Julia Gillard and Wayne Swan continually tell us what great shape we are in and that WE Australia has come through the GFC in great shape. The envy of the rest of the world often used by them to describe us.

So, cast your mind back to September 2008, the bight of the GFC.

The local market fell from some 6600 points, to around half, 3300. And now sits around the 4300 mark, it has recovered by about 50%.

The US, what is often described by them as a basket case, fell from some 13000 to 6000, yet has now increased by 100% and is back to where it started.

How can this be if we are the clever ones?

Butch you are a political racist. Going through the same thing over and over. Open your eyes Australia is doing very well, do not panic, and try to sleep.

So wha is the US doing 579?

Remember, most regard them as a basket case!

579,
Suggest you look up the word racist, it is do do with race.

Are you trying to change the words meaning simply because you think it has more impact. That strategy has fell by the wayside ages ago.

Critisism of a political party, a religion, culture or a persons conduct is not racism.

The upright meaning of the english language fell by the wayside years ago also. But it's handy when nothing else works.
What has USA got to do with our economy.
Share markets have their own religion,
Share markets control the price of oil.
share markets can go flat tomorrow, so what.

One of the reasons why the US market has risen is because of the money supply that has increased due to quantitative easing undertaken by the government. It eventually debases the fiat currency and creates inflation, so everything costs more. It is the main reason why gold has risen because people regard it as a store of value. While its price against the US dollar and most other currencies has risen, the value in purchasing power of gold largely remains the same and has for the last few hundred years. That is why it is NOT in a bubble, it's the value of fiat currency that is going down against it, so it requires more paper to hold it. Benanke says it is not money, but I ask why then is it still regarded as a form of exchange throughout the world and accepted as such ? Why are central banks buying as much as they can, particularly China who now are actually encouraging their population to invest in bullion when only fairly recently it was a banned purchase.They are also the largest pruducer in the world and no longer export it. It is probably because the US dollar is the reserve currency and the need to keep it as such with no default back to a gold standard...... Although I can see it coming.
Gold and silver are being manipulated by banks such as HSBC and JP Morgan by shorting on the bullion exchanges with derivatives on a daily basis with quantities that exceed the physical supply.... But that is a different story, a bit off subject.

579,

Butch has a very valid point: if the US share market has improved by around 100 %, while the Australian market has risen by only about 40 %, and the US is seen as some sort of basket-case, then why do people think Australia is doing so wonderfully well ? To the extent that share market ups-and-downs signify economic health, of course.

I am hesitant to call you an idiot, given that you might call me sexist, even though you appear to be male like me, or elitist. Words mean something, you can't throw them around like confetti, or unless you are a caterpillar.

Caterpillar ? Never mind.

579 you will make no impact on Rechtub.
He is not setting out to be nasty, bank on it, he may well be a good bloke.
I like to think he is,but his threads title sits best on him, he has little understanding.
Snake, even arjay at times,is not far wrong about America.
I love the place! its history, it deeds in rebuilding Europe twice.
The part it played in the Colombo plan.
But I see a different America, the old one lives, but is not being heard or seen.
America is broke, it bought about the GFC.
And it prints phony money to stall its fate.
I saw the what if Greece thread? what if the first domino falls?
We can only hope it does not.
Hard times ahead for me, I suspect you too, Labor today, no way round it.
Turned its back on us.
Claims may say I am wrong but no.
Look at NSW yesterday a festering heap of filth, future win a long way off ,but on the right track reformed and wiser.
Our fire is ahead a Liberal Government not avoidable.
Hope 579, hope they are as bad as they look, in power, and hope the faceless men and women who installed Gillard/will remove her, with one of their own, grow to understand, power is a gift taken not given, from the numbers who they serve.

The USA back to where they started from?

Yeah sure, with US unemployment at around 3% higher than pre-GFC figures plus homelessness and poverty rates "skyrocketing".

Some recovery. Obama must be thrilled.

Why not use the current price of olives in Greece as a measure of their overall economic prosperity too?

I suppose every silver lining must have a cloud.

I'm not sure you are being entirely consistent in your arguments, snake.

>>One of the reasons why the US market has risen is because of the money supply that has increased... the main reason why gold has risen because [is] people regard it as a store of value<<

While I agree with you that the increase in money supply has had an impact on share prices, I'm mystified why you don't apply the same logic to the gold price. The stark reality is that people regard shares as "a store of value" - just think of the trillion-plus dollars we Australians have invested in Super Funds, and where those dollars find a home.

