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Apr 18, 2019 | www.moonofalabama.org
james , Apr 17, 2019 7:30:29 PM | link
@ christian - find a place like this in some city close by to where you live - it will be easier in person and avoid shipping and insurance costs..
Zachary Smith , Apr 17, 2019 9:11:34 PM | link
@ Christian J Chuba #37Hmpf , Apr 17, 2019 10:29:49 PM | linkMy advice is to drop the idea of acquiring gold. There are just too many issues for the small buyer to safely overcome.
1) If gold prices ever shoot through the roof (as the seller sites keep hinting at) I'd expect the US government to politely invite you to sell them your stocks. This happened in the Thirties, and can certainly happen again. It is probably impossible to accumulate anything more than a few pieces of jewelry without being put on somebody's list. The Feds closely monitor virtually every financial transaction made in this country.
2) How will you know you're getting pure 24k gold vs 23 or 18k stuff? Worse than that, the Chinese have become VERY good at gilding Tungsten bars or disks. Even central Banks have been taken in by this scam, and what do you suppose your chances are? The 19.25 gm/cubic cm. density of Tungsten is very, very close to the 19.3 density of Gold. I'd imagine with a bit of powder metallurgy work involving a speck of 22.5 Osmium, the numbers could be exactly matched. There are a few other tests, but nobody outside of the huge dealers or central banks can afford to do them.
3) come the financial disaster, how will you "spend" your gold? Even if you're certain you have the genuine product, how will you convince me? Or anybody else, for that matter. It'll come down to what the guy at the pawn shop will give you for it, and that'll probably be on the order of 1/3 the value. (there is always the Official Government purchasers, and at their price and their penalties for holding out)
I'd suggest you buy US "junk silver" in small cash deals - the old silver coins minted up to 1964. The odds are much higher somebody will understand these have a superior value, and they're in sizes suitable for small purchases. Even so, would you reasonably expect anybody to accept a couple Ben Franklin half dollars in exchange for a sack of food - especially if there is a severe food shortage going on? If your kids know about this acquisition, you'd better prepare for the burglars - they talk about everything to everybody. Come to think of it, I know of an adult who lost tens of thousands worth of silver because he was motor mouth about it. Total loss. BTW, telling your insurance guy is the same as putting it on a billboard - this information gets shared!
@ Christian J Chuba | Apr 17, 2019 7:22:58 PM | 37Do as Karlof1 suggested - find a reputable coin dealer in your vicinity. Don't buy at Amazon, Ebay et al..
Also, if manageable buy 1 ounce coins only as this will save you surcharge that always comes with the smaller ones. Stick with well known brands - Canadian Maple Leaf, Austrian Philharmonics, Australian Kangaroo, Britannia, American Eagle - and stay away from collector items.
Notional value of the coins:
Britannia 100 GBP, Philharmonics 100 Euro, Maple Leaf 50 CAD, American Eagle 50 US, Kangaroo 50 AUS.Watch Gold spot price prior to any purchase at barchart.com (ticker ^XAUUSD - ^XAUCAD), stockcharts.com (ticker $Gold), investing.com etc (ticker XAU/CAD - XAU/US).
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www.nakedcapitalism.com
Jim Haygood December 10, 2016 at 8:47 am
Arizona Slim December 10, 2016 at 10:28 amBarron's investment weekly has published a "Get Ready for Dow 20,000" cover today. Is that a problem for stocks, from a contrarian point of view?
Not necessarily. Paul Macrae Montgomery, who first articulated the concept of fading the always-wrong MSM, stipulated that it's widely-circulated, general-interest publications that are the best mirrors of popular sentiment.
So far, they are largely silent on the twin asset bubbles - stocks and house prices - rising ominously beneath our feet. Looks like it's gonna be awhile before we reach the supreme silliness of Time magazine's fatuous June 2005 cover "Home $weet Home: Why We're Going Gaga Over Real Estate."
That one actually scored double points, for the MSM's presumptuous habit of invoking the cozy "we" formulation to tell readers what they think. (That's why "we" hate the MSM.)
With Time reportedly on the block, maybe a sensational "Dow 36,000" cover could goose the sale price up to five dollars instead of one. It's worth a try, lads!
Pat December 10, 2016 at 10:57 amSummer 2005 was when Tucson's housing bubble started hissing air. After years of tight inventory, there was a proliferation of properties for sale.
Some of those properties stayed on the market for years and many of them ended up in foreclosure.
Jim Haygood December 10, 2016 at 12:01 pmJim, odd snippet from something I heard last night struck me as being right up your alley. The guy who founded Princeton Review is now some kind of investment guru. He was talking about last years announced rate hikes, and that he told his clients they weren't going up but might reach record lows. He based that on metals traders (gold, silver etc). He says they have never been wrong about the direction of rates. (I got interrupted so if he explained the signals he was seeing from them I missed it). It should be part of a pod cast from Tim Ferriss if you want to check it out, but I really did think it was one of those things you would have in your arsenal for market prediction.
His other big advice was treat investing like a poker game, don't bet on the cards bet on the players – look for their tells. And he hasn't figured out that Uber has some real issues to deal with before its 'profits' are real, so take everything with a grain of salt.
griffen December 10, 2016 at 5:45 pmGold is anticorrelated to TIPS (Treasury Inflation Protected Securities) yields as shown in this chart:
https://marketrealist.imgix.net/uploads/2016/09/bondvsgold.png
TIPS didn't exist before 1997. But real Treasury yields (proxied by subtracting the trailing 12-month CPI change from nominal Treasury yields) went negative in 1974 and 1979 too, during the epic gold spikes of that era.
So this seems to be an enduring anticorrelation. However, I use the yield curve in my bond model rather than gold. The pronounced serial correlation in Fed-controlled short rates is highly non-random, signaling what the cockeyed commissars are up to.
It's DOW 40,000 or bust. I'm holding out for that Weyland-Yutani merger to be announced any week now.
