Global Money Supply And Currency Debasement Driving Gold Higher

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Thu, 10/13/2011 - 07:36 | 1768800 moskov
moskov's picture

Don't worry. Dollar is backed by US government but Gold is backed by nothing

Thu, 10/13/2011 - 07:40 | 1768812 agent default
agent default's picture

The insight of this statement is just too epic for words.

Thu, 10/13/2011 - 07:53 | 1768842 wombats
wombats's picture

B B B But I saw it on the news so it must be true!

Thu, 10/13/2011 - 09:43 | 1769124 Pinto Currency
Pinto Currency's picture



Gold is not "backed" by anything because it doesn't need to be backed by anything.  It's value is what it IS.


It doesn't need a promotion like it is "backed by the government" because it isn't just a piece of paper.


And given what we've seen governments do, the idea that something is backed by the government should scare the hell out of you.

Thu, 10/13/2011 - 08:01 | 1768863 Snidley Whipsnae
Snidley Whipsnae's picture

"The insight of this statement is just too epic for words."

The stupidity of this statement is a total waste of bandwidth... fixed it for you.

Subtlety does not work on trolls... You can quote me on that.

Thu, 10/13/2011 - 08:07 | 1768875 George the baby...
George the baby crusher's picture

And your rebuttle to the statement is warranted and not at all a waste of bandwidth.  Lighten up Snidley Whipshit.

Thu, 10/13/2011 - 07:45 | 1768825 qussl3
qussl3's picture

As much as i hate it, i have to agree to an extent.

Gold isnt going to circulate as currency.

Never underestimate the sheeple, remember you had Germans continue to circulate Marks when it took whole wheelbarrows of them to buy bread.

People are remarkable pliant, especially when they are so heavily "invested" in the current system.

The dollar will continue as circulating currency, while gold stores wealth.


Thu, 10/13/2011 - 08:53 | 1768948 Chaffinch
Chaffinch's picture

We all need to eat - if a wheelbarrow load of fiat was my only way to get food I'd do it.
But I'd rather prepare ahead of such a disaster - with stores of food, silver, gold etc.

Thu, 10/13/2011 - 07:50 | 1768835 wombats
wombats's picture

Marks made good wallpaper.  I'll bet FRNs would do well on the wall too.

Thu, 10/13/2011 - 07:58 | 1768852 Snidley Whipsnae
Snidley Whipsnae's picture

The US Gov has been around how long? ... and gold has been used as a store of value how long?

Gold not only has no counter party risk, it has intrinsic value due to it's rarity and because of it's historic role as a store of value...

Gold is also valued because of the past labor that has been expended to bring it to market... said labor has already been paid for.

Moskov... Do you think the US Gov will outlast gold's role as a store of value?

Thu, 10/13/2011 - 09:56 | 1769204 Smiddywesson
Smiddywesson's picture

Snide, It's a joke.  He was quoting some idiot Canadian newscaster bimbo from a few days ago who said the exact same thing.

Yeah, she actually said it.

Thu, 10/13/2011 - 10:26 | 1769356 mick_richfield
mick_richfield's picture

The dollar is backed by the US government but Gold is backed by nothing.

The insight of this statement is just too epic for words.


Well, maybe not.  Let me take a whack at it.

The reason this statement is so beautiful is because it gets so succinctly at the most fundamental difference between statists and anarchists. 

The statist cannot conceive of any source of order other than a central governing intelligence.   The need for such an intelligence seems self-evident to the statist in spite of obvious counterexamples in nature.

The anarchist  ( no power ) understands that real order arises as self-organizing phenomena:  a complex ecology from the interactions of many animals and plants, human intelligence from the interactions of many neurons.  All without a central controlling power.  The exercise of conscious force over such a system cannot improve it.

Silver (and gold ) are what get used as money in an economy that has no central governing power.  Powerful men always want to substitute artificial money for silver ( and gold ), just like they always want to make artificial changes to complex ecologies. 

In the case of money and economies, they tell us that it's for our own good.  If we, like trees, whales, or bison, didn't have any way of resisting their depredations, they wouldn't bother with lies and paid shills -- they'd just bring in the bulldozers or the harpoon ships.



Thu, 10/13/2011 - 11:32 | 1769682 toady
toady's picture

While the comment 'gold is backed by nothing' is indeed funny, I think most commenters are looking past the 'dollar is backed by the US Government'.

The government will use its power to back the dollar, and the US Military is nothing to joke about.

Thu, 10/13/2011 - 15:29 | 1770697 Strelok
Strelok's picture

All of you who are talking shit directly to moskov don't realize that he's being sarcastic.  He's referring to a video that ZH posted several days ago:

Thu, 10/13/2011 - 07:39 | 1768807 Goldenballs
Goldenballs's picture

Gold is backed by everything which means it has intrinsic value unlike yourself who is a boring and talentless little troll who probably lives in la-la land.

