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  • GLD Bearish As Greece Kowtows To The European Commission  [View article]
    Greece actually matters a lot. Look up something called Target 2 balances (which do not show up as debt). You will find that Greece owes the Bundesbank (Germany's central bank) another 600 billion euros in balance of payments deficits.
    Feb 28, 2015. 10:36 AM | 1 Like Like |Link to Comment
  • GLD Bearish As Greece Kowtows To The European Commission  [View article]
    Extend and pretend is all that we have so far and it is hard to see how that can be bullish for either Greece or Europe. Anybody who thinks that Greece will ever be able to repay its indebtedness is smoking stuff that is not generally available legally. And that indebtedness does not include the T2 balances held by Germany.
    Some time has been bought, but it is not clear to what end. In four months Greece cannot show much progress. So far, since the beginning of the crisis all Greece has been able to do is to increase its debt (as has the entire EU).

    As a separate matter, I would note that deflation would be good for gold. Why? Because deflation bankrupts debtors and bankrupt debtors will bring down the financial system as we know it.
    Feb 27, 2015. 05:42 PM | 4 Likes Like |Link to Comment
  • FOMC Deflation Interpretation Drives GLD Down  [View article]
    You say that "Gold... serves as a hedge against inflation and instability" and I agree. When the worldwide debt bubble bursts, I can assure you that you will have a severe dose of instability. One of the things that could burst the bubble is rising interest rates. The problem is that most of the developed world - not to mention the less developed world - is struggling to service their debts at current interest rates.
    Defaulting debt will bring down the banks and as debt becomes suspect, gold will be the only remaining (liquid) safe haven.
    Feb 25, 2015. 04:48 PM | Likes Like |Link to Comment
  • Gold Slides As The Greenback Climbs  [View article]
    I usually stop reading when I read that gold has no intrinsic value because that is simply not true. What is true is that it does not provide a stream of income, but you do not need to have a stream of income to have value, intrinsic or otherwise.
    Furthermore, gold is traded in a world market and simply looking at its value in dollars doesn't tell you much. If you look around the world there are a great many currencies in which it has been a most profitable investment. In addition, the Central Banks are increasing their gold holdings, suggesting that they see some intrinsic value in gold. Bottom line, Gold shines brightest when the value of paper obligations become suspect.
    Feb 15, 2015. 01:30 PM | 5 Likes Like |Link to Comment
  • Fed's Insistence On Transitory Disinflation Puts A Pause On The GLD Trade  [View article]
    Gold has been rising and will continue to rise as a result of the appearance of deflation. This is the bit that most people don't understand because we haven't seen deflation for several generations. The key part of a deflation is defaulting debt which causes people to look for a safe haven that is not someone else's debt.
    It has also been a long time since there was a gold standard, but if you check, every deflation has ended with a devaluation of the currency against gold.
    Jan 30, 2015. 05:57 PM | 4 Likes Like |Link to Comment
  • What Is Keeping GLD Up?  [View article]
    The simple answer is demand. A more complex answer is because of deflation fears.
    Jan 12, 2015. 03:28 PM | Likes Like |Link to Comment
  • Gold moves to three-week high, miners gain again  [View news story]
    Dollars is the short answer. Indeed the dollar has been soaring and, in my view, will continue to do so because we are in a deflation and that's what happens in a deflation. The soaring dollar, however, will create a lot of losers for those who are part of the $8-9 billion who have borrowed dollars for non dollar projects. Their debt service costs will soar and many will default. It will be even worse for those borrowers of dollars who produce oil, copper and iron ore.
    All this is bad news for the banking system and people who buy debt. In that environment investors will want assets that are not someone else's liability and that will cause gold to soar. And lastly. I don't think that you will find that all deflations end with a revaluation of currency vs. gold.
    Jan 7, 2015. 11:26 AM | 2 Likes Like |Link to Comment
  • Gold moves to three-week high, miners gain again  [View news story]
    The really important news is not so much the relatively small move in gold, but rather the very large moves in crude, iron ore and copper as well as the move in the value of the dollar. The fall in the basic commodities reflects a lack of demand and suggests falling industrial production. More important, however, is that a significant amount of the production of these commodities has become uneconomic and that much of the production infrastructure had been financed with debt that will be increasingly difficult to service. For those who have borrowed in dollars, that will provide a double whammy.
    This tells me that unless something in this paradigm changes very soon, we are going to see mounting defaults that will significantly weaken the world banking system. The end of the movie looks like accelerating deflation, which will propel gold prices to levels not spoken of in the last three years.
