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Fed Hosting a Debt Party, $2000 Gold Invited - Analyst

Discussion in 'Gold Silver (All things Metal)' started by Scorpio, May 10, 2017.



  1. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    Fed Hosting a Debt Party, $2000 Gold Invited - Analyst
    The Fed
    [​IMG]
    By Soren K.Group 21h ago

    The United States Is Hosting A Debt Party – $2,000 Gold Is Coming

    “The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals: that it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted…” Thomas Jefferson

    The US has seen accelerated debt build-up since the early 1980s, before culminating in the financial crisis of 2008-2009.

    You would think everyone would learn their lesson and ease off the gas, but the exact opposite has occurred! Debt levels are now at record highs, staving off GDP growth.

    [​IMG]

    In 2014, debt over took GDP for the first since post-World War II. Unfortunately for the United States, it is no longer the world’s only superpower. After WW2, the US was the beneficiary of having its infrastructure unscathed, and was essentially the world’s manufacturer. The baby boomers benefited immensely, with low tax rates and generous pensions.

    Today it’s a different story. Extreme debt has slowed economic growth, and the world’s central banks are forced to print money to continue growing and service debt.

    China’s economy grew fast than expected last year, but this of course was throttled by higher government spending and record bank lending. China’s debt to GDP ratio is a staggering 277%, with increasing new credit being used to service debt. Japan’s debt to GDP has increased to 250%, the United Kingdom’s to 123%, and France’s to 122%.

    For every dollar of GDP growth, we are adding $1-2 dollars in debt!

    [​IMG]

    What does this mean for gold?

    Since the end of Bretton Woods, gold has followed debt. We saw a period of divergence, but this was quickly rectified by a spike of 500% in gold price.

    Currently, we are seeing another divergence, and we believe another spike is in the works. While gold is already on the mends, the resulting rally can easily put gold over $2,000/oz. or more.

    The world cannot fix its debt problem overnight. In the near future we see a sustained period of economic drought and gold price abundance.

    Read more at www.palisade-research.com

    Read more by Soren K.Group

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    https://www.marketslant.com/article/fed-hosting-debt-party-2000-gold-invited-analyst
     
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  2. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

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    It will make new all-time highs like silver. It will be blamed on inflation. Prices will increase. Milek will be $5 gallon, but gasoline might be relatively low due to oversupply. Any decent car will be > $25k unless it is a disposable Chink electric.
     
  3. karl_gerbschmidt

    karl_gerbschmidt Seeker

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    everything that is written makes so much sense, yet PM's struggle to even grow in value. I never thought I would see silver at 16ish when it made its run to nearly 20, 20% decrease. I know PM's are wealth preservation, but it would be nice to take profits...I am basically breaking even after 10 years, I have bought in between 700 and 1800 for gold and 14-28 for silver. I suppose you could look at it that it is rising in value due to the dollar being devalued further with the printing of money, but it is hard to look at the dow at 21K, then you have bitcoin at 17 hundred, I don't know what the f*ck is going on, how long can they continue this charade...I do see gold at 6K, but I am now thinking 15 years out yet.
     
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  4. BarnacleBob

    BarnacleBob GIM Founding Member & Mod. Founding Member Site Mgr Site Supporter

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    "There are five main purposes of central bank cooperation"..."the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." -- William S. White, head of the monetary and economic department of the Bank for International Settlements in a speech to a BIS conference in Basel, Switzerland, in June 2005

    "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K." -- Eddie George, Governor Bank of England, in a conversation with Nicholas J. Morrell, CEO of Lonmin, September 1999

    "A 10% interest rate will draw gold out of the ground" was a quote by the Ex Chequer of BoE when THE gold standard was fully operating. The INTEREST RATE regardless of whether a gold or fiat standard is installed & operating serves as the PRICE of money. Do not mistake inherent value for price....! The diminishing PRICE of not only PM's but commods in general is related & correlated to the low REAL interest rates. The real rates are a product of excess currency denominated bank credit flooding the system.

