Interesting, thanks viper.

That's actually about half of what Bitcoin's inflation is currently, just by a basic approximation of 50/7000000. Of course, as soon as the drop from 50 BTC per block to 25 next year, the rate will be about even. If the dollar continues to be debased, the ratio may well swing the other way.

Out of sheer amusement, taking M1 at $1.956 trillion, Bitcoin exchanged nominally against only USD and without any other considerations would be about $280,000 per BTC.

I am still expecting a correction in gold, possibly to the $1,650-1,680 range. Also of note is that Bitcoin seems to be holding correlation with equity indices, dipping a little below $10 today as the markets swoon.

There are factors that need to be taken into account. As I said, a correction is necessary but this might preclude the drop for a while yet:
London Trader - Many Gold Shorts Wiped Out, Lost Everything!

Either way, I'd rather buy the dips during a short squeeze. It helps to know whose blood is in the streets when you're buying.

Umbrellas for 5 BTC?


No gov't has global jurisdiction... yet. The swings seem relatively normal for the rate of growth and level of risk.


Well said!

How many USD are printed every 10 minutes?

The Bitcoin economy is still too small to handle a massive influx of capital just yet. There's also the global perspective to consider. Until Bitcoin gains legitimacy, it'll be viewed with curiosity rather than a valid place to park cash reserves.

As for getting away from USD, every economy is interconnected. That makes a transition very difficult. It's like fixing a ball of string that's all knotted - unless you want to start cutting pieces, you need to spend the time to undo the mess.

Too much disturbance and companies, entire business sectors and even nations could fall into turmoil. Mergers and acquisitions spark on a daily basis, margins get squeezed and national borders become blurred. As ambiguity increases, tensions accelerate and cooler heads lose out to reactionary effects (lawsuits, political maneuvering, war).

On the other hand, shaking things up can spur growth and new ideas...


Mostly sunny, chance of showers in the afternoon.

Not sure if you're aware - I've been hearing rumblings about the Swiss considering some form of linkage between the franc and gold. It would seem that everyone will need to move to a float against gold in order to maintain relevance. With that as the case, Bitcoin should shine as the ideal gold ratio standard currency.

Quote of the month! That's a Tweet.

Indoctrinated - very apropos term!

The road to hell is paved with good intentions.

A business that kills its clients, makes them sick or otherwise harms them won't be in business very long. If Mt. Gox didn't shore up its security, Tradehill would be the primary exchange today.

Self-regulating systems occur naturally. Government interferes.

Government is the problem!

Bitcoin is an answer.

Isn't it obvious?

• Give everyone anything they want.
• Get nothing in return.
• Keep giving everything.
• Magic happens.
• The world is amazing.
• Brain-gasm.

 

We both have an interest in Bitcoin (my main hobby at the moment) and I offered a suggestion regarding precious metals based on years of experience. Your choice was to take it or leave it rather than start a public crusade from a private conversation. Hopefully at least some readers will benefit. Now for a long, consolidated reply...


Why? I already told you I'm not interested in a pissing contest. When I trade, it's generally for the long-haul and on my own terms. Being right and doing nothing until the market shifts can be extremely difficult, as it involves ignoring the noise.

If you're feeling threatened or intimidated, reply to some of the detailed comments I've made on a rational basis instead of making challenges and wild speculation. For instance, your first post for this thread included a good rationale and enumerated your reasoning. Let's get back to the economics of the matter before this gets moved to the speculation sub-thread.

No printing necessary for monetary inflation
https://bitcointalk.org/index.php?topic=35956.msg443739#msg443739

Paper vs. Physical
https://bitcointalk.org/index.php?topic=35956.msg444903#msg444903

After whatever temporary correction occurs, gold is going to continue higher to breach $2,000/oz. Obviously nothing goes in a straight line and there's going to be unbelievable resistance, but that doesn't change the long-term uptrend. I don't know how much farther it'll go beyond $2,000, but I assume that it'll be about double from the prior channel breakout of around $1,600-1,650. Meanwhile, I'll be glad to sell you Silver Wheaton when you've had enough red and decide to cover at a real high.


