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The Forum > General Discussion > Aust asks for Gold Audit from London.

Aust asks for Gold Audit from London.

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Bill Holter is a senior financial advisor at Miles Franklin. At the 3rd minute in this interview he says Australia has asked for an audit on 80.1 tonnes of gold held in the Bank of England.
http://usawatchdog.com/financial-fantasy-land-continues-to-prevent-collapse-bill-holter/ We used to have 167 tonnes of gold but the Howard Govt sold it off without with out tenders and the price crashed before it reached the market.

Germany and many other countries have asked for the return of their gold but the Central Bankers won't release it or just return a small portion. The fears are that the gold has been re-hypothecated and on sold to countries like China. James Rickards says that China has struck a deal with the European Central Bankers to keep the price of gold low if China continues to hold US Treasuries. Russia is now asking for payment of oil and gas in gold. It is also accepting US $ but is immediately buying gold with $ US.

Recently US Congress neutered The Dod Frank Bill and so the US Tax payer is on the hook for $303 trillion of Wall St Derivative Gambling. This is why at the last G20 meeting in Brisbane they finalised "bail in" procedures which allows banks to convert our deposits into bank shares.
Posted by Arjay, Sunday, 28 December 2014 7:30:11 AM
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The Howard government sold the gold off without tender because in order not to depress the price, the sale was done without prior announcement. And indeed the price didn't crash before reaching the market. I think you might be confusing it with what happened when Britain followed suit shortly after.

And with the diminished income it currently gets from oil, ITYF Russia's buying roubles rather than gold!
Posted by Aidan, Sunday, 28 December 2014 9:50:13 PM
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Aidan both Russia and China have been aggressively buying gold since 2008. Russia has little debt with much energy and resources. It is the power of money printing + derivatives that manipulates currencies and all our markets,which gives these central banks so much power.

Our Govt dares not cross these central bankers since they can crash our economy far easier than Russia. We now trade directly with China without the expense of the US $ conversion. This was the first break from Central Banker hegemony. We are now questioning the integrity of the Bank of England and rightfully so since to date the financial system has been a litany of lies ,deception and theft never before seen on this planet that continues to go unpunished.

As Bill Holter and many others note, this will be the mother of all collapses because too few have too much power by virtue of being able to create infinite money.
Posted by Arjay, Sunday, 28 December 2014 11:08:10 PM
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Arjay, Russia may have been buying gold since 2008, but low oil prices have forced it to do the opposite this year. And overseas central banks don't have any significant power over us. Anyone eho tries to use derivatives to push a currency where its not already going will lose a lot of money very quickly.

Our own government are the only ones with the power to crash our economy.
Posted by Aidan, Sunday, 28 December 2014 11:57:55 PM
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Aidan - Quote " Our own government are the only ones with the power to crash our economy. "

You are totally out of reality if you believe that, the bankers control the economies of nearly all countries through the power of the central banks (which are privately owned not Government owned)

“Who controls the issuance of money controls the government!” -Nathan Meyer Rothschild

“Let me issue and control a nation’s money and I care not who writes the laws.” -Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

ROTHSCHILD OWNED & CONTROLLED BANKS:

Afghanistan: Bank of Afghanistan
Albania: Bank of Albania
Algeria: Bank of Algeria
Argentina: Central Bank of Argentina
Armenia: Central Bank of Armenia
Aruba: Central Bank of Aruba
Australia: Reserve Bank of Australia
Austria: Austrian National Bank
Azerbaijan: Central Bank of Azerbaijan Republic
Bahamas: Central Bank of The Bahamas
Bahrain: Central Bank of Bahrain
Bangladesh: Bangladesh Bank
Barbados: Central Bank of Barbados
Belarus: National Bank of the Republic of Belarus
Belgium: National Bank of Belgium
Belize: Central Bank of Belize
Benin: Central Bank of West African States (BCEAO)
Bermuda: Bermuda Monetary Authority
Bhutan: Royal Monetary Authority of Bhutan
Bolivia: Central Bank of Bolivia
Bosnia: Central Bank of Bosnia and Herzegovina
Botswana: Bank of Botswana
Brazil: Central Bank of Brazil
Bulgaria: Bulgarian National Bank
Burkina Faso: Central Bank of West African States (BCEAO)
Burundi: Bank of the Republic of Burundi
Cambodia: National Bank of Cambodia
Came Roon: Bank of Central African States
Canada: Bank of Canada – Banque du Canada

Continued
Posted by Philip S, Monday, 29 December 2014 12:53:01 AM
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Cayman Islands: Cayman Islands Monetary Authority
Central African Republic: Bank of Central African States
Chad: Bank of Central African States
Chile: Central Bank of Chile
China: The People’s Bank of China
Colombia: Bank of the Republic
Comoros: Central Bank of Comoros
Congo: Bank of Central African States
Costa Rica: Central Bank of Costa Rica
Côte d’Ivoire: Central Bank of West African States (BCEAO)
Croatia: Croatian National Bank
Cuba: Central Bank of Cuba
Cyprus: Central Bank of Cyprus
Lesotho: Central Bank of Lesotho
Libya: Central Bank of Libya
Uruguay: Central Bank of Uruguay
Lithuania: Bank of Lithuania
Luxembourg: Central Bank of Luxembourg
Macao: Monetary Authority of Macao
Macedonia: National Bank of the Republic of Macedonia
Madagascar: Central Bank of Madagascar
Malawi: Reserve Bank of Malawi
Malaysia: Central Bank of Malaysia
Mali: Central Bank of West African States (BCEAO)

Czech Republic: Czech National Bank
Denmark: National Bank of Denmark
Dominican Republic: Central Bank of the Dominican Republic
East Caribbean area: Eastern Caribbean Central Bank
Ecuador: Central Bank of Ecuador
Egypt: Central Bank of Egypt
El Salvador: Central Reserve Bank of El Salvador
Equatorial Guinea: Bank of Central African States
Estonia: Bank of Estonia
Ethiopia: National Bank of Ethiopia
European Union: European Central Bank
Fiji: Reserve Bank of Fiji
Finland: Bank of Finland
France: Bank of France
Gabon: Bank of Central African States
The Gambia: Central Bank of The Gambia
Georgia: National Bank of Georgia
Germany: Deutsche Bundesbank
Ghana: Bank of Ghana
Greece: Bank of Greece
Guatemala: Bank of Guatemala
Guinea Bissau: Central Bank of West African States (BCEAO)
Guyana: Bank of Guyana
Haiti: Central Bank of Haiti
Honduras: Central Bank of Honduras
Hong Kong: Hong Kong Monetary Authority
Hungary: Magyar Nemzeti Bank
Iceland: Central Bank of Iceland
India: Reserve Bank of India
Indonesia: Bank Indonesia
Iran: The Central Bank of the Islamic Republic of Iran
Iraq: Central Bank of Iraq
Ireland: Central Bank and Financial Services Authority of Ireland
Israel: Bank of Israel
Italy: Bank of Italy
Jamaica: Bank of Jamaica
Japan: Bank of Japan
Jordan: Central Bank of Jordan
Kazakhstan: National Bank of Kazakhstan

Continued
Posted by Philip S, Monday, 29 December 2014 12:56:27 AM
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Kenya: Central Bank of Kenya
Korea: Bank of Korea
Kuwait: Central Bank of Kuwait
logo-edmond-rothschildKyrgyzstan: National Bank of the Kyrgyz Republic
Latvia: Bank of Latvia
Lebanon: Central Bank of Lebanon
Lesotho: Central Bank of Lesotho
Libya: Central Bank of Libya
Uruguay: Central Bank of Uruguay
Lithuania: Bank of Lithuania
Luxembourg: Central Bank of Luxembourg
Macao: Monetary Authority of Macao
Macedonia: National Bank of the Republic of Macedonia
Madagascar: Central Bank of Madagascar
Malawi: Reserve Bank of Malawi
Malaysia: Central Bank of Malaysia
Mali: Central Bank of West African States (BCEAO)
Malta: Central Bank of Malta
Mauritius: Bank of Mauritius
Mexico: Bank of Mexico
Moldova: National Bank of Moldova
Mongolia: Bank of Mongolia
Montenegro: Central Bank of Montenegro
Morocco: Bank of Morocco
Mozambique: Bank of Mozambique
Namibia: Bank of Namibia
Nepal: Central Bank of Nepal
Netherlands: Netherlands Bank
Netherlands Antilles: Bank of the Netherlands Antilles
New Zealand: Reserve Bank of New Zealand
Nicaragua: Central Bank of Nicaragua
Niger: Central Bank of West African States (BCEAO)
Nigeria: Central Bank of Nigeria
Norway: Central Bank of Norway
Oman: Central Bank of Oman
Pakistan: State Bank of Pakistan
Papua New Guinea: Bank of Papua New Guinea
Paraguay: Central Bank of Paraguay
Peru: Central Reserve Bank of Peru
Philip Pines: Bangko Sentral ng Pilipinas
Poland: National Bank of Poland
Portugal: Bank of Portugal
Qatar: Qatar Central Bank
Romania: National Bank of Romania
Russia: Central Bank of Russia
Rwanda: National Bank of Rwanda
San Marino: Central Bank of the Republic of San Marino
Samoa: Central Bank of Samoa
Saudi Arabia: Saudi Arabian Monetary Agency
Senegal: Central Bank of West African States (BCEAO)
Serbia: National Bank of Serbia
Seychelles: Central Bank of Seychelles
Sierra Leone: Bank of Sierra Leone
Singapore: Monetary Authority of Singapore
Slovakia: National Bank of Slovakia
Slovenia: Bank of Slovenia
Solomon Islands: Central Bank of Solomon Islands
South Africa: South African Reserve Bank
Spain: Bank of Spain
Sri Lanka: Central Bank of Sri Lanka
Sudan: Bank of Sudan
Surinam: Central Bank of Suriname
Swaziland: The Central Bank of Swaziland
Sweden: Sveriges Riksbank

Continued
Posted by Philip S, Monday, 29 December 2014 12:57:57 AM
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Switzerland: Swiss National Bank
Tajikistan: National Bank of Tajikistan
Tanzania: Bank of Tanzania
Thailand: Bank of Thailand
Togo: Central Bank of West African States (BCEAO)
Tonga: National Reserve Bank of Tonga
Trinidad and Tobago: Central Bank of Trinidad and Tobago
Tunisia: Central Bank of Tunisia
Turkey: Central Bank of the Republic of Turkey
Uganda: Bank of Uganda
Ukraine: National Bank of Ukraine
United Arab Emirates: Central Bank of United Arab Emirates
United Kingdom: Bank of England
United States: Federal Reserve, Federal Reserve Bank of New York
Vanuatu: Reserve Bank of Vanuatu
Venezuela: Central Bank of Venezuela
Vietnam: The State Bank of Vietnam
Yemen: Central Bank of Yemen
Zambia: Bank of Zambia
Zimbabwe: Reserve Bank of Zimbabwe

Take note of the 7th from the bottom.
Posted by Philip S, Monday, 29 December 2014 1:00:13 AM
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Philip S, just because some conspiracy nuts allege that those central banks are privately owned doesn't mean they are. If you actually investigated it you'd find that none of them are privately owned. An arguable exception is the Federal Reserve in the USA, which is still technically in the private sector even though the government has ultimate control and claims 100% of the profits.
Posted by Aidan, Monday, 29 December 2014 1:05:06 AM
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BTW the Bank of England did start out in private hands. It was nationalized in 1946 and has remained in the public sector ever since.
Posted by Aidan, Monday, 29 December 2014 1:10:30 AM
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Garald Celente sums it up. He says we have bankism not capitalism. All the markets are rigged.

http://usawatchdog.com/2015-forecast-manipulation-depression-and-war-gerald-celente/

Aidan you have not addressed the repeal of Dod Frank Bill thus putting the tax payer on the hook for Wall St Derivative Gambling. You also have not addressed " Bail in".ie Confiscation of bank deposits.
Posted by Arjay, Monday, 29 December 2014 7:03:58 AM
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The evidence us everywhere Aidan.
http://www.silverdoctors.com/chris-powell-admission-central-banks-secretely-trading-in-futures-market-is-a-sensational-development/

