An early summary http://thedailygold.com/major-bottom-in-precious-metals-could-occur-this-week/
Last week I said in one of my daily corporate blog posts that we were seeing no demand from India and dead as well from retail clients, ie demand was not broad based. With India out, China demand is not enough to carry the market in the face of speculative money who see gold as a "risk on" trade rather than a safety trade and who are thus selling. Maybe a repeat of 2008?
Greetings Erik,
Kudos to your effort in this thread to debunk the goldbug marketing that has strangled the blogosphere for years, but I’m a little surpised to see that you’re still swallowing the QE3 rationalization. It might be prudent to purge that little ditty before it can be used against you.
Why dig for gold when you can make more money selling shovels?
Best,
Jeff
I am in Erik’s camp that QE3 must eventually come…for so many reasons. If JAG is correct, we will have a deflationary depression that will be so deep, we will probably have to create a new term for it;
recession < depression < hyperdepression?
JAG… why do you think Ben B (and the world’s central bankers) would give up his money printing efforts after working so hard to date to keep world debt stocks level or rising?
[quote=Erik T.]Something worth watching closely will be the extent of price and volume moves on the U.S. open. My prediction is a considerable downspike right at the open (caused by a whole bunch of stops being triggered when GLD opens), followed by a relief rally through most of the morning. There is plenty of time for the people gaming the market to figure out that’s coming, and you can expect a futures ramp to the downside just before the U.S. open - that part is legitimately manipulative, and is designed to artificially lower the opening price and therefore the stop-out price.[/quote]Well, it didn’t turn out quite as I expected. The initial move after the U.S. cash open was indeed down, but it wasn’t instantaneous. That means it wasn’t stop orders being triggered that caused the action. Accordingly, there was no futures ramp to the downside in the minutes before the open.
What this says to me is that the stops are lower than I guessed. Remember that the online discount brokers (not central banks per the goldbugs) are the real perpetrators of stop-clearing runs. They have the data to know where the stops are. If there had been a large cluster of stops just below the market, they would have organized a futures ramp in the 2-3 minutes before the open, for the purpose of triggering those stops. The fact that no such thing happened tells me there was no cluster of stops where I guesed there would be one. How nice it must be to be Interactive Brokers or Scott Trade, with a screen in front of you telling you where your customers’ stops are so that you can pick their pockets!
So the stops must be clustered lower. My next guess is just below 1550, the base of price formation we’re looking at on the daily chart.
The fact that the market is still moving down 10 minutes (now) after the open tells me a lot as well. I expected stops to be triggered, then a relief rally as bottom-believers piled in to buy the bottom. What I’m seeing now tells me we have more downside to go before we test the real support level. The stop cluster I expected never got triggered - it must be lower. And discretionary traders are still selling. It all comes together to paint a picture of a major support level still yet to be discovered below the present market.
All the best,
Erik
Jim,
I’m not saying there won’t be another QE announced someday, I’m saying that the apparent correlation between QE and rising gold prices is so taken for granted by the herd that you can’t trust it.
Remember the old ditty "housing prices can’t go down?" Someone made a lot of money off of that one.
Best…Jeff
It is important to consider JAG’s words carefully. Here is why.The really weird thing about the way things work (or don’t!) now that gold is not being used as the basis for currency is that the supply of fiat currency is dictated by the market’s perception of the quantity of relatively-rapidly-maturing debt that will be made good upon. In this, the bankers don’t control, they react.
In this wacky system, the money supply that matters, the one that the "market sees" in setting prices, expands as it observes more short debt being created, and contracts as it sees short debt retired or defaulted upon. The market may change its view of how short "short" must be to be counted in its perception of money supply. The market understands that the money bids for the purchase of goods and services, and if there is more supply of money than demand, prices go up, and conversely if less, down.
In 2008, we had a deflationary event driven by the market "suddenly learning" that a bunch of debt was most likely bad, and maybe a lot more.
Thus, in 2008, all prices (in fiat) changed in a correlated way as the market re-evaluated its perception of the "market value" of outstanding debt, ie the money supply. Correlation is recurring now, as dscribed in this HSBC report as the "RORO trade".
In 2008, the deflationary collapse was halted by printing and bailouts.
John Mauldin spoke (or was it a guest article?) some time ago of the notion of the "liquidity trap" where the market simply has no demand for short debt, ie money, yet is flooded with it through cenral bank printing. That printing leads to increasing prices is not a given.
