Thursday, June 18, 2009

Coming Out Swinging

I would not say I am in a foul mood. I mean between the endless cloudy days, rain, and low temps why not feel a bit down. I think it is something else. Ok, I think I am in a foul mood. Combative even. Here at Economic Disconnect I try to look at all kinds of things all kinds of ways and besides for some very pointed comments aimed at Paul Krugman and Bill Gross, I give fair weight to any and all ideas, arguments, and viewpoints. Well today I think I have about had it on many fronts, so this post may be a bit more edgy than normal and I hate that. But here it comes regardless.

Bearer Bonds Story - A Waste of My Time as I was "Snookered"
There were plenty of developments in the story of the 134 Billion Dollars in US Bearer Bonds today, so we will start there.

First off, the bonds have been declared fakes as the Treasury informs us:
June 17 (Bloomberg) -- U.S. government bonds found in the false bottom of a suitcase carried by two Japanese travelers attempting to cross into Switzerland are fake, a Treasury spokesman said.
“They’re clearly fakes,” said Stephen Meyerhardt, a spokesman for the U.S. Bureau of the Public Debt in Washington. “That’s beyond the fact that the face value is far beyond what’s out there.”

So there is that. As Karl Denninger notes:
Ok, let's accept both parts of that statement (yes, there are two) at face value:
The "bonds" seized in Italy are fake.
"The face value is far beyond what's out there."
The latter is exactly what I noted is out there in authorized issuance in my second story on the matter:
Mr. Holmes would be initially puzzled by such a caper. On the one hand we have the impossibility of the bonds being real, because there simply isn't $130 billion of issues remaining outstanding.
As it turns out, the Bloomberg update tells us something surprising:
Meyerhardt said Treasury records show an estimated $105.4 billion in bearer bonds have yet to be surrendered. Most matured more than five years ago, he said. The Treasury stopped issuing bearer bonds in 1982, Meyerhardt said.
$105 billion? Uh, that's a lot more than the DTC estimates I've seen, which were in the area of $3.5 billion outstanding! Suddenly there's thirty times that on deposit with the DTC out there according to Treasury?This also leaves the second part of the question open:
On the other hand we have the impossibility of negotiating a fake $500 million bearer instrument, making the exercise of counterfeiting one expensive and futile.
Finally, what happened to the two gentlemen caught with them?
The latter is a rather important question, I'd think. See, counterfeiting is a serious offense. Just try printing up some fake $100s or $20s and see how amused the Secret Service is (hint: don't try this at home unless you are interested in a free stay at Club "This Ain't Fun" Fed.)

So the Treasury reports that there are 30X more bonds than previously thought out there somewhere, but still less than the 134 Billion amount found on the two guys. So they are fake.

My interest in this story was due to to the obscene amounts being reported. I was never of the opinion that these things were undeniably real, but there was that possibility. The story has so many angles I found it compelling reading. Add to this that it seems the Sicilian Mafia may be behind the bonds and this tale is still a great read. That the treasury has now disclosed the 105 Billion amount was another thing I wanted to come out of this caper; just how many of these things are out there?

But it seems I was wasting my time. One of my most respected bloggers and inspirations to write this blog is the author of Calculated Risk. On a few occasions I have emailed CR asking to use his charts, and he has always been a great help. I was a bit bemused to see CR finally post this about the bond story:
Some mid-day amusement ...
This was funny ... I never posted on this, because it was pretty clear there wasn't any real story. Maybe the post should be titled: "How some blogs were snookered!"
But a false bottom in a suitcase?

Now I would venture that CR really means the blogs that were writing things like "Bonds are real, US is toast" and such things, but really I took the dig a bit personal. I felt, and continue to feel that this story has real merit. If the mafia is using bonds like this on this scale, just who is buying them? How does this fake money relate to the troubles countries under strong mafia influence (think EASTERN EUROPE) have been having financially? There is plenty of stories here, but move along as forgery of US debt instruments on a massive scale can never cause any issues worth paying attention to.

