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Additional resources for earning interest in gold

10 responses to “Liquidating Civilization, Report 22 Apr 2018”

  1. Keith,

    If the fundamental price of gold is circa $1507/ounce what are your thoughts on why gold continues to languish in the low $1,300’s and falling presently?

    Thanks,

    Mark

  2. Hi Keith.

    Logically speaking, and likely over-simplifying, when debt is at a level at which it is not sustainable, it won’t be. So, default is inevitable, one way or another.

    I usually think of this as either explicit default, or as the more clandestine default through inflation. You seem to be describing “a third way” – partial default through negative interest rates.

    We see the negative rates in advanced economies predominately in Japan, Germany, and Switzerland. It “seems like” those economies who have the worst debt sustainability issues should be the most inclined to permanently offer negative interest rates.

    The above makes sense to me for Japan, but not so much Germany and Switzerland. It seems on the surface that these Northern Europe economies are in a more sustainable debt position than the U.S. Why should they be stuck in negative interest rates while the U.S. continues to avoid it? Are they being dragged into it just because of their profligate neighbors to the South?

    Best.

      1. It may not be a way out of debt, but it’s certainly a way to kick the can down the road… until, that is, the marginal productivity of debt says it’s not.

        The FED has announced an increase in the number of interest rate increases it’s planning, increases that will theoretically end at 3.25% now instead of the previous 3%. I’ll have to see that one to believe it. Because every attempt to raise rates will be both forced (with dramatically reduced demand for credit) and will incur mindboggling costs to the overall debt itself.

        For example, just that extra .25 they’re planning would add 6 Trillion to the national debt over 30 years. Isn’t that funny? No, not that .25% could alone add 6 trillion (which is a LOT of money; 1/3 of our current debt) No… what’s so sadly humorous is the notion that this entire fiasco could continue another 30 years. Ain’t gunna happen. We’re down to a few years before the signs of rupture become apparent… and a decade before the radioactive material reaches critical mass.

      2. I meant inflation in the more conventional sense of rising wages and prices. Isn’t a Venezuela style hyperinflation a default on the un-repayable debt, despite the fact that many debts get settled in the process?

  3. As I have written about many times, an elevated F price suggests investor psychology towards gold is too optimistic. Other current measures of sentiment offer solid verification. The Daily Sentiment Index (DSI for short, an index professionally managed), for example, reports that bulls outnumber bears by a wide margin now, approximately 80% to 20%.

    In my opinion, and I stress that, there is a psychological component to one of the “Fundamental” Price’s internal structure. Which is not good. It will lead to exactly the opposite effect.

    Fortunately, psychology can change quickly, and there are other factors decidedly more favorable towards gold. The bottom line with an elevated Fundamental is simply this — ‘there are worse times to buy gold’, or ‘whenever gold is below F — especially by a wide margin, gold is a relative bargain’. I’m not sure I buy all that, but that’s the gist of it.

  4. Another tremendous article. It’s almost as if nobody in the world truly understands economics like the big brained guys at Monetary Metals. Bravo guys. (and gals?) Bravo.

  5. Thanks for your kind words and for your comments.

    Why is the market price < the fundamental price? "Everyone" knows that gold is going nowhere. They only want to buy things that are going up! The Fundamental price is not a measure of sentiment, though it can show that sentiment is low (relatively) as now.

    1. I don’t rightly know the ingredients of the Fundamental secret sauce. It’s simply been my experience that elevated Fundamental prices tend to correlate with periods of excessive optimism, and vice versa. (Not that much can be determined from it)

      That said, silver is currently at 45%…. hardly excessive bullishness. Gold last week hit 80%, however, which is certainly noteworthy. But overall sentiment has been fairly moderate, except for those dastardly cheerleaders we call gold bugs. They’re 100% bullish 100% of the time. At least they’re consistent!

      I mentioned other signs that were more bullish. For example, gold remains much closer to its break-out levels ($1365 – 1375?) than to any support levels. Yet, as we measure the level of participation from the big Managed Funds (trend-following hedge funds really) that throw around a lot of money, we notice that their long positions are a fraction of their former selves. Gold has managed to get up here and stay up here despite a lack of typical financial drivers at the margin. As you might put it, Keith, that’s the physical market at work.

      So that group of big hitters will essentially need to rebuild their long positions now at higher levels, as they are market followers by definition. Some large traders have even started to short gold, given the problems at $1,365.

      It’s developing into an intriguing situation. The signs might be subtle but the pressure continues to build for an eventual breakout over $1,370.

  6. You are getting to the heart of things. Let me remind you, our ability to affect this outcome is zero.

    Economic growth now requires debt growth. For growth to continue, debt must grow, but can only do so with falling and even negative rates. Guaranteeing this outcome. We are foreclosing on all human generations to come, and perhaps even the biosphere and life on this planet, to eek out more growth in the present. And this is worldwide, with no resistance.

    To speak now on whether there is capitalism without debt is meaningless. There is no challenge to this system from the business community, and why should there be? As you say their profit is debt. To ask whether there are real profits misses the point. Nobody knows, and nobody will ever know.

    Game over, modern industrial civilization is going bust in front of our eyes. Nobody will even write the history, as the entire system is now irredeemable. And along with this everything follows: the destruction of truth, the loss of trust, inequality, greed, drugs, entertainment, crime, war, etc. Look closely. We are all acting in various ways like it’s over, because it is.

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