In 2012 (or 20??), it is far from impossible that the market will reject the short debt offered by the bankers that it accepted in 2008. In 2008, we would not have re-inflated if the market didn’t believe in the newly "printed" money. The emergence of RORO trading confirms that the market changed the way it peceived the fiat money system during that event.
Is the situation the same now? I don’t think so, and neither does the market.
In 2008, no one was talking about outright failures of sovereign and super-sovereign currencies, sovereign debt default, etc.
The bankers have created for us and the market a money system that is fundamentally conflicted by a paradox.
As the market loses faith in the debts within the system, the money supply contracts, and prices in fiat will drop.
As the market loses faith in the system as a whole, the supply of fiat money is irrelevant, and more is required to buy real stuff, ie prices in fiat will rise.
The race is now on between failure within the system (deflation) and failure of the system (inflation): RORO rules now.
In the former case, the fiat price of gold and other PMs will drop. In the latter, they rise to infinity as the value of fiat goes to zero.
It is now important to consider not just operation of the system as it continues to function, but what happens if and when the system itself no longer is functional.
The market is making such considerations now. Of course it is conflicted. The entire experiment has been inverted. The market feeds on money, and now every time it reaches for the banana, it gets a shock.
This is what leads the market gorilla to break out of its cage, and thus halt the experiment.
Something will have to become money again to replace fiat, and that thing will not behave the same way as other asset classes during the transition.
I submit, for the rationale described above, that precious metals will decouple from other asset classes in the RORO trading to come, because the market understands that they will be required as specie for the next set of currencies.
I would appreciate contructive crticism of this set of ideas.
Thank you for a continuing interesting debate.
bbacq
Got to say, I have a respect for Jeff Christian but I have my doubts that gold miner’s ALL IN costs could be $800 an ounce.
I’ve read a few articles and earnings reports lately that contradict this. For example, some South African gold miners (who still supply a substantial amount of world supply, declining as it may be) are experiencing costs over $1200 an ounce.
I don’t know how the aggregate of all miner’s costs figure is derived, just saying that judging by a few earnings reports coming out lately, only the best of the best have all in costs of $700 or lower. On top of that, the (understated) official inflation that we are used to seeing in all countries is going to lead to dramatically higher energy and labour costs from here over the next 2, 3, 5 years.
I have access to much less information and data than Jeff but from where I stand, and in my unprofessional opinion, given recent earnings reports the notion that gold prices have enough slack to roughly halve before the aggregate of gold mining activity starts to go below break-even is bluntly unbelievable. Companies like Harmony Gold, Anglogold and even various Canadian producers would be well and truly underwater at $1000 gold, never mind $800 gold. At the margin, a whole lot of mining companies would feel pain long, long, long before that. Enough companies to matter and affect prices at the margin.
[quote=bbacq]I would appreciate contructive crticism of this set of ideas.[/quote]Ok, I’ll take a stab at several points you made.
[quote=bbacq]In 2008, we had a deflationary event driven by the market "suddenly learning" that a bunch of debt was most likely bad, and maybe a lot more.
Thus, in 2008, all prices (in fiat) changed in a correlated way as the market re-evaluated its perception of the "market value" of outstanding debt, ie the money supply. Correlation is recurring now, as dscribed in this HSBC report as the "RORO trade".
In 2008, the deflationary collapse was halted by printing and bailouts.[/quote]
I agree with most of that, but it’s also important to remember (and few seem to) that the suspension of FASB 157 (mark-to-market accounting) was the proximal trigger for the reversal of equity markets in March 2009. What was happening was classic debt deflation - nobody wanted MBS - subprime or otherwise - and the balance sheets of the institutions that already held the stuff were collapsing. The crisis was averted - to my utter amazement - by simply changing the accounting rules to allow banks to pretend those assets are worth more than they really are. That was not a "temporary, emergency measure" - it’s a permanent change that remains with us today. Nobody actually knows whether the banking system is solvent or not, because the government has decided the answer to that question is too scary, so we’re "better off" not knowing the answer! This really isn’t an exaggeration. This has to end badly, but to my own astonishment, everyone seems happy to pretend there is no problem. If I have learned anything from this, it is that it takes longer than I thought for people to wake up and understand the big picture.
