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Guest Post: Forget Gold—What Matters Is Copper

Tyler Durden's picture





 

Submitted by Gonzalo Lira

Forget Gold—What Matters Is Copper

People are freaking out that gold has fallen to $1,650, from its lofty highs above $1,800—they are freaking out something awful. “Gold has fallen 10%! The world is coming to an end!!!” I myself took a shellacking in gold—

—but copper is what has me worried.

Copper fell from $4.20 to $3.25—close to 25%—in about three weeks. Most of that tumble has happened in the last ten days, and what’s worrisome is that, as I write these words over the weekend, there is every indication that copper will continue its free fall come Monday.

From the numbers that I’m seeing—and from the historical fact that copper tends to fall roughly 40% from peak to trough during an American recession—there is every indication that copper could reach $2.67 in short order. And even bottom out below that—say at $2.20—before stabilizing around the $2.67 level.

But we’ll see. The price of copper is not the point of this discussion. The point of this discussion is what the price of copper means.

What it means for monetary policy.

We all know the old saying: “Copper is the only commodity with a Ph.D. in economics”, or words to the effect.

The ongoing price collapse of copper signals that the markets have collectively decided that there is going to be no resurgence of the global economies—at least not for the next 9 to 18 months. Up until now, the economic data that has been coming out over the last couple of weeks seemed to indicate that there’s going to be a double-dip—but in my mind, this fall in the price of copper confirms this notion that the general economy is going down.

And remember: Market sentiment can not only be a predictor of future economic performance, but its determinant. If today the markets feel that the economy is going to suck tomorrow, often that very sentiment is what makes the economy suck canal water.

So if copper is falling like a mo-fo—which both signals and convinces the market that the economy is gonna suck—what does this mean for monetary policy?

Prima facie, the fall in the price of copper is deflationary: Less demand means that the prices fall—meaning the dollar acquires purchasing power.

What does it mean for monetary policy that copper has fallen so low?

It means that Bernanke will carry out more “non-traditional” Federal Reserve stimulus.

Ben Bernanke is famous for being terrified of deflation—and to his particular mindset, this is a reasonable fear. More to the point, Bernanke’s deflation-phobia actually matters—because after all, he is the Chairman of the Federal Reserve. He controls U.S. monetary policy.

Deflation is supposed to be bad because it shrinks an economy. (Personally, I am more afraid of inflation than deflation: The latter is self-correcting, while the former spirals out of control and into social chaos. But that’s for some other post.)

According to the deflationary world view, falling prices oblige producers to cut back on production—which means firing workers. These fired workers—husbanding their resources during their unemployment—spend less, further contracting demand, thus putting more downward pressure on prices, forcing more producers to cut back and fire even more workers, who thus spend less—

—you get the picture: A “deflationary death spiral”, in the Deflationistas’ parlance.

This is Bernanke’s fear—and he will do anything to alleviate it. Notice: It’s not that Bernanke will do anything to alleviate deflation—he will do anything to alleviate his fear of deflation.

As copper prices continue to tumble, signaling further economic contraction, there is no question in my mind that Ben Bernanke and his Fools of the Fed will view this as evidence of looming dollar deflation.

They will do everything to stop this looming deflation. But since the “traditional” Federal Reserve tools have been used up—that is, the Fed has its rate at zero, and for all intents and purposes all of its liquidity windows open—Bernanke will have no choice but to announce some new “non-traditional” liquidity injection scheme shortly.

Thus I expect some Banana Republic money-printing scheme to be announced by the Bernankster before the end of the year—perhaps as early as this coming October. The fall in the price of copper—more than anything else—is what Benny and his Fools will be looking at, to justify this new scheme.

And my bet is, this scheme they announce will be as big—and as controversial—as QE-II.

I am giving my people at The Strategic Planning Group a detailed analysis of what has happened over the past week, and what we can expect to happen in the markets over the coming weeks. You’ll have to pay to play for that.

But insofar as my overall view of the situation is concerned, this is what I think:

Bernanke will drive a schoolbus over small children, in order to prevent his notion of deflation from coming true. This fall in the price of copper is much more relevant to his course of action as Fed Chairman than the fall in the price of gold (which was just a combination of options expiration coming up, and gold positions being sold to cover losses in other asset classes).

This dramatic fall in the price of copper signals that the markets do not believe reactivation is anywhere near eminent—not for at least 9 to 18 months.

To the traditional twin Federal Reserve mandates of price stability and full employment, Bernanke has added a third mission: That of “growing the economy”—whatever it takes, however unorthodox or reckless the measures.

Therefore, it is my estimation that very soon now—end of this year at the latest—we will have QE-infinity—and beyond!

 


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Sat, 09/24/2011 - 19:11 | Link to Comment DCFusor
DCFusor's picture

Yup, copper is the one to watch.  Lookit the price of FCX, one of the best run miners on earth.  I'd love to short them, but I hate shorting companies I love, so I'm just watching, and even ditched my "core" holdings of them, sigh.  You can make arguments for other things, but copper makes the world go 'round more than any other one thing other than sulfuric acid, which isn't investable as such (because everyone who uses lots makes it themself -- there are no pure plays there).

Plot copper or sulfuric per capita and what you see is the quality of life...it's a very big deal.  Energy is of course way up there too, but I've been off the grid on solar for 3 decades -- even have enough spare to charge a Volt should I get one.  So there are workable substitutes for at least some of us, who don't live a zillion to a square foot in apartments.

 

Sat, 09/24/2011 - 19:27 | Link to Comment spiral_eyes
spiral_eyes's picture

"Thus I expect some Banana Republic money-printing scheme to be announced by the Bernankster before the end of the year—perhaps as early as this coming October. The fall in the price of copper—more than anything else—is what Benny and his Fools will be looking at, to justify this new scheme."

That might be a small part of it. The big part will be Warren Buffett's failed investment in BAC post-Greece — Buffett's mythos is too big to fail for Obama and Bernanke. 

Warren Buffett was recently photographed posing as a ninja.

After the crash, will Buffett end up as a NINJA — no income, no jobs or assets?

http://azizonomics.com/2011/09/24/ninja-buffett-to-the-rescue/ 

Sat, 09/24/2011 - 19:58 | Link to Comment donde1
donde1's picture

I think Buffet makes money with BAC. BAC will spin off all of the toxic Countrywide assets to Fannie/Freddie and BAC stock doubles in a week. 

Sat, 09/24/2011 - 20:09 | Link to Comment spiral_eyes
spiral_eyes's picture

Yeh — he will make money off it — because he's a crony capitalist oligarch. The NINJA stuff is a joke.

I think BAC is a house of cards. It's not just countrywide. Bilateral netting is (mostly) bullshit. Greece defaults and we get a massive cascade of defaults, forcing central banks either to bust out fleets of helicopters, or watch the entire derivatives ponzi collapse. BAC or Morgan Stanley failing and needing to be bailed out (post-Greece) will trigger QE3.

Sat, 09/24/2011 - 21:37 | Link to Comment Earl of Chiswick
Earl of Chiswick's picture

Krasting was on to the Copper thing early last week

http://www.zerohedge.com/contributed/red-alert-red-metal

Sat, 09/24/2011 - 22:01 | Link to Comment ISEEIT
ISEEIT's picture

Yeah, Krasting is a gem. Fucking smart guy. A Gonzo in the making. Wisdom + experience+ intelligence= Our best shot. True LIBERALS they are, pre 'progressive' LIARS who hijacked the word. The international left represents authoritarianism/communism.

NOTHING LIBERAL ABOUT THAT.

Sat, 09/24/2011 - 22:09 | Link to Comment Harlequin001
Harlequin001's picture

It doesn't take the brains of a rocket scientist to work this out. Copper is an industrial commodity, expand credit and you expand demand for copper, collapse credit and collapse demand for copper. It's that simple.

This article is stating the blindingly obvious. Copper will fall a long way and for a long time, those with assets in credit are dead, those in assets elsewhere will want to move it to somewhere that isn't imploding or devaluing. Gold and silver are still the one's to watch...

everything else is bullshit.

Sat, 09/24/2011 - 22:58 | Link to Comment ISEEIT
ISEEIT's picture

Whatever genius.

China is the new copper.

If it is true that Keynesian economic vooodoo drops dead, so does china. China becomes the next 'California" (motherfucker). Wish I had a fuck you salute on my keyboard. A well, maybe under the next regime eh?

Sun, 09/25/2011 - 01:06 | Link to Comment Ahmeexnal
Ahmeexnal's picture

Now it's Chile's turn to face a EMP blackout:

http://www.latercera.com/noticia/nacional/2011/09/680-394865-9-corte-de-...

Looting has been reported. This is only a warmup of things to come.

Sat, 09/24/2011 - 22:20 | Link to Comment ISEEIT
ISEEIT's picture

I tried to edit this comment in order to clarify my intended message. I basically want to express that some things never change. We suffer from that. The disease goes freom one false cure to another. We, the patient, have been collectively convinced to avoid the doctor.

It's a spiritual disease. Fortunately, many potential cures are available, however each requires personal accountability. The plant begins with the seed.

Sat, 09/24/2011 - 22:59 | Link to Comment ISEEIT
ISEEIT's picture

Fuck you. Explain yourself. Sell it asshat?

Sat, 09/24/2011 - 23:58 | Link to Comment Real Estate Geek
Real Estate Geek's picture

?

Sun, 09/25/2011 - 00:46 | Link to Comment brandy night rocks
brandy night rocks's picture

Maybe it's time to consider getting back on the lithium, regardless of what the other you says.

Sun, 09/25/2011 - 10:30 | Link to Comment Are you kidding
Are you kidding's picture

Every man for themselves is a spiritual disease?  It's nature...that's all...it's in our genes...mens genes anyway.  Get what you can and keep it to give to your kids...it's what we do.  Why do you call it a spiritual disease?

Sun, 09/25/2011 - 09:40 | Link to Comment thewhitelion
thewhitelion's picture

"A Gonzo in the making"  How do I say this without neeless insult to GZ?  Isn't Krasting at least equal in stature already?

Sun, 09/25/2011 - 13:52 | Link to Comment IQ 101
IQ 101's picture

This dramatic fall in the price of copper signals that the markets do not believe reactivation is anywhere near eminent—not for at least 9 to 18 months.

"eminent"? a Freudian slip in the 1st degree?

I think he means Imminent , http://www.merriam-webster.com/dictionary/imminent

 Let's just bust out our felt tip pen's and add zero's to our dollar bills.

we can call them DolLira, it worked for Italy and Zimbabwe,so it will work for us.

"If you can find one righteous man in the city,I will not destroy it"  ?

Cup of Coffee,2000 DolLira.

