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There Is No Joy In Muddlethroughville: World's Biggest Hedge Fund Is Bearish For 2012 Through 2028, And Is Long Gold

Tyler Durden's picture


That Ray Dalio, famed head of the world's largest (and not one hit wonder unlike certain others) hedge fund has long been quite bearishly inclined has been no secret. For anyone who missed Dalio's must see interview (and transcript) with Charlie Rose we urge you to read this: "Dalio: "There Are No More Tools In The Tool Kit." For everyone who is too lazy to watch the whole thing, or read the transcript, the WSJ reminds us once again that going into 2012 Dalio's Bridgewater, which may as well rename itself Bearwater, has not changed its tune. In fact the CT hedge fund continues to see what we noted back in September is the greatest threat to the modern financial system: a debt overhang so large, at roughly $21 trillion, that one of 3 things will have to happen: a global debt restructuring/repudiation; global hyperinflation to inflate away this debt, or a one-time financial tax on all individuals amounting to roughly 30% of all wealth. That's pretty much it, at least according to mathematics. And according to Bridgewater. From the WSJ: "Bridgewater Associates has made big money for investors in recent years by staying bearish on much of the global economy. As the new year rings in, the hedge fund firm has no plans to change that gloomy view...What you have is a picture of broken economic systems that are operating on life support," Mr. Prince says. "We're in a secular deleveraging that will probably take 15 to 20 years to work through and we're just four years in." So basically scratch everything between 2012 and 2028? But, but, it was that paragon of investment insight Jim "Bloody Ridiculous Investment Concept" O'Neill keeps telling us stocks will go up by 20%... stocks will go up by 20%....stocks will go up by 20%...

From the WSJ:

Robert Prince, co-chief investment officer at Bridgewater, and his managers at the world's biggest hedge fund firm are preparing for at least a decade of slow growth and high unemployment for the big developed economies. Mr. Prince describes those economies—the U.S. and Europe, in particular—as "zombies" and says they will remain that way until they work through their mountains of debt.


In Europe, "the debt crisis is [a] long ways from over," he says. The economic and financial morass will mean interest rates in the U.S. and Europe will essentially be locked at zero for years.


In this bleak environment, Mr. Prince says stocks remain vulnerable to "air pockets" from shocks, such as bad news out of Europe. But for longer-term investors looking out over the next decade, he says, equities may be a good buy. There is even money to be made in U.S. Treasurys, despite interest rates near record lows, and gold is likely to resume its climb as central banks print money to bolster their economies. Mr. Prince says

Unlike Paulson, who would have been best advised in the beginning of 2011 to park his money with these "bears", and has lately become a running watercooler joke, what Bridgewater says is actually relevant:

The views of Bridgewater are keenly watched by other investors, given the firm's elevated status in the competitive world of hedge-fund investing. Bridgewater's flagship Pure Alpha Strategy fund is considered one of the top funds in the world. As of the end of November, it was up 25% since the start of the year, according to people familiar with the situation. The average macro fund had lost 3.7%, according to Hedge Fund Research.

Also, don't tell spam-loving party animal econ professors, but the $122 billion hedge fund, is long gold.

Currently, the fund is positioned for higher gold prices, stronger Asian emerging-market currencies and lower yields across high-quality government bond markets, Mr. Prince says.

And for all those marrionettes who parrot the release of patently manipulated and fraudulent data such as anything out of the BLS or the NAR, here is what is really driving those "better than expected" recent numbers, which goes to the core of our argument that the US has not decoupled - not by a long shot - it is merely sustaining as consumers deplete every last bit of savings. Another words for which, of course, is lagging.

Recent better-than-expected news on the U.S. economy is unlikely to be the start of a healthy expansion, he says. The uptick in economic growth has been fueled by a decline in the savings rate, which, without material income and employment gains, is unlikely to be sustainable as long-term credit growth also remains weak, he says.


The problem for the U.S, says Mr. Prince, is that it is on the wrong side of a long-term debt cycle.


"We were in a leveraging-up period for 60 years, from the early 1950s to 2008," he says. This debt bubble was self-reinforcing on the way up, and "when it tipped over, it set about a self-reinforcing process on the way down."


As evidence for the long slog facing the U.S economy, he notes that the level of leverage, as measured by comparing household income to net worth, is still higher than it was before 2008.

Which means what?

Against this backdrop, the Federal Reserve will need to do more quantitative easing—buying of government bonds—but Mr. Prince says the purchases will probably be sporadic.


Gold prices should resume a rally amid continued printing of money by the Fed and other central banks, Mr. Prince says. Those efforts effectively devalue those countries' currencies compared with gold.

Bingo, and thus for all the (completed redemption driven) year end gold dumping, we have just one question: when is John Paulson's Q4 13F coming out (that's rhetorical - we know not only when it is coming out, but what is in it - stay tuned).

As for the cataclysm across the Atlantic:

"You've got insolvent banks supporting insolvent sovereigns and insolvent sovereigns supporting insolvent banks," he says.

We could not have said it better ourselves.


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Mon, 01/02/2012 - 23:37 | 2027714 ACP
ACP's picture

No joy bitchez!

Mon, 01/02/2012 - 23:38 | 2027717 TruthInSunshine
TruthInSunshine's picture

Ray Dalio or James Cramer...


Ray Dalio or Barton '20mm AUM Smally' Biggs...


Ray Dalio or Dick Bove....




Mon, 01/02/2012 - 23:41 | 2027728 ACP
ACP's picture

Correction: It will be a fucking GREAT year if you're a PD.

Mon, 01/02/2012 - 23:50 | 2027757 TruthInSunshine
TruthInSunshine's picture

Unless you wind up as the next MF Global.

Tue, 01/03/2012 - 00:06 | 2027791 TruthInSunshine
TruthInSunshine's picture

As Cameron attempts to protect his masters (the toxic, debt laden financial institutions so prevalent in the UK that are the result of The House of Red Shield's influence, whereby taxpayers are the debt serf collateral to allow for the draining of sovereign nations by private interests), Germany may have finally have decided to call a spade a spade, and take their ball home.

Only this time, Germany won't be the villain. They'll be the only sane actor at the table when it all comes crashing down, and they'll be duly noted as one of the few nations that tried to stop the great implosion that was rigged by the financial engineers fo mass destruction years ago, back when nobody was listening.

