Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

[Jay]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

Regarding China and gold, they can play multiple options at once. Build up gold reserves for international settlements if required, while continuing to peg the yuan against the USA dollar even as the dollar steadily declines in value.

This allows them to continue printing yuan as and when required to stimulate their economy, while leaving open the option to back the yuan with gold at some point in the future if it becomes necessary. At some point they could peg the yuan to gold or a basket including gold. And pegs can be shifted.

There is something to be said for having a dual currency domestic system, where your population borrows and transacts in yuan, but saves in gold. One currency is your store of value, the other your medium of exchange. If an expectation is created that gold will appreciate relative to the yuan over time, this encourages both borrowing ( in yuan) for productive activities, and the stockpiling of gold as a form of saving and inflation hedge.

It suggests though that the pool of yuan savings available for lending will dwindle as savers switch to gold. But the government can fill this gap by printing more yuan to lend. As they indeed are already doing.

This has the smell of a perpetual motion machine - all the smart people can borrow in yuan to invest, knowing deflation will reduce what they need to pay back, while preserving the value of their "rainy day" funds in gold. The benefits of endless money printing and endless (controlled) inflation without destroying the nest eggs of savers.

Doubtless, like all perpetual motion machines, there is a flaw there somewhere, but I think the temptation to try something like this would be very strong.

I suppose the drawback is that workers get paid in yuan, not gold. So when new money is printed, there is a transfer of wealth from workers to borrowers as the value of the paypacket declines. Wage increases would lag behind the printing of new money. So the ordinary guy gets screwed, as always. But since the system benefits people with the ability to borrow, and these tend to be more influential than those who aren't creditworthy, it may be attractive to those in power.

China only supports gold investment by the masses to hedge revolutionary pressures as the inflationary pain inflicted by maintaining the dollar peg gets great. Lots of new debt and rollovers from the US coming this year, and no one to buy but "others." Crank it up Ben!

[thousandmilemargin]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

Regarding China and gold, they can play multiple options at once. Build up gold reserves for international settlements if required, while continuing to peg the yuan against the USA dollar even as the dollar steadily declines in value.

This allows them to continue printing yuan as and when required to stimulate their economy, while leaving open the option to back the yuan with gold at some point in the future if it becomes necessary. At some point they could peg the yuan to gold or a basket including gold. And pegs can be shifted.

There is something to be said for having a dual currency domestic system, where your population borrows and transacts in yuan, but saves in gold. One currency is your store of value, the other your medium of exchange. If an expectation is created that gold will appreciate relative to the yuan over time, this encourages both borrowing ( in yuan) for productive activities, and the stockpiling of gold as a form of saving and inflation hedge.

It suggests though that the pool of yuan savings available for lending will dwindle as savers switch to gold. But the government can fill this gap by printing more yuan to lend. As they indeed are already doing.

This has the smell of a perpetual motion machine - all the smart people can borrow in yuan to invest, knowing deflation will reduce what they need to pay back, while preserving the value of their "rainy day" funds in gold. The benefits of endless money printing and endless (controlled) inflation without destroying the nest eggs of savers.

Doubtless, like all perpetual motion machines, there is a flaw there somewhere, but I think the temptation to try something like this would be very strong.

I suppose the drawback is that workers get paid in yuan, not gold. So when new money is printed, there is a transfer of wealth from workers to borrowers as the value of the paypacket declines. Wage increases would lag behind the printing of new money. So the ordinary guy gets screwed, as always. But since the system benefits people with the ability to borrow, and these tend to be more influential than those who aren't creditworthy, it may be attractive to those in power.

[lakedaemonian]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

fyi:

http://www.navytimes.com/news/2009/1...y_base_123009/

China is running a "string of pearls" for naval replenishment/basing in Myanmar, Bangladesh, and Pakistan.

Sri Lanka can now be added to that list as the price for China's support for Sri Lanka's eradication of the Tamil Tigers....which wouldn't have been economically, politically, or militarily possible without Chinese support.

The Chinese also have a VERY long history in Tanzania...so I wouldn't be surprised to see the PLAN grow it's presence there over time.

[seanm123]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

The subscriber link is not working.

seems to be an extra "http//" in the URL.

http://http//www.itulip.com/forums/s...533#post141533

[jtabeb]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

. I see multiple stages in this episode we find ourselves in and not a waterfall effect. At least not in the near future. But I could be wrong.

I hope not, bro. I hope not.

