Quote from: netrin on September 11, 2011, 02:54:35 PM

Does anyone have an interpretation that I don't see?

Without the explosion of debt, M2-based projections would be somewhat valid for at least the US; building analysis on the US alone is misleading. Leveraged debt is the main determinant of gold's value today, not the existing monetary base as was before a floating rate was finally established in 1971.

Because there's been so much securitization of debt and subsequent internationalization of it, the range of backing necessary from a base money supply has been greatly amplified. Had the packaged variants been kept within individual nations' borders, one country's economy (e.g.: Greece or the US) could collapse without severely impacting others - in fact, other nations would then swoop in to pick up firesale-priced assets. That way, there would simply be a percentage change in global ownership. Since that isn't the case, those entities most closely-tied to the existing financial infrastructure will be dragged down with it unless the connection is severed by dumping depreciating assets sooner rather than later.

Martin Armstrong discusses the Euro's dilemma of being a unified currency with disaggregate debt (PDF link). In short, a team effort will have a much more difficult time making progress while carrying dead weight than if every member were under heavy burden, but moving under their own power as a group: with 10 individuals pulling a massive weight, if 1 falls down and doesn't get up, that magnifies the difficulty for the remaining 9 than if the 1 that fell down were to get back up again instead of contributing dead mass - not only has working power been lost, but the weight has been increased. The same problem is partially attributable to the situation US states face.

If the Euro were to struggle along with a unified debt, progression is possible. If it continues as is, with the PIIGS succumbing, there will be fewer nations left to pay down the debt. Imagine France and Germany having to take on the burden of the PIIGS debt. Instead of France and Germany having well under 100% debt-to-GDP ratios, they will shoot well over that level. No nation makes good on its obligations much beyond that point. Default or debasement of the prevailing currency become the only options, and the former is almost impossible - it's like a person forcing himself to face his worst fear.

Applying calculus limits to gold and fiat currencies, yes - the limit for gold's value in fiat terms (due to outstanding debt) approaches infinity. It is foolish to think that would actually be achieved, even with enormous debt monetization efforts. Eventually, the rate of change becomes too rapid for human accommodation: a hyperinflation becomes impossible to sustain and the subsequent deflationary crunch, that the hyperinflation delayed, finally occurs. A very high number in fiat terms, yes (much more than $5k); not infinity.