Gold collapsing. Bitcoin UP.

[cypherdoc]

ah, finally some good news:  http://www.huffingtonpost.com/2012/12/04/elizabeth-warren-banking-committee_n_2236898.html

[1715060403]

1715060403

[miscreanity]

Think of a runner on a treadmill. The runner is inflation, the treadmill is deflation. Until the runner's body gives out from dehydration or exhaustion, things continue as normal - at least in appearance.

No reason why inflation can't last forever.  It's easier (less short-term negative consequences) to grow the monetary base than to shrink it.  Without monetary base reduction, deflation cannot go on forever.

Until real assets are completely exhausted and actual shortages cause widespread disruption (including starvation & death), monetary inflation can mask deflation.

shortages + money printing = inflation (when money velocity and lending is constant, which usually isn't the case after a boom period).

agreed.  so tell me, where is MV going?

Compare to M1:



There is no truly reliable metric I know of for euro/petrodollars, which would be similar to M3. We have no good way of knowing what the velocity is on derivatives.

Now take note of excess reserves at depository institutions:



Velocity is falling largely because the flow has been redirected - funds are now pooling at financial institutions. Domestic US monetary demand still exists, but is being starved due to reserve-building (similar situation in Europe). It is a ratchet effect wherein the institutional buffer is reinflated, then velocity rises. If even a small percentage of institutional reserves flow into the real economy, velocity can be accelerated to a breaking point.

Using a biological analogy, M1 could be compared to base physiological function - alligator brain activity controlling the organs, respiration, heart rate, etc. M2 might then be sensory interpretation and fine motor control. Derivatives and other instruments would be analogous to higher conscious thought and activity.

What I think we've seen is an organism that has sustained grievous injury and reacted - the 1970s through 1980s were the period during which a trauma occurred due to war and oil supply shock, and the initial response manifested. It may be viewed as a physical assault followed by a fight-or-flight reaction boosting awareness and overall body activity in preparation.

In the 1990s, the organism's response from the previous decade was no longer able to keep pace with the loss of blood from its injury. During the early 2000s, aggression increased as systemic functionality remained. Over the past few years, organs have begun shutting down and irreversible damage has occurred. Falling blood pressure (dropping velocity) means loss of consciousness is imminent.

Excess reserves display the blood supply present in the core relative to the periphery - by shunting blood to the core, the limbs are sacrificed to (hopefully) ensure survival of the entity. This is synonymous with a body in a state of shock - an extremely dangerous situation, and an indication of impending mortality.

When a sociological organism begins to lose consciousness, it panics just like a biological one. With M2 velocity collapsing, the sociorg is no longer able to take actions that could right itself - like playing Tetris at a level too fast to move blocks into position. If M1 takes a nosedive, it's all over - that's where day-to-day activities fail to happen on a cohesive level.

Oddly enough, M3 could still be skyrocketing, as activity there won't fail until M1 falls apart and supply runs out at the higher levels. The body dies, but the mind remains for a short time.

What might transpire over the course of a few minutes for a human body is taking place over a few decades for the sociorg.

but its been going down since 1996.  Japan has been dropping for 30+ years.  "forever" is quite a long time investment horizon.

While there are major similarities, Japan does not have the world's reserve currency and therefore does not run the same risks. The dollar does not have the flexibility to grind along because it has been the fiat foundation of the global economy. There are dynamics that would shatter the dollar if the Fed blatantly tried to pull a Japan.

[cypherdoc]

Think of a runner on a treadmill. The runner is inflation, the treadmill is deflation. Until the runner's body gives out from dehydration or exhaustion, things continue as normal - at least in appearance.

No reason why inflation can't last forever.  It's easier (less short-term negative consequences) to grow the monetary base than to shrink it.  Without monetary base reduction, deflation cannot go on forever.

Until real assets are completely exhausted and actual shortages cause widespread disruption (including starvation & death), monetary inflation can mask deflation.

shortages + money printing = inflation (when money velocity and lending is constant, which usually isn't the case after a boom period).

agreed.  so tell me, where is MV going?

Compare to M1:



There is no truly reliable metric I know of for euro/petrodollars, which would be similar to M3. We have no good way of knowing what the velocity is on derivatives.

Now take note of excess reserves at depository institutions:



Velocity is falling largely because the flow has been redirected - funds are now pooling at financial institutions. Domestic US monetary demand still exists, but is being starved due to reserve-building (similar situation in Europe). It is a ratchet effect wherein the institutional buffer is reinflated, then velocity rises. If even a small percentage of institutional reserves flow into the real economy, velocity can be accelerated to a breaking point.

