The Antidote

Something needs to be said. We are against the existence of irredeemable paper currency, central banking and central planning, cronyism, socialized losses and privatized gains, counterfeit credit, wealth transfers and bailouts, and welfare both corporate and personal.

 

A few slices of the cause-effect merry-go-round in fiat money land… (by no means the complete picture). [PT]

 

When we write to debunk the conspiracy theories that say manipulation is keeping gold from hitting $5,000 (one speaker here at Freedom Fest claimed gold will go to $65,000), we are not trying to defend the Fed. When we discuss the flaws in predicting that kind of price, and the error in expecting to profit from it, we are not expressing a pro irredeemable dollar view.

We are saying there are good arguments against the regime of irredeemable paper currency — but this is not one of them. Irredeemable currency has two fatal flaws. One is the interest rate is unhinged.

It can skyrocket as it did from the end of WWII through 1980, or collapse as it has been doing since then. Two is there is no extinguisher of debt. Debt grows — must necessarily grow — exponentially. As it has been doing for many decades.

The antidote to this poisonous system is the gold standard. However, it must be said that no gold price will cause the metal to circulate in the economy. It did not circulate when it was “cheap” 20 years ago. It did not circulate when it was “expensive” 6 years ago. It does not circulate now.

It will not circulate even if it hits any of the gold bug price targets (if anything, a rapid price rise will be a powerful force keeping it out of circulation, as most people would have large taxable capital gains). The one thing that can make gold circulate is interest.

 

Fundamental Developments

For two weeks, we have been talking about a potential capitulation. The gold price has risen about $40 since then, and that of silver 85 cents. Will the bounce continue? Have the fundamentals firmed up?

We will show graphs of the true measure of the fundamentals. But first charts of their prices and the gold-silver ratio.

 

Gold and silver in USD terms – click to enlarge.

 

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio moved down this week.

 

In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, that is the lower bid price. Conversely, if you sold silver on the bid and bought gold at the offer, that is the higher offer price.

 

Gold-silver ratio, bid and ask – click to enlarge.

 

For each metal, we will look at a graph of the basis and co-basis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and co-basis in red.

 

Here is the gold graph.

 

October gold basis and co-basis and the dollar priced in milligrams of gold – click to enlarge.

 

We have switched to the October contract, as the August is nearing expiry and under selling pressure. The dollar fell this week (the mirror image of the rising price of gold). As the dollar fell, the co-basis fell — gold became less scarce. Our calculated gold fundamental price fell a few bucks.

 

Fundamental gold price vs. gold spot market bid price over the past three months – click to enlarge.

 

Now let’s look at silver.

 

September silver basis and co-basis and the dollar priced in grams of silver – click to enlarge.

 

As the dollar has dropped, the co-basis has come down (though silver remains in backwardation). Our calculated silver fundamental price fell 25 cents to $17.59.

 

© 2017 Monetary Metals

 

Charts by Monetary Metals

 

Chart and image captions by PT

 

Bron Suchecki is a colleague of Keith Weiner, who normally writes the weekly precious metals supply-demand update. Bron is Vice President of Operations at Monetary Metals.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Against Irredeemable Paper – Precious Metals Supply and Demand”

  • SavvyGuy:

    @sandyskdk:

    > my classmate’s step-sister makes 83 an hour at home… she’s been laid off for seven months

    The word “off” seems to have sneaked in there as a typo. Makes complete sense without it!

