Topic: Gold collapsing. Bitcoin UP. - page 1541. (Read 2032281 times)

what you fail to consider here is that b/c the USD is the reserve currency of the world, 60% plus of total worldwide debt is USD denominated.  even foreign denominated debt depends on the USD which their CB's hold in their vaults as reserve currency.  why do u think every time there is a foreign bank crisis foreign banks plead for more USD swap lines?

in other words, debt contraction forces a rush into USD's.  it doesn't leave a choice.

These are almost exact words Bob Prechter used in 2007 to argue that Fed would NOT print money to fend off deflation, for the past 5 years, these arguments have been proven wrong. For some reasons, so far TPTB seems to think they need the rest of population to maintain their lifestyle, or they found out their islands are not that safe after all.

If you do think bitcoin is a speculative investment, then you are probably not 100% invested in it, maybe not even 50%, or 30%. Where do you put the rest of your fiat then? treasury? saving account? under mattress?
  

plenty, by the hedge funds and banks themselves as they eat each other alive.


these guys are smarter than that.  they know, as we do, that bubbles or HI is not sustainable.  do you not think they will try to "get out" near the top?  this will be exemplified by letting the markets decompress or deflate until its time to buy again at the bottom.  this will take down all asset markets including gold/silver.


we agree here but again, i think pm's suffer badly as a result.

The last 30% stock market rally was made without public participation, how much more potential "rush to cash" are left out there is a big question.
 
I won't characterize the real economy is dead: manufactures recovered somewhat in the last few years, automakers are doing better, energy sector is booming, consumer is spending, supply chains are running... All of those cannot hide the worsening fundamentals which is more its reliance on debt and deficit spending, but as long as they CAN kick the can down the road, they WILL.

Since the debt is mathematically not repayable, there are only 3 scenarios. 1) It may end with a sudden deflationary collapse (outright default); 2) it may end with relatively short period of hyperinflation (inflating the debt away), or 3) it may not end at all (e.g decades of low growth, high inflation, and crisis). 

If I got to pick the poison, I'll probably choose #1, but unfortunately it looks more and more likely we'd go the 3rd route.  This, I agree.

Very much liked your post, cypherdoc! I fully share your trust in Bitcoin, the only thing I'm worried about is the entire tainted coins/ non- fungibility issue. Will that be a real danger for Bitcoin? Otherwise, I see nothing that in BTC's way that cannot be overcome.

the other thing i forgot to mention is that as an idea, concept, and as a potential new means of transacting, Bitcoin stands on its own as far as i'm concerned.

gold and silver depends on further liquidity injections by Ben. 

to me this is problematic.

Look.  investing in Bitcoin instead of gold is risky and shouldn't be done at home by children.  

it takes visionary and long term thinking and a discipline to buy when no one else sees the prospects, assuming i'm correct of course.  i also think there will only be one winner, not two (it will be Bitcoin or gold).  markets usually demand this be so.  altho there are many features that are shared btwn the two, there are also too many differences.

based on 7 yrs of holding hundreds of pounds of bulky silver/gold in safes at home and going thru the process of buying and then selling it, i just don't see how this thousand year old means of transacting can possibly match the needs of the present day internet connected economy.  the taxes to be paid (almost half in my case) will alone take much of my profit.  i even had some at Credit Suisse in Switzerland back in 2009 but sold it and paid my taxes cuz i was terrified it would be confiscated with what went down with UBS.  if i want to pay a talented 18 yo coder in Azerbaijan to provide a patch for me i can't do it with gold even if i could shave it down to the right amount (big if).  i can with Bitcoin.  if central banks or gov'ts want to balance their payments nightly in the future with a stable, non-inflatable currency, they can't with gold, but can with Bitcoin (see George Selgin).

the gist of the gold argument is that its been money for thousands of years and that central banks are buying it as we speak.  to all this, i say True.