Tue, 01/03/2012 - 00:11 | 2027798 flacon
flacon's picture

This is what George Soros said of CHARLES Prince III (different Prince, but a Prince nonetheless):


George Soros is said to have replied upon hearing of the remark from the former head of Citigroup, Chuck Prince, in which, Prince said on the lead-up to the catastrophic meltdown in home values in America that "we [Citigroup] have to dance until the music stops". Soros noted that "Actually the music had stopped already when he said that.

Tue, 01/03/2012 - 00:11 | 2027806 Ahmeexnal
Ahmeexnal's picture


Greece and Italy are rising up against the german rapist bankers.

Italian partisans are already targeting german-proxy tax collecting agencies in Italia.

It will only end when Merkel hangs just like il Duce.


Tue, 01/03/2012 - 00:19 | 2027820 TruthInSunshine
TruthInSunshine's picture

I'm going to have to do the big spat thing with you on this.

In reality, Cameron and all of the UK's bagmen and bagwomen would love to see PIIGS get bailed out, so long as UK financial institutions having exposure to PIIGS toxic feces get zero haircuts (just like when TARP, TALF & QE were done in the U.S., seeing nearly every large financial entity that was a BFF of the New York Branch of the Fed [JPGoldmanStanleyWellsBankOfBerkshire]getting 100% on their ill-advised investment courtesy of U.S. taxpayers).

It's exclusively because UK seedlings of the House of Red Shield would have to sustain haircuts that Cameron derided any significant measures designed to salvage what would even amount to a much smaller, core EU state (even if that is next to impossible, at this point, IMO).

Tue, 01/03/2012 - 00:21 | 2027827 Ahmeexnal
Ahmeexnal's picture

The recent PM price smackdown is the result of the looting of italian gold by the eurobanking mafia cartel headed by Douche Bank.

Once the italians realize they have been robed blind, it will be open season on german, french and uk citizens. 

Tue, 01/03/2012 - 00:25 | 2027832 TruthInSunshine
TruthInSunshine's picture

Italian politicians have sold their citizenry down the river.

Berlusconi was as big a POS as anyone.

I will grant you that Italians were blind sheeple grazing at the welfare state trough, but that's what sheeple do, whether they're Italian, Greek, Spanish, French, British, Irish, Portugese, American, etc. etc. etc.

(I do hear that Iceland has a very feisty breed of sheople, however, that has retained a spirit of independence and defiance once displayed prominently by their ancestors).

Tue, 01/03/2012 - 00:39 | 2027839 Ahmeexnal
Ahmeexnal's picture

Hungary is also in defiance of the eurofascist project, with a new constitution that will put a leash on it's central bank:

Critics say the law curbs constitutional court powers, threatens media pluralism and ends judicial independence, while accompanying cardinal laws will limit central bank independence, tilt future elections in Fidesz's favour and perpetuate its tax policy, effectively tying the hands of future governments.


It will also put an end to the globalists genocidal agenda:

The constitution also references God, defines marriage as a union between man and woman and life as beginning at conception, sparking criticism from international organisations and EU members.


As a result, the IMF, the EU, Hilarious Clinton and other globalist puppets are outraged at this open display of rebellion.

Expect a no-fly zone over Hungary soon, followed by depleted uranium showers all over the country.

Tue, 01/03/2012 - 03:34 | 2028058 eureka
eureka's picture

And who in the US is in defiance of US centralism, Federalism and globalism?

The fourth "solution", unmentioned by Mr. Mega-HedgeFund, is WWIII - which US will launch through proxies and false flags "provocations, any day now - because only WWIII can "save" the day for US Empire, the worst fiat monger and military bamboozeler in the history of the world.

It is coming. Courtecy of your elite and your national pride, US citizens, who back them - and love war more than life, because nothing can give you that cushy little feeling of righteousness and supremacy like war can..

Tue, 01/03/2012 - 07:31 | 2028148 Oh regional Indian
Oh regional Indian's picture

2 true Eureka.

The US has been a Fascist state since it's inception. A fascist state, supposed to be a Con-stitutional Republic but mostly called a Demoncrazy.

If you don't even know your own name....any wonder it's schizophrenic nation?



Tue, 01/03/2012 - 00:55 | 2027875 Manthong
Manthong's picture

Don't forget those nice Swiss politicians and their flock.

Tue, 01/03/2012 - 07:33 | 2028150 twotraps
twotraps's picture

  TIS, Well said, recently asked my 19 month old daughter who spilled the milk?    '...Zoe....'  Zoe is my Dad's dog....Hyper-complicated, triple-hypothecated, opaque economic-political bull-shit.....comes down to human nature, a bunch of little kids blaming everyone but themselves and absolutely not respecting the fragility or stupidity of the entire system.

Tue, 01/03/2012 - 00:36 | 2027849 ACP
ACP's picture

The problem is, Jon Corzine is still living it up in his High Castle and most people here still have to get up and go to work tomorrow.

Tue, 01/03/2012 - 00:51 | 2027869 YBNguy
YBNguy's picture

Well some of us don't have to work tomorrow due to being recently laid off, happy holidays indeed...

Tue, 01/03/2012 - 01:42 | 2027941 ACP
ACP's picture


Tue, 01/03/2012 - 03:45 | 2028066 Scirocco
Scirocco's picture


Mon, 01/02/2012 - 23:37 | 2027716 gangland
gangland's picture

really good interview thanks, watching it now.

Tue, 01/03/2012 - 01:28 | 2027923 MiddleageThinni...
MiddleageThinninghair's picture

Charlie's interviewing style of constantly interrupting and trying to preemptively interpret is highly annoying.

Ray, is very interesting to listen to.


Tue, 01/03/2012 - 02:45 | 2027937 gangland
gangland's picture

rose is maddeningly annoying which is why I don't watch him regularly.

you're right, he won't shut up long enough to let his guests finish a thought.

I enjoyed what Ray had to say. I'm so cynical about elites, particularly those in the fire sectors.

But, I was very impressed with what Dalio had to say, to the point that I sought out more, including some criticisms directed towards him, as well as his rebuttal.




