Gold collapsing. Bitcoin UP.

[tabnloz]

If the ruski's do get punted from SWIFT like the UK is reportedly urging, then it will be a boon for btc & PM's

Don't think it will happen, but these financial pot shots always have the potential to escalate quickly.

http://rt.com/business/183780-uk-eu-swift-ban/

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[Zarathustra]

"Why Bitcoin is Better Than Gold, with Wences Casares"
https://www.youtube.com/watch?v=gKkfhi8Eaiw


I think his talk from Bitcoin2014 (https://www.youtube.com/watch?v=NERAN-89j8M) is better, but the above is shorter and more recent (published today).

"Barter never happened" This is the truth. It's the debt, stupid....

Indirect trade is more effective, but barter happens all the time. A merger where shareholders of the bought company are paid with shares in the new company, is barter.

'Barter never happened' means: the basis of an economy was never ever barter, it's always debt (fulfilling debt contracts).

[wachtwoord]

Ripple printing  

https://www.youtube.com/watch?v=hinsnnc0VBk

Dear lord. I think the Fed and the ECB will call Ripple labs for tips soon!

now i feel bad for ripple pumper dude that comes on here every once in a while.

He was absent for quite a while after the big crash (which happened when one ex-developer announced he was going to dump a lot)

he came by the wall thread every once in a while, to remind us how cool ripple is, he will be dearly missed.

anyone remember his name?

mah87 I think: https://bitcointalk.org/index.php?action=profile;u=67181

French dude, often in french section. Seemed 'bullish' with that fidor bank collaborating with ripple lately.

Yes the bank must be really impressed with their printing press.

[Zarathustra]

I do not disagree that deflation is a real risk (or that it is happening now), i disagree only that it is the expanding money supply in the form of debt that is the reason for it.

It is the reason. The higher the Debt/GDP ratio (that caused inflation) - the nearer the tipping point that leads to a reversal. Debt can't be created fast enough anymore at a debt level of 4 x GDP.

[cypherdoc]

I do not disagree that deflation is a real risk (or that it is happening now), i disagree only that it is the expanding money supply in the form of debt that is the reason for it.

It is the reason. The higher the Debt/GDP ratio (that caused inflation) - the nearer the tipping point that leads to a reversal. Debt can't be created fast enough anymore at a debt level of 4 x GDP.

What he's missing is that the ever expanding debt is preferentially being extended to the Treasury market, ie gvt, versus the private sector by speculators looking for risk free return and leading to severe misallocations of capital and even suppression of free markets. This is deflationary.

[Erdogan]

"Why Bitcoin is Better Than Gold, with Wences Casares"
https://www.youtube.com/watch?v=gKkfhi8Eaiw


I think his talk from Bitcoin2014 (https://www.youtube.com/watch?v=NERAN-89j8M) is better, but the above is shorter and more recent (published today).

"Barter never happened" This is the truth. It's the debt, stupid....

Indirect trade is more effective, but barter happens all the time. A merger where shareholders of the bought company are paid with shares in the new company, is barter.

'Barter never happened' means: the basis of an economy was never ever barter, it's always debt (fulfilling debt contracts).

Silly me, I thought "barter never happened" meant that barter never happened.

[Zarathustra]

I do not disagree that deflation is a real risk (or that it is happening now), i disagree only that it is the expanding money supply in the form of debt that is the reason for it.

It is the reason. The higher the Debt/GDP ratio (that caused inflation) - the nearer the tipping point that leads to a reversal. Debt can't be created fast enough anymore at a debt level of 4 x GDP.

What he's missing is that the ever expanding debt is preferentially being extended to the Treasury market, ie gvt, versus the private sector by speculators looking for risk free return and leading to severe misallocations of capital and even suppression of free markets. This is deflationary.

Yes. The higher the total debt level, the smaller the ability (of the private sector) to create additional debt (which is money).
Additional debt (that increased faster than productivity) is suffering a diminishing return, and this line with direction zero correlates with the inflation rate:

[Erdogan]

I do not disagree that deflation is a real risk (or that it is happening now), i disagree only that it is the expanding money supply in the form of debt that is the reason for it.

