|
very interesting slant on the gold debate. i've been slugging it out over on the Economic forum with all the gold bugs.
|
|
|
|
The US treasuries are being defaulted on now in the sense that the federal reserve is devaluing the dollar. The yields on treasuries are negative in real terms. US treasuries are nice if you like to lose wealth.  this is not true. UST bond holders do not invest in them for the yield. they invest for bond appreciation. this has been the best trade since 1980 of ALL except for perhaps gold the last 11 yrs. Remember, everytime the Fed jacks down interest by half the value of the bonds double. he's been halving the interest rate for decades and its theoretically infinite. there's also whats known as sliding down the yield curve as a bond ages. can't exactly remember the term for it. but it essentially the same concept; as the bond decreases in age from say a 10 yr down to a 5 yr, the interest rate drops and the value of the bond rises. this has been a fascinating trade of which i've never taken part but which expert UST investors have taken advantage of since 1980. this is why muni bond issuers have gotten killed by Wall St selling them interest rate hedges. it seems so obvious that interest rates would rise with all the debasement of the USD but in fact what is going on as explained best by Antal Fekete is that the more the Fed pushes interest rates down the more the UST bond speculators buy UST's to front run their buying schedule creating a virtuous circle of increasing bond prices and further decrease in rates. this took me a long time to understand but Fekete explains it beautifully. this is why i've explained the UST market as a vortex black hole sucking most available capital into it at the expense of the real economy. muni bond issuers have paid a dear price for their hedges which went against them. if we go into a Depression, UST bond values are likely to increase even more in value which is why so many investors paradoxically dive into them during troubled times. |
|
|
|
You mean we could do without war but people wont choose it?
I don't predict a single world fiat currency either. I never meant that with whatever I said.
wars have been part of the human race for longer than gold as real money so thats saying a lot. as long as you continue to believe this won't change i don't see an imposed one world fiat currency by the plutocrats. |
|
|
|
the black continent
o_O But anyway. I verified last week, by talking to someone in the Kenyan M-PESA industry, that Bitcoin would indeed be a cheaper alternative to M-PESA for the consumers if the carriers will allow Bitcoin data in their networks. how can they stop it for smartphones with Internet? |
|
|
|
I didn't predict it would happen. At most I'd expect some form of fiat which is used in many countries but obviously not all. An extension to the Euro idea under one central bank.
More likely to see return to gold standards.
i meant i really don't see a imposed one world FIAT currency occurring. this would make it impractical for wars which i don't think the human race could do without. i could however see an involuntary world currency like Bitcoin gaining prominence. |
|
|
|
A default on US treasuries in surely a long way off. It's true they'd take money from pension funds etc. before they get to the bonds. Also defaulting on anything, from pensions to bonds would not (necessarily at least) mean the end of debt. If US treasuries are seen as a safe haven, one safe haven destroyed in good for gold. I would expect by the time that would happen there is a major chance the US gov would revert to gold as money but perhaps a larger chance that some new fiat would be invented. Its scary when I hear about the ideas of a world central banks and perhaps a world fiat currency.  Also if it is shown to people the results of the failed fiat debt experiment, they will want to go into gold, and not back into fiat just because it seems they've stopped inflating the currency for now. i really disagree with the prediction of a one world currency. you'd have to totally disregard whats happening to the Euro AND you 'd have to believe we'd end all wars between countries. remember, countries inflate their respective currencies to pay for war so you'd have to believe we are going into a period of extended peace which is just the opposite of what i think will happen. |
|
|
|
yeah thats true. he's been really wrong on gold. i'm glad i didn't listen to him until i sold at the silver top in May and gold starting a month ago. and i'm glad i'm not a financial advisor either with clients. but he did get the 2008 deflation call right and called the bottom in 3/09. has been wrong again since 10/09 when he thought stocks would roll once again. but his overall deflation theory makes sense to me altho i freely admit this could go the other way and could regret the gold selling. |
|
|
|
this whole thread is filled with my rationales as to why i think the USD can rise and gold go down from here so i won't bother to repeat. as long as Ben has the power to screw all gold holders by squelching liquidity i remain cautious. you truly have to believe in armageddon if you think that no matter what, deflation or inflation, gold MUST go up. Bernanke can certainly influence in a major way as to create corrections that makes people go into dollars and increase its value and make the rest decline (stocks, commodities, gold, etc...) The problem is if Bernanke mantains it, it would bankrupt the USA government and the banks. So it can produce short term corrections, but it can not do it long term. what would a default on UST's do? we've done it twice before that i can identify. once in 1933 when FDR revalued gold from $20 to $35 and in 1971 when Nixon depegged. the question is, what would that type of default do to gold and the USD? i could see it driving the USD up and gold down. less virtual debt USD's lying around... |
|
|
|
Wouldn't the unlent excess reserves be pushing the velocity down most recently?
