Ron,
>>I have stated that I'm concerned about a rapid and rampant rise of gold as a result of a massive short squeeze by those unwilling to permit that mistakes and irresponsible acts of the CB's and Hedge funds to be unwound gradually.
I, too, am all for gradualism. See, we agree! Unfortunately, I doubt either of us control the money faucets.
>>A buying panic would cause so much more damage than what almost occurred in August because it directly impacts the confidence in Fiat currency as it would imply inflationary pressures were evident requiring higher interest rates to cool the economy, INSTEAD of deflationary pressures where prices are falling (as represented by the global reserve currencies), and too many goods are chasing too few dollars.
A "buying panic" in gold, if it were to occur, is an effect of past mistakes, not a cause.
>>This is why a huge upsurge in gold would be depressionary. It would weaken the dollar and Euro and their underlaying economies at a time when they are the only engines of prosperity left. This would inhibit emerging growth economies from exporting their way back to a semblance of liquidity and would essentially nail them in their economic coffins, with the political and military ramifications that would obviously follow.
Oh, I agree - every little thing seems to upset the "system" these days. Gold can rise without affecting the Euro. The Euro can even rise with gold. The only thing depressionary on this planet is the huge overhang of debt. For a loan made and spent leaves one less borrower for another day. Future borrowing merely goes to service interest on yet another loan gone sour. And a weakened dollar is a dollar that has been reduced in purchasing power. This is inflationary in dollar terms.
>>The challenge is how to wring the excesses from the global supply of goods by "culling the herd" of financially weaker corporations, without destroying or crippling the stronger ones as well. This challenge is being met with varying degrees of success in some of these economies where new transparency and regulations are being implemented.
Yes, wringing the excesses is what WILL happen, sooner or later. Funny how those excesses crop up. Can it be done safely and sanely? Does a bubble pop? Will gold help, hinder, neither? Stay tuned.
>>What is inflationary to a non-reserve currency is deflationary to Dollar and Euro based economies (Yen as well). There devalued currency makes theirs good cheaper in comparison to dollar denominated goods. Lower prices are deflationary and require economic stimulus to bring them back to stability.
Deflationary for us, yes. More stimulus? MORE STIMULUS?? But of course, even more debt to temporarily halt the ill-effects of the gigantic debt overhang while the powers-that-be can rearrange the deck chairs.
>>Again, a sudden upsurge in Gold would force the Fed and ECB to raise interest rates as bonds are sold off and capital flees to gold in the perception that the reserve currencies are being inflated and worth, thus making goods cost more. It would create a FALSE INFLATION due to gold's competition with fiat currency in the hearts and minds of investors.
The PERCEPTION currencies are being inflated. How about currencies ARE being inflated. Gold is not inflation. Inflation is inflation. Gold is the shiny yellow mirror. Isn't inflation the cure for the deflation you previously complained we are suffering from? How do you get from -1 to zero without adding +1?
>>I would think that this result would be obvious to anyone who thinks this through.
>>Hindsight is 20/20. I live in the present, not the past. So let's not play the blame game and figure out a means for gradually returning gold to a semblance of previous perceived value.
I too live in the present. I also have a well-founded appreciation of the lessons of history. The point is, where was the wringing of hands as gold fell?
>>I fear the hoary power of any bubble, whether it be a bubble of debt, or a man-made bubble in gold as a result of reverse manipulation through a massive short-squeeze. There may be an implosion on the way. But not being one who is given to through in the towel quite yet, I would like to see a little bit of grace permitted in order to let the CB's to be permitted to unravel this situation slowly and without severe shocks to the system.
Let's pop that bubble when we come to it. As stated previously, I agree that a controlled, gradual rise should be preferable. Of course, that flies in the face of the free-market rhetoric shouted from the rooftops this past 20 years. But gold rarely trades freely anyway, so I wouldn't worry too much about it.
>>The global economy will under enough pressure due to Y2K. I can find no reason to excerbate it through equally reckless behavior on the part of gold bugs.
Ron, this is almost funny. True gold bulls are the LEAST reckless people I have had the pleasure to converse with. Try cautious to a fault.
>>If you guys want to hold gold, so be it. But chumming the waters in order to attract the speculative sharks in order to force a squeeze in gold is MORE IRRESPONSIBLE than the shorting activities by the hedge funds.
Gold advocates have been saying all these exact same things since 1980. The speculative sharks don't even know what gold looks like. And NOTHING has been more irresponsible than the shorting activities of the central banks and their partners.
>>Why?? Because you know it would destroy the confidence game of the present fiat money system in order that you could replace it with your own version of a monetary confidence game (that just happens to have a few thousand years of history behind it).
No one has that power, and certainly not on this thread. But thanks for the vote of confidence. <g>
>>Money of any kind, from coins, to salt (salary), to the huge stone coins of the pacific islands, only had value because each person in that financial system recognised that value. Gold is no different. It only has value because enough people believe it does.
Yep, that's money all right.
>>And one final point... the history of gold and silver has certainly shown both inflationary and deflationary impacts. The Spanish induced inflation in 16th century Europe DRASTICALLY increased the amount of "money" during that time. The same thing happened during the gold rush of 1848 and '98.
Sudden supply surge, badly managed. We could do a better job these days, if we wanted to. I thought you worried there wasn't enough gold?
>>But then you have to look at the great deflation after the civil war through to the early 1890's. Greider speaks of this on pg. 245, giving examples of where farmers would borrow money to plant crops in fall, only to have the price of their goods erode by harvesttime.
And this is different than what's occurring today? Caused by bad monetary policies during the Civil War. Gold won't stop men from doing the wrong thing, it will only make them think twice before doing it.
>> So gold is no guarantee that there will be greater price stability. But gold certainly limits gov'ts options in dealing wtih price deflation or inflation.
You are right here, gold guarantees nothings and complicates all questionable policies. The upside is that maybe the working man won't have his wealth confiscated insidiously over time. Maybe his children won't be saddled with fiat debt for countless generations.
>>No the Fiat system is not anymore perfect than your gold standard is. But at least it is backed up by the economic strength of the country issuing the currency and their ability to levy taxes to service their debt.
You've got that right, the fiat & fractional banking system is far less perfect. And "levying taxes and servicing their debt" says it all. It all seems so "normal" now. Why do we even have debt? This country was nearly debt free for 150 years. Without debt, there is little need for taxes - certainly not at the levels we see today. Why do we have taxes? Because we have debt. We do we have debt? Go ask the Federal Reserve Banking system.
>>Anyway... I can see we disagree. I hope you guys fail in your attempt to exact your revenge on the Federal Reserve and hedge funds. But since I would have no choice but to hop on the bandwagon as well, or face a devaluation of my assets, I have little choice.
Revenge? No. But a little justice would be in order. The many busted gold fans that inhabit this thread are merely acting on their convictions and have been, much to their detriment, lo these many years.
I do wish you well, Ron. I hope you succeed. I hope you get that gradual rise you so desire. Heck, any rise at all is most welcome, if not long overdue.
Goodnight. |
