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Brodsky On "Gold Monetization And The Big Reset"

Tyler Durden's picture




 

Macroeconomic Problems

1) The global banking system is functionally insolvent and will fail without exogenous policy action*

  • There is one, interconnected global banking system linked by global financial markets and coordination among currency boards and central banks
  • In the current banking system model, debts due tomorrow are serviced by newly-incurred debts today (which create deposits)
  • Stagnant or declining nominal global asset prices since 2008 have stressed bank balance sheets
    • Loan book marks remain at substantial premiums to:
      • The present value of their cash flows in real terms
      • Liquidation prices at current or higher interest rates
  • Central bank easing and asset purchases to date have only tempered the rate of asset price declines
  • Current adversity among European banks directly impacts global commerce and finance

*Bank balance sheets can deleverage either via nominal write-downs of assets, (leading to outright failure/insolvency as tangible equity is extinguished), or through nominal increases in system reserves via base money inflation (provided by central banks as they expand their own balance sheets)


2) Governments and private parties are heavily-indebted and this indebtedness is growing exponentially

  • In the aggregate, the public and private sectors have “borrowed money into existence” for decades, as fractionally-reserved banks have created unreserved deposits and extended unreserved credit
  • In the net, private sector borrowing has stagnated and is prone to contraction
  • In response, public sector borrowings have been increased measurably to fill this gap
    • Public sector debts and deficits are increasing
    • The global economy is rapidly approaching the point where neither the public sector nor the private sector can service debts to the degree required to maintain asset prices, which, in turn, removes incentives to borrow further
    • The temporary benefit of growing debt obligations supporting ever-increasing nominal assets prices is now prone to reversal
    • Should global bank balance sheets thus contract, so would the global pool of bank deposits
    • Contracting bank deposits implies contracting money supplies and attendant deflationary pressures

 

3) The global economy is threatened because, in real terms, it continues to misallocate capital

  • The global relative price spectrum does not reflect true value and therefore is contributing to the general economic and financial malaise
    • Wealth and income concentration stemming from the asymmetric rise of asset prices tends to be self-reinforcing, and thus suffocates purchasing power for most economic participants (“the 99%”)
    • The more one pays for productive assets, the less one can pay for labor or other productive inputs
  • The extension of unreserved bank credit has fed the feedback loop of nominal asset price inflation (i.e. bubbles and subsequent busts)
    • Wages and basic input pricing has thus lagged, in relative terms, the robust upward trend of asset pricing
  • Over-priced assets have led to capital over-investment in many industries/projects
    • Unsupportable by labor inputs or unaffordable at current wage levels
  • Most developed economies have morphed into financial economies, which over time have become fragilely dependent on net imports to sustain living standards
  • The current propensity of both public and private sectors to channel ever more income towards debt service is threatening the debt-for-debt feedback loop that has maintained the appearance of stability since 2008
    • European sovereign issues
    • global real estate setbacks
    • declining public participation in equity and other leveraged asset markets

 

The Expedient Solution: Policy-Administered Asset Monetization

1) Re-monetize gold as the asset against which newly-created central bank liabilities (base money) are created

  • Gold purchases would serve to promote deleveraging in two manners:
    • 1) via base money (bank reserve) creation and,
    • 2) by providing the currency proceeds to fiscal agents to retire existing debts
  • The threat of waning confidence in the currency unit in response to expanding central bank balance sheets would be arrested by a gold price peg in the aftermath of the base money expansion
  • Any future operations to expand the base money stock would require additional purchases of gold at, most likely, higher and higher nominal prices or exchange rates
  • A gold peg would thus act both as a deleveraging agent today and a fiscal/monetary policy discipline looking forward

 

The Consequences (Pros & Cons)

1) The global banking system would be deleveraged via base money (bank reserve) inflation

  • Asset monetization is the least painful and most politically expedient option to reverse current conditions in which global bank deposit liabilities are many multiples of reserves (a classic precondition for bank runs)
  • Continued central bank purchases of sovereign debts would merely continue to roll and perpetuate the debts, albeit at attractively low interest rates (starkly negative in real terms)

2) Nominal asset (and bank asset collateral) pricing would be supported and perhaps even inflated

  • As nominal bank reserves grow, the illusion of returning strength to bank balance sheets would be perpetuated
  • The propensity for privileged speculators to place their “risk-on” bets would likely increase

3) Public and private sector debts from the prior extension of unreserved bank credit would, at the margin, be paid down with the base money creation stemming from central bank asset purchases

  • Public debts in particular could be paid down in the event fiscal agents were to sell official gold holdings to their respective central bank (central bank purchases of gold then would be, in the net, debt-extinguishing and thus, deleveraging)

4) Wages and consumables pricing would rise in asset-price terms, which would arrest and begin to reverse the political consequences of several decades of wealth and income redistribution to the top “1%”

  • An easy political posture to take for those who choose to promote it

5) Asset prices would decline relative to current and future expectations of consumption expenses which, in turn, would lead to lower living standards than currently anticipated by those asset holders

  • A necessary evil; however, the loss of future purchasing power as assets are sold to fund future consumption is already “baked in the cake”
  • This loss of perceived value can either be crystallized and recognized today so the real economy can begin to rebalance and establish a foundation for growth, or, in the alternative, be suspended -- a slow and time-consuming “death by a thousand cuts” malaise (e.g. Japan’s lost decade[s])

6) Rising relative and nominal wages would support debt-servicing capacity going forward

  • Would promote debt pay-downs at par, which better ensures banking system solvency
  • Would raise wages relative to debt, a powerful political palliative

7) Banks, being agnostic to measures of consumer-type price inflation, would most likely see the nominal pricing of their current pool of assets rise, which would eventually restore their solvency because the nominal valuations of their liabilities are generally fixed

  • The value of the currency unit is a common denominator to both sides of bank’s balance sheet
    • Real losses/gains on one side of the balance sheet are simultaneously and proportionately offset with real losses/gains on the other side
  • However, this would not hold for nominal losses (insolvency would result if a bank were to go into a negative equity position should the variable nominal valuation of its assets decline as the nominal valuation of its liabilities remains constant)

8) Deleveraged government balance sheets would have less impact on private asset values and marketplace pricing

  • The political dimension could review and renew optimal levels of participation and capital market intervention

9) No overall meaningful impact on the general price level (but, as implied above, there would likely be a migration of value, in real terms, from leveraged assets to unleveraged goods, services and assets)

  • Stable to higher nominal asset prices would require even higher nominal wage and consumable pricing looking forward

Conclusion

Asset monetization (and in, particular, gold monetization) would solve many more problems than it would create. The negatives would merely recognize the balance sheet damage already done and beginning to be manifest (first, in the private sector and now, increasingly in the public sector).

