Quote from: foggyb on August 23, 2011, 09:32:30 PM

I agree with everything you just said, miscreanity. That doesn't happen to me very often.

I'm pretty agreeable. Grin

Quote from: cypherdoc on August 24, 2011, 12:55:59 AM

http://globaleconomicanalysis.blogspot.com/2011/08/2-year-treasuries-at-record-low-21.html

so when's this UST selloff supposed to occur? and just how is inflation supposed to get going when the banks prefer to buy UST's instead of lend to each other? UST's are acting like a big black hole sucking the life out of the real economy. they're gonna drag gold down the hole too as everyone scrambles for cash to pay their basic expenses.

I don't know.

Treasuries definitely aren't the sunshine and roses safety solution that capital needs, but old habits die hard.

The government's playbook includes a line that states: "If you make the rules, you can change the rules." As a last resort, gov't can play dirty. Think Frankendodd.

For now, the repo market twist look like the best option. You really need to read Alasdair Macleod's article on that. The gist of it is that the Fed will make it more desirable to enter repo contracts than to sit in treasuries or other "safe" instruments, probably by offering better contract terms than the paltry short-term treasury rates. As long as enough of those contracts wind their way back to Fed authorized participants (which can be forced by changing the rules), credit will effectively have been extended to the government.

In effect, it's a colossal shell game: "We loan money to the banks, the banks loan money to the gov't, the Fed bumps up the base monetary supply and loans more to the banks..." That will allow for business as usual and the games will continue for a while longer, but it's now in full Enron-mode; i.e. vapor. That first phase of getting money into the banks is over, so now it's time for banks to start lending to government since nobody else is buying (other nations don't have to sell, just stop buying - interest still accrues like quicksand on existing debt). The banks are becoming trapped in the vortex they unwittingly created; little more than puppets of the government they thought was theirs to control.

That still doesn't explain why gold should be dragged down, especially when its been behaving as a safe haven. As dollar velocity increases, its volatility will rise as well. Sure there'll be that initial surge of demand you described, but as the effect wears off and capital flows into assets, more money is needed. The more money in the system, the more destructive a deflationary crunch will be.

Eventually, no amount of money injection will work and the post-inflationary deflation will finally and violently take hold. Either way, gold stands as the king among assets because it also functions as money. I know you're still skeptical of it resuming that role; why is it receiving safe haven flows, then?

Quote from: cypherdoc on August 24, 2011, 02:00:05 AM

yes, he did get the housing call right but i've always been severely disappointed in his solution for MORE fiscal stimulus.

Yeah, that's about when I wrote him off as a grade-A douche. I've heard he throws cool parties, though.

Quote from: cypherdoc on August 24, 2011, 02:00:05 AM

even in 2011 they can't move gold around the world w/o all the listed problems and concerns in the article. how are nations supposed to perform balance of payments of gold from debtor to creditor nations on an ongoing basis if we go back to a gold std? it'd be crazy complicated and expensive. we need something digital/instantaneous. did someone say Bitcoin?

There's no need to physically move the reserve bullion (just as dollar reserves are rarely ever 'move'); the existing system works insofar as gold is concerned (large-scale distributed storage with registered ownership of numbered bars). It's the leverage (and in turn the current custodianship) that's at issue. That built up during a fixed gold standard, but with gold freely floating via market exchange that rigidity is nullified, allowing it to form the basis for all currencies and goods exchangeable against it.

Market forces determine gold's value and values of everything else in relation to it; actually a very elegant system in its universality and self-correcting nature. Then the real issues shift to the fiat currencies instead of gold, but that's after the revaluation everything is undergoing - you could even look at these crises as price discovery on an epic scale.

Because gold is floating at that point, it and Bitcoin would effectively be mirrors of each other. Bitcoin is definitely the future and has some additional benefits but like it or not, gold is here to stay.