When the US $ collapses we will follow.This will mean a plummet in our living standards.Gerald Celente says when the system fails they take us to war.If they get away with "bail in" it will be total chaos. Our economies will cease to function. In the 1890's Depression they reduced the money supply by 80% but with "bail in" will be worse.
Posted by Arjay, Monday, 29 December 2014 7:35:02 AM
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SYDNEY (MarketWatch) — Commentators take it for granted that relatively unfettered global trade in goods and service and free movement of capital is a given. But the reality nowadays is far more limiting.
If current economic pressures lead to a shift to autarky, the U.S., Europe and China are likely to find closed economies a realistic policy option, although for different reasons.
Three years after the Dow dropped nearly 1,000 points in minutes, fears of a repeat occurrence are still omnipresent. Steven Russolillo reports on MoneyBeat. Photo: Getty Images.
Forthcoming articles will address Europe, China and smaller countries. Here, I look at the U.S., which unlike so much of the world could function successfully as a closed economy.
The U.S. remains the world’s largest economy, representing around 25% of global gross domestic product. Its GDP is almost twice that of China, the second largest economy.
America’s economy has access to a large domestic market. It is less exposed to trade (around 15% of GDP) than other large economies. Reliance on trade is even lower if trading with Canada and Mexico under the North American Free Trade Agreement (NAFTA) is excluded.
Despite inequality in the distribution of income, America remains relatively wealthy, with per capita GDP of around $50,000. This is among the highest in the world especially when low population (Luxembourg, San Marino, Singapore) or commodity-rich nations (Middle East oil producers) are excluded. By comparison, China’s GDP per capita is around $5,000-$6,000.
American households have substantial net worth in excess of $70 trillion, although that is down from a peak of more than $80 trillion before the financial crisis of 2008.
Moreover, the U.S. remains a major food producer, with agriculture being a major industry. It is a net exporter of food, controlling almost half of world grain exports
Posted by 579, Monday, 29 December 2014 12:27:01 PM
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The U.S. is also rich in mineral resources. Historically dependent on oil imports which make a substantial part of its $600 billion trade deficit, the U.S. now is cutting imports and establishing greater energy independence through increased production of shale gas and oil.
New technology has enabled America to access oil and natural gas, especially shale gas, from previously geological formations that were previously inaccessible.
While complete U.S. energy independence is not likely in the near term, and some of the claims for new energy sources are overstated, the increase in domestic production provides America with a significant advantage through competitive energy costs. Reduction in energy imports also reduces the country’s reliance on foreign suppliers. The U.S. dollar remains the world’s reserve currency, with a market share of around 60% of global investments. The majority of global trade continues to be denominated in dollars. Even better for Americans is that the U.S. borrows in its own currency, benefitting from a ready market for its securities, both domestically and internationally. Around $5 trillion of Treasury bonds are held by foreign investors, mainly in China, Japan, Asia and the Middle East
Posted by 579, Monday, 29 December 2014 12:27:25 PM
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579 the total USA debt is over $60 trillion, their unfunded liabilities such as Obamacare and Govt pensions is $167 trillion. So you say they have a net worth of $70 trillion. Not possible. China has now surpassed the USA as the No 1 world economy. They have far less debt and enormous productive capacity.

http://www.forbes.com/sites/realspin/2014/01/17/you-think-the-deficit-is-bad-federal-unfunded-liabilities-exceed-127-trillion/

http://rt.com/usa/166352-us-total-debt-sixty-trillion/

Australia's total debt is $5 trillion and the USA is 12 times this. We are on par with the USA in total debt but better off on Govt debt. Our Govt debt is 40% of our GDP while the USA is 110% of GDP. Our debt has mainly over inflated our house prices. There was little correction in house prices in 2008.

It is the creation of new money by private central bankers like the Rothschilds which has created this mess. When inflation grows via debt, exponentially more money must be created each successive year to pay for the debt of previous years. We are in a death spiral of the beginnings of hyperinflation.
Posted by Arjay, Monday, 29 December 2014 5:41:45 PM
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"Aidan you have not addressed the repeal of Dod Frank Bill thus putting the tax payer on the hook for Wall St Derivative Gambling. You also have not addressed " Bail in".ie Confiscation of bank deposits."
Arjay I'm not going to bother addressing trifles like that, and I've already discussed with you why you're wrong about what "Bail in" means.

"When the US $ collapses we will follow."
What precisely do you mean? Do you really think that there will be hyperinflation in America (despite the huge amount it exports)? How far do you think we would follow and why?

"579 the total USA debt is over $60 trillion,"
What any country owes to itself is rarely if ever a problem.

"their unfunded liabilities such as Obamacare and Govt pensions is $167 trillion"
Money America owes Americans. So their taxes may have to rise. So what?

"So you say they have a net worth of $70 trillion. Not possible."
Considering all the high value activity in that country, it's entirely possible.

"China has now surpassed the USA as the No 1 world economy."
Not by any measure that matters!

"Our debt has mainly over inflated our house prices."
No, our debt has enabled great investments to improve our productivity. But because of a lack of significant taxation of land value, it has also had the side effect of increasing house prices.

"It is the creation of new money by private central bankers like the Rothschilds which has created this mess."
Apart from the arguable case of the USA, can you (with proper evidence, not just a claim from a nutty conspiracy site) name even one country that still has a private central bank?

"When inflation grows via debt, exponentially more money must be created each successive year to pay for the debt of previous years."
Except that the money is already in the economy.

"We are in a death spiral of the beginnings of hyperinflation."
So how come the inflation rate is so low?
Posted by Aidan, Monday, 29 December 2014 8:12:58 PM
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With some heads buried so far in the sand all one can do is patiently wait for what is inevitable then say "I told you so".
Posted by Philip S, Monday, 29 December 2014 9:03:09 PM
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Atjay and Aidan have destroyed the credibility of Janet Yellen and yet Philip S only has his head in the sand along with all the other sheep. Surely if we believe what we are told there is only one alternative and that is to buy Gold with our ears pinned back.
The problem is dishonest money. Federal Reserve officials are free to print as many dollars as they wish, completely unaccountable for the purchasing power stolen by legal fiat.
Honest money in the form of physical gold is the solution. Gold coins, bars, and rounds represent value that cannot be inflated away. In the long run, no other asset offers the same track record -- particularly during turbulent times. Families who save using private, portable, and enduring gold have been passing wealth from one generation to the next for literally thousands of years.
Posted by Dickybird, Tuesday, 30 December 2014 7:05:20 AM
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Dickybird. PhilipS is on the right track. It is Aidan who has the comprehension problem. Aidan says there is little or no inflation.

Well little of this money printing is seen in rising wages or prices for consumer goods but the inflation is seen in the share market, derivatives and house prices. When these markets collapse we will see hyper-inflation.

It is the big end of town that benefits from the inflation of share market prices because they know when to get out while the small investors and their pension funds get screwed once again.
Posted by Arjay, Tuesday, 30 December 2014 9:11:38 AM
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Arjay, let me get this straight: you think the poster who lists dozens of government owned and controlled central banks and claims they're Rothschild owned and controlled is on the right track, and the one who challenges him to provide evidence that any of them are in private ownership has a comprehension problem? ? ?

It may surprise you to learn that comprehension does not equate to gullibility!

By what mechanism do you think a market collapse would result in hyperinflation? It doesn't seem to make much sense, as previous market collapses have heralded eras of very low inflation (and sometimes even deflation).

And if you think it's the big end of town that will benefit, why do you worry about what congress has done to the legislation you can't even spell?

__________________________________________________________________________________________

Dickybird

If you believe all you're told
Try investing in gold
But do not show surprise
If it fails to rise
Don't be perplexed at all
If you see its price fall!

BTW legal fiat is what gives currency its value, not what destroys it. And money printing is not done at the bank officials' whim, but to meet economic objectives.
Posted by Aidan, Tuesday, 30 December 2014 10:29:44 AM
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BTW legal fiat is what gives currency its value, not what destroys it. And money printing is not done at the bank officials' whim, but to meet economic objectives.

Posted by Aidan, Tuesday, 30 December 2014 10:29:44 AM

Whose economic objectives ie the banks do they serve in money printing. BTW money printing refers to money created from nothing by private banks in excess of growth which in turn produces our inflation.

So Aidan our banking system creates this inflation money as debt and asks us to repay principal + interest on what should be already ours.

In other words we are paying the banks to depreciate our money. How utterly stupid is that ?
Posted by Arjay, Tuesday, 30 December 2014 11:44:45 AM
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Arjay,
"Whose economic objectives ie the banks do they serve in money printing."
The nation's.

"BTW money printing refers to money created from nothing by private banks in excess of growth which in turn produces our inflation."
Alas reality isn't that simple, as you can't beforehand say what growth will be, and money printing is itself one of the things that drives it.

"So Aidan our banking system creates this inflation money as debt and asks us to repay principal + interest on what should be already ours."
Try rewriting the above without the use of pronouns and you'll probably start to see why that's actually a sensible way to do it – especially if you consider the different roles of central and commercial banks.

"In other words we are paying the banks to depreciate our money. How utterly stupid is that ?"
A lot less stupid than it sounds.
Posted by Aidan, Tuesday, 30 December 2014 1:47:49 PM
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Dickybird - appear you misunderstood what I wrote, it is not myself who has there head in the sand, I will just wait and remind the person when the inevitable does happen.

Aidan - The US has created out of thin air hundreds of billions of dollars for "Quantitative easing" but the average Americans standard of living has not increased because of it. over half the population is on some form of Government assistance. The only people who have gained to any large extent are the 1% mega rich

The interest bill alone is astronomical especially when you consider they did not really have to pay any interest to the private bankers in the first place, they could have just printed and issue the money.

Quote "Try investing in gold
But do not show surprise
If it fails to rise"

Of course it is going down now because it has to if it rises the US dollar will crash, the market is being rigged downwards, this has been proven true by some institutions being fined for doing it.

The reason they can rig it is easy because most people buying or selling are not selling or taking delivery of real Gold just paper that is supposedly backed by real gold. Reality is if everyone with paper gold tries to cash it in for real gold there will be nowhere near enough to fulfill the demand.
Posted by Philip S, Tuesday, 30 December 2014 2:44:55 PM
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Aidan I cannot cure your cognitive dissonance so future interaction is pointless.

Philip S diversify your assets and keep little money in a bank account. We cannot rely just on precious metals as our Govt who is owned by this banking system may just decide to confiscate PMs or put super tax on them or they may just fix the price of PMs. Opals, diamonds etc may be a better option.

Many of the commenters on the sites I've referenced are saying this will be a big year of change. No one knows exactly when but they all agree that this collapse will be enormous. Why would the banks instigate "bail in" if they are so sound? Why would Congress put the US tax payer on the hook for private derivative gambling of $303 trillion if the system was safe?

You just can't make this stuff up!
Posted by Arjay, Tuesday, 30 December 2014 6:52:47 PM
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I am so glad your head is not in the sand Philip S and you have exactly the right ideas over holding Gold as the one secure holding. The problem Arjay with opals and diamonds is that they are much harder to cash in and they cannot be divided into smaller parts.
More serious is to try and think what will be the trigger for the collapse. Will it be the default of Greece or bankruptcy of one or other of the minor oil economies like Venezuela or perhaps Nigeria. Or a new Arab Spring. Or will the Chinese decide that they are fed up with being the manufacturer for all the worlds goods and currently being paid in fiat currency that can be printed at will. When they have accumulated enough gold,will they turn round and make the renminbi convertible.
Posted by Dickybird, Tuesday, 30 December 2014 7:58:26 PM
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Your guess is as good as mine as to what the trigger will be.

Everyone with half a brain knows something is wrong, but the bankers, puppet politicians and paid for credit ratings agencies are so good at making a pile of crap look good all one can do is sit back and wait.

With the G20 bail in rules I see it sooner than later.

The Chinese currency in convertible with a few of the Major currencies now.
Posted by Philip S, Wednesday, 31 December 2014 12:04:53 AM
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According to Dave Hodges the banker "bail ins" have already begun.
http://www.thecommonsenseshow.com/2014/12/30/american-bank-bail-ins-beginning/
Posted by Arjay, Wednesday, 31 December 2014 6:16:46 AM
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The basic rules of capitalism have been distorted ever since Britain changed from the system to pay for the 1914 war and Winston Churchill failed to put it back in 1926 at the right rate and made the depression worse.
The basic rules of capitalism cannot work if some people, in particular central bankers are allowed to print unlimited amounts of fiat money. Lord Keynes would be appalled if he could see how what he envisaged as an only temporary experimental increase in money supply has been stretched. There has to be an independent arbiter controlling the quantity of whatever we use as ‘money’ to facilitate the exchange of goods. Something as intrinsically valueless as gold fills the bill pretty well. It is not particularly fair to the rest of the world as Australia is digging up appreciable new supplies every year but to paraphrase Winston’s comment on democracy “It has been said that the gold standard is the worst form of money except all the others that have been tried”.
The nineteenth century was the century of the ‘Gold Standard’ and yes it had its fair share of booms and busts but there was practically no inflation and one pound had broadly the same purchasing power at both the beginning and the end.
Posted by Dickybird, Wednesday, 31 December 2014 7:00:35 AM
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Dickybird, if that's what the basic rules of capitalism are then we're much better off without them! The gold standard only keeps people in poverty, and results in huge amounts of resources being wasted on acquiring gold. Far from being appalled at the increasing money supply, Keynes would have been appalled that countries are again implementing austerity policies at a time of high unemployment.

Money is a great servant but a terrible master. Linking it to gold hampers its ability to serve you and forces you to adjust your policies to serve it.

______________________________________________________________________________________________

Arjay it's your own cognitive dissonance that you need to work on curing.

______________________________________________________________________________________________

Philip S, while you're reliant on the misinformation of conspiracy websites, your denial that your head is in the sand is not plausible.

QE is a very inefficient way of getting money into an economy, but it's better than nothing. Government spending of course a much better approach. But to say they could just print the money is a bit misleading: to control the inflationary impact of their spending, the government (or the central bank, which is in government ownership) will have to pay some interest). Except maybe if their spending is so low and their stimulus so ineffective that they're having to run a zero interest rate policy.