Using a biological analogy, M1 could be compared to base physiological function - alligator brain activity controlling the organs, respiration, heart rate, etc. M2 might then be sensory interpretation and fine motor control. Derivatives and other instruments would be analogous to higher conscious thought and activity.

What I think we've seen is an organism that has sustained grievous injury and reacted - the 1970s through 1980s were the period during which a trauma occurred due to war and oil supply shock, and the initial response manifested. It may be viewed as a physical assault followed by a fight-or-flight reaction boosting awareness and overall body activity in preparation.

In the 1990s, the organism's response from the previous decade was no longer able to keep pace with the loss of blood from its injury. During the early 2000s, aggression increased as systemic functionality remained. Over the past few years, organs have begun shutting down and irreversible damage has occurred. Falling blood pressure (dropping velocity) means loss of consciousness is imminent.

Excess reserves display the blood supply present in the core relative to the periphery - by shunting blood to the core, the limbs are sacrificed to (hopefully) ensure survival of the entity. This is synonymous with a body in a state of shock - an extremely dangerous situation, and an indication of impending mortality.

When a sociological organism begins to lose consciousness, it panics just like a biological one. With M2 velocity collapsing, the sociorg is no longer able to take actions that could right itself - like playing Tetris at a level too fast to move blocks into position. If M1 takes a nosedive, it's all over - that's where day-to-day activities fail to happen on a cohesive level.

Oddly enough, M3 could still be skyrocketing, as activity there won't fail until M1 falls apart and supply runs out at the higher levels. The body dies, but the mind remains for a short time.

What might transpire over the course of a few minutes for a human body is taking place over a few decades for the sociorg.

but its been going down since 1996.  Japan has been dropping for 30+ years.  "forever" is quite a long time investment horizon.

While there are major similarities, Japan does not have the world's reserve currency and therefore does not run the same risks. The dollar does not have the flexibility to grind along because it has been the fiat foundation of the global economy. There are dynamics that would shatter the dollar if the Fed blatantly tried to pull a Japan.

the only lending that the banks are going to do are those loans that they can immediately flip to FNM/Freddie/FHA as i've referenced above.  absent that, they are hoarding money prepraring for the STHF.  they will swoop in when prices hit bottom for all risk assets including gold/silver in about 4-6 years.

[cypherdoc]

[sunnankar]

Using a biological analogy ...

Over the past few years, organs have begun shutting down and irreversible damage has occurred. Falling blood pressure (dropping velocity) means loss of consciousness is imminent.

... indication of impending mortality.

When a sociological organism begins to lose consciousness, it panics just like a biological one. With M2 velocity collapsing, the sociorg is no longer able to take actions that could right itself - like playing Tetris at a level too fast to move blocks into position. If M1 takes a nosedive, it's all over - that's where day-to-day activities fail to happen on a cohesive level.

Very interesting analogy which I think fits into the general thesis of The Great Credit Contraction where capital burrows down the liquidity pyramid into safer more liquid assets.

But even with the massive damage being done by the State humanity is still on an upward trajectory with advancements happening in science, math, computers, etc. and all of that is capital accumulation.



One thing that is so exciting about Bitcoin is its censorship resistant properties. The main problem from the State's interference in money and currency is its massive interference in the pricing mechanism. With a censorship resistant currency the economy will be able price much more efficiently by being able to route around the State imposed damage from monetary and financial regulation.

This will allow economic calculation to happen on a scale never before seen in human history and is extremely bullish for the generation and creation of wealth on a ginormous scale.

[miscreanity]

the only lending that the banks are going to do are those loans that they can immediately flip to FNM/Freddie/FHA as i've referenced above.  absent that, they are hoarding money prepraring for the STHF.  they will swoop in when prices hit bottom for all risk assets including gold/silver in about 4-6 years.

There are plenty of other options for banks to use in deploying reserve assets, not just real estate. Private negotiations remain obscured in many ways.

Regarding your post on real estate, we appear to have diametrically-opposed perspectives on investing in it. Although I've flipped, my primary focus has been commercial revenue generation. Price appreciation is always a secondary concern behind flow of funds. This is a long-term vs. short-term split. In terms of consistency, the former is like farming and the latter is closer to hunting; neither are guaranteed, but the former is less likely to result in going hungry.

Running a high-level business means managing the real hustling being done by a mass of participants at lower levels. Without that support structure, operational overhead increases due to hierarchical concentration of labor-intensive duties. The low-level participants must also be supported by supplying what they need to facilitate that part of the business.

