Gresham's law is an economic principle that states, "when a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation." It is commonly stated as: "Bad money drives out good" - Gresham's LawThere's a lot of ways to back into an implied value for the current "intrinsic" price of gold and silver in relation to their fiat currency counterparts - and the relative supply, or oversupply - of those fiat paper-contras.
Similarly, if we accept the eventual reality that the U.S. and rest of the western Governments will never be able to repay their debt obligations to their eastern hemisphere financiers, we know that there will be a "grand" currency system "reset," which will involve the massive devaluation of the dollar, euro and yen and the massive re-valuation higher of gold/silver. It's either that or war. Sorry, history has spoken.
At any rate, for those who are brave enough to pull their head out of the sand and think about "what's next," I wrote an article for Seeking Alpha in which I apply recent events as a means of validating Gresham's Law and why gold and silver are undervalued, given that Gresham's Law is in fact a "law."
You can read the entire article here: LINK
In the meantime, I don't think it will be much longer before the market understands that a lot more Fed printing will be required to keep the economy from completely collapsing. This realization should get a boost shortly when both Congress and the President fail to adequately address the sequester/budget/debt ceiling issue. At that point I think more people will understand why Bernanke is pushing the "seat eject" button in January when his current Fed term expires.
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The entire situation is beyond bad. Watched Carl Dennenger yesterday. Once Obummer care kicks in next year it's lights out for the economy. Hope all who are reading this blog have prepared accordingly. We are going to need more then just gold & silver.
ReplyDeletePerhaps gold is just a means to an end. A means to perpetuate a certain form of "status quo" for the uber-rich, through the "fire" of fiat regime change.
ReplyDelete"If you don't like this system you won't like the next" it was once said.
How true. The super rich LOVE this system and the poor hate it. You can bet that this will hold even truer in the next. The gap between rich and poor will be widened even further once the gold behind the new super consumers is in place and revalued.
But it will be nice to produce great products again here in the states. Even if we are "exploited" through dollar slave labor :)
"pull their head out of the sand"
ReplyDeleteI've never heard of a rectal orifice referred to as "sand"!
LOL. In my early days I would have used the proper terminology. I've had to clean up my writing a bit because clients read this.
DeleteYeah, yeah. Meanwhile "a lot of funds have been getting demands for redemptions and are in a liquidity crisis. They are dumping every share they can get a bid on. Sprott is doing it. Frank Holmes is doing it, Sheldon Inwentash is selling and every other gold fund is dumping." So what is Rick Rule and all the rest doing advising everyone to hold and invest so they have some liquidity. Great isn't it.
ReplyDeleteI think this is how bottoms are formed.
DeleteThe following from Trader Dan I think is really interesting. "Incidentally, Silver failed at the $24 barrier again. It has flirted with that strong resistance level but cannot keep it gains ABOVE that key mark. Hedge funds are pouncing on it whenever it rears its head up here and until it can prove the bears wrong but maintaining its footing above $24, they are going to be emboldened to sell all rallies. Support remains intact below $22.50 or so keeping silver confined in a trading range"
ReplyDeleteSilver is being capped by hedge funds????. I've never seen this before, where is JPM. Are the hedge funds protecting their shorts and are now doubling down while the gold cartel steals away in the night on a donkey???
There one in the same, almost. It's a cross between a daisy chain and a circle jerk...see.
DeleteBanking Abuses ‘Can’t Get More in Your Face’
What about Brown-Vittner?
This is on the right track, that basically we need more capital in the banks, fractional reserve banking by itself is an underlying structural problem, it’s then made vastly worse by the dismantling of regulations, by the intermixing with the so-called investment banking and basically the hedge funds, investment banks and commercial banks all being one party now, but reducing the amount of leverage is I think on every economist’s, near the top or at the top, of every economist’s list.
I would put criminal enforcement number one, statesmanship number two and reduction of leverage as number three.
http://blogs.wsj.com/moneybeat/2013/05/02/jeffrey-sachs-banking-abuses-cant-get-more-in-your-face/
Dave, what's your take on Bron Suchecki's claim that there is no shortage of gold and silver in the wholesale market. He defines the wholesale market as 400oz gold bars and 1000oz silver bars. The current tightness is on the retail level and simply because of the lack of production capacity to turn those 400oz bars into retail bars and coins. By the way, his goldchat blog seems to provide some useful insight into how the physical market works although I think he is often too nitpicking on other commentators.
ReplyDeleteI don't know. I don't trust him and I don't trust the Perth Mint. He defended GLD and gave some long fancy convoluted explaination that I shredded to pieces. His defense and his criticism of my shredding of his GLD defense was devoid of any substance.
DeleteSomeone who I won't name emailed me and told me he had some wealthy clients who were completely screwed over the by Suchecki and the Perth Mint. I know the guy who emailed me is bona fide.
I think I posted my shredding of Suchecki's GLD defense on here.
In a way he's right. At the right price there's plenty of gold and silver to be had at retail or wholesale level. That price is a lot higher than where the paper Comex market is right now.