Why, and how far, do you think the US dollar would crash if the gold price rises?
Posted by Aidan, Wednesday, 31 December 2014 9:23:20 AM
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Aidan you appear to have got it all the wrong way round. What evidence do you have that the Gold Standard “keeps people in poverty” In fact the nineteenth century was enormously successful in lifting people out of poverty. Probably if you take inflation into account it was better than the Twentieth. Where are your “huge amounts of resources being wasted on acquiring gold” If the Fed Reserve had been forced to buy gold to match their printed fiat dollars, the price of gold would be around $40k per Oz. Of course in the unlikely event that they will be forced into covering their errors then you might be right !
Your last para starting with “QE” indicates that you may be falling into socialist errors
“ the government will have to pay some interest). Except maybe if their spending is so low and their stimulus so ineffective that they're having to run a zero interest rate policy.” We are already suffering from incredible excess of spending in the form of fiat money being created, not for any quasi legitimate purpose on improving infrastructure, but on bailing out (or In, whichever you prefer) financial outfits which should have been left to collapse like Lehman Bros and LCTM.
Posted by Dickybird, Wednesday, 31 December 2014 11:41:40 AM
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Aidan "QE is a very inefficient way of getting money into an economy, but it's better than nothing". The money is not getting into the real economy for production or jobs. It is all for speculation, blowing up derivatives and inflating house prices.

Dr Paul Craig Roberts is the ex-assistant secretary to the US Treasury. According to Aidan conspiracy theorists are oozing from the woodwork. Perhaps there are communists and terrorists under your bed Aidan. The really big terrorists are the financial ones you refuse to acknowledge.
http://kingworldnews.com/dr-paul-craig-roberts-12-20-14/
Posted by Arjay, Wednesday, 31 December 2014 11:43:37 AM
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Have you ever wondered why all of this doom and gloom doesn’t find it’s way into normal news services.
Posted by 579, Wednesday, 31 December 2014 11:58:19 AM
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Dickybird,
<<Aidan you appear to have got it all the wrong way round. What evidence do you have that the Gold Standard “keeps people in poverty”>>
It prevents the money supply being expanded as needed.

<<In fact the nineteenth century was enormously successful in lifting people out of poverty. Probably if you take inflation into account it was better than the Twentieth.>>
Technology was enormously successful in lifting people out of poverty in the 19th century despite the hindrance of the gold standard. Unfortunately the economic damage from the gold standard and managed exchange rates continued through most of the 20th century too.

<<Where are your “huge amounts of resources being wasted on acquiring gold”>>
All that gold sitting in bank vaults... did you think governments got it for nothing? Governments could have devoted their resources to improving infrastructure and the education and health of the people. Instead the governments chose to hoard gold while many people remained destitute.

Fortunately the gold standard is dead, so we no longer have that problem.

<<Your last para starting with “QE” indicates that you may be falling into socialist errors>>
How does a socialist error differ from any other kind of error?

<<We are already suffering from incredible excess of spending in the form of fiat money being created,>>
We're not suffering from it, we're merely not benefitting as much from it as we should be.
Posted by Aidan, Wednesday, 31 December 2014 5:13:17 PM
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Arjay
<<The money is not getting into the real economy for production or jobs. It is all for speculation, blowing up derivatives and inflating house prices.>>
The main function of the stock market is to translate speculation into real gains.

Wrecking the real economy by keeping money in short supply is an extremely damaging way of controlling house prices. Land value taxation is a much better way to do it.

<<According to Aidan conspiracy theorists are oozing from the woodwork.>>
No they're not, but conspiracy theorists certainly exist, and you can find a lot of them on the internet. As indeed you have. But why do you choose to believe their claims when they're proven to be false?

<<Perhaps there are communists and terrorists under your bed Aidan.>>
You can make up conspiracy theories about what's under my bed if you want, but please don't let a good story get in the way of the facts!
Posted by Aidan, Wednesday, 31 December 2014 5:14:19 PM
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A Socialist error is that they are so kind hearted that they want to, and frequently do, give away large amounts of money that they do not have. Sometimes they want everyone to have free healthcare (Obamacare) and sometimes it is only to save a Stockmarket crash by giving ever increasing amounts to financial organizations (retail banks and Freddy Mac). Sometimes they don’t know what to do but they have a compulsion apparently to do it anyway (Pink Batts)

Problem is that anything that can be created at no or negligible cost has by definition to be worthless – only Monopoly money. Aidan - under your system how are you suggesting that fiat dollars can be changed into providing real permanent value which does not depreciate annually without fail ? Is it fair that some people, central bankers, have arranged affairs legally so they can create and manipulate economies any way they like ? Or have they unwittingly painted themselves into a corner from which the only escape is a major depression ? Or will it be Weimar Republic inflation ?

The corner they find themselves is that they will lose all credibility if they continue printing money (a lot of credibility has gone already) but if they stop printing money the interest rate will go up, back to normal levels, and the recipients of all that stupendous amount of credit will be unable to pay and will collapse. Either way we have to return to a system that uses as “money” something that cannot be created out of thin air (or thin plastic). It also needs other various characteristics, but the only serious applicant for the office is Gold
Posted by Dickybird, Thursday, 1 January 2015 9:09:02 AM
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A quick answer to 579 on why the mainstream news does not print these warnings is twofold. One my stockbroker several years ago told me “Yes, you are quite right, but there is money to be made in the mean time” and secondarily prophecies of doom and gloom do not sell newspapers.

Philip S made the comment "With some heads buried so far in the sand all one can do is patiently wait for what is inevitable then say "I told you so". He is absolutely right !
Posted by Dickybird, Thursday, 1 January 2015 9:10:03 AM
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People love doomsday scenarios of all kinds: economic, societal, apocalyptic, zombie.

The world was supposed to end twice in the past few years. A Google News search of "collapse" will yield tens of thousands of results on any given day.

To hear the talking heads tell it... The dollar's gonna collapse. The Dow's gonna collapse. The U.S. is gonna collapse.

All of this, of course, is hyperbole — bells and whistles meant to grab your attention.

But what lies beneath these calls for crisis — the data, reasoning, rationale, and denial — is very real. Icebergs aren't as exciting as avalanches, I suppose.
Posted by 579, Thursday, 1 January 2015 9:58:37 AM
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The major price manipulation of gold happens at GLD and the Comex. For every $100 of paper gold they have to sell at least $1 of real gold to make it look legitimate. Harvey Organ thought they would run out real gold/silver by last Christmas 31/12/14 and the whole scam would collapse.

I think Comex and GLD are using proxies to buy up the real gold and then recycle it on the next trade so their reserves do not diminish, thus this suppression could go on for some time. With Shanghai being the new centre of gold trades this will change. So don't expect PMs to suddenly rise when a collapse happens as infinite money created by these Central Bankers still has the market very controlled.

http://www.thecommonsenseshow.com/2014/12/31/new-york-federal-reserve-signaled-end-dollar-near/
Posted by Arjay, Thursday, 1 January 2015 5:54:12 PM
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Dickybird,
<<Problem is that anything that can be created at no or negligible cost has by definition to be worthless – only Monopoly money.>>
False. Cost of production does not determine value. Supply and demand does.

<<Aidan - under your system how are you suggesting that fiat dollars can be changed into providing real permanent value which does not depreciate annually without fail ?>>
By controlling supply to match demand. However it is rather silly to prioritise their value as a store of value to such an extent that it compromises their effectiveness as a means of exchange.

<<Is it fair that some people, central bankers, have arranged affairs legally so they can create and manipulate economies any way they like ?>>
When the central banks are owned by, and accountable to, the governments of the countries they're in, yes it is fair.

<<Or have they unwittingly painted themselves into a corner from which the only escape is a major depression ?>>
A major depression would be the corner, not the means of escape.

<<Or will it be Weimar Republic inflation ?>>
No, that's an extremely easy problem to avoid.

<<The corner they find themselves is that they will lose all credibility if they continue printing money (a lot of credibility has gone already) but if they stop printing money the interest rate will go up, back to normal levels, and the recipients of all that stupendous amount of credit will be unable to pay and will collapse.>>
Fortunately credibility in your eyes is completely unimportant. The dollar won't collapse if they continue the current policy, though lending to governments to do something useful with the money would be far more effective in reviving the economy.

<<Either way we have to return to a system that uses as “money” something that cannot be created out of thin air (or thin plastic).>>
They tried to do that once before, and it caused the Great Depression! We have to never ever do anything that idiotic again.
Posted by Aidan, Friday, 2 January 2015 12:11:36 AM
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Aidan – you are such a delightful optimist. You are prepared to run appalling risks to get the rewards you want but will not accept they are appalling risks.

Supply and demand. You are right, but when supply is costless the equation only works when you can pull the wool right over the sheeples eyes. Therefore this is valid for only a limited time

Next “central banks are owned by, and accountable to, the governments of the countries they're in, yes it is fair” Central banks are neither owned by or accountable to the elected Govts in the West. This is true in autarchies. Do you think this is the way we will be going ?

“The Weimar republic is easy to avoid” By Hitler’ methods ! Or would you prefer Mussolini just making the trains run on time !

“Fortunately credibility in your eyes is completely unimportant” Wrong Credibility is vital – this is the whole point. Fiat currencies are rapidly losing it. A quick example One US $ in the beginning of the century is I believe now worth about 75 cents. One Oz of Gold – valued in US$ is up very considerably. Gold valued as ‘value for exchange purposes’ has probably remained about level. I completely agree that QE could have been better invested see FDR’s TVA scheme or the Hoover Dam.

...the Gold system... “ caused the Great Depression! We have to never ever do anything that idiotic again”. It is inevitable that we return to a ‘money’ system that is not run at the whim of central bankers who are too frightened to penalize financial transgressors (aka Gordon Gecko etc) who over step the mark. Credit should only be created when it is for genuine increases in infrastructure/assets
Posted by Dickybird, Friday, 2 January 2015 7:45:09 AM
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Too many different scenerios to be of any consequence. Too much emphisis put on world banks. Even if goldman sachs owns the building that doesn't say they own the wealth it is worth.
Your explanation of why these stories don't reach normal media is as thin as a dollar note. I prefer my version of why this does not happen.

Havn't you ever asked the bank for a printout of your wealth. It is not hard to lose track of what you have. I would suspect that happens with gold bars stashed in someone elses bank. What makes their bank any more secure than their own.

All of these hyper predicionists have something to sell, and there is enough people that crave the sorts of words they print to be a best seller.
Posted by 579, Friday, 2 January 2015 8:31:50 AM
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Dickybird – you are such a delightful pessimist. You are prepared to do appalling damage to the economy just to avoid phantom risks. 'Tis as if you're so concerned about the risk of syphilis that you're advocating the consumption of arsenic!

Instead of panicking, have a look a the actual causes of hyperinflation episodes:
•In the 20th century, many of them were actually CAUSED BY the gold standard! The danger of running out of gold means that far from preventing the risk, it greatly increases it.
• A related risk is suddenly having to pay back a foreign currency loan when you don't have enough of that currency. The gold standard is not the main cause of this, but by restricting the domestic money supply it does favour foreign currency loans (which are).
• Even without the gold standard, fixing your currency against another currency can lead to hyperinflation, as it did in Russia.
• The Weimar hyperinflation was caused by the lack of an effective taxation system. Once they introduced one, the problem was quickly solved.
• And of course there's Zimbabwe, where the government effectively declared war on the main export industry while discouraging foreign investment.

The only example that does not fit any of those categories is America during its War of Independence. Continental dollars were issued to pay for the war effort, but not only was there no policy to limit supply to maintain value, but the British flooded the market with counterfeits.

But unless there's a counterfeiting problem, the low cost of production is totally unrelated to the market value. Supply is driven by the needs of the economy, not the profit motive. The claim that "Central banks are neither owned by or accountable to the elected Govts in the West" is an outright lie. They are both in every western country with the arguable exceptions of the USA (where it's accountable to a government that wons the profits but not the institution) and the Eurozone (where national central banks can no longer print money and the EuroGovernment-owned ECB's technically accountable but insufficiently so).
Posted by Aidan, Friday, 2 January 2015 12:12:33 PM
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<<“Fortunately credibility in your eyes is completely unimportant” Wrong Credibility is vital – this is the whole point. Fiat currencies are rapidly losing it. A quick example One US $ in the beginning of the century is I believe now worth about 75 cents. >>
Even if credibility is vital, you are not the arbiter of what's credible. As I said, credibility in your eyes is completely unimportant. And just because the US$ has lost some of its value doesn't mean it's lost credibility.

<<One Oz of Gold – valued in US$ is up very considerably>>
Yes. So are many shares. But prices can go down as well as up.

<<Gold valued as ‘value for exchange purposes’ has probably remained about level. >>
And that's because we're not relying on it. Were we to rely on it, its short supply would create problems.

