China Hoarding Gold and Plans to Issue Yuan-Denominated Bonds in Hong Kong

The New York Times reports that china will issue yuan-denominated bonds in Hong Kong.

(emphasis mine) [my comment]

China to Issue Yuan-Denominated Bonds in Hong Kong
By CHRIS V. NICHOLSON
Published: September 8, 2009

The Chinese Ministry of Finance said Tuesday that it would issue 6 billion yuan worth of government bonds in Hong Kong, a major step to internationalize its currency at a time of concern about the dollar.


Kin Cheung/Associated Press
This is the first time that government bonds, comparable to U.S. Treasury securities, are to be issued. Above, a Bank of China in Hong Kong.

The yuan bond issue, the equivalent of $879 million, will "promote the yuan in neighboring countries and improve the yuan's international status," the ministry said on its Web site.

"The first step toward internationalization is regionalization," Shi Lei, a currency analyst at Bank of China in Beijing, said during an interview. "China wants to develop the offshore market in Hong Kong."

While domestic banks like Bank of China and the Export-Import Bank of China have issued yuan-denominated bonds in Hong Kong for a couple of years at the encouragement of Beijing, this is the first time that government bonds, comparable to U.S. Treasury securities, are to be issued. The sale is set for Sept. 28.

In July, the People's Bank of China, the country's central bank, started a program for local companies to settle trade in yuan, but it has so far spurred little trade. Zhi Ming Zhang, an analyst at HSBC in Hong Kong, said the government bond issue might show foreign investors they could rely on the yuan.

"If I'm doing trade with China, where am I going to park this money?" Mr. Zhi asked, referring to the yuan. The yuan-bond market needs security and liquidity to make such settlements attractive, he said, and government bonds will provide security and a pricing benchmark. The next step, he added, would be to increase the number of Chinese issuers and investors in the yuan.

Experts estimate that China holds about 75 percent of its $2 trillion in foreign reserves in dollar-denominated assets, but since the global financial crisis began, that position has made Beijing uneasy. Since the beginning of 2007, the dollar has slipped more than 20 percent against the yen, and more than 12 percent against the yuan, and investors are concerned as the United States continues to pile up debt to finance its huge stimulus package.

In March, China's prime minister, Wen Jiabao, expressed concern about the dollar's slide and encouraged the United States to ensure its stability.

While the bond issue announced Tuesday is a step toward making the yuan a global currency, the size of the sale is small compared with those of U.S. Treasury securities, and the time it will take to establish the yuan internationally remains uncertain.
[less than a year]

"There is no timetable," said Mr. Shi, the Bank of China analyst, adding that developing the market would take "at least three to five years."
[it happen much faster, driven by panic about the collapsing dollar.]

In another move to make the yuan accessible to investors, BOC Suisse Fund Management, Bank of China's asset-management arm based in Geneva, said Friday that it had received approval from the Swiss financial regulator to create a new set of funds, nearly half of them denominated in the Chinese currency.
[This looks interesting]

The Telegraph reports that China is alarmed by US money printing.

China alarmed by US money printing
The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.

By Ambrose Evans-Pritchard, in Cernobbio, Italy
Published: 9:06PM BST 06 Sep 2009

Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing".

"We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como.

"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

China's reserves are more than — $2 trillion, the world's largest.

"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.

The comments suggest that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction.

Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise.

"Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."

Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets.

"This is where Greenspan went wrong from 2000 to 2004," he said. "He thought everything was alright because inflation was low, but assets absorbed the liquidity."

Mr Cheng said China had lost 20m jobs as a result of the crisis and advised the West not to over-estimate the role that his country can play in global recovery.

China's task is to switch from export dependency to internal consumption, but that requires a "change in the ideology of the Chinese people" to discourage excess saving. "This is very difficult".

Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China.

"The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis."

Yet the consequences are not symmetric.

"He who goes borrowing, goes sorrowing," said Mr Cheng.

It was a quote from US founding father Benjamin Franklin.

The Telegraph reports about China, Bernanke, and the price of gold.

China, Bernanke, and the price of gold
By Ambrose Evans-Pritchard Economics Last updated: September 7th, 2009

China has issued what amounts to the "Beijing Put" on gold. You can make a lot of money, but you really can't lose.

I happened to see quite a bit of Cheng Siwei at the Ambrosetti Workshop, a gathering of politicians and global strategists at Lake Como, including a dinner at Villa d'Este last night at which he listened very attentively as a number of American guests tore President Obama's economic and health policy to shreds.

Mr Cheng was until recently Vice-Chairman of the Communist Party's Standing Committee, and is now a sort of economic ambassador for China around the world — a charming man, by the way, who left Hong Kong for mainland China in 1950 at the age of 16, as young idealist eager to serve the revolution. Sixty years later, he calls himself simply "a survivior".

What he said about US monetary policy and gold — this bit on the record — would appear to validate the long-held belief of gold bugs that China has fundamentally lost confidence in the US dollar and is going to shift to a partial gold standard through reserve accumulation.

He played down other metals such as copper, saying that they could not double as a proxy currency or store of wealth.

"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not stimulate the market," he said.

In other words, China is buying the dips, and will continue to do so as a systematic policy. His comment captures exactly what observation of gold price action suggests is happening. Every time it looks as if the bullion market is going to buckle, some big force steps in from the unknown.

Investors long-suspected that it was China. We later discovered that Beijing had in fact doubled its gold reserves to 1054 tonnes. Fait accompli first. Announcement long after.

Standing back, you can see that the steady rise in gold over the last eight years to $994 an ounce last week — outperforming US equities fourfold, even with reinvested dividends — has roughly tracked the emergence of China as a superpower in foreign reserve holdings (now $2 trillion).

As I have written in today's paper, Mr Cheng (and Beijing) takes a dim view of Ben Bernanke's monetary experiments at the Federal Reserve.

"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

This line of argument is by now well-known. Less understood is how much trouble the Fed's QE policies are causing in China itself, where they have vicariously set off a speculative boom on the Shanghai exchange and in property. Mr Cheng said mid-level house prices are now ten times incomes.

"If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise."

"Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."

Of course, China cold end this problem by letting the yuan rise to its proper value, but China too is trapped. Wafer-thin profit margins on exports mean that vast chunks of Chinese industry would go bust if the yuan rose enough to close the trade surplus [but China will let the yuan rise anyway when food crisis really begins].
China's exports were down 23pc in July from a year before even at the current exchange rate, and exports make up 40pc of GDP. "We have lost 20m jobs in this crisis," he said.