Mechanically, policy-administered asset monetization would be quite simple. Using the US as an example, the Fed would purchase Treasury’s gold at a large and specified premium to its current spot valuation. The higher the price, the more base money would be created and the more public debt would be extinguished. An eight-to-tenfold increase in the gold price via this mechanism would fully-reserve all existing US dollar-denominated bank deposits (a full deleveraging of the banking system). An appropriate multiple of today’s spot price could fully-extinguish the public debt if desired.

In terms of the relative price spectrum, a speculative 50% increase in the US median home price would be most-welcomed to the US banking system (and certainly to mortgage holders). Clearly, such an operation would be a subsidy to leveraged asset holders and banks. Would this be another form of perpetuating moral hazard? Superficially, it would be easy to conclude so; however, we think this conclusion would be incomplete. Such a “subsidy” is already embedded and institutionalized in the system. The key distinction would be that the system will have been reset to promote fairness and efficiency going forward. Given today’s circumstances, that should be a universal, non-partisan goal.

Rolling unfunded debts and debating in the political sphere over the merits and risks of unfunded growth or policy-administered national austerity programs is a futile endeavor. The math suggests strongly neither can work. We are convinced policy-administered asset monetization would stop the global financial system from seizing, restore sorely needed economic balance, and reset commercial incentives so that real growth can once again gain traction.

Lee Quaintance & Paul Brodsky
QB Asset Management Company, LLC
pbrodsky@qbamco.com

 

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Fri, 06/08/2012 - 13:55 | 2507990 Ahmeexnal
Ahmeexnal's picture

Gold at $66,666 ozt

Fri, 06/08/2012 - 14:02 | 2508010 resurger
resurger's picture

NO!

its going to $65,667 

Fri, 06/08/2012 - 14:19 | 2508095 Rahm
Rahm's picture

The golden toilet gets sold at $55k/oz

Fri, 06/08/2012 - 14:25 | 2508119 MiguelitoRaton
MiguelitoRaton's picture

Off topic, but INFLATION ALERT: my local water company explained the new rates. I did the math, see the following increases: 2010 (10%), 2012 (30%), 2013 (5% for now), 2014 (13%)...oh inflation is surely contained...at 30% in 2012.

Fri, 06/08/2012 - 15:05 | 2508277 Stuck on Zero
Stuck on Zero's picture

It's going to cost you more to flush the toilet than to wipe your butt with twenties.

 

Fri, 06/08/2012 - 17:38 | 2508857 Darth..Putter
Darth..Putter's picture

Bank assets hypothicated, and rehypothicated = inflation.  The only assets not devalued by 100x are the ones in your pocket.

Fri, 06/08/2012 - 18:49 | 2509083 ClassicalLib17
ClassicalLib17's picture

@ miguelito,  Your municipality is increasing water rates so they can borrow the overage to cover other expenses.  They probably have not increased rates in several years and it is easier than telling the people they are out of money and have to increase your property tax to make up for the shortfall.  It's all very legal.  The downside is if your delivery system is old and leaking, the funds to replace that are no longer in that Enterprise Fund necessitating a bond sale to finance the replacement of  aging water infrastructure.

Fri, 06/08/2012 - 22:37 | 2509502 narapoiddyslexia
narapoiddyslexia's picture

Excuse me, but do you work for my municipal water company? Or any utility? I think I know you. Maybe. Generically, anyway.

Fri, 06/08/2012 - 18:53 | 2509095 duo
duo's picture

Was your water company bought by JPM?

Fri, 06/08/2012 - 15:08 | 2508283 A Nanny Moose
A Nanny Moose's picture

216

Fri, 06/08/2012 - 14:05 | 2508024 SilverTree
SilverTree's picture

Silver at >$3,333.33 ozt

Fri, 06/08/2012 - 14:56 | 2508252 debtor of last ...
debtor of last resort's picture

i think i just had an erection? Is that possible?

Fri, 06/08/2012 - 15:27 | 2508351 tmosley
tmosley's picture

Yes, during an industrial panic brought on by stockpile obliteration (such that other prices remain the same for the most part, greatly increasing you purchasing power), or during hyperinflation (where most other prices rise at nearly the same rate, preserving/slightly increasing your purchasing power).

Fri, 06/08/2012 - 15:49 | 2508417 tankster
tankster's picture

With the proper stimulus.

Fri, 06/08/2012 - 15:30 | 2508361 DosZap
DosZap's picture

Gold at $66,666 ozt

LOL, if it got to $10k per ozt, you can bet your sweet Kiester WE would not get to keep it legally.

Fri, 06/08/2012 - 16:23 | 2508579 tarsubil
tarsubil's picture

Just like I'm not allowed to download movies legally? Guess what? Yeah, that's what. Fuck the law. Fuck the government.

Fri, 06/08/2012 - 22:41 | 2509507 narapoiddyslexia
narapoiddyslexia's picture

What about that long, intrusive bit at the beginning of every rented movie that features the fed-ur-all byur-oh uv in-vest-te-gay-shuns?

Oh noes......!! There's a knock at my door......

Sun, 06/10/2012 - 16:37 | 2512725 Western
Western's picture

On Alibaba and Aliexpress you can find 1oz gold coins (fake). Give that to the gov't when they come asking.

 

"Ooops, sorry sirs, I had no idea.. *crying* my investments!!"

Sat, 06/09/2012 - 09:07 | 2509981 RiverRoad
RiverRoad's picture

"The global banking system is functionally insolvent" because the world's money is presently sitting stuffed away in the world's tax havens. It will continue to grow nicely there so long as we keep printing it. 

Sat, 06/09/2012 - 14:00 | 2510492 monad
monad's picture

The machine crashes at 65535. Its like Y2K, the programmers didn't anticipate this happening in the lifetime of their software.

Fri, 06/08/2012 - 13:56 | 2507993 Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture

let it be!

Fri, 06/08/2012 - 13:57 | 2507995 GeneMarchbanks
GeneMarchbanks's picture

The higher the price, the more base money would be created and the more public debt would be extinguished. An eight-to-tenfold increase in the gold price via this mechanism would fully-reserve all existing US dollar-denominated bank deposits (a full deleveraging of the banking system).

Go ahead and transfer all the free floating debt and attach it gold, fine. Then, go ahead and start shipping all that gold to China since the debt still stands.

Brilliant.