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Sep 12, 2016 | blogs.nytimes.com
October 9, 2009
Modified Goldbugism At the WSJ
By Paul KrugmanSo I was peacefully drinking my coffee this morning, and was accosted by someone waving the latest Wall Street Journal editorial on the dollar * in my face, demanding my reaction. Um, this is not cool. Also, with apologies to Brad DeLong, when reading WSJ editorials you need to bear two things in mind:
1. The WSJ editorial page is wrong about everything.
2. If you think the WSJ editorial page is right about something, see rule #1.After all, here's what you would have believed if you listened to that page over the years: Clinton's tax hike will destroy the economy, you really should check out those people suggesting that Clinton was a drug smuggler, Dow 36000, the Bush tax cuts will bring surging prosperity, Saddam is backing Al Qaeda and has WMD, there isn't any housing bubble, US households have a high savings rate if you measure it right. I'm sure I missed another couple of dozen high points.
Today's editorial was in the grand tradition. A few months ago falling stock prices showed Obama's failure - never mind, we meant the falling dollar. And just to provide extra spice, the editorial cited David Malpass ** as the wise expert on all this.
But more specifically, you need to see the Journal's fear of a weak dollar in terms of its long-term gold-bug position. The Journal has always maintained that changes in exchange rates play no useful role, that stable exchange rates - preferably enforced by some barbarous relic like the gold standard - are the essence of sound policy.
I explained why this is all wrong a long time ago. *** But it's especially important to understand the wrongness of this view right now. If there's one overwhelming lesson from the Great Depression, it is that putting a higher priority on stabilizing your currency than on domestic recovery is utterly disastrous. Barry Eichengreen **** pointed out years ago that major economies went off gold in the following order: Japan, Britain, Germany, US, France. And here's what happened to their industrial output:
[Slowest to leave the gold standard, slowest to recover.
All that glitters went off gold.]The WSJ may not realize it, but it wants us to be France in the 1930s. Let's not.
* http://online.wsj.com/article/SB10001424052748703746604574461473511618150.html
** http://bigpicture.typepad.com/comments/2008/03/malpass-ass.html
*** http://www.pkarchive.org/cranks/goldbug.html
**** http://braddelong.posterous.com/eichengreen-origins-and-nature
Reply Saturday, November 14, 2015 at 05:19 PM
anne said in reply to anne...
http://www.pkarchive.org/cranks/goldbug.htmlNovember 22, 1996
The Gold Bug Variations
By Paul Krugman - SlateThe legend of King Midas has been generally misunderstood. Most people think the curse that turned everything the old miser touched into gold, leaving him unable to eat or drink, was a lesson in the perils of avarice. But Midas' true sin was his failure to understand monetary economics. What the gods were really telling him is that gold is just a metal. If it sometimes seems to be more, that is only because society has found it convenient to use gold as a medium of exchange--a bridge between other, truly desirable, objects. There are other possible mediums of exchange, and it is silly to imagine that this pretty, but only moderately useful, substance has some irreplaceable significance.
But there are many people--nearly all of them ardent conservatives--who reject that lesson. While Jack Kemp, Steve Forbes, and Wall Street Journal editor Robert Bartley are best known for their promotion of supply-side economics, they are equally dedicated to the belief that the key to prosperity is a return to the gold standard, which John Maynard Keynes pronounced a "barbarous relic" more than 60 years ago. With any luck, these latter-day Midases will never lay a finger on actual monetary policy. Nonetheless, these are influential people--they are one of the factions now struggling for the Republican Party's soul--and the passionate arguments they make for a gold standard are a useful window on how they think.
There is a case to be made for a return to the gold standard. It is not a very good case, and most sensible economists reject it, but the idea is not completely crazy. On the other hand, the ideas of our modern gold bugs are completely crazy. Their belief in gold is, it turns out, not pragmatic but mystical.
The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate. There are powerful advantages to such an unconstrained system. Above all, the Fed is free to respond to actual or threatened recessions by pumping in money. To take only one example, that flexibility is the reason the stock market crash of 1987--which started out every bit as frightening as that of 1929--did not cause a slump in the real economy.
While a freely floating national money has advantages, however, it also has risks. For one thing, it can create uncertainties for international traders and investors. Over the past five years, the dollar has been worth as much as 120 yen and as little as 80. The costs of this volatility are hard to measure (partly because sophisticated financial markets allow businesses to hedge much of that risk), but they must be significant. Furthermore, a system that leaves monetary managers free to do good also leaves them free to be irresponsible--and, in some countries, they have been quick to take the opportunity. That is why countries with a history of runaway inflation, like Argentina, often come to the conclusion that monetary independence is a poisoned chalice. (Argentine law now requires that one peso be worth exactly one U.S. dollar, and that every peso in circulation be backed by a dollar in reserves.)
So, there is no obvious answer to the question of whether or not to tie a nation's currency to some external standard. By establishing a fixed rate of exchange between currencies--or even adopting a common currency--nations can eliminate the uncertainties of fluctuating exchange rates; and a country with a history of irresponsible policies may be able to gain credibility by association. (The Italian government wants to join a European Monetary Union largely because it hopes to refinance its massive debts at German interest rates.) On the other hand, what happens if two nations have joined their currencies, and one finds itself experiencing an inflationary boom while the other is in a deflationary recession? (This is exactly what happened to Europe in the early 1990s, when western Germany boomed while the rest of Europe slid into double-digit unemployment.) Then the monetary policy that is appropriate for one is exactly wrong for the other. These ambiguities explain why economists are divided over the wisdom of Europe's attempt to create a common currency. I personally think that it will lead, on average, to somewhat higher European unemployment rates; but many sensible economists disagree.
So where does gold enter the picture?...
Reply Saturday, November 14, 2015 at 05:21 PM
ax
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pgl, December 02, 2015 at 05:48 AManne said in reply to pgl...NYTimes post:
"Republicans unhappy with the Federal Reserve are circulating an idea that long ago lost currency with most economists: a gold standard….But economic historians describe this as nostalgia for a time that never was. Proponents of the gold standard generally overstate the benefits of putting golden handcuffs on a central bank, historians say, and the costs of that reduced flexibility are considerable…In 2012, the University of Chicago asked 40 leading economists whether a gold standard would improve the lives of average Americans. All 40 said no. "You can do a lot better than a gold standard," said Michael Bordo, an economist and director of the Center for Monetary and Financial History at Rutgers University. He described the political interest in the precious metal as "pretty crazy."… Economists generally regard a gold standard as a crude and outdated method of inflation control. There is nothing inherently stable about the value of gold. It fluctuates, like the value of everything else, as more is extracted from the ground and as demand waxes and wanes. The bigger problem, however, is that economic conditions are unstable. And during recessions, printing money can help revive economic activity."Great discussion. And nice picture of William Jennings Bryan whose "Cross of Gold" speech in 1896 won him the Democratic nomination for president. This is the best expression of the progressive agenda ever.