China's mercantilist export strategy has led the country into a cul-de-sac. China must continue to run its trade surplus. It must accumulate hundreds of billions more in reserves. Ergo, it must buy a great deal more gold.

Where is the gold going to come from?

Chinese buying drove gold over $1000




My reaction:
The news developments above are screaming warning sirens telling the world to get out of the dollar before it is too late.


China continues to internationalize the yuan

1) On September 28, China will issue 6 billion yuan worth of government bonds in Hong Kong.

2) This is the first time that China issues bonds comparable to U.S. Treasury securities.

3) This represents a MAJOR step to internationalize the yuan at a time of rising concern about the dollar.


China issued "Beijing Put" on gold

1) Comments by Mr Cheng (until recently Vice-Chairman of the Communist Party's Standing Committee) validate the long-held belief of gold bugs that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction.

2) Comments by Mr Cheng (on record) also validate the long-held belief of gold bugs that China has fundamentally lost confidence in the US dollar and is going to shift to a partial gold standard through reserve accumulation.

3) China is buying the dips in gold prices, and will continue to do so as a systematic policy. Mr Cheng's comment captures exactly what observation of gold price action suggests is happening. Every time it looks as if the bullion market is going to buckle, some big force (Chinese buying) steps in from the unknown.


Conclusion: Gold is never going back down. Don't expect to ever see gold beneat h $900 again. Prices that low would result in too much Chinese buying, so those short gold can't allow it to happen.

Meanwhile the yuan continues to strengthen as an alternative to the dollar. By the time a dollar panic begins at the end of 2009, the currency will be ready to serve as a makeshift replacement for the dollar in international trade.

This entry was posted in China, Currency_Collapse, Gold, News_Developments. Bookmark the permalink.

142 Responses to China Hoarding Gold and Plans to Issue Yuan-Denominated Bonds in Hong Kong

  1. James says:

    Do you think there's going to be a Big takedown on gold and silver prices like the oil takedown that happened last year (oil down from $147 a barrel to $32 a barrel)

    Please advise. Thanks.

  2. Natasa says:

    Dear James,
    I think that it would be quite informative for you, if you at least, read "the Conclusions" on some text - before you ask this kind of questions...
    Kind regards
    Natasa

  3. James says:

    @Natasa
    I read the conclusions. Gold not going down beneath 900 -I get it.

    It's just that I think if China decides to break the rules on their OTC derivative contracts (that funds the COMEX and LME) do you think the US shadow gov will retaliate by taking down the gold spot price like the way they did the Saudi's last year (remember last year, Saudi's want Khaleeji instead of US dollar - then the powers that be brought down the price of oil from $147 to $32).

    Please advise. Thanks

  4. dashxdr says:

    @James

    I don't think you're getting it.

    "Taking the gold price down" implies they will sell real, physical gold at that price. If they even have gold to sell. Eric's point is China will buy up every speck of gold they can as prices go down.

    If COMEX/NYMEX say gold is now $100/ounce, you'll find you can't actually get any at that price, anywhere.

  5. dashxdr says:

    Nice of this "Viper" fellow to take the trouble to identify himself in his spams...

  6. Granger says:

    dashxdr,

    You're wrong. If gold drops to $100 on comex, the sheeple of this world will buy and sell the shiny stuff at that price.

    Gold has no utility value; i.e., you can't eat it and you can't earn interest on it (unless you're leasing it out, but that option is not available to the average investor). Gold has limited industrial utility and it's used in jewelry. Gold hasn't been "money" for a long, long time; and it won't be again in our lifetime's -- these things take time to play out, and unfortunately, the "ones" who make the rules aren't ready for this game to end for at least the next 60-80 years.

    Gold today, at roughly $1,000 is a gift...a gift to anyone who owns some and can sell it at that price. I don't see the price staying above $600 twelve months from now.

    - Granger
    - http://www.MarketBreeze.com

  7. Jimmy says:

    If gold drops below 700, I will buy a lot; otherwise, I wll continue buying silver.

    The current economic tsunami has had at least one benefit to me: lower silver and gold prices. Unfortunately, sheeple start to wake up and the spot prices for gold and silver are rising fast.

  8. samba says:

    http://www.marketbreeze.com is just an advertising site

    Haha, if gold goes to 100 dollars an ounce i will buy 10kilos the day after

  9. James says:

    Remember that old saying "He who owns the gold makes the rules?" It didn't say silver :-)

  10. stibot says:

    I don't understand why Chineses announces they are buing gold if they want to buy gold.

  11. Jimmy says:

    James,

    According to the premium gold expert, Jim Sinclair, silver is more golden than gold.

    Gold spot ($998) is only 4%away from all time high ($1033), silver is still 25% below last years's high ($21) and way below all time high ($50 in 1980).

    My friend, poor man's gold (silver) is more golden than gold!

  12. Anonymous says:

    Gold is the only monetary asset which can be held outside the banking network. Any form of bank or brokerage account is automatically reported to the IRS, not only in the US but in all other countries as well (thanks to the internet and cheap computers).

    This remark has importance for the following reason. Governments all over the world have so far taxed only the increase in wealth, that is, income or capital gains. But governments also have the means to tax any form of wealth directly. The temptation to do that is growing with the amount of public debts outstanding. Before going bankrupt, the US government will start taxing the wealth of its citizens. There would be no escape from that tax for all conventional forms of assets (bank and brokerage accounts, mutual funds, homes and real estate, cars etc).

    I think that the rise of gold is partly due to capital seeking protection from future taxation. Recall that income taxes were raised up to 90% during the depression in the 1930's. Such high taxes could come back especially if the economy does not recover.

  13. Anonymous says:

    regarding gold going down to $600:

    Robert Prechter (Elliot Wave Theory) has predicted a few years ago when gold was at $400 (I believe in 2004) that gold would fall to $200 due to general deflation. It did not happen. Prechter still advises everybody to keep our money in cash and US Treasuries, but he now abstains from making any predictions about the gold price. He has never admitted to having been wrong.

  14. Anonymous says:

    @Anonymous

    If they American government should need to tax like that again...

    And this is one of many reasons that gold bugs never through, they will confiscate the citizens gold like they did in the '30s.

    But alas I digress...