yes, i think so. Also gold has been going up as the velocity as shown on the graph has been going down. Did you think about that?
In fact you should be worried about the decrease slowing down and perhaps reversing. Central banks may have wiped clear a lot of the losses and debts but will banks start flowing this credit around as they used to again? Central banks are enabling it to happen.
how could i not after the last 2d's reversal?  I just see signs in the technicals and even in the fundamentals that might indicate a reversal. i'm the one assuming the difficult role here trying to buck a multiyear strong trend b/c it still doesn't make sense to me that the Fed would destroy itself.
You can't say this without saying why. It's a worthless statement.
Even if the banking system collapses and takes most of the credit system down with it, I still see gold going up as it is safety from the collapsing system even with deflation and the like. Also this wont happen, such a circumstance has been diverted when governments and central banks subsidised banks. Now governments and central banks will continue to throw money at the problem until their own systems collapse.
I should mention that there are several definitions for hyperinflation. All I will say is that I think there will be inflation to come rather than deflation in the foreseeable future.
this whole thread is filled with my rationales as to why i think the USD can rise and gold go down from here so i won't bother to repeat. as long as Ben has the power to screw all gold holders by squelching liquidity i remain cautious. you truly have to believe in armageddon if you think that no matter what, deflation or inflation, gold MUST go up. |
|
|
|
|
miscreanity:
you need to STOP recommending FOFOA's blog. when you sift thru all the twists, turns, and exceptions he ultimately is just guessing what the Fed/gov't will do as are you and I and he doesn't even include any hard core statistics. human behavior can be totally unpredictable and i would be careful to presume Ben is an insensitive human being to all the criticism as well as being a linear thinker.
if you insist on recommending a blog to read, You Sir, should recommend, wait for it.....Noble Nomads. now that guy has way more insight into investing and the gold markets than FOFOA IMO. he even convinced me to hold onto my last 2 dozen Krands. he writes well and has more clear, altho somewhat verbose, arguments that i at least can relate to altho i might not totally agree with. AND he agrees with me on Bitcoins so he can't be all that bad! so take that FOFOA and shove it up your arse.
|
|
|
|
|
FOFOA: "A super inflationary stance by the Fed means that even unemployed workers can buy a house and pay for it!"
FOFOA later in article: "How close to the business end of the printing press are these millions of North Americans? You guys seem to assume that, during hyperinflation, millions of American mortgage payers will have access to this river of cash early enough to benefit overall. By the time they get their hands on it they may be struggling to meet other skyrocketing expense like property taxes and, uh, food. Wages won't keep up. Most people simply won't be able to keep up.
FOA: "Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms!"
ME: Where is this happening? we are on the cusp of a Greek/PIG default and the ECB is orders of magnitude behind in this supposed monetization. so is the Fed as outlined above. Germany is saying no more. to my mind, they will never be able to monetize all the bad debt.