the flipside of that argument though is that we've only had broadband global wide interconnectivity for about 10 yrs now on a retail basis.  there is no question this has been disruptive.  we have NEVER seen the seamless spread of information like this and these effects are being reflected in worldwide economics and politics ever since the NASDAQ crash in 2000-02.  the curtain that has veiled price discovery for hundreds of years has been yanked away.  why do you think Wall St IB's so resist the establishment of an formal exchange for CDS?  its b/c this is one the last vestiges of where they can transact in OTC and strip rents from their hedge funds clients.  we've had two major stock crashes of over 50% and an ongoing housing crash in 12 yrs.  no recovery here.  all the rules have been broken and the bad debts foisted onto the people by the banks.  

also, central banks don't necessarily represent prescient or forward thinking.  what did the Bank of England do in 2000?  Gordon Brown sold all of it right at the bottom as did many other CB's.  so that now they are buying means nothing to me.  they seem as good at predicting market dynamics as the rest of us.

for me to suggest that things are different this time is surely a dangerous strategy.  but to persist in linearly extrapolating that all assets including gold/silver will continue their inflationary rise after 12 yrs is dangerous too. this internet phenomenon is manifesting itself in many ways we have never seen before.  look at the revolutions in Egypt, Syria, and the rest of the middle East.  look at the largest sovereign debt default ever recorded in Greece.  look at the housing crash.  look at the trimming down of Wall St that is ongoing.  and on and on.  its quite possible the Dow is in a major topping pattern over the last 100 yrs.  look at that chart in a non log setting.  i think the Greece default is analogous to Bear Stearns in 2007.

gold bugs insist that the end of the bubble has to be manifested by a huge parabolic blowoff.  i say they already had their parabola back in April for silver and August for gold.  i think these were blunted by the same seamless flow of info facilitated by the internet which was not a factor back in 1980 during the last gold/silver parabola.

in addition, after having watched stock/bond/commodity/USD movements daily almost tick by tick for about 10 yrs, what bugs me most about gold/silver is that there is clearly an inverse movement with the USD.  as with every other asset.  yes, yes, you can point to periods of time where this has disconnected but in general it strongly applies and it really is apparent during downdrafts in asset values especially in 2008.  this all one market effect has been well described in many publications and represents a speculative financial culture which is based solely on USD liquidity.  imo, pm's just represent another manifestation of this effect, and yes, just another asset whose utility has long since been discarded.

i obviously owned my bullion back then in 2008 which was well and good but i got caught badly buying dips in pm miners and natural gas.  knife catching so to speak.  you want to see deflation in a natural resource?  just look at the carnage called natural gas (UNG).  this whole process forced me to analyze what went wrong during that time and i came to the conclusion that as much as we don't like it, the USD both hard and virtual (debt based), is the primary driver.  you have to primarily factor in the amount of debt in the system that has contributed to the runup of all assets including gold/silver.  people have gone out leveraged up and borrowed to buy pm's.  what happens if they can't make their interest pmts just like their mortgage?  they default and have to sell.

what happens when Greece's debt defaults as it did just last week?  the total fiat money supply decreases from a contraction of the debt portion thus forcing UP the value of the remaining hard fiat. what happens if we get another huge deflationary wave in stocks; same thing.  counterintuitive yes.  the dynamic that gold/silver have not been able to show me yet is whenever we have downdrafts in stocks or commodities or bonds, the USD is forced up from the virtual USD contraction and scrambling for cash and inevitably gold/silver go down.  until it escapes that relationship, i remain unconvinced.

gold bugs will then say that Ben will print.  well has he?  yes, to the tune of 3.5 x the 800 billion that the Fed started with in this financial crisis since 2008 but nowhere near what the contraction in overall debt in USD's has been.  the ratio of debt in the system to M2 is huge.

gold bugs will then argue, why has the price of my food/gas gone up?  answer:  the money that has been printed has gone only to the banks who have used it to speculate on commodities and stocks, those areas of the economy they can influence and create an illusion of a fake recovery.  so you do see inflation certain areas of the system.  the pump is that we all need to invest in HARD assets to preserve the value of our USD. this inevitably leads to commodity/stock bubbles and an unsustainable blip in economic recovery measures.  this is why oil dropped from $149 to $32 in 2008.  i think we're at the top of another one of these pumps with oil acting as a cap on further economic growth at $105 now.

