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Strategies & Market Trends : THE ZERO HOUR -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (35)	10/26/2009 10:55:10 PM
From: kimberley	Read Replies (2) \| Respond to of 130

that seems reasonable - an educated guess, i'd say -g- of course, there is also the risk that withdrawals/transactions could be limited or even suspended during the cusp of a crisis.

To: TobagoJack who wrote (35)	10/28/2009 2:27:51 AM
From: Box-By-The-Riviera™	1 Recommendation Read Replies (1) \| Respond to of 130

Player One: Care to comment on the shadow price of gold? Message 26050538 Player Two: there is not much to say, except that there is no such thing as an 'intrinsic value' of gold, as all value judgments are subjective. it is a fun exercise to check how much fiat money there is compared to how much gold there is, but that will never tell you where the gold price is going. that depends on the subjective value judgments of investors. consider how the effects of monetary inflation work. (this is a point recently raised by Steve Saville, and i agree with it). its effect on prices is never uniform. some prices will rise, others stay flat, others even fall. so if e.g. most goods prices were to stay relatively flat, and equity prices too, then it is possiblefor gold to become much more expensive than is suggested by the net growth in money supply. the ratio of the gold price to the money supply can only serve to give you an idea how big people's inflationary expectations are becoming relative to actual inflation (at the 1980 top. gold was five times more expensive relative to the money supply than it is now for instance). as an aside, the growth in the Fed's balance sheet consists mostly of bank reserves, and those should not be counted as part of the money supply (they have not yet led to money entering the economy, as the banks have not used these reserves as the basis for more lending. they could potentially do so, but the fact is that credit is shrinking, not growing). Player One: the so called shadow price however, is predicated on an actual default, introduction of new currency with some some backing, and some value far less than the original currency as debt is wiped clean. Player Two: now, the only way to find out what a proper 'price' would be in this scenario is to let the market adopt a money of its own choosing. then we'd soon know what an ounce of gold can actually buy. the problem with all state-sanctioned schemes is that a bunch of bureaucrats sits around and tries to make that determination without a market input. it's impossibly to say what they will come up with, but it's pretty clear that only an outright default, whether or not it happens via the inflation route, will force their hand. we almost had an opportunity to get to see a non-official payment system develop when the banks crashed last year. this was only a hair away from a complete meltdown of the existing system. in fact,it's probably fair to say that the system DID melt down, but that they have now temporarily masked this fact. i don't really believe that the banks have become any less insolvent. if they were just fine, the would lend, which they don't. after all, with $900 bn. in excess reserves parked at the Fed, they could lend some $9 trillion if only they wanted to do it. that tells me that they remain as bankrupt as they were before. it's all a mirage. so now we wait for entire nations to go bankrupt, the next and final step basically. Player One: ergo: the shadow price in some form is still worth contemplating along with the various strategies by which to take advantage of it, when the time comes, I presume now from your response. Player Two: it is, my only objection to the exercise is that it is not possible to construct a reliable formula for determining it. at best one can come up with a list of criteria that are either bullish or bearish for gold, and adopt a sort of rating system for the criteria.