Boom in the Doom

[bart]

Re: Boom in the Doom

another thought with my comment "when do we sell gold if "deflation" is the reason the price is going up?" comment... his "argument" is... "gold is money, money is going to do well in a deflation, therefore buy gold".

let's "unpack" it to use jk's phrase...

1. "gold is money". that's a slogan not a fact.
2. "money is going to do well in a deflation". no CASH does well in a deflation.
3. therefore... uh, nothing logically follows from these antecedents.

is that what ej means by sophistry?

soph·ist·ry /ˈsɒfəstri/ Pronunciation Key - Show Spelled Pronunciation[sof-uh-stree] Pronunciation Key - Show IPA Pronunciation –noun, plural -ries.

1.	a subtle, tricky, superficially plausible, but generally fallacious method of reasoning.

2.	a false argument; sophism.

nope. not even superficially plausible. :rolleyes:

See my last post about a "missive" ( ;) ) covering all the major reasons that gold goes up. It's far from simple and there's lot of false data and sophistry (and vested interests) out there... and it's also very time frame related. (edit/add for clarification - I actually like the word missive, all it means is a written letter or message.)

For example, the "gold is money" item is mostly true if the time frame is long enough:

[bart]

Re: Boom in the Doom

As for the role of the internet in the social milieux of breakdown, I actually think it will help. While you may get more kooky views being posted on the internet, that doesn't mean they'll become popular. The best, most popular fora are open to debate and comment. Bloggers will provide a check on the MSM, and the MSM on bloggers. This is a massive improvement.

I would love it if someone would put together an article covering *all* the reasons that gold goes up - there are quite a few... and I have a partial one written but am out of round tuits.

http://www.nowandfutures.com/grins/bueller.wav ;)

I hear Cramer even cited ml-implode the other day, hah!

I'm glad I was sitting down when I read that... :eek: ;)

Congrats Aaron!

[metalman]

Re: Boom in the Doom

appears to be two voices here. who's who? is > ej?

here we make a distinction between asset price inflation/deflation and p/c econ inflation/deflation in goods and stuff... based on what we learned from dr. hudson about the fed managing the two separately policywise.

[metalman]

Re: Boom in the Doom

what do you call what happened in argentina?

in terms of argentine pesos, the price of everything went through the roof.
in terms of dollars, argentine assets became dirt cheap.

so was it inflation or deflation?

now imagine that argentina's was an international reserve currency, with foreign cb's interested in seeing that it didn't decline too precipitously.

housing prices are still very high in terms of dollars. house prices are at a 20 year low in terms of gold. inflation or deflation? depends on the currency.

dug up the itulip charts from the select area... hope that's ok!







looks like in the extreme case currency depreciation makes for a shitload of inflation in the local currency, too.

p.s. jk, it's not pesos it's reals.

[metalman]

Re: Boom in the Doom

Yes, as you know he's a deflationista... and having gold and the very good profits is I think one reason why he misses the boat on the full economic picture.

another thought with my comment "when do we sell gold if "deflation" is the reason the price is going up?" comment... his "argument" is... "gold is money, money is going to do well in a deflation, therefore buy gold".

let's "unpack" it to use jk's phrase...

1. "gold is money". that's a slogan not a fact.
2. "money is going to do well in a deflation". no CASH does well in a deflation.
3. therefore... uh, nothing logically follows from these antecedents.

is that what ej means by sophistry?

soph·ist·ry /ˈsɒfəstri/ Pronunciation Key - Show Spelled Pronunciation[sof-uh-stree] Pronunciation Key - Show IPA Pronunciation –noun, plural -ries.

1.	a subtle, tricky, superficially plausible, but generally fallacious method of reasoning.

2.	a false argument; sophism.

nope. not even superficially plausible. :rolleyes:

[akrowne]

Re: Boom in the Doom

Just to fire my two cents into this debate, here is an excerpt from a recent email three-way exchange with Eric and Mike, where I come down on the inflation/deflation question somewhere in between the two of them. Here it is me replying to Eric, quoted:

deflation: A decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending.