This is also supported by another statement of yours:

>>the value in purchasing power of gold largely remains the same and has for the last few hundred years<<

Which clearly demonstrates what a lousy investment gold can be. Using your own scenario, in which the "purchasing power of gold largely remains the same", if you "stored" a gold piece in 1810, and sold it in 2010, it would buy the same amount of stuff, right? In between times, you'd have nothing to invest, nothing with which to build a business - just an inert piece of rock.

Here's some detail on the daily musings in gold-land.

http://www.caseyresearch.com/gsd/home

It's just a metal, whose price responds to physical demand. Just like iron ore. Or copper. Or Palladium. Apart from its history as a trading currency, what is so special about gold anyway?

But the part I cannot understand in all this weird fascination with the gold standard, is why on earth would anyone hand over control over our currency to a bunch of miners? Like, they're a whole lot nicer than bankers, and wouldn't dream of manipulating the supply of gold to their own advantage. As well as OPEC, we'd have OGEC, the Organization of the Gold Exporting Countries. Just think who would belong to it...

Nope. I'll take my chances with horrid old fiat currency, the stuff that goes into my bank account, and is stored there.

Considering that the American property market has tanked and their interest rates are at near-zero levels, it's no wonder that the stock market is attracting money.

Here in Oz, although the property market is falling in some areas, most investors are happy to stay with moderate but safe cash investments while the Euro sorts itself - out so the fact that our sharemarket is increasing at all during these globally volatile times can be seen as a vote of confidence in our economy.

This crisis has been caused by the US Federal Res and the criminals in Wall St.Our banks have now been down graded and the RBA will continue to let the international banks milk us dry and cause a depression here too.

When people are too scared to borrow there quickly arises a money shortage especially with pop increases.We need once again to let our Govts create the new money for increases in our productivity.
In any productive economy there should never be money shortages as there should never be an oil shortage to lubricate an engine.

There are $35 trillion in credit default swaps in the West.This casino economy of derivatives must be separated from the real economy otherwise you will lose the rest of your super.

Pericles

I agree with what you say. All thing being equal, and a company continues to make money, their shares could make a good investment because the return tends to match inflation, However if you buy a bond that only yields 2% and inflation is running at say 10% (the official rate is massaged, because it often doesn't include many items) you tend to lose money. Even a term deposit at say 6% is behind the eight ball. Do you remember the 70s when house mortgages were in the teens ?

Gold is a lump of metal that has very few industrial uses and pays no dividend, but it does have intrinsic value that over the years has maintained its value for a basket of goods. Which would you rather find as buried treasure, 100 year old one pound notes or one hundred gold sovereigns? People buy gold because it has always been used as money and retains value as fiat currency loses its value because fiat has counterparty promises attached to it and governments always debase it. Just think about what a dollar can buy compared with 20 years ago. This never happened during the gold standard because it was backed by the metal. It all started to crash when Nixon abolished Bretton Woods in 1971 (partial gold standard) so that he could inflate and borrow and pay for the wars
Much of what you say about Gold is true, but Aristotle defined a good form of money must be
1 durable
2 portable
3 divisible
4 have intrinsic value (rare and not able to be manufactured)

continued

Pericles

The United States has a deficit of about 14 trillion dollars, climbing by a further trillion dollars every year. They have unfunded liabilities of somewhere around 80 trillion dollars in the foreseeable future. They are struggling now paying the interest let alone the principle. Is it any wonder that the price of bullion is rising and every sovereign country is trying to get hold of it. Chavez in Venezuela has even shipped his gold back home from London and elsewhere ! Six states in the US have officially legislated gold as a form of exchange in the last few months. The only advantage that the US has is that it's the reserve currency and it wants to keep it that way because it can print it. It doesn't want to go back to Gold.

Ron Paul asked the the Senate for an Audit of Fort Knox as he doesn't believe the Gold is there any more. There has not been an audit since the 1950s but the Fed refuse and will not give a reason.

No more room or time

You say the share market is an indication of our economy, why is our share market so sensitive to what happens in greece, or mongolia. even our currency is sensitive to external forces.
Is our economy being run from overseas.