Fri, 06/08/2012 - 14:03 | 2508012 Pladizow
Pladizow's picture

Thats not what he said.

 

Fri, 06/08/2012 - 14:22 | 2508108 ParkAveFlasher
ParkAveFlasher's picture

IMO that's what's already happening.

Fri, 06/08/2012 - 14:35 | 2508166 Pladizow
Pladizow's picture

Asia is buying gold, not forcing dollar denominated debt to be redeemed in it!

Fri, 06/08/2012 - 14:52 | 2508237 ParkAveFlasher
ParkAveFlasher's picture

True, and no banker actually presses ctrl-P.

Fri, 06/08/2012 - 14:36 | 2508172 GeneMarchbanks
GeneMarchbanks's picture

Pretty much but in slow motion. This guy just wants to expedite the process.

Fri, 06/08/2012 - 15:10 | 2508284 MachoMan
MachoMan's picture

I'm also at a loss for how revaluing gold could provide stabilization to eroding confidence.  If a lack of trust is the cause of hyperinflation, then how does simply revaluing the gold, in and of itself, do anything to address the outstanding debt as well as lack of prospects for organic future growth?  Do we just get to keep revaluing our little pile of gold in perpetuity to account for our prolifigacy? 

aside from the fact that central control of price mechanisms is in large part what got us here...  I'm not sure how it presents any sort of viable solution. 

Fri, 06/08/2012 - 16:21 | 2508569 XitSam
XitSam's picture

I'm at a loss for how world-wide re-monetization of gold will be accomplished because it won't just happen by itself.  Iran is selling some oil for gold but that is just because they have been locked out of other currencies. They are also selling oil for yuan.  Other than that, Japan-China agreed to trade in their own currencies, not gold. BRICs are looking to trade in local currencies, not gold. Going to gold removes all the ability to manipulate currency for each country's benefit. I know ZHers see that as good, but at the level that this gets decided, it is seen as bad news.

As far as I can tell, "They" have different goals and don't want to fix what we see as the problem. I'm willing to listen to opposing arguments.

Fri, 06/08/2012 - 16:33 | 2508621 tarsubil
tarsubil's picture

I kinda think it will be forced on them. They will want to print but people will revolt and use gold and silver as stores of value with high inflation. Then they can just use gold and silver in barter transactions as they see it as a much better currency than rapidly depreciating fiat. The powers that be will try to avoid this succession to gold and silver and other metals more if they lack metals and less if they don't. The question really is who holds the gold? Is Fort Knox empty? Does the US plan on taking the NY Fed gold? Will Europe demand delivery of their gold? How much has China bought secretly? Gee, this is gonna be really interesting, isn't it?

Fri, 06/08/2012 - 17:03 | 2508737 XitSam
XitSam's picture

OK, definte possibility.  I'm reminded of a PR campain by the government in one of Matthew Bracken's books. "During today's difficult economic times, the only responsible place for America's gold is in Fort Knox. Gold hoarders and speculators are criminals, who only serve to destabilize the global economy.  Gold hoarding leads to exploitive labor practices, and environmental ruin. And if those aren't enough reasons to obey the law, here's another: ten years in prison for illegal gold hoarding."

Fri, 06/08/2012 - 16:52 | 2508680 delacroix
delacroix's picture

somehow selling all the soverign gold to the central banks, for more paper, sounds like the fulfillment, of the original evil plan.                    ONLY GOLD IS MONEY,EVERYTHING ELSE IS DEBT          Isn't trading gold, for debt, what led to this state of affairs?

Sat, 06/09/2012 - 07:15 | 2509887 Sean7k
Sean7k's picture

It is my greatest hope that people finally get what you have just said. 

There is a tremendous debt. It is not capable of having a real value or replaced with ANY asset class. The bankers have build a perpetual debt machine and it can't be turned off (compound interest). You have to destroy the machine.

People will continue to produce, but only for a just reward. Your gold will be worth what it has always been worth: one ounce for one cow. One ounce of silver is one days pay. However, not everyone has gold or silver, so the system of social credit will be re-established in communities that survive a reset. 

The only option that allows for a reasonable transition is to wipe out all debt of every kind. You got what you got and you have the skills you have and hopefully, you can make that work. Debt jubilee of all debt jubilees.

There are no safehavens, there are no safe hideouts. There are parasites and producers. Predators and prey. Grasping at hopes are nothing more than attempts to exert a sense of control in a future that scares the hell out of all of us. Fake confidence of your place in the hierarchy is just that.

Debt is the 800 pound gorilla in every civilzation, regardless of size. How a people deal with it and the means by which it is accumulated have everything to say about the quality and health of said civilization.

Fri, 06/08/2012 - 14:38 | 2508177 Overfed
Overfed's picture

Except right now it's not doing anything to liquidate the debt.

Fri, 06/08/2012 - 14:02 | 2507996 LawsofPhysics
LawsofPhysics's picture

A lot of words to simply say that you can not grow an eCONomy or financing, or debt, or anything, for that matter, exponentially forever in a finite world.

  How do these "educated" people get these jobs?  Big difference between anything paper and anything physical. This applies to more than just gold.

Fri, 06/08/2012 - 14:05 | 2508026 LULZBank
LULZBank's picture

Just play along brother, and think of it as a joke otherwise we'll go nuts thinking about all these common sensical things.

Fri, 06/08/2012 - 13:58 | 2507997 lemonobrien
lemonobrien's picture

If gold was every to be remonetized; the rich people would use the army and police to steal every ounce from the common man beforehand; of course the politicians would be paid off with 30 ounces of silver.

Fri, 06/08/2012 - 14:03 | 2508014 LawsofPhysics
LawsofPhysics's picture

This has been done before, not sure why the sheeple are junking you, oh wait, nevermind.  Baaaahhhh!

Fri, 06/08/2012 - 15:31 | 2508373 dlmaniac
dlmaniac's picture

Exactly.

The only thing debtors do is stealing from those having money. If they cannot steal via paper printing then they will go straight for your gold. 1000% guaranteed.

Fri, 06/08/2012 - 16:45 | 2508665 tarsubil
tarsubil's picture

I don't think the situation is the same as when FDR took zee gold. A lot of the people that are buying gold and silver are anti-government and don't have it stored in a safe deposit box. I really, really doubt that the government will find it as easy to confiscate gold today as it did in the past. If they sent IRS agents to search houses, my guess is that they'd come up empty and perhaps some would turn up missing.

Fri, 06/08/2012 - 14:04 | 2508019 Pladizow
Pladizow's picture

Yeah, for that reason alone, not counting the coutless others, you probably should not buy gold or silver!