But wait for it – our gold bug troll JohnH will later wake up drunk again to tell us how evil the FED is and how awesome the period of the gold standard was. After all trolls nothing about history and less about economics.
The reference is necessary:
December 1, 2015
The Good Old Days of the Gold Standard? Not Really, Historians Say
By BINYAMIN APPELBAUM
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economistsview.typepad.com
Jul 21, 2015 | Zero Hedge
"I held in my hand the Holy Grail for the Chicago Mercantile Exchange. The most influential economic mind of the twentieth century provided the CME with the intellectual foundation upon which to build its financial superstructure."
Nixon's estimable free market advisors who gathered at the Camp David weekend were to an astonishing degree clueless as to the consequences of their recommendation to close the gold window and float the dollar. In their wildest imaginations they did not foresee that this would unhinge the monetary and financial nervous system of capitalism. They had no premonition at all that it would pave the way for a forty-year storm of financialization and a debt-besotted symbiosis between central bankers possessed by delusions of grandeur and private gamblers intoxicated with visions of delirious wealth.
In fact, when Nixon announced on August 15, 1971, that the dollar was no longer convertible to gold at $35 per ounce, his advisors had barely a scratch pad's worth of ideas as to what should come next.
Its first attempted solution was a Burns-Connally hybrid known as the Smithsonian Agreement of December 1971. The United States needed precisely a $13 billion favorable swing in its balance of trade. This was not to be achieved the honest way-by domestic belt tightening and thereby a reduction of swollen US imports that were being funded by borrowing from foreigners. Instead, America's trading partners were to revalue their currencies upward by about 15 percent against the dollar.
Connally's blatant mercantilist offensive was cut short in late November 1971, however, when the initially jubilant stock market started heading rapidly south on fears that a global trade war was in the offing.
As it turned out, a few weeks later Connally's protectionist gauntlet ended in an amicable paint-by-the-numbers exercise in diplomatic pettifoggery. The United States agreed to drop the 10 percent import surtax and raise the price of gold by 9 percent to $38 per ounce.
Quite simply, the United States had made no commitment whatsoever to redeem paper dollars for gold at the new $38 price or to defend the gold parity in any other manner. At bottom, the Smithsonian Agreement attempted the futile task of perpetuating the Bretton Woods gold exchange standard without any role for gold.
During the next eight months, further international negotiations attempted to rescue the Smithsonian Agreement with more baling wire and bubble gum. But the die was already cast and the monetary oxymoron which had prevailed in the interim, a gold standard system without monetary gold, was officially dropped in favor of pure floating currencies in March 1973.
Now, for the first time in modern history, all of the world's major nations would operate their economies on the basis of what old-fashioned economists called "fiduciary money." In practical terms, it amounted to a promise that currencies would retain as much, or as little, purchasing power as central bankers determined to be expedient.
In stumbling to this outcome, Nixon's advisors were strikingly oblivious to the monetary disorder they were unleashing. The passivity of the "religious floaters" club in the White House was owing to their reflexive adherence to the profoundly erroneous monetarist doctrines of Milton Friedman.
A Friedmanite Fed would keep the money growth dial set strictly at 3 percent, year in and year out, ever steady as she goes.
Friedman's pre-1971 writings nowhere give an account of the massive hedging industry that would flourish under a régime of floating paper money. This omission occurred for good reason: Friedman didn't think there would be much volatility to hedge if his Chicago-trained central bankers stuck to the monetarist rulebook.
Most certainly, Friedman did not see that an unshackled central bank would eventually transform his beloved free markets into gambling halls and venues of uneconomic speculative finance.
It thus happened that Leo Melamed, a small-time pork-belly (i.e., bacon) trader who kept his modest office near the Chicago Mercantile Exchange trading floor stocked with generous supplies of Tums and Camels, found his opening and hired Professor Friedman.
THE PORK-BELLY PITS: WHERE THE AGE OF SPECULATIVE FINANCE STARTED
Leo Melamed was the genius founder of the financial futures market and presided over its explosive growth on the Chicago "Merc" during the last three decades of the twentieth century.
At the time of the Camp David weekend that changed the world, the Chicago Merc was still a backwater outpost of the farm commodity futures business.
The next chapters in the tale of Melamed and the Merc are downright astonishing. In 1970, Melamed made an intensive inquiry into currency and other financial markets about which he knew very little, in a desperate search for something to replace the Merc's rapidly dwindling eggs contract. The latter was the core of its legacy business and was then perhaps $50 million per year in annual turnover.
Four decades later, Leo Melamed's study program had mushroomed into a vast menu of futures and options contracts-covering currencies, commodities, fixed-income, and equities, which trade twenty-four hours per day on immense computerized platforms. The entire annual volume of the old eggs contract is now exceeded in literally the blink of an eye.
The reason futures contracts on D-marks and T-bills took off like rocket ships is that the fundamental nature of money and finance was turned upside down at Camp David. In effect, Professor Friedman's floating money contraption created a massive market for hedging that did not have any reason for existence in the gold standard world of Bretton Woods, and most especially under its more robust pre-1914 antecedents.
When currency exchange rates were firmly fixed and some or all of the main ones were redeemable in a defined weight of gold, exporters and importers had no need to hedge future purchases or deliveries denominated in foreign currencies. The spot and forward exchange rates, save for technical differentials, were always the same.
Even more importantly, the newly emergent need of corporations and investors to hedge against currency and interest rate risk caused other fateful developments in financial markets; namely, the accumulation of capital and trading resources by firms which became specialized in the intermediation of financial hedges. Purely an artifact of an unstable monetary régime, this new industry resulted in prodigious and wasteful consumption of capital, technology, and labor resources.
The four decades since Camp David also show that the Friedmanite régime of floating money is dynamically unstable. Each business cycle recovery since 1971 has amplified the ratio of credit to income in the system, causing the daisy chains of debt upon debt to become ever more distended and fragile.
Currently, the daily volume of foreign exchange hedging activity in global futures and options markets, for example, is estimated at $4 trillion, compared to daily merchandise trade of only $40 billion. This 100:1 ratio of hedging volume to the underlying activity rate does not exist because the currency managers at exporters like Toyota re-trade their hedges over and over all day; that is, every fourteen minutes.
