The Gold and Silver Thread

[TakeAStepBack]

Well that's super dumb. Crazy super dumb. Gold is not remotely money. T-bills are closer to being money than gold. Gold used to be a medium of exchange. It's not any more. Austrians need to deal with it.

Gold is currently no longer money. That is correct. However, in the last fourty years after completely abandoning gold as the anchor to paper money, we've seen one catastrophy after another. These booms and busts get more and more uncontrollable every time they occur, and eventually the jig is going to be up on fiat money. Probably a whole lot sooner than most people think. Austrian scholars are already saying the next bubble is going to be the big one as the only place left for it to occur is in the dollar itself. I have no reason to not trust this prediction based on the credibility of those making the call.

Austrians will not abandon the liberty brought to exchange and markets accompanied by hard money, like gold. You can call them dumb all you wish (as if that hasn't been going on for years while cognitive dissonance from the callers prevails unabated), but they are not alone in this belief. China and Russia are already calling for a new gold standard, james Rickards, well known for his fed move predicitons and a 30+ year vet in capital markets says it too. Central banks hoard gold for a reason. And not bacause it has a long term investment return.

It'll come clear for you eventually, just like everyone else who snears at the idea this system isn't going to last. Only that will happen far to o late as per usual.

 

[DSGE]

Well that's super dumb. Crazy super dumb. Gold is not remotely money. T-bills are closer to being money than gold. Gold used to be a medium of exchange. It's not any more. Austrians need to deal with it.

Gold is currently no longer money. That is correct.

Good. Case closed. Whether or not we should return to it being money is another question.

However, in the last fourty years after completely abandoning gold as the anchor to paper money, we've seen one catastrophy after another. These booms and busts get more and more uncontrollable every time they occur, and eventually the jig is going to be up on fiat money. Probably a whole lot sooner than most people think. Austrian scholars are already saying the next bubble is going to be the big one as the only place left for it to occur is in the dollar itself. I have no reason to not trust this prediction based on the credibility of those making the call.

Austrians will not abandon the liberty brought to exchange and markets accompanied by hard money, like gold. You can call them dumb all you wish (as if that hasn't been going on for years while cognitive dissonance from the callers prevails unabated), but they are not alone in this belief. China and Russia are already calling for a new gold standard, james Rickards, well known for his fed move predicitons and a 30+ year vet in capital markets says it too. Central banks hoard gold for a reason. And not bacause it has a long term investment return.

It'll come clear for you eventually, just like everyone else who snears at the idea this system isn't going to last. Only that will happen far to o late as per usual.

Actually read your post dude. You sound like a total crazy person.

I'm cool with free banking. If free banks want to use gold as reserves, so be it. But despite how terrible it may be, the reality is that governments likely aren't going to stop enforcing their fiat currencies as legal tender. In which case, fiat notes are probably going to serve as the main form of reserves. If the government decides to back those notes with gold, all the better. The upshot is that nominal spending gets stabilized, any change in the demand for money or the relative demand for currency is offset endogenously, and we all live happily ever after.

Now let's add an extra layer of reality. For now, banks aren't allowed to issue their own banknotes. So for a given demand for money, when the public's relative demand for currency changes, banks can't convert one liability (demand deposits) into another (currency). They have to satisfy the change in demand for currency with reserves, which means they have to contract their liabilities and hence the money supply falls out of line with money demand and hence we get costly adjustments to the price level and other nominal variables. Now under a fiduciary standard, we can expand the quantity of reserves to offset this (whether we do or not is another issue). Under a gold standard this would result in monetary disequilibrium (and hence malinvestment).

The upshot is, given that banks aren't allowed to mint their own banknotes, a gold standard is a ghastly idea. If that restriction is relaxed, then a gold standard would be acceptable (though I think fixing the quantity of high powered money would be better).

 

[TakeAStepBack]

I'm well aware this sounds crazy to a monetarist. I except your opinion, as I've gone down this road for years. I just disagree. One thing is certain, a serious change to current policies and a "clean up" is needed or the current system is going to end quite chaotically.

 

[TakeAStepBack]

I'd have to go dig up what i read that far back. The talk of the time was that the federal reserve was creating a climate of moral hazard and malinvestment. Along with the signs of booming credit heading into both residential and commercial real estate. These guys have been getting it right for the last hundred years, right down to Mises qaccurately predicting both the great depression and the federal reserves reactions.