Jobs Numbers and Moving Goalposts
I am not going to parse the jobs numbers, they are still terrible. But hey, getting less terrible at better rates so that's nice. Today my favorite economist who shall remain nameless offered that for unemployment to stabilise and to call the end of the recession, the initial jobless claims will have to come down to -400,000. Today's print was over -600,000. A few years back this guy was railing because employment was only GROWING at about +300,000 jobs a month (a positive 300,000) and said that was not even enough to support workers entering the job force. But now losing 400,000 a month will be just so great. That 700,000 spread is hard to reconcile, but he does have a Nobel prize.

Gold on it's Way to Zero; At Least the Top Will be in for "Gold Stinks" Stories
As gold continues its path towards a new range of 0-$10 an ounce at least I will be spared the avalanche of "gold stinks" stories because nobody writes about anything when it is at zero. We know that gold is going to be worthless in an upcoming metal route because it is going to be sold in gram quantities in ATMs. Also, I find the reasons set forth by this author, on Minyanville no less, so persuasive I have to share them with the readers right this second:
Five Reasons Not to Be a Gold Bug
The arguments for why you should sell your cat, pawn your mother-in-law, and use the proceeds to buy gold are well known: The friendly Fed is printing money faster than you can read this; it will result in inflation; the government is borrowing like a drunken monkey; the dollar will be devalued; all currencies will be debased; the only thing that will save you is that shiny yellow metal, and so forth.
Here are some arguments, however, for why you should think twice before jumping into bed with gold bugs.
1. For investors (not speculators), it's very hard to own gold because they can't put a value on it. Unlike stocks or bonds, gold has no cash flows, and has a negative cost of carry (meaning, it costs you money to hold it). It's only worth something if people perceive it to be worth something.
2. GLD ETF (GLD) is the sixth largest holder of physical gold in the world. If its holders decide (or are forced -- think hedge-fund liquidations) to sell it, to whom will they sell it?
3. In the past, gold had a monopoly on inflation and the fear trade -- not anymore. Now you have newly emerged competition from TIPS, currency ETFs, short US Treasury ETFs, and so on.
4. If gold fails to perform because of reason number 2 or 3, the perception that gold is worth something may be violated.
5. Over the last 200 years, gold wasn't really a good investment. It may yet have its day in the sun, but it also may not. The cost of being wrong is pretty high.

Oh My god! That was some powerful stuff! I mean the reasoning is so solid we could even take another look at it and be awed by the sheer brilliance.

Number 1 is hard to argue against:
"For investors (not speculators), it's very hard to own gold because they can't put a value on it. Unlike stocks or bonds, gold has no cash flows, and has a negative cost of carry (meaning, it costs you money to hold it).It's only worth something if people perceive it to be worth something."
Now this one really opened my eyes. Something only has a value based on perception? Who knew? All those houses in Phoenix Arizona that were selling for $400k in 2005, and now sell at $150k was is based on cash flow? Did the price/rent ratio get skewed that bad in that time?

So you say stocks and bonds can be valued by cash flow? Is GOOG trading on it's cash flow? No? Is it trading on what people perceive some future cash flow may be should GOOG ever really be able to monetize eyeballs? Nah. GOOG is always trading at cash value no doubt. How did the S&P ever get to 666 when the cash flow models were so much better? Who knows, but gold is dead. Great argument.

Number 2 is as mind changing as number 1, only less so:
"GLD ETF (GLD) is the sixth largest holder of physical gold in the world. If its holders decide (or are forced -- think hedge-fund liquidations) to sell it, to whom will they sell it?"
I had never really considered this. For every sell there is a buy, except when gold is sold, then the buyers fail to materialize. I mean, when all that toxic mortgage debt had no takers, the government took it all in. They were the buyers of last resort. I do not think uncle SAM has any need for gold though, so in a forced liquidation gold would have to go to zero, no negative whatever the carrying costs are, in order to be moved. I guess GLD is crap out of luck on this one!

Number three may make you want to sell your wedding ring, so be warned:
"In the past, gold had a monopoly on inflation and the fear trade -- not anymore. Now you have newly emerged competition from TIPS, currency ETFs, short US Treasury ETFs, and so on."
Brilliant! I had never considered that if the US government printed so much money that they were forced to debase the dollar and hyperinflation occurred that I could simply buy more debt instruments, backed by the full faith and credit of the US, to offset that inflation! Amazing! I read that Zimbabwe made their TIPS holders whole, even at 1000% monthly inflation. This is sooooo simple!

