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http://www.zerohedge.com/news/2016-02-11/biggest-crisis-history

Talking of Oil and Gold, last week Deutsche Bank showed a long-term graph of Oil in real adjusted terms, showing that the average real price since 1861 was $47.

20150128_DB2_0.png

Following on from that, Deutsche notes one ratio they occasionally look at is the ratio of various assets to the price of Gold...

Today we update the
Oil/Gold ratio back to 1865 and find that the Gold price has just hit an all time high at around 44 times the price of Oil.

20160211_goldoil_0.jpg

The previous high of 41 in 1892 has just been exceeded.
For perspective, the ratio was at 6.6 in June 2008 and only 12 in May 2014.
The long-term average is 15.5.
While this says nothing about where the ratio is going in the short-term surely this looks a good trade to exploit over the longer-term for those who care about such things.

However, as we noted recently, it merely predicts a crisis and according to the chart above it is the biggest crisis in history...

20160117_oilgold_0.jpg

The previous "biggest crisis in history" was in 1893 when a serious economic depresion hit America. We just topped that in terms of the gold/oil "crisis" ratio, making us wonder: what crisis is just around the corner, and just how big will it be?

An interesting measure.

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DB are so smart, how did they wind up with $66 trillion derivatives exposure?

gold/oil is pricing economic and monetary collapse, exactly as predicted by the Austrian School.

Haven't got a clue, apart from lose money chasing yield ,but there must be an angle for this report especially when it`s been widely reported that DB have a massive exposure to oil

When you are circling the plug hole every statement has an angle and that angle is there with the aim of instilling confidence, i just can`t see a logical angle from the statement hence the sarcastic post

Sarcasm filter a little high ?

Edited by long time lurking
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DB are so smart, how did they wind up with $66 trillion derivatives exposure?

gold/oil is pricing economic and monetary collapse, exactly as predicted by the Austrian School.

1. The shadow banking system is an unregulated free market.

2. The industry standard risk management methodologies are nonsensical.

3. They hold many billions of legacy loans on their books which QE has allowed them to hedge/rollover rather than dispose of.

4. They've used derivatives to offset some of their losses due legal costs since 2008.

Edited by zugzwang
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02

1. The shadow banking system is an unregulated free market.02

2. The industry standard risk management methodologies are nonsensical.

3. They hold many billions of legacy loans on their books which QE has allowed them to hedge/rollover rather than dispose of.

4. They've used derivatives to offset some of their losses due legal costs since 2008.

but it's not a free market. The margin calls are involuntarily underwritten by you and me and the rest of the taxpayers via money printing and bail in. They have been for at least the past 7 years. Just as the housing ponzi has a steady supply of new entrants through govt HTB. Free markets would have killed off this charade in 2008 and probably even 1998 Edited by evetsm
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chart-china-consumption-raw-materials12.

China collapses = world economy collapses.

My guess, and probably that of many others looking at stock markets - is that it's already happened, the Chinese are fudging their figures - and many have already seen through them.

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China collapses = world economy collapses.

My guess, and probably that of many others looking at stock markets - is that it's already happened, the Chinese are fudging their figures - and many have already seen through them.

How dows China Consume Gold?

(quoted the wrong post but the question stands)

Edited by kudukid
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As China finds that the government can't stop the property crash or the stock market crash, or the huge inflation they will start to loose faith.

Gold will become a prime target as it's much more popular out there than in the west.

Maybe not 'consume' being the right word for gold, more 'import' or 'mine'

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I haven't been on here in a long time, until the last crash to be honest.

It seems like a good time to sign on again as it seems that the crash we were expecting in 2007 is fially here, all aspects are in place and we are living in very interesting times!!!

I have been in Saudi all of the time whislt I have been away and the middle East in General has becaome very unstable in recent times, the latest decision by The Saudis to send in land troops to Syria is a massive tipping point for the area.

I expect to see great turmoil in the coming years!!

Got Gold?? :)

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As China finds that the government can't stop the property crash or the stock market crash, or the huge inflation they will start to loose faith.

Gold will become a prime target as it's much more popular out there than in the west.

Maybe not 'consume' being the right word for gold, more 'import' or 'mine'

Yes, that is my point.

The rest of the commodities will fall in consumption.

Whilst gold will become the only one to be consumed.

Which is why it is a bit misplaced on the graphic above. :)

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The graph does show how China played a huge part in stopping collapses in the last recession. If a country which such a large % of world consumption has a 1920's style boom it helps to bail the rest of the world out. Especially when you add in all the props, QE, low interest rates, bail outs etc.

When a country that size goes into a full blow 1930's style depression, coupled with virtually no where to much on interest rates (where it matters), QE becoming non effective, and the business cycle turning, commodity crash, slowing world trade, we are in for an almighty reckoning. Asset bubbles will implode all around the world.

Will be a painful transition between debt heads laying claim to resources, to productive individuals. not a great time to be nearing retirement.