Predictions among Austrian scholars was all over the place at that time (2001-2002) and slowly narrowed in as the burst became obvious to even the most in need of economic remediation.

Sources are always welcome.

Congressman Ron Paul is a subscriber and scholar of the Austrian pursuasion. Here is a clip of him from 2003.

During a speech on September 10, 2003, Congressman Paul said that “the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions … like all artificially created bubbles the boom in the housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out.”

Ron Paul didn’t have a crystal ball. He just understands how the Fed creates business cycles, regularly occurring booms and busts in the economy. And he is not alone. The question is not in if, but when the next burst happens. The debate now, is whether that burst will be the one to end all the bursts and change the system, one way or another.

His prediction came 5 years before the burst here. Here is Helicopter Ben's thoughts on it form an interview in 2005:

Maria Bartiromo: “Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?”

Ben Bernanke: “Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.”

 

[Paulie]

I'd have to go dig up what i read that far back. The talk of the time was that the federal reserve was creating a climate of moral hazard and malinvestment. Along with the signs of booming credit heading into both residential and commercial real estate. These guys have been getting it right for the last hundred years, right down to Mises qaccurately predicting both the great depression and the federal reserves reactions.

Predictions among Austrian scholars was all over the place at that time (2001-2002) and slowly narrowed in as the burst became obvious to even the most in need of economic remediation.

Sources are always welcome.

Congressman Ron Paul is a subscriber and scholar of the Austrian pursuasion. Here is a clip of him from 2003.

During a speech on September 10, 2003, Congressman Paul said that “the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions … like all artificially created bubbles the boom in the housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out.”

Ron Paul didn’t have a crystal ball. He just understands how the Fed creates business cycles, regularly occurring booms and busts in the economy. And he is not alone. The question is not in if, but when the next burst happens. The debate now, is whether that burst will be the one to end all the bursts and change the system, one way or another.

His prediction came 5 years before the burst here. Here is Helicopter Ben's thoughts on it form an interview in 2005:

Maria Bartiromo: “Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?”

Ben Bernanke: “Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.”

I don't buy for a second that Bernanke believed a single word of that.

 

[Toro]

Gold is getting crushed again this morning, down another $50 on the Fed minutes that QE3 may not be in the offing. This is what makes me nervous on PMs here. There have been some big gaps down over the past year, perhaps signaling liquidation, especially after the manic run up last summer. The long term trend is still up but there are some worrying signs of a possible top as well. Support is at $1550, which would be the bottom of the uptrend, and I will probably take a shot there. But everything right now in PMs is a trade IMHO.

 

[TakeAStepBack]

Yeah, it should mean an increase in other markets as people rally around the promise for cheap credit/low interest rates. The problem is, what we don't see.

The up trend on metals will go down for now.

I read yesterday that the gold commision is pressing the fed for an audit of its metal holdings. I think people are starting the fire idea of a bubble in gold again created by the fed. I don't know that I buy that. We'll have to just wait and see, it appears.

 

[Paulie]

Yeah, it should mean an increase in other markets as people rally around the promise for cheap credit/low interest rates. The problem is, what we don't see.

The up trend on metals will go down for now.

I read yesterday that the gold commision is pressing the fed for an audit of its metal holdings. I think people are starting the fire idea of a bubble in gold again created by the fed. I don't know that I buy that. We'll have to just wait and see, it appears.

Here's the thing about the idea of a bubble in gold...it isn't exactly NOT a bubble, in the sense that an over-inflated supply of money is finding its way into it and increasing the price to historic levels. It's just a more RATIONAL bubble than the dot-com and housing bubbles, and the collapse will not start because people found a top. The top in gold is almost solely going to be dictated by the Fed's policy.

It's almost the perfect bubble, because we've known exactly when to start stock piling, and we'll know almost exactly when to start dumping. All you have to do is watch the Fed's OMO's.

And I mean this in more of a longer term, not in Toro's trading scenarios.

 

[Toro]

I have no position in gold right now, and have not had a long position other than a quick trade since about a year ago.

One big reason is because the price action sucks. Take a look at a chart of the gold miners. This chart is death (unless you are short, of course).

