Topic: Gold collapsing. Bitcoin UP. - page 1446. (Read 2032272 times)

Interesting thought experiment: People fight fiat printing by simply stopping to accept dollars having higher than a certain serial number.

It only takes 2 words to explain why inflation was the old boss and deflation is the new:

Baby boomers

As they retire and trade their assets for fiat to live on, there are far fewer people to buy them up.  When they started saving for retirement, they were all competing to buy limited assets.  Unfortunately, many economists have become convinced that this transient market behavior caused by a population boom is a new paradigm brought on by technology.  Of course, expanding debt has also come into play as they attempt to keep this zombie limping along.  Excessive debt can be handled in two ways: inflate it away, or deflate and deal with the defaults.  If you were the one holding the levers as well as the debt, with a backdrop of boomer-driven deflation tendency, what would you shoot for?  Oh, and if you shoot for inflation, most of your currency is held by foreigners who will dump it and cause a hyperinflationary meltdown.

To me it doesn't look like old Ben has too many options he can actually accept the consequences of.

Yes, deflation has been in vogue since 2007. The reason real assets other than gold (and silver) plummet is due to the fact that they are not replacing the currency systems. We cannot realistically use oil in place of dollars, or lumber to replace Euros; their industrial value outweighs their value as a medium of exchange or savings.

If there were no concerns about counterparty risk, asset seizure by governments, or geopolitical stability even in developed nations, there would be no legitimate predictions of hyperinflation or gold's continued ascent. If the dollar could not be printed into existence by a third party, holding fiat cash would have no real downside. Being that is not the case, physical gold is the most recognizable and densest form of wealth storage available which cannot be debased or otherwise tampered with so long as it remains in your possession.

Gold is essentially in the process of eating away at fiat market share. Because of this, debts in fiat terms will become less expensive in terms of real assets, and especially in terms of gold as it displaces existing currencies. In order to offset that, fiat inflation is necessary to get the de facto debt money supply, also known as derivatives, in line with the actual economic value of each currency's respective region. In other words, there are currently too few fiat units (dollars, Euros, etc) for the amount of debt in existence.

A visual example (with Bitcoin as a rounding error):

Global Supply (100)

USD (50)
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

EUR (49)
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

XAU (1)
>

BTC (0.1)
.

If Bitcoin rose to 1% and gold were to gain to 4%, the others would have to decrease:

USD (47.5)
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.

EUR (47.5)
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.

XAU (4)
>>>>

BTC (1)
>

Gold becomes worth 4x its prior value and Bitcoin jumps 10x, while the others decrease by a few percent each. Since those systems are leveraged to such extremes, even those tiny decreases are capable of causing massive chaos through defaults and debt deflation. That destabilizes confidence in those systems and leads to further efforts to escape to the safety of gold, so EUR and USD would continue to fall while gold continues to rise. This is the same reason why Bitcoin is rising - it is coming to be viewed as safer than the end-of-life fiat systems and the confidence is migrating.

The current dilemma could be resolved by authorities abandoning the existing monetary system. Since that system is what the world we know is based upon, it just isn't going to happen. Authorities have already shown that they will attempt to create nominal gains that are illusory rather than address the issue of real gains declining. The only question is what they'll do to disguise the inflation.

Banks are parasital dinasaurs, true, but he wrote parastatal... does it make sense? "Banks are dinasaurs related to state-owned organizations"? not sure. maybe he did screw up here, but I wouldn't expect it from him. He's a german but has worked in "the city" for quite some time. His english seemed perfect when I heard him talk in Prague... but what do I know, I'm german, too.

"Hyperinflation" is a bad term. It implies that it is the extension of "normal inflation". As more people realize that they have to get out of bed and work for 8 hours a day for the same pieces of paper that a select group of people only have to print or borrow (w/o repayment), this will lead to hyperinflation. What chump would work in this scenario?

Cause selling at the bottom of a downswing is a very bad strategy .  I prefer to sell when its high and BUY when its low .  Which is why I bought before the FED meeting, and I will probably buy again before the next FED meeting if prices are lower then they are now.

Why not avoid the downswing?