Due to the dead-weight losses to society from this massive churning, the hedging casinos are a profound deformation of capitalism, not its crowning innovation. They consume vast resources without adding to society's output or wealth, and flush income and net worth to the very top rungs of the economic ladder-rarefied redoubts of opulence which are currently occupied by the most aggressive and adept speculators. The talented Leo Melamed thus did not spend forty years doing God's work, as he believed. He was just an adroit gambler in the devil's financial workshop-the great hedging venues-necessitated by Professor Friedman's contraption of floating, untethered money.
THE LUNCH AT THE WALDORF-ASTORIA THAT OPENED THE FUTURES
According to Melamed's later telling, by 1970 he had "become a committed and ardent disciple in the army that was forming around Milton Friedman's ideas. He had become our hero, our teacher, our mentor."
Thus inspired, Melamed sought to establish a short position against the pound, but after visiting all of the great Loop banks in Chicago he soon discovered they weren't much interested in pure speculators: "if you didn't have any commercial reasons, the banks weren't likely to be very helpful."
The banking system was not in the business of financing currency speculators, and for good reason. In a fixed exchange rate régime the currency departments of the great international banks were purely service operations which deployed no capital and conducted their operations out of hushed dealing rooms, not noisy cavernous trading floors. The foreign currency business was no different than trusts and estates. Even Melamed had wondered at the time whether "foreign currency instruments could succeed" within the strictures designed for soybeans and eggs, and pretended to answer his own question: "Perhaps there was some fundamental economic reason why no one had before successfully applied financial instruments to futures."
In point of fact, yes, there was a huge reason and it suggests that while Melamed might have audited Milton Friedman's course, he had evidently not actually passed it. There were no currency futures contracts because there was no opportunity for speculative profit in forward exchange transactions as long as the fixed-rate monetary régime remained reasonably stable.
Indeed, this reality was evident in a rebuke from an unnamed New York banker which Melamed recalled having received in response to his entreaties shortly before the Smithsonian Agreement was announced. "It is ludicrous to think that foreign exchange can be entrusted to a bunch of pork belly crapshooters," the banker had allegedly sniffed.
Whether apocryphal or not, this anecdote captures the essence of what happened at Camp David in August 1971. There a motley crew of economic nationalists, Friedman acolytes, and political cynics supinely embraced Richard Nixon's monetary madness. In so doing, they opened the financial system to a forty-year swarm of "crapshooters" who eventually engulfed capitalism itself in endless waves of speculation and fevered gambling, activities which redistributed the income upward but did not expand the economic pie.
As it happened, Melamed did not waste any time getting an audience with the wizard behind the White House screen. At a luncheon meeting with Professor Friedman at the New York Waldorf-Astoria on November 13, 1971, which Melamed later described as his "moment of truth," he laid out his case.
After asking Friedman "not to laugh," Melamed described his scheme: "I held my breath as I put forth the idea of a futures market in foreign currency. The great man did not hesitate."
"It's a wonderful idea," Friedman told him. "You must do it!"
Melamed then suggested that his colleagues in the pork-belly pits might be more reassured about the venture if Friedman would put his endorsement in writing. At that, Friedman famously replied, "You know I am a capitalist?"
He was apparently a pretty timid capitalist, however. In consideration of the aforementioned $7,500, Melamed got an eleven-page paper that launched the greatest trading casino in world history. It made Melamed extremely wealthy and also millionaires out of countless other recycled eggs and bacon traders that Friedman never even met.
Modestly entitled "The Need for a Futures Market in Currencies," the paper today reads like so much free market eyewash. But back then it played a decisive role in conveying Friedman's imprimatur.
In describing the paper's impact, Melamed did not spare the superlatives: "I held in my hand the Holy Grail for the Chicago Mercantile Exchange. The most influential economic mind of the twentieth century provided the CME with the intellectual foundation upon which to build its financial superstructure."
*****
Source: The Great Deformation by David Stockman
falak pemaHahaha, for the FIRST time I see a post here on ZH where the "profoundly erroneous monetarist doctrine" of Milton Friedman gets blamed for what follows : the greatest monetary sin of the West (after the gold exchange standard according to Jacques Rueff).
The Friedmanite floating rate regime is what started the instability in the world monetary casino and yes the futures market did the rest.
Yipeeee, we have it right there. The monetary SIN laid out here at ZH and it had NOTHING to do with Keynesian plays. The Casino was a PURE product of the CHICAGO school so dear to Hayek. Who approved the supply side "liberalisation" of Reaganomics that followed.
ZH has vindicated that very important piece of the puzzle in the global financial time line of our present age.
Now Keynes's ghost can rest in piece. Monetarism will have to carry its own Cross on its Golgothan march.
The Delicate GeniusI think there may be a middle you're excluding...
falak pema
hxcMay be a middle called Nixonian petrodollar anchoring. But that did not change the Casino mantra. It just anchored "our money your problem" to Saud's Oil guzzler.
All that did was to suck the Oil into the fiat bonanza world.
Something the Sauds don't appreciate anymore as the Fiat pile is making Pax Americana fragile and it cannot zero hedge its support of Sunni Saudi hubris. It has to HEDGE with IRAN...now having showed its resilience after 40 years of confronting the USA.
C'mon Genius don't just mumble in your libertarian beard, put up or shut up.
Not all monetarists are chicagoan. They became book cookers for Keynesian discretionary policy... Hence NK's, New Classicals, "market monetarists," et cetera. Friedman's been reduced to the guy in the back room, wearing a green visor and rigging up Keynes' insane monetary system.
Check it out
MASTER OF UNIVERSE
falak pemaAgreed, but only because you know more than I do when it comes to Economics, and because I always thought that cocksucker Freidman, and the Chicago School, were crooked snakes-in-the-grass all along. And frankly, Z/H does kind of beat on Keynes a bit too much sometimes, but the SOB is dead, so who cares anyhow. Historiography has a nothing to do with reality in this day and age, methinks.
1946 Keynes dies. 1965 De Gaulle starts talking about "exorbitant privilege" and US hubris.
At the end of the 60s the London Gold club that tries to bridge French concerns about US spending profiglacy (Vietnam war, great society) and US balance of trade deterioration, collapses. Harold Wilson caves in to "gnomes of Zurich" and London loses pivotal role with a devalued £.
