Thursday, April 26, 2012

Shove This Up Your Ass, Warren...

Reuters’ McGeever acknowledges how the “gold market is tiny” compared to “trillions and trillions of dollars worth of cash and assets sloshing around the world financial system.” He asks how can countries back “all of that” against such a “tiny and finite amount of gold?”  Butler responds by saying that “the amount of gold is finite by weight or volume, it is not finite by price   - article linked below
I will get to the article which is the source of the above quote below.  But first I wanted to link a speech given to the NY Fed by a guy named Robert Wenzel, who authors the Economic Policy Journal blog.  In this speech, he highlights the failure of Ben Bernanke's policies, why they are failing and why Government intervention in the economy leads to failure.  He does a brilliant job of translating basic economic laws and theories into layman terms.  With regard to the fact that Government "helps" the unemployed by taking taxpayer money and giving to the unemployed, he states rhetorically: 
In present day America, the government focus has changed a bit. In the new focus, the government  attempts much more to prop up the unemployed by extended payments for not working. Is it really a surprise that unemployment is so high when you pay people not to work?
I've made this comment to friends and colleagues many times.  He also cites work done by the recipients of the 2010 Nobe Prize in economics for work which shows that Government interference (transfer payments, regulations, etc) causes a higher rate of unemployment.

Here's the LINK.  If you only have time to read that today, stop reading this blog and read that.

On the quote at the beginning. posted an essay today making the argument that one of the BRIC countries is likely to introduce a gold-backed currency at some point in the near future that will replace the dollar.

I have always believed - and I have posted my theory in the past - that China would be the likely candidate for this once it had accumulated enough gold to enable it to make the claim as having the largest gold stock in the world.  The U.S. used that claim after WW2 in order to back its move to make the dollar the reserve currency per Bretton Woods. 

If this does indeed occur, the dollar will likely collapse.  Of course, the other interesting aspect to this would be that China/Russia would likely force the U.S. to make good on its claim that it still owns 8,100 tonnes of gold.  In that regard, Mr. Wenzel from above had this point to make:
I am very confused by the response of Chairman Bernanke to questioning by Congressman Ron Paul. To a seemingly near off the cuff question by Congressman Paul on Federal Reserve money provided to the Watergate burglars, Chairman Bernanke contacted the Inspector General’s Office of the Federal Reserve and requested an investigation [12]. Yet, the congressman has regularly asked about the gold certificates held by the Federal Reserve [13] and whether the gold at Fort Knox backing up the certificates will be audited. Yet there have been no requests by the Chairman to the Treasury for an audit of the gold.This I find very odd. The Chairman calls for a major investigation of what can only be an historical point of interest but fails to seek out any confirmation on a point that would be of vital interest to many present day Americans.

In this very building, deep in the underground vaults, sits billions of dollars of gold, held by the Federal Reserve for foreign governments. The Federal Reserve gives regular tours of these vaults, even to school children. [14] Yet, America’s gold is off limits to seemingly everyone and has never been properly audited. Doesn’t that seem odd to you? If nothing else, does anyone at the Fed know the quality and fineness of the gold at Fort Knox?
Clearly, the gold investing community is not the only one which would be interested to see an open, legitimate, independent audit of the U.S. gold inventory - something which has not been legitimately undertaken since Eisenhower was the President.  The Fed/Bernanke has jumped up and down like a lunatic promoting its new policy of "transparency."  How about making good on it rather than relying on the tenuous concept of "full faith?"

At any rate, this essay on Goldcore is another must-read:  LINK, as it responds with the free market, capitalist answer to the concern that there's not enough gold in the world to make a gold standard practical.  To that, the correct response is, "why not?"  The value of the gold is the key variable.  Value is calculated by the product of quantity and price.  If the quantity is relatively fixed, and there needs to be more "value," then the price has only one way to go...

Given the enormous amount of paper fiat currency in circulation globally that has been printed up since the last time gold was used to back money, it is understandable that from a value standpoint, that the price of gold is significantly undervalued....Warren Buffet can take my last statement there and shove it up his ass.


  1. A few months back, someone valued gold at 6300 per oz in terms of the amount of (sic) currency in circulation.

    I think that was U.S. only and not the world. The source was Zerohedge but I cannot recall who did the math.

    By that standard alone, silver is practically worthless. The bankers have done an outstanding job of manipulating those commodities.

    1. "By that standard alone, silver is practically worthless."

      Brian, was this statement meant to be fact or opinion? I don't understand how you draw the conclusion that silver is "practically worthless". Oh wait, maybe you mean paper silver, digital silver, conceptual silver. In those cases you are correct.

    2. I think he meant to say "undervalued." "Worthless" was a bad choice of words. His final sentence shows he clearly understands what is going on with gold and silver prices.

  2. Robert Wenzel has my support for a position on President Paul's economics team.

  3. LOL, Dave, your last sentence may cure poor Warren by enemAu :)

  4. How do you spell balls? starts with a t..

    confucius says...

