RiskAverseAlert

The Gold Market Fights Back

No doubting which trend is your friend in the gold market! Indeed, there is very little reason even to speak of gold "haters" these days. It's like calling Greenspan "Maestro," as though days of old hadn't been overturned to reveal his name in truth all along was "Criminal."

Nevertheless, given grotesque leverage of global finance (pushed further along by today's English-speaking lovers of Weimar Germany), any pending leverage unwind will in all probability hit gold (physical and shares) much as occurred in '08. This is not to strike a bearish tone. Rather only to note that, when capital starvation strikes, anything not nailed down tends to be sold.

Another Crisis Looms Right Around the Corner

There is one consideration missing from your rising taxes thesis: our crippled economy is an absolute nightmare, as you say. So, how are taxes to be raised? Seems impossible. Thus, a sovereign debt default dwarfing Dubai World must be looming, no?

Gold Is Not in a Bull Market

Per Nadler's "four factors that truly make a gold bull market," only the fourth holds analytical sway supporting his "Gold is not in a bull market" thesis.

The question is what will gold do as the present economic breakdown crisis accelerates? Believing that the stock market has been tracing a counter-trend rally in a bear market with much, much further to go, what seems gold's likely fate in a capital-starved world is no different than its fate last year as the world rushed to plug gaping holes in the various three-letter securities marketplaces blown to bits with the collapse of Wall Street's structured finance. In other words there is considerable risk of a huge wave of gold selling precipitated by unstoppable, ongoing balance sheet de-leveraging.

What has come to pass thus far in the de-leveraging process is only the beginning. That said, though, gold still could rocket higher in this present period of transition into the next phase of financial collapse. But beware. That gold principally is being bid higher out of perception it represents a financial store of value strongly suggests it can just as easily be sold were the need to raise capital to sweep upon the scene (which eventuality, I believe, is a virtual certainty).

The Intrinsic Value of Nothing, Part 1

First, I believe a dollar has "value" not because "the government" says so, but rather because organized government representing the will of a sovereign people makes it so. Indeed, constitutionally, the U.S. government is charged with the means for doing so: this via extension of credit whose practical worth is backed by robust physical processes serving human needs whose very being, itself, was affected by the same, organized application of national credit. Government neither "says" nor "decrees" anything lending value to currency. Rather it is through action affecting the uplifting of human creative potential that brings a currency its intrinsic value.

That said, I agree the "elaborate fiasco called quantitative easing" is doomed to fail. Yet that we have among us the blind leading the blind into a ditch is not necessarily a bad thing. How else might wiser minds gain the path of least resistance in rising to the top?

Still, sir, I have said this before in this forum and I should say it again: the Austrian school is one whose principles best suit a fascist social arrangement, whereas a Hamiltonian credit system best suits a nation whose foundational principle seeks to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare and secure the Blessings of Liberty to ourselves and our Posterity.

Three Asset Classes that Can Actually Outpace Coming Inflationary Price Increases

Any worse than double-digit inflation to come is likely only in a process of breakdown of the global physical economy. Financial assets surely will deflate; the hyper-inflation of monetary aggregates in response to the "credit crisis" virtually assures this. View the wall of money as a war chest. No Fed tightening will change the outcome this wall portends. Financial asset deflation was begun when the sub-prime mortgage market imploded, and it will not stop until cooler minds are given opportunity to act on the fact that, the present financial system is bankrupt, must be put through reorganization, and reestablished in an environment whose sound structural framework already has historic precedent (think the Bank of the United States).

Until policy drastically changes and calls a bankrupt duck "fupped duck," increasing segments of physical production will cease to exist because finance to support physical economic processes will not be forthcoming in those measures needed to sustain present capacity. We already see this effect in so many places you would have to be practically blind, deaf and dumb not to acknowledge what, really, is going on.

Thus, given our present direction, it is by scarcity that hyperinflation will be felt by most.

Tuesday Outlook: Commodities, Global Markets

"Is the recent downturn in volume because Goldman’s computers were shut down for fear they were compromised?"

No. Volume is turning down because pigs really do get slaughtered. When, in fact, equity is dead money, what do the masses who got caught last year like a deer in the headlights do? THEY HOLD! Fantasizing that the status quo of the past couple decades will somehow soon return, weak hands hold, hoping to recover from last year's whipping. It is not gonna happen. Wall Street's credit bubble has popped. The best that can happen from here is that, the lender of last resort is able to control the bloodletting. Uncle Sam certainly CANNOT inflate the credit bubble with such vigor and reckless abandon as Wall Street before. This ALONE is critical to a return of the status quo of the past couple decades. And it is not gonna happen. Indeed, it CANNOT. Yet still weak hands hold, hoping for recovery.

Commodities, Global Markets

Equity is DEAD MONEY. Stocks don't need volume to decline. They can fall of their own weight. And with a mountain of debt needing servicing ... and the physical economic capacity for doing so collapsing ... fall of their own weight they will.

The stock market is nowhere even close to bottom. Yet to sweep over the lower Manhattan casino is ... capitulation. This is the big picture in a nutshell.

Returning to Thursday's throttling ... the best those holders of bloated, over-priced inventory could do was cease offering their shares for sale. No one was buying. A disaster in waiting is all this revealed. It may take some days/weeks for truth to sink in. Yet when it does, we're likely to see an avalanche rushing toward the exits...