An Opening to Iran?
by Ron Paul
Last week, for the first time since the 1979 Iranian revolution, the US president spoke with his Iranian counterpart. Their 15 minute telephone call was reported to open the door to further high-level discussions. This is a very important event.
Thanks Tex. That was interesting. I may have read everything ever written on the topic of gold but I never seem to tire of hearing some parts of the story again. Here is a good question for you…..why do you think Central Banks buy and sell gold contra-cyclical to the main price trend? Before coming with an answer we can hopefully all agree they do it deliberately. Nobody sitting in the chair of a Central Bank is so foolish that they cannot divine a clear technical trend especially when those trends run for years at a time. There really should be blue ribbons and awards for the best answer. Thing is there is a long tradition of CB’s buying high and selling low. Sometimes they sell at the very bottom as the Bank of England did. So there is the puzzle for the day. Assuming the guys in the nice suits are not crazy then why do they dump gold cheap and buy it back high? Figure that out and you will know why gold is doomed on this current cycle judging by CB behaviour. Incidentally, the majr banks are almost all in agreement prices will drop towards 1000 by the end of 2015. Hmmmm. Very Interesting.
Seriously. I am trying to help you guys.
Good ? birdman bad timing?? Central banks have admitted in the past that they never really understood golds role.
Of course they don’t.
Thanks Tex,
Notice it is now on our homepage.
http://www.stockhouse.com/Opinion/Independent-Reports/2013/05/02/Interview-with-Sprott-USA-Chairman-Rick-Rule This interview with Rick Rule was made in May of this year but in it he reveals where his and some of Sprott’s money is being spent. I’m sure Al will update us soon on his visit with Casey et all. DT
Yep, Machine Gun. We have a lot of material from the conference which we will definitely be using.
Some quotes I saved in Dec /05
Quotes About Gold
If you don’t trust gold, do you trust the logic of taking a beautiful pine tree, worth about $4,000 – $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?
~Kenneth J. Gerbino
There can be no other criterion, no other standard than gold. Yes, gold which never changes, which can be shaped into ingots, bars, coins, which has no nationality and which is eternally and universally accepted as the unalterable fiduciary value par excellence.
~Charles De Gaulle
Every individual is a potential gold buyer, although he may not need the gold. It may be added to the store of personal wealth, and passed from generation to generation as an object of family wealth. There is no other economic good as marketable as gold.
~Hans F. Sennholz
Gold will be around, gold will be money when the dollar and the euro and the yuan and the ringgitt are mere memories.
~Richard Russell
Bullion doesn’t pay interest or dividends, nor does it grow or expand by itself. That’s the price you pay for tranquillity.
~Pierre Lassonde
Gold is not necessary. I have no interest in gold. We’ll build a solid state, without an ounce of gold behind it. Anyone who sells above the set prices, let him be marched off to a concentration. That’s the bastion of money.
~Adolf Hitler
There are about three hundred economists in the world who are against gold, and they think that gold is a barbarous relic – and they might be right. Unfortunately, there are three billion inhabitants of the world who believe in gold.
~Janos Fekete
~~~//~~~
Thanks Irwin,
I am going to put it up on our homepage.
Best
If Tapering STOPPED it could be inflationary or even HYPER inflationary.
Let me give an example of what could happen. Let us say that the Federal Reserve finally stops creating new money. It stabilizes the money supply. It ceases to buy federal debt of any kind. The immediate response would be a sharp increase in long-term interest rates. The federal government would have to sell its standard $750 billion worth of debt every year, and all of a sudden, over half of the purchases would cease. The Federal Reserve is responsible for at least half of the government’s bond sales. That would cease. Even the purchase of T-bills will cease. The Federal Reserve simply would shut down its purchases.
Let’s really extend this. The Federal Reserve actually begins its exit plan. It begins to shrink the monetary base. All of a sudden, there is a frantic increase in demand for buyers of federal debt. Not only would the purchases of federal debt by the Federal Reserve increase, to this would be added hundreds of billions of dollars of Treasury debt offered for sale to the general public by the FED. The public will have to be persuaded that it is a good idea to lend to the federal government, especially to lend long term.
