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To quote Thomas Wood

Submitted by Roanman on Fri, 10/08/2010 - 09:04


Thomas Wood, author of "Meltdown" provides the clearest explanation I've read of the events that caused the various "bubbles" we have endured over the past 10 years.


"Asset bubbles, like the housing bubble we’ve just lived through, do not occur spontaneously. If people bought lots of houses on the free market, interest rates would rise as the banks’ loanable funds were depleted. That would put an end to speculation in real estate.

But thanks to the Federal Reserve System (or simply the 'Fed'), which is no part of the free market, large infusions of money created out of thin air kept interest rates low, and thus perpetuated the bubble. During an asset bubble, demand for the asset in question rises, as does its price. Where would people get the money to keep buying an increasingly costly asset if the government’s officially approved money machine weren’t there to flood the economy with cash?

It was this interference with interest rates, pushing them well below where the free market would have set them, that set in motion the classic boom-bust cycle we’ve just witnessed. F.A. Hayek won the Nobel Prize for showing how central banks like the Federal Reserve, by interfering with interest rates and not allowing them to tell entrepreneurs the truth about economic conditions, divert the economy into unsustainable configurations that inevitably come undone in a crash. (Hayek belongs to a tradition of free-market thought called the Austrian School of economics.)

Adding fuel to the fire was the so-called Greenspan put, the unofficial policy of the Greenspan Fed that promised assistance to private firms in the event of risky investments gone bad. What kind of incentives do you suppose that created?" 



A One Hundred Trillion Dollar Bill

Submitted by Roanman on Tue, 05/18/2010 - 15:57


Evidently, the One Hundred Trillion Dollar note you see below is/was real.

At least in the sense that some moron at the Reserve Bank of Zimbabwe viewed it as currency.

Jeff Harding in a very well done piece, claims it was purchased for $7.50 on Ebay.

Click on the One Hundred Trillion Dollar note for the story.

Way double highly recommended.

Easy reading, lots of pictures, just for you Terry D. II


Money: A Semi Pictorial Fable

By Jeff Harding, on October 17th, 2009



I don't know about you, but I find it troubling that the morons running our federal government are beginning to compare so favorably with your basic Zimbabwean government morons.

As an aside, I was unable to open either the official government web site, or the Zimbabwe tourism authority site.

I couldn't decide if that was a good thing, or a bad thing.


To quote John Hathaway

Submitted by Roanman on Sat, 05/15/2010 - 14:00

The US Mint is suspended its production of 1 oz. gold eagle and gold buffalo coins three times in 2009

 Over the last decade the DJIA is down about 80% against gold.


  The following is from John Hathaway at Tocqueville Asset Management 11/30/2009

Click anywhere below to link up to the entire piece.


“The supply of gold increases at a far slower rate than that of paper money. Each year, the gold mining industry produces around 2500 metric tonnes of the metal.

This quantity adds a puny 1% or 2% to the above ground supply of 163,000 or so metric tonnes.

Unlike economically sensitive commodities, to which it is frequently and incorrectly linked, gold does not get used up.

Therefore, traditional supply and demand analysis does little to explain price movement.

It is better to think of gold as a multi trillion dollar capital market asset.

In theory, all of it  is potentially for sale at any given time.

Price behavior is best explained by macroeconomic considerations and the greater investment climate rather than micro economic considerations such as mine expansions or jewelry consumption.

To speak of a rising gold price is technically incorrect.

What appears to be a rising metal price is an illusion that signifies the declining value of paper currency and, more
important, the wealth that it measures.

Gold per se does not excite the investment world. It has not suddenly changed its stripes.

What has changed is the world around it.

What has come into view is the seemingly real prospect for the dollar and other paper currency to lose future value…

“In our opinion, the investment rationale for gold, in today’s circumstances, is deflation.

The post World War II economic model of economic growth based on secular credit expansion is broken.

We believe the applicable model is a 1930’s style credit deflation.

Asset prices are pressured by deleveraging.

Uncertainty as to collateral values restricts credit despite available liquidity.

The contraction of credit hurts economic activity, causing incomes to fall and asset values to fall further.

A negative shift in expectations rapidly overtakes behavior.

There is little government policy can do about this other than to devalue currency to lessen debt burdens.

The Fed understands this and is acting accordingly.

Keynesian stimulus packages at best mean that government spending replaces lost private sector activity to stabilize the economy.

This is pretty much where things stand at the moment.

It remains to be seen whether massive stimulus can offset the headwinds of a negative credit cycle.

Since there is no way to know how these wild experiments in monetary and fiscal stimulus will turn out, investors are gravitating to gold, knowing that the integrity of the currency is the last thing on the minds of policy makers.

Gold is a wager that these measures will not restore economic health over the longer term and that further currency debasement will be deemed necessary…

“Zero interest rates are designed to encourage a new carry trade.

Free money is intended to inflate asset values in hopes of restarting the credit cycle.

In other words, our ‘leaders’ in Washington will solve the problem of too much debt with more debt.

Decades of credit excesses have brought us to the brink of a credit collapse.

Unfortunately, there is little to suggest introspection. Most expect and assume that government intervention will continue to work miracles.

Things should get really interesting for gold when government actions are seen to be impotent.

“As long as deflationary forces prevail, world governments will remain addicted to currency debasement.

If currencies are successfully debased through inflation, gold will retain its value.

The middle ground between deflation and inflation exists only in the imagination of policy makers and analysts who still believe governments can create wealth.

Gold is a hedge against a world monetary order on its death bed.”

John Hathaway, Tocqueville Asset Management L.P., 11-30-09


Commercial banks buy gold to meet demand

Submitted by Roanman on Wed, 05/12/2010 - 06:29


Commercial banks buy gold to meet demand

 Dealers claim regional banks are stockpiling gold for clients who want their deposits saved in the yellow metal.

Emirate Business 24/7

by: Shahsank Shekhar May 05, 2010

Click the photo for the entire article


If it seems like I'm harping on this Gold thing, it's because I am.


The Lincoln quote Obama missed

Submitted by Roanman on Mon, 05/10/2010 - 06:13





Dow to Gold Ratio

Submitted by Roanman on Fri, 05/07/2010 - 06:18


Fred's Intelligent Bear keeps a nice set of charts offering a more sober viewpoint than you'll get from CNBC.

Here's the chart that makes me go all warm and fuzzy.

After yesterday's debacle it was the first thing I wanted to see this AM.

The Dow/Gold Ratio.

Up is good for Stocks, down is good for Gold.



Richard Russell has a very good question

Submitted by Roanman on Thu, 05/06/2010 - 06:48


I have for a long time now read people who read Richard Russell.


He's well into his 80's now and his Dow Theory Letters isn't cheap.

Still, the more I read him the more I wish I had been doing so all along.


"If I told you I was going to give you a large steel box for your kids,

and that box was not to be opened for fifty years,

would you rather I put three million in cash in that box,

or three million in diamonds or gold?"


Helluva question ain't it?



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