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Currency/Trade Wars, Begun They Have

Tyler Durden's picture


We have written extensively over the course of the last few weeks on the increasing rhetoric from Asia over currency fluctuations and furthermore how China was playing the US and Europe off against one another in a quasi-trade-war gambit. A flurry of headlines today/tonight via Bloomberg reminded us to revisit what is also a very worrying trend in Chinese CDS (and more broadly Asian sovereigns), as perhaps sophisticated investors look for the cheapest low cost long vol trades on a non-decoupled world devolving to its lowest common denominator.

Between Carney's 'substantially undervalued Yuan' comments, record slides in Dim Sum Bonds, growing concerns over growth longevity, Japanese retail sales, Aussie home prices, Sony's troubles in currency-land, and Barclay's warning of a restart to the Yuan peg in the case of global recession - contagion and transmission channels appear alive and well in global trade.


Via Bloomberg, this morning:



followed quickly by:

Yuan Drop Spurs Record Slide in Dim Sum Bonds: China Credit

Yuan-denominated (Dim-Sum) bonds in Hong Kong are headed for record monthly loss, erasing gains for the year, as worsening outlook for global economy fuels concern China will slow pace of its currency’s appreciation.

which was 'helped' by this evening's comments:



And growing concensus that growth in China will slow significantly:

In the latest Bloomberg Global Poll of investors, most global investors and analysts, or 59 percent, foresee China will register economic gains of less than 5 percent annually by 2016.

that were around the same time as Sony's headlines hit:



...noting that "Sony doesn’t buy many components from Europe, limiting its ability to benefit from euro weakness"

Which leaves Chinese CDS (denominated in USD remember) hitting their highest levels since early March 2009 as the spread between 5y and 10Y Chinese CDS rises to record wides of 74bps

While we suspect much of the steepening and widening of China sovereign CDS is speculative revaluation/global-recession bets, Chinese CDS still has a long way to go to meet up with the other global majors in terms of its risk relative to government bonds (since CDS have the implicit currency/devaluation premium and not just technical default).

Charts: Bloomberg


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Wed, 09/28/2011 - 22:36 | 1720637 lordbyroniv
lordbyroniv's picture

4th Turning....BITCHEZ !!!!!!!!

Wed, 09/28/2011 - 22:55 | 1720687 JLee2027
JLee2027's picture

A strong currency used to be a good thing.

Wed, 09/28/2011 - 23:22 | 1720742 Raynja
Raynja's picture

the u$ and euro are vulnerable to china still believing it is.

Wed, 09/28/2011 - 23:37 | 1720773 Pinto Currency
Pinto Currency's picture


Perhaps more simply, Chinese Credit Default Swap prices are rising because of an increased risk of inflation default.

Thu, 09/29/2011 - 00:44 | 1720888 Raynja
Raynja's picture

how can you speak of "increased risk of inflation default" for china when the us is flirting with 3% on the 30yr.

the swiss didn't peg their currency to battle inflation. the chinese don't need to truely be safe to attract global currency inflows.  every decision is made on a relative basis.

in terms of cds, the entire globe is gonna feel this malaise. anywhere that the cost of insurance on securities is not rising is a good place to be buying.  that does not mean china will not attempt to emerge from it as the dominant state(currency).

Thu, 09/29/2011 - 01:57 | 1720974 Michael
Michael's picture

Have you ever lived through a complete and total worldwide bond market collapse?

I'm looking forward to my first.

Thu, 09/29/2011 - 03:58 | 1721057 cynicalskeptic
cynicalskeptic's picture

I'm not.  I kind of like civilized life.  The Dark Ages were no fun - not even for the lords in their castles.

Thu, 09/29/2011 - 04:26 | 1721078 Michael
Michael's picture

All Fair Isaac data should be expunged for everybody as a prerequisite for the Epic Reset.

Thu, 09/29/2011 - 08:40 | 1721169 BigJim
BigJim's picture

When, and only when, the Chinese government:

i) does not have foreign reserves measured in Trillions of USD, and

ii) does not have to worry about its people overthrowing the government

then will I worry about a Chinese economic collapse. If their economy slows significantly, their central planners will throw away their money building bridges to nowhere and cities in the sand to keep revolution away. Yes, it'll all be a massive misallocation of resources, but it'll keep the wheels of commerce spinning. And once they've depleted their reserves, and barely expanded their productive capacity, we will see the mother of all collapses there.

But not yet.

Comments, please.

Thu, 09/29/2011 - 19:00 | 1724119 bid the soldier...
bid the soldiers shoot's picture

What will the mother of all collapses look like from the pile of rubble that used to be Wall Street?

Thu, 09/29/2011 - 10:14 | 1721808 Pinto Currency
Pinto Currency's picture



Check China's inflation rate and its M1, M2 etc.increase of the money supply

Wed, 09/28/2011 - 23:42 | 1720782 PulauHantu29
PulauHantu29's picture

Strong dollar will force unemployment up a few % higher. See what happened post WWI in non-German countries.....stronger dollar discourages exports due to higher prices compared with others.....result is higher unemployment.



Thu, 09/29/2011 - 01:38 | 1720947 ZackLo
ZackLo's picture

Bullshit a strong currency

1.stimulates domestic demand (For foreign AND domestic goods)
2.defends resources against voltures
3.Stimulates manufacturing (through lower costs of foreign resources AND Domestic resources)
4.Stimulates SMALL BUSINESS (big business runs on credit and small business runs on Cash savings)

of course a strong currency in this enviroment implies higher interest rates and default for alot of the bigs through the need of paying back overbloughted debts with stronger money then was borrowed and therefor to big to fail would fail....But to be honest FUCKEM YOU DECIDED TO OFFSHORE THE JOBS BITCHEZ PAYBACK TIME!!!!

The way I see it is...who are you going to sell to in this enviroment trying to STIMULATE EXPORTS...what you want to throw the whole country under the bus so foreigners can get cheap goods? sounds pretty fucking retarded to me....

Ain't never seen a country in all of human history rigorously devalue it's currency take on ahitload of debt and survive in the long run....they go bankrupt from destroying the somestic economy and then become 3rd world resource stripping mines for the stronger currency countries....ever wonder why the IMF/World bank advocates 3rd world countries taking on craploads of debt and then blowing their currencies to smitherenes? you just read why...look at belarus modern example of the stripmining of the keynesian fallacy sort...

Thu, 09/29/2011 - 04:31 | 1721087 Overflow-admin
Overflow-admin's picture

Please explain this to Philipp Hildenbrand, the SNB CEO...

Thu, 09/29/2011 - 06:38 | 1721238 BigJim
BigJim's picture

Government intervention in the value of a currency helps some people, and hurts others. It's as simple as that.

