Tuesday, September 30, 2014

A Standard FORWARD - NOT of the Past

It is good to see as conservative and widely read a source as Market Watch putting forth thoughts that seem to resonate with "cleanly" traded gold and FX markets. The devil is in the details of course:
(The Federal Reserve) can keep the dollar as good as gold by defining it in gold and making it convertible to gold. That system brought some of the greatest gains to working people and median families in recorded history.
Ahhh, "that system of the past". This is where the words of Keynes for once ring true. Gold standards of the past are incapable of performing as in the past - in today's more complex global economy.

At first, Lonegan grasps the essence of the problem when he speaks so eloquently of the dollar, and it's relation to the now defunct concept of free markets, perverted by the Feds eerie, Frankenstein-styled reserve currency experiment.

No doubt the families raised a brow or two when he went in the direction of free markets, but he lost his grasp (and they no doubt settled back in their armchairs) once standards of the past were invoked.

Surely, even Lonegan can see that a freely traded physical market in gold is being attempted in the East, despite the usual suspects fractionalizing derivative-debt-paper upon the underlying asset as usual. But all paper Gold will fail with the coming COMEX default - the difference being that when this new "Eastern paper" fails there will still be an underlying physical market in the East, whereas in the West what underlies the derivatives, are derivatives of derivatives, to be settled in derivatives.

As Another mentioned, "first gold and the dollar rise together", know that we have crossed this bridge already. The dollar is rising in perceived value relative to other currencies (and "gold") - while gold is rising in sovereignprivate, and geopolitical demand relative to its "commodity" peers.

We cannot view "gold rising" in terms of its dollar price while in a transition period set to mark "dollar price discovery" irrelevant. We can however seek to understand that the period in which the dollar price of gold IS still relevant (can still be bought for dollars at spot) is the opportunity of a lifetime - which the demand of sovereigns, wealth giants and China is rising UPON.

We can also understand that Another's comments regarding "regionalization" or "group retreat to avoid paying up" (truly a monetary perspective) has an organic function with regard to the collapse of the current system today. The dollar will be a fine and useful regional currency for the struggling US economy. And as the West isolates the dollar further, even its Euro partners "retreat".

Now comes the time foretold from more than 17 years ago. Revealed to us in agonizing slow motion, the chain reaction of events is about to accelerate into "real time".

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