Well, THAT Was Interesting

Wednesday, April 25, 2012 at 4:45 pm

What a day, huh? First we saw some May silver call-sellers get squeezed. Then, the FOMC statement caused a sharp selloff. Unfortunately for The Cartel, no waterfall ensued as price quickly rebounded. We now look to be on the verge of a rally. Let's get started!

I know that many folks come here only to read my blogs or to visit Pailin's Corner. In doing so, many miss out on the terrific information that is shared in the comments. Rather than re-type my thoughts from earlier, here are some C&Ps of my comments from the previous thread:

Submitted by Turd Ferguson on April 25, 2012 - 10:46am.
If anyone is willing to gamble in the casino, now would be the time. This reeks of a screwing of put sellers ahead of option expiry. The final beatdown before the reversal.

Submitted by Turd Ferguson on April 25, 2012 - 11:17am.
The summer is going to be hot and explosive, though, so anyone gambling should be sure to buy time, too.
Maybe (buy) the Oct or Dec (silver) $40s?
All I know is that today's action is bullshit. May call sellers have been forced to hedge by shorting futures. Just like the action we saw in late March prior to April gold option expiry. Recall that after dropping to 1630, price rallied sharply back toward 1700. Same shit here.
I expect silver back to 32 or even 33 relatively quickly, The Bernank notwithstanding.

Submitted by Turd Ferguson on April 25, 2012 - 11:21am.
A drop to 30 or just below is possible but I firmly believe that that is it.
Physical demand is very strong and there are literally tonnes waiting and hoping to be filled at $30.
EVERYTHING points to a bottom here. Longterm holders WILL NOT be disappointed.

Submitted by Turd Ferguson on April 25, 2012 - 11:48am.
And most should NOT (be trading).
However, this action reminds me of the day in early November 2010 when QE2 was announced. A beatdown headfake occurred that day prior to the announcement.
Again, if you are willing to risk a loss in the casino, this looks like an excellent opportunity to give it a whirl.

Obviously, I believe today's low was the bottom. Maybe there will be a retest but $30 silver is going to be a very difficult barrier for the permabears to break. I would still be looking to put on a speculative position here with money you are fully content to lose if you are wrong or if it is stolen from you. That said, if you absolutely feel compelled to trade in the casino, this would be a good time to give it a try.

Gold is basing above what appears to be solid support between 1625 and 1635. As our pal, Winston, pointed out earlier today, physical demand is so strong and consistent here that further, sustained drops in paper price are highly unlikely. Gold will show signs of life when it trades back above 1650 and then 1660. Let's go into more detail and begin to get excited then. For now, let's just be happy to be building such a strong base from which we can, eventually, catapult forward.

Clearly, I'm excited about silver here, too. $30 silver completes the right shoulder of our massive, reverse H&S formation and Winston has informed us about incredible demand for physical silver at that level. I am nearly 100% certain that silver won't fall again much below today's lows. As it bases here, it is preparing for Battle Royale II. Of course you remember Battle Royale I at $36 in late February and the ensuing crush. Well, Battle Royale II now lies near our old nemesis of $33. What will happen next time? I can't say for sure but I'm quite certain we won't have to wait too long to find out.

Just a quick word about open interest and the next CoT. Today's OI (basis yesterday) came in at a new low of 395,389 in gold and 122,325 in silver. Recall that yesterday, price rose by about $10 so what we clearly saw was short-covering ahead of The Bernank. No doubt many of those same shorts were put back on this morning and are now, once again, waiting to be covered. While silver rose 22c yesterday, OI fell by about 400. Clearly this was a short-covering bump, too. Please allow me to emphasize this again:

Since March 15, paper silver has fallen in price by over almost $2 yet total Comex open interest has expanded by almost 15%. There is no question in my mind that this is the result of short contracts being added. Just as the EE fleeced the over-excited longs in February, they will soon fleece the over-indulgent shorts. Just be patient.

For the CoT reporting week, gold fell about $9 while shedding 3200 in OI. Silver fell $1.22 while adding about 1000 contracts. Here's why both are ultimately positive: Gold liquidity has been wrung out and now sits patiently in the sideline, waiting to return as the charts improve. The much smaller silver market has swung from speculative long excess in late Feb to speculative short excess in late April. The EE, playing both sides of the specs for profit, will soon close the trap on the foolish spec shorts.