[Jay]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

I have no doubt that the US Empire faces the prospect of its destruction. In fact without growth, it can not remain in its present form. All advanced civilizations come to face this crossroad. Western civilization has met it multiple times but was fortunate to expand through it in each instance. The initial expansion of feudalism, which eventually bogged down into sclerotic vested interests, was circumvented by a period of commercial capitalism. That commercial capitalism devolved into mercantilism and its vested interests. The expansion of the industrial revolution provided another lift, which then begat the vested interests of monopoly capitalism and another period of turmoil and conflict, out of which the US gained global dominance. Without a new era of expansion and reorganization, the Western state will enter a decay phase. That is where we are now. With the end of peak cheap oil, we will need a new miracle to expand, or the decay of Western civilization will lead to a new organized structure. That process takes decades and the ball is in the air right now.

That being said, my point is only that the existing state, and more importantly the global vested interests behind the scene, will likely not go down without a fight and I don't think the black swan of the BRIC countries moving toward hard currency will necessarily break the camels back. These interests are very powerful, know what is happening, can make or break nations, and fiat suits them. At least in some form. I see multiple stages in this episode we find ourselves in and not a waterfall effect. At least not in the near future. But I could be wrong.

[Jay]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

Double post.

[lsa420]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

fyi:

http://www.navytimes.com/news/2009/1...y_base_123009/

Wait a second. We're the only ones that can do that!:p

[audrey_girl]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

As a person who has been schooled in Military History, Geopolitics, and instruments of power, (and yes I do mean all of them, can you name them all BTW?) I have observed ONE LESSON that stands ABOVE ALL else when it comes to conflict, one that was not presented in any of our coursework. (ok, more like crammed down my throat during continuing professional military education)

The nation that FIRST succombs to it's own internal inconsistencies will lose the confrontation.

Russia was the first to go down during the cold war for this very reason.

I'll make a stark forecast, that the internal inconsistencies in Iran MAY (and I mean MAY) allow the US to survive in it's present form through a period of political regime change in that country.

Iran is an enemy now, so that is at least, a hopeful sign.

When it comes to our closest COMPETITOR, however, my forecast is decidedly less rosy.

How does the China compare to the US?

Well, it's a pseudo-capitalist country (China) that is pursuing lassie-fair international development of the third world (esp. Africa) while securing it's future raw material in energy needs in a post peak-oil world, a classic "win-win" economically for China and her partnering nations. (please don't forget the impact on transport, mining and agricultural production here, they are vital and EJ tends to gloss over the impact in THESE areas when he does his peak oil analysis). It is SIMULTANEOUSLY building up it's regional military power AND building up the strength of it's domestic middle class through infrastructure and MOST IMPORTANTLY, by encouraging a sound economic foundation through diversified Precious Metals Savings Program among it's citizenry (Officially Sponsored, I might add). That last one, (are you reading this Washington?), is how you manage a failing banking and economic system.

If China's banking system or economic system has problems that have to be addressed via monetary debasement, the Chinese HAVE PERFECTLY prepared their middle class citizenry to emerge from catastrophe with there wealth intact, and ready to buy and spend another day.

Now compare that with a global empire that is undergoing socioeconomic collapse and is fiscally bankrupt at the household, local, state, and federal levels. In addition, it's internal resource base is largely depleted. The supplies available to it are under pressure as the governments supplying these resources feel increasing pressure from their domestic population to keep dwindling supplies of resources at home for domestic use (think Mexico and it's oil field decline). While claiming to offer "true development" to our protectorates, err, partners, instead we supply in contrast, a military protection racket where their natural resources are transferred for our use, and our products can be sold on their markets, but not vice-versa.On top of that, this empire has a global military presence that uses the lion's share of the world's energy supplies (remember, externally sourced from oil exporting countries). The Military is actively engaged fighting two wars (and will most likely add a third, forth and fifth in the next 6- 18 months). Divorce and suicide rates among the military are the highest they have ever been. The proportion of the population that is suitable for military service has declined from 7 in 10 two decades ago, to less than 3 in 10 today. Don't forget that this empire is governed by two parties that are completely unresponsive to the popular will of the electorate, and only serve the interests of their corporate contributors. This has resulted in this empire nation spending 20% of ANNUAL WORLD GDP on attempts to restore a financial system that has taken on the persona of Humpty Dumpty. And, whereas the wealth and savings of the many in China are ENCOURAGED, BY THE GOVERNMENT NO LESS, to be safely secured in the ONE financial vehicle that can safely survive all calamities (save for complete extinction of the human race), the US uses disinformation, market manipulation and outright propaganda to ensure that the lion's share of the nation's savings and retirements funds are held captive by a plutocratic and oligarcical financial elite.


I don't know everything about China or the US. The contrast of the internal inconsistencies above is ENOUGH for me to make the call that unless we change SOON, and COMPLETELY REFORM our financial and Monetary system, WE LOSE!