<<...the Gold system... “ caused the Great Depression! We have to never ever do anything that idiotic again”. It is inevitable that we return to a ‘money’ system that is not run at the whim of central bankers who are too frightened to penalize financial transgressors>>
The central bankers don't run it at a whim, they follow their government's instructions. And what currency is used does not make it easier or harder to penalise financial transgressors, which is generally not part of the role of the central bank anyway.

<<Credit should only be created when it is for genuine increases in infrastructure/assets>>
As long as credit can be repaid, why should banks care what it's used for? And who decides what's a genuine increase anyway?
Posted by Aidan, Friday, 2 January 2015 1:52:28 PM
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Aidan – I am not the one doing appalling damage, it is your friends Bernanke and Yellen and probably Draghi too. I only take precautions to survive the coming disaster by holding a large proportion of my assets in various forms of gold. I have no effect whatsoever on the world economy and I refuse to be held responsible for it ! I am not panicking, I am merely laying in ample supplies of ‘arsenic’ while I can continue with wine, women and song ad lib but only for the present. A quote from Douglas Hawks PHD MBA. Comments in brackets from me !

“The first cause of hyperinflation is when the market - consumers and other users of a currency - begin to lose faith in a country's currency. If consumers believe that the government won't honor the promissory notes (cash) it is issuing, then nobody wants to hold that cash. (How can anyone believe in the reliability of something that can be and is printed in apparently unlimited quantities – a few trillion here and there is irrelevant). The other cause of hyperinflation is actually caused by the government issuing the currency. As a government prints more money (already done) the value of that money goes down - just like the value of any commodity decreases as supply increases. The government may print more money to pay its own debts (or to bail out/in any bankruptcies), and by doing so, starts the inflation cycle. That, and people's confidence in that government, can start the hyperinflation ball rolling, and once it starts it can be very, very difficult to stop.”

From my understanding the Weimar hyperinflation was caused by the Treaty of Versailles insisting that Germany pay for the war. They then printed money to pay both that bill and to pay basic expenses and the situation described by Douglas Hawks arrived. It was not caused by a lack of an effective taxation system. This broadly speaking was Zimbabwe too.
Posted by Dickybird, Friday, 2 January 2015 3:32:45 PM
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Dickybird, they're not my friends. And I've got nothing against you gambling a large proportion of your assets on gold, even though I've got everything against replacing fiat money with gold backed money.

<<“The first cause of hyperinflation is when the market - consumers and other users of a currency - begin to lose faith in a country's currency. If consumers believe that the government won't honor the promissory notes (cash) it is issuing, then nobody wants to hold that cash.>>
How long ago did Douglas Hawks write that? Governments stopped honouring cash (in the sense of exchanging it for a set amount of gold) when Nixon was POTUS. Since then a dollar's just been worth a dollar. The market sets its value in real time, so its value is self stabilising (falling boosts exports and curtails imports; rising boosts imports and curtails exports) so the major overvaluations which would've caused hyperinflation during the Bretton Woods era simply don't occur any more.

<<(How can anyone believe in the reliability of something that can be and is printed in apparently unlimited quantities – a few trillion here and there is irrelevant).>>
Because "unlimited" doesn't mean "unrestricted".
Posted by Aidan, Saturday, 3 January 2015 2:02:07 AM
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<<The other cause of hyperinflation is actually caused by the government issuing the currency. As a government prints more money (already done) the value of that money goes down - just like the value of any commodity decreases as supply increases. The government may print more money to pay its own debts (or to bail out/in any bankruptcies), and by doing so, starts the inflation cycle. That, and people's confidence in that government, can start the hyperinflation ball rolling, and once it starts it can be very, very difficult to stop.”>>
Inflation and hyperinflation are two very different things. Can you think of a single example where the former has caused the latter? (I can't).

Hyperinflation is also quite easy to stop: raise taxes (and possibly cut government spending) until the budget balances: it will end almost instantly.

A government printing money to roll over domestic debts isn't a problem, but as I said before, foreign currency debts are a hyperinflation risk. That's why for the past twenty years, the Australian government's had a policy of not borrowing in foreign currencies.

<<From my understanding the Weimar hyperinflation was caused by the Treaty of Versailles insisting that Germany pay for the war.>>
That was certainly a strong contributing factor, but their tax system was ineffective, and the Weimar republic subsequently solved their hyperinflation problem by implementing an effective taxation system.
Posted by Aidan, Saturday, 3 January 2015 2:02:54 AM
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Aidan fiat currencies will only work if our Govts have control of their creation and we have a constitution that limits our Govts from creating too much of it. If private interests have the power of money creation then they own us and our Govts. That is the reality. Some say the Rothschilds are worth $100 trillion since they own a Central Bank in just about every country on the planet. What we have is slavery.

The BRICS nations are trying to break away from their control, this is why WW3 looms.It is our central bankers who are behind all these wars as they want to own the planet via their "New World Order".

Precious metals will have to be the way to stop the bankers from printing our currencies into oblivion. Hyper-inflation will destroy life savings and pension funds. In the USA since 2008 the money supply has increased 4 fold but this money just went into inflating the share market and creating more derivatives.

If infinite money can continue to supress PMs you will still be better off having them than a pension fund that lost 90% of its value.
Since 1913 our $ 1.00 has lost 99% of its value while PMs have gone up in value. Gold in 1935 was worth $35 per oz today it is almost $1400 per oz. If they had not over inflated property and shares and we had a good producing economy then they would out perform PMs.PMs are not a good investment but a hedge against total collapse.

Our economic fundamentals are all bad. Money printing,totally manipulated markets, off shoring of real production, Govt taxes to service unnecessary debt, bankism total control and corruption at every level. If people cannot make enough money to consume the products they produce, then our economies will fail.
Posted by Arjay, Saturday, 3 January 2015 7:48:20 AM
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World war 3 has been looming since world war two ended. It’s a matter of who has the upper hand. There are some rougue countries that are against a free society, and would bring on a world war.
North korea are again being squeezed, Russia are out of order and nearly broke, Iran can’t sell oil at a sustainable price, A host of mid east countries are incapable of fighting a world war, China is on a big downer that will last several years,
The world is overpopulated, and polluted to the extent of climate change, maybe the time is right.
If you are going to have a war you are best to do it while you are on top
Posted by 579, Saturday, 3 January 2015 8:49:36 AM
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I am not the gambler Aidan – you are. Look at the evidence. One oz of Gold has bought either a lovely set of garments or a first class means of transport since about 2000 B.C and still does in 2000 A.D. Hardly changed. Most fiat currencies have totally vanished over that period and the ones that remain can only buy about 90% of the goods they could buy only 100 years ago. It is no contest except for short term gamblers, presumably your goodself included ! You are relying on a theory created by Nixon, among other even more insalubrious efforts, that the Federal Reserve could keep the value of the US$ stable without any independent control that had been provided under Bretton Woods. Nixon of course proved a very reliable guide

“ the major overvaluations which would've caused hyperinflation during the Bretton Woods era simply don't occur any more” What major hyperinflations ? Bretton Woods seems to have provided safety checks even if barely adequately. We are now about 45 years into a major experiment in how to run the world economy without gold as an overall independent controlling factor. We haven’t begun to learn how to do it, if it proves even possible at all, in the long term. There is a rumour that a new overall “currency” is going to be created, supervised by the IMF or perhaps the World Bank – not for use by the sheeples but it will be an attempt to solve the current problems. We await information and hope they can get it right.

“Unlimited” currency printing does appear to mean “unrestricted” if you search for some parameters restricting it in the Fed Reserve releases. Hopefully you are right !
Posted by Dickybird, Saturday, 3 January 2015 9:08:21 AM
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“Inflation and hyperinflation are two very different things. Can you think of a single example where the former has caused the latter? (I can't)”. Except that Hyper is always without fail preceded by ordinary inflation. This will increase if no one deals with it. The early stage inflation can be dealt with by cutting, not increasing, both taxes and govt expenditure and letting small entrepreneurs get on with creating real wealth. The Regan years. Late stage hyper inflation necessitates changing your currency altogether or devaluing it by 1000 times (France in the 1950’s). No one knows how to deal with (value) a world currency that has “inflated” its size by at least 5 times in the last few years, but so far not dealt with its value. I am lost. I wish you would tell me what is going to happen in the next few years when some of the chickens come home to roost !

Can I strongly recommend http://www.usagold.com/germannightmare.html for a detailed history of that nightmare and reasons why the initial stages are being faithfully copied in the present.
Posted by Dickybird, Saturday, 3 January 2015 9:20:53 AM
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Arjay,
<<Aidan fiat currencies will only work if our Govts have control of their creation and we have a constitution that limits our Govts from creating too much of it.>>
Governments DO have control of their creation, and we don't need limits to money creation to be enshrined in the constitution. Having it set at th epolicy level is just as effective, though the current policy settings are actually too hawkish: there's too much of a focus on controlling short term inflation rather than encouraging economic growth and controlling long term inflation.

<<If private interests have the power of money creation then they own us and our Govts. That is the reality. Some say the Rothschilds are worth $100 trillion since they own a Central Bank in just about every country on the planet. What we have is slavery.>>
Why not make it a quadrillion since they own alien spaceships?

In reality they don't own any central banks, apart from part technical ownership of the US Federal Reserve (with neither control nor a share of the profits).
Posted by Aidan, Saturday, 3 January 2015 10:26:01 AM
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Lets not tell to many facts Aiden, it will ruine some good conspiracy's for now and the future. When truths are laid out they are glossed over and not recognised.
The conspiracists are story tellers, and would be film directors.
Posted by 579, Saturday, 3 January 2015 11:57:10 AM
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Dickybird,

Prices can go down as well as up, so investing in precious metals is a gamble. The long term odds do appear to be good, but not as good as shares.

Nixon didn't create the theory, he was merely forced by events to implement it. And it's probably the best thing he ever did, as it avoided the economic catastrophe that would've occurred had the USA run out of gold.

I didn't say there were major hyperinflations in the Bretton Woods era; the major overvaluations were dealt with before they reached that stage, so I accept your claim that "Bretton Woods seems to have provided safety checks even if barely adequately". But I disagree wholeheartedly with your claim that "We haven’t begun to learn how to [run the world economy without gold as an overall independent controlling factor], if it proves even possible at all, in the long term." We know exactly how to do it: use a combination of fiscal policy and monetary policy to control the amount of currency available. There's almost universal consensus about that, though some disagreement remains (and probably always will remain) about how to prioritise competing demands.

We certainly don't need a new currency, and the need for the World Bank and IMF has diminished.
Posted by Aidan, Saturday, 3 January 2015 5:44:30 PM
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<< Except that Hyper is always without fail preceded by ordinary inflation.>>
But never caused by it.

<<This will increase if no one deals with it.>>
As I said, a combination of fiscal policy (taxation and government spending) and monetary policy can deal with it.

<<The early stage inflation can be dealt with by cutting, not increasing, both taxes and govt expenditure and letting small entrepreneurs get on with creating real wealth. The Regan years>>
The objective is to increase government revenue to avoid having to rely on borrowing or printing money. Raising taxes is nearly always a more effective way of doing this than cutting taxes. And even in Reagan's America, the total tax burden rose even while direct taxes increased.

<<Late stage hyper inflation necessitates changing your currency altogether or devaluing it by 1000 times (France in the 1950’s).>>
1950s?

<<No one knows how to deal with (value) a world currency that has “inflated” its size by at least 5 times in the last few years, but so far not dealt with its value,>>
If it's really overvalued, the obvious thing to do is sell it. But be sure it really is overvalued. Factors like balance of trade tend to be the most important long term indicator.

<<I am lost. I wish you would tell me what is going to happen in the next few years when some of the chickens come home to roost !>>
The Ą will rise again when Japan resumes using nuclear energy.
If a rise in government deficit results in a currency falling, buy (because the situation will not last)
And though gold's not the best investment, it's unlikely to be the worst either!
Posted by Aidan, Saturday, 3 January 2015 5:44:53 PM
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Aiden on money creation."Governments DO have control of their creation, and we don't need limits to money creation to be enshrined in the constitution. Having it set at the policy level is just as effective, though the current policy settings are actually too hawkish: there's too much of a focus on controlling short term inflation rather than encouraging economic growth and controlling long term inflation."

John Howard signed away all power over our RBA in his term. Joe Hockey recently hinted to our banks that they needed to hold more cash reserves as a % of loans .In other words stop printing so much money.The bank's reply was that rates and bank charges would increase. Hockey was silenced.

