Monetary Facts
Milton Friedman said that if a country had bad economic policies, its currency would weaken, which would restore balance. Imports would drop and exports would rise. Japan’s insane policy has so far crushed the yen by 22%. The results? As Mish writes, imports +9.4%, exports +3.8%. Their trade deficit fell to the worst level in decades.
One might think that falling interest rates would be good for pension funds. After all, falling rates drive up the price of assets and pensions own assets. However, pensions are generally not nimble; they have to own the asset until maturity. So capital gains don’t help them, but lower interest rates hurt them two ways. First, it starves them of the yield they need. And second, it forces them to use a lower discount rate on their future liabilities. The result: pension funds are badly underfunded (our guess is that most are much worse off than they claim). Here is another article from Mish, about pension funds in the Netherlands. Zero Hedge has an article on this topic too.
Alasdair Macleod claims that “gold markets are failing to clear”, without any evidence. Indeed, he does not even present a description of what he even means. What would this mean? Hint: there would not be 2100 trades in an hour when the US is winding down an evening after a national holiday, and Europe is still asleep. Perhaps it means that “phyzz” is not trading? Can readers please confirm that coin shops and bullion dealers are all shut down, worldwide? He also claims that it’s so bad that no longer do “physical and derivative markets interact properly with each other,” and “the disconnection between physical gold and derivatives has become so great that it is now an immediate concern.” I am still waiting for someone to tell me where I can sell phyzz for $1900 an ounce. Meanwhile, back in reality, there is backwardation in the August gold contract. Wanna know how big it is? Around 25 cents per ounce. Yeah, backwardation is a concern. But this is nothing new, being just the new normal post 2008. But hey, let’s keep perpetuating the myth that only the paper price is going down. “Phyzz” is going up and those coins you bought at $1900 are “really” worth far more. Buy more while you still can!
Alasdair writes for GoldMoney. Is GoldMoney having any problem buying 400oz bars to back its pooled allocated product it sells to clients at the current spot price? I have not heard of them charging significant premiums above the “paper” gold price, so I assume they aren’t seeing any disconnection.
When I see GoldMoney selling gold at say $100 above paper gold prices, then I’ll believe we have a disconnection.
Good point. They may be having a problem signing up new customers or even existing customers redeeming and closing their accounts.
I dunno. I just saw this article and I was incensed that such stuff is being not only published, but eagerly consumed. It is certainly being regurgitated on every comment thread on a gold related article or blog entry, especially if the author dares Question The Narrative.
Latest figures I have show GoldMoney has been pretty flat for most of 2013, losing about 10,000oz (say 2%) over the last month. So not necessarily desperation stuff. I just think Alasdiar writes his own stuff and is not under any editorial instruction. GM just needs to be careful that this sort of meme doesn’t result in people questioning their business – potential client: “How can you be selling your product if there is no physical to be had, you must be selling paper!”
Can you overpay for physical gold NOW when priced in USD if in the future USD will not be able to buy physical gold?
thinkpeace: I agree with you in one sense. Gold is going to turn out to be a lot more precious than most people today believe. Buying it now even at $1900 will seem a relative bargain. But in another sense, I disagree. There is a market for gold. The market price is around $1400, for 400 ounce bars in London. Add the appropriate premium if you want 1 ounce coins or 1/10 ounce coins or whatever. If you pay $1900 you are paying too much, or alternatively you are getting less gold for your fixed dollar budget than you should.
You mock theses people Weiner, but just remember that the have got the direction of the world basically as right as you have, and most of them didn’t need a fancy PhD to do it.