Whitslack

The Intrinsic Value of Nothing, Part 2

Paco, I love your posts and your philosophy, but why do you keep holding TBT? The volatility is going to eat you up! You could probably sell call options (or buy puts) on *both* TBT *and* TLT and make money on both! All these leveraged ETFs are ultimately going in the same direction: down.

How to Hedge, and Against What

I don't know about this analysis. Since people are saving more, banks are amassing more deposits on their books, which means banks will be allowed to create heaps more new money by lending. (Look for a video series called "Money as Debt" if you want to know how this works.) In the present environment where government policy is changing on an almost daily basis, banks are too fearful and/or uncertain to make any moves, so they're just collecting deposits and shoring up their balance sheets. But at some point, profit motive will again assert itself, and the banks will return to lending. With the additional deposits on hand due to all the increased savings, they'll be set to create new dollars in much greater quantities than the Fed has done. (The Fed has more than doubled the monetary base in the past year.) Lots of new money and decreased production and inventories translates directly to higher prices.

The correct thing for the Fed to do (if we concede that it should even exist at all) would be to remove all the excess liquidity that it injected into the system. However, it won't do this, for two reasons: 1) it's politically unpopular because it exposes the U.S. economy for the shame that it is, and 2) it actually will be unable to remove the liquidity, since its only mechanism for doing so is to sell all the toxic crap it bought back into the market, but no one wants to buy any of that for anywhere near the ludicrous prices the Fed paid for it in order to inject the liquidity in the first place. I'd hate to be Ben Bernanke; he's playing a lose-lose game.

Not Your Grandpa's Deflation

In response to some of the other comments: "A government that is big enough to give you everything you want is big enough to take away everything you have."

To the author: thanks for an unusually entertaining read. I actually chucked aloud at some of your witticisms.

Plunge Protection Team Attacks BofA: This Ends Now

"Strong legislation must also be passed to insure that all the activities, especially all funds transfers, undertaken by the U.S. Treasury and Federal Reserve, are completely opened to public inspection."

Instruct your congressperson to cosponsor H.R. 1207, the Federal Reserve Board Transparency Act. The non-partisan bill has huge momentum right now, having recently surpassed 100 cosponsors.

Will Silver Now Outperform Gold?

paultaut, no enemies of gold and silver? I'd say the Federal Reserve has a lot to lose (say, the confidence of the American people) if silver and gold prices are allowed to rise to their economically sustainable levels and reveal just how worthless the Federal Reserve Dollar has become.

The End of Gold, Part Three

But you can't sell a cup of coffee on the open market (at least, not one you've previously bought from someone else). Instant coffee, on the other hand, may be a good investment, but only if the grim, world-coming-to-an-end scenario unfolds. Other good investments in that case include alcohol and ammunition. Better have some guns to protect your stash, though: with no tax revenues with which to pay police, there will be no one to protect your possessions for you.


On Feb 11 10:27 AM market ace wrote:

> Gold is not the answer to everything as some indicate, but anyone
> not holding some position in it is missing the boat big time. People
> also should not get too excited about gold at $5,000/oz as then a
> cup of coffee will probably be $500. Every thing in economics always
> over reacts so with all of this gov't wasteful spending inflation
> will be back big time.

What's Going to Replace the Dollar?

> Are these governments really going to hold guns to their
> citizens' heads, proclaiming, "Use our currency and starve,
> or use a private currency and go to prison."

Actually, yes. Check out the FBI raid on the Liberty Dollar:
www.reason.com/blog/sh...

The raid occurred in November 2007. The government is still holding onto the $3.5M in gold and silver that it confiscated. To date, no arrests have been made. The whole thing is totally bogus.

Big government doesn't like the sheeple having choices it doesn't control.

No Silver Lining for Precious Metal Bugs

Destruction of all wealth? By your own account, silver was 24¢ in 1932 and is now around $10. Sounds to me like those who held onto their silver rather than panicking were able to retain their wealth in the face of rampant inflation.