I have not seen the first inclining of any reform on the part of policy makers. Whether they are corrupt, inept, or just plain stupid, doesn't matter at this point. The die is cast.


China Took the Nash Equilibrium solution to the monetary problem. That allows them to do WHAT EVER they NEED to do from a fiscal and economic perspective (because the wealth of population is secured via PM holdings). They can change how their systems operates freely without risk of popular dissent or uprising. They can adapt as necessary to what ever financial system emerges and do it faster and more completely than ANY competitor because their freedom of maneuver is unconstrained with regard to their population.
For our own population we first remove the value of assets that the middle class holds, then the assets themselves, followed by removing their livelyhood (jobs), and finally their savings through taxation and inflation. This of course leaves a impoverished, dispondent, and potentially violent prone population to fend for itself, without the necessary tools (education system, social safety net, health care, housing, etc. etc.) and which is governed by an increasingly corrupt, disconnected, and self-serving political and economic elite.


How is the USA not Argentina, again? (Okay, Argentina with Nukes and presently, the most capable military in the world that just also happens to have the biggest energy requirement of ANYTHING on earth).

I hope I covered the BIG things that keep me up at night in enough detail to keep you up at night as well. This isn't everything, but I wanted to set the stage for what I see as the coming battle royal and a glimpse as to how I think it will end.

fyi:

http://www.navytimes.com/news/2009/1...y_base_123009/

[dummass]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

What happens when governments get involved?

(My apologies if this has previously been posted)

http://www.ft.com/cms/s/0/724c92ec-f...tml?ftcamp=rss


Vietnam to put an end to gold trading
By Tim Johnston in Bangkok
Published: January 1 2010 13:09 | Last updated: January 1 2010 13:09
Vietnam has ordered all gold trading floors to close by the end of March, putting an end to a business which turns over $1bn a day but which the government feared was spinning out of control.

“Both the owners of the gold-trading floors and traders are doing their transactions on a fragile foundation that lacks legal, economic and technical frameworks and knowledge,” the government said in a statement.

The order also bans using overseas accounts, but does not affect jewellery or retail gold sales.

The government said it was particularly concerned that some investors had been drawn into overleveraging their positions by low interest rates and the ever-increasing price of gold , which has risen from $660/oz when the first trading floor was started in 2007 to almost $1,100/oz today.

The government said that in some cases, investors had only been required to put up 7 per cent of the value of their portfolio.

The regulation will affect around 20 gold trading floors, but it is unclear if the government is intending to re-write the regulations and allow the floors to re-open or if the move is long-term.

The trade has become a lucrative source of income for many of the banks and trading houses which have opened the exchanges, and the ban could hit profits. But analysts say it could free up liquidity that might flow back into the stock markets, lifting the index.

Gold has a special place in Vietnamese investment portfolios. It often plays a key role in hedging property transactions, and historically provided a buffer against political uncertainty.

Today, Vietnam is one of the world’s largest gold consumers. The Vietnamese buy a similar amount of gold per head as the Germans, who have a GDP per capita more than 40 times greater.

But the appetite for gold has put significant pressure on the dong and was a key factor in forcing the government to devalue the currency by more than 5 per cent at the end of November. But the currency is still trading below the government’s approved trading band on the black market

In May 2008, the government tried to take some of the pressure off the currency by banning gold imports, but it was forced to relax the ban when Vietnamese prices hit a premium of $150/oz to the London Gold fix.

Gold imports were a substantial contributor to a ballooning trade deficit, which hit some $12.2bn in 2009, contributing to fears of re-emerging inflation.

[jtabeb]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

You don't think TPTB have worked so hard to let a few interlopers ruin the party by taking away fiat currency controls do you? We have yet to see real hard power in use, and there are still plenty of soft power options. In a world of shrinking GDP and capital destruction, stressed Empire heavy hands always come out. The BRIC dance will be furtive and tentative for that reason. Hard power eventually shows in times like these, it has been this way throughout the millennium. The precious metal market should rule out, but there will be blood first. I bet the sovereigns play along to the best of their ability as most of the central movers and shakers in the countries that matter are in on the game. In addition, they would have to be blind and have zero imagination to think that the US is out of options because it is saddled with debt and is already fighting two wars. Anyone who gets what is going on isn't that stupid. Nukes are the wild card no one but the depraved want to use.

As a person who has been schooled in Military History, Geopolitics, and instruments of power, (and yes I do mean all of them, can you name them all BTW?) I have observed ONE LESSON that stands ABOVE ALL else when it comes to conflict, one that was not presented in any of our coursework. (ok, more like crammed down my throat during continuing professional military education)

The nation that FIRST succombs to it's own internal inconsistencies will lose the confrontation.