Fri, 06/08/2012 - 14:14 | 2508072 lemonobrien
lemonobrien's picture

i'm buying, but i'm leaving.

Fri, 06/08/2012 - 14:20 | 2508098 ThirdWorldDude
ThirdWorldDude's picture

Why such a sour attitude?

Fri, 06/08/2012 - 14:35 | 2508165 lemonobrien
lemonobrien's picture

I'm not free, and I don't want to fight for something that is easily attainable else where. I have kids; civil ware ain't what I want to put my daughter through. I'm southern too; I know it's bullshit. I've also lived overseas; and there is plenty of land around the world where nobody really gives a shit. America is just one be anal cluster fuck; all about work, guns, pussy, and violence.

Fri, 06/08/2012 - 14:57 | 2508255 ThirdWorldDude
ThirdWorldDude's picture

I hear you, but have in mind that the world is fucked overall. It doesn't matter where you are, only what you do with the available resources. I'd recommend you stay put, because it's easier to get around a place and people you're familiar with, in case it gets rough. Find people you can trust to and build a network, it's easier when one gets to share his burden.

As for the PM's, you don't have to hold them at home. Remember Fight Club's rule #1 and get rid of your posessions someplace where even you'll have trouble finding it. 

Fri, 06/08/2012 - 15:11 | 2508293 Harbanger
Harbanger's picture

2nd RULE: You DO NOT talk about FIGHT CLUB

Fri, 06/08/2012 - 14:23 | 2508104 fuu
fuu's picture

Why do you think it will be any safer where you are going?

Fri, 06/08/2012 - 14:28 | 2508132 lemonobrien
lemonobrien's picture

most other countries are not nearly as violent and stupid as america is.

Fri, 06/08/2012 - 14:31 | 2508143 fuu
fuu's picture

Well good luck with that.

Fri, 06/08/2012 - 15:18 | 2508309 lemonobrien
lemonobrien's picture

i'll tell you where i'm going; after i'm sure i'm gonna get there. you're more than welcome.

Fri, 06/08/2012 - 15:27 | 2508352 fuu
fuu's picture

Thanks for the offer but I will go down with the ship. On a long enough timeline...

Sat, 06/09/2012 - 00:16 | 2509630 Cosimo de Medici
Cosimo de Medici's picture

The rest of the world has read the comments section of Zerohedge and has spoken with one voice:

“Please stay where you are Yank yobs. We’ve got enough problems of our own without having loons like your lot flood in and wreck our place, too.  And please take back this Simon Black putz.  We're not waiting anxiously for you.  Don't think you are an exception because you believe in "liberty" and "freedom".  We don't want any of you.  You are NOT welcome.”

Sat, 06/09/2012 - 01:23 | 2509687 lemonobrien
lemonobrien's picture

don't think i'll be going to europe.

Sat, 06/09/2012 - 04:34 | 2509713 Cosimo de Medici
Cosimo de Medici's picture

You think Asia or South America want you?  Wow.  You just don’t know, do you?  Even an Antarctic research station would give you the cold shoulder, ha ha ha.

NOBODY wants the Guns, Gold, and God crowd, except maybe Montana and Idaho.  Too strident, like nothing, know everything.  Maybe, just maybe, the Central African Republic wouldn’t object too strongly if you offer a proper tribute.  Those who talk of escaping the “facists” or the “parasites” are in for a very rude awakening.  A country would take in a thousand Lloyd Blankfeins before they would welcome even one typical Zerohedge poster, because at least Blankfein has decent money to spend and would not go about blabbering and lecturing incessantly about how to “really live in freedom and liberty”.  Heck, even India wants to re-export ORI, but nobody will take him. 

I think your best bet is to become a subject of Brandon Smith’s Alt Market Monarchy, though you would need to bow to that Earthly King.

Sat, 06/09/2012 - 04:56 | 2509827 Ghordius
Ghordius's picture

Cosimo, I'm not that sure of this "typical Zerohedge poster" of comments. Here I've found from all sorts and persuations.

+1 on the Indian attempts on re-exporting ORI ;-)

Sat, 06/09/2012 - 06:07 | 2509849 LULZBank
LULZBank's picture

Hahaha Brilliant Cosimo!

And a lot of truth in there!

NOBODY wants the Guns, Gold, and God crowd, except maybe Montana and Idaho.

I blame the Clint Eastwood movies.

Sat, 06/09/2012 - 07:22 | 2509894 AnAnonymous
AnAnonymous's picture

Very likely. But none of these countries will be given a choice. They will have to make a statement or comply with US citizens' demands.

Here's the deal:

US citizen nations are overpopulated. Not enough resources to maintain the extra US citizen middle class.

Either this too much of people is kept at home, in US citizen nations and they will grow in bigger and bigger annoyance as they feel disentitled, brewing troubles;

Or they are poured over another nation, country, to give them the opportunity to rebuild 'America' at the expense of the locals.

US citizen governments will push the other governments into accepting the newcomers. The newcomers will be providing with special rights etc

Much better to pour that population onto a third party than letting it accumulating at home.

Sat, 06/09/2012 - 07:02 | 2509875 jez
jez's picture

Homicide rates around the world in recent years, by country:

 

http://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate

 

Not a complete list by any means, but the US is just about the worst first-world country I can see there, at 4.8 intentional homicides per 100,000 people in 2010. It's three times more dangerous than Canada, for example (1.62), four times worse than the UK (1.23), more than five times worse than the Netherlands and Italy (both 0.87) and Japan (0.83), and nearly nine times more dangerous than Austria (0.56).

At the top of the table comes Honduras (87 homicides per 100,000 in 2011). Gold medal, guys. Venezuela, Jamaica, Colombia, they're all up there. Brazil at 26, Panama 20, Mexico 18.

Ireland is at 0.96, Mr O'Brien.

Sat, 06/09/2012 - 09:26 | 2509999 prole
prole's picture

Why do you call the US a "first world country?" A laughable assertion.

Compare the US to countries with similar make=ups of sheople, like Russia, Brazil, Chad, Uganda, Mexico, Honduras, El Sal, SA, Zim

US looks much more like Brazil than any first world country.

US does not look anything at all like Switzerland, except in small pockets like Vermont, which also, like Switzerland, has almost no crime.

And I see that you noted that US is "nine times more dangerous than Austria" but you did not see fit to mention that we have "nine times more blacks than Austria" Why the omission?

Fri, 06/08/2012 - 14:42 | 2508197 LULZBank
LULZBank's picture

Why do you think it will be any safer where you are going?