Ok, snake, let me ask you a simple question.

>>The United States has a deficit of about 14 trillion dollars, climbing by a further trillion dollars every year. They have unfunded liabilities of somewhere around 80 trillion dollars in the foreseeable future.<<

The total amount of gold ever mined out of the earth has been estimated at 158,000 tons. Assuming every ounce was 24k pure, that's a shade under 5.1 billion troy ounces, which on today's market will fetch a tad under US$9 trillion. Annual production is around the 50 million troy ounce mark, or US$88 billion.

Please explain how using gold as currency would solve any one single problem facing the US, or the world, economically speaking.

Don't forget to allow for a) an increase and b) a decrease in the value of the metal, and sketch the impact of these on i) gold-producing countries and ii) those countries who have no gold mines.

I think you may have missed the point here, too:

>>Which would you rather find as buried treasure, 100 year old one pound notes or one hundred gold sovereigns?<<

According to at least one collector's site, a 1913 pound note could fetch $4,000 in today's money, giving you a total of $400,000.

http://www.therightnote.com.au/shop650/shopdisplayproducts.asp?id=19&cat=King+George+V+-+One+Pound

Your gold sovereign weighs about eight grams, and 800 grams of gold is around 26 troy ounces, so would fetch $46,000. Even as a collector's item, they'd only fetch around $600 each, which would get you $60,000.

So the answer is an unequivocal "I'd rather find the notes, thank you".

Oh Arjay. When will you learn to do your homework, instead of just copy/pasting from hysterical doomsday sites?

>>There are $35 trillion in credit default swaps in the West.This casino economy of derivatives must be separated from the real economy otherwise you will lose the rest of your super.<<

I've asked you this before, but you refuse to do the research necessary to get to an answer... what is the relationship between Credit Default Swaps, the "real economy" (whatever you perceive that to be), and my super fund?

And if/when you are done with that, perhaps you will turn your attention to the concept of "separating derivatives from the real economy". A brief explanation of how this could be achieved might help us understand your viewpoint.

Let's face it, you don't understand the first thing about derivatives and the derivative market, do you.

As always, I urge you to "follow the money". But no doubt, as always, you will ignore my good advice, and your entire response will be built on yet another meaningless slogan.

One can always hope, though.

Rehctub, the thing is that alot of American companies are quite
innovative, are operating globally and are doing very well. Apple
for instance, is now sitting on 100 billion$ of cash! Google, MS,
Catepillar, John Deere, etc, all global companies doing very
well, which is reflected in their share price.

The part of the US economy that is in trouble is building, as they
have a surplus of houses. Now if our house building industry come
to a near abrupt halt, our unemployment figures would not be looking
too rosy.

Our share market does not reflect those kind of innovative, global
businesses. We have a few like CSL, but not too many.

Our stock market is really dominated by banks and a couple of large
miners, plus Woolies and Coles. (Wesfarmers)

The banks won't be growing like they used to and the rest is really
a one trick pony dependant on China

Pericles

I wish I could take this debate further, but unfortunately I don't have the time and the space is not sufficient. Ecomomics, especially when we have a global economy and a derivative market that is so vast now that it is said to exceed the actual global economy many times. The Credit default swaps will also come home to roost when this insurance is triggered. The whole fractional reserve banking system is under threat when money is lent without any asset to back it, as it was using gold and silver. Now only faith in the banking system and governments, which I'm afraid I don't have

I probably used too low a figure for my pound versus sovereign. Put the number up to several thousand and the paper note would certainly not be worth much,(if it hadn't rotted away) but the gold would hold its price. You can't compare one rare collector item with the constant value of bullion. Note I said value not price. As Ben Graham famously said "price is what you pay, value is what you get"

As I said before, the public are beginning to realise it is better to store their wealth in assets including gold and other rare goods. Countries are also buying bullion when ever they can get hold of it. Incidentally the University of Texas endowment fund has just purchased one billion dollars worth of gold, so there are many people who hold the opposite view to yours.

With respect, snake, time and space aren't the real reason, are they?

>>I wish I could take this debate further, but unfortunately I don't have the time and the space is not sufficient. Ecomomics, especially when we have a global economy and a derivative market that is so vast now that it is said to exceed the actual global economy many times.<<

The "derivative market" as you call it, is not mathematically related to "the global economy", you are measuring two different things. Hedging an exposed currency position, for example, which may be done using "derivatives", has absolutely no impact whatsoever on "the global economy".