Russia was the first to go down during the cold war for this very reason.

I'll make a stark forecast, that the internal inconsistencies in Iran MAY (and I mean MAY) allow the US to survive in it's present form through a period of political regime change in that country.

Iran is an enemy now, so that is at least, a hopeful sign.

When it comes to our closest COMPETITOR, however, my forecast is decidedly less rosy.

How does the China compare to the US?

Well, it's a pseudo-capitalist country (China) that is pursuing lassie-fair international development of the third world (esp. Africa) while securing it's future raw material in energy needs in a post peak-oil world, a classic "win-win" economically for China and her partnering nations. (please don't forget the impact on transport, mining and agricultural production here, they are vital and EJ tends to gloss over the impact in THESE areas when he does his peak oil analysis). It is SIMULTANEOUSLY building up it's regional military power AND building up the strength of it's domestic middle class through infrastructure and MOST IMPORTANTLY, by encouraging a sound economic foundation through diversified Precious Metals Savings Program among it's citizenry (Officially Sponsored, I might add). That last one, (are you reading this Washington?), is how you manage a failing banking and economic system.

If China's banking system or economic system has problems that have to be addressed via monetary debasement, the Chinese HAVE PERFECTLY prepared their middle class citizenry to emerge from catastrophe with there wealth intact, and ready to buy and spend another day.

Now compare that with a global empire that is undergoing socioeconomic collapse and is fiscally bankrupt at the household, local, state, and federal levels. In addition, it's internal resource base is largely depleted. The supplies available to it are under pressure as the governments supplying these resources feel increasing pressure from their domestic population to keep dwindling supplies of resources at home for domestic use (think Mexico and it's oil field decline). While claiming to offer "true development" to our protectorates, err, partners, instead we supply in contrast, a military protection racket where their natural resources are transferred for our use, and our products can be sold on their markets, but not vice-versa.On top of that, this empire has a global military presence that uses the lion's share of the world's energy supplies (remember, externally sourced from oil exporting countries). The Military is actively engaged fighting two wars (and will most likely add a third, forth and fifth in the next 6- 18 months). Divorce and suicide rates among the military are the highest they have ever been. The proportion of the population that is suitable for military service has declined from 7 in 10 two decades ago, to less than 3 in 10 today. Don't forget that this empire is governed by two parties that are completely unresponsive to the popular will of the electorate, and only serve the interests of their corporate contributors. This has resulted in this empire nation spending 20% of ANNUAL WORLD GDP on attempts to restore a financial system that has taken on the persona of Humpty Dumpty. And, whereas the wealth and savings of the many in China are ENCOURAGED, BY THE GOVERNMENT NO LESS, to be safely secured in the ONE financial vehicle that can safely survive all calamities (save for complete extinction of the human race), the US uses disinformation, market manipulation and outright propaganda to ensure that the lion's share of the nation's savings and retirements funds are held captive by a plutocratic and oligarcical financial elite.


I don't know everything about China or the US. The contrast of the internal inconsistencies above is ENOUGH for me to make the call that unless we change SOON, and COMPLETELY REFORM our financial and Monetary system, WE LOSE!

I have not seen the first inclining of any reform on the part of policy makers. Whether they are corrupt, inept, or just plain stupid, doesn't matter at this point. The die is cast.


China Took the Nash Equilibrium solution to the monetary problem. That allows them to do WHAT EVER they NEED to do from a fiscal and economic perspective (because the wealth of population is secured via PM holdings). They can change how their systems operates freely without risk of popular dissent or uprising. They can adapt as necessary to what ever financial system emerges and do it faster and more completely than ANY competitor because their freedom of maneuver is unconstrained with regard to their population.
For our own population we first remove the value of assets that the middle class holds, then the assets themselves, followed by removing their livelyhood (jobs), and finally their savings through taxation and inflation. This of course leaves a impoverished, dispondent, and potentially violent prone population to fend for itself, without the necessary tools (education system, social safety net, health care, housing, etc. etc.) and which is governed by an increasingly corrupt, disconnected, and self-serving political and economic elite.


How is the USA not Argentina, again? (Okay, Argentina with Nukes and presently, the most capable military in the world that just also happens to have the biggest energy requirement of ANYTHING on earth).

I hope I covered the BIG things that keep me up at night in enough detail to keep you up at night as well. This isn't everything, but I wanted to set the stage for what I see as the coming battle royal and a glimpse as to how I think it will end.

