Author Archives: Keith Weiner

 

The Sword of Damocles

Dear Prime Minister Tsipras,

First, congratulations for mustering the popular support to say “no” to the troika. The euro has long offered Greece a perverse incentive to borrow, and now your country is trapped in debt. By any conventional means, Greece cannot repay (I propose an unconventional way, below). The sooner everyone acknowledges this simple fact the better.

 

Parliament backing will allow Tsipras to negotiate his package of economic reforms with Greece's European creditorsWhat to do, what to do … Greek prime minister Alexis Tsipras in contemplation mode

Photo credit: Christian Hartmann / Reuters

 

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Vade Retro, Pet Rock!

For those who are speculating on the dollar—i.e. most people—there was good news this week. The dollar rose almost a milligram, to 28.3mg gold. That’s a big gain, and welcome news for those who keep all of their eggs in the one dollar basket, perhaps because they don’t want to risk any of it on pet rocks.

Yes, Jason Zweig at the Wall Street Journal actually said that. He couldn’t be more wrong—and yet he had a point. Wrong? Let me count the ways.

 

lingote-sujeta-puertas-01It’s not a pet rock, Mr. Zweig – it’s a door stop! We thought everybody knows this… (PT)

Photo via tiendasmayoristas.com

 

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Gold, the Dollar … and Batman

We can’t count how many articles we saw today, bemoaning gold going down. The price action is bad for gold (whatever that means). China under-reported their gold holdings. No, China doesn’t care about gold. No they want the price to go down so they can buy it cheap.

No, they want to convince the IMF to include the yuan (which has capital controls, by the way) into the SDR basket. No, China really intends to revalue gold (whatever that means). This is your brain on dollars. Any questions?

 

Batman knows bestAs usual, Batman knows best

Image credit:  Bob Kane

 

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Puzzled Multitudes

The prices of the monetary metals cascaded downward this week, and the ratio of the gold price to the silver price rose accordingly.

Many analysts and speculators are puzzled. With everything going on in the world, gold should go up. After all, China released its new gold holdings and the banking system in parts of the world (e.g. Greece) is a mess, and many central banks are printing money, etc.

 

g and s

 

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Monetary Metals Supply and Demand Report 12 July, 2015

Last week, we concluded with this:

 

“So now, for the first time in about two years, the fundamental price of silver is above the market price, about $0.35 over.

… Unless you really like to trade the bleeding edge of a signal change, you may not want to jump in here. Silver’s newfound scarcity could disappear as rapidly as it appeared. And even if it’s stable, it does not mean that the fundamental price must necessarily skyrocket.”

 

Gold and silver bars. Vector illustrationImage by Vector Illustration

 

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Keynes and his Fan Club

With apologies to his fans, Jerry is an evil little mouse who constantly pesters Tom the Cat. Tom tries and tries, but cannot seem to overpower someone who is a fraction of his size and strength.

Watching Stephen Moore attempt to debate Paul Krugman was like that. The “economics” of Krugman is Keynesian economics. It consists of central planning your life by force, because market failure. And Krugman repeated this phrase “market failure” several times. Of course the solution was always government intervention.

 

Economist John Maynard KeynesJohn Maynard Keynes and his book

Photo credit: Corbis

 

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Is Everything Just Fine?

Hyperinflation is commonly defined as rapidly rising prices which get out of control. For example, the Wikipedia entry begins, “In economics, hyperinflation occurs when a country experiences very high and usually accelerating rates of inflation, rapidly eroding the real value of the local currency …”

 

weimarplay

Playing with money – what a joy!

Photo via educationforum.co.uk

 

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Silver Market Change Report 

The prices of the metals dropped further this shortened week (Friday was a holiday in the US, as the Fourth of July, Independence Day, occurred on Saturday). The S&P 500 index also fell this week, as did crude oil.

 

Good-Delivery-Bar_Ag_3D_800_01Good delivery silver bar

 

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June 26 Silver Flash Crash: A Forensic Analysis

On Friday morning, at around midnight (Arizona time), the price of silver had a little crash.

 

 $_32Photo credit: doomu

 

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A Flawed View

I have to admit that I derive some pleasure in taking on hoary old myths. For example, some economists assert that the interest rate you see on the Treasury bond is not real. You see, it’s only nominal. To calculate the real rate, they say you must adjust the nominal rate by inflation.

Real Interest Rate = Nominal Interest – Inflation

It seems to make sense. Suppose you have enough cash to feed your family for 2,000 days. Then the general price level increases by 15%. You still have the same dollars, but now you can only buy groceries for 1,700 days. You’ve been robbed, some of your purchasing power stolen. Therefore you want to earn enough interest to overcome this loss. This view is flawed.

 

interest-rate-manImage via stealthflation.org

 

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THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
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