Sat, 09/24/2011 - 21:16 | Link to Comment Freebird
Freebird's picture

Buffet probably short BAC to cover his "investment".

Sat, 09/24/2011 - 21:42 | Link to Comment ToNYC
ToNYC's picture

 

That's easy since Timmy the G at T is the Buffett counterparty of last resort.

Sat, 09/24/2011 - 21:31 | Link to Comment Stoploss
Stoploss's picture

LOLOLOL!!!!!

Sat, 09/24/2011 - 21:47 | Link to Comment clymer
Sat, 09/24/2011 - 20:02 | Link to Comment jeff montanye
jeff montanye's picture

the change in the price of copper (immortal) dwarfs by several exponents the concept of the mortal buffet.  buy pm's, especially at these blue light specials and, oh, maybe srs.

p.s. thanks for the shout out to h2so4 (little billy was a chemist....)

Sat, 09/24/2011 - 20:02 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

Sorry, but this click-baiting is getting quite tiresome.

Sat, 09/24/2011 - 20:28 | Link to Comment spiral_eyes
spiral_eyes's picture

Sorry but a pic of Warren Buffett posing as a ninja is really funny, and deserves to be shared with ZH users.

Sat, 09/24/2011 - 21:14 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

Fair enough...

Sat, 09/24/2011 - 21:21 | Link to Comment stacking12321
stacking12321's picture

absolutely.

you should sue the OP, for having made you take the time to click on a link that you didn't find entertaining.

and thanks for sharing your feelings about the situation.

Sat, 09/24/2011 - 20:20 | Link to Comment I think I need ...
I think I need to buy a gun's picture

what if all commodiities will be priced in gold terms instead of dollar terms going forward. The market hasn't figured it out yet.

Anything that relies on energy as well is getting hammered ups fdx etc. USPS well i won't go there.

Of course there would be a dollar conversion but know way to know rate

Sat, 09/24/2011 - 22:27 | Link to Comment optimator
optimator's picture

Nija?  More like Kamikaze.

Sun, 09/25/2011 - 09:40 | Link to Comment Mitch Comestein
Mitch Comestein's picture

Speaking of Buffet, does anyone know (for sure) whether or not Buffet still has that stock market priced futures contract that Birk. Hath. had in 2008?  Tyler, do you know?  I would assume he is still underwater on it.  All I remember was that the contract was in the billions!

Sat, 09/24/2011 - 20:42 | Link to Comment madbomber
madbomber's picture

http://nickelenergy.wordpress.com/2011/06/02/chief-scientist-at-nasa-lan...

i think this is total BS, but apparently he makes copper while making power.

http://www.e-catworld.com/2011/09/the-domain-www-e-cat-com-now-redirects...

i also heard you can literally eat gold. shrug..

http://www.youtube.com/watch?v=Kb4k6LofQKc

Sat, 09/24/2011 - 21:15 | Link to Comment DCFusor
DCFusor's picture

I think it's total BS, and so does nearly all the fusion research community, both pro and amateur.  But -- we wait and see.  So far, this guy's had patents rejected for lack of specificity, lets no one examine his gear, has no reliable replication in any other lab, and has his papers only published in a journal he owns, having been rejected by all others.  In other words, the standard fusion "gimme money" type who climbed to the top of the snake-oil/charlatan tree and hit every branch on the way down, as far as we all can tell.  One person I trust made the attempt to duplicate his results, and did get some energy (no detectable copper, and he had a parts per trillion sensitive mass spec to look with), but...at a rate easily explained by mere chemistry.  Making copper out of nickel that way, well, I dunno, kind of expensive?

They do put gold in drinks etc, and some of them are nice. but it comes back out the other end, which is good because all gold salts are poisonous to varying degrees (I do electroplating of it here sometimes, you should see the MSDS).  Lucky, nothing in your system can attack it much so it just comes back on out later.

BTW, I did a really nice run with my fusor tonight.  Nope, it's not going to power anything anytime soon, but it's fun and it's getting better all the time, someday....but I'm not taking money for my work, I finance it by trading.  More here: http://www.coultersmithing.com/forums/index.php.  When I started, it took about 1kw in to get about 10 nanowatts out excess -- not so great.  Now I get 2 microwatts out for 300w in.  Still not great but a heck of a lot better.  It's getting up to the point of being useful to make isotopes from the neutron output of the DD reaction however. 

Sat, 09/24/2011 - 23:17 | Link to Comment madbomber
madbomber's picture

awesome.  

still alive is always good.

 

 

 

 

 

 

 

 

 

 

 

Sat, 09/24/2011 - 23:44 | Link to Comment SheHunter
SheHunter's picture

You rock DC.  Keep at it.

Sun, 09/25/2011 - 00:25 | Link to Comment DCFusor
DCFusor's picture

Thanks guys, just trying to do my little bit.  If you checked the forums, I'm way not alone, which is also cool - some real smart and effective players over there.  We have learned a lot, and have some new ideas we'll report over there as soon as we build the gear to test them, but we think we're on to something (not going to bother to explain here, take too long) involving affecting reaction cross sections via actually prepping things like spin and parity  pre-reaction so conservation laws aren't trying to be violated as they are in thermal approaches.

And y'all rock - what I learn here and elsewhere is how this is funded.  I like being credible, and it's seemed to me that going money-begging is the best way to lose credibility fast, so I don't do it.  Already got my stack of physical, land, tools, etc - no need for more of that, so I use the extra for this research.

If nothing else, it's beautiful.  My avatar is actual fusion going on in my lab, in a mostly failed experiment.  When it's right, there's very little light given off to make photos.

Sun, 09/25/2011 - 01:57 | Link to Comment Xavier Doe
Xavier Doe's picture

Awesome... net power baby!

Am also lurking / following the polywell fusion research + FWIW, LENR-CANR appears to be legit science but whether there's real usable 'net power' there, is a different question...

Sun, 09/25/2011 - 09:42 | Link to Comment Hurdy Gurdy Man
Hurdy Gurdy Man's picture

(I am a stockholder) Moller is doing its test flight this fall of their flying car that their investors have been waiting like 20 years for

 

Sun, 09/25/2011 - 09:43 | Link to Comment Hurdy Gurdy Man
Hurdy Gurdy Man's picture

(I am a stockholder) Moller is doing its test flight this fall of their flying car that their investors have been waiting like 20 years for

 

Sun, 09/25/2011 - 18:18 | Link to Comment DCFusor
DCFusor's picture

No one has gone too far with polywell, though they've sure managed to be good at asking for money and making promises, all unkept so far.  There are some serious issues with the approach that look like show-stoppers to me, but when people get excited, they ignore all too easily.  Bussard died before they even got reliable neutron detection -- they spent a ton of money, but couldn't afford $150 for a BTI neutron dosimeter?  (Real lab grade neutron detectors usually cost lots more, but...).  No one in the amateur community (surprisingly big, my boards have nearly 100 real fusioneers) has made one work.  yet even with hobby money, we've all managed to buy or somehow obtain neutron detectors.  That's really glaring as a failure in the Bussard projects -- afraid to measure because it would prove failure?

There is a ton of "arm waving" explanation around all this -- with people "conveniently" forgetting things that would get in the way of their enthusiasm.  For a farnsworth fusor, most of this is around the concept of "recirculation" of the ions.  Well, there's a spring (the electrical charge of reactor parts and the ions doing the repulsion thing) and a mass (the ions) but nothing that makes an oscillator -- all you have is a resonator.  But by some magic, any explainer of that simply arm waves that problem away.

The same goes for the polywell guys, sadly.  Both of them forget little details like particles taken out by hitting the grid -- in the Bussard case, the magnets that aren't actually physically realizable as conventional electromagnets, as they self destruct under their own heat production real quick, and superconductors won't work either due to the heatin from ion strikes.  Bussard also forgot, you can't really make a magnetic field all pointing inward (there's always another pole or cusps where it leaks out).  Further you can't really use an electron cloud to magically attract ions.  Think of a flea "attracting" a car windshield -- guess which moves.  That's so dumb it's hard to believe that anyone serious supports it, but I guess it's easy to miss that on things you're enthused about.  Fields strong enough to control/contain ions in that density haven't het been made on earth.

If you look at most arm waving definitions of how a fusion device would work -- the flaw is usually that the explainer forgets that like charges repel, and it's tons of force on very light things when they're close enough to react.  They remember there's a charge when they need it to tug on one and accelerate or heat it, but handily forget it the rest of the time (or forget that electrons are lighter and move faster at the same energy, and can't actually mask the repulsion of positive charges when they get close - if electrons could get that inbetween two ions, atoms would collapse, yet they don't).

And everyone forgets about focus/density.  The several thousands factor I've improved the basic fusor is mostly around that topic.

I'm now working on a completely new approach, using directed beams.  The idea in all this is to overcome the repulsion between two fusible fuel ions (no matter the fuel type for now).  It works out to serious force to shove them together hard enough to get reactions, which is where you hear the high temperature numbers -- people sloppily make a conversion between temperature and energy to get those, and in a tokomak, it's a reasonable thing to do.  But a tokomak is like trying to crush golf balls by putting a bunch in a shoebox and shaking the box.  Most of them move all the same way when you do that -- few high energy collisions, and a lot of wasted energy and motion into "extra degrees of freedom" -- random, hoping to get lucky.  They work a little, but that's a pretty serious constraint.  Since they keep the electrons around (a plasma) they have huge loss mechanisms, and trying to control a dense hot plasma is a pretty snaky thing to try.  I predict they'll fail again, and what is this, about the 5th time they've gone back to the money well, and asked for more billions and more decades and said "it'll work this time for sure"?  It's a tenure mill, not real science.

Along the way, I noticed that all these approaches, whether random-thermal (tokomak) or other (beam on target, beam on beam, fusors etc) have one thing in common.  They forget all the well accepted conservation laws for spin, parity and so on.  You're trying to make babies by shooting humans out of cannons at one another, forgetting that it takes one each type, they have to be facing the right way when they hit, and other important details.  Well, it's not that hard to orient spins and so on to satisfy thoee laws, so that's next, and we do this before we "invest" energy into making them go fast (the main loss in a non-random setup).  So, I'm building a couple small accelerators that can pre-select particles with the right spin and orientation and so forth before being accelerated, and which will achieve spot sizes an electron microscopist would have wet dreams about (density at the interaction zone).  Probably take me about another year to get there -- I don't make enough spare trading to hire help at this point, it's been tough, as all here have to know.  So, I just hope I can keep plugging away at this till I get it.