  15. dashxdr says:

    "Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state." -- William F. Rickenbacker

    Also regarding gold vs silver, I don't have a chance in hell of ever making any rules with my puny "fortune". Meanwhile, silver is the better investment, until it's seriously underpriced condition goes away. Then I'll transition to gold.

    Billionaires can jump into gold, there is enough there for them to protect their wealth. A single billionaire would send the silver price skyrocketing. Gold can be for kings, silver is for everyman.

  16. Anonymous says:

    The old "you can't eat Gold" saw is the most ignorant argument ever.

    Can you eat stocks?
    Cash?
    Bonds?
    Real estate?
    Guns?
    Ammo?

    You get the picture.

    Listen, you can hate Gold, what do I care? But bring some rational reasons why to the dance.

  17. Willy2 says:

    One should combine the "Excess savings" with the upcoming rise of foodprices. This will certainly force the chinese to spend a substancial amount of those savings. And that will hurt the chinese ability to buy US-Tbonds. So, which way one spins the story it's going to be ugly.

  18. dashxdr says:

    I just finished reading Jim Rogers' "Investment Biker". Wonderful book.

    A theme running through the book is the concept that statism kills a country's prosperity. Statism is big government, central control. Currency controls. Restrictions on imports. Protectionism. High taxes. Taxes on profits. General negativity towards profit.

    Again and again as he travelled throughout the world, he found countries with minimal government intervention were prospering, where individual initiative is rewarded, where people can keep their earnings. Alas the USA is no longer this way!

    USA can try to confiscate gold (they won't) but they won't get any. Fool me once, shame on you. Fool me twice... no one would be ass enough to turn it in.

    USA can try to tax at 90% (they won't) but it won't work. The capital flight would be horrendous. 90% of nothing is...nothing!

    What is all this fear of what the government might do? They can't do anything. They're bankrupt. They're dead. Gone. Defunct. Powerless. See-ya!

    The big question is, stay in the USA during the rebuilding of the economy, or create wealth and live elsewhere... it's a big world.

  19. Anonymous says:

    @dashxdr

    "no one would be ass enough to turn it in."

    They actually went to some people's houses in the '30s...

    Oh, and they also confiscated land too...

  20. Numonic says:

    I'm not going to lie(well i never lie), these rising prices in silver have in fact caused me to take a pause from buying. I usually buy every time i get a paycheck but lately prices have been higher than my average and I've yet to buy with my last pay check but I'm okay because i have a solid base. I feel I have enough silver that if prices keep climbing and the $hit has officially hit the fan I'll be more than okay with the amount I have and if prices drop low enough I'll be cool because then I'll get back in to buying more. In away these rising prices are like a stop loss but not really because I'm not selling, i'm just taking a break from buying. But i don't expect the halt in buying to effect the price because the price is not rising because of buying, it is rising because of debt defaulting in the metals market. I'm sticking to the debt defaulting issue because in the futures market physical trading doesn't matter when there is so many imaginary trades. What's disappearing isn't just the physical stuff but the imaginary stuff that has fooled the market into thinking there was more physical stuff than there is.

  21. Numonic says:

    I'd like to correct one thing Jimmy said:
    "The current economic tsunami has had at least one benefit to me: lower silver and gold prices. "
    This is wrong, it's not the economic problems that drove the price of silver and gold down and the value of the dollar up, it was the central banks intervention that did that. The economic problems have the opposite effects on silver gold and the dollar. What you saw in the gold and silver market and the dollar in late 2008 was not a result of the economic problems, it was a result of central bank intervention propping up the dollar and naked shorting gold and silver. Yes there was a rush to the dollar but a rush to the dollar isn't what effects the value of the dollar, what effects the value of the dollar is what happens following that rush to the dollar. If that rush to the dollar is met with liquidity and not default then the dollar value increases but if that rush to the dollar is met with illiquidity and default, the value of the dollar decreases. What you saw in late 2008 was the central banks printing like mad and doing everything in their power to make sure the dollar bonds stayed liquid and did not default. Soo all that rush to the dollar was met with actual delivery of dollars and no defaults but at the cost of freezing the credit markets up so that less people would have a right to these dollars. You watched the stock market suffer greatly because the central banks were more worried about gold and silver breaking out to new highs and the dollar crashing, so they put all their focus on those markets.

  22. Numonic says:

    The problem they have now is that then(late 2008) the credit problem was not as bad as it is today. Today the credit problem is worse and they don't have the ammo to all at the same time stop the stock market from tanking, prop the dollar up and bring down the price of gold/silver. I believe they've lost this control and the $hit is about to hit the fan. This fall prepare for the big fall. Mass bankruptcies and higher prices everywhere except for the debt market(stock market). It's going to cost more to borrow. So stocks(which are basically companies asking to borrow) will go down, because when you buy a stock you are lending your money to that company. If borrowing costs are rising your lending costs are going down. Your lending cost is the price of the stock.
    The problem peopel like Peter Schiff has is that he thinks printing Fed Notes is what devalues the dollar. So in situations when discussing what happened in late 2008 or other times recently when the US dollar rallied, he falsely says the reason is that people rush to the US dollar for safety and this rush to the US dollar is what causes the rally in the US dollar. But the irony is, just as he creticises people for confusing the cause and effect of printing, he confuses the cause and effect of the US dollar rally. The dollar doesn't rally because of the rush to the dollar, the dollar rallies because of what happens after the rush to the dollar. If I sell my bond or whatever and demand dollars, it's the payout in dollars that causes the rally in the dollar not the fact that I am demanding dollars. This is why Peter Schiff can't fully explain how there is record breaking printing and the value of the dollar is not dropping like crazy. Although it is dropping but the reason it's dropping is not because of the printing, it's dropping in spite of the printing. The forces acting against the printing, the "deflationary" forces are greater than the printing and so even though the printing can slow the dollars decline it is not stopping it because the "deflationary" forces are greater. People need to understand that liquidity equals dollar rally and illiquidity equals dollar devaluation, meaning enough Federal Reserve Notes equals dollar rally and a shortage of Federal Reserve Notes equal dollar devaluation. I know it seems ass backwards but you have to realize the dollar does not get it's value from it's supply/demand fundamentals, if it did it would be worth nothing because 1 gram of cotton/linen is worth practically nothing and that is all a Federal Reserve Note is. The dollar gets it's value from it's liquidity, it's seigniorage, it's minting costs which allows it to be only 1 gram of cotton and linen but able to be traded for many grams of cotton and linen. This is why the govt. is printing like mad, this is why Weimar Germany and Zimbabwe created larger denominated notes(but I've spoken before about how larger denominated notes only exacerbates the credit crunch and also causes transaction problems which is why the Central Banks will continue to print the current denomination of notes untill that stops working and they are forced to print larger notes or face default/illiquidity/insolvency.). The goal is to stop default because default not only destroys the banking system but it also destroys the banking systems currency.