Sometimes, for some people, its not about being safer but to be free'er and have a fighting chance rather than living in fear and restricted.

Fri, 06/08/2012 - 14:49 | 2508227 fuu
fuu's picture

"If gold was every to be remonetized; the rich people would use the army and police to steal every ounce from the common man beforehand"

I would like to know the name of the country or countries where this threat does not exist today.

Fri, 06/08/2012 - 15:03 | 2508273 LULZBank
LULZBank's picture

I would like to know the name of the country or countries where this threat does not exist today.

Any kind of threat can exist in any country.

"If gold was every to be remonetized; the rich people would use the army and police to steal every ounce from the common man beforehand"

But the above statement is kinda silly. Why would army, police or any individual would steal for somebody else? Why wont they just keep the loot for themselves if they're going to steal/rob it?

But a country where army, police or any other organised group IS that dumb to do it on behalf of other people is the MOST dangerous place to be.

Fri, 06/08/2012 - 16:33 | 2508614 XitSam
XitSam's picture

OK. Because once they kept the confiscated loot, they automaticially become an enemy of the state.  If they act as good little enforcement goons, they are guaranteed a middle level position, not what they could buy in a free market with the loot, but at least they are fed and aren't dead.  See: USSR, North Korea, etc.

Fri, 06/08/2012 - 16:51 | 2508686 LULZBank
LULZBank's picture

OK. Because once they kept the confiscated loot, they automaticially become an enemy of the state.  If they act as good little enforcement goons, they are guaranteed a middle level position, not what they could buy in a free market with the loot, but at least they are fed and aren't dead.  See: USSR, North Korea, etc.

This is exactly the kind of thinking I am scared of. More than gun totting bandits.

Sat, 06/09/2012 - 09:32 | 2510003 prole
prole's picture

"If gold was every to be remonetized; the rich people would use the army and police to steal every ounce from the common man beforehand"

I would like to know the name of the country or countries where this threat does not exist today.

Switzerland?

Swiss citizenism consists of laughing for hundreds of years at the slaves of other countries like the US where their own government steals their gold, then devalues their currency (1933)

(actually they don't laugh, they try to keep quite about it to preserve their little oasis of freedom)

Fri, 06/08/2012 - 14:32 | 2508145 Harbanger
Harbanger's picture

Good luck trying save yourself.

Fri, 06/08/2012 - 14:16 | 2508084 Al Huxley
Al Huxley's picture

Yeah, good point.  In fact, maybe just to smooth the process out a little we could all just turn over all our stuff to the state, and volunteer for relocation to the appropriate re-education camps - make things less messy and difficult for our betters.

Fri, 06/08/2012 - 14:05 | 2508022 resurger
resurger's picture

dont sound like a wuss! Man the fuck up ..

Fri, 06/08/2012 - 14:17 | 2508087 lemonobrien
lemonobrien's picture

that attitude will get you killed quickly.

Fri, 06/08/2012 - 14:29 | 2508123 HeNateMe
HeNateMe's picture

Wow, lemonobrien, you blew right past A, B, and C and went right to Z on that comment!

Sounds like you need a hug.  I am reaching across the ether to you now.  Here come my arms, 1 0 0 1 1 0 1 1 0 1 0 1 0 0 0 0 1

Fri, 06/08/2012 - 15:29 | 2508360 tmosley
tmosley's picture

Or they would send idiots to talk about how they are going to do impossible things using things they don't directly control, that would instantly plunge the nation into civil war if used in order to scare regular people out of physical so they can buy more for themselves.

Fri, 06/08/2012 - 16:59 | 2508723 delacroix
delacroix's picture

"cash for gold" " economic collapse"  they're doing it right now in your face. private ownership of pm's is less than 1% compared to paper assets.  realistically, they've already obtained most of it.

Fri, 06/08/2012 - 14:00 | 2507998 Cognitive Dissonance
Cognitive Dissonance's picture

"An eight-to-tenfold increase in the gold price via this mechanism would fully-reserve all existing US dollar-denominated bank deposits (a full deleveraging of the banking system). An appropriate multiple of today’s spot price could fully-extinguish the public debt if desired."

Does anyone really think that the powers that want to be would "allow" something that has increased in price by 8 to 10 fold to remain in the hands of ordinary plebs?

Rest assured that this "mechanism" will also enable the wholesale theft of Gold from general private pleb hands.

Fri, 06/08/2012 - 14:00 | 2508005 Ahmeexnal
Ahmeexnal's picture

close combat training

Fri, 06/08/2012 - 14:10 | 2508054 SilverTree
SilverTree's picture

The Art of the Tactical Carbine

Fri, 06/08/2012 - 15:03 | 2508113 ThirdWorldDude
ThirdWorldDude's picture

Hire Chuck Norris as bodyguard...

 

edit: While it's totally justified to fight off any imposter and protect your family and property, I think you won't stand a chance if your opponent is the .mil. You'd have more success if you implement The Art of Keiser Soze instead of The Art of Tactical Carbine.

 

Fri, 06/08/2012 - 20:43 | 2509338 flacon
flacon's picture

Keiser Soze! I love it! 

 

"...after that... my guess is you'll never hear from him again. And like 'that!'... he's gone!"

 

http://www.youtube.com/watch?v=rQv2-JCpKMk

Fri, 06/08/2012 - 19:04 | 2509116 TacticalZen
TacticalZen's picture

If the target breathes air, a head shot at 400 meters or a torso shot at 1000 meters means they are probably going to be easily neutralized. Millions of "deer hunter" hobbyists in the good old USA. Ilove a place where 10 million of my brothers are sufficiently skilled to pick up my rifle and finish the job if I fall.

Fri, 06/08/2012 - 14:03 | 2508013 I think I need ...
I think I need to buy a gun's picture

haven't they already done that via "cash for gold"

Fri, 06/08/2012 - 18:29 | 2509015 Tsunami Wave
Tsunami Wave's picture

Soon you'll see "gold for cash" at the local newly-transformed bullion banks at every street corner.

Fri, 06/08/2012 - 14:07 | 2508041 GeneMarchbanks
GeneMarchbanks's picture

Think about that for a minute.

Fri, 06/08/2012 - 14:13 | 2508069 Dr. Engali
Dr. Engali's picture

That's if you haven't lost it in an unfortunate boating accident. The pleebs are already selling their gold.