If there is ready availability of 400 oz bars how come Germany couldn't get them?
DeleteThe players vs. the stackers.
ReplyDeleteIt was really irksome to have observed the enthusiasm that the paper traders
displayed when gold and silver was the thing that would replace stock trading back in 2008.
As for now the pricing of gold and silver has become nothing more then a giant clown shoe. Meaningless in every way.
If the physical gold and silver market doesn't continue separating from
the make believe paper gold and silver game then confusion will only grow worse.
There is a good chance for physical silver to have the industrial world help
in realigning what would be observed as a true price.This may take a few more
years.
One can only hope that the central banks don't hold the most in physical gold though.
This would only lead to further controls by way of game playing with future prices.
Dave, do you believe that the physical demand will affect the paper market? The demand for gold is extremely strong in China. The delivery of gold on Shanghai Gold Exchange has been 0 for 2 days because there's nothing that could be delivered. However, gold still has great trouble in going back above $1500. Silver looks even uglier.
ReplyDeleteAt this time of the game, thinking metal "shortage" is really incorrect. You have to understand, paper warps the entire ideology behind "shortage". So long as paper remains an acceptable "front" or trust to physical metal, there is in theory, plenty of PMs and no shortage at all. So the idea and belief in a CURRENT real metal "shortage", can be very frustrating and dishearting.
ReplyDeleteThe point I am trying to make, is people use the term "shortage" implying that the market doesn't consider paper as being real. If you look at the physical data, clearly the removal of physical has not moved the price accordingly, so don't fight it, the underlying law of supply and demand is still at play, but perhaps not as you think. My best advice is to quit thinking "shortage" in the current environment. With paper, there is simply no shortage.
The wise person understands the price is manipulated by this endless amount of paper. What one has to resolve is what will happen to the market when the paper goes up in flames. Clearly if all you own is paper, whatever that paper represents will instantly have no true value. No one will want it.
In my opinion, the ones that understand this even still have a hard time believing such a thing is even possible and the horrific consequences. But clearly Cyprus and others have proven that is exactly what is coming. And the majority are simply clueless trusting everything, prepared for the slaughter.
So, back to the term "shortage". When the paper is removed from the supply, then and only then, will the true shortage occur. And it will be an incredible thing to witness because we simply have no idea how much paper is out there pretending to be real.
But I can tell you, there are greedy fools everywhere risking it all. And that has been the amazing truth as to how this just seems to continue on and on. They will do everything in their power to keep this "body" alive.
My advice, get as much physical as you can while you can. Doesn't matter what you get...gold, silver, bullets, clorine tablets, guns, food, whatever. Quit listening and reacting to the liar. Do what the truth requires while you still have a fighting chance. Sadly, most of us, are living paycheck to paycheck and can't purchase PMs even if we wanted too.
That is also yet another reaosn why these lying cheating manipulators have continued for so long.
And here is another thing TPTB clearly know. When you rob someone, that person tends to get pissed. And so they want to unarm them so they can not fight back. Simple common sense. Unfortunately or fortunately, when one robs a person that is a sleep, they are unaware of what happened and don't even know they were robbed or to be pissed. No worries, they will get plenty pissed the instant they realize the truth.
Well I have a question to ask if someone can help me.
ReplyDeleteIf we assume that Fort Knox gold isn't there (or at least a big part of it), Who is the major owner of that gold? Normaly, central banks (the bigger net buyers) declare how much gold they have. If Fort Knox national gold has been transfered to the market throug the years, some other countries should had a peak in their reserves and id didn't happen. So, who is owning that gold? Is it still in Fort Knox?
Anon.regarding your Fri.the 3rd blog > I have copied 3 paragraphs from your previous mssg. and have to say that I disagree.
ReplyDeleteMy take regarding a shortage of physical PM's is like being pregnant. Either you are or you're not !
There is either a physical shortage or there isn't one.
It would seem pretty risky at this stage to be dancing on both the "well it is ... and it isn't" platforms.
I have to say after reading those 3 paragraphs that you stated , I couldn't help but to think of the moment in the film "The Wizard of Oz " where the wizard was on the microphone pounding out the roaring voice while pumping all the smoke and saying " Pay no attention to that man behind the curtain !!"
You wrote :
"At this time of the game, thinking metal "shortage" is really incorrect. You have to understand, paper warps the entire ideology behind "shortage". So long as paper remains an acceptable "front" or trust to physical metal, there is in theory, plenty of PMs and no shortage at all."
"If you look at the physical data, clearly the removal of physical has not moved the price accordingly, so don't fight it, the underlying law of supply and demand is still at play, but perhaps not as you think. My best advice is to quit thinking "shortage" in the current environment. With paper, there is simply no shortage."
"So, back to the term "shortage". When the paper is removed from the supply, then and only then, will the true shortage occur. And it will be an incredible thing to witness because we simply have no idea how much paper is out there pretending to be real."