So the fact is, the "derivative market" can be $1 or $1 trillion, and the "global economy" does not shift one iota.

>>The Credit default swaps will also come home to roost when this insurance is triggered.<<

What, all of them? Some of them? Which insurance? What trigger? Do you know what you are talking about?

>>The whole fractional reserve banking system is under threat when money is lent without any asset to back it, as it was using gold and silver<<

Sure, there isn't any gold behind it. Thank goodness. If the world used gold as a currency, you and I would be paupers - there simply isn't enough of the stuff to go around. And the assets, by the way, do exist. Bricks and mortar, thriving businesses, our taxes. They're all in the mix.

>>Incidentally the University of Texas endowment fund has just purchased one billion dollars worth of gold, so there are many people who hold the opposite view to yours.<<

"Just", snake? They made this trade last April.

"According to Bloomberg Texas University’s decision to own gold was influenced by a successful hedge fund manager in Dallas, Kyle Bass, who made a fortune shorting sub-prime mortgage securities on the eve of the financial crisis."

Sounds a charmer, right?

It was just a bet, placed in order to make money. When they have made sufficient profit, no doubt they will sell - and take payment in dollar bills,

Pericles

Actually I AM short of time. Very.

However I couldn't let your comment pass

Of course the University of Texas Will sell their gold and convert to fiat Currency if and when that currency stabilises. I keep on saying, it's a store of wealth and they will convert to a much higher price. Of course it is a hedging strategy.

Exactly, snake.

>>Of course the University of Texas Will sell their gold and convert to fiat Currency if and when that currency stabilises. I keep on saying, it's a store of wealth and they will convert to a much higher price. Of course it is a hedging strategy.<<

And the difference between that and any other investment strategy is... what?

I thought you were advocating gold as currency...

>>This never happened during the gold standard because it was backed by the metal.<<

My mistake.

pericules/quote...""The "derivative market"..is not mathematically related to "the global economy",..you are measuring two different things.""

JUST LIKE THIS TOPIC BEGAN
BY COMPARING A US MARKET..IN falling US DOLLARS
[WITH A AUSSIE MARKET...IN RISING AUSSIE DOLLARS]

funny you dont point/out..friendly error

""Hedging..an exposed currency position,for example,
which may be done using "derivatives",..has absolutely no impact whatsoever on "the global economy".""

yea right...lol
saying it dont make it so

what happens when you go to get your pension
in deflated dollars tomorrow..[when wheel barrow of govt bond bailout's]..has bailed out the bankers..with yesterdays deflated values..leaving us with broken promises..tomorrow

the reality will come
if it dont...there was no real..they sold their souls for

[quote]

So the fact is,..the "derivative market" can be $1 or $1 trillion, and the "global economy" does not shift one iota.
[/quote]
what deciete

the derivitive..derives from what
if not real then how come it has stolen..not one dollar or a trillion dollars..but 3 quaderillion..['derived' from nuthin]

>>home to roost..when this insurance is triggered.<<

""What,all of them?..Some of them?
Which insurance?..What trigger?

Do you know what you are talking about?""

you must know your asking for everything
while willing to give nuthin..but every derivitive...must return...something..back to the derivitive it derived from

or else its a scam
[no not all of em..but you cant tell good from foul

which insurance?
[the govts propping up the too big to fail bankers]
those bying govt bonds...even with haircuts..just to get the next bonus..on the bailout..that came from and was returned to..the bankers geting the bailout

not the people holding the debt
what triggers your complicity..to colluded treason?

""If the world used gold as a currency,
you and I would be paupers""

lol your egsadurating again

heck i know in my case..
if my coin was still in gold/silver
my coin jar would hold more value than my bank account[certainly more that my future pension]..

scammed away by the most clever guys..in the room/..forum

http://forum.worldfreemansociety.org/download/file.php?id=6116

http://americankabuki.blogspot.com.au/2012/02/81-resignations-from-world-banks-22712.html

Large corporate conglomerates have a trick they like to play on investors. When they get into financial trouble, they find a subsidiary that isn't performing and quietly transfer all negative assets and obligations into that subsidiary, which is then "spun off" into a separate company, and allowed to collapse, taking the debt with it.

