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Sunday, May 23, 2010

Do you agree?



Thai said...

For comments

Edwardo said...

O'Neill is, in my view, correct that the rest of the so called PIIGS can not be bailed in the same manner as Greece. Of course, as we know, it's not really Greece that is being bailout out. But in any event, the other PIIGS represent a bigger slice of the European economic pie and are in as bad or worse shape with respect to their indebtedness.

O'Neill is arguing a liquidationist position. No politician wants to go there-living within one's means, and cutting spending to make that happen-but, in principle, he's right, of course.

Could the U.S. wind up as O'Neill asserts? Of course, but not necessarily for the reasons he asserts. To wit:

At some point in the not too distant future, debts stand a decent chance of being settled via a kind of financial nuclear option, which will entail the revaluation of gold to a far far higher price.

My understanding is that the world's gold market, is two tiered such that Central Banks and sovereign nation's have access to hoards that the rest of us- even private entities that can afford to buy, for example, several tons of gold-are simply not allowed to touch (there is ample evidence that this is so) are settling purchases and sales between themselves at vastly higher sums than present spot and paper market prices.

All the indebted nations, their banks really, have to do-if they have access to the gold many are purported to have (Greece, for example, is said to possess 112 tons of gold)-is to coordinate a vast revaluation of their hoards-say, by a multiple of twenty to thirty times, and the global debt picture changes over night. I expect that day is coming, but only when the banks have exhausted the present course.

Unfortunately, the U.S., which may have leased out the majority of its hoard a long time ago, may be left out in the cold as a result. And that may be the great geo-political game that is being played out of view of hoi polloi. He who owns the gold makes the rules, and there's a lot of scrambling going on by sovereign nations who want to make sure they own it when the rules of the game change in an epochal way. Sorry for the digression, but I think it's germane.

Dr John said...

Who could argue with the idea we should spend less. I do not know how he could say we would be in a drastically different place without the 3rd tax cut. I can see the argument that perhaps we would be a little better off(not sure I buy even that) but he offered no support for what to me seems like a very dramatic claim.

Edwardo, as always I very much appreciate your perspectives on gold. Where is our(US) gold ?

Edwardo said...

The U.S. Gold has been leased out, called away in a long standing and ultimately doomed effort to suppress its price. That's my conjecture. Alternatively, some or all of it may have degraded, or it may be laced with Tungsten. No audit has been done on the hoard in eons so anything is possible. We will know in the fullness of time.

In the meantime, QE II-rumored to be a 5 trillion dollar package, see Zero Hedge, that's a big, um, package, is waiting to be enacted by TPTB and that should be good for a several hundred dollar move in gold and puts the U.S. closer to the point when, due to a currency collapse, the price of a few ounces of gold could be enough to buy a new car.

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