...

> So, deflation is clearly bullish for gold, or at least bearish for the dollar and neutral for gold (unlikely) -- in which case I as a prisoner of the dollar zone still should buy gold because it will "appear" to rise for me.

Deflation is clearly NOT bullish for gold. Is this the state of economics discussion on the web these days? Horrific. In a deflation, no one has any money. What are they going to buy gold with?

Once again, it DOES matter whether you're referring to catastrophic "spiral" deflation or gradual deflation. I don't care much about what one counts as "general prices"... when financial assets deflate (as they are unambiguously now), especially when its in the reserve currency, gold becomes more attractive.

There's no contradiction. Yes, there's less money available in the US to buy gold. But that isn't the case for the other 95% of the world.

Deflation is deflation is deflation. It's absurd to even discuss the
definitions. If you expect a deflation, sell your gold asap. It's at an all time high. Sell it now.

We're having one in the financial-economy sense, and I'm holding my gold (stale definitions aside).

You know "gold is at an all time high" isn't true. Adjusted by monetary base (the appropriate measure), it is half to a third of the all time high.


Given the globalized setting of the current calamity, I expect it to go much higher than even the real value of the watermark from 1980.

I have greater faith in the price of oil, gold, and food as indicators of
inflation.

Then I think you're ignoring an significant element of the picture here. I still contend a large percentage of the price increase in gold (and perhaps the non-financial commodities) is due to financial deflation (I honestly don't know what I could call it that you wouldn't find objectionable, but we clearly have financial asset prices falling.)

Its a bit of a funny dynamic, actually. You have Arab and Chinese investors "withdrawing" dollars and then buying gold. Maybe they're ostensibly worried about inflation, but they're motivated to act because of distrust of US financial assets, bringing about financial economy deflation here when they cash out their stocks and subprime securities!

Anyway, at the end of the day, I'm just saying this is an additional reason to buy gold. You can call it "Krownism" instead of "deflation" if you prefer, because I certainly don't mean CPI deflation.

-Aaron

As for the role of the internet in the social milieux of breakdown, I actually think it will help. While you may get more kooky views being posted on the internet, that doesn't mean they'll become popular. The best, most popular fora are open to debate and comment. Bloggers will provide a check on the MSM, and the MSM on bloggers. This is a massive improvement.

I hear Cramer even cited ml-implode the other day, hah!

[jk]

Re: Boom in the Doom

what do you call what happened in argentina?

in terms of argentine pesos, the price of everything went through the roof.
in terms of dollars, argentine assets became dirt cheap.

so was it inflation or deflation?

now imagine that argentina's was an international reserve currency, with foreign cb's interested in seeing that it didn't decline too precipitously.

housing prices are still very high in terms of dollars. house prices are at a 20 year low in terms of gold. inflation or deflation? depends on the currency.

[bart]

Re: Boom in the Doom

question is... why was he recommending gold? because "deflation is in the cards"? what the sense in that? and when do we sell gold if "deflation" is the reason the price is going up? when the fed prints and inflation happens? that's the problem with recommending the right thing for the wrong mishmashy reason.

Yes, as you know he's a deflationista... and having gold and the very good profits is I think one reason why he misses the boat on the full economic picture.

[metalman]

Re: Boom in the Doom

I'm not trying to defend Mish, and indeed we've had more than a few disagreements over the years both online and in private, but he has been in gold and recommending it for many years.
If you didn't know that, it's quite a different picture that emerges.

I agree with EJ too - good guy and he's in there trying and pitching, even though his economics is odd.

question is... why was he recommending gold? because "deflation is in the cards"? what the sense in that? and when do we sell gold if "deflation" is the reason the price is going up? when the fed prints and inflation happens? that's the problem with recommending the right thing for the wrong mishmashy reason.