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but it's not a free market. The margin calls are involuntarily underwritten by you and me and the rest of the taxpayers via money printing and bail in. They have been for at least the past 7 years. Just as the housing ponzi has a steady supply of new entrants through govt HTB. Free markets would have killed off this charade in 2008 and probably even 1998

Shadow banks aren't actually banks. They conduct their activities without explicit access to central bank liquidity or public sector credit guarantees. The majority of losses sustained in the shadow banking system in the last seven years have not been compensated for by the taxpayer.

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02

Shadow banks aren't actually banks. They conduct their activities without explicit access to central bank liquidity or public sector credit guarantees. The majority of losses sustained in the shadow banking system in the last seven years have not been compensated for by the taxpayer.

off or on book, margin calls must still be met, not least because counterparties want assurance of solvency. The shadow banking system is mostly SIVS owned by on book banks. The notional $700 trillion derivative debt must eventually feed through the entire system, on or off book. That's what is getting bailed out.

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I haven't been on here in a long time, until the last crash to be honest.

It seems like a good time to sign on again as it seems that the crash we were expecting in 2007 is fially here, all aspects are in place and we are living in very interesting times!!!

I have been in Saudi all of the time whislt I have been away and the middle East in General has becaome very unstable in recent times, the latest decision by The Saudis to send in land troops to Syria is a massive tipping point for the area.

I expect to see great turmoil in the coming years!!

Got Gold?? :)

Gold is not a commodity; it is an element with an atomic weight of 79. This means that it is of uniform specification anywhere in the world.

There are those that believe that we are headed towards a new monetary system based on gold and SDRs and that this will arise after the current system has been destroyed.

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OH ****** ME!!!!!

"IT" IS HAPPENING.

Calm down dear. Calm down. It's just a stockmarket. Not the end of the world. ;)

Let's have some perspective here shall we? The broader market S&P500 (not the more narrow and 'symbolic' DOW) is down less than 15% from its all time high middle of last year. We haven't seen real crash moves yet (though I agree one is coming) of 5%+ in a day,

I suggest you reserve this level of bold and big font size for when the real crash really happens. I suspect you do not remember the 1987 crash? I do! Not THAT was a crash deserving of comments such as

OH ****** ME!!!!!

"IT" IS HAPPENING.

:lol::lol::lol::lol::lol::lol:

I read some of your latest posts I cannot but help think of this.....

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I know it is a bit of a hobby horse of hotairmail regarding collapsing company profits. You would think that given a collapse in the FTSE 100 that the p/e would be stable at about 17, couldn't believe it when I looked in the FT just now........p/e 21.05 :o that is some collapse. 5,600 is no longer looking so cheap after all.

Linky please?

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I suspect you do not remember the 1987 crash? I do! Not THAT was a crash deserving of comments such as

OH ****** ME!!!!!

"IT" IS HAPPENING.

:lol::lol::lol::lol::lol::lol:

I read some of your latest posts I cannot but help think of this.....

Actually the 1987 crash was a short and relatively mild event. The crash of 1973/74 was worse; if you look at any graph of the stock market in recent years the 1987 event is insignificant whereas the 1973/74 crash was quite serious.

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Actually the 1987 crash was a short and relatively mild event. The crash of 1973/74 was worse; if you look at any graph of the stock market in recent years the 1987 event is insignificant whereas the 1973/74 crash was quite serious.

Not really so. The 87 crash was, admittedly, over very quickly rather than being a drawn out affair like 73. And in both cases the markets recovered relatively quickly (18 months or thereabouts).

The point I was light heartedly making was that yes bad stuff is a coming our way, but that the REAL declines aint happened yet. As I say - perspective. What did we get the other day? A few hundred point DOW decline (that then recovered a lot by end of the day and even more so on the Friday)? Big deal. We've both seen far worse than that in the last less than 10 years, never mind going back to 2000-2002 and the dotcom crash.

The difference this time is, as some claim, the markets will not bounce back quite so quickly like 73 or 87 - or indeed post 2009.

For me, despite the claims (which appear to be true) that the world economy is falling off a cliff the declines in stockmarkets (as I say, only 15% down from peaks) is remarkably muted and restrained thus far - both in terms of total decline and maximum daily declines seen. This suggests to me that the decline from new year is merely wiping out the extreme excess froth from the top of the market. The markets still remain overvalued but that participants have not yet come to terms with that - and this points to much bigger and seismic declines ahead when they do.

Edited by anonguest
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Something to do with oil if I recall correctly.

Some reading for interest:

https://en.m.wikipedia.org/wiki/1973–74_stock_market_crash

Hang Sent went from 1800 to 300.

https://en.m.wikipedia.org/wiki/Secondary_banking_crisis_of_1973–75

Correct. The 1973 arab-israeli war and the shock repricing of oil that amounted to a tripling (quadrupling?) of the oil price almost overnight in practical terms.

But, as I said, even then the markets recovered (in nominal terms at least) very quickly.

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