Tue, 01/03/2012 - 04:32 | 2028097 Snidley Whipsnae
Snidley Whipsnae's picture

"rose is maddeningly annoying which is why I don't watch him regularly."


+1... Rose is disgusting. I stopped trying to listen to his interviews years ago. He must be doing what his handlers want; ie, disrupting interviews.

Mon, 01/02/2012 - 23:40 | 2027720 Jim in MN
Jim in MN's picture


That's the sound of a Lost Generation.  All because of CORRUPTION and moral bankruptcy.

Mon, 01/02/2012 - 23:47 | 2027736 bob_dabolina
bob_dabolina's picture

What it do Jimbo? 

Did you hear about the aerosolized plutonium detected in Europe from Fukushima? 

How long does it take to get cancer from that shit?

Mon, 01/02/2012 - 23:47 | 2027747 john39
john39's picture

they spray metals all the time from planes, usually aluminum... helps monsanto take over agriculture with its franken-products.  occaisonal radiation is just an added bonus.

Tue, 01/03/2012 - 01:56 | 2027962 falun bong
falun bong's picture

bullish for metals then


Mon, 01/02/2012 - 23:41 | 2027724 strangeglove
strangeglove's picture

Booyah Bitchez!

Mon, 01/02/2012 - 23:41 | 2027726 Caviar Emptor
Caviar Emptor's picture

Goldman selling "Mayan puts" on gold miners. 

They expire 1/2013. Goldie promises to pay if world ends. 

Tue, 01/03/2012 - 00:57 | 2027879 Long-John-Silver
Long-John-Silver's picture

That's like buying life insurance with no surviving family members.

Mon, 01/02/2012 - 23:42 | 2027730 bob_dabolina
bob_dabolina's picture

I wouldn't discount stock prices going up. Let's not forget the best performing stock market of the decade; ZSE

I postulate that the debt jubilee enviasaged is less probable than just printing the money. Both are painful though countries (or empires) have never collapsed due to deflation, only under the conditions of inflation-hyperinflation have these social edifices collapsed.  

I wouldn't discount another wave of massive delevering and deflation before we hit the inflation tsunami. It's a very tenuous time to be investing, that's for sure. 

Tue, 01/03/2012 - 07:38 | 2028154 twotraps
twotraps's picture

I agree with you.  Perhaps a 'light' version of 08 where everything sold off, maybe less panic but definitely an effort to raise cash.  I still wonder why they would entertain wild, hard to control inflation when a painful deflation could be cushioned by new accounting regs or more bullshit to allow banks to hide losses??  They are doing that anyway, and deflation leaves the game intact, ready to re-inflate at a later date without calling it 'hyper-inflation'???

Mon, 01/02/2012 - 23:45 | 2027739 Bansters-in-my-...
Bansters-in-my- feces's picture

Got Gold ?

Mon, 01/02/2012 - 23:46 | 2027742 FrankDrakman
FrankDrakman's picture

Meanwhile, some moron at Slate is telling us everything will be fine:

Mon, 01/02/2012 - 23:50 | 2027763 TruthInSunshine
TruthInSunshine's picture

Joe Wiesenthal & Andrew Ross-Sorkin are sexting each other right now.

Tue, 01/03/2012 - 02:40 | 2028021 Hopium Dealer
Hopium Dealer's picture

Andrew looks like a former ankle grabber..

Mon, 01/02/2012 - 23:56 | 2027765 Caviar Emptor
Caviar Emptor's picture

Long personal radiation shields and detection kits for 2012 on Iran, Nth Korea, Paki all revving up, mushrooming Euro missile shields, Russia nuclear smuggling, fire-prone nuclear subs, ocean radiation dumping, nuclear fish (fuku~sushi) and baby milk, and US pre-approving first nuke plant in over 30 years. What could go wrong? 

Mon, 01/02/2012 - 23:52 | 2027767 nah
nah's picture

you dont need to own anything anymore


the government is fine

Tue, 01/03/2012 - 00:04 | 2027784 antidisestablis...
antidisestablishmentarianismishness's picture

"4 years in" and the S&P has been up big or flat in 3 of the 4 years.  Hmmm.

Tue, 01/03/2012 - 00:04 | 2027785 RobotTrader
RobotTrader's picture

This guy will probably do OK on his gold longs.


But he's going to get destroyed on his bearish view on stocks.

Tue, 01/03/2012 - 02:39 | 2028017 akak
akak's picture

RobotRetard would probably do OK on his gold longs, that is, if he actually owned any --- until the curtain goes up on MFG act II (and acts III, IV, etc). 

But of course, he is going to get destroyed by the coming two-decade bear market in stocks.

Tue, 01/03/2012 - 02:38 | 2028019 Hopium Dealer
Hopium Dealer's picture

You'll be Trollin' in 2012 it looks like..

Tue, 01/03/2012 - 02:44 | 2028023 akak
akak's picture

It's the RobotRetard Bunny: he keeps going, and going, and going, and going ..... just about as automatically and mindlessly, too.

Unfortunately, Bernanke put lithium (carbonate) batteries in him before winding him up.

Tue, 01/03/2012 - 00:06 | 2027794 Meremortal
Meremortal's picture

2028? Nah, things will look a lot better by 2022! It's time to start looking past the Big Dip instead of waiting for it to happen. It's happening now. Life goes on. Get cracking.

Tue, 01/03/2012 - 02:49 | 2028032 Hopium Dealer
Hopium Dealer's picture

I  agree. Look at collapses through history. A hyperinflation depression followed by a deflationary depression would take globally about 10 years at this stage. If this circus goes on until 2014-2015 then 2028 would right.

Tue, 01/03/2012 - 02:51 | 2028036 Hopium Dealer
Hopium Dealer's picture

I agree. Look at collapses through history. A hyperinflation depression followed by a deflationary depression would take globally about 10 years at this stage. If this circus goes on until 2014-2015 then 2028 would right.

Tue, 01/03/2012 - 07:40 | 2028158 twotraps
twotraps's picture

Hopium, never really read about hyperinflation-depression and its duration, where can I read about it ?  Thanks.