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Japan: It isn’t What the Media Tell You
      Known for Being Terrible For the past few decades, Japan has been known for its stagnant economy, falling stock market, and most importantly its terrible demographics.     A chart of Japan's much-bewailed demographic horror-show. Most people consider a declining population to be a bad thing due to the implications for assorted state-run pay-as-you-go Ponzi schemes, primarily those related to retirement. It is hard to be sympathetic, since it would have been possible to...
  • Bitcoin Facts
      A Useful Infographic When we last wrote more extensively about Bitcoin (see Parabolic Coin – evidently, it has become a lot more “parabolic” since then), we said we would soon return to the subject of Bitcoin and monetary theory in these pages. This long planned article was delayed for a number of reasons, one of which was that we realized that Keith Weiner's series on the topic would give us a good opportunity to address some of the objections to Bitcoin's fitness as a medium of...
  • An Update on Polly: She May be Coming Back to Life
      A Twitch of a Toe In our recent update on credit spreads we proposed to use the seemingly deceased  Monty Python parrot Polly as a stand-in for the suspicion of creditors in today's markets.  The question was whether Polly was indeed dead or merely in a deep coma. Depending on this, one should be able to gauge how powerful a miracle will be required to resurrect her.   Meet Polly. Is she alive?   In the first half of November there was actually a small sign that...
  • The Complete Idiot’s Guide to Being an Idiot
      Style Over Substance There are many things that could be said about the GOP tax bill.  But one thing is certain.  It has been a great show. Obviously, the time for real solutions to the debt problem that’s ailing the United States came and went many decades ago.  Instead of addressing the Country’s mounting insolvency, lawmakers chose expediency without exception.  They kicked the can from yesterday to today.   The empty chairs meeting – this is slightly...
  • The Zealous Pursuit of State-Sponsored Collapse
      When Bakers Go Fishing Government intervention into a nation’s economy is as foolish as attempting to control the sun’s rise and fall by law or force.  But that doesn’t mean governments don’t meddle each and every day with the best – and worst – of intentions.  The United States government is no exception.   From the “When the government helps the economy” collection: Breaking a few eggs while baking the bridge to nowhere omelet. [PT]   Over the...
  • Precious Metals Supply and Demand – Thanksgiving Week
      Grain of Salt Required The price of gold fell $7, and that of silver 24 cents. This was a holiday shortened week, due to Thanksgiving on Thursday in the US (and likely thin trading and poor liquidity on Wednesday and Friday). So take the numbers this week, including the basis, with a grain of that once-monetary commodity, salt. We will keep the market action commentary brief.   Relatively modern examples of salt money which was widely used in African countries until the...
  • Lessons from Squanto
      Standing In Your Way Governments across the planet will go to any length to meddle in the lives and private affairs of their citizens.  This is what our experiences and observations have shown.  What gives? For one, politicians have an aversion to freedom and liberty.  They want to control your behavior, choices, and decisions.  What’s more, they want to use your money to do so.   As this by now famous cartoon implies, the State is essentially a gang of criminals...
  • What’s the Point? Precious Metals Supply and Demand Report
      Questions and Answers A reader emailed us, to ask a few pointed questions. Paraphrasing, they are:   Who cares if dollars are calculated in gold or gold is calculated in dollars? People care only if their purchasing power has grown. What is the basis good for? Is it just mathematical play for gold theorists? How does knowing the basis help your readers? Is it just a theoretical explanation of what has already happened? Prove that if someone has known the basis...
  • The Stock Market and the FOMC
      An Astonishing Statistic As the final FOMC announcement of the year approaches, we want to briefly return to the topic of how the meeting tends to affect the stock market from a statistical perspective. As long time readers may recall, the typical performance of the stock market in the trading days immediately ahead of FOMC announcements was quite remarkable in recent decades. We are referring to the Seaonax event study of the average (or seasonal) performance across a very large...
  • The Party of Spend More vs. the Party of Tax Less
      Eternal Spendathon The Senate just passed a 500-page tax reform bill. Assuming it lives up to its promise, it will cut taxes on corporations and individuals. Predictably, the Left hates it and the Right loves it. I am writing to argue why the Right should hate it (no, not for the reason the Left does, a desire to get the rich).   The Federal debtberg has grown beyond all measure since Nixon's gold default. So has the money supply and the amount of private debt. No-one...
  • The Santa Claus Rally is Especially Pronounced in the DAX
      The Gift that Keeps on Giving Every year a certain stock market phenomenon is said to recur, anticipated with excitement by investors: the Santa Claus rally. It is held that stock prices typically rise quite frequently and particularly strongly just before the turn of the year.   Unbeknown to many, Santa Claus paid a high price for enriching investors [PT]   I want to show you the Santa Claus rally in the German DAX Index as an example. Price moves are often...
  • Heaven Forbid Peace Should Break Out Between the US and North Korea!
      Rude Interruptions As long as the US Empire can be funded and maintained on the backs of its taxpaying public, the chance of a deescalation of tensions not only on the Korean peninsula, but throughout the world are practically nil.  And as long as the nation’s current interventionist ideology holds sway, it will only be through a financial meltdown that the role of the US as global policeman will come to a much-needed end.   Hamhung, North Korea, June 30, 1950; an example...

Support Acting Man

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

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

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com