[quote=bbacq]John Mauldin spoke (or was it a guest article?) some time ago of the notion of the "liquidity trap" where the market simply has no demand for short debt, ie money, yet is flooded with it through cenral bank printing. That printing leads to increasing prices is not a given.
In 2012 (or 20??), it is far from impossible that the market will reject the short debt offered by the bankers that it accepted in 2008. In 2008, we would not have re-inflated if the market didn’t believe in the newly "printed" money. The emergence of RORO trading confirms that the market changed the way it peceived the fiat money system during that event.[/quote]
Personally, I avoid the phrase liquidity trap because its meaning has changed over the years, and different people using it in different ways leads to confusion and miscommunication. When Keynes originally coined the term, he was talking about the scenario where a liquidity injection fails to reduce interest rates as central bankers presumably intended. But ZIRP in Japan in the '90s brought new meaning to the term - suddenly people used "liquidity trap" to describe the "trap" central banks fall into when interest rates reach the zero bound, and it therefore becomes impossible to reduce them by injecting liquidity to the system.
I’m not criticizing you on this bbacq - just suggesting that you be ready for different people to read different meanings into your words when you talk about liquidity traps. I also make a point of never using the word "inflation" without qualifying exactly what I mean. Some people think inflation means rising consumer prices. Others think it means rising money supply. Others think it means rising aggregate money and credit (perhaps the most useful definition). But if you use the term in isolation, you’re almost guaranteed to confuse people who are stuck on a different meaning than yours.
I beg your pardon, but please speak for yourself. I most certainly was talking about these things going back to 2006, and so was Chris Martenson going back even farther. Perhaps what you mean is that these rather obvious risks have now begun to reach the consciousness of the masses. That I would agree with.
[quote=bbacq]The bankers have created for us and the market a money system that is fundamentally conflicted by a paradox.
As the market loses faith in the debts within the system, the money supply contracts, and prices in fiat will drop.
As the market loses faith in the system as a whole, the supply of fiat money is irrelevant, and more is required to buy real stuff, ie prices in fiat will rise.
The race is now on between failure within the system (deflation) and failure of the system (inflation): RORO rules now.
In the former case, the fiat price of gold and other PMs will drop. In the latter, they rise to infinity as the value of fiat goes to zero.
It is now important to consider not just operation of the system as it continues to function, but what happens if and when the system itself no longer is functional.
The market is making such considerations now. Of course it is conflicted. The entire experiment has been inverted. The market feeds on money, and now every time it reaches for the banana, it gets a shock.
This is what leads the market gorilla to break out of its cage, and thus halt the experiment.[/quote]
I have a slightly different perspective. Back in 2008, my belief (shared by quite a few people at the time) was that it would be obvious to markets that printing money and diluting the value of the currency couldn’t possibly work in the long run. I reasoned that the Fed was out of useful bullets once we hit the zero bound in interest rates, because I thought QE - outright money printing - would be recognized for the desperate measure it truly is, and that markets would revolt because of a loss of faith in the system.
I couldn’t possibly have been more wrong. What happened is that (as David Tepper is often credited with first saying publically), freshly printed money has to go somewhere, and where it went was to bid up risk asset prices. More money = higher prices, and no discernable increase in concern about the stability of the system! Since 2009 it’s been just that simple, and so far the long-term perils of money printing are a popular topic only among people like us, who are considered "fringe extremists". So far, these concerns are ignored almost completely by the mainstream.
The RORO trade emerged as everyone figured out that Fed money printing has a LOT more influence on asset prices than conventional fundamentals. When people think more QE is imminent, they start buying. Asset prices all go up together in reaction to anticipation of more freshly printed fiat (risk on). That includes upward moves in prices of assets that have traditionally had a negative correlation, such as equities and gold. Eventually that gets overdone or there is reason to think the Fed will back off on QE, and everyone wants out as deflation begins to rear its ugly head again (risk off), as is happening right now.
The whole reason this is working is that it HAS been working. So far, anyway. Everyone has adjusted to a "new normal" perception where few dare to short the market or even be flat, because "everyone knows" they can count on Benny and the Inkjets to print more fiat to save the market if it starts to crash. In reality, Ben can only print so long as inflation doesn’t become a big problem, but few seem to grasp that. Those who do are quick to dismiss the concern, thinking that because the CPI has been moderate, "there is no inflation". To my utter astonishment, they completely ignore commodity prices. All of this sets up the really big risk event that I see coming in the next couple of years.