The investors to whom that debt is owed get screwed, the larger corporation survives and the executives write themselves huge bonuses.

It looks like the EU is playing the same game with Greece.
http://www.spiegel.de/international/europe/0,1518,817795,00.html

This is the New World Order. People worked to death, no services, just pouring the money into the pockets of the private central bankers, and even that will not be enough to repay the debt in a banking system that by design creates more debt than money.
http://www.presseurop.eu/en/content/article/1555361-draghi-buries-european-social-model

http://ning.it/naHUz6

there was never an america
welcome to usa
http://vidrebel.wordpress.com/2012/02/28/there-never-was-an-american-empire-only-a-machine-that-consumed-us-all-part-ii/

Pericles,

I thought of you when I watched this exchange between Ron Paul and Ben Bernanke

http://www.silverseek.com/article/ron-paul-assaults-ben-bernanke-parallel-currencies-video

You might be interested to watch it

Good of you to think of me, snake, I appreciate that.

>>I thought of you when I watched this exchange between Ron Paul and Ben Bernanke<<

But I think "exchange" is too generous a word, for what was essentially a one-way transaction. It came across to me as little more than Ron Paul stating part of his election manifesto, in what, it has to be said, was a rather emotional and ungracious manner.

Tell me, what did you take away from the session? Did any of it actually make sense to you, or were you in the same position as Bernanke, sitting and watching Paul take somewhat uncoordinated free hits?

Whatever, it might be useful for you to take a look through a relatively calm article, that talks about the reality of gold-backed currency.

http://blogs.ft.com/martin-wolf-exchange/2010/11/01/could-the-world-go-back-to-the-gold-standard/#axzz1noGcvsLv

Let me know what you think after you've read it.

Pericles,

Thanks for drawing my attention to the article. I too think it is a well balanced comment and I tend to be a bit ambivalent over a gold standard. There are pros and cons on both sides and I have read similar criticisms on most of those points. It also draws attention to the fact that economics on an international scale is extremely complicated and plagued by political as well as financial consideration and whole treatise have been written on the subject. I should dust off a volume on my shelf at the moment by Friedman. However there seems to be an acceptance of keynesianism rather than that of Ludwic Von Mises and the Austrian school which I think has more relevance in the current global mess.

I am NOT an economist. It's just that I have more than a passing interest in the subject and I see no real effort to take any pain in the present circumstances to try and solve this problem of debt. The only course as I see it is to either deflate the currency or default (Like Iceland) and then introduce some system to back the currency so that it can't be manipulated.

Politics demands that the former is unacceptable so, as the press are so fond of saying, "kicking the can down the road" is the only option and continue to "print" money which will inevitably create massive inflation. This of course brings me back to the fact that Gold along with other physical assets is a form of wealth storage, because saving paper money is the road to the poor house at the moment. Interest rates are not even keeping up with inflation.

I foresee increasing social upheaval over the coming years as adjustments are made, but I also wish the main-stream press would reprint some of the very articulate and well informed comment I am reading on-line with some facts and figures that belie the actual facts.

good to talk to you.

Pericles

Sorry I forgot to answer your question.

I am in the Ron Paul camp as I think Bernanke is doing his country and the world a disservice, but then you get back to the political conundrum. I understand what he is trying to do but he is caught between a rock and hard place. I would be surprised if it will work.

It all boils down to the fact that so many people thought the party would go on forever.... Just borrow money for consumption and make a fortune from derivatives with Wall Street manipulation.

There's one fundamental mathematical problem that you might care to re-visit, snake.

>>Gold along with other physical assets is a form of wealth storage, because saving paper money is the road to the poor house at the moment<<

If we discard for the moment the possibility that we will ever return to a gold-backed currency, your concept of "storage of wealth" using gold suffers from the very simple problem that in order to buy anything, it will need to be re-translated into the currency of the day - i.e. dollars. Which brings us back to your opening point: "the value in purchasing power of gold largely remains the same and has for the last few hundred years"

So, if you expect gold just to keep pace with the purchasing power of the dollar, then holding it is pointless for that very reason.

If on the other hand you expect its purchasing power to rise faster than the dollar, then you are simply a gold speculator, alongside professional traders (and the odd university) around the world.

Good luck with that.

Pericles.