I've never subscribed to the hyper inflation scenario.  I think true inflation is around 8-10% per year.  Approximately the amount the National Debt is expanded per year.  I think in the future we will continue to have ~10% rise per year in National Debt, gold will rise with this.  I don't think you can get rich with gold, you just tread water.  Its a store of value, one that is superior to FRNs.  The gold market is more volatile then the FRN market, thus it has bigger swings (we are in a minor downswing atm imo), but the general uptrend of gold will continue unless they stop deficit spending and money printing.

The money printing and the gold priceI don't think this linkage is stronger than imagination.
even back in 2006 and 2007, we were not in hyperinflation, right?

If the imagination stops, the gold price will plunge.

most of the things that you need to produce something is plunging (coal, oil, metals), there is no sigh of inflation, don't mention the hyperinflation, so why gold?

Maybe you're right, maybe it will turn out that you and other gold bugs are the rare people who predicted the right future and we indeed have a hyperinflation, but the most important thing is that right now, most of the market don't believe in inflation, the "money printing leading to hyperinflation" is a fading story.

why not just sell the gold and buy it back when you see the some evidence that market need to chase gold again. Don't say QE3. QE1 and QE2 did not bring us hyperinflation, so won't QE3. people won't buy gold b/c of QE3.

This is a headfake down..  The money printing has not stopped.

Anyone wanna guess if gold will headfake up one last time before $1550 caves? Trying to time my first short..

Excellent article miscreanity!! They are parasites, nothing more. I loathe going to the bank - the lines, the attitudes, the incompetence. Nowadays I only go to the bank for one reason - to deposit cash into my Virtex account so I can buy more Bitcoins. Back when I was stacking metals I had it set up so I could simply place a phone call, enter a pin code and wire money to ye olde coin shoppe 

the problem is Sclichter can't spell; "parastatal" -> "parasital".

http://finviz.com/futures_charts.ashx?t=DX&p=d1

Up Up and Away!

Found this to be more enlightening,
http://www.youtube.com/watch?feature=player_detailpage&v=1V7n3qRRM60#t=21s
  lol ...

A truly enlightened article about where the monetary system is headed, including Bitcoin and gold.

The Silverox Update:

Gold:  -8%

Bitcoin: +24%

Diff:  32%

Silverox's long GPL:  -11%

cypherdoc's GLD short:  +1%,  shorts on SLV, GG, SLW, RGLD, DZZ, ZSL way up.

Actually, I do accept the spot price for what it is: a lie of omission.

The spot price is not a valid market valuation for physical metal that actually has to be produced through work. It is a perfectly valid valuation for paper representations of physical gold, particularly fractional representations. The participants are overwhelmingly the very institutions that have an interest in obscuring gold in the first place. There's enough evidence from the multiple dumps of futures contracts totaling more metal than is pulled out of the ground on a yearly basis - there is no way to deny that those contracts are functioning as derivatives, not 1:1 claims on real assets. In effect, futures contracts are margin ownership of the underlying asset, and taking delivery is like being among the first to withdraw your money from a Ponzi scheme, leaving others to watch in horror as their paper investment, which was assumed to be firmly tied to a real asset and not just marginally associated, crumbles.

If you have a piece of paper that proclaims its worth as being a valid claim for one Shadow Hawk, and I deliver an actual vehicle to you from across the continent in exchange, that piece of paper had better be worth the amount of effort I went through to procure and ship the real, physical item. If not, I won't accept your piece of paper, and if you still want the vehicle, you will make payment in whatever form I choose because I own what you want. In that case, the paper declines in value while that of the actual, physical object rises. Now that I know you're in a weak position because you want the real thing, I'd be apt to increase the price by a few points for the hassle.

The majority of market participants don't analyze the foundations of the entire monetary system. Instead, they assume what is either in their textbooks, or what financial advisers and Warren Buffett tell them. There is little to no attempt made to discern the difference in supply & demand dynamics of financial instruments and real assets. Sure, MMT works in an abstract sense where financial instruments roam, but it fails spectacularly when it comes to the limits of reality.

Why is gold not $250/oz already? Why is silver not under $10/oz? Why is oil not free?

of course you completely miss what's going on.  i, unlike you, accept the current spot price of gold for what it is.  you, otoh, continuously claim that the real price of gold is somewhere north of $2000 based on absolutely no evidence whatsoever. 

I'm surprised that he won't sell for a 'collapsed' price of maybe $100/oz