/hr in 2000 should of course be $24/hour to keep pace with this non-existent inflation target that keeps getting missed.
Don't comply with the tax code. END OF LINE.
sarc aside, this whole cognitive dissonance (monetary policy makers vs. fiscal policy makers) that the supercop to the world (goons with guns) can't manage the amount of currency in circulation should end up with Jon Bhoener and Obama giving Janet Yellen medical treatment.
I certainly would not want any future american to become medical doctors considering on their first day of work a) their student loan interest is not tax deductible. b) they are part of the non 501c3 35% income tax bracket.
The Central Bank jig is coming to a close. More people are awakening every day.
Everyone should watch this 12 year old girl explain how central banking robs us all with inflation and will eventually make the citizens debt slaves.....remarkable.
Help make it go viral. Share it with friends, family, and even your children.
https://www.youtube.com/watch?t=372&v=JHQOX8EVNmE
So simple, even a child can see it.
the maggots will stick a gun barrel up your ass if need be but you will be using clownbux.
Easy Money - Bily Joel
https://www.youtube.com/watch?v=tdGzzfQ52TQ
Easy Money - movie clip
https://www.youtube.com/watch?v=a-982oTKR0M
Which is why a coalition of Ministers of Finance from around the world is trying to put physical gold back into the hands of the people.
Source:
https://s3.amazonaws.com/khudes/ltokyoembassiesoutoftokyo.pdf
Background:
https://s3.amazonaws.com/khudes/mboard3.pdf
If they can outlaw cash, they can outlaw gold... again. Then what?
At that stage your dead anyway... Start shooting.
Am I misunderstanding something? The author says the amount of gold supporting the dollar was increased 70% with the stroke of a pen. Wasn't it in fact decreased 70%. Pretty major typo.
very mutch is mizzing
The wording in the article could be better, but it is basically correct. By changing the conversion for $ to Au from $20.67/oz to $34/oz, the same amount of gold now covered 70% more dollars.
Really?
Can the gods please provide an adult's table too?
(...on a long enough time line the survival rate for the select few expands toward infinity, hiccup)
Unite as one. Peaceful Non - Compliance / Non - Participation into their Criminal Fraud System of Debt Bondsge & Enslavement.
Pack a Gun and Pay NO TAX! The Criminal Fraudulent System would Collapse into its own footprint as did Building Seven.
You be long, YOU BEEN WRONG !gold will go down as fast as the market will soon. There's no hyperinflation coming, that you been WRONG too! In fact, real estate is going down 15% soon. TOPPED 2.0
People buy Gold and Silver because they know banks are insolvent, and depositors money is destined to be stolen by the crimnal bankers.
Nay.
People buy Ag and Au to impress women and get pussy.
At last count, women outnumbered men.
simpletons always amaze
http://www.barrons.com/articles/bears-are-back-in-charge-as-charts-flash...
Bears Are Back in Charge as Charts Flash Danger
Now that the Fed rate decision has been digested, the bears are on the prowl looking for more prey.
By Michael Kahn
September 23, 2015
Last week, everyone was on the edge of their seats waiting for what Janet Yellen and company would do. The immediate reaction was predictably volatile, but as of Tuesday’s trading the bears have taken back control. Correction over. Now a new leg lower begins.
In my column last week, I outlined a potential framework for what may be heading our way (see Getting Technical, “Roadmap for Stocks Now That Rate Hike Is on Hold,” Sept. 17). In it, I pointed to a rather severe downside target should a bearish trend really take hold.
But there is one more support level that must be taken out before my worst-case scenario is put into play. It is the bottom of a very large head-and-shoulders pattern two years in the making (see Chart).
http://si.wsj.net/public/resources/images/ON-BM892_GTchar_NS_20150923131...
Standard & Poor’s 500
This ubiquitous pattern consists of a central peak or head surrounded by two lower peaks or shoulders. A line called the neck connects the lows between the peaks, and that provides the support that must hold to keep the market from falling a lot further.
There is more going on behind the scenes than a contrived Picasso-like depiction of the market. After all, on a real person the neck is higher than the shoulders but that is not the point. What is important is that a head-and-shoulders formation encompasses all the technical changes that came before it.
For example, the moving average death cross that got so much attention occurred as the head portion of the Standard & Poor’s 500 broke down. So did the break of the bull market trendline drawn from the very important October 2011 low. And arguably, so did the completion of the Dow Theory sell signal shortly thereafter.
The neckline for the S&P 500 is currently in the 1865 area — not quite 4% below Wednesday afternoon trading near 1935. So is the closing low last October after the Ebola scare panicked investors out of the market temporarily. Considering all the volatility still plaguing the market, that is really not too terrible.
It is what happens at the neckline that will be critical. It is a very important support floor under the market where buyers must emerge to basically save it.
Head-and-shoulders patterns do not demand that the decline continue unless the neckline is penetrated to the downside. Therefore, if buyers do emerge then the decline will be halted. And the good news is that failed bearish technical patterns often result in new bullish conditions. In other words, that could be it for the bears.