Actually I think we are more or less on the same page here as you just may misunderstand me.

When I said "the value in purchasing power of gold largely remains the same and has for the last few hundred years" I stick by the statement. However, as I said before it does usually have to be converted to the currency being used to make a purchase. Although not always as Iran is accepting gold for oil following the sanctions. The value of gold is recognised in practically every country of the world and there is no one anywhere I can think of that would not give you an exchange if you carried some on you. Try doing this with paper money and there would only be a select few that would be recognised.

Bullion keeps pace with inflation by and large although silver in particular is a more volatile commodity, particularly when the price is manipulated in such an extreme way as it has been in the last 10 years by the banks. The population reverts to commodities especially gold in uncertain and financially unstable times because the value doesn't get debased. I would rather put 10,000 dollars worth of gold in a box than 10,000 dollars of paper money because in 30 years when I open the box the gold will still "buy" the same as it did previously whether it is a suit of clothes or a meal (in rough terms)

Having said that there is of course the lost "investment return" of the paper money if you didn't touch it (like the gold) If inflation is running at 10% per annum and you could only invest at 2% (treasury rate)your paper money would have lost 8% in real terms annually. That means over that 10 year period your paper money would have lost over half its value in terms of buying power. But the gold would not.

continued

Pericles

At the moment there is very little return on bonds and fixed interest, so people turn to gold as an alternative until they see the base rate go up or a better investment. The way the world is going commodities seem to be the best bet.

There are some interesting inflation calculators on line and over the last 40 years it requires 5 times the amount of money in purchasing power due to inflation. Here I am discussing store of value (not unlike housing and why people invest in them)and not wages which tend to keep pace.

The reason that Warren Buffett doesn't like gold is because he is clever enough to be able to get a return on his money greater than inflation. So he has no interest in putting his deflating currency into an inert lump of metal.Although in the past he has invested in silver. Many people want to save their hard earned and look for somewhere to put it. Gold is one place that keeps pace without investing in production.

gold and silver cant ever be put back into coin
but their inflation adjusted value can be restored
*back into its face values

we know inflation has devalued..the bying power of a 'dollar'
so lets return back..to 1966..when coin was still silver

the 65 threeopence piece
bought a bottle of coke
[plus got a penny back for the empty bottle

it contained 1.41 grams of silver

today worth the same..in the weight of silver
but today costing over 2 bucks

this reveals how the value has been stolen..from the coin/age

deflated..via the fiat paper/plastic note franchise system
the only fair thing to do is revalue the coin

[to what it should have been..had the silver not been stolen
like the gold was before it[and like the copper was stolen..
when a one cent coin..cost 5 cents of copper..

restore the value on its face
not the gold content

value the coin AS IF..the nickle weight
was in real silver gold..but only the face values change

how can they be so clever?":
quantive easing in euro's now lol

too easy...former govt reseves..lends you cash at one percent
you the banko..lend out as credit on a credit card..for 20%[or micro credit for 30/40%][to the poor][only further impoverished..by high ursury

easy money
how do you sleep at night

Pericles

In a previous post you asked me about CDS being triggered.

This web site

http://dealbook.nytimes.com/2012/03/01/greek-crisis-may-test-the-value-of-swaps/?emc=eta1

dated March 1st not only explains the current problem in Greece over Credit Default Swaps and how they might, or might not be triggered, but also illustrates the complicated involvement that I could not possibly attempt to explain. Good luck !

The European Central Bank has made 529.5 billion euros ($A664.03 billion) in low-interest loans to banks in the second round of a massive credit infusion. The offer of credit for 3 years was taken up on Wednesday by 800 banks. The uptake was modestly higher than the 489 billion euros handed out to 523 banks at a first offering on December 21. Banks used some of the money from the first round of loans to buy government bonds.
A GFC can be a real winner. Borrow it at 1% and re-lend at 6%, does wonders for the bottom line. Considering the people you are re-lending too are the very same people you borrowed it off in the first place. Considering you created the GFC its great to get the innocent to pay for your mistakes. The wonders and joys of Capitalism, its all win win as they like to say.

Thanks for the article, snake.

Some light can be shed on their impact by looking at the headline numbers.

"Just over $70 billion of default swaps exist on Greek government debt. After subtracting swaps that pay out on a default from those that get paid, the net amount is $3.25 billion."