FOFOA: This is very important: Once hyperinflation commences it is characterized by a running shortage of cash, even though it appears like the opposite to the outside observer. The currency collapses in value against economic goods because the debt and the credit collapsed. There is no credit, only cash, and there is a shortage of cash for everyone, including the Elite and the government. So they, the Elite/government, print and print for their own survival while saying it is for yours.
ME: so again, how does this shortage of cash lead to unemployed workers buying a house as he said above? how does the avg unemployed worker come to the gold table causing the final parabolic blowoff to the charts?
i must admit, to my simple mind, there are too many twists, turns, and exceptions to FOFOA's logic. paraphrasing: yes RE will go up, but down in gold terms so therefore its not a good investment. yes the Dow will stay the same or go up but again down in gold terms so therefore it is not a good investment. yes, there will be a shortage of USD's with everyone scrambling for them but in your face hyperinflation and devaluation. no, debtors do not have to pay off their debts, they can be socialized (never says anything about how gov'ts can default which we're about to see). yes, we can have deflation in certain assets yet crushing HI in gold.
to my simple mind we've had USD devaluation, i.e. debt accumulation, for 100 yrs with rising asset prices across the board in stocks, bonds, commodities, and now gold. we've now hit the ceiling and everything will go into reverse, i.e., rising USD value as assets across the board default and go into reverse, including gold; down.
|
|
|
|
|
i'm reviewing FOFOA's post on Deflation vs Hyperinflation. he only came to his views in 2008? that by itself doesn't mean he's wrong mind you.
|
|
|
|
 isn't money velocity of M2 supposed to be accelerating if hyperinflation is supposed to be taking root? |
|
|
|
|
FRB total assets=$2.8T
Ben is going to print another $52 T to cover private/public debt like real soon? when does this exactly happen after Fridays announcement?
|
|
|
|
 according to FOFOA the banks should be dumping their bailout cash as fast as possible. whats up? edit: FOFOA (hyperinflationist) insists that deflation will be resisted by banks b/c the asset side of their balance sheet will collapse. but wouldn't that be balanced by a skyrocketing USD value of their excess reserves? |
|
|
|
|
wow, this is exciting. thanks.
|
|
|
|
|
LOL. these projects are great until something goes wrong like a Tsunami and then they'd expect us to go save them on our tax bill otherwise they'd sue us.
|
|
|
|
 Excellent. Thanks for the report link. From a technical perspective, why shouldn't we draw bands somewhat as I have (green) below? Fundamentally, couldn't we see 1980 an undershoot after Nixon's shock wave? Heh, why bother drawing lines on the chart if you are just going to ignore them when you want to?  But really, yes, it is quite possible. If that is the case, we are pretty much on the lower bound of your green channel right now, and right now would be the time to dump metals and buy stocks. I'm not sure that I buy the four seasons model advocated by the longwave group. It does make sense at times, but I usually end up back at my theory that everyone is wrong. If it does turn out to be right, we can expect the next bottom at around 2 or 1. Two would be appropriate for a "winter" bottom. One would be right if we match the 1896 and 1980 crashes, but ignore 1932. Below that, to the 0.7 or 0.5 level as suggested by the 1932->1980 trendline (black line on the chart) seems a bit silly. I think we would have bigger problems of the Mad Max variety before it gets there. The difference is not trivial. Getting it wrong means that you buy a third or a quarter or a sixth or a twelfth as much value as you could have. If 6 comes and goes, start watching closely around 2. If 2 comes and goes, then 1 is almost certainly the sure winner. The problem will be knowing a temporary pullback from a sustained move. I would watch for a sustained rally in the stock market that coincides with a sustained decline in the gold market. Sustained meaning about 2 weeks, but I think it'll come down to a feeling rather than a set duration. Longwave; isn't that Ian Gordon? |
|
|
|
|
sure enough, Whirlpool forms a ^ at 10:50am and heads straight down.
|
|
|
|
|
Show Posts