It is the reason. The higher the Debt/GDP ratio (that caused inflation) - the nearer the tipping point that leads to a reversal. Debt can't be created fast enough anymore at a debt level of 4 x GDP.

So what you are saying is that the expansion of debt, which normally drives inflation, is risky, and that risk becomes critical when debt level rises to a certain fraction (or multiple) of GDP, and when that risk manifests into loss, the money supply collapses and we therefore get deflation. Nice. Thought so too.

[Erdogan]

I do not disagree that deflation is a real risk (or that it is happening now), i disagree only that it is the expanding money supply in the form of debt that is the reason for it.

It is the reason. The higher the Debt/GDP ratio (that caused inflation) - the nearer the tipping point that leads to a reversal. Debt can't be created fast enough anymore at a debt level of 4 x GDP.

What he's missing is that the ever expanding debt is preferentially being extended to the Treasury market, ie gvt, versus the private sector by speculators looking for risk free return and leading to severe misallocations of capital and even suppression of free markets. This is deflationary.

Misallocation of capital should decrease productivity, which should drive prices higher.

So there must be something else, or, an indirect causality creating the deflation.

[Zarathustra]

"Why Bitcoin is Better Than Gold, with Wences Casares"
https://www.youtube.com/watch?v=gKkfhi8Eaiw


I think his talk from Bitcoin2014 (https://www.youtube.com/watch?v=NERAN-89j8M) is better, but the above is shorter and more recent (published today).

"Barter never happened" This is the truth. It's the debt, stupid....

Indirect trade is more effective, but barter happens all the time. A merger where shareholders of the bought company are paid with shares in the new company, is barter.

'Barter never happened' means: the basis of an economy was never ever barter, it's always debt (fulfilling debt contracts).

Silly me, I thought #barter never happened" meant that barter never happened.

No, it's clear that barter occasionally happens, but it's not the foundation and the motor of the economy, which is fulfilling debt contracts at maturity date (including interest on top of it), which enforces you to produce surplus by encreasing productivity.

[tabnloz]

Judge dismissed allegation of aluminium anti trust/price manipulation case.

Not gold / silver, but related, and of course, bitcoin user not affected.

http://mobile.reuters.com/article/idUSL1N0QZ2KO20140829?irpc=932

[cypherdoc]

Gold 2.0

http://www.caseyresearch.com/cdd/whether-you-love-or-hate-it-youre-missing-what-really-matters-about-bitcoin

[STT]

Good point.  Increasing productivity has been known to cause deflation since at least Adam Smith (1776).  I still don't see how collapse of debt (which reduces the demand for money because now that debt isn't going to be repaid) causes deflation.  If you have to make debt payments, you will try make sure you have enough dollars to pay them.  This is why debt increases demand for dollars.

The base rate is so low now that is a minor consideration, the debt itself as its created causes a greater monetary base then otherwise would be the case.   So in absolute terms, inflation has occured right away and eventually if it matches productive increases then its justified, the debt is repaid the economy is larger, however failed investment is deflation.
Deflation will occur when the debt defaults, there is a reverse effect that now the new money (included on bank sheets as an asset) is no longer in existence, there is less money available.

If you have less of something the price naturally rises, I think a weighing scales works here as if you remove a bag of sugar it rises (as does price rise with less volume of sugar in the total economic market).  In 2008 the dollar rose greatly in value even though alot of debt defaults were occurring in housing and the banks themselves were in great trouble (and the banks were worth less).   However these assets formerly counted performing debt, registered as Tier 1 capital by the banks ceased.
 They had used Tier 1 as their fractional reserve source for business and customer lending, normally dollar should rise in value as less were available.   We do not have a capitalist system, so our central bank created far more dollars then have been lost from default

Wences Casares

Says gold is valued as its scarce.   There are far rarer elements, this is the not its most importance feature, it has many more.   Tungsten is similar weight for example but as a pure metal it fractures.  Gold represents wealth and to some extent it satisfys the demands of the wealthy for opulence perhaps.  Dollars are tokens for IRS and government bills, they sate governments thirst for a cut of its nations commerce without outright confisication or royal charter type diversion.
  Bitcoin has no outright demand, this remains a problem that no great powerbase gains from its existence;  so to continue btc is desperately relying on its users, miners to actually need it not just sell it

Barter was common between tribes, not so much within them.  It still is.