Please provide an exact quote regarding the statement of foreigners being "less dependent" on dollars. I'd like to know where I wrote that; I believe my statement was that the world has shrinking desire to hold USD - nothing to do with dependency. If anything, the US is dependent upon the rest of the world to keep the game going.

There is no definitive profit incentive with the established swap lines. They are necessary to facilitate liquidity and an attempt to reduce volatility in exchange rates occurring due to large capital flows from one region to another. If you see this differently, please elaborate.

Whether you view the USD-based global economy as an inverted pyramid or bubbles on top of bubbles, either way failure above leads to increasing deflationary pressure further down. Think about the implications of a collapse - the US has the most to lose and would be severely crushed, hence the strong incentive to prop the entire world up. This is being done by monetizing debt without actual realization of the expected value, so the entire system will become incredibly fragile. I find it very improbable that a system of such magnitude will be able to hold together with a skeletal support racked by osteoporosis.

The consequence of monetization is inflation even as many tangible goods experience deflation. Be careful not to mistake velocity of US dollars for demand; volume (quantity) does not equal quality. Again, ensure that you understand the concept of bad money driving out good money.


Agreed. There are some key differences, but overall it's a similar path. Japan's currency inflated while the real economy deflated. I don't know if Bitcoin will save so much as provide an escape.


All you're looking at is one year? Are you aware of seasonality? For the past few years, the start has been marked by a decline and slow rise to the middle of the year. During the latter half of the year, the precious metals tend to take off without looking back. Are you suggesting that the world's problems have gone away and that this pattern is irrelevant? I don't see how anything has changed - in fact, things seem to have gotten worse.

Since you're analyzing charts, it should be obvious that the high at the end of April was followed by tests of support around $32. After that, there was a higher low followed by a higher high. It could also be argued that the consolidation pattern is in a rising channel. I don't see any long-term trend lines to mark major support points, nor moving averages. Where is the 50-day moving average, or the 200-dma? MACD? Fibonacci levels? Negative divergences? Index ratios?

Are you taking into account anything behind the scenes? Capital flows? Warehouse supply levels? Cost of manufacturing or mining? Corporate hedging on future returns? Political environments, worker strikes and nationalization efforts? International demand outside of the US and Europe?

Daily gyrations do not make a trend.


Take ten deep breaths and go grab a beer.

We've discussed my stance elsewhere, notably that there will be overall deflation in certain asset classes and inflation in others. I apply what is relevant based on underlying aspects, especially capital flows.

There is no one-size-fits-all definition. I agree that we may not be on the same page. Best of luck with your trading - be nimble.


All economies and societies are dynamic. Inflation and deflation can occur concurrently across disparate asset classes and at various scales. We just tend to limit our perspectives by thinking in terms of static snapshots and linear projections.

BitCon 2011? I'm not sure 'Con' is the best representation for a financial instrument.

That's the kind of media shock I'm talking about; insane exposure. I might start buying as much as I can now...

Is there potential for any innovative surprises, or will we have to find out in person?

The problem I've noticed is that there are occasional lock-ups even with the temperature steady. My 69xx cards won't start again even if cgminer is restarted. They don't respond to anything and require a cold boot.

The influence the US wields in the global arena has diminished. It has become much more difficult to manipulate circumstances for its own benefit.

Precious metals downside is limited. Imminent re-inflation efforts, whether publicized or surreptitious, will continue propping up equities at the expense of the dollar.

 

This is insanity in the making. Even if a fraction of a percent of the readership from those organizations decide to dabble in Bitcoin, it could easily make the influx that brought the price to $30 seem like a trickle.

Depending on the perspective presented by the media outlets, it could amount to much more than a small percentage of their audience.

I don't know if the Bitcoin economy is flexible and robust enough to survive a shock of that magnitude...

The saving grace might be that it's still too technical for most.

Divergence of the paper and physical markets is likely closer than most expect, and many will be caught completely unaware.

