Monday, April 15, 2013

The price of canned goods collapsed. No, it was gold?

Gold closed at $1355/oz today, nearly $600/oz below its peak less than two years ago. I said then, sell, sell. Man did I get the mail from the gold bugs. I was just crazy, hyper-inflation was going to happen any minute, the USD would be worthless, and gold would be $10,000/oz within months.

The pundits are blaming gold's collapse on reduced growth in China, as if 8% annual growth was bad. As I recall the imminent collapse of the Chinese economy was one of the compelling reasons to buy Glenn Beck's gold.

The race to the bottom is being driven by margin calls since gold is nothing but another commodity. In fact the panic is driving down all commodities and stocks as well as investors try to get into a 'liquid' position. As in, floating on top and not drowning.

If this doesn't prove to the current generation that gold was never 'money', what will? For many there is no learning curve, the right wingers are just 'flat liners'. The historical reality is that gold coins always had the value stamped on their face. The only reasons to use gold for coins was their durability and it made it difficult to counterfeit them. The Constitution makes clear that Congress shall have the power to mint coins and establish the value thereof. The gold bugs interpret that to mean money should be coins, just as they believe the Second Amendment means that they can own any arm they can 'bear'. (RPGs for everyone?)

Speaking of things that aren't money, the value of 'bitcoins' has collapsed. This virtual currency was being traded on open markets on the internet. According to one of the millionaire hustlers pushing this non-money, "We have elected to put our money and faith in a mathematical framework that is free of politics and human error." That's great when it's going up, not so good when your 'money' evaporates. Another demonstration as to why it wasn't Libertarians that founded this country, it was liberals. It's always been liberals that have come to the rescue of the Republic, it always will be, until it's gone for good. and twitter @BruceEnberg


Anonymous said...

Don't worry the hedge fund operators are still making money. Just like when they trade commodities thousands of times per day to drive the prices up they do the same short selling when the commodity prcies drop by their design. We peons get a break because the premium we pay them for their manipulation of markets with increasing commodity prices does not apply with decreasing prices. The only danger is we can go over the financial cliff as happened in 2007 with the housing crisis.

Fake_William_Shatner said...

Before Gold collapsed -- I do remember saying; "Liberals, get gold -- Conservatives go buy some stocks."

I sold all my stock before November 2008 -- more out of necessity, but I also "felt" from the gestalt of factors that things were going to get really ugly with the banks because the reserve -- the money that backstops insurance on accounts, was empty.

I stopped preaching about Gold when the Libertarians and Glenn Beck jumped on that bandwagon --- I never had a belief in gold -- I just understood a bit about how leveraged a lot of financial groups were while betting on the unregulated markets.

BitCoin is NOT the solution to money -- but neither are privately owned banks. Any system that seeks to facilitate barter needs to be in part based on REAL THINGS.

Fake_William_Shatner said...


Paul Krugman tried to explain WHY Gold is a bad thing to use as a currency; what occurs is people go to great lengths to mine it, rather than doing something purposeful. Gold doesn't really do anything beyond make good jewelry, plate things well, or glitter in vaults. People also didn't get his logic behind creating a "Trillion Dollar coin" to solve our make-believe austerity crisis. It's simple and brilliant in two ways;

1) Coins are still minted by the US Mint -- controlled by Congress. Not the Fed. A trillion dollar coin then wouldn't be balanced by the debt created by the Fed -- a guaranteed cabal of oligarchs who get 3% on all money created each year, just because they live and breathe, and have this official title of "Federal Reserve" which translates to; "we are such big thieves, we are legit." So a $1T Coin is non-inflationary.

2) It doesn't take much "work" to create a coin. And it's a lot easier to guard it. It's only purpose needs to be as something we point to and say; "That's worth a $Trillion." All our money is an illusion that is backed by the promise of future trade and our military (more these days about our ability to destroy you, than to be used for trading oil).

BitCoin's failure is that it isn't tied to something LIKE a government or a thing of value. There's no reserve or stock -- so it's going to be volatile.