Number 4 just scares you with what the writer already said:
"If gold fails to perform because of reason number 2 or 3, the perception that gold is worth something may be violated."
Hard to argue with that. Performance anxiety is an issue for all of us!

Number 5 is a summary:
Over the last 200 years, gold wasn't really a good investment. It may yet have its day in the sun, but it also may not. The cost of being wrong is pretty high.
Obviously if your investment time lime is 200 years you need to stay away from gold. It is far better to go with tulips (think dividends) and cabbage patch kids (think rarity) when planning for the long term.

Very convincing stuff!
Full Disclosure: Long gold and silver and will be all the way to zero for each. As they fall I will simply dollar cost average in (as they suggest on CNBC) so I will be protected. Oh, wait......

Inflation vs. Deflation and the Limits of Rational Discourse
I think the inflation vs deflation debate is an attractive thought experiment with far reaching implications. I will say up front I am pretty strongly in the "deflation now, inflation later" camp and that is no cop out. I never mince what I say or mean. I could care less about pleasing any audience by changing my opinions based on group think. I think the great debates and interactions featured here in the comments section here at Economic Disconnect have been some of the best, most civil, most accepting debates anywhere on the net. I appreciate all for their great ability to keep it intellectual.

That said, there has been a change in tenor from both sides of the debate as of late. Inflationists are calling deflation thinkers "dumb". Deflationists are attacking inflation types with terms like "blind", and "unable to see what is in front of them". This has to stop. I will delete any such comments from this blog, but I doubt I will ever have to police the comments as the crowd here is top notch. We even have outliers in the "Stagflation" camp, though that one has moved to the "Negflation" outlook as of late, but he is a bit crazy anyways! (just kidding Mark)

To see why this debate is hard to reconcile, we should start with the clear fact that NOBODY EVEN AGREES WHAT THE DEFINITIONS ARE for inflation and deflation. Some point to money supply, others to prices paid, and others to random data points.

I would like to put out an idea I have been working on that may help many of us get onto the same page. I have not fully developed this idea, but I thought it would be good to get it out there and get some feedback. Perhaps deflation and inflation proponents are closer in view than they know. Consider:

Classic Inflation Definition: Tons of "cash" (whatever iteration) chasing too few goods pushes prices up. How that cash was made (money supply, easy credit, etc) is not central to the argument. Many cannot keep up and hardship occurs due to lack of ability to buy needed goods/services.

Classic Deflation Definition: Money supply (whatever iteration) normal or low but not being put into purchases of goods, causing prices to fall. This reinforces the pattern and a spiral down ensues that causes hardship through various channels (loss of job, loss of equity in home or investment etc) which feeds itself.

Yes simplistic, but remember I am the easily "snookered" type. (Still burns)

Now consider:
In inflation (be it regular or hyper) you have ever increasing asset values, but the pace of increases of all the things you need are going the same rate or faster. You either go nowhere or fall behind.

In deflation (I think there is only regular) asset values are falling which destroys the equity in them, decreasing money supply as debt is defaulted on. Everything falls in price INCLUDING YOUR WAGES, hence you are chasing necessities that are falling in price, but your assets are worth less and your paycheck getting smaller. You either go nowhere or fall behind.

I think the core issue to think about is how much relative income you have that will have to chase relative prices and here I think the two views are more alike than thought.

Again, this is a theorem in progress and I would ask all readers to offer their ideas in the comments section. I value your opinions and I think this thing has some merit. Or not. Leave a comment anyway!

Ok, enough for the night. I will be online for a bit, so please get involved as I would like to get some feedback.

Have a good night.


getyourselfconnected said...

I forgot to say get your requests for friday entertainment in! See, I am all out of sorts!

Lisa said...