It's encouraging that I can actually do this with larger particles -- I'm a gunsmith and competitive shooter (benchrest) and can easily hit a golf ball at 1/3 mile (which is the scale this problem exists at - nuclei in a solid are golf balls spaced 1/3 mile or so).  I've built several guns that good (or better) and that's actually harder.  No two bullets are exactly alike, but all deuterons are.  Guns can have bent brass -- not an issue here.  Different charge, barrel vibrations -- all not a problem with deutrons (or other ions).  So it's basically do-able.  Just that no one is barking up the right tree -- my approach won't generate corner offices and tenure and money and perks for thousands until after it works, hence no interest.  And it by the way, can't scale to gigawatts - it seems like you limit out at around 10kw or so -- plenty for one house.  So politics get in the way, power company can't use it, but doesn't want me to get it either, as it screws their business model totally if everyone can have one of these -- When I was younger and dumber, I asked them.  They actually told me that!  These are the same guys who say solar can't work, but ignore that it does when they mistakenly come to read my meter, and tear down my adverts to sell the stuff -- public and private viewpoints are somewhat different in their case.

 

 

Sun, 09/25/2011 - 01:52 | Link to Comment Aeonios
Aeonios's picture

Gold salts give gold enough reactivity that it can behave like a heavy metal; therefore you can get HM poisoning from gold salts (similar to lead or mercury).

Metallic gold, on the other hand, is virtually impervious to corrosion. If you eat gold it comes out the other end basically unscathed. Shitty, perhaps, but chemically unchanged.

I wonder how the value of the gold in Goldschlägger compares to the cost of a bottle these days. Long Goldschlägger?

Sun, 09/25/2011 - 18:20 | Link to Comment DCFusor
DCFusor's picture

I worked it out, it's not much, about 5c at the current price of gold.  That leaf is real thin.  Yes, we filtered some, and carefully washed all the gold flake and weighed it, and it took a really sensitive scale to weigh at all.  It's only microns thick.  It's less than one leaf from a sign-painter's book per bottle.  The booze is pretty worthwhile though.

Sun, 09/25/2011 - 14:22 | Link to Comment IQ 101
IQ 101's picture

So can you knock an atom off of Lead?

I have a bunch of weights in my fishing tackle box, you can have them,if you ever decide to go the alchemy path.

Fusion delusion, man will never fly.

Sun, 09/25/2011 - 14:29 | Link to Comment bankruptcylawyer
bankruptcylawyer's picture

dcfusor, i'm impressed with you knowledge about sulfuric acid. yea, it's funny how these are just basic important chemicals most people in their right mind have no clue about their industrial importance across many many chemical industrial processed used to create the material objects whose availability is a major yardstick for measuring the material wealth of our lives. 

one of my very good friends is works at general atomics on fusion research. i've been to his speeches and international fusion conventions while he was a ph.d. at columbia ( i was a disgruntled J.D. that never went to class) ......and from speaking with him and his friends and going to conventions. 

i've come to understand a few things about 'fusion' and the distinction between it and 'fusion energy'. there will be NO small scale 'fusion energy' power plants in our life time. and any individual hack out there claiming to have created a surplus (exothermic---more energy coming out than in) fusion reaction is simply a liar. there are many fascinating individuals out there legitimately working on fusion based sources of different types of neutrons and other fusion based technologies that are 'small fusion'. but there will be NO fusion energy created without and army of scientists and engineers. cold fusion is simply a lie, and any liar claiming to produce it has routinely been discredited for decades and yet....the public gets schemed again and again. 

w.c. field explained it all. 

there's a sucker born every day.

 

 

 

 

Sun, 09/25/2011 - 18:37 | Link to Comment DCFusor
DCFusor's picture

Agree with much of what you say.  But -- there's a vacuum in thinking that's quite serious in big science.  Tokamaks, which indeed have sucked down tons of bucks but never worked (what are we on now, the 5th time more billions and another decade it's going to take?), cannot even theoretically work small -- surface to volume area issues with losses.  But it's by far not the only way to get fusion.  however, mention of alternate approaches are like Ron Paul in the mainstream media -- it just doesn't exist.  Yet, they do exist.

However, I'm not limited by their thinkig (or lack of it).  For example, in theory I can get 100% reaction rate with two "proton microscopes" firing say, deuterons at each other, the required precision has been achieved already -- just no one's used it for that.  Rather than put a gas in a shoebox and attempt to shake the shoebox hard enough to get them to hit hard at random, you can do this "malice aforethought".

Imagine the first manmade nuclear reaction - protons on lithium, gives 16.7 mev out, for 250kv or so in -- good gain of about 64.  But in solid Li, the nuclei are golf balls 1/3 mile apart, so hitting them with a normal accelerator beam is like trying to hit golf balls 1/3 mile apart with a shotgun from a helicopter -- most of the shot misses, and most of the gunpowder is wasted.  What if instead you built an array of benchrest rifles and actually friggin aimed the doggone things instead?  Doh!  That's the type of road I'm going down though there are additional details over and above aim that matter -- for deuterium, one of the reactants has to be spin up, and one spin down for the reaction to take place, else conservation laws are attempting to be violated, and we know that won't fly.  There are some other more-esoteric issues, which this board isn't the place for (mine is).

The point is, the guy who said what you repeated was just wrong by ignorance of other approaches, just like trying to find out about Ron Paul on NPR, CBS, MSNBC etc...

Yet, what I'm talking about actually isn't fairy dust, and takes into account known and accepted science that the big science boys ignore!  They didn't get much education I suppose, it's been the blind leading the blind in this and many other fields for quite awhile now.  Almost every day, one of the science press release boards breathlessly announces some "new discovery" weekly that I can find in my books from the '40's and 50's for just one example.  It's a joke how stupid most "big science" is these days (and most of what passes for that I'd call engineering, not science, anyway).

But I don't have to care what they think - I'm funded by my own fortune, made by developing little things like the softare that makes voice over internet work, and other communication products.  I found a long time ago that begging for money puts you in a bad place -- either you're a charlatan, or asking someone to be your boss, neither of which suit my case or needs here.  There are still things just one guy, or loose collaborations of them can get done, and I'm doing it with my money where my mouth is, unlike most, so there.  I even created the forum to attract the required talent, and it's working quite nicely.  We have pros from all over, including the big science projects worldwide (ITER, CERN, NX atomics).

Go see my website, or my forums, and see if you can even find a hint we look for money or have a donate button.  We don't.  This is not a shill outfit, it's real as can be.  In fact, we've gone to fairly great lengths to keep people out.  The Turing test is you have to find my email or phone number and ask, and it's not on the forums...else we don't need you.

 

www.coultersmithing.com

www.coultersmithing.com/forums

 

 

Sun, 09/25/2011 - 07:21 | Link to Comment oldmanofthesee
oldmanofthesee's picture

I should have told you guys that I was going long 300 shares of FCX. A certain signal of the coming downturn!

Sun, 09/25/2011 - 08:06 | Link to Comment Mike2756
Mike2756's picture

Forget copper, gasoline is about .5 rich here.

Sun, 09/25/2011 - 12:22 | Link to Comment Chuck Walla
Chuck Walla's picture

Anyway, Freeport is taking gold mining seriously now.

Sun, 09/25/2011 - 20:31 | Link to Comment Silver Bug
Silver Bug's picture

Pure gibberish still being published by the Globe and mail, read the article that is linked here:

 

http://silverliberationarmy.blogspot.com/2011/09/gold-is-in-bubble-pure-nonsense-still.html

Sat, 09/24/2011 - 19:12 | Link to Comment nope-1004
nope-1004's picture

How much of the Dr. C fall was engineered by Benocide et al.?

That would be my question.  No doubt falling copper is deflationary.... but Benocide NEEDS a deflationary episode to head back into the QE pit.

 

Sat, 09/24/2011 - 19:18 | Link to Comment LeBalance
LeBalance's picture

All this talk about "market this" and "market that." In the !Now! let's define what "markets" exist.  None.  The good old "market" is Dead.  Connection between prices and "consumer sentiment?" [As a start.] (Are we laughing at the notion?)

Sat, 09/24/2011 - 20:01 | Link to Comment SMG
SMG's picture

Is this indicating a China collapse that's been talked all these years?  I'm not sure because China always seems to grow no matter what. However...

Subprime crisis sweeps Wenzhou as bankrupt bosses flee

http://www.shanghaidaily.com/article/?id=483329

 

 

 

Sat, 09/24/2011 - 20:55 | Link to Comment Hephasteus
Hephasteus's picture

That's been america for 8 fucking years. The only thing that stopped it is ponzi stock market and people running their balance sheet off stock sales and buy backs at low prices through the fed.

Sat, 09/24/2011 - 22:56 | Link to Comment Let them eat iPads
Let them eat iPads's picture

Of course China has huge growth all the time - if you believe the iron-fisted rulers of a third world totalitarian shithole.

Sun, 09/25/2011 - 00:02 | Link to Comment mjk0259
mjk0259's picture

China is now the world's largest car market - bigger than the US. 50 years ago there was only a few thousand cars in the whole country. Now they sell millions a year. So, there has to be growth which is benefiting very much a few hundred million people even though the rest are semi-starved slaves/serfs.

 

Chinese like totalitarian. Mao first took their money, then all the metal from their houses, then their land, then their houses, then their kids, and made them work as slaves on senseless construction projects and at night critize themselves and praise his thoughts. They loved it. He's still a God there.

 

You would be hard pressed to find a Chinese city that looks more third world then Detroit/Camden/Newark and many others. The newer ones look like a century ahead of NYC even if they are empty.

 

Sun, 09/25/2011 - 18:59 | Link to Comment NumNutt
NumNutt's picture

Hmm, maybe I should move to China and open a Pep Boys auto parts store. Instead of Manny, Mo, and Jack, it would be Pee, King, and Duck.

Sat, 09/24/2011 - 23:57 | Link to Comment mjk0259
mjk0259's picture

Trivial compared to what happened in the US during the 1800's railroad boom with multiple lines being built to places that generated no traffic and almost every company defaulting on their bonds. Normal for rapidly growing semi-capitalist system to have a financial collapse every 25 years or so.

Sat, 09/24/2011 - 20:17 | Link to Comment hungrydweller
hungrydweller's picture

Exactly.  This whole scenario is looking more and more like the 1970's when we had a downturn in the business cycle.  The Fed artificially stimulates creating inflation until they think it will stick.  It doesn't (never does) and we get another contraction.  More stimulus and a resurgence in the stock market followed by another quick recession.  Wash, rinse, repeat.  Look at a chart of the DJIA over that decade. 

It wasn't interrupted until the Mighty Volcker jacked up interest rates and let the cycle run its course that we finally recovered.  That said, he also had room to allow Congress and Reagan to deficit spend our way into a new boom.  Unfortunately, there is no such margin left for a deficit spending recovery now.  Over 100% debt/GDP ratio and interest rates at zero across the board.