With the instigation of the private US Federal Reserve Congress had a lot of power to control the money printing, however slowly that power was eroded by the Fed via their powers of money creation. The RBA is another Rothschild controlled central bank that owns and controls the Govts of Australia. We have lost our sovereignty and what little freedoms we had. We are just another vassal state of the Empire of Bankism.
Posted by Arjay, Saturday, 3 January 2015 8:52:23 PM
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It should be understood that Gold in all its various forms is an Insurance policy NOT an investment. It may easily go up and down in terms of any fiat currency but it provides safety

Yes, Nixon didn’t create the theory he merely read part of Keynes and then distorted it. It would have been so much better if we had had the crisis then, it is going to be far worse when it does come – shortly. When it does come I expect a new currency will be forced on the world by China with the support of the BRICS. If we are lucky the IMF and World Bank may have a say. This will be only to settle accounts between countries and will not be available for individuals. Its purpose will be to prevent the creation of unrestricted/unlimited credit, which the world (and not just a few people with foresight) will consider as the cause of the crisis. To go further, what would this currency look like and will it have some automatic controlling mechanism. It may well not be Gold as it was all through the 19th century and partially the 20th, but what are the alternatives. Suggestions please

One thing I believe we cannot continue to do as you seem to think we can, is to say “Janet Yellen is a lovely lady and I am sure she will get it right. We will trust her with all our money”

” a combination of fiscal policy (taxation and government spending) and monetary policy can deal with it.” It being inflation. How or why then did we get into the massive Q.E’s ? Inflation is the old fashioned way of reducing debts and we have to have inflation to reduce the massive debt. Do you really believe that Janet can balance everything so we have a little bit of inflation but not too much ! To go back to an earlier post you are a delightful optimist. I just hope you are right but I want my insurance policy !
Posted by Dickybird, Sunday, 4 January 2015 8:31:10 AM
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Unbelievable, Arjay...

"The RBA is another Rothschild controlled central bank that owns and controls the Govts of Australia. We have lost our sovereignty and what little freedoms we had. We are just another vassal state of the Empire of Bankism."

Which empire is that?

Shouldn't we then be vassals to, say, the three largest banks in the world? You know; number one, the Industrial and Commercial Bank of China, number two, The Hong Kong and Shanghai Banking Corporation (HSBC) or number three, Credit Agricole Bank of France?

To give you something to work with the postal address for Credit Agricole Bank is 42/4, Pushkinska St, 01004, Kyiv, Ukraine!

Just to put it into perspective the ICBC, alone, could buy and sell the entire Rothschild family about ten times over...

Any news yet about that gold audit, you know, the one with which you started this thread?
Posted by WmTrevor, Sunday, 4 January 2015 10:10:42 AM
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Arjay, Howard may have signed away too much power over the RBA to the RBA, but we did not lose any of our sovereignty. The government still sets the RBA's objectives, it is still 100% government owned, and is not in any way controlled by the Rothschilds.

_____________________________________________________________________________________________

Dickybird, technically gold is a hedge rather than an insurance policy, and there are many other investments that are also hedges.

Nixon acted out of economic necessity, not because of any interpretation (correct or otherwise) of what Keynes wrote. The USA was running out of gold, and had he failed to act it could have resulted in hyperinflation.

The inflation crisis occurred in the 1970 thanks to OPEC. It's over! The global economy is no longer so reliant on a single commodity so cost push inflation is no longer a serious threat. And central banks use interest rates to control credit creation so that it isn't unrestricted. Therefore we don't need another currency, and there is no reason for China to insist accounts be settled in a currency other than its own!

<<How or why then did we get into the massive Q.E’s ?>>
Because there was a fall in private borrowing and governments were stupidly reluctant to take up the slack. Without governments running bigger deficits until the private sector recovers, QE enabled money to get into the economy, though it was an inefficient way of achieving that.
Posted by Aidan, Monday, 5 January 2015 1:42:23 PM
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Aidan's comments.Arjay, Howard may have signed away too much power over the RBA to the RBA, but we did not lose any of our sovereignty. The government still sets the RBA's objectives, it is still 100% government owned, and is not in any way controlled by the Rothschilds.

Aidan the BIS (Bank of International Settlements is a Rothschild Bank)sets all the rules for all our banks to function. They do this through APRA.The RBA sets interest rates not the Australian Govt.
Posted by Arjay, Wednesday, 7 January 2015 6:11:24 AM
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Arjay the BIS is owned not by the Rothschilds but by its members, of which the RBA is one. The BIS set some international rules for central banks, and sets (but does not enforce) capital requirement standards for commercial banks. APRA set and enforce some domestic rules for the banking system. Neither of those take away ultimate control from the Australian government.

The RBA sets interest rates according to the Australian government's objective. Although the government surrendered day yo day running of interest rate policy, they still retain overall control, and there is a dispute resolution process for any disagreements between the treasurer and the RBA board. AFAIK that process has never been used, though IMO Wayne Swan should have used it when the RBA unnecessarily hiked interest rates in 2009 and 2010.
Posted by Aidan, Wednesday, 7 January 2015 8:55:04 AM
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Aidan I rather believe Ellen Brown who has written volumes on this topic.

Quigley wrote of this international banking network:
“[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”
Yes private Central banks whom the Rothschilds are the king makers.

http://www.globalresearch.ca/the-tower-of-basel-secretive-plans-for-the-issuing-of-a-global-currency/13239
Posted by Arjay, Wednesday, 7 January 2015 5:34:10 PM
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Arjay, there are no plans to introduce a global currency, there are no central banks under Rothschild control, and with the technical exception of the USA, no country has its central bank in private ownership.

Countries, not the BIS, regulate commercial banks.

People post all sorts of claims on the internet that are easily refutable with readily available information, so why do you always prefer to believe the conspiracy theories?
Posted by Aidan, Wednesday, 7 January 2015 6:37:57 PM
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Aidan in denial again. Read James Rickards "The Death of Money". He is a CIA and Central Bank insider. Rickards is pushing for the IMF to be the source of this new Global Currency called special drawing rights but the BRICS nations have other ideas.

The IMF do not have enough gold to back their currency while the BRICS do with the massive gold reserves of China ,Russia and India. Just the Indian pop alone in jewelry they have 18,000 tonnes.

The new world order of banksters is failing and this why they they are pushing for war with Russia and China.
Posted by Arjay, Thursday, 8 January 2015 5:33:44 AM
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An interesting thought-bubble, Arjay.

>>The IMF do not have enough gold to back their currency while the BRICS do with the massive gold reserves of China ,Russia and India. Just the Indian pop alone in jewelry they have 18,000 tonnes.<<

Do you have any, you know, facts, with which to back your assertion that the BRICS have "enough gold to back their currency"? Some actual numbers would be helpful, they generally lend a whiff of credibility to an argument involving quantity.

And when you say "the Indian pop alone in jewelry they have 18,000 tonnes", how would you suggest that these trinkets, predominantly in the hands of the public, are able to be used to back their country's currency?

You still don't actually think these things through, do you.
Posted by Pericles, Thursday, 8 January 2015 5:50:11 AM
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Arjay, denying your silly claims doesn't make me, or anyone else, "in denial". To be in denial one has to deny actual facts like you do!

Special drawing rights are not a currency, and their use to set the values of currencies has declined since their introduction. See http://en.wikipedia.org/wiki/Special_drawing_rights

Currencies no longer need gold backing - they're backed by debt and taxes. But global taxation is politically impossible, so there will never be a global currency replacing all the others. And nor should there be; just look at the trouble the Euro has caused to some of its members!
Posted by Aidan, Thursday, 8 January 2015 12:42:47 PM
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Aidan,"Currencies no longer need gold backing - they're backed by debt and taxes." You have just explained why the whole system is doomed to failure. So two negatives will give us a currency positive ?

Inflation created as debt which excels growth is killing all western economies and we get taxed to pay back debt on money that should be ours in the first place.
Posted by Arjay, Thursday, 8 January 2015 6:02:38 PM
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Arjay, though you may dislike them, debt and taxes are not negatives; they're essential processes, unlike gold which is just an expensive luxury. Debt, along with government spending, puts money into the economy, enabling it to work, and taxes take it out again.

The whole system is not doomed to failure. But a gold backed system would be doomed to failure when gold supplies run out.

Inflation rates are low in western economies so your argument that it's killing them is just silly.

<< we get taxed to pay back debt on money that should be ours in the first place.>>
As I said earlier in the thread, your pronouns make it appear silly. If you rewrote it without them then it might help you understand why we pay ourselves interest on the money we borrow from ourselves.
Posted by Aidan, Thursday, 8 January 2015 9:13:44 PM
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Arjay, one of the questions you regularly fail to answer, is the simple "why should gold - a mineral, dug out of the ground like so many others - be an appropriate currency in the twentyfirst century"?

What is it about gold-as-currency, apart from a nostalgic feeling that things were so much better when we traded in doubloons, that you admire so much?

After all, we measure its value predominantly in paper money, do we not...?
Posted by Pericles, Friday, 9 January 2015 6:27:53 AM
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Aidan It would appear that you believe that the current economic system can continue ad infinitum. If not will you tell me why it is going to crash and of course I would like you to add when.

A Gold backed system is most definitely not doomed to failure. But Gold is probably not the only solution. We have to settle on a system that has Automatic controls on the creation of credit aka fiat money printing. Finally Gold is not only an expensive luxury, it, or something with the same properties, is essential as an independent controller. The reason that we get such wild variations in the prophecies for the US$ value for Gold is very understandable if you treat Gold as stable and the US$ as varying by the amount of unbacked credit printed by the Fed Reserve. The real value of the US$ is highly variable in the long run when a reasonable interest has to be paid on the trillions of new US$, and it will be seen that Gold has always bought the same amount of basic services that it always has.

Please do answer the question of whether you really believe the present system can continue and if you do is there any limit at all to the printing or will they just continue until they run out of paper or perhaps ink?
Posted by Dickybird, Friday, 9 January 2015 8:00:26 AM
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Dickybird, that is simply tosh.

>>Gold has always bought the same amount of basic services that it always has<<

An interesting conjecture. More of a slogan, really. But certainly erroneous.

An ounce of gold in Elizabethan England would make five angels (80 grains each), the most common coin of the era, and be worth two pounds ten shillings. And for two pounds ten shillings, you could pay a labourer's wages for six months. At today's minimum wage of $640.90 per week, six months would cost you $16,663 - eleven ounces of gold.

Slogans are fun, of course. But they should not be used as a substitute for thinking.
Posted by Pericles, Friday, 9 January 2015 1:26:22 PM
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Thank you Pericles for the comment but you are really only pointing out that in the terms of a fiat currency in vogue Gold is very cheap and a laborers wage is vastly overvalued. Or possibly in Elizabethan times labor was very cheap and Gold very expensive.

This is not a valid comparison
Posted by Dickybird, Friday, 9 January 2015 2:46:53 PM
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Dickybird, there is no economic reason why the current system can't continue ad infinitum. It may eventually be replaced with something else for political reasons, but if that happens, that something else will not be gold related.

A gold backed system can not succeed when the gold runs out, therefore either it's doomed to failure when that happens or threatens to happen, or government make the people materially worse off to prevent it from happening (with the poor inevitably hit the hardest). I regard all those outcomes as failures.

We have to AVOID settling on a system that has AUTOMATIC controls on the creation of credit. We need to retain control so we can react to events. We need ACTIVE control, not ultra-expensive passive control!

And if you look at e gold price in the last twenty years, you'll see that it hasn't tracked the cost of basic servioces at all. Even the US dollar is more stable than gold!
Posted by Aidan, Friday, 9 January 2015 3:35:07 PM
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Aidan. I love your capital letters. I think we have got to the nub of the matter. I believe we MUST have automatic controls. If we can get automatic controls then obviously we will not need your active ones. Why are the current active controls bound to fail ? The reason is that human beings are basically corrupt and self promoting and ANY system that puts this sort of power in the hands of a small group of people will inevitably create corruption. Perhaps we are very lucky that the level of corruption in the U.S. and the Western world is fairly low. But it is far higher in the rest of the world and the ROW will not continue for much longer allowing the printing of fiat money which they consider is a form of corruption. They will do their level best to defeat the western system and as they, in particular China, are now the manufacturers of the worlds goods, they create all the genuine wealth.

If we reform our system in time by installing proper AUTOMATIC controls then all might be well. If we fail then we will get the equivalent of the Fed Reserve of the Chinese central bank running the world. The only automatic controller is the old Gold Standard which was so successful in the 19th century. However we are currently relying on the integrity of the various central banks of the world and that sort of reliance has never worked in the past.

A return to the Gold Standard is the only reliable solution.

Lastly Gold will never run out as it isn’t consumed for anything. It may get harder and harder to mine but then the price will rise to compensate. Even your statement “if you look at the gold price in the last twenty years, you'll see that it hasn't tracked the cost of basic servioces at all. Even the US dollar is more stable than gold! Is wrong” Gold was $35 in 1971 and is now nearly A$ 1500. Some stability
Posted by Dickybird, Saturday, 10 January 2015 10:57:59 AM
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Dickybird,
<<If we can get automatic controls then obviously we will not need your active ones>>
That's like saying "if we can get cruise control then obviously we will not need the accelerator and brake"!

Printing fiat money is not corruption at all; it is an important part of sensible economic management. Most countries that do it are actually too cautious, but China is an exception.

Who do you think creates more genuine wealth in the manufacture of iPads: Apple or Foxconn? And why?

Your policies would literally cause a holocaust by diverting resources away from the people who need them most. And for what? Wasting them acquiring gold to permanently manipulate the currency market!

<<Lastly Gold will never run out as it isn’t consumed for anything. It may get harder and harder to mine but then the price will rise to compensate. >>
But if you're on the gold standard, the price CAN'T rise to compensate!