My dear GYSC,
Short note tonight. You were not snookered. There is a big story with the bonds, but there are too many pieces of the puzzle missing right now to be able to understand it. You are on the right track, though. I was surprised to see CR's post on that, but even though he is a really nice guy, he is a bit of a "fence-rider." He sees the glass half full and anticipates rainbows during a storm. Several of my fellow traders had a bit of a laugh over his "snookered" post :)
All of this rain and cloud cover is wearing on my nerves...I want SUN!!

getyourselfconnected said...

Thanks so much for the kind words. As if an 11 hour work day (commute included) is not enough time spent doing things you would rather not, I do not think that story was a waste of the time I had to use. Stillplenty of angles and very interesting. If you have 5 minutes to "waste" I would love your take on my inflation/deflation not so far apart view.
We all miss you Lisa.

Lisa said...

I'll put up a blog post tomorrow or over the weekend, I promise. I'll talk about the inflation/deflation stuff :) Good night! (You are nobody's fool, GYSC! You have a great mind and great blog)

getyourselfconnected said...

Too kind, but just the lift I needed!
Thanks Lisa

Vincent said...

If you are going to read about gold on Minyanville be sure to read Lance Lewis.

An interesting read and worth the look about inflation/deflation causes and theories:

getyourselfconnected said...

I knoe Lance Lewis's works well, and while a bull on metals, he does not ignore real market factors. My point was this , sorry, fool thinks gold sucks because its value is based on perception. Like anything else is not? Fugget about it!
Sorry, a bit rankled tonight.

getyourselfconnected said...

?Donde estas Gawains, Watchtower, y Kevin?" in my time of need??

Anonymous said...

Depew has his moments, but insights into gold valuation are not among them. The whole "throw the gold out the window" meme has more to do with hidden fears about the future than future gold valuations. While he likes to go on about the "moment of recognition", I think he has yet to experience it.

Gold vending machines: The idea behind these is being distorted. They are meant to dispense airport gift items for kids. My own father always brought some sort of gifts home when he was out of town. I've given 1/10 gold coins featuring various animals to my niece as birthday presents for the last five years. It doesn't have anything to do with persons suddenly deciding that they need to exchange fiat for metal.

When considering inflation, one must always consider the value of the inflating currency relative to the rest of the world's currencies. It's worth noting which country has the largest gold reserves. Explicit backing may be an artifact of history, but implicit backing still matters. Hence the reserves.

My pay has been cut, my hours have been cut, and my spec real estate is under water for what will likely be years. If scarce commodities go up in price as a result of said scarcity, I will use less of them lacking the means to increase my consumption. What inflation?

Lance Lewis's nickname should be "Lucky" because his theories have nothing whatsoever to do with the current rise in gold prices.

Snookered? Don't feel bad, the Italian government thought they had a windfall.

Anonymous said...


If one looks back at the housing bubble and how it was funded that may shed some clues. Rubin's strong dollar policy under Clinton outsourced US jobs and our manufacturing base due to slave wage differentials in exporting countries with week currencies differentials allowing us to maintain a high standard of living buying cheap imported goods on Mcjob wages. The fuel that funded the infalion of basicaly every asset class was secularization, with the banks flipping it to hedge funds, pension funds, and most important overseas investors and central banks, recycled OPEC petrol dollars and the YEN carry trade was also a factor. Now that the bubble has popped and the scam has been reveled those investors are no longer there but the debt still is which is slowly being transfered to the government and Benny and the inkjets balance sheet.
As unemployment rises and import demand falls those dollars that have been recycled into treasuries and bought the scrutinized garbage is also falling even as government expenditures are rising.
The debt the government is issuing is competing with funding for municipalities, corporations and states increasing their borrowing cost as income and tax revenue is falling.
If there is a shift out of dollars into say commodities, the dollars to fund our debt credit based society simply are not there and intrest rates will explode.
Part of the reason we may be seeing the BRIC's going to using currency swaps is probably a combination of being pissed off over the screwing they got which was thier fault as well as ours and the lack of dollars as our imports fall.
How long they can keep the debt implosion from taking place is the only quesition.
The problem is too much debt and even more debt ain't gonna fix it for long.

watchtower said...

I'm still long PM's, which probably means "get the h### out now!" : )

Seen this?