this is all being done to lure the retail investor back into the stock/commod markets to fleece them once again at the top.  ask yourselves; when was the time to buy Apple; now at $600 or in 3/09 when it was $70?  look at the charts of China and all other foreign stock markets.  is it reasonable to suggest that the US will decouple?  i don't think so.  we're heading into the tank again.

the same type of investment logic applies now; when is the best time to buy Bitcoin?  now or when it goes past $32 again towards new highs?  the gist of the matter is that Bitcoin has lasted over 3 yrs now, the sourcecode has fended off all attacks, the new implementations all have gone smoothly, we have an increasing boatload of talented devs like Gavin and etotheipi, etc.  to my eye, based on the techinicals, $4 is the new $2 and represents a minor wave 2 of a major wave 3 up.  we're just consolidating waiting for the big move.

yes, its possible that Bitcoin will get caught in a deflationary wave down.  the charts tell me otherwise (oh yes, those voodoo charts).  and i'm willing to take that speculative chance.

gold bugs will then argue that Ben will just print to fill up the debt hole.  will he?  can he?  is he?  i say no.  why would he destroy his only franchise, the USD?  self destruct so to speak?  b/c he wants to keep the game going.  all these 0.01% just got done exchanging all their bad debts for USD's at the Fed.  these guys own their wealth in the form of USD's so to expect them to destroy the USD just to help you guys , the 99.99%, get out of your new debt burden is also folly.  instead, they'll just crash all asset markets and move to their private islands where they can watch us all on their bigscreen TV's fight amongst ourselves to solve our debt crisis.  they also learned their lesson back in the 1970's when interest rates went to the high teens which represented a type of hyperinflation and destroyed the value of the mortgages they had lent out to homeowners.  i don't think they let this happen again.

i think as we move down to test the lows of March, 2009 in stocks we will look back and say that last 4/29/11 represented the top of this reflationary wave when all commodities, especially silver, topped and began their slow grind down.  whereas they lagged the Dow down back in 10/07 to 8/08, they are now leading.  you have to be concerned as an inflationist as to why these commodities and miner stocks are lagging so badly the recovery in Apple and the general stock market.  and i don't think a move like this will represent Armageddon as gold bugs would have you believe.  there will be some pain but the main losers will be those speculative hedge funds and banks that try to hold on hoping their bubbles will re-inflate.  this is all a rebalancing of the system facilitated by enhanced internet communications.

yes, investing in Bitcoin is risky and may represent a pipedream, but for me, the future potential FAR exceeds gold/silver which i think topped last May and August.  could be wrong but i doubt it.  Bitcoin is here to stay.

edit:  can we just cut and paste the entire Gold: I smell a trap thread here?

HI isn't necessary - it would just hasten adoption of Bitcoin and other alternatives to the present currency regime. There's already a gradual shift to diversify based on even the potential of further fiat debasement.


That doesn't mean the illusion can't continue. There is no limit to how many zeros can be instantly pumped into the system, whereas it takes time for deflation to occur. It took ~10 seconds for the WTC towers to fall, but an image of them could be projected in the fraction of a second it takes to turn on a light.


Every instance of financial panic or mini-collapse over the past decades, and especially since 2007, has been met with monetary easing: liquidity. Each of those events have been the equivalent of breaking a bone, followed by a solution consisting of adrenaline and mind-over-matter to mask the pain and keep moving. Eventually, there is simply too much damage done to the body for it to continue no matter how much compensation is in effect. Another analogy is turning the radio up in a car when the driver hears rattling.

In monetary terms of fiat currencies, deflation is on the back burner right now. What S3052 & cypherdoc are expecting (correct me if I'm wrong) is a round of deflationary forces to now ensue that will create a rush to cash (i.e. USD). This will happen, but there is a worldwide process (decreasing confidence in gov't) which is decreasing the relevance of fiat, especially the USD.

Instead of all the capital from equities, other currencies and assets flowing into the USD, there are myriad alternatives providing increasing levels of attractiveness (esp. gold & guns). Bitcoin is one of these alternatives, but awareness is not yet great enough for the kind of immense capital flow we'd like to see. It's a situation of death by a thousand cuts.