Finally, this short video about government debt. Not much new here for the average Turdite but, since it's presented in such a brief and simple manner, perhaps you can C&P the url and email it to your friends.

That's all folks. Watch the overnight trade for signals of sovereign and big-money buying of physical post-Bernank. A positive London trade post 3:00 am would be a strong signal. TF

p.s. Tomorrow, April 26, is Israeli Independence Day. Be cautious and on the lookout for some crazy headlines.

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Comments

Dr. Sandi

Submitted by Dyna mo hum on April 25, 2012 - 11:03pm.

You need to keep thinking you are in the phiz for the long haul ahead. Think like way up the road. The feds house of cards will not last. But I confess I thought apple was too high to buy @ $150 and look at it now. No fool like an old fool!

Hi Fred......

Submitted by kingboo on April 25, 2012 - 11:05pm.

i agree with Victor on that point about competing currencies, but what if we step back in time....to say Nixon's administration...... the gold standard was only "a problem" because our govt had incurred so much debt that the gold standard became a burden to them.........they took the easy way out, agreed? Of course by this time the rest of the developed world was caught up in our dollar web, no? So, naturally....everyone had to devalue right along with us..

It wasn't the gold standard that failed it was politicians that didn't want to take their medicine, so they dropped the standard and 40 years later, here we are. The world's government have no problem creating all sorts of other "accords" and "agreements", so why not create one that involves a gold peg internationally? That would solve your competing currency issue, no? Give me your thoughts........

Cheese - - yes please!

Submitted by atarangi on April 25, 2012 - 11:13pm.

i_love_cheese_sticker-p21720573932306956

The great silver debate

Submitted by Big Rocks on April 25, 2012 - 11:25pm.

Silver
I'd like to throw in my 2coppers on the great silver debate. When I started buying silver, again, about 8 years ago, one thing that convinced me it was the right move was it's use as money throughout history. The word for silver and money was the same in many languages, argent, plata and in chinese, Thai and so on. However I now understand how silvers role has changed and it has become more valuable as as commodity than as a form of money. That actually enhances it's value but at the same time increases it's volatility.
I believe that silver has tremendous potential as an investment if one has great patience.
Everything we are learning from guys like SRS about the future scarcity and mining costs will come to fruition but don't count on that happening right away. There are still a lot of silver deposits coming on line in the next few years and that supply keeps us at the mercy of those that control this relatively small market. CBs aren't buying silver they are buying gold that says something no?
As for Victor I like reading what he has to say and it adds a lot to this site. Even though I rarely post I read a lot looking for the valuable contributions, info and points of view that are extremely valuable and I consider Victor's posts as such. Even perhaps ESP if I don't agree.
I think what he is trying to get across is the concept of money as a store of value vs. A means of exchange. When you understand the difference and that the future of money will separate the 2 you will better understand what he is trying to say. I don't think silver will ever be a currency again because it has a greater value as a commodity. That doesn't mean it cannot be used as a SOV and in a barter economy it would be a trade good easily valued as would oil, diesel, salt etc.
Gold on the other hand exhibits it's greatest value as a monetary store of wealth. Stock to flow, indestructible, easily transportable but still unlikely as a means of exchange, possibly even too valuable to be used as such even in a barter economy.
The allure of gold today is the role it will play as the final liquidator of debt when the fiat monster dies. This will require a breathtaking revaluation of gold into the stratosphere something that won't happen to silver at least not for the same reasons.

I agree, kingboo

Submitted by Fred Hayek on April 25, 2012 - 11:29pm.

The same thing happened after WWI. The value of the pound was set at way too few pounds per ounce of gold. They'd gone nuts printing money during WWI (what a surprise) and almost as a matter of pride went back to the same conversion rate after it because they didn't want to take their medicine and admit what they'd done. As a result, a lot of gold left england.

A gold standard isn't perfect and it can be screwed with, too. But it makes it harder for a government to steal from its citizens through inflation and that's worthwhile.

Anyway, I wanted to touch on something else in Victor's argument about why the U.S. would not be able to go back to a gold backed currency because of the euro. He says:

Once more in different words:

If there is trouble with the confidence in the US dollar, the official gold price of US$ 7000 per ounce remains unchanged, but the United States start losing their gold reserve.

If there is trouble with the confidence in the Euro, the price of gold in Euros rises while the gold reserve of the Eurosystem is unchanged.

