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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (10272)	3/16/2004 8:25:05 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Tue Mar 16 2004 19:45 trotsky (J'Bear) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved we certainly agree in principle, and the point about the concentration of assets in the hands of fewer and fewer financial institutions is one i myself frequently make when discussing systemic risk - i think it's VERY important. and sure enough, we CAN learn from history, and assume the 'rhyming effect' to be very much in force. maybe we misunderstood each other a bit - i agree for instance that we have an eerie parallel here with the 1920's, insofar as once again, the general consensus is that we have 'mastered' financial and economic risk. my comment on the length of cycles was just an attempt to interpret what at this stage is merely empirical knowledge. for instance, it took stocks after '29 only 3 years to reach their nominal lows, whereas Japan's bear market reached fresh nominal lows a full 13 years after the top. the only explanation that makes sense to me is that the cycle has been lengthened due to more forceful intervention. otoh, i believe when you referred to the potential for a quick collapse, you were probably looking at what i'd call the 'endgame'. i.e. the point at which an actual, 'too-big-to-bail' crisis eventuates. that for which Argentina's collapse was the dress rehearsal, so to speak. the capital letter PANIC, Puplava's 10-sigma event. we may well be in for that unique experience at some point...probably more a question of when than one of if. Date: Tue Mar 16 2004 19:28 trotsky (frewils, 18:29) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved you have to admit though that when the price of silver was still in the doldrums, no-one here thought it supported the claim of a glut either. i think only uptick argued that the low price proved that there was no shortage. still, these assertions by the Perth mint can probably be taken as a bullish contrary indicator - since at tops, the word 'shortage' is far more prevalent than the word 'glut' ( recall the fabled 'DRAM shortage' of late '99/eary '00 as an example ) . in reality, i doubt that the Perth mint has any more accurate information on the readily available amount of silver than anyone else. the only reliable silver statistics we DO have are those of production and consumption ( in deficit for ages ) and the KNOWN inventories, which as TB points out don't seem all that big. however, there must have been large unknown inventories in the past, since that's the only reasonable explanation for the previously depressed price. Date: Tue Mar 16 2004 19:19 trotsky (RIP, 18:28) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved oh well, no doubt the present system is in fact deeply flawed. but we have to differentiate whether we talk about the most basic economic laws ( which in turn derive from rational human action ) or whether we are criticizing the current fiat money system. those are simply different topics. i would agree that a great deal of the credit creation we have witnessed since the last link to gold was severed has created never before seen imbalances and structural distortions - and especially the credit created over the past 5 years has probably ended up in the hands of mostly not credit-worthy borrowers ( i'm thinking specifically about the mortgage credit bubble, car loans and credit cards ) , which should ultimately contribute greatly to systemic destabilization. also, i agree with the assertion that the central bank fiat system such as it is now constituted is inherently evil on account of an uneven distribution of purchasing power ( earlier recipients of the fiat money created are cheating those further down the chain ) and the 'invisible tax' effect. also, it is susceptible to depleting the pool of real funding, as numerous activities inimical to true wealth creation are furthered. lastly, in the final analysis it vastly enhances the power of the state, to the detriment of the individual. anyhow, i expect these things to be part of the set of shared convictions on a gold site. Date: Tue Mar 16 2004 19:02 trotsky (Alberich) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved regarding the mobility of capital via other means than outright loans like e.g. the stock market, or similar co-ownership arrangements, we do obviously have those, and they make sense. however, there is a qualitative difference between the LENDING of one's savings and the INVESTMENT of one's savings, in terms of risk and return potential. anyhow, economic calculation is best undertaken by using the time value of money, or the discounting mechanism of interest rates. an entrepreneur estimating the potential future return of capital invested needs a yardstick, a method to compare this return with a quasi 'riskless' return such as that of e.g. a US t-bill. that way it is possible to properly assess the relationship between the risks undertaken and the potential return from same. this should actually be obvious. Date: Tue Mar 16 2004 18:28 trotsky (kapex) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved it is true that the money for the huge debt balloon overhanging the global economy has come from thin air - and that's exactly where it will disappear to in the coming bust. once the non-wealth-generating false economic activities spurred on by the credit binge are liquidated, the credit that gave rise to them will be liquidated as well - mostly in the form of default. guess what the bond market is smelling here? click here ... tfc-charts.w2d.com hint: it's NOT inflation. Date: Tue Mar 16 2004 18:21 trotsky (mozel) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved money is a good like any other good. the only difference is its 'moneyness', i.e. the characteristics which make a certain good more useful as money than another. gold has these characteristics ( i.e., scarcity, a pre-existing demand, and fungibility/transportability ) . a present good is always worth more than a future good. from this derives the time value principle, which holds true for money just as it holds true for any other good. the time value of money is called the 'interest rate'. well, what's the big deal...your usury rant sounds positively medieval. to recap: time value is inherent in ALL goods. in the case of money , it does not really matter in this context if the money is a paper money or not. the difference in arriving at the time value is only one of degree, not one of principle. PS: no religious dogma can erase this basic truth - a present good is worth more than a future one. no anti-usury rant will change that simple fact.