Tue, 01/03/2012 - 00:07 | 2027795 San Diego Gold Bug
San Diego Gold Bug's picture

Long gold of course.  Gold has now gone up 11 years in a row at an average of 18.5%.  Gee....tough call.  Stack em, pack em and rack em.  Thanks to the ZH reader who mentioned!

Tue, 01/03/2012 - 00:14 | 2027803 ebworthen
ebworthen's picture

Holy Fuck.

I cannot talk common sense to otherwise intelligent people.

Family members being screwed over by Wells Fargo and they think I am a tin foil hat wearer.

Good friend who has a credit card balance of $7,000 at 9.99% or higher who has a savings account of $8,000 who thinks I am a conspiracy theorist for telling them to pay off the damn credit card and that they are losing money earning 0.5% on a savings account while paying 9.99% on a credit card balance!

Oh but wait...they need a good FICO score!

But wait...the Government wouldn't let Wells Fargo and Chase do something illegal, would they????



Tue, 01/03/2012 - 00:52 | 2027872 xela2200
xela2200's picture

Don't forget the people who increase their payroll withholding, so the government gives them back money come April 14. Financial common sense is not as common as You might think.

Tue, 01/03/2012 - 01:27 | 2027922 JohnG
JohnG's picture



Same problem here.  I've stopped trying.  Only give advice when asked.  It's just not worth the mental pain.

Some people just have to figure it out for themselves, and they just might not.

Get used to it......

Tue, 01/03/2012 - 01:55 | 2027960 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Yep, I have dropped out of the game of trying to warn those who do not listen.  If things go bad, it's no longer my problem if they decided not to look and prepare.

"Prophecy Fatigue"

Tue, 01/03/2012 - 02:21 | 2027995 Deo vindice
Deo vindice's picture

I have found that (unasked for) advice that is freely given is given the precise value that was paid for it.

Keeping my mouth shut and my eyes open has been a whole lot less painful.

Tue, 01/03/2012 - 09:10 | 2028279 bernorange
bernorange's picture

I used to be sounding the alarm pretty strongly, but have recently stopped.  I'm still sharing my thoughts and perspective on events, but confined to my own "real estate".  Those who are receptive to engaging the subject(s) will find their way.

Tue, 01/03/2012 - 02:31 | 2028011 dolph9
dolph9's picture

Yep, exactly.  It's not worth the hassle.

Besides, alot of these sheeple are actually fairly benign.  They are content with Cheetos and 500 cable channels, why burst their bubble.  They aren't going to go postal overnight.

Tue, 01/03/2012 - 02:23 | 2027998 passwordis
passwordis's picture

Umm, not the advice I would give.  Having debt in a high inflation/hyperinflation economy works in the debtors favor. Of course, it depends on his financial situation and outlook.  I might suggest he keep the debt and buy 200 or 300 ounces of silver with the $8000.  

  Even if we don't hyper inflate, his silver might double or triple in 2012.

  If trading cash for depth is going to determine whether you eat or your rent is paid, than by all means, pay the debt off.. but if  the rate is reasonable and the payment is something you can deal with without worrying about the necessities than why would you want to give a large sum of cash to a bank when you can save it for emergency's or trade it for something that will maintain or possibly increase it's value.?


Tue, 01/03/2012 - 12:58 | 2029048 MachoMan
MachoMan's picture

It's good advice.  We have a biflationary environment and a currency with an unknown, but certain, expiration date.  As a result, we have to hedge for both contingencies.  By paying off debt, the meantime deleveraging/necessity inflationary environment will be more easily traversed.  I presume that with the savings account, he's risk averse with the money, so where else is he going to put it that will return 10% (or not eat 10%)? 

I think it's also safe to presume that with a savings account, he probably has a source of income... if he'll throw his unlevered dollars into diversified inflationary hedges, then he'll be rocking and rolling in no time.  There's just an order of operation to these things... pay off the debt first, then worry about inflation... this is what the biflationary environment requires of us... 

In the end, it's all about converting ethereal dollars into real products (guns, gold, gummy bears)...  and he would accomplish that (whatever he bought with the cards).  If you can do it without leverage, you can find returns that keep close pace with inflation...  but not without a lot of looking.

Tue, 01/03/2012 - 00:14 | 2027811 Caviar Emptor
Caviar Emptor's picture

See massive Russian nuke sub fire (12/30/11). oh the fire is out so no worries. Chernobyl fire was put out.

Tue, 01/03/2012 - 07:22 | 2028146 Mitzibitzi
Mitzibitzi's picture

From what I read, it was an external fire. Burned all the paint and the anechoic coating off most of the hull, but there was no interior damage apart from some blistered paint and melted insulation. What makes me laugh is how long it took them to cotton on to submerging it down to the sail level to put the bloody fire out. It's a submarine, for God's sake! They're meant to do that!

Tue, 01/03/2012 - 00:14 | 2027813 lynnybee
lynnybee's picture

... i have joy, gentlemen.   i've discovered the joys of truth & wisdom & the joy of education in precious metals.   

Tue, 01/03/2012 - 01:57 | 2027965 DoChenRollingBearing
DoChenRollingBearing's picture

Good for you lynnybee!  Another + 1 for you.

It has been my great pleasure to read your comments re .gov scumbags.

Your precious metals will be much appreciated by your descendants, they will not forget...

Tue, 01/03/2012 - 00:16 | 2027817 kito
kito's picture

Seems optimistic to me. No end to all fiat currencies, bank runs, food shortages, chaotic social unraveling.........I'm not seeing this jiving with tylers view of an end game.......

Tue, 01/03/2012 - 00:16 | 2027818 Instant Karma
Instant Karma's picture

I believe the same things. It's simple math. I had been buying gold with lesser amounts of the white metals (Ag, Pt, and Pd). But the economic sensitivity of these has led me to focus exclusively on Au.

I too believe gold prices are viciously suppressed by governments to attempt to maintain some semblance of value in their currencies. Use their manipulation to your advantage and buy the dips.

Some weeks in the gold and silver pits they trade nearly an entire years worth of production in just a week. Usually as the price is being pushed down. This price suppression kind of works until the real word price of physical starts shooting over the phony spot paper price.

Tue, 01/03/2012 - 02:37 | 2028018 passwordis
passwordis's picture

I too believe gold prices are viciously suppressed by governments to attempt to maintain some semblance of value in their currencies.