Fri, 06/08/2012 - 15:03 | 2508271 LongSoupLine
LongSoupLine's picture

Long - Scuba gear

Fri, 06/08/2012 - 14:21 | 2508101 jimmyjames
jimmyjames's picture

Does anyone really think that the powers that want to be would "allow" something that has increased in price by 8 to 10 fold to remain in the hands of ordinary plebs?

Rest assured that this "mechanism" will also enable the wholesale theft of Gold from general private pleb hands.

**************

BS--the "plebs" have no gold and an increase by 8 or 10 times will seal the deal that none can get it in the future-

Barely 1% of the world is invested in gold and that includes the miners-

This blog site alone-is proof that few hold physical gold and also proof that even fewer understand golds importance in the future-

Fri, 06/08/2012 - 14:31 | 2508126 Cognitive Dissonance
Cognitive Dissonance's picture

I was referring to you and me as plebs. I have Gold. I assume you do as well.

I suspect it will be removed from our hands, by force if they think they can get away with it, by legal means if not.

Fri, 06/08/2012 - 14:33 | 2508149 Motley Fool
Motley Fool's picture

That's fox piss CD. ;)

http://tinyurl.com/d76nf86

Fri, 06/08/2012 - 20:45 | 2509348 flacon
flacon's picture

Viva FOFOA!

 

 

Fri, 06/08/2012 - 14:37 | 2508153 Bastiat
Bastiat's picture

 

 

I suspect it will be removed from our hands, by force if they think they can get away with it, by legal means if not.

Is there a difference?

Fri, 06/08/2012 - 14:43 | 2508205 Cognitive Dissonance
Cognitive Dissonance's picture

Not really. It's all just semantics. :)

Fri, 06/08/2012 - 14:55 | 2508249 Bastiat
Bastiat's picture

Yep:  F. Bastiat's key point and why I picked the name. 

Sat, 06/09/2012 - 09:37 | 2510010 prole
prole's picture

lol FB layin down the law

Fri, 06/08/2012 - 14:35 | 2508160 HeNateMe
HeNateMe's picture

I doubt TPTB care about the crumbs. 

Fri, 06/08/2012 - 14:37 | 2508173 jimmyjames
jimmyjames's picture

I was referring to you and me as plebs.

It will be removed from our hands, by force if they think they can get away with it, by legal means if not.

********

Yes-i was referring to myself as a pleb as well-

My point is-there is so little actual gold in private hands that i doubt it would be worth their while-

"If" it comes down to a desperate demand for gold-i would suspect they would want to bring as much as possible onto the market and not drive it underground--the 1 or so % are not fool enough to hand it over or to sell where the taxman can confiscate 90%-

 

Fri, 06/08/2012 - 14:52 | 2508238 Cognitive Dissonance
Cognitive Dissonance's picture

If you bought your Gold from another private party or at a coin dealer that didn't record it, then I would agree. But if you purchased it from a dealer I suspect they will be forced to turn their sales records over to the confiscation teams.

There is something else I rarely see discussed here on ZH. From my point of view, the reason for owning Gold is NOT so much wealth creation, but rather wealth preservation and the transition from the present system to the "new" money system. If you can't "sell" your Gold, turning it into assets that can be shown on the books, you are pretty much relegated to living underground.

I suspect any new money system will be exclusively electronic. I hope there is still an active and vibrant "cash" underground that will help me liberate my PMs. I posted my thoughts on this a while back.

http://www.zerohedge.com/contributed/golden-end-game-%E2%80%93-thought-experiment

http://www.zerohedge.com/contributed/golden-end-game-%E2%80%93-thought-experiment-part-two

Fri, 06/08/2012 - 15:05 | 2508278 jimmyjames
jimmyjames's picture

Thnx for the links-will read them-this shrinking reply box sucks for lengthy discussion-but a few yrs. back i was trading gold for silver and vice versa and none of the transactions were recorded-this was at a large coin dealer-so-I'm wondering how they would account for that-

Fri, 06/08/2012 - 15:35 | 2508386 Cognitive Dissonance
Cognitive Dissonance's picture

Then you are lucky and I assume they will figure some will slip under the radar in this manner. But if you bought PMs through the mail, internet or phone and had them shipped to you, chances are that you will be traced because records exist.

Just my opinion. That and $0.50 gets you a phone call. :>)

Sat, 06/09/2012 - 09:49 | 2510017 prole
prole's picture

They don't have to confiscate the sheople's gold. Speaking for America, they already stole the sheople's gold in 1933. The remnant, or we few ridiculed gold bugs who remain have a mere pittance, why bother to pick that up? All the gold private US citizenisms hold wouldn't be enough to fuel one Aircraft Carrer ops for a week.

Europe and Asia probably got a cleansing of gold in WW2 as well, with Germany scooping up the gold of the briefly occupied lebensraum, then who got that in the end? Hmm same people who got America's 1933 gold? (I have no idea, I just know I didn't get it)

Why would they trace gold? Most sheople don't have any, TPTB have most of it in the first place, and they have the rest of the sheople putting their "money" into whatever sinking mutual funds or paper accounts. Everything is under control

Sat, 06/09/2012 - 12:33 | 2510270 Jena
Jena's picture

Why would they trace and confiscate gold?  Because they can.  That's the concern. 

Read CD's links if you haven't already.

Fri, 06/08/2012 - 18:20 | 2508967 4horse
4horse's picture

jimmyjames

that's not my name

-so-I'm wondering how they would account for that-

or all the other jimjams of same, seizures
running through our brains while counting ozs
. . . as they're counting zzzzs. sheep. and backwards

to ISPs

ps. and speaking of which, backwards, how many zzzhs
amount to a stinktank, if here questioning getaways
they already got decades ago, and before they even started

Stealing

thoughts. lives. futures,markets, motives, which, TIA
not hypothetical. and not in utah. long already account
for all greed and fear watched on their TelaVivs

Reading

indeed everything here

Fri, 06/08/2012 - 15:10 | 2508288 Motley Fool
Motley Fool's picture

Of course there must be cash. How else would one pay for drugs and hookers, inarguably essential parts of society. :)

Fri, 06/08/2012 - 15:21 | 2508326 Cognitive Dissonance
Cognitive Dissonance's picture

I say essentially that in my piece, that all money systems are partially dependent upon the criminal element to do the dirty monetary work for those hands that wish to remain "clean", at least from the public's point of view.

I am counting on this to remain the same......at least initially, allowing me to slip back into the system relatively unscathed.

Fri, 06/08/2012 - 16:47 | 2508679 Tao 4 the Show
Tao 4 the Show's picture

BTW, AU has already appreciated 8x.