    If credit & money was scarce & demand was growing, the real rates would rise into equalibrium... however today demand for instant credit is steady but not growing, the slack in demand growth results in "credit at rest"... When demand for credit declines the credit markets "mark down" the PRICE expressed as an interest rate to entice new customers to purchase their product called by various names: credit, debt, money, currency, etc.. The lowering of interest rates is akin to sale days @ the local car dealership, Wal-Mart or Macy's... the price is lowered yet the use & value in the product remains the same. For instance the car did not change when the price was lowered, it remains valuable transportation.

    IMO the PM' & most commods are shouting at the markets that credit deflation has taken hold of the commercial credit based Global economy. Credit & fiat are just proxies for commods, which are traditionally expressed in real specie, usually PM's of Au or Ag.

    Observing the current trend in the equities & bond market bubbles we can see the excess credit created during the previous reflationary cycle flowing into the financial markets, not for speculation activities but rather for lack of any other available parking space or investment opportunities.

    The shabby secret is that the credit now flowing into the financial markets is DOA, its credit that has lost its "marginal utility" to grow the economy & provide a rising standard of living for the economic participants. Its a version of the "walking" dead credit money, thats on digital life support. The patients are just laying around ICU (fin markets) in a state of entropy (loss of marginal utility) while the medical personell (fin authorities) provide a dose of hopium for the families that the patient will recover.

    I think AU & AG are sending us a strong message & signal that underneath the surface credit & price deflation is raging. The Yellen Fed cannot raise rates & retain credibility as each previous time they have initiated FFR increases the credit markets moved against the peg. They are pushing on the proverbial string... indeed its the Keynes "liquidity trap"!

    The loss of the marginal utility of credit & money to stimulate demand & grow the economy evidenced by the falling velocity of circulation means Central Authorities no longer possess the ability to steer economic & financial policy thru regulatory or fiscal stimulus activities. Its akin to rain, we need XXX amounts of rain to grow healthy crops of food, to little rain and the crops are small, stunted & spiney, producing smaller fruits & volumes to harvest, to much rain and the fields flood destroying the crop...

    The grand illusion can be explained using the concept of a pit fire used to cook food. A cord of wood possesses the marginal utility & value to produce fire & heat to cook a meal, hence it has productive value & a price when maintained in the state of firewood. Once the wood has been burned to produce heat & cook food it has lost its former marginal utility & real value leaving only ashes. The ashes do possess some value to the economy (soil amendment) but 99+% of the value was diminished & lost when the product was employed to produce heat. The same economic actions occur in the economy, new credit flotations are the cord wood FUEL that will be employed to cook the food (marginal utility) increasing economic activity, once the credit has been used to heat & cook the economy it has lost most of its ability to produce new BTU's, IOW as ashes the marginal utility has dissappeared along with the previous value.... In this illustration the ashes are the flows moving into the financial markets... these so called assets possess almost zero marginal utility! This again is the first shabby secret, the second shabby secret concerns the Fed Central Bank SCAM, its policies, regulations & operations. Best I can tell after years of observation the Fed is a farmer conning the consumer. It feeds fresh oats (credit) to the hungry horses (banks) to keep the horses nourished & alive, then they treat the value of the consumed oats as if they have never been consumed by the horses... And we ALL know that oats are more valuable before they have been utilized as nourishment by the horses... Once the oats are consumed, the value of the oats are highly diminished and now the remaining value becomes a specialized class of asset... in this example, the used oats are processed or employed as fertilizer or soil amendments... they (oats) no longer possess the marginal utility or inherent value that was recognizable prior to the horses consuming them. The Fed & financial markets create the illusion that the used up oats (credit/fiat) have retained the same value as fresh oats (new credit) by attaching a dollar denominated value to them in a alchemical process that purports to slowly & methodically transform horse crap into new valuable oats. The transformation process is called earning dividends or capital gains on the horse shit... Evidently a lot of people must like eating horse crap rather than fresh oats!