It will be very interesting to see how this plays out.  Until then, I will play the recurring boom-bust mini-cycles for all they are worth using leveraged ETFs.  One mini-cycle complete so far and profits are booked.  I'll wait for the next printing cycle to begin and play it out all over again.

Sat, 09/24/2011 - 21:21 | Link to Comment Dapper Dan
Dapper Dan's picture

I guess no one read Bruce Krastings insightful blog posted here on ZH.

This is a must read,    presumptuous of me?

FUCKING A !!

http://www.zerohedge.com/contributed/red-alert-red-metal

From Bruce, 

 Does it matter if copper breaks down? In the normal course of things I would say no. The demand side is slipping on a global basis; there’s plenty of metal around, so lower prices are not much of a surprise. But there is a wild card on copper this time around. I’m wondering if the crap out in copper is going to bring indigestion to China.

Sat, 09/24/2011 - 21:34 | Link to Comment Dapper Dan
Dapper Dan's picture

I just read this,  

Power returns to parts of Santiago after massive Chile blackout halts some copper mines, plunges capital into darkness - Reuters

could be some thing nefarious, as in something nefarious this way comes.

Sat, 09/24/2011 - 19:13 | Link to Comment JW n FL
JW n FL's picture

 

 

whether copper goes up or down..

the printing will come back with a vengence.. becuase of the Trillions that will be needed to right the ship.. albeit only until such time all those monies can be paid as bonuses.. then back to the markets are failing and have fell 25% and we need more free money for Wall Street!

 

Or maybe.. just maybe.. they will let the serf's suck rotten eggs for a lil while.. maybe, sice Wall Street is sitting on $30 trillion in Cash.. they will let the markets fall 40% and make the spinless sheepeople beg for QE to save their retirement accounts?

 

It doesnt matter in the end.. becuase either way YOU! are fucked, sorry.

Sun, 09/25/2011 - 16:36 | Link to Comment JW n FL
JW n FL's picture

 

 

http://www.scribd.com/doc/66299520/JP-Morgan-Saxo-Consolidated-Silver-Class-Action-Complaint-09-12-2011

 

1. 1. Unlawful conduct. “Defendants combined, conspired and agreed to restrain trade in, fix, and manipulate prices of silver futures and options contracts traded in this District on the Commodity Exchange Inc. (“COMEX”) division of the New York Mercantile Exchange (“NYMEX”). Defendants thereby have violated Section 1 of the Sherman Act.

Also during the Class Period, certain of the Defendants, including JP Morgan, have intentionally acted to manipulate prices of COMEX silver futures and options contracts.

2.2. Purpose and Means. Defendants have effected their foregoing restraint of trade and manipulations in order to profit themselves. Defendants have caused declines in the price of COMEX silver, and COMEX options, and also stabilized such prices through diverse means. These means include (a) a dominant and manipulative short positions and market power manipulation; (b) repeated manipulative and uneconomic trades and trade manipulation; (c) false trades made to facilitate a trade manipulation; and (d) other acts.

3.3. Market Power Manipulation. (a) JP Morgan, gradually acquired control, between March 17, 2008 and August 2008, of an enormously large ounce short position in COMEX silver futures and silver that previously was held by Bear Stearns. This short position and JP Morgan’s existing COMEX short silver positions gave JP Morgan substantial market power in COMEX silver futures contracts.

4.4.Manipulative and Uneconomic Trades (a) During the Class Period, JP Morgan also made large manipulative trades that repeatedly caused sudden, unreasonable and artificial fluctuations in COMEX silver prices which profited JP Morgan. (b) One of these episodes occurred on August 14 and 15, 2008. JP Morgan’s trades caused a very large decline of almost $1.41 per ounce, or approximately 12%, in COMEX silver futures. This represented an approximately $220,000,000 increase in the value of JP Morgan’s COMEX silver short positions.

7.7. CFTC Commissioner Comment (a) Such depressions of the prices of COMEX silver futures through large uneconomic trades created benefitted JP Morgan’s extraordinarily large COMEX short position. (c) Also, these types of trades were reported to the CFTC by other persons. Plaintiffs further specifically allege that Commissioner Bart Chilton made public statements, including on October 26, 2010, to the effect that he believed there had been manipulation or related unlawful conduct in the COMEX silver futures market. “I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by member of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.” Bart Chilton

58. 58. JP Morgan executed its trades on this day through, at least, a futures floor broker named Marcus Elias. Marcus Elias was a former classmate and wrestling teammate of Chris Jordan, a senior silver trader at JP Morgan. After the close of floor trading on June 26, 2007, Marcus Elias acknowledged that he had executed purchase trades for JP Morgan at or near the lows of the market. Marcus Elias also executed sell orders on behalf of JP Morgan in the morning, which contributed to the price declines, and then purchased futures on behalf of JP Morgan subsequently as the market bottomed.

65. 65. Through its trading conduct on this day, JP Morgan intended to force traders who were short out of the money puts to cover their positions. As options on July futures approached expiration, JP Morgan had no fundamental reason to believe there would be a price move downward. Yet JP Morgan maintained its put positions until the last available day to trade these options - an economically unjustifiable action because at expiration the options would expire out of the money and worthless. However, by virtue of this large put options position, JP Morgan knew that a large and less capitalized segment of the market was conversely short options. So, rather than simply liquidate its out of the money positions at a loss, JP Morgan sold futures into the market and placed “spoof” orders to generate widespread panic. This selling forced panicked traders to systematically sell silver futures. As discussed below, this conduct was repeated again in August 2008.

100. c. JP Morgan’s Communications with HSBC

88. 88. Between 1996 and 2000, Robert Gottlieb, Christopher Jordan and Michael Connolly worked together at the Precious Metals Trading Desk of HSBC and at Republic National Bank of New York, prior to its acquisition by HSBC. 89. In 2006, Jordan began his employment at JP Morgan where, until 2010, he was one of JP Morgan’s principal COMEX silver futures and options traders. 90. After a brief stint at Bank of America as a commodities trader, Mike Connolly returned to HSBC in 2007, where he served as Senior Vice President of HSBC’s Precious Metals Desk. 91. In March 2008, Robert Gottlieb began his employment at JP Morgan Chase where he presently serves as a Managing Director/Trader. 92. Prior to JP Morgan’s acquisition of Bear Stearns in 2008, Mr. Gottlieb had worked for Bear Stearns from January 2006 forward. 93. Bear Stearns, through Robert Gottlieb and others, had developed the previously alleged large Bear Stearns short position in COMEX silver futures prior to March 17, 2008. 94. Contrary to standard antitrust compliance manuals, Mr. Gottlieb regularly spoke to, and communicated and met with HSBC silver trader Mike Connolly from the time that Mr. Gottlieb joined JP Morgan until at least October 2010.

500. d. JP Morgan’s Motive and Financial Incentive to Cause Lower COMEX Silver Futures Prices From The Second Quarter Of 2008 Forward.

95. 95. By the second quarter of 2008 and continuing thereafter through the end of the Class Period, JP Morgan possessed a large financial incentive to cause lower COMEX silver futures prices. Lower COMEX silver prices caused the mark to market value of JP Morgan’s short COMEX silver positions to increase. The amount of the increase in the value of JP Morgan’s short COMEX silver short positions was at least $100,000,000 and was as much in excess of $150,000,000 for each $1 decline in COMEX silver prices.

116. 116. According to other witnesses as well, on or before August 15, 2008, brokers who often executed trades for JP Morgan accumulated a significant number of September puts that were well out of the money. 117. As prices decreased, these September puts became much closer to being in the money. Accordingly, those who had been selling these puts had to close out their positions by buying back the September puts on August 15, 2008. 118. Chris Jordan at JP Morgan was selling back large amounts of September puts on August 15 at an enormous profit.

124. 124. In his communications with the CFTC, the whistleblower described how JP Morgan signaled its co-conspirators in advance of the manipulation, so that JP Morgan along with its co-conspirators, could reap enormous profits by artificially and unlawfully suppressing and manipulating the price of COMEX silver futures and options contracts.

Sun, 09/25/2011 - 16:38 | Link to Comment JW n FL
JW n FL's picture

 

 

Dear Friend of GATA and Gold (and Silver):

An updated complaint in the class-action lawsuit against JPMorganChase alleging manipulation of the silver futures market, filed this week in U.S. District Court for the Southern District of New York, details the mechanisms of the manipulation and some of the traders executing it.

According to the updated complaint:

-- MorganChase already had a large short position in silver when it acquired another large short position upon the investment house's acquisition of the failed New York brokerage Bear Stearns in 2008. This, the complaint says, gave MorganChase hugely disproportionate influence in the silver market.

-- MorganChase used "fake" and "spoof" trades to manipulate prices downward, particularly in advance of contract expiration dates, when MorganChase held put options, which became more valuable as the price of silver was driven down.

-- MorganChase reduced its short position following the May 25, 2010, hearing of the U.S. Commodity Futures Trading Commission, in which complaints of gold and silver market manipulation figured heavily. (GATA Chairman Bill Murphy and board member Adrian Douglas testified at that hearing and presented a statement by a London silver futures trader, Andrew Maguire, detailing market manipulation he had witnessed.)

-- MorganChase regularly engaged in uneconomic trading activity in silver whose only purpose was price manipulation.

-- The CFTC received a detailed complaint about silver market manipulation from a "whistleblower" (this is presumably Maguire).

--Market circumstances during the period of manipulation alleged by the lawsuit were much different from the circumstances previously investigated by the CFTC when it concluded that there had been no manipulation.

While these are all only allegations, the silver price manipulation case against MorganChase is now extensively detailed with names of participants, specific actions and their dates, and identities of participants. Market experts no doubt will find much more of signifance in the consolidated complaint.

King World News has just published a summary of the consolidated complaint here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/16_Id...

The full complaint can be found at GATA's Internet site here:

http://www.gata.org/files/ConsolidatedSilverClassActionComplaint-09-12-2...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Join GATA here:

The Silver Summit
Thursday-Friday, October 20-21, 2011
Davenport Hotel, Spokane, Washington

http://news.silverseek.com/SilverSeek/1316196109.php

 

 

Sat, 09/24/2011 - 19:15 | Link to Comment hungarianboy
hungarianboy's picture

really sorry for those bag holders. but those who didn't want to listen or at least taking notice that's what they get.

Sat, 09/24/2011 - 19:17 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Until the fiat insanity stops, my preferred insanity is Gold and Silver.

Sat, 09/24/2011 - 20:21 | Link to Comment Manthong
Manthong's picture

Maybe this will put a bit of a damper on the insane theft of copper infrastructure.. although I am entertained with the continual stories of low-lifes who use their own carcasses to demonstrate how changing the di-electric constant of high voltage sources makes bug zappers work.    

 http://www.youtube.com/watch?v=XYUz5b2DbbY

Sat, 09/24/2011 - 20:38 | Link to Comment Hulk
Hulk's picture

One should avoid at all costs taking delivery on energized copper...