 I used to think that too but the real reason they keep it down is to buy up as much as they can, in anticipation of a gold standard which was their plan all along.  The culprits holding down the price just happen to be the same culprits who own all of the gold... amazing how that happens..  

When Ron Paul is elected and gets his gold standard, where is he going to get all the gold?  And at what price? 

Answer:  From the culprits, and at whatever price the culprits demand. 

Tue, 01/03/2012 - 03:43 | 2028063 bardot63
bardot63's picture

Why is it that otherwise supposedly intelligent zerohedge readers cannot understand, don't get, can't seem to fathom, the concept that you don't need tonnes and tonnes of gold to put a currency on the gold standard? 

True, you cannot back the inflated currency of any nation with gold at $1500 per ounce.  At that rate, there is certainly not enough gold.  But you can back all the currency in the world with just one ounce of gold -- if gold is valued at around $700 trillion per ounce.   And when you think about it, that's kind of where it's all headed.  Germany modeled that concept for us in 1921-23, with the horrific inflation of the Wiemar Republic, when any starving citizen would gladly have traded his wheelbarrow stuffed with trillion-Reichsmarks notes for a gold coin.  

Another way to view it:  If the dollar in your pocket is backed by only a single atom of gold, your day doesn't change at all, so what do you care?  At the moment, that dollar has nothing backing it at all.  The amount of gold needed to back currency diminishes with the rise in gold's nominal value. 


Tue, 01/03/2012 - 12:17 | 2028786 passwordis
passwordis's picture

Why is it that otherwise supposedly intelligent zerohedge readers cannot understand, don't get, can't seem to fathom, the concept that you don't need tonnes and tonnes of gold to put a currency on the gold standard?


  First things first, I never claimed to be intelligent but let me reply by asking you why "supposedly intelligent zerohedge readers" cannot comprehend what they read.  A gold standard, no matter what type, will certainly require more gold than what's currently available on the physical market. Needing tones and tones of gold is your claim. You miss the point.


 If the dollar in your pocket is backed by only a single atom of gold, your day doesn't change at all, so what do you care?.

 If your day does'nt change at all, than the gold standard is not all it's cracked up to be. It's supposed to change my day. That's the point.


 The truth is, there are so many variations of a potential gold standard that it is an exercise in futility to try and draw any conclusions.. Certainly if every dollar was backed 100% by gold, we would need tones of gold and what exactly happens with the currency in a gold standard? Will it still be a federal reserve note backed by the US government's gold? Or will the currency belong to the United states?

 Let's not pretend we have the answers. My point was, at some point the government may very likely need what the culprits have and the culprits will set the price ala the de beers diamond cartel.

Tue, 01/03/2012 - 00:20 | 2027825 fnord88
fnord88's picture

Question on government spending and its role in tech fields.

Politically I lean toward a form of anarcho-capitalism, but a physicist, geek and all round space lover, I realise that without government their would simply be no space industry.

Now the USA spends upward of $50 Billion each year between NASA and the DoD, and seems to get very liittle.

The ansari X-Prize, for the cost of $10 million, got multiple private companies to spend $100's of millions in order to win, developing new tech at a fraction of the cost of NASA.

Now instead of .gov picking winnings ( or losers as the case may be), if all research was incentive based, like the x-prize, would that be a good way to spur investment without having to pick winners? It is a strategy that can work across multiple fields, for example instead of giving Solandra all that money, if .gov had said we will give $500 Mil, to whomever can come up with a better form of solar that meets X and Y goals, then you are either paying for something that works, or not paying anything at all.


Batteries, fusion etc etc etc, the list of industries the government could stop spending billions on for shit results is long. And if nobody can meet the challange, .gov does not have to spend anything.


As far as i am aware however, no government anywhere does this. They all pick the company that is going to be able to do what no other company has done, and then seem shocked when it can't do it.

I know lots of people, me included, broadly believe governments do more harm than good, and have no role in business at all. But I also believe that NASA and the space race, were financial positives for the USA, not just in the new tech, but also in inspiring millions like myself to do science instead of Med or Financial etc.



p.s. it currently costs around $10 000 per kilo to lift shit to the space station. The shuttle was originally designed to make space cheap, rather than contractors in marginal electorates rich.

Tue, 01/03/2012 - 00:31 | 2027833 bob_dabolina
bob_dabolina's picture

The space race between Russia and the USA was really an extension of cold war tensions. 

Having the ability to shoot nukes at eachother would be the most efficient way of exterminating most life on the planet. Thus it became a national security priority. Also having the ability to spy from space was paramount. In fact there was a program run out of Danbury CT called the KH-9 Hexagon, and it's purpose was to design a satellite capable of spying on the Russians during the cold just became declassifed a few weeks ago. 

That's why so much money was funneled to the space program. The cost didn't matter, it just needed to get done, and get done quick.

I think sending these robots to Mars is a big waste of time and money. The fact of the matter is, is taking humans through the Van Allen radiation belt is impossible...the radiation is simply too high. The amount of lead required to protect human life would be too heavy using modern technology to leave our atmosphere.

Tue, 01/03/2012 - 02:01 | 2027969 falun bong
falun bong's picture


Kennedy conceived the Space Race as a way to defuse the Cold War, not continue it. Same amount of government spending as a war, only (relatively) peaceful and scientific outcome, not bloodshed. Of course the military got hold of the idea, and had to sieze the ultimate "high ground"

Tue, 01/03/2012 - 02:04 | 2027974 DoChenRollingBearing
DoChenRollingBearing's picture

The KH-9 was a great satellite for its time.  Amazing technology, actually.  It allowed imagery analysts to see LOTS of terrain at a reasonable quality level.  Money well worth spent.

There are a bunch of pictures from the ONE DAY exhibition a few months ago.  My daughter and her BF went and took pictures.  I have photos of the KH-9 at my blog.  Anyone interested in a link, please gmail me at my name.  And promise you will behave.  I ask ZH-ers to do this as I have recently got a spammer...  I also write under my own name.

Tue, 01/03/2012 - 00:45 | 2027860 ebworthen
ebworthen's picture

Space is the castle tower and fortress of the middle ages.

It is the airspace of WWII.

Whoever owns the high ground owns the batlte field.