Take a country whose currency gains in value. If the economy has 'sticky' wages - ie, where employees expect (or are mandated by government) to earn the same units of a currency, even if that currency buys more goods, then exports will rise in price because labor costs will rise. As this 'stickiness' is the rule rather than the exception, a strong currency will hurt the exports of pretty much any country where labor is a significant component of whatever it is being exported.

However, if this situation has arisen because of trade surplus, then it means consumers in that country have greater buying power, and encourages consumption of imports. This acts as a natural balancer of trade between nations.

Now... if you weaken a currency, stickiness in wages means that exporters get a 'leg up' because there is a lag between prices going up due to inflation, and wages rising. So exporters gain at the expense of their workers' wages' value.

The USD's strength is complicated by the fact there is 'artificial' demand created for it because it is the world's reserve currency, and foreigners need it to buy oil. Oil is not only priced in USD, but most exporters demand it in payment. So (given the huge amount of money involved) the USD is much, much stronger than the country's exports would suggest, because, in effect, everything exported ANYWHERE in the world, paid for in USD, acts like an export from the US itself (at least in terms of its effect on the dollar's value).

This artificial strength is a double-edged sword, however. It gives US consumers enormous buying power; but it also makes many of its exports uncompetitive, particularly if they have a high (un/semi-skilled) labor component. Job 'offshoring' is a natural result of this; if the jobs hadn't been offshored, the companies would have eventually gone out of business anyway due to their inability to compete with countries whose currency is not being artificially inflated by payments in USD for oil (and other commodities).

It's this artificial strength that enables the US to borrow so much, incidentally, and is why TPTB in the US and its western satraps will move heaven and earth to ensure the USD remains the world's reserve currency. When a Western consumer borrows money at cheap rates to fund his lifestyle, or buys stuff for a day's wages that would cost a foreigner a week's wages, he is essentially leveraging the toil of people all over the world who produce goods sold for USD.

Thu, 09/29/2011 - 07:58 | 1721390 Bobbyrib
Bobbyrib's picture

"stimulates domestic demand (For foreign AND domestic goods)"

LOL. I do want a stronger dollar, but that statement is only half true.

Thu, 09/29/2011 - 00:21 | 1720858 r00t61
r00t61's picture

For better or for worse, today, every nation's primary economic strategy is centered around export mercantilism, so strong currencies are anathema.

Probably some of these nations' leaders long for the good old days when one could simply send some stormtroopers into another nation, declare it a colony, eliminate any of the brown/yellow-skinned people that resisted, and extract as much wealth as needed, instead of engaging in lame financial/accounting skullduggery.

Wed, 09/28/2011 - 22:55 | 1720688 Clockwork Orange
Clockwork Orange's picture

That is exactly what this is.  I hope everyone outside of ZH world is beginning to pay attention.  If not, they will wish they had ...

Wed, 09/28/2011 - 22:58 | 1720693 Silver Bug
Silver Bug's picture

Indeed they have, this is going to get messy, it already has. Jim Rickards new book about the ongoing currency wars is coming out soon.

Thu, 09/29/2011 - 07:52 | 1721375 covert
Wed, 09/28/2011 - 22:37 | 1720638 DaBernank
DaBernank's picture

First come the currency wars...

Thu, 09/29/2011 - 01:41 | 1720952 ZackLo
ZackLo's picture

Then come the trade wars....

Then come the world wars....

the tragedy of economic ignorance in the human experience..

Thu, 09/29/2011 - 04:01 | 1721059 cynicalskeptic
cynicalskeptic's picture

War - boosts the economy, puts the unemployed to work (albeit as cannon fodder) and distracts the populace from their real problems by getting them all 'patriotic' and supportive of government.

In the case of the US it allows a country to offset the dropping purchasing power of its currency with blatant force of arms in simply grabbing assets (though that didn't work out so well in Iraq).

Wed, 09/28/2011 - 22:38 | 1720649 Thomas Jefferson
Thomas Jefferson's picture

The doom is thick tonight.  Squeeze your cheeks together gentlemen.

Wed, 09/28/2011 - 22:51 | 1720676 nwskii
nwskii's picture

I just made a diamond

Wed, 09/28/2011 - 23:49 | 1720717 baby_BLYTHE
baby_BLYTHE's picture

Competitive devaluation and all out race to the bottom in terms of currency war has been going on for quite some time now. It is the simple reality of the government having no balls and the central banks having to cheat on the public in their place by cheapening the purchase power of the currency.

Wed, 09/28/2011 - 22:38 | 1720650 Blorf
Blorf's picture

What is the point of getting CDS on US Bonds? First, they'll never default, just print the money. 2nd, if they default, whoever you bought the CDS from has long since blown up.

I should set up a company that does nothing but sell treasury bond and satellite crash insurance.

Wed, 09/28/2011 - 23:31 | 1720653 sitenine
sitenine's picture

The Senate is also taking up the issue.  This was also posted on MW yesterday.  No one seemed to notice.

Wed, 09/28/2011 - 22:40 | 1720655 tmosley
tmosley's picture

Great, now instead of having one room full of crazy Westerners dictating their domestic inflation rate, they will have several.

Wed, 09/28/2011 - 23:44 | 1720785 knukles
knukles's picture

Just like Europe!  Yeah!

Wed, 09/28/2011 - 22:40 | 1720656 Tater Salad
Wed, 09/28/2011 - 23:19 | 1720734 JW n FL
JW n FL's picture



I hope they send those ships near Florida / Bahamas.. cause I am telling you that the salvage business is SO VERY PROFITABLE!!

They have NOTHING that I can NOT personally sink!

and their "new" radar jamming missle that can do nothing, LOL!! 2 words goal keeper and its out dated, nowa dayz!

maybe when Iran builds Aircraft Carriers! LOL!!

these BIG, Slow Ships in shallow waters are FUCKED!

Thu, 09/29/2011 - 00:02 | 1720819 DoChenRollingBearing
DoChenRollingBearing's picture

OK, JW, you have my personal blessing to take out whatever Iran cares to send our way.  Do check on maritime law, though re salvage.  Maybe you should sink it/them in international waters...

That would make you a PIRATE however!  Obama might not like you much after your, well, executive action re the Iranian Navy, LOL...

+ a big fat green

Thu, 09/29/2011 - 01:04 | 1720887 Whalley World
Whalley World's picture

Dont underestimate the inventors of the Magic Carpet and Lantern.

Thu, 09/29/2011 - 00:16 | 1720836 Captain Nukem
Captain Nukem's picture

The US Navy should pull a 'Pueblo' on them. Wouldn't it be nice for the US to have Iranian hostages for a change?

I mean, if we say they were intruding within US territorial waters, it's their word against ours, right?

Thu, 09/29/2011 - 00:30 | 1720870 jonjon831983
jonjon831983's picture

Near US Waters does not mean in US waters.  As long as they stay within bounds... well unless after an incident it becomes a he said she said kinda thing with either side saying they were/were not in territorial waters.

