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HOLA441

Hardcore Austrian economist Detlev Schlichter discusses the relationship between asset prices and cheap money stimulus. You have to read a fair bit of this article to get to any discussion of gold (section titled 'No safe havens, sorry.')

http://papermoneycol...raving-markets/

Despite being a PMs enthusiast, I found it interesting that Schlichter is quite cautious about gold and asset prices in general because of money manipulation:

We are in a proper mess and I am sorry to say there are no painless exits, there are no cheap assets and there are no safe havens. Gold remains my favourite asset because it is something that has maintained wealth for a long time and it cannot be printed by Bernanke and not issued en masse by Geithner.

Yet, as I explained last week in detail, gold is not cheap. I believe its price already reflects the expectation that the Fed will print vast amounts of additional dollars and that an inflationary endgame to the global economic malady has a high probability. I don't call it a bubble because so many things are actually pointing in the direction of such an outcome. Yet, any reluctance on the part of Bernanke to use the printing press more aggressively – and I believe he has good reasons to be cautious – is likely to depress the premium in the gold price over gold's long run PPP. It is not an easy trade.

I think last week's volatile price action in gold supports this interpretation. When the poor labour report came out on June 1, gold enjoyed its biggest one-day rally in more than 3 years, evidently in expectation of more central bank activism. But with Bernanke appearing reluctant in his testimony on Wednesday to prepare markets for another round of debt monetization, gold retreated quite sharply.

I found this a refreshingly honest discussion about the opportunities and risks in gold from a committed Austrian - better than the usual 'gold is going to the moon' type of stuff.

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HOLA442

I found this a refreshingly honest discussion about the opportunities and risks in gold from a committed Austrian - better than the usual 'gold is going to the moon' type of stuff.

I agree but I find it more interesting how many commentators have recently been looking closely at what may emerge after the next financial collapse and their prophesies are becoming increasingly pessimistic.

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HOLA443

I agree but I find it more interesting how many commentators have recently been looking closely at what may emerge after the next financial collapse and their prophesies are becoming increasingly pessimistic.

Do you mean pessimistic in the sense of Gold going high, fast; or pessimistic in the price of Gold drifting down?

My own guess would be that Gold will tank sharply, (particularly if the PTB crank up their manipulation levers at the same time) and then rebound until it reaches the genuine, very high price. A real, one-way financial collapse involving at least one bank leaping off the London Gherkin, would cause every Frenchman to start digging in his orchard, and the Swiss would start counting their ammunition almost as fast as they count their bullion.

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HOLA444

Do you mean pessimistic in the sense of Gold going high, fast; or pessimistic in the price of Gold drifting down?

My own guess would be that Gold will tank sharply, (particularly if the PTB crank up their manipulation levers at the same time) and then rebound until it reaches the genuine, very high price. A real, one-way financial collapse involving at least one bank leaping off the London Gherkin, would cause every Frenchman to start digging in his orchard, and the Swiss would start counting their ammunition almost as fast as they count their bullion.

I think that when 'gold-based' economic commentators started talking about the coming financial crisis back in the mid 2000s they were optimistic in their thinking that there would be a short sharp shock and then we would end up with a bi-metallic currency with banks returning to their role as building societies and money-changers rather than the multinational economic power monsters we have now. However, the feeling now seems to be that the transition from the end of our current debt-based money system to the future money system will 1) take far longer that previously thought 2) will probably involve massive power struggles within and between states and 3) the current system may rear its ugly head again as your average person in the street, bankers, business leaders and politicians cannot fully grasp the idea of a finite monetary system.

Perhaps when people are looking into this situation and seeing that an economic collapse would mean the end of all pension companies, insurance companies, high street banks, investments banks, large corporations and an astronomical rise in commodity prices in the short term, it is difficult to say what anything may be worth in a future economic system.

I am a silver-bug and believe that long term its worth will outstrip that of gold but agree with you that we are going to see huge price volatility in the coming months and years. I think this volatility in metals such as gold and silver highlight how our current system is built upon a shifting sand where nothing is really safe.

Sorry for the rant

Edited by Marcus Aurelius
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HOLA445

No need to apologise. IMHO you are right on all counts.

I think that TPTB want a "reset" but do not want to take the blame for it. So they'll put things off again and again until something resembling a "Black Swan" event occurs. Then, they'll give the system a jolly good kick to exaggerate the problem and make the most of the event.

Stand by for a "manufactured" event near, just before, or just at the end of the Olympics. If one can't be made up, then they'll wait for the next "events, dear boy, events" moment in order to make the most of the need for a complete monetary system reset".

We shall see.

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