By 1969 the French have put the fear of God up Nixon when a french gunboat arrives reclaiming French gold deposited in NY. SO...1971 and Nixon makes the plunge.
You can say what you like about Keynes. He had nothing to do with Nixon/Johnson's spending spree which made gold revoke inevitable. It was not his philosophy which was à la mode in 1969 but the Chicago school.
MASTER OF UNIVERSE
From what I have read about Keynes he was appropriately characterized as 'brilliant'. Of course, no amount of Keynesian Stimulus could have shut down the Bear Stearns bear raid, or the Lehman Bros. Chapter 11. Ergo, the downfall of Freidman's orthodoxy was bound to occur as soon as Glass-Steagall deregulation provided the leverage via the FCC. Since the exemption on leverage for Bear Stearns it took five years to melt down to a systemic Worldwide intractable problem. Keynes was right about CB intervention, but he had no way of knowing that certain fundamentals would be altered beyond logic of failsafe.
p.s. thanks for going into detail on history. I always appreciate historical background given my background in Experimental Psychology/Personality/Biography/Historiography and Sociology.
withglee
Nixon's estimable free market advisors who gathered at the Camp David weekend were to an astonishing degree clueless as to the consequences of their recommendation to close the gold window and float the dollar.
Oh really? What would you have done ... with the street price of gold at over $70, the official price at $35, and the French choosing to be compensated in gold rather than dollars, as they were supposedly the same thing.
What would you have done?
knukles
Another reason the Chitown Loop banks were not supportive of Melamed's currency futures ideas was that the Harris primarily was at the time "the" Bulge Bracket Big Swinging US Based Dick of the cash and forward 4X markets as well as one of the largest financers of the futures businesses on the CME and CBoT. They saw Leo not as a product extension, but a threat to their dominance.
withglee
When currency exchange rates were firmly fixed and some or all of the main ones were redeemable in a defined weight of gold,
With, then as now, less than an ounce of gold per person on Earth, a third grader had arithmetic skills enough to know this was a ridiculous claim.
armageddon addahere
most-interesting-frog-worldEverybody acts like Nixon closing the gold window was the beginning of something. It wasn't. It was the end. At that point the US had been spending money like water overseas for everything from the Marshall Plan, Volkswagens and Japanese transistor radios to the Korean and Vietnam wars. There was a net inflow of gold during the depression and WW2, but after that there was a steady outflow all through the fifties and sixties.
The whole world wanted American dollars, and a lot of it got turned in for American gold. The gold was nearly gone. At the rate it was going, the last ounce would leave Fort Knox in less than two years. They had no choice but to end the convertability of gold - sooner or later. Nixon's only choice was to take action and make a smooth transition or let everything go to hell at once.
"The Great Deformation by David Stockman" ... This is the most remarkable treatise on economic history ever written. If you haven't read it you are still in the dark.You will continue to see many excerpts from this book on ZH ... and well deserved.
David Stockman should be given a Nobel Prize for Economics ... for exposing Economics as the insanity it is and fully captive to politics.
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Jul 21, 2015 | Zero Hedge
"I held in my hand the Holy Grail for the Chicago Mercantile Exchange. The most influential economic mind of the twentieth century provided the CME with the intellectual foundation upon which to build its financial superstructure."
Nixon's estimable free market advisors who gathered at the Camp David weekend were to an astonishing degree clueless as to the consequences of their recommendation to close the gold window and float the dollar. In their wildest imaginations they did not foresee that this would unhinge the monetary and financial nervous system of capitalism. They had no premonition at all that it would pave the way for a forty-year storm of financialization and a debt-besotted symbiosis between central bankers possessed by delusions of grandeur and private gamblers intoxicated with visions of delirious wealth.
In fact, when Nixon announced on August 15, 1971, that the dollar was no longer convertible to gold at $35 per ounce, his advisors had barely a scratch pad's worth of ideas as to what should come next.
Its first attempted solution was a Burns-Connally hybrid known as the Smithsonian Agreement of December 1971. The United States needed precisely a $13 billion favorable swing in its balance of trade. This was not to be achieved the honest way-by domestic belt tightening and thereby a reduction of swollen US imports that were being funded by borrowing from foreigners. Instead, America's trading partners were to revalue their currencies upward by about 15 percent against the dollar.
Connally's blatant mercantilist offensive was cut short in late November 1971, however, when the initially jubilant stock market started heading rapidly south on fears that a global trade war was in the offing.
As it turned out, a few weeks later Connally's protectionist gauntlet ended in an amicable paint-by-the-numbers exercise in diplomatic pettifoggery. The United States agreed to drop the 10 percent import surtax and raise the price of gold by 9 percent to $38 per ounce.
Quite simply, the United States had made no commitment whatsoever to redeem paper dollars for gold at the new $38 price or to defend the gold parity in any other manner. At bottom, the Smithsonian Agreement attempted the futile task of perpetuating the Bretton Woods gold exchange standard without any role for gold.
During the next eight months, further international negotiations attempted to rescue the Smithsonian Agreement with more baling wire and bubble gum. But the die was already cast and the monetary oxymoron which had prevailed in the interim, a gold standard system without monetary gold, was officially dropped in favor of pure floating currencies in March 1973.
Now, for the first time in modern history, all of the world's major nations would operate their economies on the basis of what old-fashioned economists called "fiduciary money." In practical terms, it amounted to a promise that currencies would retain as much, or as little, purchasing power as central bankers determined to be expedient.
In stumbling to this outcome, Nixon's advisors were strikingly oblivious to the monetary disorder they were unleashing. The passivity of the "religious floaters" club in the White House was owing to their reflexive adherence to the profoundly erroneous monetarist doctrines of Milton Friedman.
A Friedmanite Fed would keep the money growth dial set strictly at 3 percent, year in and year out, ever steady as she goes.
Friedman's pre-1971 writings nowhere give an account of the massive hedging industry that would flourish under a régime of floating paper money. This omission occurred for good reason: Friedman didn't think there would be much volatility to hedge if his Chicago-trained central bankers stuck to the monetarist rulebook.
Most certainly, Friedman did not see that an unshackled central bank would eventually transform his beloved free markets into gambling halls and venues of uneconomic speculative finance.