Also though - this event is pressure + fear.  Someone will start saying omg... these boats may have missiles on them!

Thu, 09/29/2011 - 07:11 | 1721304 MSimon
MSimon's picture

Lot a USN Aircraft on the Atlantic coast. Nice to have the Iranian Navy within range.

Wed, 09/28/2011 - 22:41 | 1720659 e1618978
e1618978's picture

There must have been 10 times in the last six months that you declared the currency war started...

Wed, 09/28/2011 - 22:45 | 1720670 Money Squid
Money Squid's picture

Now I shall declare war on you sir!

Wed, 09/28/2011 - 23:05 | 1720710 DaBernank
DaBernank's picture

How long was it between the Reichstag fire and the invasion of the Sudetenland, or Poland, or the start of the Blitz... when does a war actually begin?

Thu, 09/29/2011 - 01:27 | 1720841 bid the soldier...
bid the soldiers shoot's picture

If you're referring to the war with Eastasia, we haven't decided when it began. We only know that we have always been at war with them.

If you know what's good for you, you won't get too snoopy.

Thu, 09/29/2011 - 02:02 | 1720977 DaBernank
DaBernank's picture


Thu, 09/29/2011 - 12:40 | 1722311 bid the soldier...
bid the soldiers shoot's picture

Wanna meet me at the Chestnut Tree for a glass of Victory Gin after the markets close? :o)

Wed, 09/28/2011 - 23:19 | 1720738 LongSoupLine
LongSoupLine's picture

hmmm, and what has gold and silver done in those six months...ballears.

Wed, 09/28/2011 - 23:31 | 1720761 WmMcK
WmMcK's picture

+1 for your avatar -- calgon take me away.

Wed, 09/28/2011 - 23:32 | 1720762 Prometheus418
Prometheus418's picture

Well, sadly, silver's going to go down now- I just bought some more, and you know how that goes.

Thu, 09/29/2011 - 00:05 | 1720825 DoChenRollingBearing
DoChenRollingBearing's picture


Yeah, I know EXACTLY how you feel.  Fortunately it has always been transistory, your PMs will work out just fine.

At least 75% of the time I buy gold, the price goes straight down for a while.  But, that's OK, because I never sell.  Give it some time, your PMs will take care of you.

Thu, 09/29/2011 - 00:25 | 1720863 Prometheus418
Prometheus418's picture

I know, or I wouldn't have bought it.  :)

I do sell, but only for useful items- never cash.  Still have to do the conversion numerically, as people don't price things in oz, but it really comes down to barter.

I don't know that I really care if it goes up or down on the "legitimate" markets.  While that does affect how much silver I can buy, it hasn't had much effect on it's relative trading value on the gray markets.

Funny thing is, I generally have tried to avoid gray markets in the past, but I'm finding that I actually enjoy transactions much more and get far better value by avoiding retail outlets these days.  Figured I'd better learn to deal with them now, when it's a choice, rather than later, when it's a necessity.

(I had originally termed this as "black market," but that's really not the right thing.  I'm talking about private sellers that don't keep records or pay sales tax, not fences and thieves.  There are plenty of people who are just fed up, and are willing to sell eggs out of the back door of a farm house, or guns off a card table- not stolen, just not part of the system.)

Thu, 09/29/2011 - 01:13 | 1720922 Whalley World
Whalley World's picture

Good advice,

My friend and sister called me today in a panic about their PM's and they have been in for years and are aware of the fundo's.  I have been in the mining shares since 02 but this takedown in shares has me thinking,,,, if the banks go down, who's shaes are they.  I have decided to cash in a chunk of the miners and go all in physical silver. 

Wed, 09/28/2011 - 23:59 | 1720813 Golden Pompoms
Golden Pompoms's picture

We need to bring gold back up!  Stick to the motto.  Gold goes up because fiat currency gets printed.  We need to make that destiny!!! Let's send Gold up to $13,000 an ounce by 2013!!!! YEEEHOOO  we can do it.

Thu, 09/29/2011 - 00:14 | 1720843 Stuck on Zero
Stuck on Zero's picture

The currency war has been going for twenty years.  We're losing.

Thu, 09/29/2011 - 01:46 | 1720960 ZackLo
ZackLo's picture

40 years to be exact...1971.. the year we gave it ALL away

Wed, 09/28/2011 - 22:41 | 1720661 GrinandBearit
GrinandBearit's picture

Fear leads to anger,  anger leads to hate,  hate leads to the dark side. 

Wed, 09/28/2011 - 23:43 | 1720783 GoinFawr
GoinFawr's picture

Lucas shot first.

Wed, 09/28/2011 - 23:46 | 1720792 knukles
knukles's picture

You mean the Brit electrical automotive harnesses referred to as the "Prince of Darkness"?

Wed, 09/28/2011 - 23:56 | 1720806 GoinFawr
GoinFawr's picture

Motto:"Get home before dark."

Thu, 09/29/2011 - 00:45 | 1720892 spdrdr
spdrdr's picture

The three-position Lucas switch--DIM, FLICKER and OFF. The other three switch settings--SMOKE, SMOLDER and IGNITE.

Thu, 09/29/2011 - 02:12 | 1720983 MisterMousePotato
MisterMousePotato's picture

Ah. Another person with fond memories of their old MGBs and Jaguars. I remember driving through Nebraska when instantly the interior of my MGB filled up with smoke and the car was dead as a door nail. (BTW, did you know that the mosquitoes in Nebraska are even worse than they are in Northern Maine?)

Why am I writing this?

Wed, 09/28/2011 - 22:44 | 1720667 Tater Salad
Tater Salad's picture

Dark side?  Me too, I like my bitchez like my coffee, black and strong!

Wed, 09/28/2011 - 22:45 | 1720668 FOC 1183
FOC 1183's picture

Lest we forget Chuck Schumer-Hawley's comments today on the CNY peg: "the jig is up"

Wed, 09/28/2011 - 22:45 | 1720669 CalibratedConfidence
CalibratedConfidence's picture

Just a bunch of dead beat particles we have in power


Wed, 09/28/2011 - 22:47 | 1720671 Caviar Emptor
Caviar Emptor's picture

But but but according to CNBS all we need is "confidence!" 

All together now:

-All you need is la la la la

-All you need is la la la la

-Confidence is all you need

Wed, 09/28/2011 - 23:29 | 1720755 Executioner
Executioner's picture

You made me want hear that song, Caviar!

Thu, 09/29/2011 - 00:49 | 1720896 Nobody For President
Nobody For President's picture

And booze.

Don't forget the booze.

Wed, 09/28/2011 - 22:48 | 1720672 zorba THE GREEK
zorba THE GREEK's picture

When the going gets tough, start a currency war for a diversion.

Hopefully it doesn't lead to the real thing.