It happened over a ten year period, or you could call it about 50x over a 50 year period, or about 75x over an 80 year period.

Fiat currencies are great, aren't they?

Fri, 06/08/2012 - 16:53 | 2508696 Overfed
Overfed's picture

The latter first, then the former. Though really, how many regular schmucks really have substantial physical gold or silver? Most of us hold a few $K at best, we're not going to become wealthy overnight. A 10 fold increase in PM prices will probably happen, but it will also probably be due to hyperinflation.

Fri, 06/08/2012 - 19:12 | 2509138 TacticalZen
TacticalZen's picture

Agreed. But it doesn't take many people who have 10% of their net worth in PM's to amount to quite a lot of PM, especially to help fund black and grey markets. Black markets will always thrive.

Fri, 06/08/2012 - 23:45 | 2509588 Overfed
Overfed's picture

I like to call them "free markets".

Sat, 06/09/2012 - 07:27 | 2509900 supermaxedout
supermaxedout's picture

Agreed, but important is as always the timing.

Gold rises and therefore one gets 10 times the fiat money compared to todays exchange rate.  But inflation has not yet kicked in or is still modest at this point of time. This is the time to buy valuable real estate, vineyards, farm lands or other tangibles, since such items do always rise in inflationary times. Bread becomes expensive, so becomes farmland.

Fri, 06/08/2012 - 17:21 | 2508802 post turtle saver
post turtle saver's picture

"Does anyone really think that the powers that want to be would "allow" something that has increased in price by 8 to 10 fold to remain in the hands of ordinary plebs?"

 

How about 53x over the past 10 years? With a 2:1 split to boot?

 

"That's it, send out the troops boys, we're confiscating all AAPL outstanding shares from the peasants ASAP!"

Sat, 06/09/2012 - 08:20 | 2509950 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

"That's it, send out the troops boys, we're confiscating all AAPL outstanding shares from the peasants ASAP!"

No troops needed for that, just some accounting entries in the books at Cede & Co.

Fri, 06/08/2012 - 14:02 | 2508008 insanelysane
insanelysane's picture

The more I think about it the more I don't get it.  Please help.

Q:  What do we buy gold with?   A: Useless fiat.

Q:  Why do gold sellers take useless fiat in exchange for gold?  A: ?

Q:  And if nobody takes fiat, how would gold sellers get more gold to sell if other gold sellers only take gold?  A: ?

Fri, 06/08/2012 - 14:06 | 2508038 tuttisaluti
tuttisaluti's picture

you can buy my house and pay in gold or silver.

Fri, 06/08/2012 - 14:23 | 2508110 LawsofPhysics
LawsofPhysics's picture

I will sell you some of my commodities, and even move you to the front of the line, if you pay with gold or silver.

Fri, 06/08/2012 - 14:08 | 2508042 SDRII
SDRII's picture

diluting dinars

Fri, 06/08/2012 - 14:09 | 2508048 LULZBank
LULZBank's picture

Its all about Trading and for Gold is a trade. You buy and sell what people want to and try to get some extra for yourself. Be it fiat, Gold, tulips or sea shells.

Gold sellers are buying and selling Gold so they are not exactly holding on to fiat as such. They sell Gold and receive fiat and at that sametime they have already ordered more Gold, awaiting payment and receipt.

Thats how I understand it.

Fri, 06/08/2012 - 18:36 | 2509034 4horse
4horse's picture

in a nutshell: Holomodor

 

Ukraine <====back-to-the-future====> United stasis

http://www.theoccidentalobserver.net/articles/MacDonald-Solzhenitsyn-200-Years-Together-18.html

Fri, 06/08/2012 - 14:02 | 2508011 LULZBank
LULZBank's picture

Obama in his Choom wagon with his crew, all totally stoned.

Obama: Why do I have to print mo dollahs than all dem presidents before me? Wots dis Exponential Function dem lot are talkin 'bout homie?

Homie: Thingamajigs mon, but mah bitches keep sayin dey wanna see how da dollah is made bruva.

Fri, 06/08/2012 - 14:05 | 2508029 mrktwtch2
mrktwtch2's picture

realy tyler..you let someone post more drivel about going back to the gold standard..why dont we base it on coal??

Fri, 06/08/2012 - 14:11 | 2508060 Dr. Engali
Dr. Engali's picture

I don't know too many civilizations who have used coal for money in the past few thousand years. Maybe sea shells but not coal.

Fri, 06/08/2012 - 14:12 | 2508063 LULZBank
LULZBank's picture

Coal is combustible.

Fri, 06/08/2012 - 14:18 | 2508090 Al Huxley
Al Huxley's picture

Good idea - you should be stocking up heavily on coal.

Fri, 06/08/2012 - 14:25 | 2508120 LawsofPhysics
LawsofPhysics's picture

Technically, coal and oil (priced through gold or a reserve currency backed by gold) have been the real standard for many years.  What, you don't think people will accept PMs for commodities?  How ignorant are you?

Fri, 06/08/2012 - 14:34 | 2508156 ParkAveFlasher
ParkAveFlasher's picture

Why gold for reserves?  Alright everybody join in ...

1) doesn't burn, rust, tarnish, oxidize, fade, etc.  Bugs can't eat it.  lasts a long time.

2) ^^^easy to store.

3) high density means more material in less volume

4) few practical uses means industrial demand low compared to existing bullion stock / inventory.

5) scant supply means new mineral resources are hard to find and do not impact price considerably on short time frames

6) divisible, reconstitutable

7) not too shiny!

8) a billion Indians exchange it ritually on a seasonal basis.

9) a billion-point-five Chinese will do what a billion Indians do, or at least look into it.

10) can not be manufactured or synthesized, unlike diamonds.  and unlike fiat.  simple physical tests prove fraud / salting / alloying / etc.

11) ... ?

Fri, 06/08/2012 - 15:33 | 2508380 Silver Pullet
Silver Pullet's picture

Interesting article by Peter Schiff today - What is Money? (somewhere in europacmetals.com)

He uses salt as an example of money and says that salt was used by the Romans as money.

Fri, 06/08/2012 - 14:07 | 2508036 Everybodys All ...
Everybodys All American's picture

The first step that should imediately be taken is to split apart these too big to fail banks. It would help create jobs and lower systemic risk taking. Makes sense doesn't it and that's why it will never be done by Obama.

Fri, 06/08/2012 - 14:06 | 2508037 Jason T
Jason T's picture

interesting idea.  

Fri, 06/08/2012 - 14:15 | 2508043 Dr. Engali
Dr. Engali's picture

An eight to ten fold increase....not to shabby but I had hoped for more. I'd like to pay off my house with a couple oz of silver.