Much of NASA spending is shadow military spending.

Research "Rods of God" to find a sensible weapons application of space technology.

I don't really care if there are Martians or not; let me sleep at night, or find some Gold or way to grow food in space.

Tue, 01/03/2012 - 04:39 | 2028102 knowless
knowless's picture

It would make sense to give the money to the person who solved the problem now wouldn't it? Instead of the hubris of believing to be all knowing enough to discern the humans capable.


I wish the government would post awards like that; they could have wanted signs for diseases, with amounts listed.. but you see, that would get in the way of the elites hoarding patents to maintain their wealth by disallowing the progress of technology and humanity..


so we've got to deal with that whole thing first I guess.

patent law is no longer an effective tool for spurring technological/societal progression, it needs to be reformed, so that the ideal is once again that ownership of ideas is granted to those who create them.

Tue, 01/03/2012 - 06:06 | 2028123 StychoKiller
StychoKiller's picture


RICH Economy step 1:
Offer a prize of $50,000/year to any worker that designs a
machine/software/process that will replace him/her.
Offer an additional prize of $30,000/year to ALL OTHER WORKERS that get replaced.

Answering conservative objections:
1. A machine works 24/7, thereby tripling output immediately.
2. Machines do not take sick leave.
3. Machines are never late for work.
4. Machines do not form unions and constantly ask for higher wages and more fringe benefits.
5. Machines do not take vacations.
6. Machines do not harbor grudges and foul up production in sneaky, undetectable ways.
7. Cybernation was advancing every decade anyway, despite the
   opposition of Unions, government, and other Alpha males; it was
   better to have huge populations celebrating the reward of $30K
   to $50K/year for group cleverness than huge populations suffering
   the humiliation of welfare.
8. With production rising due to Cybernation, consumers were needed and a society on welfare was a society of very meager consumers.

The majority of the unemployed, living comfortably on $30k/year, spent most of their time drinking, smoking, engaging in primate sexual acrobatics and watching TV.
When Moralists complained that this was a subhuman existence, Hubbard answered, "And what kind of existence did they have doing idiot jobs that machines do better?"

[/quote] -- R.A. Wilson

Tue, 01/03/2012 - 00:20 | 2027826 Black Friday
Black Friday's picture

But Soros said...

Tue, 01/03/2012 - 00:22 | 2027831 PaJoad
PaJoad's picture

Question for the experts: is Jim O'Neill correct on 20% stock ramp if door number 2 (global hyperinflation) is chosen? It's all about the trade until fiat becomes confetti, right? While buying phys in the mean time....

Tue, 01/03/2012 - 01:41 | 2027935 cranky-old-geezer
cranky-old-geezer's picture



It's all about the trade until fiat becomes confetti, right?


I can see a 50,000 DOW in the future.

...but gas will be $15 / gal and other necessities priced correspondingly.

...but I can also see America collapsing before then.  $8 / gal gas would do it. It would bring the economy down completely.

Tue, 01/03/2012 - 05:12 | 2028111 css1971
css1971's picture

Europe runs on $8/gallon gas. Or at least it did before the crash.

Tue, 01/03/2012 - 06:09 | 2028124 StychoKiller
StychoKiller's picture

Hmm, Europe uses the metric system, try 8Euros/LITRE.

Tue, 01/03/2012 - 00:33 | 2027844 bullnutz
bullnutz's picture

This from SilverDoctors:

Implementation of Dodd Frank Act Delayed till at least July 16th, 2012   Right before they left for the holidays, the CFTC slipped in a piece of legislation extending the implementation of Title VII of the Dodd Frank Act from taking effect on December 31, 2011 until July 16th, 2012.  Title VII of the Dodd Frank Act is one of the most crucial parts of the bill, dealing with the all allusive regulation of over-the-counter swaps markets.     Honestly, what is going to happen in the first 6 months of this year that everything is being delayed or rushed into law:  
  • JPM given entensions till May on position limits
  • Dodd Frank Act delayed until July
  • The Director of the FBI extended two more years.
  • NDAA  rushed into law:  Like where to put these terrorists that can't be released is a new issue?  
  • SOPA being rushed into law:  The Internet has existed for quite some time now, how is it that copyright is critical right now?
  • Emergency broadcast enhancements:  We are also testing a nationwide emergency broadcast system which, in a world of instant access to information, is significant only because it can be misused to LIMIT access to information

It's coming folks in the first 6 months of this year.  Watch the delaying techniques, they are a tell of when the devaluation will occur.

Tue, 01/03/2012 - 00:35 | 2027847 bankonzhongguo
bankonzhongguo's picture

Everyday I rise to understand that ALL OF THIS did not need to happen.

Its being done on purpose.

The last insult is to devalue the dollar 40% (already a good 10%) in order to consolidate all banking under a Basel III "crisis."  That should be good for another 100 year run.

For the amount of all the bailouts and swaps, the Fed could have paid off everyone's household debt 3 times over.

The "laws" don't matter anymore. 

So stop obeying them.  Our so called leaders certainty don't.

Help Ron Paul Save America.


Tue, 01/03/2012 - 00:52 | 2027870 Shineola
Shineola's picture

Banko, you are so right that the only way I can take the other side is to call you an anti-Semite. ;)

Tue, 01/03/2012 - 03:50 | 2028070 Conrad Murray
Conrad Murray's picture

Save A Country, Hang A Banker!

Tue, 01/03/2012 - 00:37 | 2027852 bob_dabolina
bob_dabolina's picture

...and there goes gold/oil

Tue, 01/03/2012 - 00:48 | 2027865 Shineola
Shineola's picture

I wonder if "long gold" means long paper? In this pretend and extend world, that would be short good judgement.

Tue, 01/03/2012 - 01:00 | 2027885 RobotTrader
RobotTrader's picture

Gold now up $50 from last week's lows.


Gonna be a huge gap up in ES tomorrow.

Tue, 01/03/2012 - 01:14 | 2027902 bob_dabolina
bob_dabolina's picture

Not gona' disagree, however, last I checked stocks were down Friday and Gold was up. Also, last I checked gold was up for the year and the SnP was unch.

What makes you so confident?

Tue, 01/03/2012 - 02:51 | 2028035 akak
akak's picture

Gold up $1300+ from last decade's lows.