Wed, 09/28/2011 - 22:48 | 1720673 FranSix
FranSix's picture

All bond yields, 3mo, 6mo, 12mo have fallen to zero:

Wed, 09/28/2011 - 22:51 | 1720677 Caviar Emptor
Caviar Emptor's picture

Too bad heating oil is up...biflation you win again

Wed, 09/28/2011 - 22:57 | 1720691 Printfaster
Printfaster's picture

The thirty at barely 3. 

That is not a yield curve, that is a yield pancake.

What is shows is that only the US can collect taxes.  Taxes are the only thing holding the dollar together.  Must have more intrusion.  Need for government to know how much change is in your pocket.  Must get liquidity wherever it is.

Wed, 09/28/2011 - 23:21 | 1720696 sitenine
sitenine's picture

That's because the chart is shit.  MW and Google have the same problem occasionally.  When the data isn't available they show you misleading garbage.  Go to the source:

As you can plainly see, the 1 year is at 0.12%  Hitting 0.0% after hours is either a mistake or Armageddon really did just happen...  Actually, I wouldn't totally rule that out either ;)

Thu, 09/29/2011 - 00:14 | 1720845 FranSix
FranSix's picture

"Negative Yields and Nominal Constant Maturity Treasury Series Rates (CMTs). Current financial market conditions, in conjunction with extraordinary low levels of interest rates, have resulted in negative yields for some Treasury securities trading in the secondary market. Negative yields for Treasury securities most often reflect highly technical factors in Treasury markets related to the cash and repurchase agreement markets, and are at times unrelated to the time value of money.

As such, Treasury will restrict the use of negative input yields for securities used in deriving interest rates for the Treasury nominal Constant Maturity Treasury series (CMTs). Any CMT input points with negative yields will be reset to zero percent prior to use as inputs in the CMT derivation. This decision is consistent with Treasury not accepting negative yields in Treasury nominal security auctions."

They don't accept negative nominal interest rates, but they're called for given the huge short term bias in the money markets.

Wed, 09/28/2011 - 22:51 | 1720678 HedgeAccordingly
HedgeAccordingly's picture

yes sir. the ever elusive bat pattern evealed herself .. foretelling volatility

Wed, 09/28/2011 - 23:23 | 1720745 JW n FL
JW n FL's picture



I am making a run on Iran's war ships in open fishermen's! and I will win! ALL DAY, EVERY DAY!


All we have to do is sink them.. to bring them back up.. but it will be easier if we place the floats first and then sink the ships on the floats, in shallow water.. on a calm day of course.. LOL!

They better stay up the coast around new jersey, in the poison waters of the Atlantic!

if they get near DC they are toast.

Thu, 09/29/2011 - 00:08 | 1720829 DoChenRollingBearing
DoChenRollingBearing's picture

Do it in international waters (see my above reply to you JW), but be careful that Obama doesn't tag you as a PIRATE!

Go ahead, Iran, make his day!

Wed, 09/28/2011 - 23:46 | 1720791 Azwethinkweiz
Azwethinkweiz's picture

but don't forget:


Russia practices Iranian reprisal

Thu, 09/29/2011 - 01:04 | 1720916 Nobody For President
Nobody For President's picture

Iran is still flying F-4 Thuds and F-5 Freedom Fighters.

Buy your own damn F-5 and be ready for those bitchez!

Wed, 09/28/2011 - 22:52 | 1720680 gwar5
gwar5's picture

Yoda: "The Dark Lord of QE3 soon returns. Buy gold you must, sleep well you will."

Wed, 09/28/2011 - 22:55 | 1720689 bill1102inf
bill1102inf's picture

Gold, $1000.00/oz, 'coin shops' buying for -20% off spot, or $800/oz - coming to a world near you soon enough.

Wed, 09/28/2011 - 23:00 | 1720700 tmosley
tmosley's picture

Yeah, no history or logic to back that up, just blind assertion.

0/10.  Go back to troll skool.

Wed, 09/28/2011 - 23:29 | 1720757 IEVI
IEVI's picture

hey tmosley I don't post here often but I read all the comments and I thought you might want to know ..that jackass bob_dabolina is a total fraud

check this out

scroll down to my argument with him in the comments

Wed, 09/28/2011 - 23:44 | 1720784 tmosley
tmosley's picture

Well done, sir.  I knew it had to be something along those lines.  I had presupposed that he had something like 20 or more "play" accounts, and simply posted the winner so he could pretend he was some hotshot trader.  No wonder he had all this time for internet chatting and running websites rather than fucking $10,000 an hour prostitutes.  

I had strong suspicions, but you did the detective work.  Well done. 

Thu, 09/29/2011 - 00:13 | 1720842 DoChenRollingBearing
DoChenRollingBearing's picture

Well done to both of you, sirs!

Thu, 09/29/2011 - 00:18 | 1720851 bob_dabolina
bob_dabolina's picture

I've already disproven your ridiculous theories. I am flattered that you are working so hard in an attempt to discredit me. This happened in the early days of ZH as well.

Thu, 09/29/2011 - 00:21 | 1720856 tmosley
tmosley's picture

I like how you cling to the lie.  Go down with the ship.  

Thu, 09/29/2011 - 00:28 | 1720865 Hephasteus
Hephasteus's picture

Denial is a strong horse. It can be ridden to death.

Thu, 09/29/2011 - 01:02 | 1720878 GoinFawr
GoinFawr's picture

"mistadabolina mistabobdabolina mistabobdabolina won't you quit you really make me sick with your fraudulent behavior..."

Thu, 09/29/2011 - 00:55 | 1720895 bob_dabolina
bob_dabolina's picture

No one commenting on my blog believed him either. I don't give a shit, if you think it's a big grandiose illusion than don't read it. Everyone else who reads it knows the truth, just look at the fuckin comments.

I've already done two posts on this BS

Thu, 09/29/2011 - 00:40 | 1720884 jomama
jomama's picture

your racist rants didn't help your standing, either.  they just scream how fucking ignorant you are.

i can't even imagine how pathetic you are from behind that keyboard, trolling around ZH desperately for attention.

Thu, 09/29/2011 - 00:50 | 1720899 bob_dabolina
bob_dabolina's picture

nigger nigger nigger 

STFU with your raycees talk. It's so sophomoric and juvenile. All you can do is call me a raycees, find something new to complain about.

Thu, 09/29/2011 - 00:53 | 1720905 jomama
jomama's picture

you are a tiny human being.

Thu, 09/29/2011 - 00:56 | 1720910 bob_dabolina
bob_dabolina's picture

Stop discriminating against tiny people you sad sad person

Thu, 09/29/2011 - 01:08 | 1720917 GoinFawr
GoinFawr's picture

I think he meant it more like,

"... you lie, steal, cheat and deceit; it's such a small small game."

Thu, 09/29/2011 - 00:56 | 1720909 tmosley
tmosley's picture

You know what's juvinile?  Misidentifying someones race, and then claiming that the "fact" that he is that race somehow makes him stupid.  You know, like you tried with me.