    The horses continue nourishing on fresh oats & shitting used oats... the farmer keeps distributing the horse shit making space for the new valuable fresh oats... the Farmer cannot lose, he pays XXX for fresh oats and sells the used oats for the same or even higher price to the horse crap eaters. The ignorant horse crap eaters not knowing any better will actually bid the price of used oats higher & higher hoping to acquire even more used oats which lowers the price of new oats. The Farmers running a scam that not one man in a million can recognize.

    A problem for the farmer arises when the price of fresh oats becomes so low that the fresh oat producers can no longer grow oats at a profit. A strange thing happens when no new fresh oats are produced, the farmers horses lacking nutrition become sick & the old shit oats become even more valuable via scarcity, even when the barns are overflowing with horse crap.

    The farmer confronted with the loss of new oat production is forced to start buying back & destroying used oats. His repurchasing activities will bring the new & used oats back into equalibrium resulting in the production of fresh oats once again reviving the scheme!

    The farmer & his scheme however is confronted with the unintended consequences of his scam.... not everyone recognizes his horse crap as holding value. They prefer holding fresh oats (PM's, oil, commods) & the value thereof. They recognize the farmers scam & that the farmer must play games to continue the fresh oats / used oats price equalibrium to continually enrich the farmer....

    In reality the Farmer is creating the illusion that horse crap is actually the equivalent of chicken salad..... As stated above, some folks would rather hold fresh oats (PM's) that are out of the reach of the farmer... they know that fresh oat production will termanate as a consequence of the Farmers scam... the Farmer will then be forced to overbid on fresh oats.

    $2000 a bushel for oats doesnt matter when the farmer is isueing IOU's to purchase new oats & rebalance his equalibrium... as the real gains are fleeting once the general price index begins rising the real price will collapse.
     
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  5. the_shootist

    the_shootist I self identify as a black '69 Camaro Midas Member Site Supporter ++

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    Patience my friend, patience!
     
  6. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    to also quantify part of that BB,

    lack of demand is related to lack of ability to repay,

    in that, the slaves have a insatiable demand, but do not possess the ability to repay with the farmers vig fees attached.

    Then we can refer back to HT and his inflation greater than previous until the winter comes.

    As you stated, putting more and more credit inputs into the system for less and less real productive gain is what is going on. Massive inflation being injected, and a lack of productive enterprises to apply it to.

    For instance, this new tax bill where all the rage is speaking about these large corps repatriating funds from overseas. The mantra is that it will result in growth. That is pure poppycock! That isn't happening.

    If there were productive enterprises to apply those funds to, any of those companies can go get the credit and build the damn factory without ever bringing a dollar back. Adding a factory or capacity is not material if the demand does not exist for the product to be sent into the market.

    We have discussed this, where major corporations are feasting on the smaller and even equals. Why? Because there is no demand, and the only way to show growth is thru mergers and acquisitions.

    etc.
     
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  7. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

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    The bitcoin frenzy is nothing to what gold would do in times of emergency like Venezuela. When enough people become educated about gold a new floor price will quickly slide in place.
     
  8. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    for reference to what BB states:

    1.jpg
     
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  9. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    This peak in M1 money velocity occurred in 2008,
    and has been straight down since,

    Why? If the economy is so strong, house prices are so high, unemployment so low, why?

    Have the laws of money and velocity been decimated or ?

    That $1.2Trillion stashed overseas by corporations, sitting there doing nothing is frozen velocity.
    The excess creation of fiat relative to economic activity causes velocity to decline.

    Putting it into perspective, even with house prices increasing rapidly, or the price of a new SUV doubling over the past few years, velocity still remains stubbornly low.

    Which makes one question just how much fiat is being created. It has to be one heckuva large number.



    2.jpg
     
    Last edited: May 12, 2017
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  10. solarion

    solarion Gold Member Gold Chaser

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    It would help if the government still provided a measure of M3, but given what we know about the velocity of M2, I doubt John Williams' guestimated M3 is all that far astray:

    [​IMG]
    http://www.shadowstats.com/alternate_data/money-supply-charts

    Create a ton of bank credit "dollars" and give them to banks that would rather just park them to collect interest on excess reserves than lend them into the economy and it explains a bunch. Demographics probably plays a role too with boomers retiring/expiring and millennials too poor to step in and fill their debt slave shoes effectively. Also helps to explain why DC is so enamored with open border policies and importing people that breed like rabbits.
     