Fri, 06/08/2012 - 14:09 | 2508049 SDRII
SDRII's picture

Did I miss Bernanke commenting on the Fedex 7% rate hike effective July? Negative energy pass through?

Fri, 06/08/2012 - 14:16 | 2508079 Dr. Engali
Dr. Engali's picture

There is no inflation.

Fri, 06/08/2012 - 18:06 | 2508934 Overfed
Overfed's picture

I know you mean that sarcastically. Real inflation is easily 10%.

Fri, 06/08/2012 - 14:10 | 2508051 Peter Pan
Peter Pan's picture

Governments will resist a major role for gold because it does not fit in with their ongoing deficit spending.

Fri, 06/08/2012 - 14:10 | 2508058 Lokking4AnEdge
Lokking4AnEdge's picture

If you are a marginal country (Greece, Spain, Portugal, Italy etc...)and suspect that in the (near) future you will have to place your gold reserves as forced collateral against loans-you would probably try to sel first some of the gold for cash instead of leaving it to the lender (Germany...). This explains the latest period of weakness in the price of gold...

Fri, 06/08/2012 - 14:16 | 2508085 Temporalist
Temporalist's picture

Portugal and Italy are not marginal in their gold holdings.

Fri, 06/08/2012 - 14:31 | 2508138 ThirdWorldDude
ThirdWorldDude's picture

Portugal is (~90 t.); Spain isn't (~3000 t., similar to Italy) 

Fri, 06/08/2012 - 20:05 | 2509262 ffart
ffart's picture

Would that give them anywhere near enough money to cover their current debt servicing needs? I'm think not even close. I guess it's analogous to an unemployed crack addict selling their wedding ring to cover next month's rent, if things are that bad over there than Europe truely is a lost cause...

Fri, 06/08/2012 - 14:14 | 2508074 Henry Chinaski
Henry Chinaski's picture

the system will have been reset to promote fairness and efficiency going forward

It's kinda evident that TPTB have no interest in this stated objective.

Fri, 06/08/2012 - 14:16 | 2508083 SDRII
SDRII's picture

http://in.reuters.com/article/2012/06/06/barrick-ceo-idINL1E8H62CK20120606

Barrick named an existing director, John Thornton, as co-chairman of the board, a role he will share with Munk.

John L. Thornton is a leading international businessman, corporate director, Chairman of The Brookings Institution, Director of Global Leadership at Tsinghua University in Beijing and a former President of Goldman Sachs. Mr. Thornton holds degrees from Harvard College, the University of Oxford and the Yale School of Management.

Fri, 06/08/2012 - 14:20 | 2508099 zerotohero
zerotohero's picture

Don't forget - FUCK THIS SHIT IT'S FRIDAY.........

Fri, 06/08/2012 - 14:21 | 2508103 deflator
deflator's picture

Whatever it takes to put some brakes on this runaway freight train of infinite government growth. Even seashells would be better than an infinfite growth model--at least we know that seashells are finite.

Fri, 06/08/2012 - 14:23 | 2508106 Amagnonx
Amagnonx's picture

For myself - I would rather a total crash, which would force the conclusion that fractional reserve banking must be wiped from the pages of history.

 

The reset will occur - as the paper assets must finally be evaluated against the underlying assets - ie. debts that cant be repaid, wont be - making all that paper worthless, and debt will no longer be considered an asset.

 

Without this total destruction - the systemically broken ponzi will not be revealed for what it is.  However - there is no doubt in my mind, that the controllers (of the global systems) will offer people a way out - a few cents on the dollar to accept (most likely) a cashless, global, digital alternative - that they will assure people is 'backed by gold'.  The sickening thing is - that it will most likely be accepted.

 

 

Sat, 06/09/2012 - 19:32 | 2511142 Pseudolus
Pseudolus's picture

paper is already intrinsically worthless and isnt payment in full. aside from that:

+n to the x for last paragraph

the official separation of the plebs from wealth/value (capital formation/inheritance) has been going on for 40 odd years. Now the divorce papers are coming through...

 

Fri, 06/08/2012 - 14:23 | 2508112 RobotTrader
RobotTrader's picture

Best of all worlds today for Bernanke and TPTB.

Oil ETF's like USO crushed to new lows for the move, bank stocks flying, retail stocks up, REITs up big.

Man, this guy is good.

Fri, 06/08/2012 - 14:25 | 2508116 Confundido
Confundido's picture

This guy is delusional...has he checked the experience of Argentina under convertibility? Does he know why it didn't work? Do that, and then open your mouth!

Fri, 06/08/2012 - 14:29 | 2508136 GeneMarchbanks
GeneMarchbanks's picture

Please explain further, not about Argentina, but about this proposal?

Argentina had the USD as a reserve and gold was out of the question.

Fri, 06/08/2012 - 14:28 | 2508134 jmac2013
jmac2013's picture

He's advocating the Treasury sell all its gold to the FED in exchange for a bunch of their funny money?   Is there something else I'm missing, because it sounds like one of the worst ideas anyone could conceive.

Fri, 06/08/2012 - 14:54 | 2508246 Stoploss
Stoploss's picture

No.

Yes.

Fri, 06/08/2012 - 14:31 | 2508142 delivered
delivered's picture

Too many bullet points so let's summarize:

1.) Too much debt with not enough assets to support the debt. By assets I mean either a.) the underlying cash flow supporting the debt, b.) the actual value of the collateral supporting the debt, or c.) having a secondary repayment source to support the repayment of the debt.

2.) To solve the problem, one of two choices is available. Default the debt away or Inflate the debt away (to bring asset values in line with debt levels). Inflate it is!

That's my take on the article and my position since 2002. Let's just get on with it.

Fri, 06/08/2012 - 14:34 | 2508159 disabledvet
disabledvet's picture

"This is true" and "has been for years now" and "you're about to get more of it." Now where's the part where they fail and you win again?

Fri, 06/08/2012 - 14:38 | 2508180 Zola
Zola's picture

Basically it is just called devaluation of the dollar !!! To back the dollar , estimates are Gold price needs to be above 10k , so that a 80%+ devaluation of the dollar !!! Better do this once and be sturdy in holding the peg afterwards, else its hyperinflation time !

Fri, 06/08/2012 - 20:56 | 2509368 laosuwan
laosuwan's picture

i am told that a 50 cent blueberry muffin now costs about 2 - 3 dollars in the usa. The muffin index seems to indicate that the devaluation has already taken place.

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