You are a fucking idiot.  I went to your blog for the second time in my life today to see the thrashing you got from IEVI, and noticed that you have what, all of TEN followers.  You have like two posters.  For someone with as much free time as you seem to have, I wouldn't be surprised if they were all you.

You have lost any pretense at credibility.  Now you are just another troll laying dead on the side of the road.  Time for a new user name!

Thu, 09/29/2011 - 01:03 | 1720911 bob_dabolina
bob_dabolina's picture

The blog has been up for two weeks and as over 15,000 page views and there are a good handful of people that comment. 

I haven't lost any credibility. There is always someone out there that is going to attack someone. People were saying the samething about Zerohedge....remember "Zero Intelligence" "Zero Edge" and all the other things people were saying? This is part of the process.

AND ievi didn't give me a thrashing. He would go off on how Daily P/Ls don't get reset daily and than goes off on a conversation he had with A TOS professional that said the same thing I was trying to explain to him. His responses were rife with contradictions.

Thu, 09/29/2011 - 01:09 | 1720918 piceridu
piceridu's picture

Bobby my boy, the jury has already given their verdict...GUILTY! Maybe the seven 6th graders that peruse your site just don't know it yet. You are a pathetic little boy.

Thu, 09/29/2011 - 01:13 | 1720923 bob_dabolina
bob_dabolina's picture

According to tmosely all my followers are simply me with different sns. LOL you all come out of the woodwork at the same time. 

I'll let you folks finish up here and when you're done maybe you can all chat about how the moonlanding was faked, and some 9/11 conspiracies

Thu, 09/29/2011 - 01:15 | 1720925 IEVI
IEVI's picture

I never said P/L's don't get reset. Someone else on your blog said that. I said they reset at midnight CST. The screenshot from your blog is prior to 12 midnight CST and it shows ZERO P/L for the day in GC  after you claimed to have made 165,000.

You fucked up man. You are not only a liar you are a bad liar.

You can't explain the Reset All Positions button from the first screen shot from your blog.

Give it up.

I thought you were some dumb kid screwing around, but the fact that you are still trying to maintain this fraud leads me to believe that you must be a fucking sociopath.


Thu, 09/29/2011 - 01:24 | 1720932 bob_dabolina
bob_dabolina's picture

And I don't how you got that SS. Maybe you photoshopped it for all I know, I don't care. You are going through A LOT of time and effort trying desperately to discredit me and so I have to question your motivations. Is it personal? I'm not really sure but also why are you even reading my blog if you are so adamant that it's not real? That seems not only stalkerish but sociopathic as well. Get over yourself.

Thu, 09/29/2011 - 01:31 | 1720938 GoinFawr
GoinFawr's picture

I see  him as more of a detractor

Quit flattering yourself, if you can help it.

Thu, 09/29/2011 - 01:34 | 1720945 bob_dabolina
bob_dabolina's picture

Who the hell are you and why are you tailing my comments? Do you want my attention or something?

Thu, 09/29/2011 - 01:49 | 1720958 GoinFawr
GoinFawr's picture

... just trying to enjoy myself watching you squirm. You're doing great!

Thu, 09/29/2011 - 01:39 | 1720950 IEVI
IEVI's picture

Yesterday was the first and last day I went to your blog. You claimed to have turned 100K into 2.4M in a year, I was curious to see how you did it and if it was true. As soon as I saw that screenshot with the Reset All Positions I knew you were a fake. You confirmed it further with your second screenshot showing zero P/L.

As for my motivation to expose you

#1   I hate liars.

#2   Isn't this fightclub?

Thu, 09/29/2011 - 01:48 | 1720965 bob_dabolina
bob_dabolina's picture

#1 I'm not a liar 

#2 My P/L reset

#3 This is a financial blog

# 4 You've been absolutely manical about this. I've answered you, you've answered me, I guess this will continue forever and unfortunately I don't have time no inclination to monitor for your blog posts (which like I said are stalkerish and creepy)

#5 Thank you. Since your temper tantrum my traffic has hit turbo speed. 

Thu, 09/29/2011 - 01:55 | 1720971 GoinFawr
GoinFawr's picture

#5 will likely be short lived. Folks just want to see for themselves that your pants are actually on fire. Though I should warn you that once they find out that they are I doubt they would cross the street to piss them out.

Thu, 09/29/2011 - 07:11 | 1721307 Incubus
Incubus's picture

I went to his blog like once. Why do people peddle their crappy blogs on ZH?





Thu, 09/29/2011 - 08:13 | 1721428 Sequitur
Sequitur's picture

Dabolina: exposed. Fucking liar and fraud. Go to his website, now he's even blocking comments. Look dopeshit, we all know you are a fraud, your stupid-ass explanations CONFIRM you don't know what the fuck you are talking about.  Look how he put up a bunch of BS posts just to move his bullshit exposure to page two.

It's over Johnny. OVER.

Thu, 09/29/2011 - 07:09 | 1721297 CalibratedConfidence
CalibratedConfidence's picture

dude, you're a bitch....go get your shinebox!

Thu, 09/29/2011 - 08:43 | 1721516 tmosley
tmosley's picture

15,000 page views?  I just went back again to look at where you have posted several nothing posts to knock the incriminating evidence off of the front page, and your traffic counter says you have gotten only 1,500 visits EVER, and "3 recent" ones, including MINE.

I don't think anyone is ever going to believe a word you say again, if they ever did.

This is what happens when you act like a little brat.  You get spanked.

Thu, 09/29/2011 - 01:42 | 1720954 geekgrrl
geekgrrl's picture

Dude, Not OK. You are a racist, or at least putting on a very convincing performance of a racist. A closer guess might be psychopath, although I'm not really the judgmental type.

Just because IEVI exposed you as a poser, don't start lashing out at people because you're humiliated. Maybe it would be better if you just took some time away from the computer and chilled and thought about why it is so important to you to portray yourself as superior to so many people on this site? And why it's so important to convince us you are winning in the market, when you're really "winning"?  Reset All Positions Bob.

Thu, 09/29/2011 - 02:06 | 1720968 tyler
tyler's picture

It sucks mental hospitals are the first to get the axe in this economy.  It sucks even more whoever let you out gave you internet access.



Thu, 09/29/2011 - 03:04 | 1721015 mfoste1
mfoste1's picture

FUCK your face bitch

Wed, 09/28/2011 - 23:19 | 1720736 PaperWillBurn
PaperWillBurn's picture

And I'll happily be paying twice that today.


