what answer is that? comex bullshit-Why Gold Is Dropping When It Shouldn't?
- and what it all means
Alex Wallenwein
Oct 14, 2008
Why is gold dropping right now when anyone in their sane mind would expect it to rise? The simple answer to this question is, "because Comex-gold isn't gold" - and because it deceptively pretends to be 'the' price-setter for real gold.
Gold is gold, paper is paper, and "Comex gold" is nothing but paper masquerading as gold while simultaneously pretending to be the price-setting medium for actual gold in the world. Now, finally, Comex-gold is in the process of being unmasked.
The real supply and demand determinants for Comex gold are not actual gold investors but fund managers. Fund managers are inextricably intertwined with the world of contract-based credit instruments. They use bet on Comex gold contracts to hedge their other (currently horrendously losing) bets with something they all, in their in-bred belief in paper markets, believe will 'go up' in value while everything else is going down.
However, these very same fund managers and their paper-bound investment psychology are the exclusive reason why Comex gold is dropping in these times when everyone (including fund managers) expects gold to rise. As already stated, though, and as they now finally realize to their own dismay, Comex-gold just isn't gold - and that causes even further selling.
Two Losing Bets, Compounded
Fund managers' other bets are losing money fast, now, so they need to raise cash to keep up the overall value of their respective funds, so they can earn their management bonuses and avoid getting booted for lack of relative performance. Guess what they cash in on? The very same Comex paper-gold they mistakenly bought as a 'hedge', of course.
Meanwhile, real investors in real gold are enjoying their shopping spree - except that the spree turned into a treasure hunt as the shelves and display cases of gold dealers look more and more like the supermarket shelves in the old Soviet Union - bare.
This is the only 'bare-market' in real gold the world will see for a long, long time to come.
With this split, this disconnect, between Comex illusion and gold reality, one thing or the other will have to give, and it won't be physical gold that gives.
The system built up around the reputation of Comex-gold as being a price-setting mechanism for real gold plays right into the hands of the financial establishment. The establishment depends for its (now increasingly meager) existence on the illusion that gold "isn't living up to its promise" as a real inflation and disaster hedge. The implication, of course, is that investors might as well stay in the computer blip and paper world.
As the Comex gold price illusion drops, many retail investors are still persuaded to keep their money circulating in the paper world, and that ultimately feeds the system. Of course, by now that 'feeding' mechanism looks more like life-support, but try and unhook someone who is on life-support. The results are dramatic, inevitable, immediate - and final.
Yet, even on life-support, the system is deteriorating at a catastrophic pace. It would be hilarious to watch if it wasn't for the fact that we are all depending on this phony system for our real-life support. Without credit freely circulating through the commercial paper universe, for example, grocery stores won't have food on their shelves, there won't be gas a the gas station, and your bank will be shut. Cash doesn't transfer very well without the bank settlement process.
That's the problem.
Centralized Mayhem
Our economy has become too centralized. Everything has to travel over long distances, so face-to-face cash transactions will not be able to keep the system alive. There is much to be said for localized, decentralized distribution systems, which in essence involve many different and varied local economies rather than one large and uniform one. For arms-length cash transactions to be able to sustain an economy, economic activity needs to be localized, i.e., decentralized,
The same thing goes for politics, of course. That's why the framers of the Constitution gave us a de-centralized federal system with little power at the center and much of it spread out to the states. That system can develop its own evils, as we have seen during the days of slavery, but we are now seeing that centralizing and controlling everything from the federal level is not really the answer, and rather magnifies evil on an aggregate level.
And now, in the face of all this abundant evil, the G7 crackpots have the audacity to suggest that we need to centralize power even more and come up with 'global solutions.' Yet, globalization was the very reason our profligate lending and spending habits here in the US spread around the globe so fast. True to their form therefore, politicians and so-called leaders are now using the bad situation that they created as an excuse for persuading us to give them the added power they need to make it even worse!
Silvio Berlusconi, the Italian prime minister and former EU president, let the cat out of the bag last Thursday when he blurted out (God bless his soul for being such a loose cannon!) that the G7 want to shut down the markets this coming week while they figure out how to deal with the crisis. That cat was very quickly stuffed back down his throat as he was forced, only an hour later, to retract his statement by saying he just repeated what he had "heard on the radio."
Right.
You Can't Argue with Abysmal Failure
Judging from the success rate of elected and appointed leaders in politics and economics so far, whatever they will come up with over this weekend and the succeeding week will undoubtedly be an unmitigated catastrophe. Just picture a time line from Bear-Stearns in mid-March to IndyMac in May, Freddie and Fannie,in July, Lehmann, AIG, WaMu, and Wachovia in September, the bailout package fiasco a couple of weeks ago, and then last week's post-bailout market-action, and you'll see a direct, negative correlation between official action and market performance.
The more they try to 'help,' the worse things get - and now they want to act on a global scale and they want our support?? I don't think so.
A very legitimate question arises whether things would have even gotten this bad if they had done nothing. I can tell you one thing for sure: if they had never had the power to do what they did, things would have never gotten to the point where they would have been called upon to exercise it to save us. By 'they,' I am referring to the political and financial thieving class, of course. A prime example for how badly they have screwed things up is what has been sold to us as 'deregulation.'
Deregulation? Sorry. Not for You!
Under the Republican mantra of "deregulation", the only things that were really deregulated were the banks' ability to sell investment products and deal in derivatives, and the largest corporations like Enron and WorldCom. You, the living, breathing individual on the other hand, are now more regulated than ever. What does that tell you?
Here is some advice: whatever 'they' tell you to do - do the opposite! Why not? After all, they routinely do the opposite of what they say, so why can't you?
This is not to say that under a Democrat regime of over-regulation things would be any better. You, the individual, would still end up being as regulated as you are now, or worse, and the additional concentration of power at the government level would certainly not make the economy any better, either.
So, this November 4th, when they are asking for your vote, tell them what you think. Vote to un-elect every single politician who is asking you to reelect him or her, from local dogcatcher to city hall member, from state-rep to federal congressman and senator. It won't even matter whom you vote for, as long as you vote the incumbents out. Then, rinse and repeat, from now on until you die. It's the only power you have left.
But, back to gold (excuse the digression).
Continued at:
321gold.com
just try and buy an ounce for 837 |