Institutional reserves being present will meet the demand for money when the time comes, sort of a SHTF scenario. While the funds are being held, they are being put to use in business-as-usual - expanding the ownership class and facilitating real economic activity at the expense of fiscally irresponsible regions.

Do you really think the dollar will maintain its form and status in the latter half of this decade when everything that's supposed to be supporting it is collapsing? The dollar relies on numerous supports (incl. government, multinational trade incentive, economic stability, etc), while Bitcoin and gold depend mainly upon electronic communications and human society, respectively.

[World]

http://www.reuters.com/article/2012/12/05/us-apple-shares-idUSBRE8B40VK20121205?irpc=932

[Melbustus]

One thing that is so exciting about Bitcoin is its censorship resistant properties. The main problem from the State's interference in money and currency is its massive interference in the pricing mechanism. With a censorship resistant currency the economy will be able price much more efficiently by being able to route around the State imposed damage from monetary and financial regulation.

This will allow economic calculation to happen on a scale never before seen in human history and is extremely bullish for the generation and creation of wealth on a ginormous scale.

Yes, I like to point out that bitcoin is the first monetary system humanity has ever created that *credibly* offers perfect information to all participants. It'll be interesting to see what the ramifications of this turn out to be.

[silverbox]

plumbing new lows:

I'm not all back in yet, buying oppurtunity, it dips much more and I'll buy back in to where I was.

you keep saying that.  give us a target.

1.25-1.50 I'll buy all back in.

[miscreanity]

But even with the massive damage being done by the State humanity is still on an upward trajectory with advancements happening in science, math, computers, etc. and all of that is capital accumulation.

...

This will allow economic calculation to happen on a scale never before seen in human history and is extremely bullish for the generation and creation of wealth on a ginormous scale.

Absolutely. The old guard will fall from the new system like sand through a sieve, being highly incompatible.

I'm fond of this representation of Exter's pyramid (but I should've swapped food for shelter)

[miscreanity]

they will swoop in when prices hit bottom for all risk assets including gold/silver in about 4-6 years.

Looks like you'll be about 4-6 years late

Goldman Calls The End Of The Great Gold Bull Market

[adamstgBit]

they will swoop in when prices hit bottom for all risk assets including gold/silver in about 4-6 years.

Looks like you'll be about 4-6 years late

Goldman Calls The End Of The Great Gold Bull Market

10 year bull market, and now a 4 year bear market...

sounds like cypherdoc is spot on.

[miscreanity]

10 year bull market, and now a 4 year bear market...

sounds like cypherdoc is spot on.

If by 'spot on' you mean opposite of reality, then yes

Paper could follow that path, but physical metal won't.

[cypherdoc]

http://www.reuters.com/article/2012/12/05/us-apple-shares-idUSBRE8B40VK20121205?irpc=932

i'm making huge bank on this short.

[adamstgBit]

10 year bull market, and now a 4 year bear market...

sounds like cypherdoc is spot on.

If by 'spot on' you mean opposite of reality, then yes

Paper could follow that path, but physical metal won't.

wtv man, IT'S OVER  


now all the gold bugs are going to come rushing into the bitcoin market?

[cypherdoc]

10 year bull market, and now a 4 year bear market...

sounds like cypherdoc is spot on.

If by 'spot on' you mean opposite of reality, then yes

Paper could follow that path, but physical metal won't.

misreality, you just said about a month ago that that divergence wasn't likely to play out like you thought.  flipping around again?

[cypherdoc]

Using a biological analogy ...

Over the past few years, organs have begun shutting down and irreversible damage has occurred. Falling blood pressure (dropping velocity) means loss of consciousness is imminent.

... indication of impending mortality.

When a sociological organism begins to lose consciousness, it panics just like a biological one. With M2 velocity collapsing, the sociorg is no longer able to take actions that could right itself - like playing Tetris at a level too fast to move blocks into position. If M1 takes a nosedive, it's all over - that's where day-to-day activities fail to happen on a cohesive level.

Very interesting analogy which I think fits into the general thesis of The Great Credit Contraction where capital burrows down the liquidity pyramid into safer more liquid assets.

But even with the massive damage being done by the State humanity is still on an upward trajectory with advancements happening in science, math, computers, etc. and all of that is capital accumulation.



One thing that is so exciting about Bitcoin is its censorship resistant properties. The main problem from the State's interference in money and currency is its massive interference in the pricing mechanism. With a censorship resistant currency the economy will be able price much more efficiently by being able to route around the State imposed damage from monetary and financial regulation.