Sat, 09/24/2011 - 20:56 | Link to Comment Hephasteus
Hephasteus's picture

What's the other end of this wire hooked up to. I'm not falling for that one again.

Sat, 09/24/2011 - 22:14 | Link to Comment Hulk
Hulk's picture

LOL, 4,000 amp breaker didn't help?

Sat, 09/24/2011 - 22:51 | Link to Comment Arkadaba
Arkadaba's picture

Entrepreneurs!

Sat, 09/24/2011 - 22:58 | Link to Comment New_Meat
New_Meat's picture

Mannie:

" ... changing the di-electric constant of high voltage sources makes bug zappers work."

Darwin award wannabeez are all over the place.  Stupid is as Stupid does.

- Ned

Sat, 09/24/2011 - 19:16 | Link to Comment clagr
clagr's picture

Ok, so...

Is it better to own GLD index or the gold mining stocks?

Sat, 09/24/2011 - 19:20 | Link to Comment DormRoom
DormRoom's picture

neither.. sit on cash, and wait u8ntil gold hits $1200, and silver hits $21, then buy to your hearts content.

Sat, 09/24/2011 - 19:50 | Link to Comment taraxias
taraxias's picture

If you are waiting until 1200 to buy some, you won't be buying any.

Sat, 09/24/2011 - 19:58 | Link to Comment medicalstudent
medicalstudent's picture

peri-1300 is built into the chart.

 

its an inclined formation though, so the longer it takes to complete the move the higher it goes.

 

either way, we may not have a post office by the time it gets there.

Sat, 09/24/2011 - 20:07 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

"If you are waiting until 1200 to buy some, you won't be buying any."

Dont go all in on that bet. If the copper-is-a-plopper thesis is true, it is unambiguously deflationary.

Sat, 09/24/2011 - 20:17 | Link to Comment taraxias
taraxias's picture

The more deflationary the "signals", the faster he pulls the trigger to print. What's so hard to understand about that?

Sat, 09/24/2011 - 21:16 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

Nothing at all. Only you're equating printing with inflation, which is the normal course of events. But then there's that troubling bit about a credit collapse and velocity in the toilet. But other than that, it's all inflation all the time....maybe.

Sat, 09/24/2011 - 22:10 | Link to Comment Hephasteus
Hephasteus's picture

Wrong. When copper is a plopper it's an indicator of something else. They are mining thier ass off 24/7 to keep enough gold and silver on the market to keep it from exploding. I talked about this on the forums months back so I'll just repeat it. When you are in a depression all things make a comback in price but it's through artificial inflation manipuatlation means. When the double dip hits gold and silver skyrocket and copper goes in the toilet. Because it's a byproduct of them diging their ass off to keep the price of gold and silver low. Other things go in the toilet too. lead sulfuric acid, plastic explosives, etc etc. So you end up with millions of pounds of c4 and thousands of land mines and this makes for a brilliant scheme to get out of the depression. Which is only a depression because the people who can still create just create stupid ass shit and the people who can't learn very very quickly that this goddamn planet owes you a living. The trick then is hijacking the newly enlightened individuals into kiling the wrong goddamn people.

How to recognize the entrance into that stage of the game. Miners get on TV and turn pump monekys. They talk about how great thier company is how great thier employees are and how "capital intensive" thier mining operations are. The capital intensive part means they have to start ponzi'ing up to keep dumping gold and silver on the market cheap. Watch the dividends payment to see if they are actually making money or ponzi'ing.

The final part is when all the bankers end up with warehouses full of plastic explosives that cost them millions to make and they damn sure plan on making billions off selling them.  Admiral Logistics and General My strategy is different than you think it is then know what to do.

Sat, 09/24/2011 - 19:55 | Link to Comment DeadFred
DeadFred's picture

Agree. The mining stock are going to be destroyed by the two prong attack of commodities turning south and all stock getting hit hard if the market sells off. GLD is an easy liquid way to have paper exposure to gold even if it's a suspect fund. After they hit their lows I'd buy the mining stocks although good luck with figuring out when the low is except in the rear view mirror.

A question I haven't even got a good guess for is how low will this thing (our hypothesized market rout) go and what's the time frame. If anybody wants to entertain us on this weekend with your guesses...?

Sat, 09/24/2011 - 23:06 | Link to Comment Let them eat iPads
Let them eat iPads's picture

90% off the juniors is low enough for me.

Sun, 09/25/2011 - 09:59 | Link to Comment JW n FL
JW n FL's picture

 

 

Mining stocks are for suckers.

unless you are a principle YOU WILL NEVER SEE ANY OF THE GAINS!

This Fact has played itself out over and over and over and over out over and over and over and over out over and over and over and over, again.

Wake Up!

Sun, 09/25/2011 - 16:35 | Link to Comment JW n FL
JW n FL's picture

 

 

http://www.scribd.com/doc/66299520/JP-Morgan-Saxo-Consolidated-Silver-Class-Action-Complaint-09-12-2011

 

1. 1. Unlawful conduct. “Defendants combined, conspired and agreed to restrain trade in, fix, and manipulate prices of silver futures and options contracts traded in this District on the Commodity Exchange Inc. (“COMEX”) division of the New York Mercantile Exchange (“NYMEX”). Defendants thereby have violated Section 1 of the Sherman Act.

 

Also during the Class Period, certain of the Defendants, including JP Morgan, have intentionally acted to manipulate prices of COMEX silver futures and options contracts.

 

2.2. Purpose and Means. Defendants have effected their foregoing restraint of trade and manipulations in order to profit themselves. Defendants have caused declines in the price of COMEX silver, and COMEX options, and also stabilized such prices through diverse means. These means include (a) a dominant and manipulative short positions and market power manipulation; (b) repeated manipulative and uneconomic trades and trade manipulation; (c) false trades made to facilitate a trade manipulation; and (d) other acts.

 

3.3. Market Power Manipulation. (a) JP Morgan, gradually acquired control, between March 17, 2008 and August 2008, of an enormously large ounce short position in COMEX silver futures and silver that previously was held by Bear Stearns. This short position and JP Morgan’s existing COMEX short silver positions gave JP Morgan substantial market power in COMEX silver futures contracts.

 

4.4.Manipulative and Uneconomic Trades (a) During the Class Period, JP Morgan also made large manipulative trades that repeatedly caused sudden, unreasonable and artificial fluctuations in COMEX silver prices which profited JP Morgan. (b) One of these episodes occurred on August 14 and 15, 2008. JP Morgan’s trades caused a very large decline of almost $1.41 per ounce, or approximately 12%, in COMEX silver futures. This represented an approximately $220,000,000 increase in the value of JP Morgan’s COMEX silver short positions.

 

7.7. CFTC Commissioner Comment (a) Such depressions of the prices of COMEX silver futures through large uneconomic trades created benefitted JP Morgan’s extraordinarily large COMEX short position. (c) Also, these types of trades were reported to the CFTC by other persons. Plaintiffs further specifically allege that Commissioner Bart Chilton made public statements, including on October 26, 2010, to the effect that he believed there had been manipulation or related unlawful conduct in the COMEX silver futures market. “I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by member of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.” Bart Chilton

 

58.                58. JP Morgan executed its trades on this day through, at least, a futures floor broker named Marcus Elias. Marcus Elias was a former classmate and wrestling teammate of Chris Jordan, a senior silver trader at JP Morgan. After the close of floor trading on June 26, 2007, Marcus Elias acknowledged that he had executed purchase trades for JP Morgan at or near the lows of the market. Marcus Elias also executed sell orders on behalf of JP Morgan in the morning, which contributed to the price declines, and then purchased futures on behalf of JP Morgan subsequently as the market bottomed.

 

65.                65. Through its trading conduct on this day, JP Morgan intended to force traders who were short out of the money puts to cover their positions. As options on July futures approached expiration, JP Morgan had no fundamental reason to believe there would be a price move downward. Yet JP Morgan maintained its put positions until the last available day to trade these options - an economically unjustifiable action because at expiration the options would expire out of the money and worthless. However, by virtue of this large put options position, JP Morgan knew that a large and less capitalized segment of the market was conversely short options. So, rather than simply liquidate its out of the money positions at a loss, JP Morgan sold futures into the market and placed “spoof” orders to generate widespread panic. This selling forced panicked traders to systematically sell silver futures. As discussed below, this conduct was repeated again in August 2008.

 

 

100.              c. JP Morgan’s Communications with HSBC

 

88.  88. Between 1996 and 2000, Robert Gottlieb, Christopher Jordan and Michael Connolly worked together at the Precious Metals Trading Desk of HSBC and at Republic National Bank of New York, prior to its acquisition by HSBC. 89. In 2006, Jordan began his employment at JP Morgan where, until 2010, he was one of JP Morgan’s principal COMEX silver futures and options traders. 90. After a brief stint at Bank of America as a commodities trader, Mike Connolly returned to HSBC in 2007, where he served as Senior Vice President of HSBC’s Precious Metals Desk. 91. In March 2008, Robert Gottlieb began his employment at JP Morgan Chase where he presently serves as a Managing Director/Trader. 92. Prior to JP Morgan’s acquisition of Bear Stearns in 2008, Mr. Gottlieb had worked for Bear Stearns from January 2006 forward. 93. Bear Stearns, through Robert Gottlieb and others, had developed the previously alleged large Bear Stearns short position in COMEX silver futures prior to March 17, 2008. 94. Contrary to standard antitrust compliance manuals, Mr. Gottlieb regularly spoke to, and communicated and met with HSBC silver trader Mike Connolly from the time that Mr. Gottlieb joined JP Morgan until at least October 2010.

 

500.              d. JP Morgan’s Motive and Financial Incentive to Cause Lower COMEX Silver Futures Prices From The Second Quarter Of 2008 Forward.

 

95.  95. By the second quarter of 2008 and continuing thereafter through the end of the Class Period, JP Morgan possessed a large financial incentive to cause lower COMEX silver futures prices. Lower COMEX silver prices caused the mark to market value of JP Morgan’s short COMEX silver positions to increase. The amount of the increase in the value of JP Morgan’s short COMEX silver short positions was at least $100,000,000 and was as much in excess of $150,000,000 for each $1 decline in COMEX silver prices.

 

116.                116. According to other witnesses as well, on or before August 15, 2008, brokers who often executed trades for JP Morgan accumulated a significant number of September puts that were well out of the money. 117. As prices decreased, these September puts became much closer to being in the money. Accordingly, those who had been selling these puts had to close out their positions by buying back the September puts on August 15, 2008. 118. Chris Jordan at JP Morgan was selling back large amounts of September puts on August 15 at an enormous profit.