    Jan 6, 2015. 04:17 PM | 7 Likes Like |Link to Comment
  • Manufacturing PMI Deflation Shock For SPDR Gold Trust ETF  [View article]
    If you are right about deflation, then you are wrong about gold. It is my view that deflation remains as a significant risk and with deflation comes bankruptcies - which are the market's way of getting rid of excess debt. That will push people to hold cash (to take advantage of declining prices) and gold (because it is liquid and not someone else's debt). In addition, history shows that deflations are generally followed by a return to sound money, which is achieved by devaluing the currency against gold.
    Dec 3, 2014. 12:50 PM | 1 Like Like |Link to Comment
  • Switzerland And The Change Of The World Economic Order This Weekend  [View article]
    That's hard to answer. Perhaps it's just because you don't understand that prosperity cannot be achieved by just printing money and adding to debt. I think that people who believe that are more like your description of the "gold bugs".
    Nov 29, 2014. 09:16 AM | Likes Like |Link to Comment
  • Switzerland And The Change Of The World Economic Order This Weekend  [View article]
    Let's remember that Switzerland is a very small country and while its monetary policies have a history of prudence and stability, there is no way that the Swiss Franc could become a reserve currency because the supply of Swiss Francs is simply too small and would be totally insufficient to impact the clearing of the vast number of international transactions that take place every day.
    Second, the announced rate of purchases of gold if the referendum passes is too small to have a major impact on the market. It would, as a move towards sound money, have a significant impact on the belief that financial difficulties can be solved by fiat money.
    Nov 27, 2014. 10:35 AM | 8 Likes Like |Link to Comment
  • GLD - On Inflation And Econo-Watch  [View article]
    While I agree with Fishfryer (above), I do not see inflation as an issue. The real issue is deflation and if (and as) we tip int it (as Europe appears to be doing) both gold and the dollar will soar. That's because deflation is the bane of creditors as it makes debt more expensive to repay, causing large amounts of debt to default.
    What we are waiting for is a trigger event and I believe that it will come from either Europe of Japan and in either case will involve illiquidity of the banking system.
    Nov 22, 2014. 05:09 PM | 3 Likes Like |Link to Comment
  • What Is Next For GLD?  [View article]
    The only important issue is whether or not the developed world is tipping into deflation. I would argue that it is, but we are not there yet and when we are it will be too late to act.
    The problem is the mountains of debt - public and private - that cannot be repaid, only rolled over. The central banks have outdone themselves in trying to create some inflation to reduce this burden and have been unsuccessful despite the trillions of dollars (and Euros and Yen) that have been injected into the monetary system. That leaves only deflation to get rid of the excess debt.
    That, of course, is an environment in which both cash and gold will see significant increases in value. Cash will become valuable because of declining prices and gold will become valuable because it is not someone else's debt - and in a
    deflation, all debt becomes suspect.
    Nov 21, 2014. 10:59 AM | 4 Likes Like |Link to Comment
  • The FOMC Pushes Down GLD  [View article]
    I agree that there is little inflation but the danger is not inflation it is deflation. Europe is already showing signs of deflation and Japan can't shake the deflation that has plagued them for a decade.
    The problem strikes me as both simple and straight forward. The developed world in as well the emerging markets have incurred an excessive amount of debt that not only cannot be repaid, but cannot be serviced at "normal" interest rate levels.
    There's nothing new here; societies have become over-indebted throughout history. So far, there are only two known ways of solving this problem: creating a level of inflation that reduces its value and experiencing a deflation that removes the excess debt through bankruptcy.
    Currently, the inflation route has not been too promising given the trillions of dollars of "printed" money that has been created and when that plan fails deflation takes hold.
    The good news is that gold (along with cash) always performs well in a deflation (particularly as it is a liquid asset that is not someone's debt) and is often the solution to restarting and restoring the economy. Indeed, that's what FDR did (revalue gold) to combat deflation in the '30s as have many leaders in similar circumstances throughout history.
    Nov 1, 2014. 06:29 PM | 2 Likes Like |Link to Comment
  • Gold Is Against The Ropes  [View article]
    Who knows what the value of the assets are that secure the debt; Lehman found out the hard way a few years ago. Much of the "security" consists of relatively illiquid assets, not to mention that much of the debt is unsecured. Sovereign debt is all unsecured and demonstrably cannot be repaid. If it can't be refinanced, then it will default.
    Oct 6, 2014. 08:30 AM | 2 Likes Like |Link to Comment