Gold could run out if there's a run on gold. Unless you're referring to a hard gold standard, where there's no more currency than there is bullion; that situation would be far worse, as each boom would necessarily have to be followed by an equally large bust, and we would have destroyed our ability to react to that bust.

<<Gold was $35 in 1971 and is now nearly A$ 1500. Some stability>>
I said twenty years, not forty four! Inflation was high in the 1970s for two reasons: firstly the effects of currency deregulation after a long period of unnecessary regulation, and secondly the effects of OPEC restricting oil supply (which would have been just as bad had currencies retained the link to gold). It took time to stabilise the dollar (and other major currencies) but it's accomplished.

It is IMPOSSIBLE for the price of gold in 1971 to have any bearing whatsoever on the validity of my claim that gold hasn't tracked the cost of basic services at all in the last twenty years.
Posted by Aidan, Saturday, 10 January 2015 4:42:30 PM
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Aidan Cruise control is only a work in progress. When we get to the driverless car we won’t even be offered the brake and accelerator !

Printing money. You may well be right. I am just pointing out that it is too big an invitation to corruption. The innumerable totally inaccurate references to the Rothschilds in this blog are really only jealous ridiculous accusations of corruption.

Apple & Foxconn. Both are essential. The world is now one economy. Both the inventors and the producers are needed but Foxconn is producing continuing wealth while Apple has to reinvent annually. So Foxconn wins until perhaps everyone in the world has an Ipad

"Congress devalued the dollar (in terms of gold) in January 1934. This action raised the official price of gold by more than 65 percent (from $20.67 to $35 per troy ounce)". This is fact and an enormous percentage revaluation. So the price can rise. Perhaps this is the secret – what is needed for a successful Gold Standard is an automatic revaluation maybe annually. This is why the pundits are suggesting the correct gold price is from $2,000 to $40,000 to compensate for the latest QE.

Price of Gold in 1971. The price of gold in terms of the US$ was fixed up to 1971. After that it was at least theoretically free, so that is my reason for a starting point, not an arbitrary 20 years. In fact it has been manipulated since too although this is harder to do. But is that corruption showing its face again. I was an Owner builder in 1971 and I was paying $3 an hour for skilled workers. Now $30+. Stable dollar my foot! Gold in $ terms of course has increased far more. This is what I am saying – we are in a real pickle ! Perhaps the Gold Standard isn’t the solution but the present situation is far worse. I can’t think how you can accept the current situation with equanimity
Posted by Dickybird, Sunday, 11 January 2015 8:13:13 AM
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Dickybird,

Driverless cars react to events. Fixed currencies do not.

Apple does the high value work of designing iPads. Foxconn has the relatively minor role of assembling them, and if Foxconn didn't do it, some other company would. In terms of value, it's contribution is nowhere near that of Apple; it's somewhere among the other component manufacturers.

<<Perhaps this is the secret – what is needed for a successful Gold Standard is an automatic revaluation maybe annually>>
Can you not see why that would amount to a multi trillion dollar government subsidy to the banks every year? Whereas the existing system brings nearly all the benefits of that yet costs nothing.

You use the 1971 starting point because it suits your argument to fudge the figures by including the turmoil of the 1970s! You look at the start and end price and ignore the extreme volatility of the gold price that has not been reflected in the cost of basic services.
Posted by Aidan, Sunday, 11 January 2015 12:26:18 PM
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An excellent longer exposition of the situation.

Unfortunately no solutions offered

http://bonnerandpartners.com/important-story-finance-gold-standard/
Posted by Dickybird, Sunday, 11 January 2015 2:38:01 PM
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Aidan. Fixed currencies certainly do react. Tell that to the Germans, Zimbabweans and even the Argentines.

I was assuming Foxconn entirely manufactured Apple equipment and that Apple mainly designed it. I am not very up on Foxconn, I may be wrong

The Gold Standard with annual revaluation will provide a “multi trillion dollar government subsidy to the banks every year”. If it is designed wrongly it could easily do that. So more thought is definitely required to draft the legislation. But the existing system cannot survive. I hope you have read the reference above to Richard Duncan’s article

The problem is trying to find the proper values for both the $ and Gold is that there is so many corrupt attempts to vary both. Try the Big Mac index. Or try this article

http://www.finfacts.ie/Private/curency/goldmarketprice.htm

It too explains a lot of history
Posted by Dickybird, Sunday, 11 January 2015 3:00:25 PM
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Dickybird, it's the inability of fixed currencies to react in real time that forces their eventual catastrophic reaction.

Foxconn is a computer and consumer electronics assembler. There are several such companies but Foxconn is by far the biggest, and works for many manufacturers. In Apple's case they assemble components made by Apple and by many other manufacturers around the world (with Japan the biggest source country).

Trying to keep a currency above market value for the best part of a year is something that risks bankrupting governments. To attempt to do it at all is to design it wrongly!

The existing free market system can survive and works much better than any centrally planned system would be able to. Sure there's some corruption but it only has a short term effect on prices.

150 years ago, as the article you link to says, a trade imbalance would've caused a big recession. Nowadays with real time currency value adjustments, a trade imbalance is self correcting without a recession. Surely that's better?
Posted by Aidan, Sunday, 11 January 2015 4:37:05 PM
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Aidan. Yes both systems react to crises. The Gold Standard had innumerable small “reactions” in the 19th century and just because Bernanke/Yellen think they can control everything we are inevitably building up for the biggest crises the world has ever seen.

Apple/Foxconn. You asked, I thought, which created the most wealth, the designer or the manufacturer. It is always the manufacturer. Ask any architect, artist, inventor of most things. When it comes to making and selling millions of anything the creative mind gets bored and gives up. The humble manufacturer takes over and creates the wealth the designer made possible.

Next –Gold Standard would tend to bankrupt errant Govts, especially those that print $ just like a counterfeiter. It is supposed to bring them to heel before they have let the whole thing blow up completely. Your system means that there is no penalty for some people to arrange for countfeit/fiat money to be given to their friends in need. The present system IS a centrally planned system. Of course it won’t work – just like the USSR.

In the 19th century a trade imbalance did cause LITTLE recessions – all the time. Now by creating enormous quantities of fiat currency a trade imbalance is being ignored. This seems to be by fooling enough people that there is no trade imbalance. Apple/Foxconn again. How do you imagine the US can design everything and then get China to make it and sell it back to them, be paid in fiat currency and think this can continue for ever ? Mind you the sudden appearance of fracking will mean that the crisis is postponed for several years. But that alone will not be able to fix the basic imbalance
Posted by Dickybird, Monday, 12 January 2015 7:39:40 AM
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This is where your argument gets difficult to maintain, Dickybird.

>>Thank you Pericles for the comment but you are really only pointing out that in the terms of a fiat currency in vogue Gold is very cheap and a laborers wage is vastly overvalued. Or possibly in Elizabethan times labor was very cheap and Gold very expensive.<<

You seem to be making the argument here that value of gold, on the one hand, and the value of a labourer's work on the other, act independently of each other.

Which is sadly in direct contradiction to your previous statement that

>>Gold has always bought the same amount of basic services that it always has<<
Posted by Pericles, Monday, 12 January 2015 8:14:12 AM
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Dickybird,
<<Yes both systems react to crises.>>
Not exactly. Fixed exchange rates force governments to react to crises in a way that disadvantages the people. Floating exchange rates usually enable crises to be avoided completely.

<<and just because Bernanke/Yellen think they can control everything we are inevitably building up for the biggest crises the world has ever seen.>>
On the contrary, because control has been handed to the market, there is no longer the opportunity for a crisis to occur. There's certainly not the opportunity for the biggest crisis the world has ever seen!

The present system is a FREE MARKET system. Markets, not central planners set the value of most currencies. You want to replace all that with centrally planned exchange rates that would send us all bankrupt like the USSR. Indeed the centrally planned exchange rate, held way above market value for decades, was the main cause of the USSR's demise!

The current penalty for printing too much money, whether to serve your own country's need or help a friend, is that the market is likely to devalue your currency. Which will increase the price of imports and commodities, but it will make your exports more competitive (solving the trade imbalance problem that you're so paranoid about). You seem to think there should be an additional penalty, with you rather than the market as the arbiter. Why?

<<How do you imagine the US can design everything and then get China to make it and sell it back to them, be paid in fiat currency and think this can continue for ever ?>>
I don't think it can continue for ever, but it won't all stop at once and the market will enable adjustments to be made when changes occur.

Right now, the USA is good at designing things, which according to market value tends to be worth much more than fabricating things. Both are needed, but design increasingly accounts for a higher proportion of the total price because few can do it well.
Posted by Aidan, Monday, 12 January 2015 6:10:14 PM
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Aidan. We started with you being a delightful optimist and you are really rubbing it in now if you think we are operating in a free market. The Fed even declares its policy is to create credit as needed by printing $s and none of those $s will be backed by any assets. Basic economic laws inevitably mean that the asset backing of all $s has to shrink to match. Each $ will buy less “goods”. i.e. By this law inflation must be coming.

Why hasn’t it arrived yet ? Could it be that the Market is so manipulated that at present it cannot react properly and we are getting deflation instead. We do seem to be getting deflation and with it job destruction. And it would seem that Yellen/Draghi will try to fix it again by printing. Let us hope Angela Merkel will say no and mean it.

Anyway you say “The current penalty for printing too much money, ......., is that the market is likely to devalue your currency.” The U.S. has been printing enough to wear out the press but the US$ buys more and more other currencies and most commodities. Except of course Gold and we are seeing less and less Gold for your $ . Perhaps Gold is starting to behave like it should, after being suppressed for some years.

Lastly on the US/China trade imbalance “I don't think it can continue for ever, but it won't all stop at once and the market will enable adjustments to be made when changes occur. “ is the best example of your lovely optimistic outlook. I just hope you are right. But at present we are in a terrible mess and to go back on a reliable Gold Standard of some sort is essential.
Posted by Dickybird, Tuesday, 13 January 2015 9:53:10 AM
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Dickybird,
However much you say putting your head in a noose is essential, there is no real reason to do so.

It is a free market, and the Fed is merely one of the participants.

You are under the delusion that the Fed is creating too much credit. Deflation proves otherwise. In reality it's creating TOO LITTLE credit – for though it created far more than before, there are two other effects that it now has to compensate for: firstly the private sector isn't creating enough credit, and secondly there's more private saving than there used to be before the GFC. Money that's being saved isn't being spent, and spending is what the economy depends on. Variations in spending are what drive inflation and deflation. Asset backing is irrelevant.

Other central banks are doing likewise, but the real problem is governments refusing to borrow more. Or in the Eurozone, governments being unable to borrow more (for which Angela Merkel must take much of the blame).

'Tis not optimism that enables me to confidently predict that the Chinese fabrication of goods for American companies won't all stop at once, it's the fact that (unless there's a war) there will be no reason for the trade to abruptly stop. As for the market's ability to make adjustments when those changes occur, have you not noticed the rise of the Second BRICK countries? Bangladesh, RSA, Indonesia, Cambodia and Kenya will all be great alternatives to manufacturing in China.
Posted by Aidan, Tuesday, 13 January 2015 12:41:47 PM
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It might be a good idea, Dickybird, to do a little more research of the "Finance 101" variety, before posting again.

>>The Fed even declares its policy is to create credit as needed by printing $s and none of those $s will be backed by any assets.<<

The creation of "credit" automatically brings an asset into being, viz. the loan itself. It is not possible, in our enlightened age, to create a debit without a corresponding credit entry in the ledger, and vice versa.

For example, the toxic loans that precipitated much of the GFC were treated by the market as assets, and valued accordingly. Inappropriately, as it turned out, but assets nonetheless.

When a government releases more money into the economy, it quite often does so through the issuance of government bonds. These are debt instruments, carrying an interest rate and a maturity date, which are subsequently traded as assets.

"Printing money" is more an emotional, quasi-political slogan than a realistic description of what happens in the real world.

But I can tell that you are not actually listening, are you:

>>But at present we are in a terrible mess and to go back on a reliable Gold Standard of some sort is essential<<

It doesn't matter how many times you write this, it will never make a skerrick of sense. Go back and read earlier responses, then tell us where the "gold standard: impossible dream" argument fails.
Posted by Pericles, Tuesday, 13 January 2015 3:02:12 PM
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Private sector credit normally arises when surplus wealth from productive businesses needs to find further profitable investments. If private credit was lacking it could be that too much was being removed in taxes and spent on unprofitable investments or just wasted. (Pink Batts !)

Pericles. “ The creation of "credit" automatically brings an asset into being, viz. the loan itself. It is not possible, in our enlightened age, to create a debit without a corresponding credit entry in the ledger, and vice versa.” Can we try to follow this through. When I was learning double entry book keeping it was sometimes difficult to decide on the other side of any transaction. Presumably this statement means that the Fed created credit and purchased the toxic loans etc from the banks and financial entities who would have gone bust if this exchange had not occurred. However how does this transaction change those toxic loans, now owned by the Fed, into interest paying assets/bonds like the ones in your next quote below. There is a well known axiom in the computer industry “Garbage in - Garbage out”. Do we now have a bankrupt Fed full of toxic loans ? If so eventually that fact will become public and confidence will collapse. They are supposed to be in financial charge. Now we no longer have the security of our currency being backed by Gold (!) we are utterly dependent on public confidence that the Fed is getting it right. Keep it up. The world depends on you and people who think like you.