Let us contrast the two philosophies as follows:

In Rickards’ proposal, the United States claim that one US$ is as good as 1/7000 ounces of gold. Even if others in the market do not agree and value gold higher than that, the United States Government must still continue to allow redemptions at the fixed exchange rate of 1/7000 ounces per US$, drawing down the gold reserve in the process if necessary.

The ECB simply lets the market discover how good the Euro is in terms of gold. Since the ECB has no intention of interfering with this market judgement, any gold that is purchased, can be purchased from the private market equally well, leaving the gold reserve of the Eurosystem intact in the long run.

And finally, yet another aspect:

In Rickards proposal, the US dollar claims to be as good as gold and is advertised as a long term store of value. The United States Government or the Federal Reserve commit to draw down their gold reserve in order to deliver on this promise.

Since the ECB has never claimed that the Euro were as good as gold, they need not redeem any Euros for gold. If somebody purchases gold with their Euros, these Euros continue to circulate. The Euro is explicitly advertised as a transactional currency, but not as a store of value. Gold is the store of value. This is Free Gold, the separation of the store of value from the medium of exchange, i.e. from the credit money that forms the transactional currency (also see Section 7 of The Many Values of Gold and FOFOA’s The Long Road to Freegold).

So, he's got the dollar and the euro. And in response to Rickards' argument that, after a crash, the dollar will have to be backed with gold to gain the confidence of the populace in the U.S. and worldwide he says that this won't be a problem for the euro. It seems that people will have to see convertibility to have confidence in the dollar but just the ECB having gold will do it for confidence in the euro.

Really?

I mean, seriously? THAT'S WHAT WE'VE GOT NOW!!

We, supposedly, have 8,000 tons of gold but it has no bearing on the issuance or the value of the currency. Is anyone doing big exhales? Oh, pffew! I thought Ben Bernanke and Turbo Tax Timmy would inflate the dollar like crazy, but they've got 8,000 tons of gold not actually tied to it in any functional manner whatsoever so I guess that can't happen. What?!?!

There's not a human being on earth having those thoughts.

And that's what his description of the euro is, an unbacked, not convertible currency the issuers of which also own some gold (though, a fair chunk of that gold he attributes to them is in London and New York, so good luck geting it). So what?! So freaking what?!

The ECB has shown itself willing to print willy nilly and debase its currency at a rate rivaling helicopter Ben. Hell, there's a story out today that they've been printing euros in Greece totally outside of ECB programs and the ECB is quietly turning a blind eye to it!) So, what the hell do you have with this incredible euro? What significant element of our central bank insanity is NOT present in the euro? Nothing that I can see.

But, according to Victor, if people look into a future gold backed dollar and the euro, they'll see that the dollar is convertible at Rickards' back of the envelope hypothetical rate of $7000 per ounce and the ECB will say, yup, we've got gold too. The person investigating asks, will you convert my euros into gold? And the ECB says, no, you have to buy gold with them to do that. You can do that with ANY fiat currency, right now. And the person investigating might ask, "Well, the new head of the treasury says that their currency is only issued in proportion with their gold holdings. What about you?" And the ECB says, "Well, if you don't like our currency, go buy some gold with it." But Victor posits that people will actually have as much or more confidence in an unbacked euro than they will in a gold backed dollar. This argument makes no sense to me. That sales pitch will simply not work. It's a bit like the makers of two cars with equally bad reputations and one starts issuing a 150,000 mile warranty on the entire car, bumper to bumper while the other says, "Hey, you can trade it in at other dealers in town." And the buyers are supposed to be equally confident in purchasing the two vehicles. Really?

go dEEp

Submitted by survivalwstyle on April 25, 2012 - 11:34pm.

get the best phyZZ

now that is interesting.

it reaLLy is black and white.

i like both.

edit: damn. those were hard to get. here is the link that they would not load from, no euro vogue in that one though so just search star girls vogue. they aLL are insane, my kind of photoshOOts. naomi c takes it for me....check it and teLL me. peace

Yuan

Submitted by Big Rocks on April 25, 2012 - 11:39pm.

Fred I think the Yuan is a false prophet replacing the $ as a reserve currency is like jumping out of the frying pan into the fire. Would you really want them calling the shots in the world political economy.
And what the heck is partial gold backing? How does that work? Isn't that what the euro has? Does it mean they have gold to dump on the FX to support their currency?
I think the only reserve currency that can replace the $ is gold. Others will try but none will succeed!

