What Christian was saying is that every ounce of gold or silver is being sold 100 times. This would not be problematic if we were speaking of some dusty market in Central Asia with rows of traders’ stalls wherein some commodity (such as gold, silver, radios or Kalashnikovs) were being sold and resold in rapid-fire succession: there, our sensibilities about scarcity, value, and price discovery would actually grip reality. Here, however, we are talking of markets where the distinction between reality and representation has become as blurry as the last round of a game of musical chairs, enabling some sellers to offload paper IOUs promising eventual delivery of silver and gold – promises that would be impossible to keep if some small segment of the buyers were to demand delivery of the real thing.
This is quite similar to the naked short selling of stocks, where traders sell stock that does not exist, but enter IOUs in their computers, and then “fail to deliver” what they have promised. It is hard to distinguish this from fraud (notwithstanding the Efficient Market Hypothesis of financial theory, which maintains, essentially, that it shouldn’t matter). Christian, the fellow who inadvertently revealed the massive naked short positions in gold and silver, said that he didn’t see this as a problem because “there are any number of mechanisms for cash settlement,” and “almost all of these short positions are in fact hedges…”
This is slightly absurd. Later in his testimony, Christian himself said that it was “exactly right” to say that the hedges are nothing more than hedges of “paper on paper” – a particular sort of merry-go-around where one IOU is settled by another IOU, with these IOUs outnumbering real gold and silver by multiples of a hundred times.
Outcast_Searcher wrote:Big picture, there is a larger percentage of people, especially in the first world, who apparently think it is fine to commit some kind of fraud if it gets them ahead.
Still, the reason why The Automatic Earth doesn't focus on gold or its price is very simple: it's not the right conversation to have at this point in time.
When we're done, as a society, as a national and global economy, with this round of real life Jeopardy behind us, 90-something percent of those who today see themselves as investors will no longer be that, and will have had to sell their gold and silver and most of their other possessions just to keep their families clothed, warm and fed. Unfortunately, that realization hasn't seeped through at all. First off, we're not smart enough to do the math, and second, we wish to wish it all away.
When our financial systems began to shake in 2007 and large chunks started to fall off in Jericho fashion in 2008, we were not witnessing yet another cyclical economic move, not another run of the mill thirteen in a dozen recession. We were watching the end of the financial system as we had come to know it.
And we still are. We're watching Wile E. Coyote on a broken reel.
(snip)
It's time to stop fooling yourselves. For the US economy, housing market and labor market, like for Wile E., there’s only one way to go from here, and that is down. It's not going to come back for a very long time, if ever. And that, if nothing else, means our decisions, as a society and as individuals, will have to be radically different from what they would be if there were a chance of a recovery.
(snip)
This will lead to an explosion in unemployment, since ever fewer people will have any discretionary income needed to keep stores and factories open, which will then hammer home prices even more. Consequently, tax revenues at all levels will scrape the gutters, forcing governments at all levels to lay off more workers, and so on: you can by now finish the story pourself and color the pictures. It's called debt deflation, people, and once you’re in debt way over your head as a society or as an individual there's nothing you can do but to lay low and let it run its course.
(snip)
If you can accept that 90-odd% of US banks are zombie banks (toxic assets!), that nothing has changed despite the money that was transferred from you to them, that their losses on toxic paper are far worse than anything you could ever afford, then you will have tp accept that you are zombies too, zombies, not investors, and that it's immaterial whether you make a nickel or two on gold purchases, that those matter only in Wile E. Coyote's suspended cartoon reality, not in yours.
http://theautomaticearth.blogspot.com/2010/10/october-8-2010-wile-es-suspended.html
Sixstrings wrote:So, anyone agree? After it all collapses, if a dollar is worthless and a bit of food is beyond priceless, how ultimately useful is a stash of shiny metal?
The question is, what will you do AFTER you've bought that last bit of food with your last silver coin?
Or, what will you do if the person who has that food looks at your shiny metal and says "I don't need that. The food is worth more."
PrestonSturges wrote:People's belief in gold and silver has some factual basis, but that gold has to be in your hand, not a gold certificate, and if you have gold in hand, then you are a prime target for theft.
Also having stuff to barter like fruit is quite useful. Are you better off with one gram of gold, or the pear tree it could have bought?
PrestonSturges wrote:I think if there was a catastrophic economic collapse, the Dems would send the National Guard to the farms to plant and harvest by hand so everyone could get 1200 calories a day.
PrestonSturges wrote:I think if there was a catastrophic economic collapse, the Dems would send the National Guard to the farms to plant and harvest by hand so everyone could get 1200 calories a day. The GOP would send the National Guard into the streets to randomly shoot starving "looters."
Pops wrote:OTOH if you have tools, food I don't have, fuel, skills, labor etc, we can easily calculate what is a fair trade.
Cloud9 wrote:Zombies were taken care of by the vagrancy laws of the 1930s. If you don’t have any visible means of support and no address off to the county work farm with you. Idle hands are the devil’s work shop.
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