 

124.  124. In his communications with the CFTC, the whistleblower described how JP Morgan signaled its co-conspirators in advance of the manipulation, so that JP Morgan along with its co-conspirators, could reap enormous profits by artificially and unlawfully suppressing and manipulating the price of COMEX silver futures and options contracts.

 

Sat, 09/24/2011 - 19:52 | Link to Comment Chaffinch
Chaffinch's picture

Neither, but don't sit on cash as DormRoom suggests. Buy some physical gold and some physical silver NOW whilst you still can. If you want to hold back some cash and wait for lower prices then that is your choice, but there is no guarantee that you will ever be able to buy cheaper than you can now.

Sat, 09/24/2011 - 19:57 | Link to Comment scrappykoala
scrappykoala's picture

I like the indexes better then the mining stocks especially at these price3s. Remember the mining stocks only go up after prolonged high prices and you dont have that now. But thats just my opinion I would however stay away from GLD as they are managed by JPMorgan and are suspect to me. There is one based in Swizterland that I think is a lot safer but again my opinion.

Best bet is physical though

Sat, 09/24/2011 - 20:50 | Link to Comment DosZap
DosZap's picture

scrappy, agreed..............

GDX is where I would be no ETF's, and no miners.

Physical core FIRST.

Sat, 09/24/2011 - 22:12 | Link to Comment Al Huxley
Al Huxley's picture

Dead cat bounce on the miners, at least back to the lower bollinger, and then yes, as usual, they will drop like fucking stones - fucking miners! But a nice chance to increase physical gold holdings (although I'm guessing no rush to buy, be on sale for a while).

Sat, 09/24/2011 - 19:18 | Link to Comment DormRoom
DormRoom's picture

if  world governments allow another systemic financial collapse to occur, I hope they hand out Das Kapital to every school on Earth.

Sat, 09/24/2011 - 21:55 | Link to Comment bid the soldier...
bid the soldiers shoot's picture

maybe Peak Oil has something to do with this systemic financial collapse? maybe not?

Sat, 09/24/2011 - 22:38 | Link to Comment Shirley Wilfahrt
Shirley Wilfahrt's picture

Peak Population/Chicken > Peak Oil/Egg

 

But I'm on my 3rd Beam of the evening...so wtfdIk...

Cheers

 

Sun, 09/25/2011 - 03:05 | Link to Comment bid the soldier...
bid the soldiers shoot's picture

SW

No peak population = no peak oil

No internal combustion engine = no peak oil

No chickens = no Colonel Sanders

No eggs = Peak Oil

You got one right.

Sat, 09/24/2011 - 22:45 | Link to Comment Long-John-Silver
Long-John-Silver's picture

There's no such thing as peak oil. What we have is peak environmentalism that has quite successfully hampered the production of oil.

Sun, 09/25/2011 - 01:10 | Link to Comment JacktheTab
JacktheTab's picture

Once again: u r dumb.

 

Sun, 09/25/2011 - 03:21 | Link to Comment bid the soldier...
bid the soldiers shoot's picture

I must respectfully disagree with you. Yes, Virginia, there is such a thing as Peak Oil. The only question is the day (or night) when we can't buy condoms and Joy Jel any more.

I believe from the time the banks made sub-prime mortages (say 1999) and began to pump, clump, and dump them as MBSs on the world like a gentle spring rain, that wormsign had been seen by TPTB and that they knew the arrival of the sand worm of Peak Oil was nigh and It soon would suck the life out of everything we knew and loved. And this world wide depression is how they dealt with.

Step on demand for crude oil. Develop insurrection weapons 3.0. Make Greece default. Etc. Etc.

Sat, 09/24/2011 - 19:19 | Link to Comment StrangerThanFiction
StrangerThanFiction's picture

Let's see, $50.00 is more than an once silver and $500.00 is even more silver! I think I'll pass.

Sat, 09/24/2011 - 19:32 | Link to Comment LongBalls
LongBalls's picture

With that avatar how in the hell can you expect anyone to read your posts? Silver is the last thing on my mind now.

Sat, 09/24/2011 - 20:02 | Link to Comment DeadFred
DeadFred's picture

Aren't you worried that there's a smudge on one side? What's that about?

Sat, 09/24/2011 - 20:35 | Link to Comment caerus
caerus's picture

here...let me get that for ya...

Sat, 09/24/2011 - 21:37 | Link to Comment See in the pink
See in the pink's picture

Know what a "Dirty Sanchez" is?

Sat, 09/24/2011 - 22:41 | Link to Comment FeralSerf
FeralSerf's picture

.

Sat, 09/24/2011 - 21:41 | Link to Comment FeralSerf
FeralSerf's picture

That's not a smudge.  That's the access door to get to the electronics and stuff.

Sun, 09/25/2011 - 03:36 | Link to Comment Tompooz
Tompooz's picture

..and me thinking it was chocolate. 

Sat, 09/24/2011 - 19:37 | Link to Comment subqtaneous
subqtaneous's picture


Agreed.  State the obvious then huckster for something you probably get much more comprehensively right here at ZH for a yearly donation.

 

I think not.

 

Sat, 09/24/2011 - 19:22 | Link to Comment no2foreclosures
no2foreclosures's picture

Gonzilla has got to worry as he is a Chilean and copper is one of Chile's biggest exports and sources of income.  What this means for the Yanks is that the thieves won't be ripping out copper wiring from abandoned homes anymore.

BTW, the only "mission" of the Bernank and the Fed is to save and enrich the banksters.  If they can appear to be doing something concurrently for the common man, well that's just an added, incidental bonus (price stability, full employment, and healthy economy).

Sat, 09/24/2011 - 22:01 | Link to Comment OldTrooper
OldTrooper's picture

What this means for the Yanks is that the thieves won't be ripping out copper wiring from abandoned homes anymore.

I beg to differ.  Let's face it - the fellows doing this aren't the sharpest tools in the shed to start with.  Do you really think these rocket scientists keep up on the price of copper?  I bet these fools will be stealing (or trying to steal) copper even if the price drops to $1.20.

http://www.youtube.com/watch?v=34gGBtkgIEQ

(Oh yeah, there are many more like this - some too graphic though)

Sun, 09/25/2011 - 00:25 | Link to Comment jdrose1985
jdrose1985's picture

They are keenly aware of the prices when they're going to the scrap yard every day.

Kinda makes sense now, right?

Sun, 09/25/2011 - 10:06 | Link to Comment JW n FL
JW n FL's picture

 

 

Anyone! who is out creeping around a Power Sub Station in the Fucking DARK! trying to steal cooper to scrap some money together should be prayed for..

and I will tell you fucking scumbags something.. I have more tolerence of someone like that.. that you calous mother fuckers who dont have any feelings for someone that bad off.

and when the day comes.. I am NOT Hunting them! I am hunting YOU and I will give them YOUR HOUSE AND YOUR SHIT! You Fucking Spinless, Feelingless Cowards!

You deserve to get your balls cut off and fed to ya with a sledgehammer, bottom feeding gentic trash that you are.

Sat, 09/24/2011 - 19:22 | Link to Comment theotheri
theotheri's picture

Not from me, I'm quoting a blog poster elsewhere:

 

Gold is not a staple nor an economic necessity. “Investing” in gold is not significantly different than buying art or many types of real estate. Its success as a money-making strategy depends simply on a subsequent buyer paying more for it, with no value added, and this is what makes it a purely speculative play.
When you own a typical business, you truly own a piece of the economy because business has the capacity to genuinely create wealth i.e. labour and innovation being converted to capital. For those of us deficient in the gifts of prognostication, who cannot foresee the best times to jump in and out of speculative plays, business ownership is the safest long-term route to protecting our interests in the economy. In other words, say, if you owned shares in a broad selection of companies which provide utiltities, resources, consumer staples, and other necessities, over time your ownership of that chunk of the “economy” would not proportionally go up or down. The liquidation price for that portion of the economy, in dollars or gold or anything thing else, may fluctuate, but your fundamental proportional ownership does not. There are still risks; the goods and services which some businesses produce are more discretionary than others, and therefore more sensitive to consumer strength. By way of example, one might prioritize the average consumer’s spending in the following order: 1. Oil and toilet paper 2. Electronics 3. Gold. In other words, people will continue to spend money on oil products and toilet paper long after they don’t have any money to “invest” in gold or buy jewelery.
The capacity to create wealth through the provision of goods and services is the only benchmark of true lasting value. If you believe that you can escape the economy into gold, or that the ownership of gold can fundamentally outperform the ownership of the economy in the long term, you’re kidding yourself. And those who keep harping on about the “fiat currency Ponzi scheme” are either assuming that the only choice is between owning gold and owning dollars, or else don’t understand what an economy really is.

Sat, 09/24/2011 - 19:36 | Link to Comment Dick Fitz
Dick Fitz's picture

Unfortunately fiat money distorts the economy so radically that investing in a productive business becomes speculation, no matter how in depth the due diligence. A company that looks great in one way looks shitty if inflation (which is solely a monetary phenomena- aka money printing) surges. Gold returns no interest, but if/when inflation surges, it protects cash that has been converted.

If fiat wasn't so prone to political gyration, then owning gold would be foolish. In the climate today, it is prudent to lock up capital in a value medium that will outperform any other asset or equity class, and that's gold.

Can you understand that?

Sat, 09/24/2011 - 19:37 | Link to Comment FeralSerf
FeralSerf's picture

<<If you believe that you can escape the economy into gold, or that the ownership of gold can fundamentally outperform the ownership of the economy in the long term, you’re kidding yourself.>>

In the long term, you are dead.  On a more contemporary scale, gold certainly can outperform a falling economy as a place of refuge for one's assets.   In a rising economy (which doesn't look to be likely in the near term), not so much.

Gold is capital waiting to be deployed.

Sat, 09/24/2011 - 21:36 | Link to Comment My Days Are Get...
My Days Are Getting Fewer's picture

Agreed.  I own much gold and am waiting to deploy the capital.

 

Please give me a couple of examples of great businesses I should build.  I am not talking about securities or drugs or washing money or running a pawn shop.

My problem is that I don't know of any.

Sat, 09/24/2011 - 22:48 | Link to Comment FeralSerf
FeralSerf's picture

If you don't mind the weather, how about furnishing services in the Bakken Williston Basin oil areas? They need lots of the ordinary stuff. I hear single wides are renting for lots. Good restaurants and recreational possibilities might be winners too. Like the Cal gold rush, sell pick axes and Hangtown fries.

Sun, 09/25/2011 - 03:36 | Link to Comment lunaticfringe
lunaticfringe's picture

I am from there. The weather is nasty. The terrain not any better. But there is tons of money to be made there...any biz would work...catering to drilling rigs would be a gold mine.