  23. Numonic says:

    It's kind of funny people think that the biggest problem the Fed has is that it will print too much and not be able to pull in all those dollars back in in time. That's not the biggest problem the Fed has. The biggest problem the Fed has is the opposite, it can't print or get the dollars fast enough to stop the credit contraction and defaults. Again this is dollar bearish because all a dollar is is a 1gram cotton/linen sheet of paper and if it worked on supply and demand then it would be worth nothing because 1 gram of cotton and linen on the market is worth practically nothing. Here's more proof, did you know that when we were on a gold or silver standard, that the silver in the dollar was overvalued? Yes, an ounce of silver in the market was many times more cheaper than the amount of silver in a dollar even though it was the same weight of silver. This is Seigniorage or you can say a minting cost and this is the reason the silver in the dollar was more valuable than the silver in the market and also the amount of cotton and linen in a Federal Reserve Note is worth many times more than that same amount of cotton and linen in the market. The Seigniorage is based on the dollars liquidity, the govt. charges so much because it promises to remain liquid. If the govt. fails at minting these notes in a reasonable time, the value of the note will drop as the reason it was so high was because of it's liquidity. this is what happened in Weimar Germany also. The Treaty of Versailles demanded payment for debts owed from Weimar but when Weimar could not pay, it's currency was devalued and I don't mean they printed more, i mean the value of the curreny was devalued. the devaluation came before the larger bills were printed. The only reason the larger bills were printed was to pay for the rising prices in goods. The rising prices came before the larger bills. Weimar germany had massive defaults and a massive credit contraction, those larger bills were the after math and the result of the massive debt destruction and rising prices. Again, the rising prices came BEFORE the larger bills were printed and the rising prices were the reason the larger bills were printed.

  24. cees says:

    "You can't eat Gold"
    Well.. if the US Dollar collapses soon, the only wat to buy enough food - then for a while - is... paying with Gold ( coins)...

  25. Anonymous says:

    @cees

    Except gold isn't legal tender in the US...

    And if you think that "gold coins" will have more value to corporations because they are made out of gold...

    Remember we are talking about the exchanging of money (aka legal tender) of goods, and services, with corporations that need to pay the government in legal tender...

    Just another thing that shows that gold bugs haven't thought things out too well...

    This why people say you cannot eat gold.

  26. Natasa says:

    Numonic,
    Good post.

    Basically I understand your explanation on this way:

    - You referred to Mish Shedlock (“the prophet”) at beginning and I can start there too.
    Mich “predicted”for YEARS “deflation” in dollar values (monetary deflation) and explain (“teach”) in his theory this:

    Total money supply = money in existence + credit
    Since out there is “credit destruction” – we are in “monetary deflation” explained Mish.

    NEXT Question is – WHAT is “Total money supply”?
    Simple answer:
    “Total money supply” = PROMISES (or “paper promises”) of governments.
    With this “paper promises” – we can buy REAL THINGS (or services).

    Let’s see situation on the Planet now…
    We have 1000 TRILLIONS USD of “paper promises” and 50 TRILLIONS of total value of REAL THINGS (measured for one year in USD!).
    Or mathematically (since Mish “the prophet” looks like it) present relation of “value” measured in USD:

    “Paper promises” >> REAL THINGS

    With other words - “Paper promises” exceeds the REAL THINGS by 20 TIMES! (Eric already wrote about it)
    In the real life the economy always tend to “equilibrium” (as a nature law).

    In simple situation – IF every “keeper” of “Paper promises” would like to exchange them to REAL THINGS it would come to a MASSIVE SHORTAGE – of REAL THINGS (not “ Paper promises” as Mish believes)
    This MASSIVE SHORTAGE can be initiated with some major event like:
    - shortage in REAL food
    - shortage in REAL gold
    - shortage in REAL energy (now it is jet easier to manipulated with oil since there are no simple method to storage it, and GS criminals (who controlled US government) can still “play” with it, but lets see how long?
    ANY of these events – can cause a massive deflationary PANIC.
    (Of course “deflation” here is in REAL THINGS (logical) NOT in “paper promises” as Mish “the prophet” believe. “Paper promises” are in enormous amount already there.)

    Logically – just few of those “lucky-guys” could success to exchange their “paper promises” for REAL THINGS.
    Others – just stayed there with literally worthless paper in their hands (those war once upon a time the ““paper promises”)

    EQUILIBRIUM achieved.

  27. Anonymous says:

    @Anon 1:47

    What can one figure out? What is "the" solution?

    To summarize:

    - Gold is not legal tender, you can't directly pay taxes with it.
    - Even if you "own" a house, fully paid, try once to not pay your property taxes - then you realize who owns what in reality.
    - A "fiat" currency is bound to the economic power and material wealth of the issuing "region" (that can be a nation state). If I can buy nothing of "value" in or from the issuing "region" - no one else will touch the currency.

    So, where or how do you preserve "wealth" or "buying power" i.e. income that you do not need to spend immediately?

    It is clear that it should start with food. But if you do not want to trade with it, there is only so much you can buy/eat before it goes bad.

    I would be happy if you could give more insights in how you do play the game.

    Bernie

  28. Natasa says:

    Today’s “monetary system” based on USD is exactly how a Ponzi scheme works.
    As long you can find somebody who is prepared to put own money in the scheme (in believe to “earn money”) – scheme works.

    In this instant – when any of the members loose the “confidence” in scheme (since there are no possibility to widen it!) – the complete scheme destroys.
    (Look how much bankers talk about "confidence"...)

    I agreed with Numonic that cause for “dollar strengthens” at the end of 2008 was - neither “flight to safety” nor “American economy” (it is destroyed).
    ONLY reason is that Central bankers on the Planet – tried to repair crushing Ponzi "monetary system" based on USD.
    Of course they tried (than!)to support USD as base of - the death system.

    Situation now is different.

    Everybody (or many of them like Chinese) realized that “the System” is – doomed and irreparable.