I'll lock in my piece of the wealth pie while you hold on to fantasy coupons. Best of luck

Wed, 09/28/2011 - 23:27 | 1720749 JW n FL
JW n FL's picture




Gold, $1000.00/oz, 'coin shops' buying for -20% off spot, or $800/oz - coming to a world near you soon enough.
I hope you are right! I hope it goes down to $1 dollar an oz. or $5 Bucks and oz. I will buy More and More and Fucking MORE!! Are they going to sell H and K 416's for $800 bucks? I would LOVE to have a box or two extra for GREAT Prices!
Wed, 09/28/2011 - 23:57 | 1720787 philipat
philipat's picture

I suspect that the decline in Gold simultaneous with the Twist announcement was no coincidence but a coded warning to the Chinese not to start getting ideas about reducing purchases of Bernankebucks in favour of Gold reserves.

The Chinese are too smart for this. They will stockpile other (Dollar-denominated) commodities, which will allow them to recycle the green to keep the Yuan low whilst reducing purchases of Benbucks, which will result in Ben buying and switching on more printers at the same time that commodity prices are rising , which will result in Gold price increases, which will be driven in part by Chinese buying. Full circle.

The only loser? Main street. Sound familiar?

Thu, 09/29/2011 - 00:16 | 1720847 DoChenRollingBearing
DoChenRollingBearing's picture

+ $1600

The more they keep batting the price down, the more I will buy as money comes in.

We will win bitchez, THEY will lose!

Wed, 09/28/2011 - 23:28 | 1720752 viv_savage
viv_savage's picture

Are you hoping or do you actually believe this? Do you think it'll be difficult to buy gold if/when it gets to your predicted price? Why is coin shops in quotes? If you are real... noodle this: POG = NULL (time) (then) POPG (price of physical gold)= Fuck I sold at 1K for 800 squares of ass wipe at the 'coin shop'.


Wed, 09/28/2011 - 22:57 | 1720692 treemagnet
treemagnet's picture

I think my silver and gold are undervalued......I'm gonna peg my holdings to the level of bullshit in D.C., thats gotta help, right?

Wed, 09/28/2011 - 23:02 | 1720695 chump666
chump666's picture

An excellent post ZH.

Anyone trading markets should be looking at Asian CDS/money/bond/FX spreads as they start to look more and more like Asia could be slipping into a broad recession.  That and metal prices falling ala China hardlanding.

Yuan selling is a good sign something is up re: China economy

Wed, 09/28/2011 - 23:04 | 1720708 FranSix
FranSix's picture

Either the Yuan or the HKD will de-peg first, much like the Thai Bhat did during the real estate collapse there in 1997.

Wed, 09/28/2011 - 23:37 | 1720776 chump666
chump666's picture

re-peg or de-peg?  USD gains the Yuan/HKD drops off completely?  Yeah I can see this.  The Thai Bhat example is a good one.  If HK property prices tank like they did in the 90's at 60%, the HKD is done.  Short trade from hell.

The fear is on the Yuan, is that if it is shorted the Chinese will re-peg it back to the USD...leading further into a trade war.  What a mess. They should let it be shorted.


Wed, 09/28/2011 - 23:02 | 1720704 RobotTrader
RobotTrader's picture

Its pretty much "anything but commodities" risk aversion.

Look at the fantastic plunges in many of the Finviz charts.

Wed, 09/28/2011 - 23:57 | 1720809 Rob Jones
Rob Jones's picture

There is great disorder under heaven and the situation is excellent.
-- Mao Zedong

At least for people who want to increase their PM holdings.

Wed, 09/28/2011 - 23:05 | 1720707 philipat
philipat's picture

Fear not, The Donald will fix everything by putting tarriifs on all Chinese goods (Which will result in the equivalent of doubling Chinese wages to 200$ a month so bringing all the manufacturing jobs back home) and telling OPEC to f off. As I understand the plan.


That should end well?

Wed, 09/28/2011 - 23:20 | 1720739 Caviar Emptor
Caviar Emptor's picture

Right on, my fiscally conservative friend. We need a president who's had TV experience. Fred Thompson already had presidential experience, ok perhaps just as a movie president but the way things have been going, that's huge. 

The Donald also knows the art of the deal. So in his campaign he'll also promise to snooker the Chinese and Saudi's into giving us favorable terms. He's dropped hints that he'll pimp out his daughter (or son) on as-needed basis to get the best terms possible. 

Worst case? We cut off all imports. That'll show 'em. 

Wed, 09/28/2011 - 23:28 | 1720751 philipat
philipat's picture

My thoughts entirely ;-)

Thu, 09/29/2011 - 12:34 | 1722274 bid the soldier...
bid the soldiers shoot's picture


Thu, 09/29/2011 - 12:32 | 1722278 bid the soldier...
bid the soldiers shoot's picture

Go short Walmart before you cut all imports.

Wed, 09/28/2011 - 23:22 | 1720743 High Plains Drifter
High Plains Drifter's picture

A Dream Within A Dream

by Edgar Allan Poe
(published 1850)

Take this kiss upon the brow!
And, in parting from you now,
Thus much let me avow --
You are not wrong, who deem
That my days have been a dream;
Yet if hope has flown away
In a night, or in a day,
In a vision, or in none,
Is it therefore the less gone?
All that we see or seem
Is but a dream within a dream.

I stand amid the roar
Of a surf-tormented shore,
And I hold within my hand
Grains of the golden sand --
How few! yet how they creep
Through my fingers to the deep,
While I weep -- while I weep!
O God! can I not grasp
Them with a tighter clasp?
O God! can I not save
One from the pitiless wave?
Is all that we see or seem
But a dream within a dream?

Wed, 09/28/2011 - 23:30 | 1720760 disabledvet
disabledvet's picture

One of the best ever penned...I say "QE for Europe." FASTEN YOUR SEATBELTS!:

Wed, 09/28/2011 - 23:30 | 1720758 Trimmed Hedge
Trimmed Hedge's picture

They want to charge me 19% over spot for silver.

That doesn't include shipping.

Is that a good deal?

Wed, 09/28/2011 - 23:59 | 1720812 riley martini
riley martini's picture

try kitco

Thu, 09/29/2011 - 01:10 | 1720921 Trimmed Hedge
Trimmed Hedge's picture

Kitco is 14% over spot.

Man, this PM stuff is a rip-off.


It's like a co-located HFT-machine sub-pennying you a millisecond before your stock buy order shows up.

Only in this case, it's real-time with a blatant 14%-21.5% mark-up.

Thu, 09/29/2011 - 00:00 | 1720815 riley martini
riley martini's picture

try kitco

Wed, 09/28/2011 - 23:34 | 1720768 Die Weiße Rose
Die Weiße Rose's picture

NO ! it is a lousy deal

Wed, 09/28/2011 - 23:40 | 1720780 Trimmed Hedge
Trimmed Hedge's picture

But Apmex is charging even more: 21.5% over spot.

So, relatively speaking, that is a pretty good deal.

Thu, 09/29/2011 - 00:04 | 1720823 Prometheus418
Prometheus418's picture

Depends on all sorts of things.  Just because spot price exists, that doesn't mean that you can necessarily find a buyer or a seller at that price.