Gold is part of barter, it is not often used or needed absolutely by either 'tribe'.   It is just useful for this purpose of exchange, it is so divisible, compact, fungible and so on.  The slight case for jewelary or other uses is secondary, I would rate it as a kind of barter.   We obviously vary in our use of this medium, I would rather exchange for oil most of the time however that would be much slower and costly to do.   Bitcoin also, its there to transfer value I dont especially want it otherwise so I relate that as barter but more accurate then using oil or less fungible goods like food perhaps [ the oldest markets and exchange or barter surely were food or cattle markets?]

Barter usually replaces money as the method of exchange in times of monetary crisis, such as when the currency may be either unstable (e.g., hyperinflation or deflationary spiral) or simply unavailable for conducting commerce.

[cypherdoc]

I do not disagree that deflation is a real risk (or that it is happening now), i disagree only that it is the expanding money supply in the form of debt that is the reason for it.

It is the reason. The higher the Debt/GDP ratio (that caused inflation) - the nearer the tipping point that leads to a reversal. Debt can't be created fast enough anymore at a debt level of 4 x GDP.

What he's missing is that the ever expanding debt is preferentially being extended to the Treasury market, ie gvt, versus the private sector by speculators looking for risk free return and leading to severe misallocations of capital and even suppression of free markets. This is deflationary.

Misallocation of capital should decrease productivity, which should drive prices higher.

So there must be something else, or, an indirect causality creating the deflation.

i think this is what you're looking for.  net shadow liabilities in the system have been dropping since 2007-8 despite new record national debt levels trying to compensate ---> deflation:

http://www.newyorkfed.org/research/epr/2013/0713adri.pdf

[cypherdoc]

Good point.  Increasing productivity has been known to cause deflation since at least Adam Smith (1776).  I still don't see how collapse of debt (which reduces the demand for money because now that debt isn't going to be repaid) causes deflation.  If you have to make debt payments, you will try make sure you have enough dollars to pay them.  This is why debt increases demand for dollars.  Again, yes initial issuance is short term inflationary, but I don't see how you can claim it is inflationary overall.

you're over thinking this.

money supply = monetary base + mostly credit/debt.  in the run up into the 2008 high in housing and stocks, ppl leveraged up to buy both assets.  when the bubble burst, margin calls went out to stock holders and home owners found they could no longer make mortgage payments.  what do you do in that situation?  panic sell at lower prices to limit your losses.  the whole process began to snowball with stocks and home values plunging as a result along with widespread debt defaults.  oil dropped to $30. gold hit its 9 yr cycle low. all that leverage started coming out of the system (deflation) and there was a worldwide scramble for USD's to pay off that liquidated debt as well as a run to safety into UST's which only exacerbates the deflation associated with Fed policy to manipulate rates downwards during normal times.

[cypherdoc]

furthermore, continuously falling interest rates increase the burden of previously contracted debt at higher rates for businesses.  this destroys their capital.  a perfectly sound business may fail if their debt burden begins to exceed the profitability of their deployed capital, thru no fault of their own.

[cypherdoc]

It's the money velocity that has collapsed ... and is still in vicious downtrend. Monetising the debt directly is a futile attempt to boost money velocity by the wizards of fiat.

The two biggest stories of the week from the elite are that USA (White House) is considering bombing both sides in a far off war ... (suspected insanity) and that the CFR suggests to print money directly into householder accounts aka helicopter money drop (patently insane).

