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Some Perspective on the Gold Bubble talk....
NumbersUsacom
Posts: 1,457 ✭
Also if you look at the simple fact the low of 35.00 which the 1980 high started at is an approximate 20x move. The current move started at 250.00 and is an approximate 6.8 move thus far. If we went the whole 20x we would reach $5000.00 Gold. We may not see the 20x but then again we could see a higher number. When a true bubble forms it usually exceeds previous bubbles. Check out the third chart down....
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not.
the dollar under threat is a fundamental influence. This long pause is a bubble reliever, too.
Does supply tighten up?
Folks hold tight?
Hugh Selloffs? (who buys?)
Low to negative premiums?
When it was $800, they may have wondered how it would be at $1800. But it seems abundant now, with low premiums...
In 1980, Volker could afford to spike rates up to 14% and raise margin requirements as high as necessary to cool off the speculative enthusiasm for gold. The economy did go cold as a result and employment was tough for at least a couple of years in most industries.
In 2012, the Bernanke can't afford to raise rates or the national debt will "explode" instantly, most likely hastening a default. Bernanke also can't raise rates for the same reason that Obama can't raise taxes - the economy would die.
It might anyway, unless the debt can be lightened in genuine ways and not with the sleight-of-hand accounting gimmicks that Congress loves to try.
I knew it would happen.
Give Me Liberty or Give Me Debt
<< <i>The bubble is in dollars >>
I can live with that assessment
float as silver did from 1964-1971, I suspect that the starting price of gold might have been closer to $60-$75/oz vs. $35. That would trim the 25X
multiple down to around 15X. In international trading gold snuck up to $44/oz in 1968/69. That was just as the London Gold Pool disbanded their efforts to cap the
price of gold.
Willie - "The USDollar will be surrounded, then isolated, then sink with the rest of the fiat paper currencies. The great Gold accumulation movement is fast underway, picking up speed. The New York and London bankers are in fast retreat, delivering their precious gold bars to Eastern entities, as they are being systematically drained of their gold assets."
U.S. Exporting Record Amounts of Gold Overseas
and, according to the World Gold Council the fundamentals remain unchanged
"The backdrop of negative real yields, a slow recovery and a likely continuation of expansionary monetary policies – with all the risks these present – provides further support to the long-term strategic investment case for gold."
Give Me Liberty or Give Me Debt
Willie is paranoid.
A rise in interest rates to a more "normal" level--an increase of perhaps 200 basis points, would not cause debt levels to explode. It would however increase investment and remove the irrational disillusionment that so permeates this country.
Knowledge is the enemy of fear
<< <i>It may not cause debt levels to explode, but it would cause tens of trillions of otc interest rate contracts to blow up. >>
Says who?
Knowledge is the enemy of fear
That's when I'm selling.
In 2000, 40 ounces of gold purchased one unit of the Dow.
Today, it's about 7.8 ounces buys one unit of the Dow.
Still has a long way to go to get to 1:1, but it will.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>
<< <i>It may not cause debt levels to explode, but it would cause tens of trillions of otc interest rate contracts to blow up. >>
Says who? >>
Talk about a house of cards. Due to the hundreds of trillions caught up in unregulated OTC derviatives such as interest rate swaps and the fact that over 90% of them are handled by the top five banks, a rise in interest rates would cost one of the two counterparties a lot of dough. The risk is default by a major player who would not be able to cover the losses because his side of the bet is being covered by some other bet with someone else who is depending on side bets with yet someone else. And we all know who really looses when a TBTF bank gets in trouble. Most of the derivative money is fractionalized. Default on interest rate swaps will be a repeat of when the mortgage derivatives exploded in the real estate market but on a much larger scale and will be the begining of a long line of dominos. Regardless of the FED's zero interest rate policy to avoid the first domino, believing interest rates won't go up is like believing home values won't go down.
OTC derivatives are the gun that Wall St. holds to the head of the economy. It is their insurance policy that they will never be allowed to fail. Had congress listened to then CTFC Commissioner Brooksly Born that derivatives needed to be regulated there would most likely be no economic crisis today. Unfortunately, congress sided with Greenspan, Rubin and Sommers with the hands off approach and to this day these weapons of mass economic destruction remain unregulated. Even Time Magazine bought the Plunge Protection Team's BS:
Give Me Liberty or Give Me Debt
A 200 basis point rise in rates would be GOOD for the economy.
Knowledge is the enemy of fear
<< <i>Think about it. If the outcome is so extreme, then it most likely will not happen. Derivatives are just paper. And we all know paper can and usually becomes worthless.
A 200 basis point rise in rates would be GOOD for the economy. >>
10% would be better. Volcker proved high interest rates, while temporarily painful, can fix an economy that is drowning in debt. Unfortunately, Wall St. now dictates interest rates.
Give Me Liberty or Give Me Debt
A 200 basis point rise in rates would be GOOD for the economy. >>
10% would be better. Volcker proved high interest rates, while temporarily painful, can fix an economy that is drowning in debt. Unfortunately, Wall St. now dictates interest rates.
Last time I read about it, the debt instruments being rolled over right now are pretty much the last ones having higher rates, and they are short term paper that is being traded off for 30 year paper in the "Twist" operation. This, in itself is a fiasco as the Treasury's capacity to continue that process is "hitting the wall". What happens after (and in conjunction with) that is outright monetary inflation, i.e. QE to infinity. There's nowhere else to turn, unless the Govt defaults on its debt outright.
All a 200pt bump in rates will do is crash the bond market, taking savers' money and retiree's money along with it. A 10% jump in rates would purge the system of crappy debt, for sure. But it would also crash the system and destroy lots of people. Neither is politically feasible, but that's never stopped the politicians for long.
Bottom line, we're at the end of the monetary rope and the economy isn't going to bail out anyone.
I knew it would happen.
Rates were 200 pts higher in Jan 2011. The stock market was up 10% in the months prior to peaking and up another 10% in the following 6 months.
With every asset class there is give and take. Bonds go up, stocks go down. Been this was ever since. And will be ever more.
The only thing we have to fear (and we are going a darn good job of it) is fear itself.
Knowledge is the enemy of fear
I knew it would happen.
Knowledge is the enemy of fear
Give Me Liberty or Give Me Debt
What does that mean for gold? Until debt liquidation outpaces dollar creation, gold will continue to rise - just as it has been rising - and magical dollars will continue to pile up in bank balance sheets and bank accounts. If endpoint in the massive debt liquidation is ever finally liquidated, I am guessing that the event will be instantaneous and pervasive. What will we end up with? A massive pile of dollars that were all created in order to compensate for the debt liquidation vs. a quantity of gold that hasn't changed much. At that moment, or maybe a tad before that moment - it will dawn on someone, somewhere - that there are tons more dollars than there are tons of gold and someone will quickly re-calculate their relative worths.
When that happens, I plan to be holding gold.
I knew it would happen.
<< <i>"Which Is Why You Should Buy It" >>
Agreed !!
I A Greed, are we all A Greed? Some words just seem self explanatory.. were all just full of Greed, its either Agreed or Afeared. I'm a coveting this, I'm a coveting that. Until it all implodes and then we run from Greed into the the frantic claws of Fear. I'm Afeared of this, I'm Afeared of that... and so it goes.