Senate Passes "Cash for Clunkers" Program

Senate passes $1 billion 'cash for clunkers' program over strong Republican opposition

By Ken Thomas, Associated Press Writer

"Dealers participating in the program would receive an electronic voucher from the government for the trade-in to apply to the purchase or lease of a qualifying vehicle. The bill directs dealers to ensure that the older vehicles are crushed or shredded to get the clunkers off the road."

Reminds me of what GawainsGhost was posting about a couple of days ago.

Anonymous said...


That's kind of interesting but the problem I see is most of the people who drive clunkers ain't got a pot to piss in anyway and they damn sure ain't got the money to by a new car. Now if you want to make a staight across the board trade maybe that would work.


GawainsGhost said...

Posted in two parts, as it is rather long.

As to your definitions of inflation and deflation, my father once told me, "Son, show me two econmists who argee on economics, and I'll show you an economist standing in front of a mirror." I suppose that is why it's called the dismal science.

In your theorem in progress, you state, "In inflation (be it regular or hyper) you have ever increasing asset values, but the pace of increases of all the things you need are going the same rate or faster." But consider the housing bubble. It was localized mainly in four states, where home prices skyrocketed, doubling or tripling in a short span of time. However, the prices of everything else--food, clothes, cars, electricity, etc.--in these areas did not experience the same inflation at the time.

Meanwhile, other areas of the nation did not experience anything like this--home prices remained relatively stable or demonstrated only modest appreciation, or depreciation. This is why I say that real estate is not a bubble; it's bubble wrap. A large sheet of many bubbles, some of which are inflated just right, others of which are over inflated, some to the point of popping, and still others which are under inflated, some to the point of collapsing.

So, realistically, the crisis in home prices was a localized inflationary phenomenon that affected only one specific component, housing, fueled by low interest rates, lax lending, speculation and malinvestment, and of course appraisal, securitization and ratings fraud.

Now, I think you are correct to look at inflation and deflation in terms of income and expenses. When both are rising, you have inflation. When both are falling, you have deflation. That is a simplistic way of looking at things, I know, but the question at issue goes to the definition and concept of money.

GawainsGhost said...

Here's how I look at it. You have a job that pays a salary, which translates into income. That income is then divided into savings and expenses. It goes without saying that if your expenses equal or exceed your income, you have no savings, but let's keep it simple.

Savings are invested in assets. Here is where I quibble with most people, because I am a grammarian and believe that words mean things. An asset, properly defined, generates income. A liability generates expenses.

Thus, a home cannot be defined as an asset, since it does not generate income, unless it is a rental property that produces more income than expenses. A home, properly defined, is a capital savings (equity) account with expenses (taxes, maintenance, utilities, insurance).

The same, by the way, is true for gold. It is not an asset, because it does not generate income. It too may be thought of as a capital savings account with expenses (holding costs). If the price of gold goes up, and you sell it to realize the profit, at that point it becomes an asset. But if the price goes down, and you have to sell it and take the loss, at that point it becomes a liability.

There are expenses associated with every investment. It is in recovering equity that is all. In other words, the return of money is more important than the return on money.

What is true for real estate is also true for gold. You only lose money if you are forced to sell. Prices go up, prices go down. You have to ride that wave. The key to making money is in managing it and knowing when to buy and when to sell. The time to buy is when everyone else is selling. The time to sell is when everyone else is buying. Price is largely irrelevant, if you understand money.

Think of yourself as a corporation, You Inc. You have income, savings and expenses. Maximize savings and minimize expenses. Savings are invested in income-generating assets. This is the secret of the rich. The real money is making money, and the real risk is having only one source of income.

Thus, it is entirely possible to remain profitable regardless of what the economy is doing, whether it's inflationary or deflationary.

So, in the end, while I agree this subject has merit, I think arguing over definitions is an exercise in futility. Knowing what money is and does is all that really matters. Let the economists debate their theories, they are so dismal after all.

Manage your money and you will do fine. When you have money, that is, when you control your money and make it work for you, make money for you, you're free. You can do whatever you want.