Following COMEX numbers daily, I strongly suspect that paper settlement has been occurring for some time and even increasing of late. There are frequent disparities between the delivery notices (physical metal to be delivered from a bullion bank to a client), open interest (number of contracts outstanding and awaiting delivery) and actual metal reported as being delivered. Even after accounting for loans and swaps, there is a gap. The most plausible conclusion is that contracts are being settled for cash instead of physical; cash settlements are technically illegal when delivery has been requested.

From looking into information from the CME group, it appears that JP Morgan has little to no gold, silver or platinum. Other major bullion banks still have reasonable reserves, but the number of contracts standing for delivery has been putting critical pressure on warehouse stocks of the metals. Normally, delivery is made within the first few days of the month. For the past several months, delivery has been intermittent and run down to the wire, taking all month and what appear to be many cash settlements.

In addition, COMEX warehouse stores of gold, silver, platinum and palladium are dangerously low. It wouldn't take many contracts to overwhelm capacity and pull all of the metal out. During the knockdown in May, GLD and SLV were bought at the bottom in mass quantity as investors were panic selling. I think it very likely that JP Morgan acquired many shares. Since then, there has been significant activity with large quantity of metal being moved out of both ETFs. That would act as a supply of physical for JP Morgan to cover its sizable short obligations and prevent a default of both the banks and the exchanges while keeping it under their control.

Even with ETF metal, the global demand for physical may overwhelm JP Morgan, et al. This could be the reasoning behind the continual delays in delivery, persistent cash settlement and suppression of prices. If the paper short is all that's left and no longer linked to physical, the paper price could be slammed to zero while physical becomes nearly unobtainable.

This is mostly inferred from activities going on behind the scenes, but seems to be the most plausible explanation so far. It is a game of musical chairs and having gold means you get a seat. Without gold, you're out.

While I do think it could be eventually, Bitcoin is not yet mature enough to alleviate that situation and won't be for some time yet.



There is only so much margin liquidation that can occur. As the market trends toward 100% collateral, raising margin requirements will no longer be an option for suppression. Nor will there be anywhere near as much panic selling. Physical gold will eventually be available only to institutional trading and very wealthy private investors as the price rises.

Do not discount fund management (hedge, money market, etc) as a prime source of GLD/SLV investment. The ETFs are attractive to institutional investors because of their liquidity. It is unlikely that most people realize what those ETFs are, let alone trade them.

Those looking to "ride the wave" in paper without holding physical do not seem to understand money or the importance of physical bullion. They also tend to sell at the worst possible times due to reliance upon conventional wisdom.

I agree with your take on JPM and other banks profiting from the volatility in precious metals. They will be among the greatest beneficiaries.

From Whose wrong: Gold or Treasuries? yesterday:

Followed by my subsequent post:

Indeed, there was a drive down from about $1780 to $1720 over the course of nearly six hours followed by steady buying. The price is now steady at ~$1740 prior to the FOMC announcement. If the $1650 level cannot be breached and close to the downside of that level, the problems will prove worse than almost anyone expects.

I'm not interested in a pissing contest, so let's move on.


No new money needs to be printed for massive inflation to occur; more than enough already exists to trigger such a monetary event. I'll explain momentarily. First, a few important points:

• "Dollarization" due to the dollar's status as global reserve currency has led to more than half of existing dollar instruments being held outside of the US.
• The petrodollar is the largest aggregate pool of foreign-held US currency.
• The US dollar has been losing its appeal in global markets; this can be seen in efforts by oil producing nations to use alternative currencies.
• Volatility in the exchange rate of the USD has been significant since 2008 with massive inflows and outflows over short periods of time.
• Gold is held in varying quantities by central banks as a reserve asset.

If we agree on the above statements, we can continue.

What would happen if all the dollars around the world went back to the US? It would effectively double the money supply there or more, wouldn't it? I think we could agree that 100% or greater inflation, even spread over several years, could be highly detrimental to any economy.