Obviously, a huge gap in RobotRetard's historical perspective.

Tue, 01/03/2012 - 06:38 | 2028133 Mark Wilson
Mark Wilson's picture

"Gonna be a huge gap up in ES tomorrow."


Yep. SPY up $3 from Friday's close right now.

Tue, 01/03/2012 - 01:04 | 2027890 steveo
steveo's picture

Here is some free shit

Free Commodity newsletter from BPT and coupon expires tomorrow, just saying, I am done with begging after my telescope project, LOL

Tue, 01/03/2012 - 01:11 | 2027898 monopoly
monopoly's picture

Well, I did not "dump" any of my gold or silver. Took a 10% hit last quarter but that is just par for the game. Been moving up for years with dumps and pumps again and again. Weak holders out, now we can move higher.

I have never witnessed such bearishness on gold as  the last 3 months. Just amazing. You really think anyone in power in this country cares about US. Just keep adding on dips.

Good Night.

Tue, 01/03/2012 - 01:29 | 2027925 pleseus
pleseus's picture

Gold and Silver put in a bottom last week.  Both metals will grind higher throughout 2012 on a wall of worry.

Tue, 01/03/2012 - 01:40 | 2027939 i_fly_me
i_fly_me's picture

Thanks for pointing back to the Dalio interview, I missed it first time around and he is definitely someone to whom attention should be paid. I should have just read the transcript though.  Having to listen to that moron Rose talk through his nose at a guest who out-classes him on every level is excruciating.

Tue, 01/03/2012 - 06:13 | 2028125 slackrabbit
slackrabbit's picture

Bang on...Charlie should have just shut the hell up.

Also Rose's level of denial of how bad the situation is, must have frustrated the shit out of Dalio. His continual 'growth at all costs' and 'there must be money for ....'  bargaining clearly indicated he doesn't want to understand what the word bankrupt means.

If anything, the interview gives a perfect example of the denial in both the mainstream media and in the halls of power across the globe of just how up the creek we really are; something the Kyle Bass also complained about as well. 

Tue, 01/03/2012 - 02:23 | 2027997 Teamtc321
Teamtc321's picture

Re-load the page, they are there.

Tue, 01/03/2012 - 02:53 | 2028037 props2009
props2009's picture

Capital3x closes the year with record performance. The december trade results are displayed here. 87% success ratio on its trade calls with profits of 1900 pips in december alone.


From the time C3X began, it has accumalated over 10,000 pips in a space of mere 5 months while the S&P500 ENDED the year where it begain (0% return for buy and hold). 



Tue, 01/03/2012 - 04:06 | 2028080 linrom
linrom's picture

a debt overhang so large, at roughly $21 trillion, that one of 3 things will have to happen: a global debt restructuring/repudiation; global hyperinflation to inflate away this debt, or a one-time financial tax on all individuals amounting to roughly 30% of all wealth. That's pretty much it, at least according to mathematics.


The next time one of you parrots the official robber-Barron talking point that even if you tax the rich at 100%, it wouldn't make a dent, Ray Dalio says otherwise. Here you go 'some math":

divide $21T/30%, you get $70T in wealth amassed by the elites. But that is no surprise, total DEBT in US stands at $55T, which is the other side of wealth accumulated by the elites. It's not DEBT overhang that strangles the economy: its wealth accumulation. WHY! Because there is no money velocity at the top--it never gets spend. And when DEBT can't grow, the economy tanks.


And yes, all this "idle' money will eventually seek refuge in the stock market, or some other financial asset class; but, not a penny will be spend to bail out the economy until they kill the stock market.

Tue, 01/03/2012 - 08:53 | 2028256 Burr's 2nd Shot
Burr's 2nd Shot's picture

A "wealth" tax isn't a tax at all, it is merely confiscation.  I think the official robber-baron talking point deals with income tax, and the math on that is correct, you cannot get there by taxing income.

But if you want to steal their land, toys, businesses, etc., you can pay off all of the debts of the world.  Only problem there is that most of the rich have their wealth in illiquid investments (land being a big one).  If you are out stealing all of the money from the wealthy, who is going convert the asset into the fiat you need to pay off the debt?  And at what price will that conversion take place, current market value?  As a quick mental exercise, ask yourself why fences get away with not paying full market value for stolen goods.

Give unto fiat what is fiat.  To take any type of tangible asset and convert it into fiat to pay off fiat obligations is the stupidest thing I have ever heard.  The fact that you want to rob someone to make this happen is even worse.

Tue, 01/03/2012 - 05:11 | 2028110 ciaoant1
ciaoant1's picture

"If China," says Mr. Stapleton, M.P., to his constituents, "should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors." (Times, Sept. 3, 1873, p. 8.).

Tue, 01/03/2012 - 05:16 | 2028112 fonzanoon
fonzanoon's picture

I was with this guy right up until he endorsed treasuries.

Tue, 01/03/2012 - 05:18 | 2028113 steveo
steveo's picture

I finished organizing a new Nuclear and Radiation resource blog.

18 categorized pages

many links.

Quite a bit of original material I produced myself.

Blog format, with comments

Check it out

Tue, 01/03/2012 - 05:58 | 2028120 Milk Monk
Milk Monk's picture

I think that ZH is very wrong on everything, because when I try to talk to almost any of my friends about the fuckup going our way, they all think I am freaking depressive doomist... /sigh

Probably, the only reason why they think I am retard is because I do not know exactly "when" and "how much"... but I guess I am not alone on this.

Tue, 01/03/2012 - 06:28 | 2028129 ebworthen
ebworthen's picture

There is an intense pressure to "think positive" and "believe" and have "faith" that things will get better.

This pressure and these beliefs are what allow the mammon lusters to take advantage of people over and over again.

Nothing wrong with thinking positive; but in the face of no prosecutions for blatant theft, market manipulations, flash crashes, HFT machines, mortgage fraud, end of property rights, habeus corpus, fourth amendment, and completely bought/bribed politicians - it is delusional.

Tue, 01/03/2012 - 06:38 | 2028132 StychoKiller
StychoKiller's picture

The next time you feel the urge, just tell someone to google "Mandrake Mechanism", "Fractional Reserve Banking" or "Exponential functions".  Make them do their own research.