It thus happened that Leo Melamed, a small-time pork-belly (i.e., bacon) trader who kept his modest office near the Chicago Mercantile Exchange trading floor stocked with generous supplies of Tums and Camels, found his opening and hired Professor Friedman.
THE PORK-BELLY PITS: WHERE THE AGE OF SPECULATIVE FINANCE STARTED
Leo Melamed was the genius founder of the financial futures market and presided over its explosive growth on the Chicago "Merc" during the last three decades of the twentieth century.
At the time of the Camp David weekend that changed the world, the Chicago Merc was still a backwater outpost of the farm commodity futures business.
The next chapters in the tale of Melamed and the Merc are downright astonishing. In 1970, Melamed made an intensive inquiry into currency and other financial markets about which he knew very little, in a desperate search for something to replace the Merc's rapidly dwindling eggs contract. The latter was the core of its legacy business and was then perhaps $50 million per year in annual turnover.
Four decades later, Leo Melamed's study program had mushroomed into a vast menu of futures and options contracts-covering currencies, commodities, fixed-income, and equities, which trade twenty-four hours per day on immense computerized platforms. The entire annual volume of the old eggs contract is now exceeded in literally the blink of an eye.
The reason futures contracts on D-marks and T-bills took off like rocket ships is that the fundamental nature of money and finance was turned upside down at Camp David. In effect, Professor Friedman's floating money contraption created a massive market for hedging that did not have any reason for existence in the gold standard world of Bretton Woods, and most especially under its more robust pre-1914 antecedents.
When currency exchange rates were firmly fixed and some or all of the main ones were redeemable in a defined weight of gold, exporters and importers had no need to hedge future purchases or deliveries denominated in foreign currencies. The spot and forward exchange rates, save for technical differentials, were always the same.
Even more importantly, the newly emergent need of corporations and investors to hedge against currency and interest rate risk caused other fateful developments in financial markets; namely, the accumulation of capital and trading resources by firms which became specialized in the intermediation of financial hedges. Purely an artifact of an unstable monetary régime, this new industry resulted in prodigious and wasteful consumption of capital, technology, and labor resources.
The four decades since Camp David also show that the Friedmanite régime of floating money is dynamically unstable. Each business cycle recovery since 1971 has amplified the ratio of credit to income in the system, causing the daisy chains of debt upon debt to become ever more distended and fragile.
Currently, the daily volume of foreign exchange hedging activity in global futures and options markets, for example, is estimated at $4 trillion, compared to daily merchandise trade of only $40 billion. This 100:1 ratio of hedging volume to the underlying activity rate does not exist because the currency managers at exporters like Toyota re-trade their hedges over and over all day; that is, every fourteen minutes.
Due to the dead-weight losses to society from this massive churning, the hedging casinos are a profound deformation of capitalism, not its crowning innovation. They consume vast resources without adding to society's output or wealth, and flush income and net worth to the very top rungs of the economic ladder-rarefied redoubts of opulence which are currently occupied by the most aggressive and adept speculators. The talented Leo Melamed thus did not spend forty years doing God's work, as he believed. He was just an adroit gambler in the devil's financial workshop-the great hedging venues-necessitated by Professor Friedman's contraption of floating, untethered money.
THE LUNCH AT THE WALDORF-ASTORIA THAT OPENED THE FUTURES
According to Melamed's later telling, by 1970 he had "become a committed and ardent disciple in the army that was forming around Milton Friedman's ideas. He had become our hero, our teacher, our mentor."
Thus inspired, Melamed sought to establish a short position against the pound, but after visiting all of the great Loop banks in Chicago he soon discovered they weren't much interested in pure speculators: "if you didn't have any commercial reasons, the banks weren't likely to be very helpful."
The banking system was not in the business of financing currency speculators, and for good reason. In a fixed exchange rate régime the currency departments of the great international banks were purely service operations which deployed no capital and conducted their operations out of hushed dealing rooms, not noisy cavernous trading floors. The foreign currency business was no different than trusts and estates. Even Melamed had wondered at the time whether "foreign currency instruments could succeed" within the strictures designed for soybeans and eggs, and pretended to answer his own question: "Perhaps there was some fundamental economic reason why no one had before successfully applied financial instruments to futures."
In point of fact, yes, there was a huge reason and it suggests that while Melamed might have audited Milton Friedman's course, he had evidently not actually passed it. There were no currency futures contracts because there was no opportunity for speculative profit in forward exchange transactions as long as the fixed-rate monetary régime remained reasonably stable.
Indeed, this reality was evident in a rebuke from an unnamed New York banker which Melamed recalled having received in response to his entreaties shortly before the Smithsonian Agreement was announced. "It is ludicrous to think that foreign exchange can be entrusted to a bunch of pork belly crapshooters," the banker had allegedly sniffed.
Whether apocryphal or not, this anecdote captures the essence of what happened at Camp David in August 1971. There a motley crew of economic nationalists, Friedman acolytes, and political cynics supinely embraced Richard Nixon's monetary madness. In so doing, they opened the financial system to a forty-year swarm of "crapshooters" who eventually engulfed capitalism itself in endless waves of speculation and fevered gambling, activities which redistributed the income upward but did not expand the economic pie.
As it happened, Melamed did not waste any time getting an audience with the wizard behind the White House screen. At a luncheon meeting with Professor Friedman at the New York Waldorf-Astoria on November 13, 1971, which Melamed later described as his "moment of truth," he laid out his case.
After asking Friedman "not to laugh," Melamed described his scheme: "I held my breath as I put forth the idea of a futures market in foreign currency. The great man did not hesitate."
"It's a wonderful idea," Friedman told him. "You must do it!"
Melamed then suggested that his colleagues in the pork-belly pits might be more reassured about the venture if Friedman would put his endorsement in writing. At that, Friedman famously replied, "You know I am a capitalist?"
He was apparently a pretty timid capitalist, however. In consideration of the aforementioned $7,500, Melamed got an eleven-page paper that launched the greatest trading casino in world history. It made Melamed extremely wealthy and also millionaires out of countless other recycled eggs and bacon traders that Friedman never even met.
Modestly entitled "The Need for a Futures Market in Currencies," the paper today reads like so much free market eyewash. But back then it played a decisive role in conveying Friedman's imprimatur.