  11. BarnacleBob

    BarnacleBob GIM Founding Member & Mod. Founding Member Site Mgr Site Supporter

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    You just described the "Boom-Bust Ponzi Bubble" centrally "ENGINEERED" economy..... It should be recognized that bubble metrics became correlated when the marginal utility of debt/credit began its cascading decline.

    The marginal utility of $ denominated debt began crashing in the 1960's leading to the highly unstable 1973 fiat petro $. By 1979 $ denominated debt was highly diminished & in serious jeopardy of losing its reserve status. The $ & political/monetary management thereof post the abandonment of BW 15 Aug. 1971 resulted in a global loss of confidence in both the currency & credit. The 1970's era experienced Watergate, public protestations, racial riots, desegregation, abortion, womens rights & severely out of control .gov agencies of every kind.... International sovereign, institutional & private Investor confidence in U.S. .gov, financial & economic authorities was shaken to its core... foreign investment & capital began exiting the U.S. financial system en masse, the fleeing capital created double digit price inflation in the U.S. economy which further destabilized public confidence in the political & monetary system....

    Then Fed Head Paul Volker working with the U.S. Treasury began to artificially raise interest rates in the U.S. financial system to not only terminate & stop foreign capital outflows & domestic price inflation but to also attract both new foreign & domestic capital into the bank-king & financial system. The artificial set interest rate exceeded 16.5% on U.S. treasury bonds by 1981... This ignited & initiated the bond bubble that has been a raging financial fire for over 30+ years... rates have been declining since the 1981 apex... as rates declined on an anticipated schedule, bond values appreciated tremendously. Essentially providing long term very low risk highly profitable investment for ALL of the bond players...

    There were two big major problems in the scheme... 1. How would the volumes of currency & credit be created to service the bond payment obligations; & 2. And how would authorities manage rates & investor confidence when rates began to decline towards the zero bound.

    #1. The boom-bust economy was created as a source of credit expansion that is required to service the bond & financial obligations. The housing, student loans & auto sales bubbles are but systemic attempts to create the credit/debt required to service obligations. Thus its no stretch of the imagination as to why no bankers have been criminally charged in the 2007/08 GFC or even the LIBOR manipulations... its all sanctioned from above! Lehman Bros., AIG, & Bear Sterns, etc. were mere victims of central planning & the operations thereof...

    #2. Rates are crashing toward the zero bound, authorities are working to mitigate, slow down and/or arrest the declines. IMO the banks are holding trillions in reserve @ the Fed as a confidence game to assure investors that the banking & financial system possesses the liquidity if or when margin calls develope. IMO the reserves were not nor were they ever created as capital to loan out into the economy... Paying banks .25% on reserves that are not theirs is however a nice touch to retain confidence in the bank-king system....

    The system has hit a wall, the U.S. consumer is tapped out and real wages are effectively defacto frozen.... this consumer was the driving force for new credit creation: trinkets, mortgages, autos, student loans etc. were all purchased & priced by a credit driven mechanism .... the inflation was used to service bond & financial obligations at no cost to .gov, etc...

    It should be zero surprise that the velocity of circulation has been driven over a cliff when the credit creators can no longer assume greater & greater debt levels... Thus there is a great sucking sound, and its coming from the bond market.... circulation is being diverted from main street to bond street! This effectively prevents employers from raising wages even if they wanted to.... Federal .gov revenues & spending y-o-y are now in decline.

    Its a damnable position with no politically acceptable way out!

    JMO
     
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  12. edsl48

    edsl48 Silver Member Silver Miner

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    That milk may be $5 per gallon but to the FSA that seems to be catered to these days it will still be free (at the middle class tax expense of course)
     

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