The actual "impact" is therefore around under 5% of the face value of the CDSs themselves. When you compare this with the pain of losing 50-70% of the value of a government bond - and it is the Banks who take this pain, by the way - you can begin to see that numbers like "$35 trillion in credit default swaps in the West" - which is where we started - are in fact unrelated to the underlying economic risk.

This might also help.

http://www.economist.com/node/21548232

There's more, if you are interested - this edition carries a full "Special Report" on the world of derivatives and other financial innovations. It should serve to reduce your concerns a touch.

I'd also point out that no-one would actually bury currency notes and dig them up later, and expect them to be worth as much as gold. But using the money actively by investing it, most certainly could.

Paul 1045 & Pericles

I had a look at the article. Thanks Pericles. It all goes to show what I tried to indicate previously about the whole GFC which is so interwoven with CDOs and CDSs which have been interchanged so many times no one seems to know the source, particularly the former which have been bundled with all sorts of toxic securities which the rating agencies originally listed as triple A. Now the legal challenge over the actual reponsibility and liability of the holders of the swaps that even if paid, could create precedents over many more in other European countries, apart from Greece, which could be infected.

Interestingly enough, there are a number of articles on LTROs (QE by any other name) and such like, in the business section of this week's Weekend Australian and how a large percentage is being used in the Carry Trade.
It appears to me that the banks have got far too large and powerful so that politically they have to be constantly propped up by governments, when perhaps the should go the way of Lehman Brothers. At the moment they are being allowed to get away with what would otherwise be considered illegal.

Incidentally, do either of you guys follow Nigel Farage who is the British representative in the European parliament. There are several Youtube clips of him addressing the assembly which I think you would find interesting. This one

http://www.youtube.com/watch?v=2gm9q8uabTs

is a couple of years old, but very prescient. There are others there too.

Pericles

Again I thought of you !

You might be interested in listening to this pod cast between Chris Martenson and Ben Davies which reflects my whole feeling about the financial situation and philosophy towards it. It is a long one, so if you get bored I will understand if you don't want to waste your time. Ben Davies does articulate everything in a way that I would be unable to express and also make my self understood. This is why it is impossible to discuss the problem in any depth on these pages.

Hope this helps.

http://www.chrismartenson.com/blog/ben-davies-greece-just-preview-whats-coming-rest-us/71786

Farage of UKIP, snake?

>>Nigel Farage who is the British representative in the European parliament. There are several Youtube clips of him addressing the assembly...<<

Not a reliable source, I feel.

"Mr Farage's party, UKIP, campaigns for the withdrawal of Britain from the European Union. It has 13 representatives in the European parliament."

http://news.bbc.co.uk/2/hi/8537664.stm

The intellectual honesty of a political party that dedicates itself to Britain's withdrawal from the EU, but at the same time is happy to eat from the same money-trough, must surely be questioned.

So, perhaps a little biased, yes?

Pericles

"So, perhaps a little biased, yes?"

Yes maybe. I was just amused at the forthright way he got stuck into the Europeans, sitting on their derrieres drawing fat saleried sinecures! There was an element of truth in what he was saying though.

Quite, snake.

>> I was just amused at the forthright way he got stuck into the Europeans, sitting on their derrieres drawing fat saleried sinecures!<<

All the while, sitting on his own derriere drawing a fat salary. Plus a veritable fistful of perks - travel, entertainment, staff...

"The basic salary of an MEP is already £82,915 a year, compared with £64,766 for an MP at Westminster. Euro MPs can also rake in £360,000 in expenses."

http://nigelfaragemep.co.uk/pages/posts/greedy-meps-demand-yet-more-money-141.php

So, from one corner of his mouth he pretends to despise the entire setup, and from the other he says "yes please" to the rivers of gold that they send his way.

http://www.guardian.co.uk/politics/2009/may/24/mps-expenses-ukip-nigel-farage

Principles? Absolutely none.

Credibility? Well into negative territory.

Reminds me of the classic scene in Casablanca, where police chief Renault is closing down Rick's:

"Captain Renault: I'm shocked, shocked to find that gambling is going on in here!
[a croupier hands Renault a pile of money]
Croupier: Your winnings, sir.
Captain Renault: [sotto voce] Oh, thank you very much."

Only obvious difference is that Farage doesn't understand the term "sotto voce".