[bart]

Re: Boom in the Doom

...
Mish skates breezily over the inflationary implications to domestic CPI of a currency plunging in purchasing power internationally. As EJ notes succinctly, it appears Mish "does not travel". Anyone this breezily cavalier about the inflationary implications of a currency racing down in purchasing power is laying themselves wide open for a good old fashioned debunk - and debunk is what Mr. Janszen indeed does.
...

I'm not trying to defend Mish, and indeed we've had more than a few disagreements over the years both online and in private, but he has been in gold and recommending it for many years.
If you didn't know that, it's quite a different picture that emerges.

I agree with EJ too - good guy and he's in there trying and pitching, even though his economics is odd.

[donalds]

Re: Boom in the Doom

I'm reminded of back when I was in graduate school in the 80's, during which I studied extensively alternative energy (less from a technical than from a social theoretical perspective), and read works by writers like Amory Lovins. Lovins had a nice concept back then, namely, that what was really important in terms of energy was not so much it's generation as it's end use. Ultimately, he argued in 'Soft Paths' and other works, it was the end use that determines the soundness of the forms in which energy generation take.

Now, it seems to me that Knustler is at least attempting to make this point, and frankly I found his reasoning worthy enough to read it in it's entirety.

What I have yet to determine is this: are you, EJ, engaging in a rhetorical argument for purposes of stimulating debate, or are you speaking from conviction? I suspect it is more the later than the former. However, until you flesh out how this will politically come to fruition - and it does seem that you are asserting, and for good reason, that expanding uses of alternative forms of energy generation (along with that of infrastructure development, which by necessity must coincide), will ultimately derive from political decisions and policies (along with the needed social investments) - your argument leaves one with the impression that it is simply rhetorical, aimed at stimulating debate.

So . . . I'd suggest that until you make do flesh out the political to substantiate your projections for the future, your argument will likely fall short in convincing. Once you do flesh this out, assuming you do and that it is made public, then from there the debate can really begin. But be aware that once you enter this turf, that is the sphere of the political (and thus also policy formation and linking it to just how these social investments will materialize), then you have entered a complex cobweb of entangled and competing/contending interests for which consensus (a social/political consensus which by necessity needs to be accomplished for your projections to materialize), will be difficult in obtaining to say the least, especially in a society such as ours where conflict and divisions have become the order of the day and the very fuel on which the political system runs.

Only when you begin to flesh this out politically, and just as important how this will carry over to needed social investments, especially difficult when capital is a private endeavor, only then will you have taken the needed next leap. I commend you for your success in taking your argument as far as you have, but the next leap will require a great deal of study. I doubt that a couple years of study will be adequate.

[chrisk]

Re: Boom in the Doom

A bit off-topic, but I'll state even more strongly that Mish is mished-up when it comes to economics. I had a discussion with him on the Motley Fool boards, in April of 2004, in which he tried to defend his new interest-only adjustable rate mortgage. Now there are valid defenses for ARMs, but his was straight out of the Free Luncher's handbook. He claimed that it would take X years for the initial savings from his ARM to be eaten up by higher rates in later years, and since he would sell within X years anyway, it was a no-brainer. I tried, but failed, to convince him that you can't ignore the latter years of the loan just because you plan to move soon. What might appear to be a free lunch is actually paid for with a greater vulnerability to falling house prices: if house prices drop, an ARM borrower may be forced to choose between paying higher rates or selling at a loss -- whereas a fixed rate borrower can ride out a bad market forever (barring loss of income, which hurts either type of borrower).

Mish kept insisting that house prices are irrelevant to the ARM versus FRM decision, and didn't seem to understand the connection: that buying at a high price makes it more likely an ARM buyer will be trapped into paying higher rates later. He seemed quite pissed off at me, in fact. I'm very curious what he thinks about the subject now that the housing environment has changed a bit.

Here's the thread, for the record (my name was GeekGod over there):

http://boards.fool.com/Message.asp?m...id=&sort=whole

[Jim Nickerson]

Re: Boom in the Doom

EJ wrote:



In trying to understand the mess we are in and what outcome may result I have been reading a lot -- so much so my head often spins trying to make heads or tails of the arguments such as this article is meant to address.