I think the really big event comes when further QE fails to lift asset prices, surprising most market participants, or when further printing becomes impossible because oil prices have been elevated to the point of causing a gas price political crisis. In other words, it’s when the Bernanke Put (which everyone took for granted) doesn’t materialize that all hell breaks loose. The reasoned thinking of people like Ron Paul who can see what’s coming isn’t even remotely interesting to the Washington policy machine. But $7 gasoline prices will change everything, almost overnight, as Washington goes into reactive crisis response mode - the only thing it knows.
I contend that the whole 2009-Present experience has been a fantasy mirage, resulting directly from the widespread (and so far correct) belief that no matter what happens, the Fed will save the markets from crashing. The day that the market wakes up and recognizes that Ben can’t save the markets any more, we’ll see a crash that will make 2008 look like fender bender. Watch for signals that sitting congresspeople are at risk of being thrown out (becoming un-re-electable) "unless something is done" about gas prices. Intelligent, forward looking analysis and insight (a la Ron Paul) is completely irrelevant. Congresspeople waking up and recognizing that their career in politics will END with the next election unless they take away Ben’s printing press will change everything, instantly.
[quote=bbacq]Something will have to become money again to replace fiat, and that thing will not behave the same way as other asset classes during the transition.
I submit, for the rationale described above, that precious metals will decouple from other asset classes in the RORO trading to come, because the market understands that they will be required as specie for the next set of currencies.[/quote]
I used to think that myself, but my view has evolved. The key is the part about the (broader, mainstream) market "understanding" this stuff. I don’t think they do. People who have been interested in PMs for years have the idea in their heads that we "just have to" go back to a gold-backed currency because it’s what’s always happened throughout history. But if you actually go back and study that history, you’ll find that major wars are often needed before people recognize what you are taking for granted as obvious. Just watch the mainstream cable channels - Bloomberg and CNBC really are a good proxy for the general level of comprehension in the market. Most people continue to view gold and silver as "barbaric relics", and the guys who most people foolishly perceive to be the smartest investors in the world just went on record as saying that civilized people don’t buy gold! This is very telling, and it’s a message goldbugs sadly seem to miss.
There are PLENTY of other options to a gold-backed currency, including a global fiat currency. Stop and consider the scenario where the world recognizes the failings of national fiat currencies, and there is a general consensus we need something else. The options being debated are global fiat administered by a global CB (perhaps an outgrowth of today’s Fed), or a return to the gold standard. Forget your own opinion, and think in terms of what would likely happen on the stage of public opinion. All the people with the most power and influence in the world will see this as a choice of more power for the elite (global fiat), or a profound loss of power for them (gold standard). So it would come down to a public debate between the most powerful people in the world - Nobel Prize winners like Paul Krugman and the folks who OWN the media - vs. some Austrian economists nobody ever heard of. The latter group might actually know better, but who would win the contest for public opinion?
In summary, history shows that you always go back to a PM-backed currency, but when you study that history closely you realize we’re a long way from that point. It usually takes complete wipe-outs (hyperinflations) of fiat currencies and/or major wars to get the world to wise up. All the goldbugs who repeatedly insist that we’re headed back to gold-backed currency would do well to research what it’s taken in the past to get a society to recognize that neeed. I’m sad to say it, but we haven’t felt nearly enough pain yet.
All the best,
Erik
[quote=Erik T.]
There are PLENTY of other options to a gold-backed currency, including a global fiat currency.
[/quote]
Erik
I agree with what you said and your reasons for this path. The World Bank would love to have Special Drawing Rights (SDRs) become the world currency. BUT, the failing Euro has demonstrated that monetary union requires fiscal union, and that requires nations to essentially yield their sovereignty as well. I have no doubt that powerful people would like to see that happen, but with the increased chaos that is resulting in Europe that would be a very hard sell. I expect the next 12 months will provide a clear example of disaster. I think self preservation would overcome the hope that extending a failed system to a global scale would be an improvement. Can you really see this happening anyway?
Travlin
Gold Fields CEO has a very different view from Jeff Christian on industry costs.
Erik
I agree with what you said and your reasons for this path. The World Bank would love to have Special Drawing Rights (SDRs) become the world currency. BUT, the failing Euro has demonstrated that monetary union requires fiscal union, and that requires nations to essentially yield their sovereignty as well. I have no doubt that powerful people would like to see that happen, but with the increased chaos that is resulting in Europe that would be a very hard sell. I expect the next 12 months will provide a clear example of disaster. I think self preservation would overcome the hope that extending a failed system to a global scale would be an improvement. Can you really see this happening anyway?
