Friday, March 11, 2016

Trends and Events

The ECB is doing exactly as predicted, and the FED will follow suit (visibly or not). This fiat money endgame does not have "multiple exit strategies" - it always ends the same way. Is this time somehow different? Read Thomas Kuhn to get a feel for "revolutionary" monetary policy (indeed, as with science).

This trend of endowing Western central banks with omnipotence (or not) needs to be checked with an understanding of the primary dealer role. The TBTF commercials closest to the CBs have a heavy hand in markets and the systemic players act in collusion, trading roles and strength accordingly as factors dictate (a moving target is easier to conceal from the investor class).

The future role of gold has asserted itself from time to time, but always for the wrong reasons. Price movements continue to be a reflection of futures speculation, and are completely removed from any supply side consideration despite the fact that supply tightness would be sending up red flags on a physical plane reality.

We do not exist in a physical world. Our "valuation system" exists in a fantasy world exempt from default (the death of fiat). In other words, political confidence in the system prevents systemic default because our most sacred contracts have an implied socialized guarantee. Confidence in this system depends upon "the favored" being bailed out by the "little people" at large. This system will get its "new name" years later in retrospect as the dust of its demise clears.

Our "money" has no "time value", therefore negative interest rates can be seen as either an outcome of that recognition or a necessary precursor to it. Confidence in the future utility of paper is the only real value that contracts hold, and all paper money is a futures contract.

Though few see the world in this way, gold has a future value that far outweighs its present valuation methodology as a profit vehicle or currency hedge. The families have always viewed gold as a central bank reserve asset, long in place and being repositioned to reliquify our paper proxies for value.

That is all for now ...

No comments:

Post a Comment