But a lot of trading is in store before the neckline is tested, and it may not get tested at all. Again, this is just a framework against which we can judge the market’s actual movements and act accordingly.
As an aside, there is one outside influence that keeps me on the more bearish part of the spectrum and that is commodities. While the energy rout is well known, what’s troubling is the continuing decline in industrial commodities such as copper, cotton and lumber, and even in basic materials stocks such as U.S. Steel (ticker: X), which is now trading at a 12-year low. Food commodities also seem to be under extreme pressure, and the Market Vectors Agribusiness exchange-traded fund ( MOO ), covering food producers, equipment makers and supplies, just confirmed a breakdown below a three-year support level.
Watch the S&P 500’s neckline. That should be the point of no return, but if demand picks up perhaps the market will avert the severe decree.
I sometimes wonder if it occurs to anyone that an unfettered banking sector in an orgy of derivatives speculation would be the cause of a stock rout and recession, rather than a jawboning factory.
You can eat enough gold to make a difference but not silver.
Bitcoin last price $236
Shiny pet rocks can be outlawed and confiscated with the stroke of a pen. The best thing to have when SHTF is a pair of fleet feet!
They can indeed be outlawed with the stroke of a pen. But if you intend on coming to collect it, you better bring more than a pen...
Ok, if you want to die a hero defending a handful of shiny collectibles and soon to be worthless patch of dirt, knock yourself out. I'll be in Argentina, dining on juicy steaks surrounded by beautiful women.
"I'll continue to transform the spoils of my physical labor into gold and silver...for the ultimate reasoning...to minimize my participation and contribution in and to this immoral...corrupt system we have today." BlackMagician
Couldn't Obama just do an executive order and confiscate everyone's gold the same way FDR did in 1934 ??
They could try.
Too many high velocity Pb and Cu delivery systems covering the open waters where those boats went under.
The sheeple turned it in in '34. Go look at all the 1933 and prior year coins available to buy. Those were not melted down and put in ft. knox in the mid-late '30's. Since gold is not circulating as a medium of exchange today, and the avg citizen probably doesn't even have 1oz, my guess is there would be little benefit to looking for AU from the avg. Joe. They would have to grab institutional holdings and mines.
Holy shit, bitcoin
Every measurement has a standard base.
One meter is the distance traveled by a ray of electromagnetic (EM) energy through a vacuum in 1/299,792,458 (3.33564095 x 10-9) of a second.
A meter measures distance whereas money measures value. Both require a standard.
Now where would this world be with a floating meter?
Obviously some folks against gold here didn't see Bloomberg's report today.
http://www.bloomberg.com/news/articles/2015-09-24/it-s-all-perverted-now...
"At the height of the financial crisis, the unprecedented decline in swap rates below Treasury yields was seen as an anomaly. The phenomenon is now widespread.
Swap rates are what companies, investors and traders pay to exchange fixed interest payments for floating ones. That rate falling below Treasury yields -- the spread between the two being negative -- is illogical in the eyes of most market observers, because it theoretically signals that traders view the credit of banks as superior to that of the U.S. government."
Why buy useless gold when you can stand in line to buy a new I-Phone? Gold is $1150/oz, a new I-Phone maybe $100/oz. Only Nike shoes endorsed by a black basketball player command as much respect or bucks. You can’t eat gold, okay, or the phone. But with the phone at least yo can put a deal fo some blow together, try that with gold. Gold has gone nowhere in a decade or more, the phone can get yo a new set of wheel for your Escalade.
Millions of brain-deads will stand on line for the phone, do you see them standing on line at the mine? No! Demand for new toys has never been greater, demand for gold...not so much. Janet wants the fools out buying toys, not gold…duh! Only ZH gold bugs keep talking up gold, and having only more losses to show for it.
Embrace the ‘New normal’ limitless debt, stocks, zero rates, and more toys, not gold. Failure to do so is why most ZHer’s are poor.
3-month U.S. T-Note already trading negative. very sad/
Not much inspiration for bond repricing in December. {no rate cut}
There's a big difference between a debt extension and the debt limit.
Boner( boehner) resigned because he knows that the funds set aside to fund the government were exhausted months ago.
The Debt limit was reached 2-3 months ago, and excess reserves, IOU's have been used to keep the government running.
Look at the debt clock! It's been frozen for almost 3 months. The spending has to quit!
No more wars, and Illegal immigrants. When I visit other countries I am respectful. I expect the same. It's called reciprociity.
@ YC
That's just silly talk. Don't you know THEY can print CLOWNBUX to fund .Gov until they're worthless?
TPTB will never let gold be a monetary base, because they would not make money off of it.
They would come up with things nearly as good as gold but better because they can contol it, or some line like that. The point is that they only care about making money and gold would reduce that.
Who wants to buy some useless, traditional relics? At spot.
http://www.ebay.com/itm/121580551976?&RILT=Image_1_oz_Valcambi_Gold_Bars...
When will big investors expose and blow up the COMEX's 200x contract on every ounce of gold?