[touchring]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

I don't know everything about China or the US. The contrast of the internal inconsistencies above is ENOUGH for me to make the call that unless we change SOON, and COMPLETELY REFORM our financial and Monetary system, WE LOSE!

I have not seen the first inclining of any reform on the part of policy makers. Whether they are corrupt, inept, or just plain stupid, doesn't matter at this point. The die is cast.

I don't see any chance of change unless a third party emerges.

[Jay]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

GOLD and Silver are for the BRIC's. They know this, the west knows this, I even, know this. The only question left in my mind is WHICH one of the BRICS will MOVE FIRST to a hard currency system. (My Guess is China based on the fact that they are ENCOURAGING their citizens to purchase physical gold and silver)

You don't think TPTB have worked so hard to let a few interlopers ruin the party by taking away fiat currency controls do you? We have yet to see real hard power in use, and there are still plenty of soft power options. In a world of shrinking GDP and capital destruction, stressed Empire heavy hands always come out. The BRIC dance will be furtive and tentative for that reason. Hard power eventually shows in times like these, it has been this way throughout the millennium. The precious metal market should rule out, but there will be blood first. I bet the sovereigns play along to the best of their ability as most of the central movers and shakers in the countries that matter are in on the game. In addition, they would have to be blind and have zero imagination to think that the US is out of options because it is saddled with debt and is already fighting two wars. Anyone who gets what is going on isn't that stupid. Nukes are the wild card no one but the depraved want to use.

[jtabeb]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

Why would china want to give up the opportunity, privilege, right to print money? Why would any government want to do that? Why would any politician in power want to do that?

Whats better for china than to print some yuan, build up their economy and keep putting out bogus economic statistics to keep the west occupied glorifying the chinese economy?

Also if you have ever read marx's work, he states the key to power of the government is to print money. This is key especially for a socialist/marxist system. If china were to go to a gold/silver currency, they would not necessarily vibe with the particular ideology, and cause structural social problems.


I am not doubting that a country can go to a PM currency system, it could happen, the odds are against it. Also a country that goes on a PM system can just as easily exit it just like the US in 1971.

Please pay attention (for EXTERNAL trade transactions, I EXPLICITLY mentioned this for a reason).

All your counterpoints IGNORE THIS MAIN TENANT of what I am suggesting will happen.

And the advantages are enormous for a country like China that has to use the West as a Credit intermediary. They COULD completely by-pass that arrangement and set up a regional trading block that they and they alone control AND that is not subject to western intervention.

[chr5648]

Re: Lessons of the American Lost Decade – Part 1: The gold bugs were right - Eric Janszen

A Nash equlibrium is a condition where no player can better their position by use of a unilateral strategy.

The Dollar is not a Nash Equilibrium.

GOLD and Silver are for the BRIC's. They know this, the west knows this, I even, know this. The only question left in my mind is WHICH one of the BRICS will MOVE FIRST to a hard currency system. (My Guess is China based on the fact that they are ENCOURAGING their citizens to purchase physical gold and silver)

My prediction for 2010? If ANY country moves to a hard currency system, ALL WILL BE FORCED to follow suit (for international, not domestic trade). The reasoning is easy to see. If you are an oil exporter, would you rather get paid in Yen, Dollars, Pounds, or Gold. There is NO way a FIAT debt based currency can compete in the global market place AGAINST the Fourth currency (gold) or the FIFTH currency (silver).

If (and I am thinking more and more WHEN) a single country chooses to gain the global advantage of gold and silver pricing for exports and imports, EVERYONE ELSE MUST FOLLOW, or NO TRADE WILL FLOW TO THEM if they remain on the FIAT standard. It's that simple, IMHO.


And, Deflation is what we will have and HAVE been having. You just have to KNOW what the DEFLATOR is. GOLD and SILVER are the deflators of GLOBAL EXCESS DEBT.

As I have said before and WILL SAY AGAIN HERE and NOW, BUY THE DEFLATORS! (GOLD AND SILVER).

Thanks EJ, good bit of analysis.

Why would china want to give up the opportunity, privilege, right to print money? Why would any government want to do that? Why would any politician in power want to do that?

Whats better for china than to print some yuan, build up their economy and keep putting out bogus economic statistics to keep the west occupied glorifying the chinese economy?

Also if you have ever read marx's work, he states the key to power of the government is to print money. This is key especially for a socialist/marxist system. If china were to go to a gold/silver currency, they would not necessarily vibe with the particular ideology, and cause structural social problems.


I am not doubting that a country can go to a PM currency system, it could happen, the odds are against it. Also a country that goes on a PM system can just as easily exit it just like the US in 1971.