There’s only one way for the federal government to persuade people to buy under these conditions. It would have to raise interest rates. It will then be possible for banks to lock in rate of return of 1% per annum from depositors, and loan that money to the federal government at 6% per annum or perhaps more. All of a sudden, banks see an enormous benefit. They can buy Treasury debt at high rates of interest, and make money on the spread. They pay 1% to depositors, and they can lock in 6% by buying from the federal government, which is considered a low-risk borrower.
All of a sudden, banks begin lowering their holdings of excess reserves at the Federal Reserve. That figure starts going down fast. They lend to Uncle Sam, who then spends the money. The money enters the fractional reserve banking system. Now, unlike everything since 2008, banks will have started to lend.
The Federal Reserve could sell $1 trillion worth of government debt, thereby cutting the monetary base from to $3.6 trillion to $2.6 trillion. That would be a substantial deflation of the monetary base. Yet prices could rise by 100% per annum in a very short period of time. Why is this? Because banks, in search of a high rate of return paid by what is considered a low-risk borrower, would move money that has been locked up in excess reserves, and handed over to the federal government. I assure you, the federal government will spend every dime. There will be no holding back.
The velocity of money would reverse. It would start rising rapidly. Finally, what everybody expected to take place in 2009 would in fact take place. The more money that comes out of excess reserves in order to hand over to the federal government at higher rates of interest, the more the velocity of money will increase, and the more the fractional reserve banking process will multiply the M1 money supply. That will lead to an incomparable increase in the rate of price inflation in the USA.
So, what would be normally conceived of as a policy of monetary deflation by the Federal Reserve would in fact lead to tremendous price inflation. It would lead to a tremendous increase in M1 and a tremendous increase in velocity.
So, we are living in a topsy-turvy world. It is a world in which a massive expansion of the monetary base has led to almost no price inflation, and a massive monetary contraction of the monetary base could easily lead to mass inflation and then hyperinflation.
This is why it is very difficult to predict what the outcome will be of a new Federal Reserve policy. This is why the Federal Reserve does not know what the outcome will be. But you must get used to the fact that traditional monetary categories no longer suffice to explain what is happening in the general economy. The excess reserves held by the banks have distorted the monetary system to such an extent that cause-and-effect is no longer very predictable.
The above is a quote from Gary North.
Where is the gold interviews today from Gary, Rick and Doc?
LUK government shutdown youtube ( WWII veterans breach barriers at world war II memorial in washington DC — october 2 ) !!
If you are going to listen to Gary North then you should listen to the other side, aka Jim Willie. Right now they are verbal fighting on the web. Here’s the latest Jim Willie interview via Greg Hunter
http://www.youtube.com/watch?v=3pny7v62YSE&feature=share
I am only interested in the mechanics and economic logic of what is going on, I don’t choose sides.
But thanks for pointing that out.
Same here John, I try not to take sides but in the end one must. Or at least take a hedge on/against both sides. I’ll admit that I tend to favor Jim Willie, he makes me consider arguments that I don’t think I would ever come to on my own. This is not saying that he is right, but it does expand my critical thinking basepoint.
John,
Bingo…simple logic to a very complex situation….gold will have its say no matter what the BS, con-artist say.
Thanks Robski!
Fascinating report Robski – thanks.
I found this video to be interesting, the concept of anti-fragility is new for me, will be doing some more studying on it.
Nassim Taleb &David Kahneman discuss anti-fragility.
http://www.youtube.com/watch?v=MMBclvY_EMA
Thanks Robski
Your welcome Al,
I hope that some of the other bloggers do look at this, or at least have a comment on this. The more that I look at this concept, the more that can see some validity in it. I really found Taleb’s response to the fed interesting, but not surprising in relationship to his argument.
The last 15 minutes of the interview has a Q&A that Taleb responds to the Fed. This relates to the above post.
Hi, AL found this very interesting video on one of your favorite topics , maybe you could have the producers as guests on a weekend show. Wonder if Bob Moriarty has seen it ?
Mike. http://www.AgendaDocumentary.comhttps://vimeo.com/63749370
Mike, the link does not work for me.
Robski Corrected link https://vimeo.com/63749370 www. agendadocumentary .com is the site to buy the video 1 1/2 hours.
and for gold commentary….
http://www.bloomberg.com/news/2013-10-06/gold-befuddles-bernanke-as-central-banks-losses-at-545-billion.html