History will look back askance on these times with pity.

the collapse in velocity and interest rates is a strong signal that deflation is winning.  no matter how much money the Fed prints, it can't force ppl to spend.  the Fed's complicity with the US Treasury to buy bonds over the last 34 yrs has caused a steady drop in interest rates.  this drop in rates has caused periods of euphoria and over investment in certain sectors of the economy but overall what it is causing is deflation. the Treasury market, the largest market in the world next to forex, is continually front run by speculators searching for risk free profits in the form of ever rising bond prices.  speculators know that the Fed will be there to pay them a higher price for the bonds they just bought from front running auctions.  they know that ultimately in the case of a problem, bonds will be backstopped by the public either in the form of taxes or further money printing.  the Treasury market is a veritable Black Hole.  stop and think for a moment of the Ponzi scheme at work.  Fed uses fresh USD to buy UST's from gvt and turns around and sticks those UST's on the asset side of it's balance as backing for those same USD's it just printed.  gvt turns around and uses the USD's obtained from issuing UST's and wastes that money on welfare projects and warfare.  they are much worse at allocating capital compared to the free market.  when gvt needs to redeem the UST's, it just issues even more UST's for more USD's from Fed and the cycle spirals downward in terms of real productivity.  this is deflation and we're seeing it in a plunging monetary velocity and negative interest rates in Europe.  of course, certain sectors of the economy can experience price inflation at different times like the stock mkt currently just to fool you that hyperinflation is just around the corner.  the noughts saw commodities rise along with gold.  student loans are at all time highs.   but these are just distractions to the main dynamic in play; the US Treasury/Fed ponzi dynamic using USD's and UST's to cause inadvertent deflation.  real productivity suffers and the Fed is pushing on a string.

for more on this read the writings of Professor Antal Fekete.

How do you think this will end?

no one knows of course.  according to Fekete, we are going to end up in death and destruction as the Black Hole US Treasury sucks everything into it.  only then does he think gold will be restored as ultimate money.  gold would be part of an Armageddon play.  i obviously disagree with this part about gold.  i'll also disagree with the death and destruction part b/c w/o hope for a better life, there is no living.  so i'll take the optimist prediction.  not just for that but also b/c i think technology can save us, of which Bitcoin is an integral part.

whether gold's drop in price from 2011 to now is from a topping of its 9yr cycle, from manipulation, or from a nascent Bitcoin effect doesn't really matter.  the fact is, the price is dropping.  if it continues to drop and Bitcoin is flat or starts increasing in price, there will be a solid case for optimism.

to explain this, let's assume interest rates continue to drop from Fed printing and more deflation.  but first, it's helpful to understand the relationship btwn interest rates and gold hoarding from long ago before CB's.  when a country lowered interest rates on loans that were considered "too low", fears would arise from investors that the lending was being made too easy thus encouraging a potential speculative boom.  as a check to this, potential new bondholders would not buy and instead redirect their money into gold hoarding.  when the country noticed this, it would be a signal that their lending policies were too easy and that they needed to raise interest rates.  so gold was a check on bond prices and vice versa interest rates.  fast forward to today when there appears to be something wrong with this dynamic.  as i said above, it could be from manipulation, a topping of gold's 9 yr cycle, or a nascent Gold 2.0 effect from Bitcoin.

if there is manipulation going on then one has to assume that this is possible b/c the Fed actually owns some gold and can thus lease it out to primary dealers to do the manipulating.  how much is left is anyone's guess.  also, there is a huge paper market surrounding gold that is opaque and can be manipulated to suppress price.  to the extent that the Fed/gvt doesn't have any usable Bitcoin to short with (excluding the SR stash that we can monitor on the blockchain) i think that Bitcoin has an advantage over gold in that regard.  if my 9yr cycle top call continues to hold, that means we still have a few more years of downside in the gold price to go.  the question will be how deep that goes.  if Bitcoin holds steady or starts to rise again, that would be a huge sign, imo.  not to mention all of the technical advantages we've all advanced ad nauseum in this thread.  all these factors tip the scale towards Bitcoin from gold, imo.

so my optimist view goes like this.  since gold doesn't seem to be doing its historical role of providing a check on bond buying or interest rate manipulation, perhaps Bitcoin might one day assume this role instead.  that would require a significant and progressive rise in the Bitcoin price as speculators would start dumping UST's in favor of Bitcoin.  if this happens, interest rates will start to rise, savers in fiat won't continue to be penalized as now they could start leaving money in the bank again and earn reasonable interest.  pensioners and retirees could start to rely on CD's for income once again.  and then maybe we could even go to a Bitcoin Standard as i've talked about in the past.  Bitcoin could become the great regulator of CB's and gvt's.  

this would be my greatest hope.  after all, i am biased.