Tue, 01/03/2012 - 07:48 | 2028162 Overflow-admin
Overflow-admin's picture

/bored of being surrounded by sheepy friends unwilling to open their minds
/bored of seeing everyday well informed, and even sometimes brilliant bloggers
/bored of thinking why these categories cannot merge in their actual form


Some days I feel like I would prefer going all long on wine, so I can get drunk whatever the outcome of the crisis is. I remember an old anecdote about Weimar Germany: two brothers were asking themeselves how to deal with the crisis. The first one tought he was smart, bought Weimar bonds and lost everything. The second was bored of such crazy investments and spent all the money he could in wine. He actually had really good time drinking wine with friends, when everything was breaking apart, and started a bottler business at the end of the crisis.


Food for tought...


Okay, remembering that was interesting but did you see silver pulling up gold today? Fuck this is interesting! I think I should have bought around 27 last week. But it's okay, I'm getting used to it, I'll wait for the monkey brigade to smash down the comex and then I'll buy today's fucking dip. Silver bears: any advice?

Tue, 01/03/2012 - 08:20 | 2028180 Winisk
Winisk's picture

You are not alone.  I keep tinkering with new ways to get people to think about the unsustainable nature of our financial system.  I say, with a smile on my face, that my two young girls will not go to university because I won't be able to afford it.  I lay out how much it costs now, project the current rate of inflation out ten years, and come up with a number that blows their mind.   That's when I get the blank stare.  But I continue on.  I do the same with the cost of a modest home.  Tack on the price of a car, food and taxes.  Then I challenge them to tell me how my children will "muddle" through, have an affordable home, and raise a family of their own, while having the same opportunities that we have.  There never is a cogent reply.  The cheerful manner in my approach disarms them though because I am not a depressive doomster. I don't dare discuss peak oil or peak everything else, except as a casual remark.

Tue, 01/03/2012 - 09:08 | 2028277 Milk Monk
Milk Monk's picture

I can try :) though financing your university education is not that big issue here (Czech). Anyway I am not trying to be negative about the situation - I can hardly do anything about it myself so I am trying to describe it as an important background information which probably should drive our decisions in life - positively - to do some preparations, "hedge" the little wealth I have, consider my saving&spending, etc.

But the topic is like talking about funeral so many are denying right from the start.

Tue, 01/03/2012 - 06:06 | 2028122 lolmao500
lolmao500's picture

Let the doom begin :

Iran will take action if a U.S. aircraft carrier which left the area because of Iranian naval exercises returns to the Gulf, the state news agency quoted army chief Ataollah Salehi as saying on Tuesday.

"Iran will not repeat its warning ... the enemy's carrier has been moved to the Sea of Oman because of our drill. I recommend and emphasize to the American carrier not to return to the Persian Gulf," Salehi told IRNA.

Tue, 01/03/2012 - 06:56 | 2028134 PulauHantu29
PulauHantu29's picture

"Iowans love Ron Paul" is what the signs read behind the newsman last night on TV even though the reporter only mentioned Romney and Newt in the broadcast.

I wonder why MSM ignores him when he is leading in the polls there and is the only candidate who wants real change for a change?


Tue, 01/03/2012 - 07:13 | 2028141 Hedge Fund of One
Hedge Fund of One's picture

There is no Joy in Muddlethroughville ...
Joy to the World!



Tue, 01/03/2012 - 07:28 | 2028147 fonzanoon
fonzanoon's picture

Dow futures up 220. Looks like there is joy in muddlethroughville

Tue, 01/03/2012 - 08:16 | 2028201 gwar5
gwar5's picture

When I hear "Coordinated solution" to tax 30% of all financial assets in developed countries, what I really hear  is "Global Bank Holiday" and the issuance of a global replacement currency at a 70% exchange rate, or worse. There's no way they will send out bills or try to collect from everybody. They'll steal with the old tried and true methods like a new currency. 


The slumbering IMF with their SDRs proto-currency the most likely candidate. This would tax the developed world, cut sovereign debt, maintain a fiat currency status quo, and realign the new global realities of the emerging BRICs in a broad stroke using the same crises. It might even require that sovereigns hand over their gold to IMF control in order to partial-back (at first) a new global currency. This would make it palatable to the oil states and China and prevent a sovereign from getting any funny ideas about creating any competing currency. No, these pricks won't go back. They'll just try to kick the same 400 year old schemes up to the next level.

We are meant to suffer as long as it takes until we beg them for a "solution" and that's when their plans will be pulled out of the drawer where they've been sitting for 50 years.




Tue, 01/03/2012 - 08:27 | 2028217 aztec two step
aztec two step's picture

Here is an excerpt from the end of the WSJ article and Dalio was actually somewhat bullish on stocks:


"Mr. Prince also thinks stocks are attractive from a long-term perspective, especially compared with bonds or cash. Broadly, discounted earnings-growth rates, which reflect the expectations about future earnings implied by current prices, are negative, he says.

A moribund economic outlook "is pretty priced in right now," he says. "If we have a long, drawn out deleveraging process without substantial air pockets, chances are equities are a pretty good bet, ironically."

Tue, 01/03/2012 - 09:22 | 2028306 tooktheredpill
tooktheredpill's picture

Bigger doesn't always mean better. You would hope to be bullish over a 16 year period.

Tue, 01/03/2012 - 09:36 | 2028334 prole
prole's picture

James Altucher is "very bullish for 2012" and lays out the reasons why:

I'm not agreeing, or not agreeing, I'm just saying this should have its own ZH thread and discuss the yes or no of his call.

Tue, 01/03/2012 - 12:49 | 2028999 LooseLee
LooseLee's picture

That moron establishment shill is actually robotrader (aka James Altucher). Never saw a stock price he didn't like and wanted to buy (or, rather tell others they should buy)...

Tue, 01/03/2012 - 10:26 | 2028478 halflink123
halflink123's picture

This guy is a wall street tool. He  didn't see any of this coming and now he's lecturing...and I don't see ANY deleveraging going on, everyone is still spending and levering up like crazy, including corporations & the gov't. No I doubt there will be a "smooth" delev. and even whether a "smooth" delev. is a good thing.

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