I just paid 11% over spot for a couple of rolls of mercury dimes- and it took me an hour or two to find even that.  Most auctions were much higher, and anything more desirable like ASEs or silver dollars was way more.  How much you're willing to pay depends on what your goals are, and what your sources are willing to accept in payment.  If you think silver is going to $250 an ounce, why quibble about a few bucks?  If you are only going to hold it for a week, and hope to turn it over quickly for a profit, you'd better keep looking until you find it at or near spot.

Unlike many here, I actually do sell silver as well as buy it- I only sell on a small scale, but what does that matter?  I know that with a spot price anywhere near $30, my stuff isn't going anywhere but on a stack right now.  If I needed to trade or settle a debt, I'd still be valuing physical metal at $50/ASE, $40/dollar, $20/half and so on.  It has nothing to do with the stated spot price, it's just where I'm willing to part with coins.  If it pops to $60, the prices will raise accordingly, and stay there unless it corrects for more than 6 months or so.  Nobody I've dealt with has ever complained, as I am forthcoming about the difference in price, and explain my reasoning.  Won't compete with the coin shops, but I'm not trying to- if people don't want silver, I just give them paper cash and go on with my day.

It's just too damn volitile to slavishly follow the spot price tick for tick- if I wanted to lose my shirt, I'd start an account to trade ETFs and buy on margin.  From what I saw tonight as I was hunting for deals, physical price is hanging right around $40/oz in most places.

Thu, 09/29/2011 - 00:21 | 1720855 jomama
jomama's picture

...aaand APMEX is buying silver at at least 2 bucks over 'spot' right now.

Thu, 09/29/2011 - 00:29 | 1720868 zorba THE GREEK
zorba THE GREEK's picture

My guys sell 90% at spot price. Silver rounds at $1.00 over. 100 oz. bars at spot (to me a dollar back-I'm a good customer)

Dealers can now buy silver rounds on line at .50 over.  At coin shows I always pay spot or below on both gold and silver.

You need to look around more, I'm sure you can get better prices. Even Kitco offers better prices then what I hear a lot of

ZH posters say they pay. 

Thu, 09/29/2011 - 01:00 | 1720898 tmosley
tmosley's picture

Who are "your guys", and why are they selling 100 oz bars to you for less than APMEX buys them for (currently buying 100oz silver bars for Spot+20 cents)?  Note that that is a $70 per bar fee to carry bars from your guys to APMEX.  

Never deal with Kitco.  They employ Jon Nadler.  Enough said.

APMEX is easy, and a pleasure to deal with.  I am willing to pay a little more for that, similar to my dealings with local dealers.  One of the local sellers is an asshole, so I don't go there.  There are plenty of other places.  Hell, I found a sports memorabilia store last week that also deals in silver--good prices too, when they have anything in stock.

Thu, 09/29/2011 - 01:16 | 1720926 zorba THE GREEK
zorba THE GREEK's picture

I have been buying PMs for 10 years And have made many connections. When a dealer or scrap buyer makes a big buy he 

knows he can lay some off on me so that he doesn't get caught holding into the week-end. The farmers market I go to on

week-ends buys 100 oz silver bars at $2.00 back and sells them at spot. Late Saturday he will give them to me at $1.00 back

because that's what the guy who buys all his scrap gold and silver will pay. That guy ships it out and makes a profit too.

Most dealers and gold/silver retail scrap buyers sell to one guy. If you offer them a little more than their main buyer pays,

often they will sell you at a good price, especially if you visit them often. Also if you go to coin shows and check out the

dealers who don't specialize in bullion, many will sell K-Rands and small gold bars below spot just to get rid of them.

Thu, 09/29/2011 - 11:40 | 1722081 tmosley
tmosley's picture

A farmers market that trades 100-oz bullion bars?

Where is this magical place?  I will do the lesser $20 carry all day and quit my job.  I can fit about 20 of those bars into a flat rate box, ship to APMEX, and make $385 per box.  A box a (trading) day is $more than $115,000 per year.  And that is at the "stranger" rate, and just one box full a day.  

Thu, 09/29/2011 - 01:09 | 1720919 Prometheus418
Prometheus418's picture

Good for you- sometimes I get coins below spot as well, just not tonight.  I'm of the opinion that it over-corrected, and I'm not about to whine about not getting the full crash discount.

I suspect it's a matter of scale in some cases.  I'm already "all-in" with my savings, so I am adding to the stash on my paydays.  While I'd love to say that I get paid enough to buy a 100oz bar every two weeks, that is just not the case- a couple hundred bucks at a crack is about the best I can do, usually 5 ASEs or a handful of 90%.  Still have to feed my kids and keep the lights on, after all.  Sure, I could save up and buy a bigger bar every six months or so, but that's kind of risky when I'm betting that the price will rise.  Even little additions like I make add up pretty fast, if you keep at it- and my goal is to remain solvent and keep my home, not drive a new Ferrari every year.

Sad fact of the matter is that on the smaller end of these trades, spot price is just a suggestion.  You get deals on 100 oz bars and 1000 oz boxes, sure- but that doesn't really translate into the price for a few coins.  The local guy had nice deals for quite a while, but the Eagles are long gone, and 90% is rarely in the counter anymore either.  What he has left tends to be wierd crap that I don't want to mess with, like commemorative football coins and generic rounds.  

Thu, 09/29/2011 - 00:10 | 1720814 Die Weiße Rose
Die Weiße Rose's picture

Silver was used in Photographic film, we used to use tons of it in the Lithographic film-process until about 10 years ago, when the whole industry was made redundant by digital photography.We used to take 2 kilos of silver per week out of our developing machine, that processed square-meters of Kodak and Dupond lithographic film, and no, I am not exaggerating.

After 200 years, this whole use of silver in photographic film industry and Kodak has virtually disappeared and all went digital.

I still got a few kilos of silver laying around, but I think the price will fall more soon....

besides, have you heard about the german U-Boat ?

9/28/2011 11:13:00 AM
Wreck hunting - the future
Shipwreck's silver stash a record haul for Saul Former Premier David Saul is co-founder of the company that owns the Odyssey Explorer which found the massive cargo of silver on a sunken merchant ship. *Photo supplied David Saul *Photo supplied

Raymond Hainey
Senior Reporter

WEDNESDAY, SEPTEMBER 28: An underwater exploration firm co-founded by former Premier David Saul has found more than $233 million in silver — the biggest-ever haul of precious metal from a shipwreck.

Odyssey Marine, which numbers Dr Saul among its directors, found the massive cargo of silver on a merchant ship sunk by a German U-boat in 1941.

Dr Saul said: “It’s a very exciting find — but the recovery is going to be the tricky part. It’s extremely deep and it will be an enormous challenge.