Travlin
[/quote]
Trav,
Unfortunately, YES, I really can see something along these lines happening.
It’s a matter of context. Yes, I agree with you 100% that Europe proves the shortcomings of currency unions without fiscal unity. But remember, the bottom line on the gold standard is always that having one robs the most powerful people in the world of some of their power. My view is NOT that a global currency is a good idea - I think it could lead to global mayhem. Furthermore, although I cited a global fiat currency as an example, my real point was that the people with all the power will do whatever they can to avoid a gold standard. Global fiat is just one possible alternative they might propose.
I also think it’s easy to imagine how they would twist ideas around to make it sound like the Euro debacle somehow serves as evidence that global fiat is a GOOD idea. I know, I know - that’s utter nonsense. But people like Krugman are so good at reciting nonsense with a straight face that they get Nobel prizes for doing so. The VAST majority of the people who need to be influenced (electorates of the powerful nations) are economically clueless, and incapable of having their own ORIGINAL opinions. Their views will be shaped by credentials and political ideology, not by what makes the most sense.
In summary, my advice is to stop thinking about what SHOULD happen (I agree wholeheartedly a gold standard is the answer to that), and start thinking about what the most powerful and influential people in the world will try to make happen instead in order to retain or increase their power. A gold standard robs them of the ability to fund their largesse with printed money, as opposed to just tax revenues. They will figfht tooth and nail to prevent that outcome from happening.
Again, believe me, I get it! But you have to remember, the vast majority of people on this planet think guys like Krugman have the answers, and they’re not going to listen to reason from goldbugs and austrian economists who aren’t even taken seriously on the public stage. If they did, Ron Paul would have already secured his party’s nomination - instead, he just dropped out of the race. I’m sorry to say it’s going to get a lot worse for a long time before it gets better.
Erik
CPTWaffle,I kept quiet after my earlier post on this was rebutted by Jeff. I feel less than a minnow in this epic thread and have no credentials that give me the right to question people like him. But I agree with you. I have heard compelling anecdotal evidence that miners try to disguise their true capital costs. Not sure where Jeffs data comes from - if it is "deep" from detailed analysis of company and individual project finances or shallow from annual reports and the like. If the latter, then I reserve my judgement.
But before getting too hung up on this point I would like to know whether it matters. We have heard in this thread opinions from Victor and Bron (I think) that cost of production has almost no bearing on the gold price - it is the reluctance of existing holders of gold to part with it that is more important. This opinion seems to contradict Chris Martensons own opinion recently expressed in a podcast that the cost of production sets the price floor.
if Chris is right, then yes it really matters whether gold costs $800 an ounce or $1200+ to produce.
I went to visit the Perth mint with my mother the other day to see what is involved in buying gold. If Chris is right then I would believe that gold cannot fall much further and we would both be buying it. So this is a very important issue and I look forward to reading responses on these points.
Thanks everyone for a GREAT discussion.
John
A friend who owns two small private gold mines tells me cost of production varies hugely from one mine to the next. There are apparently SOME mines with very high quality deposits where the cost of production is still below $500. My friend lamented that quality deposits/favorable operating costs like that are so rare now that the cost to buy a mine like that carries a huge premium. But they do exist. My friend’s mines have $900ish cost of production, which he said was on the high side of industry average, but in his experience the best you can do if you are buying a small mine (like his) with private funding.
On the question of "does it matter", the answer (to be certain) is that it matters at least a little, but probably (in my opinion) not that much. One thing that is certain is that some gold projects have incremental cost of production of $1200 or even higher. No doubt about that. As the price falls thru that figure and stays there, those projects become uneconomic and may be taken offline, slightly reducing supply.
The answer to "does it matter" depends on where the metal is coming from to meet demand. It’s a totally different equation for Silver, where the metal gets "used up" in industrial applications, and mine supply is more important. But in the case of gold, all of it - every ounce that’s ever been mined save for just a little waste in electronic partsand other small waste uses - is owned by somebody. They all have their price, and it changes with circumstances and perceptions of future market direction.
If the price of gold fell to and stayed at $1000, it would definitely take some supply offline. But I doubt it would amount to enough to make any real difference.