    Man who speaks with forked tongue should not kiss balloons.(aka fiat debt)

    Geithner Urges China to Loosen Hold on Finance System

    ‘Save Excessively’

    “China’s financial system is still dominated by large state-owned banks, who favor lending to large state enterprises, with comprehensive controls on deposit interest rates,” Geithner said. That system limits the returns of consumers to below inflation, “forcing them to save excessively” and restricting consumption, he said.

    “Raising the ceiling on deposit rates will also allow Chinese households to earn a higher return on their savings, both increasing their income and reducing their need to save, thus increasing their ability to consume goods and services, including from the United States,” Geithner said at the Commonwealth Club of California.

    1. It seems that everyday Geithner makes statements that serve to confirm that fact he is mentally disabled.

  5. Jim Sinclair interview with Futures Magazine.

    "JS: Silver is not money for one practical reason: It is too heavy. Gold is extremely portable. If you wanted to buy a pick-up truck you could put the money in your lefty pocket in gold but if you wanted to buy it with silver even at today’s prices you would need a pick-up truck full of silver.

    So there you have it the great? Jim Sinclair says Silver is not money. All you Sinclair lovers had better sell your monster boxes of Silver Eagles.

    1. Hmmm. Got a link for that? According to the U.S. Constitution, gold and silver are money.

      Silver is poor man's gold. Has been since the Roman Empire.

      Even if Sinclair really did say that, he's wrong. And he's wealthy so he doesn't have to worry about "fungibility," which is what silver provides.

      It's best to have both, because if you want to buy a cup of coffee and only have a gold coin, what are you going to receive for change? On the other hand, silver owners can flip a silver coin at the server and say "keep the change, honey."

    2. this is what he said..more of a comment regarding gold's utility as money for large scale transactions...context is everything.

      FM: What about silver?

      JS: Silver is not money for one practical reason: It is too heavy. Gold is extremely portable. If you wanted to buy a pick-up truck you could put the money in your lefty pocket in gold but if you wanted to buy it with silver even at today’s prices you would need a pick-up truck full of silver. Silver is not as monetary as gold.

      ...and just remember there is a big push in Mexico and China to to remonetize silver as a vehicle for saving

    3. Having read some JS myself, he seems to be a true gold bug, and not into silver at all, which may explain in part his - IMO wrong - statement (if indeed he did say that). While the inventory of the world's gold above ground Au is currently around 135000 tonnes, it is only about a third of that when it comes to silver (numbers I have read somewhere, sorry, no reference). With a Au/Ag mining ration of currently ~1/10, and a ~ half of the mined silver being consumed by industry, I have no problem with the idea that a pocket full of silver may also buy a nice truck some day. Anyway, JS is a very vocal pro-PM/gold person, and seems to have a very rational view of the world, and the financial system in particular. He likes gold, and if gold does go up, it will likely drag Ag with it as well... and then Ag may just develop a life on its own... we'll see... my 2 oz. Al

  6. What else do you need to know about the system?

    The Truth About Egan-Jones

    . but not from us: after all we are known for being biased, which in the mainstream media parlance means calling it like it is. No - instead we leave it to none other than Bloomberg's Jonathan Weil who does as good a job of being "biased" as we ever could: "Egan-Jones, which has been in business since 1992, could have continued operating as an independent publisher of ratings and analysis, not subject to government oversight or control. Instead it chose to play within the Big Three’s system, exposing itself to regulation and the whims of the SEC in exchange for the government’s imprimatur. Now it’s paying the price." And not only that: as the most recent example of Spain just shows, where Egan Jones downgraded Spain 9 days ago and was ignored, but well ahead of everyone else, only to be piggybacked by S&P, and the whole world flipping out, it has become clear: calling out reality, and the fools that populate it, is becoming not only a dangerous game, but increasingly more illegal. Then again - this is not the first time we have seen just this happen in broad daylight, with nobody daring to say anything about it. In fact, this phenomenon tends to be a rather traditional side-effect of every declining superpower. Such as the case is right now...
    Getting a Pass

    Life isn’t fair, as they say. The big raters, which are paid by the issuers of securities they grade, so far have gotten a pass, even after helping cause the financial crisis by slapping AAA scores on countless tranches of subprime-mortgage dreck. Egan-Jones, with fewer than 20 employees, makes its money by selling subscriptions to investors, meaning it’s not beholden to issuers. Yet Egan and his firm are getting pinched, although nothing in the SEC’s administrative complaint indicates investors were harmed.

    None of this is to excuse any infractions Egan-Jones might have committed. We will have to wait and see if the agency’s claims stick in court. That said, it seems Egan-Jones’s big mistake was to seek formal recognition from the SEC at all.

  7. Jim Grant explains how Central Banks are Waging War on Supply and Demand

  8. Regarding Santa's preference for Gold over Silver, most of his net worth is in GOLD mining.

    I wouldn't get all bent out of shape about it... I mean, what else would he say... dah!