SWRichmond

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    • Tue Dec 2nd 11:49 AM
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      Rating: 0 0
      Commented on:
      Gold Price and the Money Supply
      Third possibility: They believe they have no choice, and are hoping to tether it on the other end once inflation has taken hold.


      On Dec 02 11:41 AM Smarty_Pants wrote:

      > "I also agree that timing the implosion is impossible; however, the
      > pace does seem to be picking up a lot, doesn't it? This is very visible
      > in the Fed's actions, in Paulson's Panics, and in the sudden and
      > obvious willingness of central banks and governments worldwide to
      > shovel cash out the door." - SWRichmond
      >
      > The central bankers of the world are either all incredibly foolish
      > or incredibly shrewd. Time will tell which is closer to the truth.
      View article »
    • Tue Dec 2nd 11:25 AM
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      Rating: 0 0
      Commented on:
      Gold Price and the Money Supply
      P.S. The opportunity to have a dialog of sorts with intelligent people here at SA is one way I "look". Thanks for sharing.
      View article »
    • Tue Dec 2nd 11:23 AM
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      Rating: 0 0
      Commented on:
      Gold Price and the Money Supply
      Adam,

      Your point is well taken; I am one of those dollar-bear fundamentalists and also have a built-in distrust of central banks and the idea that something as big as an economy consisting of billions of minds can be successfully "managed". I don't think it can, so this entire credit crisis, for me, is one giant confirmation.

      I am, however, constantly looking for well-thought-out alternative views; I am very well aware of confirmation bias. I also agree that timing the implosion is impossible; however, the pace does seem to be picking up a lot, doesn't it? This is very visible in the Fed's actions, in Paulson's Panics, and in the sudden and obvious willingness of central banks and governments worldwide to shovel cash out the door. I am still trapped in confirmation; everything I see makes perfect sense. I am still able to discern no deviation from the path. Believe me, I am looking.
      View article »
    • Tue Dec 2nd 10:33 AM
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      Rating: +1 0
      Commented on:
      The Coming Dollar Deflation
      Patience, grasshopper.

      www.cnbc.com/id/280145...

      "Cost of Insuring Sovereign Debt Jumps to Record High"

      Referenced article points out the high, and growing risk of default in sovereign bonds, due essentially to the high demand for funds that governments are experiencing to fund various bailouts and stimulus packages. THESE PROGRAMS HAVE ONLY JUST BEGUN, and in many cases have not yet even begun to be funded.

      Hide in Treasuries if you choose. The "stock market is a generational buy" paradigm took more than a year to break, so too it will be with the "Treasuries as safe haven" paradigm. The herd is monumentally wrong.
      View article »
    • Tue Dec 2nd 10:22 AM
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      Rating: +2 0
      Commented on:
      Gold Price and the Money Supply
      Adam,

      Then we will simply disagree. Central banks want to inflate, must inflate, and want to do so stealthily. A long-term solution to the US federal debt problem, a steady, stealthy debasement, was well underway until the credit crisis shined a bright light on USDX. Currency debasement benefits the government more than it hurts them. It works better when the public has no "inflation expectations".

      The concept revolves around the need to pay off debt: either we can produce enough excess to pay off debt, or we can render the present value of the debt meaningless by inflation.

      Debt levels appear to be unserviceable, witness bank failures and mortgage foreclosures. How do you suggest the debt will be paid? Productivity gains?
      View article »
    • Tue Dec 2nd 08:45 AM
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      Rating: 0 0
      Commented on:
      OPEC and Production Cuts: Why Now's the Time to Buy
      I am slowly building a position in DXO. At 3-4 bucks a share, I'd be an idiot not to.
      View article »
    • Tue Dec 2nd 08:21 AM
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      Rating: +1 0
      Commented on:
      Gold Price and the Money Supply
      Your thesis makes sense and IMO correctly explains the runup in gold into March '08; everyone was expecting a massive inflationary response to the credit crisis. "Inflationary expectations" were high. This was clearly visible in gold and later in oil. Always remember, the Fed officials regularly refer to that phrase. Markets run on business fundamentals, corruption, and psychology. Right now, it's mostly about corruption and psychology.