Meanwhile, the notion that deflation has or will overwhelm inflationary efforts is real and valid. In fact, America's death knell was sounded around 2001 and its oxygen supply was cut off in 2007. America, as the saying goes, is already dead - it just doesn't know it yet (that doesn't rule out a rebirth/resurrection once the ruling hegemony has fallen). However, in its final death throes there is likely to remain a progressively greater optimism bias based on decreasing expectations. It's like the Pollyanna principle, going from rationalising a broken hand by saying, "I still have my other hand" to getting shot in the head and thinking, "I may be paralysed and nearly a vegetable, but I can still think".

In effect, the body is dead (the real economy), but the mind is still active (national leadership and financial system) - for now. So long as the mind remains active, the illusion of a future exists. Because of this, the very last resources can be consumed by the financial system and people within it can still believe things will turn around.

So while cypherdoc & S3052 are correct in stating that deflationary forces will overwhelm (or already have) the inflationary power of gov't, that doesn't mean the efforts from the top will cease or even be discernible from the real economy for the majority. The leadership will continue on its merry way, completely oblivious to the reality that its support structure is gone. We are living in an illusion.

It was just a glitch in BATS, no biggie.

Yes, but 100 shares move the market 9%?  That just seems really shallow for something like APPL.  But, what do I know.

did u not see my posts above as this was happening?  i think its due to HFT.

wild speculation might say that b/c they were a new exchange, they didn't have their Apple HFT prop machine in place yet. 

this market is getting increasingly unstable indicating we are at or near the top.

Will one of you market guys help me see what I'm missing here.

I heard this kind of predictions during the peak of the housing bubble, something like "once it bursts, Fed won't be able to inflate its way out of it", or "it's too big to be bailed out"..... all of which have been proven just signs of lack of imagination.  

Sir John Templeton's famous quote "The most dangerous words in investing are ‘this time it’s different.’ "

Would you care to elaborate? I have been looking for signs of deflation scare, but other than housing market, I see little.

It's over. The next time goverments will fail to prevent deflation. In fact, the have already lost this battle.

+1
I think if severe deflation really takes hold, Bitcoin will take a bigger hit from King Fiat than gold does; As in 2008, US government and Fed world governments and CBs have shown their ability and determination to prevent severe deflation from happening.

Bitcoin's ultimate success to a great degree depends on hyperinflation of major currency(s), which seems unavoidable IMO.  

Ditto.

You noticed

No argument on the cyclical shifts between inflation & deflation. I'm pointing out the lack of distinction between monetary and real assets. Applying only real asset thinking to gold (appropriate for paper contracts) while it's acting primarily as a monetary asset (applicable to physical gold) produces a flawed representation: assumption that contracts are the same as the underlying physical gold.

Printing hasn't mattered since day one - it only creates an illusory smoke-screen. It won't matter any time they print. What will matter is how real assets with monetary functions behave in relation to normal assets. Take fiat as baseline and look at real assets in general. If you lump gold in with real assets as "just another commodity", then virtually all assets were rising in value relative to gold, which was falling.

A grossly-simplified visualisation:



The deflation occurring in real assets relative to gold is independent of fiat. If fiat were abandoned entirely, the same situation would remain. Printing is a reaction to this circumstance in order to maintain relevance and control among established, fiat-dependent systems. What fiat has done over time is distort the relationship between gold (in its monetary capacity) and real assets. Critical to note is that fiat as monetary foundation is inherently destabilising, unlike gold (or Bitcoin).

If things really were getting better and authorities showed a genuine measure of responsibility, I'd agree with you on gold and sub-$1500 expectations. For now I'm still amazed that such an intelligent individual can give Bitcoin monetary credence, yet not gold. The only functional difference between the two is their physical nature (or lack thereof).

Oh my.
Those deflationists have never stopped amazing me, for the past ten years.
I think they are good for a healthy pm bull market though

you're using my terms again  

i'm only focused on deflation NOW.  what have i been doing ever since the 10/6/11 bottom call i made?  answer:  focusing on inflation.

but now thats over.  the markets alternate cyclically btwn inflation and deflation.  and it won't matter if they print during this downphase.

btw, Apple taking the dump...

edit:  i also think in multiple time frames.  from 2005-2011 when i owned gold and silver, i was thinking inflation.  the longer term cycles indicate we're about to enter a long deflationary phase.