There is an old adage in trading commodities in that the stocks lead the commodity price. If the stocks are going down while the commodity is rising, that is a big red flag.

This does not mean the bull market in gold is over. However, I want to see some evidence that it is resuming its upward trend before reentering. I would rather not be dogmatically wedded to a thesis, or worse ideology. Instead, I want the market to talk to me. And right now, the market is saying stay away.

 

[Toro]

Another reason why I am concerned about gold.

Safest Best Investment According to the Public? Gold | The Big Picture

 

[Truthmatters]

Its ready fore a crash.

You can thank people like glen beck

 

[KissMy]

The Fed has a dual mandate. With the failing jobs market the Fed can't seriously take QE3 off the table. The Fed is bluffing & people in the gold market know it. The OWS riots will grow stronger for the rest of the year. Since legislative branch has failed again, the Fed will have to come to the rescue.

 

[KissMy]

The Plunge Protection Team had to be called in today to prevent the -200 close. They will have the DOW back near 13000 by the close. The global economy is in the shitter & sell in May & go away sounds good to investors.

 

[KissMy]

GMAC is going Bankrupt again this weekend. They still owe the US Treasury $12 billion. Who is going to finance those GM new car sales????

Reuters: Bankruptcy may be best option Will Obama bail out GM again?????

7 million homes already foreclosed on. 5.59 million more homes are in default. We are only 55% through this mortgage disaster.

A select group of struggling mortgage borrowers is about to get an offer that sounds too good to be true. Executives at Bank of America say that they will begin mailing 200,000 letters offering certain customers mortgage principal reduction.

 

[FireFly]

- Jobs market going down
- Stock market going down
- EU going down
- Euro going down
- Banks going down
= Likelihood of QE3 going way up that will make gold soar.

 

[Toro]

Let's also note

- gold going down
- silver going down

And that's with both the LTRO and Operation Twist.

 

[KissMy]

Ally Financial gets Treasury's OK to put ResCap mortgage unit into bankruptcy

Detroit-based Ally Financial Inc., the auto lender majority-owned by taxpayers, has received U.S. Treasury Department approval to put its Residential Capital unit into bankruptcy as the government seeks to recover bailout funds.

Treasury will support directors at Ally and ResCap if they decide that filing for court protection from creditors is the best course for the mortgage unit, said an Obama administration official who asked for anonymity because the arrangements haven't been made public. The approval is conditioned on a review of terms, the person said Monday.

It is amazing that this does not make the news.

 

[Valerie]

I pity the fool who bets against the US Dollar!

Gold, Acting Like A Commodity, Plummets In The Face Of A Rising Dollar - Forbes

Commodities Sink as Dollar Reclaims Safe Haven Status

Let's just get one thing straight right up front: there really is no such thing as a risk-free investment. Just eight months ago, gold was at $1,900 and enjoying a huge rally on the perception that the dollar was doomed. But lately, its status as currency of last resort looks to be, once again, losing out to the more traditional paper variety. To be clear, I'm not picking on gold or talking up the dollar, but rather pointing out what pros like Rich Ilczyszyn of iiTrader.com call ''perceived safety," and how volatile and changing global markets can quickly turn any haven into a loser.

"Europe is taking a lot of heat right now, so everybody plows into the dollar's perceived safety, short term," Ilczyszyn says in the attached video, adding that he thinks gold could see another $100 drop, on top of the 12% drop it has undergone since late February. From his purview at the Chicago Mercantile Exchange, the renewed exportation of fear and uncertainty from Europe makes for a simple equation: "euro risk = strength in the dollar," which in itself opens numerous avenues to play that, plus metals, energy, rates, stocks, or currencies. But broadly speaking, Ilczyszyn's first move is to protect.

"We have really slashed some of these positions because we don't know what's going to happen...with the euro zone and risk."


Commodities Sink as Dollar Reclaims Safe Haven Status | Breakout - Yahoo! Finance

TFNN.com - Educating Investors

 

[Toro]

Investors who treat gold and silver as a religion or ideology will get crushed.

 

[uscitizen]

depends on when they bought at $1,600 I am still up by 200% or so. Not too crushing.
and gold eagles sell for more than bullion price.