Sun, 09/25/2011 - 03:53 | Link to Comment Tompooz
Tompooz's picture

Medical Tourism is a sure winner. The overpriced specialists and hospitals in the US  are pricing themselves out of the market. Dental work for 1/10th of the US cost in the Philippines.  Combine with holidays and new wife and get some of that gold out of Uncle Sam's grasp all at once. 

Sat, 09/24/2011 - 19:46 | Link to Comment agent default
agent default's picture

"Gold is not a staple nor an economic necessity."

Money is a unit of account, a medium of exchange and a medium for storing value. 

Unfortunately none of these three criteria will be met in the long run when the printing presses start rolling for real in order to inflate away the debt.  Or when the currency is devalued in order to pay down the debt.  Have no illusion about how all this debt will finally be settled.  Either they will default on the debt or default on the currency.

In a fiat currency system these two actions are essentially the same BTW.  As far a investing in gold is concerned, nobody is investing in gold in the sense you invest in equities.  It is viewed as a means to preserve value, and possibly along with silver as a medium of exchange when it all goes to shit. People are just looking for a convenient price range to buy that's all.  Why do you think the governments go after precious metals with a vengeance when things turn ugly?  Because they can substitute their paper, effectively establishing an alternative means of exchange  (bartering?) and store of value, but at the same time locking government monetary and other policies out of the real economic cycle.

Remember: If you stop using their paper you don't go bankrupt.  They do.

PS: The US already defaulted on its currency when it got off the gold standard. Everything else is an aftershock.

Sat, 09/24/2011 - 19:58 | Link to Comment CapitalistRock
CapitalistRock's picture

That's not true. I don't need anyone to ever buy my gold for more than I paid. Not in real terms. In nominal terms they certainly will.

Some think you own gold to get rich. Maybe. I'll take some real added value but that isn't why people usually buy gold. You by gold to protect wealth. In real terms. Not the silly nominal terms you are confusing yourself with. Art or real estate often work just as well as gold, which is why I own some of those too.

Sat, 09/24/2011 - 20:43 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

"Gold is not a staple nor an economic necessity. “Investing” in gold is not significantly different than buying art or many types of real estate. Its success as a money-making strategy depends simply on a subsequent buyer paying more for it, with no value added, and this is what makes it a purely speculative play."

First of all, every investment has these attributes. As to whether there was value-added is in the eyes of the buyer. The value add may be as simple as you happen to have gold oz ready for sale at the moment I want to buy it.

But more importantly, I think a great number of people buy gold not as a pure investment play per se, but rather in the same vein as they buy fire insurance on their house. It is for protection from the tail events. Just as fire insurance protects from a loss that would be insurmountable from ordinary income, so gold protects from losses that occur when paper assets burn.

As to this last point:

"And those who keep harping on about the “fiat currency Ponzi scheme” are either assuming that the only choice is between owning gold and owning dollars, or else don’t understand what an economy really is."

Nice strawman/false dichotomy duo. While it is true that the "capacity to create wealth through the provision of goods and services is the only benchmark of true lasting value[,]" the ability to produce in an advanced division of labor economy depends critically on the presence of money--i.e., on a stable unit of account, and generally accepted medium of exchange. The less stable is the monetary medium the lower the degree of specialization that will pay.

IOW, "The division of labor is limited by the extent of the market." (Smith) The extent of the market is limited by the degree to which people can rely on trade to furnish them with the things they do NOT produce.

The extent to which people can rely on trade in turn depends crucially on the monetary system being used. A sound and stable monetary system greatly expands the temporal and spatial aspects of trade and thereby enhances economic well-being b/c people can spend time producing and trading rather than worrying about the monetary system. However, a weak and abused monetary system does the opposite.

Sat, 09/24/2011 - 21:43 | Link to Comment pasttense
pasttense's picture

ZH regularly runs articles on the insider selling vs insider buying--and insider selling is several hundred times as great as insider buying. This shows stocks are vastly overpriced.

Sat, 09/24/2011 - 22:52 | Link to Comment Shirley Wilfahrt
Shirley Wilfahrt's picture

The Pigmen don't want the serfs creating true wealth. The "wealth" of this nation has been disassembled and shipped overseas. The pool of talent that used to run those machines is dwindling by the day.

Between the EPA, IRS, DOT, OSHA, ....WTF should anyone be surprised?

USA's biggest export....other than death/destruction/dollars....is fucking waste paper. We have become a nation of fat, lazy, stupid sheep.....just what is wanted by the Pigmen.

We are Jack's Sucking Chest Wound.

Cheers.

Bitchez.

Sun, 09/25/2011 - 02:49 | Link to Comment NoClueSneaker
NoClueSneaker's picture

Dunno, me thinks Americans still able to provide wonders - unfortunately all the gear stolen by pigmen.

Hunderts of thousands of square miles paved with highend mainframe computers doing two things: detonatig simulated nukes and cheatin & robbing witth HFT :-P

Somehow very communist ...

 

Putting some of mini nukes at the right places would solve the probs. Lloyds & Jamies r eager to get penetrated.

 

 

Sun, 09/25/2011 - 00:39 | Link to Comment Stoploss
Stoploss's picture

Q:  If you purchased 10K of  gold in 2000, how much would it be worth today, 24 Sep 2011??

A:   60K

Q:  If you purchased 10K of dow componets in 2000, how much would they be worth today, 24 Sep 2011??

A:   10K

 

Yall have a nice evening now.

Sun, 09/25/2011 - 01:48 | Link to Comment Mr_Wonderful
Mr_Wonderful's picture

Spot on.

Enuff said.

 

Sun, 09/25/2011 - 10:23 | Link to Comment JW n FL
JW n FL's picture

 

 

You are a fucking Dumbass.. Try to pay attention and learn something.

Q. "Its success as a money-making strategy depends simply on a subsequent buyer paying more for it,"

A. Yes! Buy Low, Sell High!! just like everything else in the World. Farming, Drilling for Oil and so fucking on!

 

 Q. "with no value added,"

A. You are correct that the Holder of the Metal (if no improvemens are made, Bullion to Jewelry and / or other) makes no changes or improvements the Value should stay close to the purchase price in the short term.

BUT!! and there always is. It is NOT! the Holder of the Metal effecting / affecting the Price. Monetary Policy changes the Price. The Federal Reserve Printing More and More and More and More and More and More MONEY!! is what causes the Paper (fiat) price to increase. The Gold does Nothing. The FED Printing more paper and thusly de-valuing the paper thru expansion or growing the size of the float is what Drives the Price of Gold or PM's.

*** Note: Silver has outperformed Gold and will continue too, it is more scarce and the above ground supply would take a 100 years to catch up and be even with Gold.. and the uses are FAR! more wide spread.

 

Q. "and this is what makes it a purely speculative play."

A. When you take you fat ugly wife that has a Porn-Stash to dinner it is a speculative play.

 

 

Sat, 09/24/2011 - 19:23 | Link to Comment CD
CD's picture

Being right for the wrong reason is just as bad as being utterly wrong. 

"This fall in the price of copper is much more relevant to his course of action as Fed Chairman than the fall in the price of gold (which was just a combination of options expiration coming up, and gold positions being sold to cover losses in other asset classes)."

Yes, BSB will print. Yes, deflation or even the fear of it is to be avoided at all costs in his book. But GL really needs to take his head out of his ass, if only briefly. 

"there is going to be no resurgence of the global economies—at least not for the next 9 to 18 months. Up until now, the economic data that has been coming out over the last couple of weeks seemed to indicate that there’s going to be a double-dip—but in my mind, this fall in the price of copper confirms this notion that the general economy is goingdown."

You acknowledge that as the head of the FRB, BSB is in control? (Very wrong assumption on many levels, but let's get past that for now). Given that assumption, do you really think he does not KNOW the above, and didn't know until he saw the price in USD of copper decline so much? I'm sorry dude, but that's just plain silly. GL with your SPG.

Sat, 09/24/2011 - 19:41 | Link to Comment FeralSerf
FeralSerf's picture

<<Being right for the wrong reason is just as bad as being utterly wrong. >>

 

Not necessarily so -- it's often cheaper!

Sat, 09/24/2011 - 19:34 | Link to Comment Libertarian777
Libertarian777's picture

I find it interesting that Keynsian economists and others always talk about the 'death spiral' when talking about deflationary forces, yet for our ENTIRE history, technology has been the greatest deflationary force out there (a slowdown in population growth in developed countries being the other).

I fail to see how the fact that fewer people can farm and thus food costs < 10% of the average wage vs > 40% a few decades ago, is BAD

And therein lies the truth.

With a (naturally) deflationary economy (technological progression), DEBT is not necessary, but in a debt-free world, there is no ability for a central economic planning council (central bank / government or whatever else) being able to insidiously tax people through debasement of the currency, and in fact will require visible taxation. Hence, as Bernake had mentioned in a prior testimony to congress, without debt, there would be no 'money' (as he understands it).

Think about deflation from an average 'normal' person's point of view. Money you save today, even if you earn zero interest, is worth more tomorrow. It won't stop you from buying necessities, but it will make you think twice about buying crap from China. People will still buy iPads now even though cheaper versions will come out later.

Now think from a wage point of view, in a deflationary environment, my wage never goes up, but my purchasing power does. However progressive taxes don't work in a deflationary environment, and neither do capital gains taxes or taxes on real assets.

So deflation is, for main street, the best thing since the industrial revolution, for wall street and the central economic planners, deflation equates to loss of control.

Sat, 09/24/2011 - 19:44 | Link to Comment Dick Fitz
Dick Fitz's picture

Excellent point, Lib7777

In a non-fiat world, interest rates (set by the market) would be low, but steady deflation would result in a gradual rise in living standards for all.
Gold "hoarding" would be a rare phenom, and productive capital would put to use more efficiently.

Sat, 09/24/2011 - 20:58 | Link to Comment dalkrin
dalkrin's picture

Ah, to be able to return to a smurf-like medieval society where the pressures of modern inflation, forcing us to work, constantly stressed about the rat race, would be non-existent.  Everyone would be in a state of contentment, there would be no want, or poverty.  Now that was the Garden of Eden.

Sat, 09/24/2011 - 20:03 | Link to Comment chirobliss
chirobliss's picture

+10. An articulate, thinking libertarian. Whodda thunk.

Sat, 09/24/2011 - 20:28 | Link to Comment MiloKhan
MiloKhan's picture

Exactly. People often say that deflation is terrible for debtors, but the opposite is true in that inflation is very bad for net creditors (and anyone who saves). Inflation is a giant transfer of wealth from those who have money to those who don't.