Thu, 10/13/2011 - 08:10 | 1768877 JonNadler
JonNadler's picture

he's referring to a Canadian reporter who said gold was backed by nothing but the dollar by the US Government

She was a student of mine long ago


Thu, 10/13/2011 - 10:29 | 1769374 mick_richfield
mick_richfield's picture

Then it's up to you to rescue her.

Thu, 10/13/2011 - 07:40 | 1768813 r00t61
r00t61's picture

Is the increase in money supply offset by credit destruction?

Thu, 10/13/2011 - 07:48 | 1768833 agent default
agent default's picture

No not really, the increase in the money supply is implemented in order to avoid credit destruction at this point.  It is a catch 22 situation actually, either you default on the debt (credit destruction) of on the currency through inflation.  The end result is of course the same, it's just that the monetization path is stealthier and keeps the masses calm(er).

Thu, 10/13/2011 - 07:54 | 1768845 Cycle
Cycle's picture

Exactly right. Hyperinflation and deflation are two sides of the same coin: money destruction. One by debasing its purchasing power, and the other by destroying "debt dollars"  via debt default. Historically, hyperinflation is probably worse than deflation in terms of maintaining social order.

Thu, 10/13/2011 - 07:51 | 1768838 Crash N. Burn
Crash N. Burn's picture

Depends what you means by"credit destruction", commercial and industrial loans contracted by 25% in 2010 and the currency supply is collapsing for the first time since the Great Depression.

Thu, 10/13/2011 - 07:58 | 1768856 PaperWillBurn
PaperWillBurn's picture

"All the other monetary aggregates contain credit money and debt assets that are generally very liquid and directly tied to the value of a physical dollar. These assets that we are taught are the same as dollars are the direct debt of certain approved corporate institutions. They are mere credits while the institutions engage in a murky game of financial smoke and mirrors with your real money. These credits may be the most dangerous of all during a systemic collapse as they are cloaked in a morass of legalese small print.

And as I have shown to some degree in this post, and in greater depth in past writings, these wider aggregates have little effect on the consumer price index we all watch so closely. The big secret of the central bankers is that it is the monetary base, the cash, that has the most effect from a quantity theory perspective.

And it is systemic confidence (YOUR confidence in the system) that has an equal effect from a velocity perspective.

To demonstrate my point, I have adapted the above diagram to show what it looked like in Zimbabwe last year...


The important thing to remember is that the pile of debt on the right side of the diagram is fixed to the value of each individual physical dollar. So as the physical stuff is diluted to fill the void left by the failing credit/debt system, it directly impacts the real value of the debt market.

This is exactly where we are heading. So you have to ask yourself: With a whole planet-full of paper debt wealth, how long are the savers going to sit there waiting for their value to disappear? But the fact is that it doesn't matter how long they sit there. The only difference that will make is how much value they are going to lose. You see the system can no longer support their value on its own. This is clear from the housing crisis, Iceland and now Greece. But the system must go on so the very unit their value is fixed to must be diluted to infinity just to keep the circle spinning.

And infinity is truly the limit. Don't expect austerity or a deflationary collapse. Don't expect them "to do the right thing" and let the bad debt fail. There is simply too much of it out there. It is our entire global monetary system, not just the bond investors. There is no political will anywhere in the world to let the people's wealth simply vanish in order to maintain the value of a silly little physical dollar. This **THIS** is the big Catch-22! In order to save the people's "money" it will be destroyed!"

Thu, 10/13/2011 - 07:48 | 1768824 Ponzi Unit
Ponzi Unit's picture

Moskov, you are a pathetic hireling, a common troll, a pissant
agent provocateur.

Thu, 10/13/2011 - 07:57 | 1768850 Smithovsky
Smithovsky's picture

I think he was just sarcastically quoting the pretty little TV reporter from CTV, although I think the video has been taken down



Thu, 10/13/2011 - 08:10 | 1768878 JOYFUL
JOYFUL's picture

whoa up there bud...guy's just an innocent bystander, quoting an airhead reporter from Alberta CANUCKISTAN....

please redirect your anger towards a more suitable candidate> after catching up on current gold related discussions here & elsewhere.

“What you're thinking is what you're becoming.” 
 Muhammad Ali


like your adjective tidal formation, just wish you to find the right home for them!

zuggestion box:  Eric Holder?

Thu, 10/13/2011 - 07:50 | 1768836 Cycle
Cycle's picture

What currency debasement?  Most of the money creation has been counterbalanced by debit creation. That money was not printed, it was created with debt.  Usually it is a mix of the public and the private sectors that create money by borrowing, but failing that, we now have the Fed in the borrowing game.