That is effectively what is happening - the exported dollars are coming home to roost. Now for the explanation:

While the dollar was stable and there were no concerns about the US gov't paying its bills and generally being reliable, the currency was accepted generally without question almost anywhere in the world. Now that there have been some truly frightening financial shocks to the system, the dollar is becoming undesirable.

Because of this, holders are growing hesitant to rely upon the dollar and are choosing to reduce or eliminate their exposure in favor of other currencies or forms of money. Businesses that accept dollars will attempt to exchange for alternatives or use the dollars where they are still accepted. Eventually, the predominant place (or even the only place) where dollars will be accepted is the issuing nation - the US.

As the world rejects a significant portion of USD, we now understand how all of that currency will flow back to its point of origin. Therein lies the already-existing mechanism for inflation. This started primarily with the Middle East during the shock in the 1970s and again with Saddam Hussein in Iraq during the 1990s. Rejection of the dollar threatens a cascade effect that could very well cripple the dominant standing of the US in the global arena, especially coming from such a large pool of wealth as the petrodollar.

Now the US has no choice. It cannot stem the tide of dollar rejection in favor of the Euro and other currencies. One of the prime reasons for this is perceived instability in the US economy and by extension the dollar. Since gold is held by central banks a form of reserve, wildly fluctuating prices for the metal in USD suggests one or the other is unstable, thus controlling the inevitable rise of gold is critical for the US to maintain an appearance of stability.

There are more details and additional factors that are accelerating that trend, but I think you can start to get the idea that inflation is already baked into the cake. Even printing the relatively small amount now is only serving to exacerbate the problem, and who actually thinks they'll stop printing more? This is why currency controls, especially involving international travelers, are on the rise. It's an effort to manage the influx of unwanted dollars.

It bears repeating that the dollar is in a managed decline with gold naturally rising in direct opposition. This balance is rapidly growing beyond control of the forces that are attempting to make this a gradual transition because the global economy is far greater than any one nation. These things also take years to unravel, if not decades. A parabolic rise is only beginning to build.

You're better off holding long positions in precious metals and sitting tight than risking complete loss by being short. Better yet, get physical.

Cheers.

It's good that you can understand the criminals, but be very cautious with such a US-centric perspective. The rest of the world is becoming wealthier and does not share the same views as the developed nations. That has far more clout than any bank. The same goes for governments.

Unlimited paper can be supplied, but as futures markets become full cash and no margin, the price fixing ability disintegrates. This will result in a divergence between paper markets and physical. You will be able to play in the illusion, but obtaining physical at the paper prices will be completely impossible. Remember that the paper is supposed to be a claim on physical; without that backing, it is no longer associated with value and is therefore worthless.

Make sure you understand the concept of bad money driving out good; valuable assets will be hoarded (gold) while depreciating assets will be a hot potato that everyone tries to get rid of as quickly as possible (fiat). As velocity of the depreciating asset increases, commerce becomes more difficult as the valuation rises in volatility - hyper/inflation even as other assets depreciate. If nobody relinquishes their store of valuable assets, the price for them is driven even higher.

It's foolish to be solely in the deflation or inflation camp. Determining which will occur in a particular asset is critical. For instance: I think housing will deflate while food costs inflate.

Selling your bullion now means you might not be able to acquire the physical again; certainly not at the price range from several years ago. Thinking $1780 is a parabolic top catches you in a myopic magnitude trap - the capital flows have much more wealth to transfer between asset classes, so a few hundred dollar move in gold is small beans.

If London devolves to chaos, I would take the most cost-effective wealth conveyance as I leave - gold and silver... and a flash drive with my Bitcoin wallet. I think it's unwise to discard one for the other.

Again, just a warning.

I think it was the dumbass who sold ~30k BTC at $6 buying back in.

Today, the USD/BTC rate broke above $10 on Mt. Gox.

I reiterate the apparent correlation with equity markets. Markets futures made an amazing recovery over the past several hours...

What else is Bitcoin tied to, and how strongly? Where? At the exchanges, the individual traders or elsewhere?

Talk about perfect timing - Mt. Gox price just shot up over $10/BTC.

Patience, grasshopper