    They tried and will try EVEN harder to “escape” from “Ponzi death” and NOT stay there just with worthless “paper promises” in their hands.
    Simply – they are buying REAL THINGS for “paper promises” based on USD.
    That is “pressure under” Eric talked about.

    I agreed also with Numonic that it is quite strange that Peter Shiff talking about “printing inflation”.
    It really looks that he did not understand the relations on the Planet neither, but it looks too that he has at least more “common sense” than Mish “the prophet”.

    “Printing” is NOT NECESSARY.

    “Monetary inflation" is ALREADY there – since there are 20 TIMES more “paper promises” then REAL things.

    There are two possibilities FED has:
    1. Huge Devaluation of USD value (about 20 TIMES!) – which is politically impossible or...
    2. “The printing” of huge bills which actually doing the SAME as Devaluation of USD.

    EQUILIBRIUM achieved.

    Outcome is always – the same.

  29. Jay Midnyte says:

    Yes you cannot eat gold. But when the USD collapses and you need to trade with other people then they will not take dollars. Silver or gold would work. Now if it's just a severe devaluation of the dollar but the currency somehow survives, you can still convert it back into the then hyper inflated dollars!

  30. Jay Midnyte says:

    "Some shallow souls like Karl Denninger actually state that one cannot eat gold, and thus is has no structural value. What a truly moronic point of view by a fine forensic analyst. Stick to your knitting, Karl! Then again, he is half blind and a high school chemistry and physics laggard (see his 911 Event shallow commentary). One cannot eat crude oil, cement slabs, steel beams, or human undergarments, and these surely have structural value to gird a foundation."

    Willie

  31. Natasa says:

    Jay Midnyte,
    Thanks.
    Great link!

  32. dashxdr says:

    @mr pinnion

    I get so sick of people telling me I'm underestimating the danger, or not thinking things through.

    I'll say it again. I don't give a shit how bad it gets. I'm not afraid of how bad it gets. I'm prepared for that.

    Hell is not the worst place to be. Limbo is. I'm not religious at all, mind you. But I loved Larry Niven's book "Inferno". Limbo is a waiting place. It is not hell, it is not heaven. It's where life seems ok, but it's really just...plain...limbo. No extremes. We're all in limbo. It sucks. It's a mediocre existence. Only being fractionally alive.

    How to escape limbo? Easy. The government goes back to the constitution, sound money, and we're all in heaven. Great! Painless. But it won't go that way.

    Instead, we'll go through hell. USA's systemic collapse into 3rd world status. Chaos. True free market, survival of the fittest. Perhaps even a bit of kill or be killed. Taxes? Who will tax? No courts, no police, no organized government at all. Some might call it hell. But at least it will wake people up. They'll say, "This sucks! Someone fix this!" but no one will answer their call. Everyone will have to solve whatever problems they're facing on their own.

    And in such an environment, whatever claws its way back up to prosperity will not believe any empty promises for paradise from any would-be government beaurocrat or con man. "Thanks, but no thanks. And if you don't get off my property in 5 seconds you're dead."

    As regards the inane "You can't eat gold!" statement. LOL! Right now gold is not a liquid as cash dollars. Big deal. Neither is real estate, precious art, your car. But there will always be a demand for gold, meaning you can sell it for something that IS more liquid that you can exchange for food.

    Karl Denninger, Mish, these guys are opportunistic morons. Denninger just wants to maintain the status quo. He sold some dot-com company and made his few millions back in the 90's. He just wants it all to stay the same, he's already loaded. Mish -- mish is an insect trying to gain popularity. Much like Alex Jones.

  33. dashxdr says:

    More on gold. Gold is a store of wealth. Its liquidity varies throughout history. If you've got a million dollars of wealth, would you want to keep it all as dollars? When at any time the dollar can collapse and you can discover you can't BUY anything with your dollars?

    Or course not. But you don't buy a million dollars worth of bread, merely because "You can eat bread!" You can't store bread. It rots. Goes bad.

    Gold, on the other hand, lasts forever. It doesn't oxidize. It can be melted and it won't change. It can be broken into pieces and merged back together, it's always the same stuff. And it's scarce. You can't magically create more of it. It is the best storage of wealth in history.

    So you can store your million dollars in gold. And when you need some bread, you take a bit of your gold, sell it for dollars or whatever the liquid currency of the day is, and get your bread.

  34. Anonymous says:

    @dashxdr

    "So you can store your million dollars in gold. And when you need some bread, you take a bit of your gold, sell it for dollars..."

    In the US the only legal currency will be dollars, but here's the thing...

    Knowing the value of gold why would you ever trade it for dollars?

    When you do that you know your not getting what you should be...

    Yet your going to be forced to do it in order to live in America...

    Sure gold maybe a store of wealth when when a currency collapses, when we have inflation, or when a war breaks out...

    But the dollar isn't just a regular currency, its a world currency, and if it collapses it might also mean that the gold reserves that America has is either severely depleted, or none existent...

    Try selling your gold to a bank for dollars and see who shows up at your door, looking to confiscate the rest of what you got...

    If you, or anyone, truly believes that a currency collapse will happen your best bet is to leave America now when you got the chance...

    After the collapse... well your fate lies not in your own hands then...

    It will be a very bitter pill to swallow that may even lead to your death...

  35. Anonymous says:

    We're from America, we're from America
    Where we eat our young
    We're from America, we're from America
    It's where Jesus was born

    We're from America, we're from America
    Where they let you cum on their faces
    We're from America, we're from America
    We speak American

    We don't believe in credibility
    Because we know that were fucking incredible
    We don't believe in credibility
    Because we know that were fucking incredible

    I want to be a martyr, don't want to be a victim
    Be a killer with a God so they call me a hero
    Want to be a martyr, don't want to be a victim
    Be a killer with a God so they call me a hero

    God is an excuse
    God is an excuse
    God is an excuse
    God is an excuse
    God is an excuse
    God is an excuse
    God is an excuse
    So sing it with me

    We're from America
    From America
    We're from America
    You can sing it with me

    We're from America
    From America
    We're from America
    You can sing it with me

    From America

    We don't like to kill our unborn
    We need them to grow up and fight our wars
    We don't like to kill our unborn
    We need them to grow up and fight our wars

    We believe in everything we say
    We say it because we believe it
    We believe in everything we say
    We say it because we believe it

    We're from America
    From America
    We're from America
    You can sing it with me