@Big Rocks

Submitted by Fred Hayek on April 25, 2012 - 11:45pm.

I'm not hoping for the Yuan to achieve such status nor do I trust the totalitarian chinese government. But one can see that they would like to at least unseat the dollar as the global reserve currency and at least achive a sort of multipolar balance of things . And if, as Rickards and other have suggested, they want to set themselves apart and above the increasingly debased dollar in the perception of the world, nothing would do that like gold backing.

Amen Brother Hayek.......amen......

Submitted by kingboo on April 25, 2012 - 11:47pm.

"A gold standard isn't perfect and it can be screwed with, too. But it makes it harder for a government to steal from its citizens through inflation and that's worthwhile."

Oh, by the way.....the obscurity they create on the gold futures market is absolute fucking nonsense.....it's another complex stunt to obscure gold's true intrinsic value........until and unless they find it "convenient" to allow true price discovery, by then they would have the lions share of the wealth and be headed to Monte Carlo. If the average guy knew gold (through an honest pricing mechanism, not this horseshit we have today) was rising yearly, he could choose to "trade" his dollars for gold and proceed to sleep well..... but NO! god forbid. The true price discovery will not come until the world elite have siphoned off enough wealth to cover their bad bets, and it's very hard to piece the puzzle together after the fact, particularly when you have regulatory agencies that are on the payroll.

So, again it's human shortcomings (greed) that cannot be overcome without a gold peg of some sort. The average guy is not going to put 12 hour days in just to watch it be stolen incrementally, right? The gold standard didn't fail.......it was the scumbags leading us into the slaughterhouse.....they failed.

If they really had our interests at heart..

Submitted by kingboo on April 25, 2012 - 11:52pm.

our gov't could lead the way! We could lead the charge on an international gold peg of some kind......it would save us the embarrassment of going down in the history books as not only causing the debacle, but riding the dollar right to the bottom of the sea, while another country and it's currency picked up the ball and ran with it.......which is where we are headed at this rate....no?

zombie apocalypse

Submitted by KC on April 25, 2012 - 11:58pm.

Still looking for the zombie apocalypse survival partner, but I scored 5 45lb superpails of wheat from a couple that was moving out of state for only $10 a pop. Good day.

Finding the Culprits of the Crisis

Submitted by RuNuts on April 26, 2012 - 12:02am.

Fraud & corruption at the highest levels? You bet!

Hat tip to Jesse's Cafe Americain...
Derivatives expert Janet Tavakoli takes a hard look at what — and who — caused the financial crisis.

Janet Tavakoli calls it as she sees it — and what she often perceives isn’t a pretty picture. But for any advisor, or other investment professional, to ignore this industry veteran’s razor-sharp insights would be folly.

A gutsy critic of both Wall Street and the federal government, the Chicago-based consultant, specializing in derivatives and structured products, pulls no punches. Through her independent research into the global financial crisis, Tavakoli uncovered what she calls massive, widespread fraud committed by a network of mortgage originators, securitizers, and rating and regulatory agencies, among others.

Earlier, the founder of Tavakoli Structured Finance, 58, predicted the thrift industry blow-up and the demise of Enron. Then she foresaw that excessive leverage and structured products’ misratings would lead to a global financial crisis.

In her just-published e-book, The New Robber Barons, Tavakoli charges that the relationship between failed mortgage lenders and investment banks that securitized and sold risky loans was “the largest Ponzi scheme in the history of our capital markets … a financial Pearl Harbor,” where “investment bankers piloted many of the planes.”

Now Tavakoli sees another huge financial crisis looming. more...

http://www.advisorone.com/2012/04/25/fi ... the-crisis

Can you show me one thing

Submitted by El Gordo on April 26, 2012 - 12:17am.

Can you show me one thing this Administration has done or one policy it has enacted which would lead you to believe that it has ever had our best interests at heart?

SRSrCheck my post

Submitted by tyberious on April 26, 2012 - 12:31am.

I think I did. Its late and I'm tired, but you can check tomorrow.

How about free physical examinations - - -

Submitted by atarangi on April 26, 2012 - 12:32am.

Reply to El Gordo

REPLY....THE GREAT SILVER DEBATE

Submitted by SRSrocco on April 26, 2012 - 12:36am.

Big Rocks..... I dropped in here for a minute and saw your comment and thought I might add some info to your argument.