I can assure you that I am listening and I would love to be enlightened as to the difference between “ the issuance of government bonds. These are debt instruments, carrying an interest rate and a maturity date” and QE. The first is, I agree, perfectly acceptable as long as there are people willing to buy them. But no one knows the effect of the second and as it is now such an enormous sum it must eventually bring about a crisis
Posted by Dickybird, Wednesday, 14 January 2015 9:21:06 AM
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Hmmmm. As I suspected, Dickybird.

>>When I was learning double entry book keeping it was sometimes difficult to decide on the other side of any transaction.<<

This would seem to be a fairly massive hole in your education, I'm afraid. It would certainly explain your inability to grasp some fairly straightforward concepts.

>>Presumably this statement means that the Fed created credit and purchased the toxic loans etc from the banks and financial entities who would have gone bust if this exchange had not occurred.<<

Sigh.

The packaging of loans into AAA-rated instruments was not conducted by the Fed. They stepped in later, to remove them from the balance sheet of banks who were overloaded with non-performing assets (see TARP: Troubled Asset Relief Program). Whether it was better to do this than let the banks drown in red ink is a matter for politically-motivated debate, but one thing it did not do is "create credit".

>>However how does this transaction change those toxic loans, now owned by the Fed, into interest paying assets/bonds like the ones in your next quote below.<<

It does not. The issuance of bonds is entirely separate from the purchased assets, whose component parts are sold off over a period of time - mostly, obviously, at a loss.

>>Do we now have a bankrupt Fed full of toxic loans ? If so eventually that fact will become public and confidence will collapse.<<

Here is all the information you need in order to make this judgment for yourself.

http://www.federalreserve.gov/monetarypolicy/bst_fedsbalancesheet.htm

Let me know what you find.

But first, sort out your understanding of debits and credits. It is quite important when looking at balance sheets.
Posted by Pericles, Wednesday, 14 January 2015 9:50:17 AM
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Dickybird,

>>Private sector credit normally arises when surplus wealth from productive businesses needs to find further profitable investments.<<
That would be the case if banks didn't exist. But banks do exist, so private sector creation normally arises when banks can lend profitably.

>>If private credit was lacking it could be that too much was being removed in taxes and spent on unprofitable investments or just wasted. (Pink Batts !)<<
Firstly pink batts are a sensible use of money when people are wasting large amounts heating and cooling badly insulated homes.

Secondly, unless there's a labour shortage, private credit is scarcely affected by what the government removes in taxes and puts back in spending; what counts is what the government removes in taxes and doesn't put back in spending. AKA the surplus.

If the government runs a surplus it reduces the money in the economy, making it harder for businesses to make a profit. Sometimes that's a good thing as it's a way of reducing inflation without having to increase interest rates. Better still, it can enable interest rates to be cut, enabling more private credit creation. But in a downturn there's little scope for cutting interest rates, so a surplus is a bad thing.

Taking money out of the economy retards it and putting money in accelerates it. That's true no matter which side of zero we're on. Which brings us to the situation we're currently in: the economy's suffering because the deficit the government is running is too small.
Posted by Aidan, Wednesday, 14 January 2015 11:55:43 AM
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Both of you appear to approve of the standard socialist view that the way out of problems is to give money to anyone who seems to need it. This is a delightful idea and you have immense support from the voters who naturally hope to gain any crumbs left over. But you completely ignore the inevitable crisis when it comes to repaying the debts. “ And so one of the wonders of the modern financial world unfolds before our dumbstruck eyes: borrowing from someone who has no money… charging it to someone else's account… and pocketing a good part of the cash”. A short but accurate description of what is going on. How can you seem to think this is quite acceptable behaviour

Thirty-five trillion dollars is a good estimate of ‘excess credit’ created since the 1970s in the U.S.. But instead of debt to GDP at 140% — where it had been for decades — the rate has risen to over 300% of GDP, where it is today.

I may not be an economics professor, but I know that for households, businesses and governments ‘there’s no new way to go broke, it’s always too much debt’. Sovereign nations default when debt burdens become too onerous or it’s politically opportune and when there is no other alternative. The serious problem is that this time it is the biggest economy in the world, not peripheral economies like Zimbabwe and Argentina

And Aidan you tell me that the cure is to have more debt. When this cure has been tried for years and has never succeeded in fixing the problem, only pushing the solution further down the road, why on earth do you think that more of it will do any better.
Pericles. Perhaps you should be the one to study debits and credits. When they are created out of thin air, they tend to evaporate. Garbage in Garbage out !
Posted by Dickybird, Thursday, 15 January 2015 7:52:25 AM
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One more time, Dickybird. Neither debits nor credits can be made from "thin air".

>>Pericles. Perhaps you should be the one to study debits and credits. When they are created out of thin air, they tend to evaporate.<<

There will always be one of each, balancing each other out. And whether in a business or a government context, they invariably refer to specific, identifiable and visible transactions.

I refer you to your own words:

>>When I was learning double entry book keeping it was sometimes difficult to decide on the other side of any transaction.<<

Instead of saying "it was sometimes difficult", you should be more honest with yourself, and say "I didn't understand how". Debits and credits are the bedrock of accounting, but it is clear that to you they remain an unfathomable mystery.

Failure to grasp this leads you to say things like:

>>Thirty-five trillion dollars is a good estimate of ‘excess credit’ created since the 1970s in the U.S<<

I'm afraid that coming from someone who cannot figure out where debits and credits should go, this lacks just a smidgeon of credibility.

At least you are honest enough to put the words ‘excess credit’ in quotation marks, indicating that you haven't a clue what that means, either.

As for this:

>>“And so one of the wonders of the modern financial world unfolds before our dumbstruck eyes: borrowing from someone who has no money… charging it to someone else's account… and pocketing a good part of the cash”<<

I know a number of ten year-olds who would drive a double-decker bus through that little diatribe. They would ask you: who are you imagine you are borrowing from; to whose account is it then charged; and how do you get to pocket part of the cash?

Any thoughts? Or shall we leave it there, that you don't actually have a clue, and are just cut'n'pasting from some fruit-loop web sites.
Posted by Pericles, Thursday, 15 January 2015 10:54:52 AM
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Dickybird, why do you think a crisis when it comes to repaying the debts is inevitable?

You say the way households, businesses and governments is "too much debt" but have you really considered what that means? The limiting factor is not the actual amount of debt but the ability to service it, which in turn depends on the interest rate. When interest rates are low, we can afford to service much more debt than when interest rates are high. So in the subprime crisis, households did go broke in a "new" way, being able to service the debt at the low introductory interest rate but not the high ongoing rate.

Financially sovereign nations have never defaulted on debts in their own currency for purely financial reasons.

You say that more debt has never fixed the problem, but it did in the 20th century. And what do you mean by "only pushing the solution further down the road"? What do you imagine the solution is? Indeed what exactly do you imagine the problem is?
Posted by Aidan, Thursday, 15 January 2015 10:59:11 AM
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Aidan your post is harder to answer. But Yes a crisis is inevitable as the only cure offered for our present problems is more of the same, more Q.E.. The only other choice left is default for the US$, but I sincerely hope it will never get to that

Second para is absolutely right. But I think we cannot service the current level of debt, even at 1% interest rates. Govts are borrowing to pay the interest and we all know where that leads

Sovereign nations when in trouble borrow from overseas and then default. Zimbabwe might qualify for your statement as it defaulted on its own currency so badly that it had to change its currency to the US$. Perhaps it isn’t “sovereign”.

Lastly the problem to put it shortly, is that the world is insolvent. Interest rates cannot be raised as was done in the past by Paul Volcker as we already cannot pay at 1%. The solution proposed is to borrow more money to pay the interest. This way lies disaster and default. You are asking me what the solution is. I am asking you too. I just want to have some idea so that one can position ones assets so that there are at least some of those assets left when we get through the crisis. The only answer I have is to buy Gold or gold miners. This is really desperation advice. Gold doesn’t pay any interest as we are so often informed but when nothing pays any appreciable interest without running an enormous risk like junk bonds, and the value of the dollar is shrinking every year intentionally then for safety you go back to gold for the security it has been ever since Midas!

You give me your solution or are you too happy to ignore the evidence
Posted by Dickybird, Friday, 16 January 2015 7:41:39 AM
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Pericles "someone who has no money"…could be any bankrupt financial outfit "charging it to someone else's account"…usually the Fed and "pocketing a good part of the cash” is $11 million as CEO salary + continuing bonuses for top staff<<
In your next sentence “ you” meaning presumably Dickybird is mentioned 3 times. Try and take the personal out of your comments. We all are trying as far as I am concerned to think about what is going to happen in the world in the next month, 6 months or perhaps a year. All the comments have nothing to do with me, or for that matter you, personally. You may be investing in bonds paying minimal interest or equities with a current Median P/E of nearly 20 and shrinking earnings, but that is your business. On this related segue you might note that Gold is up considerably from its November lows. Is this significant or not ?
Finally I can congratulate you – neither debits or credits can be made from thin air. If you were a company accountant and did that the SEC or ASIC would be after you double quick
However the Fed and the ECB and the Japanese central bank all think they can do this via Q E and do it with impunity because legally they can. It is left to the market to catch up with the sins - eventually

“40 years of living beyond our means in a world ruled by credit peddlers has created an embedded attitude of entitlement”. Another quote from someone who has foresight but I see you have your head buried in the sand and feel “entitled” if only the stupid people like me would keep quiet. I doubt if you will even look at the evidence
Posted by Dickybird, Friday, 16 January 2015 7:45:45 AM
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Dickybird, our present problems of economic stagnation would not be solved by default. The best cure is more government spending until the private sector recovers. Other possible ways of addressing the problem are lower taxes and lower interest rates.

Your opinion that "we cannot service the current level of debt, even at 1% interest rates" is based not on facts but incorrect assumptions. Governments are borrowing because tax income is enfeebled by the reduced economic activity. Once the level of economic activity gets back to normal, there will be plenty of tax revenue (plus more scope to raise taxes or cut spending). So servicing the level debt is not a problem at all. But I do find it rather amusing that you advocate luxuries (gold) when you think we can't afford the basics (servicing debt).

When Zimbabwe was financially sovereign (i.e. when it had its own currency) it did not default. Default and debasement are two very different things. And it certainly wasn't the need to service debt that caused the latter!

The world is not insolvent. When the economic situation justifies it, interest rates will be raised (though perhaps in smaller increments than before).

As an investment, gold is probably OK – but don't get caught in the hype! Personally if I had more money to spare I'd go with shares, but I'm really not the best person to ask.
Posted by Aidan, Friday, 16 January 2015 10:38:23 AM
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Aidan. We agree, I think, that we have the start of a problem of economic stagnation. I think more Govt spending would be fatal and tip us over and anyway would only be a temporary measure until your second cure is put into place. Lower taxes and low interest rates and of course a balanced budget which means heavily reduced expenditure. Will even Campbell Newman dare to do it ?

Next para. Govts are borrowing because reduced economic activity is producing less taxes and so far they have not cut expenditure nearly enough to make it balance. Then more delightful optimism from you --- “economic activity gets back to normal, there will be plenty of tax revenue” ---- No, economic activity cannot get back to normal under the present fiscal regime. You are getting it arse about ! As you are in treating Gold as a “luxury” Gold jewellery is a luxury and only a small amount of the gold in the world is made into jewellery. Gold is an insurance policy only, NOT a luxury. As soon as the world gets it all right again and has credit backed by serious assets, not promises printed on paper, then the gold can be sold and the proceeds invested in profit making companies making something there is a demand for. Or some other alternative reform of the currency as mentioned before

I consider default as occurring when no one will accept your currency as it is so debased. Two sides really of the same coin

What are your views of the Swiss Bank reversal. I think they were only waiting until their referendum on gold was voted down. If this had come before, the referendum might well have passed, and the results would have been considerable and world wide. This is the Swiss returning to having a proper hard currency whatever the cost, as that has proved so profitable in the past. And they are in effect saying that Mario Draghi is going to do it all wrong and they are not prepared to be dragged along any longer.
Posted by Dickybird, Friday, 16 January 2015 3:02:00 PM
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Oh, Dickybird. Could this be the tender fledgling sprout of some common sense?

>>Finally I can congratulate you – neither debits or credits can be made from thin air. If you were a company accountant and did that the SEC or ASIC would be after you double quick<<

Which enables you to now retract both of these:

>>...we have to return to a system that uses as “money” something that cannot be created out of thin air<<

and

>>Pericles. Perhaps you should be the one to study debits and credits. When they are created out of thin air, they tend to evaporate<<

But what's this? You go and spoil it all with this...

>>However the Fed and the ECB and the Japanese central bank all think they can do this via Q E and do it with impunity because legally they can.<<

We should by now at the very least, you and I, have agreed that "creating debits and credits out of thin air" simply does not - can not - happen.

Can.

Not.

Happen.