    We're from America
    From America
    We're from America
    You can sing it with me

    From America
    You can sing it with me
    From America
    You can sing it with me

    We're from America, we're from America
    We turn literature into litter
    We're from America, we're from America
    We believe in being a quitter

    I'm in recovery
    I'm in recovery
    I'm in recovery

    From America
    From America
    From America
    So sing it with me

    We're from America
    From America
    We're from America
    You can sing it with me

    We're from America
    From America
    We're from America
    You can sing it with me

    From America
    You can sing it with me
    From America
    You can sing it with me

    We eat our young
    We eat our young
    We eat our young
    (From America)
    You can sing it with me

    We eat our young
    We eat our young
    We eat our young
    (From America)
    You can sing it with me

    We eat our young
    We eat our young
    We eat our young
    (From America)
    You can sing it with me

    We eat our young
    We eat our young
    We eat our young
    (From America)
    You can sing it with me

  36. dashxdr says:

    @Anonymous

    You really don't get it, do you?

    As if the government passing a law makes it fait accompli! LOL!

    Civil laws are not physical laws.

    Do you know what "Black Market" means? Do you know that in spite of the War On Drugs, that "illegal" narcotics are readily available? This is the black market.

    Do you know during Prohibition alcohol was readily available?

    Are you really as naive as you sound, or are you instead driven by ego, unable to back down? Or perhaps you really are paid to just introduce chaos?

    Whatever motivates you, know that you yourself will forever be irrelevant. People are constantly leaving your perspective and joining mine. And know what? They never go back. Once you wake up you stay awake.

    Grovel in your cave, fearful of government edicts. Myself? I intend to live life in freedom. Live free or die!

  37. dashxdr says:

    @LOLAnon

    I'm going back to ignoring you again, don't be offended.

  38. Numonic says:

    Anonymous is a silly character.

    Anyway I came acroos more proof of how "fractionally reserved" our economy is.

    Last week I bought an item at the store for a few hundred dollars. I paid cash. The item didn't work as I expected it to so today i went to return the item and I had to get back a check in return. They couldn't pay me in cash as I paid for the item, they had to give me a check.

    Just more proof of how "fractionally reserved" our economy is.

  39. dashxdr says:

    @mr pinnion

    I have a problem with defeatest wimps who bring nothing to the table other than being ANTI everything. You say you like gold, they scoff, "Hah! They'll just take your gold away from you." You say you will defend your home with your guns, they say, "Hah! They'll just crush you."

    Evidently their plan is to just huddle in their living room waiting to be herded onto cattle cars and into the gas chambers. They've given up already. For them, the fight is lost before it's even begun.

    And to make themselves feel better about their "decision" to passively do nothing, to not prepare in any way (as in hoarding food, guns, ammo and precious metals for example) they scoff at anyone else who HAS prepared.

    The truth of the matter is they are worthless sheep, not worth saving, not worth bothering with. They whine about, "You'll get yours! Just wait and see!" but really they are trying to convince themselves.

    They're the ones that are truly afraid. They feel utterly helpless to take control of their lives. They feel so helpless, they deny that anyone else is in control of their own life.

    I like to quote this line:

    "If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace. We ask not your counsels or your arms. Crouch down and lick the hands which feed you. May your chains set lightly upon you, and may posterity forget that you were our countrymen." -- Samuel Adams

    Do whatever the hell you want. It's your worry. I'll worry about myself.

  40. Anonymous says:

    @dashxdr

    LOL!

    I bet you're not even American, but if you are you're going find out what freedom really means and the price you have to pay for it.

    What I can tell you is this...

    Violence only begets violence...

    And those that think like you will be made examples of...

    I have no fear for death, but it sounds like you do...

    Even the mere talk of it makes you unhinge...

    I'm glade we had this little talk, if for nothing else to expose who you really are to the world...

    Just remember this...

    When you're out fighting the Government...

    I'll be sucking Uncle Sam's dick making sure I get that ring-side seat...

    So I can witness first hand, the bullet entering the back of your head.

  41. dashxdr says:

    @mr pinnion

    You don't understand me at all. I want chaos, anarchy, utter collapse of the US empire. I want the dollar to go to hyperinflation. I don't fear any of these things. I'm hoping for, waiting for, counting on them.

    As such Obama is my hero. He's USA's Gorbachev. He will preside over the collapse of the US empire. When the US government can't finance operations. When this huge war machine utterly disintigrates because soldiers need to eat too.

    Watch the collapse in the US dollar as the Fed keeps monetizing the US debt. China is getting out as fast as possible. They're setting up for their own currency to be international. The pace they're moving at is amazing.

    Any month, any week, any day, any minute the panic out of the US dollar can begin. It'll be great if you're buried in debt, as the dollar denominated debt will become meaningless.

    The US as it exists today is not worth preserving. The world is moving past empires. It's moving past war and war machinery. It's moving to civilization, independent logical nations united by common culture, ethnicity, ideals, religion, whatever. Not artificial borders set by greedy empires.

    The world is becoming multipolar again. Nations trading honestly together for mutual benefit. Prosperity will come with minimal governments, sound monetary policies, and by rewarding success and innovation.

    There is no place in this world for the US empire. Or the US dollar as it exists.

    Who will mourn the USA's demise? Certainly I won't.

    Anarchy! Bring it on.

    These will certainly be exciting times to live in.

  42. dashxdr says:

    @LOLAnon

    JGA. NOIBYS.

  43. Anonymous says:

    @mr pinnion

    Yes, I agree it was a bit harsh, but it seems like its the only thing he can understand...

    All he does is speak violence against anything that does not conform with his desires...

    An individual like this, if in deed he acts as he talks, is dangerous and thus his life will be short lived...

    He dreams of a society without government and one where he is free to do as he please, a state of lawlessness...

    No society will ever become like that, never...

    Even if it were to totally collapse...

    There will always be a segment that will control the military, enforcement and such...

    So I have no idea what planet dashxdr is from, but it must be planet wacko...

  44. dashxdr says:

    @LOLAnon

    LOL!

    Look very carefully in all my comments, every single one. I never speak of initiating violence. I might speak of self defense. Two different things. Perhaps you don't understand the difference, you are after all a sheep. Taking the brainless path of swallowing the mainstream media's party line. Going along with the majority.

    You, on the other hand, seem very threatened by my words. You did mention you would suck uncle sam's dick so you could watch them put a bullet in the back of my head.