While silver is a commodity it is a precious metal and it is a form of money. As I mentioned before, Official Mints are producing:

GOLD & SILVER EAGLES

GOLD & SILVER MAPLES

the US Mint and the Royal Canadian Mint are not producing the same coins in Copper. Again, you can't change 2,000 years of history of silver as money. I do realize there is rhetoric on the internet that states silver is more an industrial metal than money. Why do you think Hugo Salinas Price is trying to reinstate the Silver Libertad as official money in Mexico? He is not concerned about the so-called notion that silver is BETTER as a commodity than as MONEY.

While Silver Eagle sales are down in 2012, they are doing a hell of a lot better than Gold Eagle sales:

FIRST 4 MONTHS 2012 COMPARED to 2011

SILVER EAGLE SALES = -25%

GOLD EAGLE SALES = -44%

I would also like to remind the reader-investor that silver was not money in 1980 and it reached $50 an ounce. Some will say that is was due to the HUNT BROTHERS buying up silver. This is partly true, but there were no DERIVATIVES in 1980 and ALGO TRADING like today. There was no silver leasing and silver trading at 100 to 1.

Silver has to be manipulated like gold because it confirms the DEATH of the DOLLAR. The manipulators and the Brain-dead analysts want to make sure that the public and investors realize that silver is just a stupid industrial metal so they go back to sleep and buy more US Treasuries.

Anyhow.... the more people who are brainwashed into believing silver is better off as a commodity the longer it will take for silver to regain its role as REAL MONEY and a STORE of VALUE.

That is why we must have patience....

RU nuts

Submitted by stealthbear on April 26, 2012 - 12:38am.

Excellent, must read article. Thanks for linking.

Tyberious....WHAT POST?

Submitted by SRSrocco on April 26, 2012 - 12:40am.

I didn't see any.

Victor Victor

Submitted by Xeno on April 26, 2012 - 1:11am.

I am surprised and while I'm not as versed in the subject as yourself and do think you have some very valid points and enjoy your blog posts, I am surprised at your post and think you missed the mark on the silver valuation issue today.

While I agree that as a consumable good used in industry, silver will be priced more as a commodity than as money but the supply/demand fundementasls argue for a higher price until mine production and available supply meet demand. But even higher prices will not dampen it's use in producing products since per piece very small amounts are used but overall production demand is higher.

Then there's the issue of how miners work to consider.

As I understand it, miners are a business and as such as their costs increase so eventually must the price they charge for their product. And as a business, when prices are low they mine the easy to get ore to reduce production costs but also tend to produce more. When prices for the ore rises, they can then afford to mine the harder to get and more production costly ore but this reduces the amount produced over the same time period because it is more difficult to mine.

Same as the oil producers when there's a shortage of uneconomical cheap production until the prices rise. How much of the cheap easy to get silver has already been mined? I don't know but if the drawn down of inventories the past few decades combined with all the forward sales and rising demand is any indication, I'd say silver has quite a way to go on the upside before enough is mined to bring supply/demand into balance. At this point how much higher is certainly an unknown to most all of us.

As for gold, it is already being used in international payment settlements but the issue is debt levels. Probably more accurately, unpayable debt levels. Either gold rises in value to balance the debts and we continue on from where we are, or debts go bye bye and the system crashes because it's based on debt, or maybe a combination of the two.

Either way, both are going higher. Gold because it is money and will probably also be used as a capacitor for savings without causing massive inflation, and silver because of the demand/supply imbalance and slowing production until the price rises enough that it's economical to mine the harder to get ore (environmental costs notwithstanding).

S.W.I.F.T.

Submitted by NW VIEW on April 26, 2012 - 1:20am.

We are gaining an education into what SWIFT is all about in the news. Most of us have never heard about the interbank financial system or how it operates. As America uses financial warfare through SWIFT, we will see reactions from other nations that will aid them in their survival and in the end " a new currency" outside of SWIFT. We are really forcing them into a corner where they cannot buy or sell anything outside of their own base. It opens up an analogy to the future financial controls imposed in Rev. 13:17 "And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name".

The SWIFT system is a shadow of the things to come. jmo

silver

Submitted by victorthecleaner on April 26, 2012 - 1:40am.

IndigoStar7,

What are your thoughts on silver as it relates to China in the future? They reportedly have about 95% of the worlds resources within their boundaries. Is it to be excluded and not even considered in your forward thinking on why silver is so really no different then....chickpeas?

