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Pater Tenebrarum

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  • Thoughts on the Silver Crash [View article]
    Buffett simply fails to acknowledge gold's important role as a monetary asset. Gold is the money of the free market - but Buffett, in spite of being a successful capitalist and investor - personally does not believe in free market ideology. For reasons I fail to fully understand (I am guessing it has to do with his father as it were), Buffett supports a socialist political ideology - just as George Soros does, by the way. Gold is the enemy of welfare/warfare statism, as Alan Greenspan sagely remarked in a 1967 essay entitled 'Gold and Economic Freedom'. Hence, supporters of statism will always disparage gold. Buffett is no exception.
    May 6, 2011. 01:59 PM | 5 Likes Like |Link to Comment
  • Thoughts on the Silver Crash [View article]
    Buffett doesn't understand gold - it's as simple as that. He doesn't even want to. It's a late rebellion against his gold standard-supporting conservative father.
    May 6, 2011. 01:50 PM | 5 Likes Like |Link to Comment
  • Get Out Of Bitcoin Now [View article]
    In fact, since Wells Fargo is a fractionally reserved bank, and 83% of all outstanding deposit money in the US consists of fiduciary media today (i.e., money substitutes theoretically available on demand, for which no reserves in the form of standard money exist), the money is indeed 'not there', whether they tell you so or not.
    Feb 27, 2014. 07:51 PM | 4 Likes Like |Link to Comment
  • The Austrians Are Right - Inflation Is Coming [View article]
    In fact, the Austrian school's biggest gripe with inflationary policy has nothing to do with changes in money's purchasing power (although it is of course the case that a broad-based decline in the objective exchange value of money can arrive with a considerable lag as a result of inflationary policy). It is all about the fact that when additional money enters the economy, it distorts relative prices, which leads to investment in a production structure that ultimately proves unsustainable as the necessary real savings to sustain it don't exist. The introduction of additional money however makes it appear as though these savings existed, and so capital is malinvested and ultimately ends up consumed. The housing bubble was an excellent demonstration of this principle.
    As Mises wrote in a brief description of the malinvestment of capital engendered by inflation of the money supply:

    "The whole entrepreneurial class is, as it were, in the position of a master-builder whose task it is to erect a building out of a limited supply of building materials. If this man overestimates the quantity of the available supply, he drafts a plan for the execution of which the means at his disposal are not sufficient. He oversizes the groundwork and the foundations and only discovers later in the progress of the construction that he lacks the material needed for the completion of the structure. It is obvious that our master-builder's fault was not overinvestment, but an inappropriate employment of the means at his
    Dec 2, 2013. 11:24 PM | 4 Likes Like |Link to Comment
  • There's No Way In Hell The Fed Will Taper [View article]
    There are a few issues I have with the 'taper' debate. First of all, we cannot be certain that the rise in bond yields is due to 'taper' speculation. Just because the mainstream financial press said so doesn't make it so (they always need an easily graspable 'reason' as to why market moves happen). In fact, it seems extremely unlikely, as tapering would likely lead to a decline in inflation expectations, which is bullish, not bearish for bonds. The Fed's buying or abstention from buying is always swamped by the effect of inflation expectations on the bond market (just look at what bonds did during QE1 and QE2).