“Working in this area has been more fun than you can imagine — and there are more wrecks, equally important in terms of history and value, that we’ve been contracted to find and salvage.”

The SS Gairsoppa, which belonged to the British India Steam Navigation Company, was sunk in the North Atlantic off the coast of Galway, Ireland.

The ship was on its way to the UK when it ran low on fuel in stormy weather and tried to divert to the then-Eire (Ireland) when it was spotted by the German submarine U-101 and torpedoed.

The wreck of the 412ft ship was found this summer, nearly three miles (4700m) beneath the waves and 300 miles off the Irish coast.

But the ship was only identified as the bullion-laden Gairsoppa last week.

The salvage of the silver is likely to begin next spring.

Odyssey’s senior project manager Andrew Craig said: “We’ve accomplished the first phase of this project — the location and identification of the target shipwreck.

“Now we’re hard at work on the recovery phase. Give the orientation and condition of the shipwreck, we are extremely confident that our planned salvage operation will be well-suited for the recovery of this silver cargo.”

Salvage agreement

Under the terms of a salvage agreement with the UK government, Odyssey will keep 80 per cent of the value of the cargo — $186.4 million.

Odyssey was founded by Dr Saul and two wealthy US businessmen after he met at them at New York’s Explorers’ Club and found they shared a love of the sea and wreck-hunting.

The firm uses high technology developed by the US military, which became available for civilian use after the end of the Cold War.

A total of 32 of the 85 crew aboard the Gairsoppa made it to the lifeboats, but only three sailors made it to the coast of Cornwall, England, around two weeks later.

Two died making it to shore, leaving Second Officer Richard Ayres as the only crewman to survive the attack. Second Officer Ayres survived the war and died in 1992.


Der Brite prahlt

1. Der Brite prahlt: "Die Welt ist mein,
die Völker Englands Knechte!"
Mit deutschem Schwert erklingt ein "Nein!",
wir fordern uns're Rechte.
Tagaus, tagein und Nacht für Nacht
beschlichen wird die Beute,
bis endlich der Torpedo kracht,
trotz Wutgeheul der Meute.
Das U-Boot kämpft für Deutschlands Ehr'
für Recht und Freiheit auf dem Meer,
drum hüte dich, Engeland,
drum hüte dich, Engeland!

sorry all you Pomies,

didn't mean to sink the silver...


Thu, 09/29/2011 - 00:30 | 1720869 The Deleuzian
The Deleuzian's picture

Dude!  6 million ozs. of silver is about a worldwide weeks worth of supply or less...No photography out of silver anymore equals no scrap supply for the boys to play around with anymore...At present, scrap is grandmothers sterling tea pots and silverware...In the grand scheme of things, it's not a big deal...Except for the guys who have a payday when they have it....

It is an interesting story and well worth the dive to get it for sure...I wonder though if the bars/ingots they come up with will be specially sold or premiumed like Binions silver was?

Thu, 09/29/2011 - 00:31 | 1720871 Hephasteus
Hephasteus's picture

Silver was never used much in photography. Ponzie'd the fuck up polaroid took care of that. They pushed and pushed and pushed their shitty cameras since the 60's. They spend billions on ad campaigns in the 80's and everytime they've been pushed into the grave the ponzier's rez them. They are the shitty AOL of the silver industry.

Thu, 09/29/2011 - 00:52 | 1720904 Prometheus418
Prometheus418's picture

Fundimental discussions are good, IMO, so I'll bite.

You're right about the silver nitrate- that ship has sailed, and isn't coming back.  But photography is not the only thing silver is used for.  Cellular phones require it to fit in those compact packages, medical devices use it as solder because it does not require flux, and has anti-microbial properties, and it is used in missles (in what quantities is a matter of some debate, but it's more than an ounce or two.)  It is also used in items such as public water fountains (again, for the anti-microbial properties) and is consumed as an alternative medicine in colloidal form.

But that's actually besides the point- silver's usefulness is what makes it less valuable than gold as money.  If there was truly no use for it beyond coinage, it would be much closer to gold in price- money works best when it's not being melted down to make other things, after all.

It is also what you make change for gold with.  While FOFOA is a damn smart guy or gal, and is technically correct that gold would be able to do the job of a reserve currency alone if you are willing to split it into tiny fragments, I don't think that is a very practical result.  

Let's take a short moment to consider what might happen under a purely gold standard, where one ounce is valued at, for instance, $10,000/oz.  All well and good, if you only purchase cars and houses- but what do you do at the grocery store?  Let's say you're buying a loaf of bread (it's almost obligitory in these speculations, after all.)  that costs $3, and the smallest gold piece you or the cashier have is a 1/10 oz gold coin.  Are you willing to accept a $997 loss on that loaf of bread due to a lack of change, or do you want a handful of silver back?  (I am making an assumption, perhaps mistaken, that most people are not interested in carrying around little nuggets of gold that they need tweezers to manipulate, and a dime is about a practical minimum size for a coin.)

Now, it could be argued that currency can be produced that contains gold specie.  Let's say you have a $10 paper bill that has a tiny thread of real gold woven into the bill.  Godwin's law all but guarantees that there will be a problem with people carefully pulling and removing or clipping those threads, and passing them off to unwitting cashiers.  Or you could have a coin with a little pellet of gold in the center- but what is to stop people from punching the pellets of the smaller denominations, and replacing them with something "close enough" like brass?

Your only other option, aside from a bi-metallic standard, is to print regular paper currency that is pegged to gold, but in that case, we're right back to where we are now- unless you, personally, have the right to audit the reserves at will, you just simply need to trust that the gold to back the currency is in a vault somewhere.

Or, we need something entirely different.  I guess we'll all find out sooner or later, when the dust finally settles.


Thu, 09/29/2011 - 01:04 | 1720915 The Deleuzian
The Deleuzian's picture

Agreed...Gold is a lousy pocket currency for the peasants..Not that we woulden't want it in our pocket but making change would be next to impossible on everyday food/gas/movie ticket etc...Still, I have to wonder if gold was officially 'monetized' again...Maybe not in coinage but a 'Bretton Woods' type declaration...Where would that put silver...??? 

Thu, 09/29/2011 - 01:22 | 1720929 Prometheus418
Prometheus418's picture

Traditional value was about 16:1, so that would be a reasonable place to start.  It'd be bound to fluctuate over time, so it could be higher or lower.  Let's say it was 16:1, and gold was at $10k/oz.  That would still put a 90% silver dime at about $45.  Below that, you'd probably need to move to something else, like copper- which is exactly what happened when gold was currency.  The other 10% of sterling is copper anyhow, so it's not that big a stretch to change the ratio to suit.  Nickel could be a good choice as well.

Thu, 09/29/2011 - 01:26 | 1720935 GoinFawr
GoinFawr's picture

Gold was a lousy pocket currency?

'Pieces of eight' were easily divisible... Arrrgh!

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