I seriously do not understand how, say, a 1% annual rate of deflation can be so catastrophic. Yes, it may result in less investment in some areas because rates of return need to be higher for an investment to be worth making, but that is not a bad thing. People have gotten so used to money flowing freely that a lot of it ends up going to shitty investments, and when those go bad much wealth is destroyed.

On a related note: one big reason why so many things are financed through debt also has to do with the favorable treatment it gets in our tax code as opposed to equity financing. If this advantage was neutralized, a lot more investments would be financed by equity rather than by debt. I say change the tax code so that there is no longer a bias in favor of borrowing money for everything; we really should not be subsidizing that.

Sure, it changes the way a lot of business investments are done, but you simply would have to share future profits rather than promise interest, and if equity based income was taxed much less than it is now it would be a lot more appealing for investors as well. Yes, people would have to do more due diligence and use their common sense and brains to figure out if an investment is good, but that's not too much to expect, is it?

Sat, 09/24/2011 - 21:04 | Link to Comment dalkrin
dalkrin's picture

Much notice has gone to the 20 year now "Lost Decade" experienced by Japan, among which woes are deflation.  Yet in terms of living standards, have they really decreased?  In terms of technology, I am sure the present is immeasurably better than that surveyed in 1990.  So what is the problem?  In truth, there is not one Japan, but 120 million individual Japans being experienced.

Sat, 09/24/2011 - 22:07 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

"Much notice has gone to the 20 year now "Lost Decade" experienced by Japan, among which woes are deflation.  Yet in terms of living standards, have they really decreased?"

 

Yes.

Via Fukushima.

Sun, 09/25/2011 - 06:48 | Link to Comment Vlad Tepid
Vlad Tepid's picture

Had some whackjob jump on me on another thread the other day for pointing out the same thing.  It is a very important point and you make it well.  When my co-commentor makes a crack about Fukushima, the truth is the stardard of living has not been reduced below 1990s level except for the people living in the tsunami zone.  While fishermen may need to find work elsewhere, tsunami damage will soon be fully repaired.  The nuclear accident is an ongoing decades long tragedy but people will move out of the affected zones and resume their (high) standard of living in an area slightly removed from Fukushima's ground zero.

Your last sentence was a great one. I hope some will stop shouting (to themselves) that Japan will be a depopulated wasteland long enough to read your post.

Sat, 09/24/2011 - 21:24 | Link to Comment duckhook
duckhook's picture

It is  adisaster for the largest creditors >And who are the largest debtor.The USA 

Sat, 09/24/2011 - 20:53 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

"I fail to see how the fact that fewer people can farm and thus food costs < 10% of the average wage vs > 40% a few decades ago, is BAD"

It isn't bad, and it isn't deflation either. "Deflation" when the term is used properly, is reserved for a contraction of money and credit relative to goods and services such that prices fall (or money gains in purchasing power, take your pick). Such a process usually results from widespread bankruptcies and business failures.

The falling prices you allude to in the agricultural example, result from greater productivity (i.e., from an increase in supply). More stuff at lower prices = good.

In short, both INflation and DEflation are monetary phenomena. Price changes are their Effects not their causes.

Sat, 09/24/2011 - 21:29 | Link to Comment DCFusor
DCFusor's picture

There is, however, an endgame, and some deflationary forces are taking us there.  It's near the point where full employment in value creating jobs is impossible.  It just doesn't take all of us working to make the amount of "stuff" we all want.  Under our semi-capitalist system, we don't have ways to handle those who can't justify their existance by doing productive work very well.  Yes, we hire marketing guys, lawyers, people to shuffle papers and get coffee when times are good, but when the rubber hits the road, like now - a lotta people find no one has any interest in some of those skills.  And those who do produce don't much like paying for the safety net for those that don't -- I'm one of them, but it seems cheaper (at least, less stressful and messy) than shooting people for trying to steal your food and so on.

We can't quite get there.  At the point the one big robotic factory makes everything everyone needs -- the capitalist motivation for building it disappears, because there's no way to reward the guy who builds that factory.  And we're bumping up against it now -- note all the lawsuits and M&A that don't increase the size of any pie, but just try to steal a bigger slice of the same one?  That's the symptom.  The Star Trek universe would be nice, but human nature prevents us getting there, sigh.

Been thinking about this a lot, and so have a lot of other smart people.  No answer yet that can't be picked apart in seconds by someone else smart, sad to say.  That pesky human nature can't be changed much if at all, despite what our "conditioners" think, and it gets in the way real bad at some point in every scheme that looks any good.

Sun, 09/25/2011 - 02:30 | Link to Comment chindit13
chindit13's picture

It just doesn't take all of us working to make the amount of "stuff" we all want.

Bingo!  Therein lies the intractable problem.  It also gets worse if we suddenly decide we no longer want what we want.  Perhaps the next Messiah will be an anti-Tom Peters and we will all praise inefficiency.  I often think the entire debt bubble was allowed merely to keep the game going, by creating demand for bigger houses filled with more "stuff".  Of course other than no arbitrageable labor, we moved everyone to China and India, creating in those countries dreams and expectations that cannot help but be dashed.

In the nation of my current residence, we embrace inefficiency with a cultural passion.  Most stores regularly have five times as many staff as customers.  It makes an Apple Store look as if they need to hang a "Help Wanted" sign.  A golf course where I like to practice my multi-lingual cussin' has hundreds of workers, some even weeding the greens by hand.  As a lad I spents summers as a greenskeeper on a regulation size course in the US.  We had a staff of eight.  Farming is done the old way, with an ox pulling a wood and steel plow.  Tilling an acre, with tea breaks and snake warnings, is a multi-day job.  Refurbished roads are tamped by an army of men carrying hand tampers, which is a bamboo pole attached to a flat piece of steel.  No steamrollers needed, and the work is so poorly done that there's pot holes aplenty to fill in two weeks' time.

Maybe I am seeing the future by seeing our past, or their present here.

Sun, 09/25/2011 - 06:50 | Link to Comment Vlad Tepid
Vlad Tepid's picture

We're all Luddites now!

Sun, 09/25/2011 - 03:13 | Link to Comment chindit13
chindit13's picture

.

Sat, 09/24/2011 - 21:19 | Link to Comment Saxxon
Saxxon's picture

"Hence, as Bernake had mentioned in a prior testimony to congress, without debt, there would be no 'money' (as he understands it)."

This just demonstrates yet again what people like the Bernank and his cartel are; a pit of blood-rasping vipers, seamlessly programmed without a human conscience.

Sat, 09/24/2011 - 21:53 | Link to Comment superuser
superuser's picture

Why wouldn't wages also deflate along with prices? Doesn't seem like the math squares at the business level, let alone that this scenario flies in the face of capitalism as it is manifested today

Sun, 09/25/2011 - 18:28 | Link to Comment LongBalls
LongBalls's picture

Education at its finest. You sir, are in danger of providing substance to society. Now try to put it on a bumper sticker so the sheep can understand.

Sat, 09/24/2011 - 22:29 | Link to Comment bardian
bardian's picture

I fail to see how the fact that fewer people can farm and thus food costs < 10% of the average wage vs > 40% a few decades ago, is BAD

DING DING DING!!

I read your post before your name.  Thank you for correctly articulating the mechanism of economic progression, which, once understood, obligates one to libertarianism.

Economic progression IS increased real wealth.

Increasing real wealth IS decreased cost of living relative to wages.

How does this happen? Savings and investment leads to increased capital leads to increased productivity.

 


Sat, 09/24/2011 - 22:51 | Link to Comment Fake Jim Quinn
Fake Jim Quinn's picture

There are two types of deflations. Good deflation is when technology increases productivity and costs fall. Bad deflation is when shop owners are going broke and dumping goods on the market. I don't think the Fed distinguishes well enough between these two. They apply a "one-size-fits-all" approach. But that would not surprise any ZH reader. Until the Fed makes the difference, they'll keep printing

Sun, 09/25/2011 - 00:13 | Link to Comment mjk0259
mjk0259's picture

"Now think from a wage point of view, in a deflationary environment, my wage never goes up, but my purchasing power does. However progressive taxes don't work in a deflationary environment, and neither do capital gains taxes or taxes on real assets."

 

Not so, wages go down in both nominal and real terms. When I started working at a real job, we had free medical, pension, and got paid for overtime.

Now, I have to work 60 hours a week but only get paid for 40. No pension. Medical costs me about as much as if I just paid it myself.  I'm still better off then at least 80% of country despite the constant threats to outsource my job to India.

Sat, 09/24/2011 - 19:34 | Link to Comment knukles
knukles's picture

 

 

 

 

Print print print print Nothin has changed
Print print print print Cept getting worse
Print print print print Get us outa this mess
Print print print print Be like a nurse
Print print print print Make like good
Print print print print Make like adult
Print print print print Print lots of money
Print print print print So Greece don't default
Print print print print Protect the banks
Print print print print Politicians too
Print print print print It's Joe Public
Print print print print Whose gonna get screwed

Sat, 09/24/2011 - 19:36 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Sorry. I don't think I understand. Are you suggesting that there might be some printing in our future? :>)

Sat, 09/24/2011 - 19:50 | Link to Comment agent default
agent default's picture

In our grim dark future lies only ink.

PrintHammer 40K

Sat, 09/24/2011 - 19:48 | Link to Comment MsCreant
MsCreant's picture

I saw the other version first. I was posting to let you know there was a koan in there.

What is printing? What does it mean to print? What are some of the ways we use the term? Can't decide if it is Zen or Post modern, both or neither, but something else.

Cultural reproduction. Petri dish, virus, you feeling my weird sick game here?

Print print print print 
Print print print print 
Print print print print 
Print print print print
Print print print print 
Print print print print 
Print print print print 
Print print print print 
Print print print print 
Print print print print 
Print print print print 
Print print print print 

Sat, 09/24/2011 - 22:32 | Link to Comment subqtaneous
subqtaneous's picture

just 4 u, mscreature: http://youtu.be/xOCceWqy76g

 

can't tell 'em apart --- ;-)

 

Sat, 09/24/2011 - 22:58 | Link to Comment FeralSerf
FeralSerf's picture

Isn't that a command in Fortran?

The PRINT statement writes the string in quotes to the standard output channel, e.g. the display terminal.

Sun, 09/25/2011 - 02:43 | Link to Comment knukles
knukles's picture

Post-modern, pre-apocolyptic faux, early Filipino seashell enhanced collateral excess fiat printing.
That or Ben's beard trimmings.

Sat, 09/24/2011 - 19:30 | Link to Comment jm
jm's picture

How about everyone look at rising LIBOR as a signal of rising real interest rates.  Then look at Fed balance sheet expansion coming to an end for a while.  These two things tell the story of gold like Mayweather clocking Ortiz.

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