In describing the paper's impact, Melamed did not spare the superlatives: "I held in my hand the Holy Grail for the Chicago Mercantile Exchange. The most influential economic mind of the twentieth century provided the CME with the intellectual foundation upon which to build its financial superstructure."
*****
Source:
[Jul 22, 2015] Metals are getting crushed
"..."With the more positive outlook on the dollar, and with debasement risk starting to fade, the demand to use gold as a diversifying asset against the U.S. dollar becomes less and less important.""
And following gold's plunge, analysts are getting increasingly bearish on the commodity.
Goldman Sachs now sees the price of the metal dropping below $1,000 an ounce, according to Bloomberg's Debarati Roy. .
Goldman's head of commodities research Jeff Currie told Bloomberg: "With the more positive outlook on the dollar, and with debasement risk starting to fade, the demand to use gold as a diversifying asset against the U.S. dollar becomes less and less important."
Currie also said the firm prefers to approach gold "on the short side" for the longer term.
Math-Chem-Physics
U.S. Treasury Yields are falling today July 22 due to Safe-Haven flight of Investment Money due to the impending military actions in the China Sea between the U.S. & China ; other areas such as Ukraine are also likely now to explode in conflict. This will soon attract Safe-Haven Investment into Gold and Silver also and the Gold & Silver Mining Stock Equities in XAU and HUI. My previous blog on July 20, 2015 below explains this in detail , and also explains why the FRB won't raise its Fed Funds Rate until 2017 :
China is a very shrewd Investor, and so some of its Gold was obviously sold near the top of 2011 and 2012 when Gold was approximately $1,900 per ounce. Of course, China is today buying hundreds of tons of Gold so that when the October 2015 IMF Adjustment is made to Voting Rights giving China equal weight to the U.S.A., China's Gold holdings will be at least 4,000 tons instead of the 1645 tons reported last week. The P8 Reconisance Flight over China's Manmade Military Islands in the China Sea by U.S. Admiral Swift today was vehemently protested by China, and likely will lead to shoot-down of a P8 by China soon, thus sparking powerful Gold and Silver gains for coming weeks throughout 2015 --
The sell-off that drove gold down to $1080.50 today within a few minutes of the Shanghai Stock market opening is yet another case of Manipulation of Gold price lower by some large Banks using "Naked Gold Shorts". The authorities will soon fine those responsible and thereby halt that, just as they have recently in 2015 in the cases of Currency Manipulation, and also Manipulation of the Libor Rate.Gold is now rallying sharply off its bottom of $1080.50 hit within a few minutes of the Shanghai Market opening; Gold price has now recovered more than one-half of its loss, which loss is in spite of the strong Fundamentals of Gold; those strong Gold Fundamentals are related to the impending 86 Billion Euros Bailout for Greece that will strongly bolster the Euro and Gold as the U.S. Dollar sinks sharply, thus allowing the all-important Large Speculators today to sweep up thousands of Gold Contracts based on those strong Gold Fundamentals -- The weekly Commodity Report on Wednesdays will illustrate this on July 22; of course , today's panicked small speculators won't know this until it is too late on July 22. At 3:05 a.m. EDT, Bloomberg News reported that Greece will pay all 7.05 Billion Euros Debt Repayment on time that is due near-term. Gold has so far rallied up to $1119, and Silver has also rallied sharply to be down only a few cents, and the Euro is up 0.2%. Additionally, the FRB cannot raise its Fed Funds Rate according to FRB Vice Chair Fisher on July 17 because the Annual 1.2% PCE Core Inflation Rate fell from 1.3% of the previous month, which is far below the 2% Mandate; FRB Member Mester's notion to use a Interest Rate increase to improve "financial stability" was totally rejected by FRB Member Williams --
The German Parliament on July 18 voted overwhelmingly to immediately start the Bailout Negotiations with Greece, and German Chancellor Merkel then stated that the Greece Bailout must be agreed to quickly so that lengthening of the maturity of those loans by decades with lower Interest Rates will quickly make the Greece Debt "sustainable", thus allowing the IMF to quickly loan their fair share of the 86 Billion Euros -- July 20, 2015 at 7:30 a.m. PDT
[Jul 11, 2015] Gold Daily and Silver Weekly Charts - Some Group Is Sitting On These Markets
Jul 11, 2015 | jessescrossroadscafe.blogspot.com
"Gold is looking like the dog that just did not bark -- but not uniquely so. Most safe-haven assets are looking distinctly lackluster, including the VIX index. Either 5,000 years of safe-haven buying has just become bunk, or there is a desire to portray what is evidently a financial and economic crisis as nothing to be concerned about."At least in my judgement, the precious metal markets are being consistently rigged.Ross Norman, Sharps Pixley
"In keeping silent about evil, in burying it so deep within us that no sign of it appears on the surface, we are implanting it, and it will rise up a thousand fold in the future. When we neither punish nor reproach evildoers, we are not simply protecting their trivial old age, we are thereby ripping the foundations of justice from beneath new generations."
Aleksandr Solzhenitsyn, The Gulag Archipelago
I believe the reason that they are being rigged is that the financiers have convinced the political class that this is a necessary action in order to prevent a panic, a run on the dollar and the bonds, and a seepage of critical funds into an unproductive investment as compared to equities for example.
We are just defending what is ours, right? And what is ours is the global dollar hegemony.
This is really just another excuse for looting, picking both the global public pockets and the Treasury's.
This sort of thing seems to happen periodically, at least once per generation, and the system generally has to get washed out badly, and then reform may come. You can see a clear trend back to the early Reagan years for this particular dalliance with the overreach and madness of the moneyed interests.
Protracted market rigging tend to distort supply profoundly. And there should be no doubt that the distortions and excesses of our current round of economic quackery have caused an historic imbalance of wealth and power. And the rigging of the gold and silver markets have badly affected the ability of supply to meet demand.
Oh well. Interesting times.
Have a pleasant evening.
[Jul 10, 2015] Are Big Banks Using Derivatives To Suppress Bullion Prices
Jul 9, 2015 | Zero Hedge
Submitted by Paul Craig Roberts and Dave Kranzler via PaulCraigRoberts.org,We have explained on a number of occasions how the Federal Reserves' agents, the bullion banks (principally JPMorganChase, HSBC, and Scotia) sell uncovered shorts ("naked shorts") on the Comex (gold futures market) in order to drive down an otherwise rising price of gold. By dumping so many uncovered short contracts into the futures market, an artificial increase in "paper gold" is created, and this increase in supply drives down the price.