[iCEBREAKER]

The implications of the above illustrated display of the penultimate power of marginalism have disturbed me for some time (since 2007).

   Oh wise and more-knowing cypherdoc, what shall we do at Zero Hour?   

Head to backwoods Idaho?  Trade silver for gunmetal, brass, and lead?  Join the Masons?  Smoke a fat joint?  Take some BTC profit?  All of the above?

[cypherdoc]

[majamalu]

How do you think this will end?

no one knows of course.  according to Fekete, we are going to end up in death and destruction as the Black Hole US Treasury sucks everything into it.  only then does he think gold will be restored as ultimate money.  gold would be part of an Armageddon play.  i obviously disagree with this part about gold.  i'll also disagree with the death and destruction part b/c w/o hope for a better life, there is no living.  so i'll take the optimist prediction.  not just for that but also b/c i think technology can save us, of which Bitcoin is an integral part.

whether gold's drop in price from 2011 to now is from a topping of its 9yr cycle, from manipulation, or from a nascent Bitcoin effect doesn't really matter.  the fact is, the price is dropping.  if it continues to drop and Bitcoin is flat or starts increasing in price, there will be a solid case for optimism.

to explain this, let's assume interest rates continue to drop from Fed printing and more deflation.  but first, it's helpful to understand the relationship btwn interest rates and gold hoarding from long ago before CB's.  when a country lowered interest rates on loans that were considered "too low", fears would arise from investors that the lending was being made too easy thus encouraging a potential speculative boom.  as a check to this, potential new bondholders would not buy and instead redirect their money into gold hoarding.  when the country noticed this, it would be a signal that their lending policies were too easy and that they needed to raise interest rates.  so gold was a check on bond prices and vice versa interest rates.  fast forward to today when there appears to be something wrong with this dynamic.  as i said above, it could be from manipulation, a topping of gold's 9 yr cycle, or a nascent Gold 2.0 effect from Bitcoin.

if there is manipulation going on then one has to assume that this is possible b/c the Fed actually owns some gold and can thus lease it out to primary dealers to do the manipulating.  how much is left is anyone's guess.  also, there is a huge paper market surrounding gold that is opaque and can be manipulated to suppress price.  to the extent that the Fed/gvt doesn't have any usable Bitcoin to short with (excluding the SR stash that we can monitor on the blockchain) i think that Bitcoin has an advantage over gold in that regard.  if my 9yr cycle top call continues to hold, that means we still have a few more years of downside in the gold price to go.  the question will be how deep that goes.  if Bitcoin holds steady or starts to rise again, that would be a huge sign, imo.  not to mention all of the technical advantages we've all advanced ad nauseum in this thread.  all these factors tip the scale towards Bitcoin from gold, imo.

so my optimist view goes like this.  since gold doesn't seem to be doing its historical role of providing a check on bond buying or interest rate manipulation, perhaps Bitcoin might one day assume this role instead.  that would require a significant and progressive rise in the Bitcoin price as speculators would start dumping UST's in favor of Bitcoin.  if this happens, interest rates will start to rise, savers in fiat won't continue to be penalized as now they could start leaving money in the bank again and earn reasonable interest.  pensioners and retirees could start to rely on CD's for income once again.  and then maybe we could even go to a Bitcoin Standard as i've talked about in the past.  Bitcoin could become the great regulator of CB's and gvt's.  

this would be my greatest hope.  after all, i am biased.

Thanks for explaining this in such detail. I have been following your writings since mid-2011, and I must admit you were more right than at first I dared to concede.

Do you think it is possible that we will see hyperinflation in USA? I ask this because while Mish believes that scenario is almost impossible, Fekete does not rule it out.

Finally, many people seem to think that gold and bitcoin can go up hand in hand. What do you think of that?