    The next thing is that I doubt that 'tapering' or lack thereof should have any influence on the gold market. Did 'QE infinity' help the gold price? No, it didn't. Then why should 'tapering' hurt it? What is important to the gold market is the damage that has ALREADY been inflicted on the economy by the Fed's inflationary policy. In other words, when the seeming positive effects (the short term increase in aggregated 'economic activity') are swamped by the discovery of the longer term negative effects (e,g. capital malinvestment due to distortion of relative prices in the economy), then the gold price should react to this reassessment of past inflationary policy by market participants.
    Sep 10, 2013. 06:21 PM | 4 Likes Like |Link to Comment
  • The Stock Market Rebound Is Coming [View article]
    You would, after they have been bearish all the way up? At least Rosenberg has been, don't know about Bernstein. Bob Janjuah, another prominent bear, also recently talked about 'one more leg up'. This is something one often sees. The market turns down, and well-known committed bears suddenly become afraid that it could make a fool of them again. And so their opinion changes at just the wrong moment, when they would finally be proven right. Mind, there is no guarantee that this is the case here. I am merely sharing an observation, as I have seen this happen frequently in the past. It may well prove to be relevant again this time.
    Nov 15, 2012. 04:49 PM | 4 Likes Like |Link to Comment
  • Lessons From 5 Years Of Economic Crisis [View article]
    It calls itself 'MMT' these days, but it is the same hoary inflationism countless monetary cranks have preached since the 1920's. In fact, it is better called chartalism, taken from Georg Friedrich Knapp's 'The State Theory of Money' (the title speaks for itself...).
    Never mind that these inflationist theories have all been refuted a thousand times already - they seem to have more lives than a cat. If one could really create wealth by printing money, we'd already be in the Land of Cockaigne and the roasted chickens would fly into our mouths. Somehow it hasn't happened yet.
    Oct 11, 2012. 10:54 PM | 4 Likes Like |Link to Comment
  • The Scourge Of Central Banking [View article]
    It is imo very difficult to argue that the stance of monetary policy is 'tight' when the broad true money supply has increased by more than 80% in a little over four years. What we observe, or can infer, is that there has been a concomitant increase in the demand for money (i.e., a demand for holding higher cash balances), which for the time being has confined the inflationary effects to pushing only certain prices up (look at a chart of the CCI to see which ones).
    Oct 5, 2012. 01:00 PM | 4 Likes Like |Link to Comment
  • Gold And Silver Are On Their Last Legs ... For A While [View article]
    Imports of gold into China via Hong Kong have soared about tenfold this year compared to last year if memory serves. So someone clearly is buying a lot of gold in China.
    I don't think the Chinese authorities would tell anyone if they were buying gold for the official sector. Rather, they will do what they did last time around: they'll quietly buy, and one day just let us know that their gold reserves have increased by X amount. Last time they increased from 650 to 1050 tons (approx.) 'overnight'. Wouldn't you know, a state-owned entity other than the central bank had bought all that gold (and was therefore not obliged to keep the IMF in the loop) and simply 'transferred' it.
    Aug 21, 2012. 05:31 PM | 4 Likes Like |Link to Comment
  • Gold And Silver Are On Their Last Legs ... For A While [View article]
    Actually, in euro terms gold is only a smidgen away from breaking out to a new all time high - and as experienced gold traders should know by now, the euro gold price has tended to lead the dollar gold price for the past five years.
    Meanwhile, net speculative long positions in gold futures are at their lowest since 2008 and gold sentiment is also at its lowest since 2008. The Hulbert Gold Investment Newsletter index has spent most of 2012 in negative territory (investment advisors on the whole recommended a net short position in gold for most of this year). Bull markets don't end when everybody turns bearish after a few months of consolidation.
    Aug 16, 2012. 03:17 PM | 4 Likes Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    The stock market stopped being a credible 'discounting mechanism' somewhere around 1998, when bonds and stocks for the first time decoupled in the course of the LTCM crisis, heralding the soon to begin secular bear market period.
    The expectations regarding the Fed are based on the 'potent directors fallacy' - the idea that a small group of powerful men can somehow stop a primary bear market and recession from happening. It has been on display in 1929 when punters thought a powerful banking consortium would save the day, and it has been on display for most of 2007/8, when most market participants appeared convinced that the series of monetary easing measures and bailouts would avert a crash and keep the subprime crisis 'contained' as officials kept promising.
    A variant of this fallacy today is the conviction that 'in the end, the ECB will print' (this is to say, do what it is statutorily forbidden from doing, namely monetize government debt). This conviction will imo turn out to be a costly error. Also, the Fed is unlikely to begin with 'QE3' (make no mistake, it is coming, but it will be a day late and a dollar short) before the markets get walloped badly. It needs a political fig leaf before it can engage in more debt monetization - a fig leaf only a collapse in 'risk asset' prices can credibly provide.
    Jul 9, 2012. 04:27 PM | 4 Likes Like |Link to Comment
  • Bernanke on Money Printing: No Regard for the Principles of Sound Currency [View article]
    Too true, unfortunately. Crises, real as well as imagined ones, bring out the worst in the governing classes. They always somehow end up vastly enlarging the State while leaving individual liberty much reduced in their wake.
    There is one thing over which the governing classes have no control though, at least not yet - the international information exchange enabled by the internet. They have lost control over information, a not unimportant development. Central banking may yet trip over it for instance - it has never been held in lower esteem in modern times than at this very moment.
    Jul 15, 2011. 03:04 PM | 4 Likes Like |Link to Comment
  • The 'Anti-Austerity' Crusade of Joseph Stiglitz [View article]
    It has in fact been 'done' many times throughout history. 'Deficit spending' as an alleged cure for economic recessions has really only been around since the 1930's. At times the economy will recover in spite of the burden of government spending, but often severe and long-lasting depressions directly result from it, as the economy's structure of production is not given a chance to realign itself with consumer demand to achieve a sustainable production-consumption balance. Empirical examples for the failure of deficit spending are legion. I already named Japan's slow-motion depression and the US Great Depression as two pertinent eras exemplifying the failure of this policy. Even the current era demonstrates it nicely. The main reason why economic recovery is so hard to achieve in the US these days is not because the Federal Reserve is too tight or the government doesn't spend enough. The exact opposite is true - the economy can not get out of its funk *because* they are engaging in these policies. It is true that should these policies be abandoned, another short term slump would be registered. This is because there are now non-wealth-generating activities in train that are the result of renewed resource misallocation due to government policy. The distortion of one of the economy's most important price signals - the interest rate - by a central economic planning agency is only furthering more capital consumption. The pool of real capital is after all not increased by easy money or deficit spending - but it is misdirected by them. However, once the malinvested calpital is either transformed (where possible) or liquidated, the foundation for a sustainable recovery would soon be in place once again.
    May 19, 2011. 10:55 PM | 4 Likes Like |Link to Comment
  • Thoughts on the Silver Crash [View article]
    This is an important point: margin hikes can not alter the market's underlying supply-demand fundamentals. When palladium was in shortage back in 2001, the exchange raised margins to 100% of the contract's value. And yet, on the spot market palladium traded even higher, until the market was convinced the supply problem was no longer a threat.
    May 6, 2011. 02:02 PM | 4 Likes Like |Link to Comment
  • Smaller Explorers vs. Major Miners [View article]
    Rubicon and Fronteer both are among the brightest prospects in the exploration sector. Another one that looks good to me is Tower Hills (THM on the AMEX).
    Dec 23, 2010. 12:51 PM | 4 Likes Like |Link to Comment