Erik
My, you seem to enjoy bloviating and picking nits, Erik. Is this your blog, or someone else’s? You exude proprietoral condescension in your words. I thank either you or the actual operator for tolerating my presence here.
I’ll address a couple of points by you and others.
Cost of extraction effect on price of gold: Hoarding and dishoarding are far more important sources/causes of demand and supply, respectively, than actual physical consumption and production. Gold derives most of its value from its monetary function. If it is needed in order to be money, it has high value to the market, if not, it is valued lower. Production costs may affect individual mines greatly, but much less the overall market price. Only in a case where supply elasticity through dishoarding dropped dramatically (eg if fiat was obviously dead, and "from my cold dead hands" sets in everywhere) would production costs matter much.
"I beg your pardon, but please speak for yourself. I most certainly was…" Too funny. You don’t miss a chest-beat do you, Erik! Since you want to play, I’ll say we would have to go back decades to find my first thoughts on default and currency failure. Um, "no-one" need not always be taken in its strict literal sense, Erik, I think you are getting a little self-centered.
"I think the really big event comes when further QE fails to lift asset prices" I think you completely miss my point, or get it backwards, or want to get it backwards, or something. Quite to the contrary, the big event, ie the market rejection of fiat, occurs when despite tight monetary policy, prices rise anyway, because people know the clock is running down for trading their paper into something more useful, like PMs, food, land etc. Like the eighties, but on steroids. You don’t seriously believe they aren’t still desperately trying to inflate this leaky balloon do you?
"The key is the part about the (broader, mainstream) market "understanding" this stuff. I don’t think they do." There is no "they" in "market" to understand things in the way I am using the term, Erik. The market itself thinks, the market remembers, the market computes prices. My neurons don’t think, my brain does.
"People who have been interested in PMs for years have the idea in their heads that we "just have to" go back to a gold-backed currency because it’s what’s always happened throughout history. But if you actually go back and study that history, you’ll find that major wars are often needed before people recognize what you are taking for granted as obvious. Just watch the mainstream cable channels - Bloomberg and CNBC really are a good proxy for the general level of comprehension in the market. Most people continue to view gold and silver as "barbaric relics", and the guys who most people foolishly perceive to be the smartest investors in the world just went on record as saying that civilized people don’t buy gold! This is very telling, and it’s a message goldbugs sadly seem to miss."
Oh, that IS rich Erik. You are seriously inside the box. "If I actually go back and study history???" LOL!! It is through the study of history that I find truth, Erik, and it is by listening to talking heads on Bloomberg and CNBC that good people are deceived. A study of history reveals that the only kind of currency that can stand market-tests are those backed by specie. It’s how the west was won (apologies to any Native Americans in the audience, its just an expression).
It’s also true that gold-backed currencies have failed market tests. The reason they all failed is that they were implemented coercively. Coercion does not lead to truth, the market demands truth, and the market always eventually eliminates coercion. It might slowly take an entire empire down with it, as it did with the Romans, or we can use our heads, and avoid a few hundred years of bad times. There was a time in history when most people didn’t sit in Plato’s cave watching Munger’s, Gates’, and Buffet’s shadows dance, and instead went outside to see reality, and they didn’t retreat back in fear.
"major wars are often needed before people recognize…"? Really? I’d like to think they can be enlightened otherwise this time. Have we ever had an internet before? Could it be different this time?
"goldbugs": please.
The only possible stable answer is competing privately-issued specie-backed currency, with no coercion, so that when the market tests the currency, and an issuer is over-extended, it doesn’t take the whole currency down with it, just the dope who embezzled. Maybe bitcoin-like schemes will eventually prove possible, but, for now, the only way to ensure money-supply limitation is by ensuring the appropriate disincentives exist, and they don’t in central banking.
"There are PLENTY of other options to a gold-backed currency, including a global fiat currency."
I agree. All the other options are just inferior, that’s all.
"Forget your own opinion… I’m sad to say it, but we haven’t felt nearly enough pain yet."
Why on earth would one want to do that. I am instead spreading not my opinion, but truths discovered by others, in order to avoid the pain.