When you have debt, that is, when money, someone else's money, controls you and makes you work for it, making money for someone else, you're a slave. All you can do is work.

In that regard, for Friday night entertainment, here is the quintessential song.

GawainsGhost said...

Oh, and by the way, the Austrian School defines inflation as an expansion of the money supply and credit, and deflation as a contraction of the money supply and credit. Thus, Freidman's dictum that inflation is always and everywhere a monetary phenomenon is not exactly true, as it fails to take credit into consideration.

Mish harps about this constantly. Be sure to read his post on the Chinese telling the Australians that Keynesianism is a failure and needs to be recognized as such.

GawainsGhost said...

Finally, and after this I'll shut up, there is a must read over at Zero Hedge on Mandelbrot's multifractal cascades. I highly recommend it, but it is rather wonkish.

I love Mandelbrot. The problem with most economic theories is that they are based on computer models that assume a normal price distribution, like a sine curve. High demand, high price; low demand, low price. This is what underlies all their definitions, particularly of inflation and deflation.

But Mandelbrot, back in the early 60s, found a record of daily price changes in cotton going back over 100 years. That is a tremendous amount of data, and when he plotted it, he found that there is no normal price distribution. Rather, price changes move in fits and spurts.

This was the foundation of chaos theory and later fractal geometry. What appears on the surface to be random actually conforms to a deep underlying order, where small changes in initial conditions cascade into large, sometimes catastrophic, changes to the sytem as a whole. And so, it is said, "On the West Coast of Africa, a butterfly flaps its wings, and thunder clouds clap in LA." Think of the current economic crisis in those terms.

Chaos theory fascinates me. In fact, when I was in graduate school, I developed my own theory of literary criticism. Basically, what I did was take the New Criticism, which is grounded on linear, deterministic science, and regrounded it on chaos or nonlinear, indeterministic science. I called it the Eclectic Criticism and wrote a 250 page thesis applying it to the illuminated books of William Blake. Blew my professor's mind.

OK, I'm done for now.

watchtower said...


Maybe the gov could guarantee a loan for these individuals at low to 0% interest rate? : )

Fog a mirror = Get a new car

Anonymous said...


"Fog a mirror = Get a new car"

Sounds great NINJA car loans, worked out well for housing why not give it a shot. I still think maybe a one to one exchange is the way to go a 2009 Chevy in every garage.


watchtower said...



Just give them a new car, forget about all that nonsense of loans and such, it's not like they were going to pay it back anyway.

This is why you are retired and I'm still working : )

Anonymous said...


"Manage your money and you will do fine. When you have money, that is, when you control your money and make it work for you, make money for you, you're free. You can do whatever you want."

I retired at 51 and trust me I'm not free and I really can't do whatever i want, as I'm a slave to my investments, that is how I make my living and being a rather untrusting soul of human nature letting someone manage my accounts ain't gonna happen.
I do get to get up when ever I want so there are pluses don't get me wrong.


GawainsGhost said...

Kevin, you're only a slave to your investments if you are working for them and they are losing money for you. If they are working for you and making money for you, then you are the master.

Let's not go into Wonderland.

"When I use a word," Humpty Dumpty said, in a rather scornful tone, "it means what I choose it to mean--neither more nor less."

"The question is," said Alice, "whether you can make words mean so many different things."

"The question is," said Humpty Dumpty, "which is to be master--that's all."

Humpty Dumpty sat on a wall:
Humpty Dumpty had a great fall.
All the king's horses and all the King's men
Couldn't put Humpty in his place again.

That's the real point, isn't it? Without a common definition of terms, there can be no communication. Or any form of agreement among economists.

I could care less about what economists think, as they are only concerned about their theories, while I am only concerned about what works in the real world.

There, assets generate income, liabilities generate expenses, the real money is making money, and the real risk is having only once source of income.

Definition of an economist: Anyone who when confronted with the statement, "This is what works in the real world," asks, "Yes, but does it work in theory?"

Stagflationary Mark said...


In my world...

Inflation is more money than goods (i.e., too much money chasing too few goods).

Deflation is less money than goods (i.e., too little money chasing too many goods).