This will allow economic calculation to happen on a scale never before seen in human history and is extremely bullish for the generation and creation of wealth on a ginormous scale.

who's Trace Mayer?  

seriously though, a couple of comments.  first, the bad debt needs to be cleared to allow us to evolve to the next level using all this great technology being developed.  for that to happen, we are going to have more than a few years of rough times ahead as the dredge gets cleaned out (bad businesses and corruption).  only then yes, society can move forward otherwise the weight of irredeemable debt payments will continue to suffocate us.  Greece and Europe are great examples of how its impossible to solve a debt problem with more debt.

Bitcoin is going to help in this regard by causing widespread deflation aka price discovery.  look around you; everything is overpriced.  this has occurred b/c of 40 yrs of widespread debt expansion that has provided the vast majority of the money supply.  this debt is in the process of actively defaulting decreasing the money supply and causing a scramble for the remaining currency to pay this debt off.  thus the USD should rise as it has already lost all its value since 1913 helping to create this mess.  those who don't understand the primacy of debt expansion are doomed to make a huge investment mistake assuming that inflation is inevitable.  its that same linear thinking i've talked about that will get you.

[cypherdoc]

One thing that is so exciting about Bitcoin is its censorship resistant properties. The main problem from the State's interference in money and currency is its massive interference in the pricing mechanism. With a censorship resistant currency the economy will be able price much more efficiently by being able to route around the State imposed damage from monetary and financial regulation.

This will allow economic calculation to happen on a scale never before seen in human history and is extremely bullish for the generation and creation of wealth on a ginormous scale.

Yes, I like to point out that bitcoin is the first monetary system humanity has ever created that *credibly* offers perfect information to all participants. It'll be interesting to see what the ramifications of this turn out to be.

precisely.  and what we have now is price obscurity and imperfect information promulgated by investment banks on a huge scale.  look at their resistance to moving derivatives to an exchange away from the OTC market.  look at the Libor scandal.  what were CDO's all about?  and on and on and on...  all this to inflate prices.  and what has been used to pay for those inflated securities?  debt.  why do you think Ben and the ECB are desperately trying to prevent Greece et al from defaulting?  b/c it would blow a hole in the asset side of the balance sheets of the Northern European banks. its all about the debt.  and debt is the main component of the money supply; by far.  Ben can't piss fast enough to fill the actively flushing toilet of debt defaults.  and all i hear you guys talk about is the minuscule part of the equation; money printing.  which quite frankly isn't occurring on that wide of a scale.  big whoop; $800 billion to 2.8 trillion of FRN's.  that's nothing compared to the magnitude of the debt contraction happening right now.

[silverbox]

One thing that is so exciting about Bitcoin is its censorship resistant properties. The main problem from the State's interference in money and currency is its massive interference in the pricing mechanism. With a censorship resistant currency the economy will be able price much more efficiently by being able to route around the State imposed damage from monetary and financial regulation.

This will allow economic calculation to happen on a scale never before seen in human history and is extremely bullish for the generation and creation of wealth on a ginormous scale.

Yes, I like to point out that bitcoin is the first monetary system humanity has ever created that *credibly* offers perfect information to all participants. It'll be interesting to see what the ramifications of this turn out to be.

precisely.  and what we have now is price obscurity and imperfect information promulgated by investment banks on a huge scale.  look at their resistance to moving derivatives to an exchange away from the OTC market.  look at the Libor scandal.  what were CDO's all about?  and on and on and on...  all this to inflate prices.  and what has been used to pay for those inflated securities?  debt.  why do you think Ben and the ECB are desperately trying to prevent Greece et al from defaulting?  b/c it would blow a hole in the asset side of the balance sheets of the Northern European banks. its all about the debt.  and debt is the main component of the money supply; by far.  Ben can't piss fast enough to fill the actively flushing toilet of debt defaults.  and all i hear you guys talk about is the minuscule part of the equation; money printing.  which quite frankly isn't occurring on that wide of a scale.  big whoop; $800 billion to 2.8 trillion of FRN's.  that's nothing compared to the magnitude of the debt contraction happening right now.

The massive debt you always talk about is built on the money supply leveraged to the umpteenth.  You don't think that new money Ben is printing isn't immediately leveraged that same way the old money was??  It starts out as a few billion that Ben pumps in every day, but then after the Wall street boys get done leveraging it, it offsets those huge numbers you like to talk about

[adamstgBit]

 

cypherdoc's blowing little penguin's minds across the globe  
so its not inflation that will deliver the final blow but deflation?
deflation sounds good, everything gets cheaper, whats the problem?