This manipulation works because the hedge funds, the main purchasers of the short contracts, do not intend to take delivery of the gold represented by the contracts, settling instead in cash. This means that the banks who sold the uncovered contracts are never at risk from their inability to cover contracts in gold. At any given time, the amount of gold represented by the paper gold contracts ("open interest') can exceed the actual amount of physical gold available for delivery, a situation that does not occur in other futures markets.
In other words, the gold and silver futures markets are not a place where people buy and sell gold and silver. These markets are places where people speculate on price direction and where hedge funds use gold futures to hedge other bets according to the various mathematical formulas that they use. The fact that bullion prices are determined in this paper, speculative market, and not in real physical markets where people sell and acquire physical bullion, is the reason the bullion banks can drive down the price of gold and silver even though the demand for the physical metal is rising.
For example last Tuesday the US Mint announced that it was sold out of the American Eagle one ounce silver coin. It is a contradiction of the law of supply and demand that demand is high, supply is low, and the price is falling. Such an economic anomaly can only be explained by manipulation of prices in a market where supply can be created by printing paper contracts.
Obviously fraud and price manipulation is at work, but no heads roll. The Federal Reserve and US Treasury support this fraud and manipulation, because the suppression of precious metal prices protects the value and status of the US dollar as the world's reserve currency and prevents gold and silver from fulfilling their role as the transmission mechanism that warns of developing financial and economic troubles. The suppression of the rising gold price suppresses the warning signal and permits the continuation of financial market bubbles and Washington's ability to impose sanctions on other world powers that are disadvantaged by not being a reserve currency.
It has come to our attention that over-the-counter (OTC) derivatives also play a role in price suppression and simultaneously serve to provide long positions for the bullion banks that disguise their manipulation of prices in the futures market.
OTC derivatives are privately structured contracts created by the secretive large banks. They are a paper, or derivative, form of an underlying financial instrument or commodity. Little is known about them. Brooksley Born, the head of the Commodity Futures Trading Corporation (CFTC) during the Clinton regime said, correctly, that the derivatives needed to be regulated. However, Federal Reserve Chairman Alan Greenspan, Treasury Secretary and Deputy Secretary Robert Rubin and Lawrence Summers, and Securities and Exchange Commission (SEC) chairman Arthur Levitt, all de facto agents of the big banks, convinced Congress to prevent the CFTC from regulating OTC derivatives.
The absence of regulation means that information is not available that would indicate the purposes for which the banks use these derivatives. When JPMorgan was investigated for its short silver position on Comex, the bank convinced the CFTC that its short position on Comex was a hedge against a long position via OTC derivatives. In other words, JPMorgan used its OTC derivatives to shield its attack on the silver price in the futures market.
During 2015 the attack on bullion prices has intensified, driving the prices lower than they have been for years. During the first quarter of this year there was a huge upward spike in the quantity of precious metal derivatives.
If these were long positions hedging the banks' Comex shorts, why did the price of gold and silver decline?
More evidence of manipulation comes from the continuing fall in the prices of gold and silver as set in paper future markets, although demand for the physical metals continues to rise even to the point that the US Mint has run out of silver coins to sell. Uncertainties arising from the Greek No vote increase systemic uncertainty. The normal response would be rising, not falling, bullion prices.
The circumstantial evidence is that the unregulated OTC derivatives in gold and silver are not really hedges to short positions in Comex but are themselves structured as an additional attack on precious metal prices.
If this supposition is correct, it indicates that seven years of bailing out the big banks that control the Federal Reserve and US Treasury at the expense of the US economy has threatened the US dollar to the extent that the dollar must be protected at all cost, including US regulatory tolerance of illegal activity to suppress gold and silver prices.
Pinto Currency
The price is set in London where they trade 200 million oz spot every day.
It is a paper spot market fraud.
http://www.safehaven.com/article/36534/lbma-data-points-to-gold-and-silver-default
SafelyGraze
supply and demand still set the price as PCR points out, the demand is not for physical hugs,
mark dice and a handful of chocolate bars"you can't eat chocolate!"
SafelyGraze
spoiler:
Oldwood
I thought Kyle Bass told us that there was no way near enough physical to cover paper gold. This would mean that they are simply printing gold to push "supply" up and prices down. On the other side we have stocks and with exception to splits or IPOs, they aren't making more, but companies are buying them up which decreases supply and with a little QE stimulus, pushes prices up. To me it all looks manipulated, but I'm sure they are only trying to make us all rich.
Captain Debtcrash
As shown in China, manipulation eventually always fails. Any manipulation of gold and silver will too. Those that say zero is the correct allocation to gold and silver these past weeks are using it as evidence that it doesn't even serve as a safe haven, exactly what a manipulator would want.
BaBaBouy
Its A Dirty Stinking Putrid Trading World For GOLD SILVER And Now Also Most Other Commods...
[Jun 19, 2015] From the FOMC Smash To the Usual Price Capping
"...Gold is still in a trading range from 1170 to 1230, although it appears to be breaking out in some other currencies. "
Prices of precious metals popped back up sharply at The Bucket Shop as the traditional FOMC related price manipulation was over.
Otherwise the action in the warehouses and 'delivery' was moribund as usual, more like a morgue than a market, where the mourners are in the hallway and parking lot smoking cigarettes and playing liar's poker.
It is like a morgue, where values go to die. Kind of like the Congress.
There is some intraday commentary on NAV and the precious metals here. I thought it was interesting that the discount to NAV on the Central Gold Trust widened back to the Pre-Sprott Offer levels.
Gold is still in a trading range from 1170 to 1230, although it appears to be breaking out in some other currencies.
I am becoming more enthusiastic about the longer term potential for silver. I have some observations and charts about that from last night here. I do not know why there is such a lid on the price of silver, but it is certainly there for those who would have eyes to see it.
This gaming of the markets will end, and badly. But the timing is problematic.
We are being served badly by our leadership. I do not see how this can fail to bring about change. And I doubt that they will bother to initiate that change until they feel the heavy hand of history, clutching the backs of their collars. Alas, that is often too late.
Have a pleasant evening.