Someone with a lot of money could profit by triggering the blowup.
The whole thing about increasing the supply of money is BS. The Fed hasn't made more money avaialble to you and me. If it had, we would have rampant inflation and our gold and silver would shoot to the moon. No, the Fed has increased money supply for banks and it sits there in reserves unused. Wasted on the banksters. In that respect, the fiat is worthless.
A properly managed MOE process (i.e. one that knows money is "a promise to complete a trade") maintains a natural perpetual perfect balance between supply and demand for money.
The Fed "does not" create money. Only traders create money. And traders destroy money when they deliver on their trading promises. You have all done this when you buy (and pay for) anything on time.
The government is a deadbeat trader. The money they create never gets destroyed. It just gets rolled over ... and that is default. When you have a "guaranteed default" you have counterfeiting.
Counterfeiting (and other defaults) not met by immediate interest collections is INFLATION.
The relation for a proper MOE management process is INFLATION = DEFAULT - INTEREST = zero.
It's just that simple.
WTF are you talking about? Do you just make shit up? Like this:
A properly managed MOE process (i.e. one that knows money is "a promise to complete a trade") maintains a natural perpetual perfect balance between supply and demand for money.
One can simply stop reading after digesting the retardedness of such a statement.
BTW, traders create value in the exchange process, not money.
Put the pipe down FFS.
Put the pipe down FFS.
Swallow your slur and make your case Pareto.
Here's mine.
Money is "a promise to complete a trade". It always has been and it always will be. This is obvious from examining trade:
(1) Negotiation; (2) Promise to Deliver; (3) Delivery.
With simple barter exchange, (2) and (3) happen simultaneously on-the-spot. Money allows (2) and (3) to happen over time and space. Thus money is "obviously" an in-process promise to complete a trade.
Here's the process.
A trader makes a trading promise and gets it certified by the MOE process. These certificates (records and money) then circulate as the most valued object of simple barter exchange. When the trader delivers on his promise, the certificates (money) are returned and destroyed. If the trader defaults, the default is immediately recovered by interest collections of like amount. This process guarantees perpetual zero inflation by the relation INFLATION = DEFAULT - INTEREST. This whole process is known by anyone who has ever bought something with payments over time. What happens under the covers today is straight out and out theft of a fraction of the transaction. You know it as "interest rates" and "inflation". They are both straight out theft from responsible traders.
No money pertaining to this trade exists before the trade is certified nor after it is delivered. In the interim, supply and demand for the money created is in perfect balance. It's the nature of any trade.
Regarding "creation of value". As always, value is in the eyes of the beholder. The in-process trading promises are most highly valued because of the integrity of the process. They are guaranteed to never lose their value. They are in perpetual free supply. Because of these attributes they are accepted universally.
Capitalism is an unnecessary parasite attached to this process. It is attached by the interests of government and banking. It dictates the fiction that someone must first "save" before someone else may make a "trading promise". This is ridiculous on its face ... but you have been thoroughly infected and indoctrinated by this nonsense. You accept it with no support for the requirement whatever.
And one thing to note: Governments are deadbeat traders. They make trading promises they never intend to keep. They just roll them over ... and that is default. Further, they declare themselves the most credit worthy traders and pay the smallest interest (rather the the largest payed by other total deadbeats). They are, in fact, straight out counterfeiters. The result is a 4% annual leak (theft) of the trades. They claim to be shooting for 2%. The correct inflation is 0%.
If you're going to declare this presentation retarded, you need to make your case. It should be difficult as you are going up against the obvious.
Swing away Pareto. Expose the fallacy ... or apologize and STFU.
Poverty is the default. Capitalism is what generates prosperity.
end of story
Owning gold is in effect not only a short on the dollar and on the credibility of the Federal Reserve, but most importantly a one of a kind asset that protects wealth.
Owning gold is "short on common sense". If everyone owned their fair share (i.e. 1oz per person on Earth), everyone would be shorting 2,000 dollars. This is only about 6 weeks of unskilled labor (a truly inflation-proof unit of measure).
If you've only stored up that much wealth ... or can only protect that much wealth, you're insignificant.
Gold is a "distraction". Only those currently holding it and those in the business of mining it would have any interest in it.
I can't believe these brain dead Mises Monks.
"The truth is that the amount of gold is irrelevant, it is the price of gold that matters."
The price of gold went from 850 to 250. From 2011, the price of gold went from 1900 to 1100.
The price of anything goes up and down.
"Owning gold is in effect not only a short on the dollar and on the credibility of the Federal Reserve, but most importantly a one of a kind asset that protects wealth."
Gold and pther commodities have been falling since 2011. Yes, gold will go up again, but so will other assets, as the value of money declines.
“Gold, unlike all other commodities is a currency… and the major thrust in the demand for gold is not for jewelry. It is not for anything other than an escape from what is perceived to be a fiat money system, paper money that seems to be deteriorating.” - Alan Greenspan 2011
Seems to be? What planet was he on?
GO "PET ROCKS" both colours (colors for the American readers).
_JOHNLGALT.