      "Inflationary expectations" have been allowed to recede by allowing deflationary pressures to build and begin to express themselves. IMO this is no accident. People now see the monster that wants to eat them, and there is readiness among the general public to accept a massive inflationary response. Remember Trichet's inability to overcome German resistance and lower rates earlier in this crisis? Where is that German resistance now?

      One weakness of your analysis though is that your time period is way too short to be of predictive value. It doesn't include any periods of actual deflation nor any periods of central bank pursuit of extreme measures such as the quantitative easing that has recently begun. When the Fed cracks open an ink jug and pours it into the printing press, that to gold smells like blood in the water. We are just now starting that process in earnest.
      View article »
    • Tue Dec 2nd 07:58 AM
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      Rating: 0 0
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      Is the Fed Taking a Step Toward Explicit Quantitative Easing?
      The act of "making debt more affordable" means, by definition, making money less valuable. When money becomes less valuable, real things cost more. You just agreed with condemning people on fixed incomes to slow starvation. Either that, or you are among the majority who believe that we can lie about math.


      On Dec 02 07:48 AM Its going to work wrote:

      > Great article. The Fed is now addressing the fundamental problem:most
      > Americans cannot afford their debt and are terrified it will overwhelm
      > them. When mortgage rates fall and people refinance you see increased
      > confidence in the average American. The fear of a mortgage blowing
      > their head off goes down due to more stable financing and in many
      > cases they will have more cash flow.
      >
      > In effect the Fed is increasing the money supply to prevent a debt-deflationary
      > spiral where prices go down, production goes down, wages go down,
      > and everyone is looking for a job. They have plenty of room for "quantitative
      > easing" because so much capital destruction has occurred. The goal
      > is to maintain prices, maintain wages, and make debt more affordable.
      > It's going to work but the day of reckoning will come if some of
      > the inertia put into the economy is not spent retiring personal and
      > private debt.
      View article »
    • Tue Dec 2nd 07:53 AM
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      Rating: 0 0
      Commented on:
      Is the Fed Taking a Step Toward Explicit Quantitative Easing?
      The Fed prints money and uses it to buy Treasuries. The Fed will print enough to buy whatever Treasury issues, so there is never a need for rates to rise in the face of a skeptical market. In other words, using circular monetary reasoning that only a central banker could love, we will create brand new money and use it to buy investments from ourselves, printing our way to prosperity. All that is required for this to work is a massive global suspension of disbelief, and lots of people educated in public schools who no longer understand what capital is.

      In this manner Treasury rates can be kept low; since Treasury will be issuing at least $2 Trillion to cover next year's deficit, all one has to do is watch the Fed's balance sheet balloon.


      On Dec 02 06:29 AM ItsAMegaFlopper wrote:

      > Wish I better understood exactly HOW the mechanism of the Fed "buying
      > longer term treasuries" works. What does it accomplish? What motivations
      > (among buyers/sellers) does it change, i.e. what value is supposedly
      > added? What are it's risks?


      Note to the article's author: quantitative easing started a few weeks ago.
      blogs.reuters.com/grea.../
      View article »
    • Mon Dec 1st 17:43 PM
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      Rating: 0 0
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      The Credit Spreads Blow-Up
      I have to ask: are the high rates quoted to businesses the result of expected quantitative easing? Everyone knows that dollars are being printed at breakneck speed. This is known to lower the buying power of dollars in the future (current dollar strength being temporary in nature), so if I were to loan dollars over the long term I would want a high rate of return to make up for the lost buying power realized over the term of the loan.