How do you know what the Chinese will do? As far as I can tell, right now they are trying to accumulate as much gold as possible. The big story is not whether some inflation scared small investors in America buy a lot of silver. They do - thanks to all the pushing. The big story is rather what replaces the U.S. dollar in the international financial system as the primary reserve. Europe has always pushed for gold, and the Eurosystem is setup for a gold world. The oil countries have always favoured gold. So what exactly would China do with all their silver? (They will neither get oil nor German machines for it). Building solar panels and selling them to the world, I suppose. Fair enough. This tells you that silver is an industrial metal.

Xty,

concerning the gold/silver ratio, can you give me an economic argument or an arbitrage that would force the GSR to a specific value or even to revert to some historic mean? I don't know any. The reason why there is no such argument is that the gold price is arbitrary. By this, I mean that the gold price is not determined by some economic process. In order to understand this argument, you can think about tulip bulbs. If tulip bulbs cost $10000 each, everyone will grow some in his garden which will soon drive down the price. If tulip bulbs cost $0.0001 each, there will be a lot of demand from flower shops and gardening companies which is going to get the price back into some reasonable range, say $0.10 to $2.00 each. The price of gold, in contrast, is not subject to any such economic consideration. It is arbitrary. If the price of gold is arbitrary, then so is the GSR. So why care about the GSR?

Maradona,

Victor is obviously a dis informant.

Hey, is someone going to pay me a salary for this? Would be cool. Than's in advance. Please contact me by board message once you have the contract ready.

For all the stackers out there, don't pay attention to Victor u other trolls when he discredit silver or gold

Perhaps you can remind me where I tried to discredit gold. I fact, I have even mentioned a price target for gold somewhere (about 4 weeks ago perhaps). Do you remember that target?

I am writing all this because there are several outlets who spend a lot of energy pushing silver to their retail clients. They all rather hold gold themselves. When eventually gold goes to $30000/ounce and silver stays at $60/ounce (both in today's purchasing power), all these little people will not know what happened to them (while Sprott himself has his own vault full of gold - he is just using the silver to make some additional money from his clients, eh, muppets).

Xty,

Silver was/is used as a common medium of exchange

Don't confuse medium of exchange with store of value. The medium of exchange, i.e. how you perform transactions, just needs to be convenient. Printed paper, ledger entries, or electronic credit all work fine. What matters is the store of value. The problem with the present dollar world is that everyone uses the debt of others in order to save for their retirement. This is what fails - for the reason everyone of you knows. So you need to try to find out what is the best store of value, and what will dominate the store of value use globally once the dollar has been retired.

The same argument applies to all the historical examples of the use of silver as a medium of exchange. Yes, fine, use silver for your coins, I don't care - this is not what matters. What matters is the store of value. Even the U.S. government understand this. They have some 8000 tons of gold in the vault and no silver. They, too, know what will come after the dollar. Hint: not silver.

Regards,

Victor

the Euro

Submitted by victorthecleaner on April 26, 2012 - 2:09am.

Fred Hayek,

And the ECB says, "Well, if you don't like our currency, go buy some gold with it."

Exactly. This is the key point. If you want to store your savings for the future, buy gold with it. Yes, you! Everyone of you! If you need to make a quick transaction, some pastries from the bakery, the next paycheque, some internet shopping, use the Euro. If you want to borrow something to buy a new car, borrow Euros. That's exactly the point. Separation of medium of exchange (Euro) from the store of value (gold).

The dollar has tried to be as good as gold for a long time. It failed. It failed again. And it failed once more. And each time, the government that had promised to maintain the value of the dollar, eventually couldn't. And rather than admitting that credit money is not as good as gold, they started behaving really crazy (1933) and invented all sorts of pretexts to get around this responsibility.

Do you really think the next time will be different? Do you think you can setup a government and a banking system that can guarantee the value of credit money in the very very very long run? Over more than 100 years? Who guarantees that, 50 years down the line, the people don't elect a government that starts watering down the banking regulations and that starts to inflate the money again. Hint: nobody. This is why you always have to save in gold and not in debt. Because you don't know who will be in charge 50 years later.

You see, if Rickards' proposal comes true, the U.S. end up with a paper dollar that the government claims is backed by gold (but we know governments, don't we - and we know bankers, don't we?). In Europe, they use paper money for transactions and save in gold. Every single citizen saves for their retirement in physical gold.

Notice the difference?