    Violence? You seem to relish it. Condone it. You're willing to give oral sex so you can see it. And I'm a whacko?

    You've obviously had a free ride all your life. Surprise! The productive members of the former USA are shrugging you parasites off. It's scary to you, isn't it? You'll have to fend for yourself. You won't have nanny or daddy government taking care of you. Protecting your worthless, valueless, incapable hide from grownups like me! Boo hoo! Make the bad guy go away!

    I don't need to initiate any violence at all against anyone. I merely have to do nothing. People like you will shortly starve to death. Or if you don't willingly admit being hopelessly wrong about what's coming and you decide you'll live by theft, you'll see me, and other people like me, ready to defend their property by any means necessary.

    You, sir, will find yourself quickly without options. Unable to survive as a parasite, and unable to eke out a living as an "honest" thief, what will you do? What will you do?

    Your fear is all over you, as much as you deny it. LOL!

  45. Anonymous says:

    @dashxdr

    "I might speak of self defense."

    Twist it anyway you want, but inciting revolution is to incite violence...

    Thus, its not self-defense.

    As to my comment before, believe me there will be millions of people willing to do the same...

    Remember when Bush jr. asked the nation to spy on their neighbors?

    You think everything is going to go honky-dory after the currency collapse...

    You haven't a clue, and as such you haven't prepared for anything...

    You're just a sad little violent dreamer how hates America...

    But in the end the joke will be on you...

  46. dashxdr says:

    @LOLAnon

    You seem to be incapable of understanding anything.

    Inciting Revolution? In what way?

    I merely opt out. I refuse to be a slave anymore. I withhold my labor. And the system collapses on its own.

    This is a threat to you. Why?

    And this wonderful bullet in the back of my head that you hope "they" will give me, for what reason? For choosing not to be a slave? What crime is this?

    By telling other people they don't need to be slaves, that is a crime?

    You keep coming back to the same tired song. "They will get you!" Just exactly who are "they"? My neighbors? Fellow citizens. You yourself? You seem to be more of a threat than my neighbors. You seem to equate some sexual excitement with violence. The idea of a free man getting shot for defending his freedom gives you a hard on, doesn't it?

    Really, in spending your time in this "debate" what do you hope to accomplish? What is your goal?

    I'm convinced now you're an NWO operative. Spreading chaos and confusion. Otherwise why would you be so scared shitless about people en masse deciding to opt out of slavery?

  47. Numonic says:

    Anonymous left the NWO meeting too early and forgot to get the memo saying to not try to recruit/convince people on marketskeptics.com for the people on that site are not naive enough to fall for such crap.

  48. Anonymous says:

    "I'm convinced now you're an NWO operative. Spreading chaos and confusion. Otherwise why would you be so scared shitless about people en masse deciding to opt out of slavery?"

    Like I said, dashxdr is from planet wacko.

  49. dashxdr says:

    Speaking of Illuminati, evidently there are 1,000,000 of them in the USA alone. Interesting reading, Svali is an Illuminati whistleblower:

    http://www.illuminati-news.com/072706a.htm

    So if they really exist, there are a million of them, why couldn't LOLAnon here be one of them? Some drone, low down in the ranks, whose "Work critical to the Family" is trying to confuse the public?

    You're doing a bangup job, LOLAnon! I note you suddenly seem much calmer and in control of yourself. Back to the good old fallback, "When all out fails, use derision and ridicule."

    I think you lost any credibilkity when you spoke of sucking uncle sam's dick. I'll be sure to remind you of that from time to time. You really slipped up there, didn't you?

  50. dashxdr says:

    Sorry, not 1,000,000 Illuminati in the USA, 1% of the population.

  51. dashxdr says:

    @LOLAnon

    I'm going to proceed under the assumption that you're Illuminati. I'm having a ball reading about your organization. Here's a quote, just for you:

    SV: When I was very young I absolutely believed in the goals of [the group]. You never saw a more loyal group member. I thought that they were saving the world. I thought that we were doing a wonderful thing. But the older I got, I started to see the methods that were being used for so long, and that the ends do not justify the means. I became increasingly cynical, partly because I saw what I was doing to people. I was lying to them. I was manipulating them. I was telling them things that weren't true. I remember questioning this, thinking, "I was told lies as a child too, then. I was manipulated."

    LOLAnon please read Svali's interview. Do you see that? "The ends do not justify the means."

    You spilled your guts as regards the brave new world you envisioned. You clearly believe in it. But try to see we'll never get there by the behind the scenes, controlling, iron hand. Your group is doing far, far more harm than the good. You're part of a cult. Think for yourself.

  52. Numonic says:

    dashxdr forget about Anonymous. I can't believe he relishes the idea of you getting shot in the head. Whatever you said must have really pissed him off.

    But i do want to correct one thing you said dashxdr.

    You said "Watch the collapse in the US dollar as the Fed keeps monetizing the US debt.

    I would put it differently. I would say: Watch the collapse in the US dollar IN SPITE OF the Fed monetizing the US debt.

    Whether China's fears are authentic or not I think they are a little misguided, not in the end result of the dollar becoming worthless but in the way it will become worthless. Like Peter Schiff and allot of mainstream "inflationists", it seems China's fears are the same. They fear that the continuation of printing is what will devalue the dollar but the more likely catalyst for the devaluation of the dollar will be the opposite, an inability to print enough to stop defaults. What I am saying is that there is more of a chance that when China tries to cash the bonds, the bonds will default, not only devaluing the dollar but not allowing them to even get the worthless dollars. So instead of China and most of these mainstream inflationists fearing all the printing, they should be fearing the credit markets remaining tight IN SPITE OF all the printing and realize that that implies that there is a greater chance of the dollar loosing value through mass defaults than through a flood of easy credit. If the problem we had today was that there was too much credit chasing too little goods and the reason credit was contracting was because of this, we would see credit contracting but we wouldn't be seeing bailouts. The bailouts(and bank "failures") tell us that the problem is impending defaults and the fact that credit is still contracting in spite of the all these bailouts tells us that there is potential for massive defaults. Again this is still dollar bearish but like i said there are two ways the dollar will loose value and 1 is through an over expansion of credit and the other is through massive defaults and everything I see currently points to the dollar collapsing because of the latter. But as long as you understand that the dollar will loose value/collapse, that's probably all that matters, although what happened during the Weimar Germany hyperinflation is that because most or all the bankers and investors were Jewish, allot of people falsely blamed Jews for the collapse in Weimar and soon after Hitler was in power and you know the story, so it may be important to know the real cause of the collapse.

