Thursday, January 7, 2016

Crash & Soar

I smirk at the term "soar". Those who play the market for continuity of some sort have seen nothing yet. All this really tells us is that the item traded in commodity markets is always a currency, not the commodity itself - not even the currencies themselves to be accurate, but rather currency future expectations, relative to other currencies.

As Soros talks his hedge in Sri Lanka (it might as well be Davos) and Gross acknowledges the new demographic normal in what once was a conspicuous consumption model with no remaining consumption fuel outside of expanding debt in currency terms (long since unrepayable in "post-currency" terms) we watch the continuing effects of gradual systemic decline.

In dollar terms, we could easily see 1075/oz gold again in USD by tomorrow (not a prediction, just a possibility that bears recognition). But this is of no consequence in the larger scheme.

I write now because of this recent tendency to depict China's strategy as desperate or "clueless". It is neither. The adjustment is not so much to magically transform from a producer to a consumer model, but rather to a balanced and harmonic model where each country's resources and expertise are used wisely to balance production and consumption within a larger regional economic system that gradually indemnifies debtor economies to irrelevance.

The 1% have adjusted accordingly. The momentum play now takes place where the 2 to 5% begin their move, and so on.

Some will say that holders of gold are doom and gloomers, awaiting Armageddon. But I say that gold holders are eternal optimists. We do acknowledge that if we take the world back to the stone age, gold will then finally have no value - just as it held no value for prehistoric man. Our optimism precludes this outcome.

We see gold as the light at the end of the paper tunnel, where a new golden future awaits. A future where a new age of globalism exists to replace the failing model of globalism today.

Those who talk of the conspiracy to form a new supranational currency (SDR? please don't make me laugh) have been asleep for decades. All currencies today are global. It is the arbitrage of the strong over the weak that senior wealth exploits. When those advantages are no longer profitable, gold resumes it's "balancing purpose" among the paper markets.

We see a new leader emerging who speaks not of tyranny against all those who fail to pay tribute to the advantages of a dying regime, but rather a world of peace and harmony, where economic freedom begins to thrive again ,and wealth begins it's balance into an equitable system where failure is not rewarded, where fraud is not propped up by more paper debt -  but rather where success is rewarded, and nurtured, and prosperity is not just a debt fueled dream for the middle classes, but an economic reality.

No other world will do for our children and grandchildren. No other future is acceptable to holders of gold. Powerful countries and powerful families do still hold it. Gold simply "will not die". The desperation lies in letting it flee to a new era you will fail to be a part of. Is gold so different from paper? The time for honoring paper wealth will soon be at an end.


  1. "The momentum play now takes place where the 2 to 5% begin their move."

    What about their move? Speculative bets on the price of gold using proxies such as leveraged ETFs?

    Some see the price of gold going further down. I would presume that, if the powers that be wish to reinstate gold in some way, they need it to look like a solution before they suggest it is THE solution. If gold (even if it's only "paper gold") craters with the rest of the markets, it may look "weak".

    On the contrary, if gold is allowed to rise up to, say, $3,000 before the lights go out, then it could be seen (and felt by the masses) as the "antidote", the "forgotten anchor".

    Furthermore, if the price does reach such a level, then when gold gets revalued, maybe the new price in gram could be in the same range as the "former" price in ounces, resulting in the price displayed on television being somewhat similar to what it was before the event.

    In any case, gold (event "paper" gold) has recently been acting opposite to the markets, and I don't see why this relationship should change. Time will tell.

  2. I don't think so. I think we've entered a transition period where the 2 to 5% will begin to gradually take possession of physical (this does not include the shell game between the bullion banks and central bank grey paper movements).

    Of course I could be wrong, but I think the families are beginning to recognize that the dollar system is coming unglued. Thus we have HSG's "sudden reversal" of central bank reserve depletion beginning in mid 2014 after some 60 years of parabolic growth.

    The reserves that are being depleted (IMHO) are dollar denominated reserves whose bonds are being added to the FEDs balance sheet.

    It is not physical gold that is being removed from CB reserve holdings, but rather "paper".

    Where some of this paper ends up? Though it might seem heretical to say - it can "vanish" just as easily as it is "created".

    Another would say that it burns in Hugo's "orgy of defaults".

    Gold does not burn. It rises from the ashes in another form.

    Happy Hump Day!