The latter can happen even if the supply of money is growing rapidly though. Think production overcapacity built on a faulty exponential business models. For example, do we really need SO many houses, cars, and self-storage units? Can we even afford them as we outsource our jobs?

Further, I believe that where the extra money goes is very important. Give one million to all billionaires and nothing happens. Use billions to bailout bank reserves and nothing happens (if the banks won't increase lending). Send a trillion to China and nothing happens (as long as they continue to hoard it, which makes little sense in the long run). Distribute ten trillion to all Americans and something BIG happens to the price of canned goods though.

On a related note, I'm a believer that increasing income inequality helps drive deflation (just like it did during the Great Depression). If there was one worker making $10 trillion a year and everyone else made next to nothing, then the price of lettuce would be very low. The trillionaire simply could not hoard/eat enough lettuce to affect the price.

Just opinions.

Anonymous said...

Too Big To Fail, Politically

based on what we see so far, there is little reason to be encouraged. The reform process appears to be have been captured at an early stage – by design the lobbyists were let into the executive branch’s working, so we don’t even get to have a transparent debate or to hear specious arguments about why we really need big banks.

Writing in the New York Times today, Joe Nocera sums up, “If Mr. Obama hopes to create a regulatory environment that stands for another six decades, he is going to have to do what Roosevelt did once upon a time. He is going to have make some bankers mad.”

Good point – but Nocera is thinking about the wrong Roosevelt (FDR). In order to get to the point where you can reform like FDR, you first have to break the political power of the big banks, and that requires substantially reducing their economic power - the moment calls more for Teddy Roosevelt-type trustbusting, and it appears that is exactly what we will not get.


Stagflationary Mark said...


Here's my current list of gold concerns.

1. It's more than tripled in the last 10 years. Toilet paper hasn't. Toilet paper is therefore the much better hoarding bargain. Toilet paper hoarding doesn't even require a greater "fool" to buy it from me. Nor will I ever pay capital gains taxes since I'll eventually use it personally, lol.

2. If the You-Know-What REALLY hits the fan, people will sell gold to buy food, toilet paper, and possibly ammunition. Gold is not useful directly in a survivalist situation. Aluminum foil is though. I have plenty of that.

3. The 600 year silver chart is just plain scary. Behold the miracle of modern mining equipment. Why does gold hold up better than silver over the long run? Not enough silver bugs?

4. Gold bugs speak of the gold price to oil price ratio. Why? The ratio doesn't pass a common sense test. Oil is burned. When it is gone, it is gone. Meanwhile, all the gold ever been mined is still in existence.

5. Platinum is MUCH rarer than gold, but only slightly more expensive. Why? Everyone "knows" platinum credit cards carry more prestige than gold cards. Platinum is one cool metal. I'm serious.

6. There's apparently a diamond glut. De Beers is doing all they can to contain it. All the diamonds ever mined are still in existence. Ring a bell? Do you know for sure there isn't a similar gold glut? How would you know?

7. Enough of the gold advertisements already! It's getting out of hand. It reminds me of 1982. That's the year I sold 3 silver dollars at a local hotel for $18 each. In hindsight, selling it to them when they wanted to buy worked out very well for me (as a seller).

That being said, I owned gold and silver from 2004 to 2006. I understand the reason to hoard it and I would never dream of shorting them. It is FAR from a "sure thing" though. There's plenty of "safe haven" risks.

Anonymous said...

Oil manipulation

The big banks are using taxpayer money to manipulate the oil market. Here’s an excerpt from Phil Davis’ Friday post at Phil’s Stock World:



getyourselfconnected said...

That was some comment thread. I will try to cover some of it in the next post.

Anonymous said...

We understand that the American people expect us to ask the hard questions of Treasury and to work to ensure that TARP funds are used in a transparent, accountable, and responsible manner. Through our hearings and reports, this is what we seek to accomplish. Thank you again for your contribution to this effort.
Elizabeth Warren


Please do not reply to this message. To provide additional comments or suggestions, please use the form available on our website, Thank you.

I hammer these guys at least once a week and all I ever get is a auto-reply.I feel like the little kid that only got a lousy T-shirt but I ain't giving up.