With respect to both EJ and Mish for their efforts at describing this mess and their understandings of it, I do think it is worthwhile to offer my 2˘ on these matters, which has to do with the often confusing use of the word "inflation" to describe different things.

Case in point is the quote above, whereby in contrast to Mish's definition ("Inflation is a net expansion of money and credit"), EJ is using the term "inflation" to describe a depreciation of currency valuation and a corresponding and compensating increase in prices to make-up the difference.

While EJ's use of "inflation" is given in context here, more often than not I've found it is not readily done so, and the different meanings lead to different understandings -- which can be needlessly confusing.

In discussions such as these I wish we'd all settle on a singular definition.

Baring that it would help were we all to use the word with a preceding phrase that we intend it to be understood, such as the following:

1) monetary inflation

2) currency depreciation inflation

Both incur price or cost increases, yet both are the result of different actions, which do seem to have divergent implications and/or reactions. (Or am I simply confused here?)

In any event, I can't help but believe how an economy of definition with respect to "inflation" (and much other such financial jargon) might improve our collective abilities to understand one another in this infernal economic Tower of Babel as its been built and designed, but confounds us all to no good end.

I mention this merely as someone on the sidelines, trying to get a handle on this mess we are in, and thought it relevant as one thing that annoys me.

I do otherwise appreciate the thoughts given here by all. And Mish's blog too, despite where you think he is mistaken, does IMO offer a viewpoint of some merit too. Even EJ concedes this. Ultimately, until the final results are in on this predicament all I can do is keep reading all points of view. Thanks.

When there is increase in money and credit, it makes each existing dollar/bonar less valuable, thus it depreciates each bonar/dollar. It seems to me to be the same thing stated in two ways.

[godraz]

Re: Boom in the Doom

EJ wrote:

If on the other hand you're expecting the dollar to keep falling and inflation to therefore continue rising, as in truth it has, hang onto your gold...

In trying to understand the mess we are in and what outcome may result I have been reading a lot -- so much so my head often spins trying to make heads or tails of the arguments such as this article is meant to address.

With respect to both EJ and Mish for their efforts at describing this mess and their understandings of it, I do think it is worthwhile to offer my 2˘ on these matters, which has to do with the often confusing use of the word "inflation" to describe different things.

Case in point is the quote above, whereby in contrast to Mish's definition ("Inflation is a net expansion of money and credit"), EJ is using the term "inflation" to describe a depreciation of currency valuation and a corresponding and compensating increase in prices to make-up the difference.

While EJ's use of "inflation" is given in context here, more often than not I've found it is not readily done so, and the different meanings lead to different understandings -- which can be needlessly confusing.

In discussions such as these I wish we'd all settle on a singular definition.

Baring that it would help were we all to use the word with a preceding phrase that we intend it to be understood, such as the following:

1) monetary inflation

2) currency depreciation inflation

Both incur price or cost increases, yet both are the result of different actions, which do seem to have divergent implications and/or reactions. (Or am I simply confused here?)

In any event, I can't help but believe how an economy of definition with respect to "inflation" (and much other such financial jargon) might improve our collective abilities to understand one another in this infernal economic Tower of Babel as its been built and designed, but confounds us all to no good end.

I mention this merely as someone on the sidelines, trying to get a handle on this mess we are in, and thought it relevant as one thing that annoys me.

I do otherwise appreciate the thoughts given here by all. And Mish's blog too, despite where you think he is mistaken, does IMO offer a viewpoint of some merit too. Even EJ concedes this. Ultimately, until the final results are in on this predicament all I can do is keep reading all points of view. Thanks.

[Verrocchio]

Re: Boom in the Doom

Kudos, EJ, on another meaty commentary. I particularly admire the apt title: Boom in the Doom. And pity the unfortunate readers of Mish's missives based on mishmash economics -- they'll surprise themselves by backing up over little old ladies!