The example you use - QE - creates real financial transactions, with both real debits and real credits.

And because you still fail to grasp these simple concepts, this isn't going to wash either:

>>In your next sentence “ you” meaning presumably Dickybird is mentioned 3 times. Try and take the personal out of your comments<<

"You", as in "you, Dickybird", are the only correspondent left standing here who still adheres to these unfounded perceptions.

As such, "you" are the one who remains in need of instruction, advice and correction.
Posted by Pericles, Friday, 16 January 2015 3:16:02 PM
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Aidan We agree, I think, that we have the start of a problem of economic stagnation. I think more Govt spending would be fatal and tip us over and anyway would only be a temporary measure until your second cure is put into place. Lower taxes and low interest rates and of course a balanced budget which means heavily reduced expenditure. Will even Campbell Newman dare to do it ?

Next para. Govts are borrowing because reduced economic activity is producing less taxes and so far they have not cut expenditure nearly enough to make it balance. Then more delightful optimism from you --- “economic activity gets back to normal, there will be plenty of tax revenue” ---- No, economic activity cannot get back to normal under the present fiscal regime. You are getting it arse about ! As you are in treating Gold as a “luxury” Gold jewellery is a luxury and only a small amount of the gold in the world is made into jewellery. Gold is an insurance policy only, NOT a luxury. As soon as the world gets it all right again and has credit backed by serious assets, not promises printed on paper, then the gold can be sold, except for central banks and the proceeds invested in profit making companies making something there is a demand for.

I consider default as occurring when no one will accept your currency as it is so debased. Two sides really of the same coin

What are your views of the Swiss Bank reversal. I think they were only waiting until their referendum on gold was voted down. If this had come before, the referendum might well have passed, and the results would have been considerable and world wide. This is the Swiss returning to having a proper hard currency whatever the cost, as that has proved so profitable in the past. And they are in effect saying that Mario Draghi is going to do it all wrong and they are not prepared to be dragged along any longer.
Posted by Dickybird, Friday, 16 January 2015 4:43:27 PM
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Dickybird,

<<We agree, I think, that we have the start of a problem of economic stagnation.>>
No, I don't agree it's the start. It started in America in 2007 and spread to the rest of the world in 2008.

<< I think more Govt spending would be fatal and tip us over>>
Fatal to whom and why? Tip us over what and how?

<<and anyway would only be a temporary measure until your second cure is put into place. Lower taxes and low interest rates and of course a balanced budget which means heavily reduced expenditure. Will even Campbell Newman dare to do it ?>>
A balanced budget is NOT part of the cure, and trying to force one exacerbates the disease!

Next para. Govts are borrowing because reduced economic activity is producing less taxes and so far they have not cut expenditure nearly enough to make it balance.>>
No, not to make it balance but to revive the private sector. If you then want a balanced budget, the thing to do is to then slowly cut back so that the private sector can take up the slack. But when the private sector is weak, balancing the budget is futile and trying to do so will only weaken the economy.

<< Then more delightful optimism from you --- “economic activity gets back to normal, there will be plenty of tax revenue” ---- No, economic activity cannot get back to normal under the present fiscal regime. You are getting it arse about ! >>
Keynes famously worked out what it would take to get the economy back to normal. There's no feature of the present system that would prevent economic activity from getting back to normal.

<<As you are in treating Gold as a “luxury” Gold jewellery is a luxury and only a small amount of the gold in the world is made into jewellery. Gold is an insurance policy only, NOT a luxury.>>
Technically it's a hedge rather than aninsurance policy. And anyway, an insurance policy is a luxury.
Posted by Aidan, Friday, 16 January 2015 6:27:03 PM
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<< As soon as the world gets it all right again and has credit backed by serious assets, not promises printed on paper, then the gold can be sold, except for central banks and the proceeds invested in profit making companies making something there is a demand for.>>
Silly comment! Gold can be sold any time.

<<I consider default as occurring when no one will accept your currency as it is so debased. Two sides really of the same coin>>
Default is failure to honour your debts. A collapsing currency is a separate problem.

<<What are your views of the Swiss Bank reversal.>>
Overdue! I don't think they should've capped the value in the first place. A sovereign wealth fund is a much better way of dealing with an overvalued currency.
Posted by Aidan, Friday, 16 January 2015 6:27:49 PM
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Aidan. Let me finish some sentences for you. “Economic stagnation..... spread to the rest of the world in 2008” and hasn’t recovered since.

“Tip us over what and how” Into recession and collapse of confidence because credit is being issued with no assets to legitimise it.

“ But when the private sector is weak, balancing the budget is futile and trying to do so will only weaken the economy” The private sector is weak because confidence is slipping in Govts and central banks. Govt must balance budgets to try to restore confidence.

Swiss Bank reversal. You are looking at it from a personal point of view and you are probably right over investing in a sovereign wealth fund for individuals, except all of these types of funds came under a cloud in the 2001 crisis like LTCM. I am more interested in trying to guess the effect the Swiss action will have on other central bank Chairmen. Will they dawn that the most successful country financially is not following them into more QE

Gold “Technically it's a hedge rather than an insurance policy. And anyway, an insurance policy is a luxury.” Call it what you will – It is the holding of last resort, when all else has failed. You don’t need to own any when everything is going well, as it has done for years, but since the beginning of this century the solution to all crises has been to create more money to solve it. This solution only delays the crisis it for a few years and then the problem re-emerges. It has not been solved, only deferred. The world is now one economy and the laws of nature apply to the world as they used to in the 19th century if you were setting up a High street bank. I am spelling out below what happened in the 19th century to a little bank and as we are all one economy now, it equally applies to the world economy in the 21st
Posted by Dickybird, Saturday, 17 January 2015 7:58:25 AM
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You start a High street bank by taking in deposits on short term repayment contracts and lending the money out again long term. This is inherently unstable and only works provided that two conditions hold. There must be Overall Confidence and secondarily, you, the bank manager, must ensure that your long term loans are backed by assets, not by thin air or people who are spending their loans on wine, women and song or the modern equivalent, socialist giveaways to voters that are unable to even pay your interest. In the 19th century there was no one to back you up, you were bust. In the 21st century the world is all one economy and if you are now Chairman of the Fed, there still is no one to back you up ..........

Too many people have been wasting your loans and Confidence is slipping, particularly in Zurich it would seem. Should it all “tip over” the only holdings worth while are probably real estate and gold and possibly blue chip companies, but they will be worth half what they were.

My advice, for what it is worth and I am well aware you don’t think it is worth anything, would be to hold a large percentage of your net assets in gold or gold related holding until the powers that be have found a solution. This is not issuing more unsecured credit when the problem is basically caused by issuing insecure credit. What that solution is I have no idea. You appear to think it is more credit but can you explain to me how more of the same medicine is going to work. Surely you need to try a different medicine. After the crisis gradually sell your gold and related holdings and invest in blue chip shares. You will be buying them at half price
Posted by Dickybird, Saturday, 17 January 2015 8:00:43 AM
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Dickybird,

<<“Economic stagnation..... spread to the rest of the world in 2008” and hasn’t recovered since.>>
True. And the really annoying thing is that it came close to recovery in Australia but the combination of unnecessarily high interest rates, the high dollar and the government trying to rush back to surplus wrecked it again.

<<“Tip us over what and how” Into recession and collapse of confidence because credit is being issued with no assets to legitimise it.>>
False. As someone else pointed out earlier, the loans themselves are assets. Plus the banks have to comply with the Basel requirements.

<<The private sector is weak because confidence is slipping in Govts and central banks.>>
Completely false and utterly ridiculous! Loss of confidence in governments and central banks would weaken the currency but not business. Business is weak because of a lack of opportunities to make money.

<<Swiss Bank reversal. You are looking at it from a personal point of view and you are probably right over investing in a sovereign wealth fund for individuals, except all of these types of funds came under a cloud in the 2001 crisis like LTCM. >>
I don't understand what you're saying here, and I suspect you don't either! Sovereign wealth funds aren't hedged investment funds like LTCM, they're state owned by definition. See http://en.wikipedia.org/wiki/Sovereign_wealth_fund

<<I am more interested in trying to guess the effect the Swiss action will have on other central bank Chairmen. Will they dawn that the most successful country financially is not following them into more QE>>
Will it dawn on you that success removes the need for QE?

<<You don’t need to own any [gold] when everything is going well, as it has done for years, but since the beginning of this century the solution to all crises has been to create more money to solve it.>>
That's the appropriate solution to the problem of insufficient money. And make no mistake, the problem is one of insufficient money, not insufficient assets or insufficient gold.
Posted by Aidan, Saturday, 17 January 2015 1:50:25 PM
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<<This solution only delays the crisis it for a few years and then the problem re-emerges. It has not been solved, only deferred.>>
It's called the economic cycle. That problem reemerges from time to time, and we have undiminished capacity to solve it the same way every time. But instead you want to treat the solution as the problem, and so make the real problem much much much much much bigger!

<<The world is now one economy and the laws of nature apply to the world as they used to in the 19th century if you were setting up a High street bank.>>
Economics is not nature, and unlike one 19th century bank, the amount of money in the system is not limited.

<<Too many people have been wasting your loans and Confidence is slipping, particularly in Zurich it would seem.>>
The value of the Swiss Franc shot up and you interpret that as confidence slipping? Seriously?

<<Should it all “tip over” the only holdings worth while are probably real estate and gold and possibly blue chip companies, but they will be worth half what they were.>>
There are lots of holdings that would still be worthwhile, but avoiding tipping over is still the best solution.

<<This is not issuing more unsecured credit when the problem is basically caused by issuing insecure credit. What that solution is I have no idea. You appear to think it is more credit but can you explain to me how more of the same medicine is going to work. Surely you need to try a different medicine.>>
You're wrongly conflating at least two very different problems. The problem of too much credit to the uncreditworthy ended in 2008. After that there was the opposite problem, with creditworthy companies finding it difficult to get credit. And now we have the related problem that there's too little opportunity for companies to make money.
Posted by Aidan, Saturday, 17 January 2015 1:51:06 PM
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Aidan. I think we both know the other’s views quite clearly and I certainly appreciate your point of view. I think we are going to have to wait for the market to decide who is right. Problem is that if you are right the market is going to stagger on for an indefinite number of years. If I am right we are going to have a really nasty recession and I hope another conference like Bretton Woods to get a currency in the world that cannot be manipulated and that seriously and automatically penalizes those that get it wrong. From that point the world can genuinely start to rebuild its assets.

It doesn’t have to be Gold based but Gold provides all the requisite facets. It is portable, indestructible, easily divisible and there is only a limited quantity available. Winston Churchill made the mistake of trying to get the U.K. back on the Gold Standard at $20 or the equivalent in pounds, and FDR made a killing for the U.S. by upping the price to $35. There is a lot of discussion available on what would be the correct figure now that we have the enormous unbacked QE credits to allow for. You get wild variations from $2,000, $5,000, $16,000 and even $40,000 an Oz - all estimated by various doubtful methods. But we need to be like FDR and not Winston ! If your scenario is right of course there will be many more QE’s to come and it will have to be even higher.

Swiss Bank sense. “The value of the Swiss Franc shot up and you interpret that as confidence slipping? Seriously?” Of course the Swiss franc shot up because their central bank saw sense and refused to be coupled to the Euro any more probably because they knew Mario Draghi was about to issue a cold draft of QE. Switzerland has always been a hard currency and they didn’t like what was happening to it. Therefore they decoupled before any more damage was done to the Swf and naturally it lept up to its proper value.
Posted by Dickybird, Saturday, 17 January 2015 3:40:30 PM
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Dickybird, you may appreciate my position, but I certainly don't appreciate yours because the assumptions yours is based on are all demonstrably false!

The existing system "seriously and automatically penalizes those that get it wrong" far better than any centrally planned system could, but with the added advantage that the damage is self limiting. The world should be building its assets now, not hastening a crash by making its actions contingent on one!

<<It doesn’t have to be Gold based but Gold provides all the requisite facets. It is portable, indestructible, easily divisible and there is only a limited quantity available>>
That last facet is precisely what makes it unsuitable.
Posted by Aidan, Saturday, 17 January 2015 5:03:34 PM
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Dickybird, for someone who confesses that they don't understand debits and credits, you sure write a lot of words.

And give a lot of advice...

>>My advice, for what it is worth and I am well aware you don’t think it is worth anything, would be to hold a large percentage of your net assets in gold or gold related holding<<

Given that most ordinary folk in Australia count property as their cornerstone asset, how would you suggest they make the transition to gold?

http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/4102.0main+features402014

Once this has been achieved, what do you suggest they use as currency?

>>This is not issuing more unsecured credit when the problem is basically caused by issuing insecure credit. <<

What percentage of credit in Australia is unsecured, do you think?

>>Switzerland has always been a hard currency and they didn’t like what was happening to it.<<

Seriously, if you understand anything at all about 20th century history, I suggest you don't offer up the Swiss as examples of anything honest or ethical in the world of finance. There are very specific historical reasons why their currency has not been subject to the same external forces as the rest of Europe.
Posted by Pericles, Saturday, 17 January 2015 7:27:12 PM
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