      Everyone is interpreting the chart as a result of "flight-to-qualit... but couldn't it also be seen as currency risk? And isn't the currency risk in fact caused by the quantitative easing?
      View article »
    • Mon Dec 1st 12:31 PM
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      Rating: 0 0
      Commented on:
      Seeking an Historical Precedent for the Current Crisis
      You might want to reconsider your statement that "It's only a recession". Here's why:

      Country GDP (annual)
      World $ 65.6 Trillion
      USA $ 13.8 Trillion
      EU $ 14.4 Trillion
      Japan $ 4.3 Trillion
      China $ 7.1 Trillion


      Inflation-adjusted costs of various historic events Cost
      Marshall Plan: $ 115 Billion
      Louisiana Purchase: $ 217 Billion
      Savings & Loan bailout: $ 200 Billion
      Enron / MCI Worldcom: $ 240 Billion
      Japan Depression: $ 700 Billion to $1 Trillion
      Vietnam War: $ 700 Billion
      WWII (US only costs): $ 4 Trillion
      FDR’s “New Deal”: $ 500 Billion

      Spent or committed by US to this bailout, so far: $ 8.8 Trillion
      View article »
    • Fri Nov 28th 16:13 PM
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      Rating: 0 0
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      Fun with Government Bonds
      Yes, this is an oft-discussed topic. Let's examine one more important aspect.

      Capital, that is real capital, as clearly distinguished from newly-printed faux-capital, seeks productive employment in exchange for return. Under normal historic circumstances, capital would flee to economies with safe currencies that are not being actively debased by their hosts.

      The current circumstances are different: cooperative global debasement, a new modern phenomena, leaves capital no safe currency to which to flee. I view this as covert capital controls, revealing cooperative global banking as a capital trap. This is a more serious an issue than it might seem. Once successful, and coupled with the coming global regulation regime, a new inescapable system will exist where capital can be forced to flow where bankers and governments want it. Complete control of money is the end of financial freedom. The phrase "investment opportunities abroad" will be become meaningless. If you want to "save" or "invest", you will have to do so in a controlled system. It is reminiscent of the American one-party political system.

      While I do own some TBT, I am rethinking it; if this global regime succeeds, and if all currencies are equally debased, then rates could in theory never rise.
      View article »
    • Fri Nov 28th 15:13 PM
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      Rating: +1 -2
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      In Search of the Next Reserve Currency
      Dollar redeemability for gold was de facto replaced by dollar redeemability for oil. For a currency to have value it must be usable for procuring things of internationally recognized value. What better suited than oil? It is rare and highly sought after, and until recently in stable supply.

      The ME is the world's de facto oil bank, where nations borrow oil and repay their loans with dollars and defense spending. This is why the US defends the ME Arab states, in spite of our joined-at-the-hip political ties with Israel. The world's largest army defends the world's largest bank, it makes perfect sense. Fort Knox is now Fort Arabia/Kuwait/Iraq.

      If Obama thinks we are leaving Iraq, he is an idiot. The dollar would collapse, as it would be an admission of military weakness by the US (as noted above) and it would be the middle of the end game for dollar-denominated oil.

      The end of dollar-denominated oil means someone else must step up to defend Arabia. To prevent this possibility, the US builds the world's largest military base in its new conquest; we will not leave until either the dollar collapses or the oil runs out.
      View article »
    • Fri Nov 28th 14:57 PM
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      Rating: +1 0
      Commented on:
      Letting the Reinflation Genie Out of the Bottle
      Here's a major concern that I've not seen answered-away, anywhere: you can't print capital. Capital is deferred consumption. You can print money, and money can be capital, but you can't print capital. If you could, we'd all be rich beyond dreams of avarice. Printing new money must dilute existing capital. The Fed's alphabet programs aren't recapitalizing anything, they are merely making the accounting look less scary.

      Want real capital? Raise interest rates, and encourage savings. Anything else is just telling lies about math.
      View article »
    • Fri Nov 28th 14:37 PM
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      Rating: +2 0
      Commented on:
      Lock in Low Gas Prices
      Already playing a somewhat riskier game here, on the same reasoning, routinely buying small batches of DXO. The only way oil continues down is if reflation fails completely and the central banks stop trying, just short of currency destruction. I consider that a low-probability outcome.
      View article »