Thinking about the Yuan. Can you explain to me why Saudi Arabia would sell their oil for Yuan? The Yuan is backed by debt just as any other credit money, and you can buy Chinese made consumer electronics with it. How do you buy German cars and American fighter planes with Yuan? The Yuan as a reserve currency fails because of what is known as the double coincidence of wants.

If they back the Yuan wiht gold in the same way as Rickards proposes, they get the same problem. They won't because they understand exactly what they are doing. If they use gold as a floating reserve in the same way as the Eurosystem does, the Saudis will sell them oil for Yuan. Check.

Regards,

Victor

It is interesting that Victor

Submitted by diegeiro on April 26, 2012 - 2:12am.

It is interesting that Victor appears when sentiment is low. I have spent time on his blog and have read his point of view on his blog, and also on screwtapefiles.blogspot.com
He blogs about where he gets his name in the comments here:
http://victorthecleaner.wordpress.com/2012/02/08/the-many-values-of-gold...
what is in a name? Perhaps nothing, I am not sure, but I do understand where screwtape comes from as I am a CS Lewis fan.

there was something on screwtape files written by a member blogger from Dubai early in the month, I can't find it now to reference, that was a red flag for me as for me, the enemy of my enemy is not necessarily my friend. I went there the day this site was down for a bit.

anyhow it is important to see what the other side of a position is in order to know what your position is. It is hard for me to see the US having a gold standard come back. That is wishful thinking to me since we probably no longer have any gold, thanks to the crooks at the E S F and in Treasury. also, I am not sure how great an authority Rickards is. and I did read the book.

getting sleepy now.

silver - -

Submitted by atarangi on April 26, 2012 - 2:16am.

I don't believe Victor is a troll for one second. His posts are well reasoned and very impressive. For me though to discredit silver is just theoretical speculation. The fact is that silver has been pretty much the top investment of the decade. Until the trend reverses, I can't see the point in getting too concerned about silvers possible potential demise.

cheers victor and others (and turd of course!)

Submitted by sixdollarsilver on April 26, 2012 - 2:25am.

well-informed straight talk is always much appreciated in these parts

SRSrocco

Submitted by Eric Original on April 26, 2012 - 2:33am.

Don't know if this is the one you were thinking about, but recently Pan American Silver backed out of it's option to develop Orko Silver's big La Preciosa silver project in Mexico. PAAS said La Preciosa wouldn't meet their internal rate of return hurdle. La Preciosa was modeled as a combined open pit and underground operation.

Orko is now back to 100% ownership of it, and will try to make a go of it on their own, or find another buyer. Orko's stock is down by about 50% since the news.

Where have you been hiding Six Dollar - - -

Submitted by atarangi on April 26, 2012 - 2:34am.

"Victor the straight shooter" does have a ring to it. Now that I think of it so does "Six Dollar Silver".

I just don't understand where

Submitted by Driven81 on April 26, 2012 - 2:38am.

I just don't understand where we are supposed to get this next massive leg up in the metals without any new inflationary pressure or buying frenzy.

Federal Reserve interest rates are low. Bond yields are low. The stock market is high. Employment is stagnant. Housing is starting to fall again. Fire has not yet been set to the world, via war. And despite rising prices, its likely to be a dismal earning season for compnay profits. Personal debt is still growing, and people are saving rather than spending and they are doing so in cash, not metals.

Of course we know what the long term prospect for Gold and Silver is, but that is our cheat sheet for the end of the bull run. If we did not have this cheat sheet, where would we be at in our TNA? I mean TA?

Its okay to use the cheat sheet, and strongly advised, but just make sure you know that its not all uphill. Everyone seems to be so shocked when it goes down, as if a market isn't supposed to do that on its own, aside from manipulation.

Thumbs up to Victor!

Submitted by donnojackshit on April 26, 2012 - 2:58am.

Whilst I appreciate Victor's thoughts on gold, silver is not to be underestimated!

I feel that after the USD collapses with all the other IOU currencies around the World, and gold shoots to the $30 000/Oz plus, possibly resulting in a GSR of 300 to 600, that this may only be a short term aberration for the silver price (2015 to 2016?).

It won't be long after the initial shock and radical World changes, that the GSR may normalise to reflect the true value of silver, with a GSR approaching, dare I suggest, of 1!

I postulate this occuring 2017 to 2020.

So gold to the Moon first, followed by silver later.