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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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'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.


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? 

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. 

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.

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.


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.

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?

Ahmeexnal's picture

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

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

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.

ISEEIT's picture

Fuck you. Explain yourself. Sell it asshat?

brandy night rocks's picture

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

Are you kidding's picture

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

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?

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 ,

 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.

Freebird's picture

Buffet probably short BAC to cover his "investment".

ToNYC's picture


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

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....)

Withdrawn Sanction's picture

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

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.

stacking12321's picture


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.

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

optimator's picture

Nija?  More like Kamikaze.

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!

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), 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:  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. 

madbomber's picture


still alive is always good.












SheHunter's picture

You rock DC.  Keep at it.

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.

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...

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


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


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.



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?

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.

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.

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.





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.



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!

Mike2756's picture

Forget copper, gasoline is about .5 rich here.

Chuck Walla's picture

Anyway, Freeport is taking gold mining seriously now.

Silver Bug's picture

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

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.


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?)

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




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.