I've been thinking about monetized barter for some time, and I'm sure such a system could work -- but it would need 5 main components to make it "legally" work in our market and have the value of non-volatility. It would need to be based on a collection of goods and services and be redeemable in some way. I haven't seen any solutions to "fiat money" that do any more than 2 of the 5 features.

Fake_William_Shatner said...

I'll list the 5 things I think a good "alternative" currency should have:
1) Easy to use and blend with normal transactions.
2) Not easy to game. (Bitcoin fails this one).
3) Non volatile.
4) Reserving the "electronic currency" means that you gain value over time rather than lose value (non deflationary) -- so the new currency appears to have value, that's absolutely key to acceptance.
5) Has to be based on REAL things - not promises, not just a government or bank saying it has value. There are 5 oranges or a promise in the future to fix your fence that are tied to the good. Credit Default Swaps based on insurance policies drafted on high interest mortgage loans kept getting traded and deposited and factored such that $65 Billion in mortgage bundles ended up collapsing an unregulated market valued at around $1.4 Quadrillion in "hot air."

That's a huge problem all over the place with our financial services companies. "Money ownership" or financial instruments are making more than doing, creating, or owning of real things -- it automatically creates it's own bubbles to pop.

They got this right in Ancient Egypt and even Christianity and the Muslim religions said; "no interest". And that was good for a long time. It fell apart with a few greedy kings who got hooked on loans and that ended in why the Spanish Inquisition went after witches (and the Jewish bankers) -- long story but it's fascinating.

Anyway; the GOOD thing about Gold as a currency is it is a "THING" that will always be Gold, and it has a valuation. The bad thing is it's not really useful. So a PERFECT barter currency replacement will equal a chicken or a visit to a doctor -- not ANOTHER stand-in like gold that represents possibly buying a chicken. And BitCoin's only value is a hashtag and a code -- not even an insurance policy ten times removed from someone's property.

So anything YOU want to invest in -- and you want it not to collapse, needs to be an abstraction of something real -- not an abstraction of an abstraction.

But of course, if people don't get what Paul Krugman is saying -- they probably won't understand what I just said either.

Anonymous said...

The same kamikazee banksters and globalist controllers that are propping up the stock market with, among other things, 85 billion dollars a month from the Fed are suppressing the price of metals. Meanwhile countries are buying gold. The banksters are buying gold while badmouthing it for the brainwashed novice investors. BRICS are decoupling from the dollar. China is doing direct currency swaps with other countries without the dollar.

I agree. No question, canned food, water, canned food, and more water are number one on my list. I still can't afford gold. But I'm definitely going to try to buy silver and take advantage of the temporary dip.

BTW, I had the pleasure of meeting Mr. Malloy in Minnepaolis. He was still a good sport in letting me have a picture taken with him after I showed him a picture of myself and Ron Paul to him. I believe the phrases "full of shit" and "broken clock right twice a day" were bandied about. He's still one of my favorite radio hosts (next to Alex) and I enjoy your nightly missives.

Ronmac said...

Maybe we need to find more practical uses for gold. How about bringing back gold filings? Or better yet, how about gold teeth? In some places of the world like eastern Europe and central Asia gold teeth is a status symbol, the sign of a savvy investor.

With all this talk about G-20 countries laying the legislative groundwork for the large scale confiscation of bank accounts (Cyprus-style)to cover their gambling losses, I would be nervous about keep large sums of money in a savings account.

But don't rush out and convert your cash to gold and stick it in a safety deposit box thinking it's safe. Apparently Homeland Security has the power to seize the contents of all safety deposit boxes in the event of national emergency (such as an impending financial collapse).

You can always stick it in a hole in your backyard. Fine, if you think that's safe. A better idea would be to extract some of your bone marrow and replace it with gold. I'm no medical expert but I would imagine the gold would poison your system and you would die a slow agonizing death.

But it's better than being robbed of your life savings, and left to die homeless and alone under a bridge somewhere, knowing that a gang of Wall Street execs are partying on your dime.

Anonymous said...

Buying gold could be thought of as a form of protest to the bankers. Assuming it is real tangible bury it in the yard coinage or raw nuggets from small miners. We are all thru with supporting the man.