It does not matter, it is still money counterbalanced by Fed debt.  In a deflationary depression, rolling debt defaults will quickly mop up that liquidity, resulting in a rise in dollar purchasing power. This gold cycle model is consistent with this view.

Thu, 10/13/2011 - 08:01 | 1768864 qussl3
qussl3's picture

Assuming default is even possible anymore.

We've built such a mountain of debt that everything rests on a hair trigger, once one small portion goes kaput everything goes.

There are 3 options, on the 2 extremes either high inflation for a decade or insane deflation within months that would make 2008 look like a party.

Alternatively, periods of mild deflation and extended inflation for decades.

We are a global Japan, without the external export market to support excess production.

Thu, 10/13/2011 - 07:58 | 1768854 abugarance
abugarance's picture

spot on, look at the current velocity of the M2 which has collapsed, all the pumping of M2 has reached the breaking point of low effect on circulation, follows depression and deleveraging, reversing all the liquidity pumping

Thu, 10/13/2011 - 08:06 | 1768874 msmith
msmith's picture

Currency debasement is the long term story for sure.  In terms of the short term, the EURUSD and USDCAD are showing some interesting USD strength to keep an eye on.  Also the USDCHF is beginning to show signs of breaking down against the wishes of the SNB.  Gold may still have room to push higher.

Thu, 10/13/2011 - 08:16 | 1768890 Poor Grogman
Poor Grogman's picture

Look I don't know about you clowns but I have reached the acceptance stage of this whole collapse. This means that i'm actually starting to enjoy it a bit (beer helps).

Adjustment can be fun if viewed from a safe distance.

Unless there are more nasty surprises that I don't know about let the new good times roll.....

Thu, 10/13/2011 - 08:25 | 1768902 Thomas.2012
Thomas.2012's picture

Be careful what you wish for.

Talk to people in their 80´s and be sure that there will be a whole bunch of nasty surprises which you never dreamed about in your wildest nightmares.

Thu, 10/13/2011 - 08:36 | 1768920 Poor Grogman
Poor Grogman's picture

Point taken, not wishing for anything, but merely accepting the inevitable.

Big difference.

Let the chips fall where they may I have forged my path and if it is the wrong one then so be it.....

Thu, 10/13/2011 - 11:30 | 1769662 Pinto Currency
Pinto Currency's picture


The part I don't get is what is a safe distance when the crisis is global.


And what about those 104 nuclear power plants in the US when TSHTF.

Thu, 10/13/2011 - 15:33 | 1770735 Strelok
Strelok's picture

Don't be so sure that you have forged your path.  You must be prepared to adapt if insurmountable roadblocks drop out of the sky. 

Thu, 10/13/2011 - 08:52 | 1768946 PulauHantu29
PulauHantu29's picture

"You can't eat gold," The Bernank said.

Thu, 10/13/2011 - 08:58 | 1768968 Poor Grogman
Poor Grogman's picture

Yes but you can't bury food for ten years then use it either.

Thu, 10/13/2011 - 09:12 | 1768999 Clint Liquor
Clint Liquor's picture

Sure you can. Dehydrated food in air tight containers are good for 25 years buried in the ground.

Thu, 10/13/2011 - 09:24 | 1769051 Poor Grogman
Poor Grogman's picture

I can't imagine what that would taste like...
I wonder if there is any on EBAY..
Oh. Hang on a minute what's this? 30 year old peas stored in dry sandy soil no worms or caterpillars.

Buy it now .. Only $20.00

Wow I,m bidding baby..

Thu, 10/13/2011 - 10:06 | 1769249 eurogold
eurogold's picture

I don't get it. I am holding Gold. Everyone is saying Gold is taking off, but I am not seeing it. The price is dropping or just ranging.

When will we finally see Gold react positively to the financial turmoil?

Thu, 10/13/2011 - 10:50 | 1769478 StrangerThanFiction
StrangerThanFiction's picture

Be patient young Jedi, the low price of precious metals is a buying opportunity.

Thu, 10/13/2011 - 10:48 | 1769463 Spigot
Spigot's picture

They have to restructure the global monetary situation to get debt/GDP back into sustainable range (100-150%). A few tactical bancrupcies will be allowed. Inflation of the monetary base will rule. That is all. Things of finite quantity will "appreciate" in price, or correspondingly currencies will have to drop in value vis a vis real things.

Thu, 10/13/2011 - 11:18 | 1769597 Bansters-in-my-...
Bansters-in-my- feces's picture

Every Harry,Dick and Tom has a reaon why Gold is moving higher.


Gold is moving higher ,only when the TPTB allow it to.

Simple math.

Thu, 10/13/2011 - 15:35 | 1770747 Strelok
Strelok's picture

Simple math.


Lol. that made me chuckle.

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