I think maybe the general public is getting the drift, via the internet. Check out this 12-year-old girl, for instance (I hope that everyone forwards that link to a friend - she nails it. ). She has the problem correctly identified, but fails at the last step in advocating public central bank currency issue. That system, just like the private central systems like the Fed and BIS, doesn’t have disincentives for over-printing. The only one that works very well, best of a bad lot, is multiply-issued competing private gold-backed currency, if anything other than PM coinage is to be used, and, these days, reverting to coin would certainly slow things down a lot.
All it takes now is a few informative viral videos for the as-yet uninformed (rember Joe the Plumber?), coupled with the informed already knowing the system is a crock, and it comes down, and we move on. HIstory tells us it is going to take a long time? Erik, did the Romans have an Internet? Hundreds of trillions in derivatives of dubious value?
Erik, your contribution to society would be greater if instead of attempting to predict how things will play out within an existing corrupt and broken system, you focussed on the alternative that works. The way you argue - broadbrushing swathes of society, appealing to the authority of coercive bozos - makes me think you have an agenda.
I say let’s hurry up and get to competing specie-backed currencies. I think the market is saying the same thing.
Thanks for the laugh, bbacq. Next time you expressly request feedback on your thoughts, I’ll know better than to assume you actually have a sincere interest in respectful intellectual discourse with someone who disagrees with some of your views.
I wasn’t commenting on your point; I was making my own point. Hence the words "I think…" at the beginning of the sentence. It appears that you believe yourself to be a greater expert than I am on the subject of what I think! That’s rather amusing, bbacq. I won’t bother commenting on the rest of your missive, as it’s now clear you have no sincere interest in thoughtful discourse, but are here only to rant about your own beliefs.
All the best,
Erik
Hi Erik
When your friend talks about a $900 cost of production, is that just operating costs or has he factored in capital expenditure and maintenance too?
Cheers
My understanding is that the $900 figure is "fully loaded" and includes CapEx, but does NOT include the cost of acquiring the property itself. I’ll ask him next time I talk with him, and post again if anything is different.
All the best,
Erik
Erik beat me to it. And much more polite. Please refrain from ad hominem attacks, they cheapen your responses.
"The key is the part about the (broader, mainstream) market "understanding" this stuff. I don't think they do." There is no "they" in "market" to understand things in the way I am using the term, Erik. The market itself thinks, the market remembers, the market computes prices. My neurons don't think, my brain does.I still do not understand your meaning, please explain.
There was a time in history when most people didn't sit in Plato's cave watching Munger's, Gates', and Buffet's shadows dance, and instead went outside to see reality, and they didn't retreat back in fear.Please enlighten me as to when that was.
we can use our heads, and avoid a few hundred years of bad times.
"major wars are often needed before people recognize..."? Really? I'd like to think they can be enlightened otherwise this time. Have we ever had an internet before? Could it be different this time?I hope it can be. However it seems to me that with all our whiz-bang gizmos and such the human animal has not evolved in a positive manner is 5000 years or so. History may not repeat itself, but we sure seem to interact with each other the same.
A study of history reveals that the only kind of currency that can stand market-tests are those backed by specie.What is your definition of market-tests?.
Specie-backed currencies, as you pointed out, have been manipulated in most if not all cases. It would be great if the current money masters would willingly give up their power to be replaced by your private competing minters in a non coercive system. My thought there is that currently, those that hold the most gold are the ones making the rules and will fight tooth and nail to keep it. My personal opinion is that their power is so great and their morals so low that modern society would not survive the war that brings that change. Even if enough people were ever to awaken and band together before communication was severed to attempt that change the others in the cave of Prussian education would surely kill them. At least we would finally find out if Yamashita’s gold is fact or fiction.
Nathan Martin’s opinions on gold backed currency make sense to me. Perhaps the longest running currency was completely fiat based and worked until specie-backed currency was forced on the populace. I’m referring to Tally Sticks. A benevolent master of all might be the most peaceable end even if we do get the short end of the sticks. But I digress.
Welcome to the site.
Tycer et al, in my continuing quest to understand the other side of the gold/silver trade (i.e. what could go wrong with my bullish thesis) am intrigued by your reference to Nathan Martin and am off to ‘google’ for additional information … anything to speed up my process from your perspective appreciated.
Btw, thinking of the Blue Ridge Parkway brought back fond memories from childhood years ago - thx …
Kudo’s to this thread & all who have contributed as my ongoing education on precious metals / PM mining industry has improved … navigating wealth mgmt as we are all living financial history in realtime IMO.
disc: long bullion & select miners since 2004ish