    So who can we blame for the situation we are in today. You can't blame the current administration, you can't even blame the last administration, you can't blame the current Fed Chief, you can't blame the current bankers, you have to go back to when the banking system first started. But I don't even think it matters to find who to blame, as long as we know what the problem is/was and how to prevent it from happening again is all that matters. I don't look at what's happening to the dollar and people holding dollars as theivery, i just look at it through the eyes of the free market. If you get screwed holding dollars, that's just part of capitalism and the free market. You bet on the dollar and lost. That's capitalism. Thankfully the knowledge to see where the dollar is headed is out there if you do your homework and those who find this knowledge and bet against the dollar by buying gold and silver will reap the benefits and this is all part of the free market which is always free even in cases of communism. Communism works in the realm of the Free market and the consequences of communism is a free market effect. So know that the free market is always there in any situation. And everything will always workout for the best.

  53. Anonymous says:

    @mr pinnion

    You would think, being that they are into buying commodities, they would understand that this is how it works...

    I even told them in a very logical way...

    But no...

    These guys are hard set on seeing this happen and thus will makeup stuff in hope that the effort and money they stockpiled into PMs will pay off...

    But I digress...

  54. Natasa says:

    @mr pinnion

    actually, it is not even need to "print" those money on the computer neither.

    It is "good" enough to DEVALUATE USD i.e. when you get up next Monday - the value of USD is just 0.1% of its value on Friday afternoon if you compare it to the other (basket) currencies or gold.

    Why not?

    The effect is same as "printing" as you explained.
    Even in this case - the tomato by Mr Shop will be 10 times more expensive than if you compared with Friday night.

    There IS a little difference:
    - Mr Shop will in this case probably TAKE your dollars (if you have them), but in case of many ...00000000000000 - probably NOT - since he could not be sure how much 0000 is TOMATO worth - today!
    More clearly - it is high possible that he would like anything "hart" in exchange for tomatoes.

  55. dashxdr says:

    @Numonic

    Treasuries have their own market dynamics which can be separate from the US dollar dynamics.

    The world is dumping US Treasuries. The only question is how quickly. But the tide has turned.

    The average term for US bonds is 48 months = 4 years. Which means every year 25% of the debt matures and must be rolled over or retired. With a $2T budget deficit and an outstanding $12T debt, 25% of which is $3T, that means every year the US must sell $5T in bonds, or $96B a week.

    As other people have indicated, "printing" US dollars is a loose term. They're not physically printed. Haven't been for a long time. They're just digits in the electronic monetary system. There is no physical limitation to how much dollars they can create in accounts. That's built into the system.

    Personally I can't read your long posts all the way through, I zone out because I reject your logic. "If the US doesn't print enough money, the dollar collapses!" This ridiculous. Please don't try to explain it to me again.

    Anyway the US/Fed alliance has 2 choices. Since the world isn't buying treasuries anymore, and $96B a week has to be bought _somewhere_, they can A) Create the money and buy them themselves, or B) Default.

    Option A keeps US bond prices high in dollar terms, keeps interest rates low, but the dollar collapses. Option B causes US bonds to collapss, interest rates rise, but dollars retain more of their value. For a while.

    Option B is immediate pain. Option A is slower, drawn out pain. They'll go with option A.

    There is no magical way the USA can get out of this situation. It's the end of the line.

  56. Numonic says:

    I really hope this does not lead to another holocaust because like I just said misguided blame might have been what led to the Jews persecution by Hitler and all and it seems you guys are making the same mistake. I think it's important to know what the problem is so that we don't go through it again.

    Dashxdr, i advise you to read through my last several replies about why I say default will devalue the dollar. Through out my replies on this site I've even given proof of how the bailouts are bullish for the dollar and defaults are bearish.

    You really have to understand that printing is in fact going on and is what the bailouts are. And that the borrowing we are doing from China is in fact borrowing physical Fed Notes from China while the Fed and Treasury electronically gives China our bonds. It's half electronic and half physical. It's trading electronic money for physical money. That is what goes on when we borrow. We give them electronic money and they give us physical money. All the debt is electronic but we pull in physical money in exchange for it.

    You really have to understand this. It's important so that you don't mistakenly put the blame on the ones printing the money.

    Printing does nothing to the money supply if it is neither loaned out or if it is not used to stop defaults. If the printed money does not go to any of these then it is as if it were never printed in the first place. Currently the printing is going to the latter, to stop defaults.

    The one gram cotton/linen piece of paper would not be worth enough to buy many grams of cotton/linen if it weren't for this printing/minting and stoppage of defaults. The printing is what makes that one gram of cotton/linen more valuable than one gram of cotton and linen on the market. Know that.

    Please do not confuse printing with the expansion of credit and don't jump to the conclusion that printing will lead to the expansion of credit, nor should you jump to the conclusion that printing will lead to the stoppage of defaults. The fact of the matter is they can't print enough to stop defaults because the printing is not just a "loose term" but it is in fact physical. And there is a limit which is the speed in which they can print these denominated bills and the fact is that the demand for these denominated bills are moving faster than they can print them. They are holding on as almost all so called "defaults" have been stopped but as you can see FDIC funds are low, IOUs are being issued and there is a slew of credit problem in our near future that will put pressure on the printing presses. The irony is that I would say the loose term in this situation is not "printing" but "default" for we have yet to witness true defaults in this country or bankruptcy as what we have is bankruptcy protection which is a bailout. We are fast approaching true bankruptcy and this will destroy the value of the dollar.

  57. dashxdr says:

    @Numonic

    I really had hoped you wouldn't try to explain it again...

    "Dashxdr, i advise you to read through my last several replies about why I say default will devalue the dollar. Througq out my replies on this sitx V're even given proof of arw the bailouhs are bullish for the vollar ojd dpraults are beariqo.

    You reflld hage io kydecstwtc thod qvcntpng is og wayt noidg ob awl ss wuau ohe babtkxoc adm. Xdy tmdt the bmeukwixb me ary tryng jroh Qhinl ih in vuot aureouthr ifksgbiz Rux Notes yguw Ghiop lqwhp taq Dnw tjd Yrpaxsug hiqbjjoujuiybw iyyyy Zvpve eec utxit. Gi'e khdl ljfxtrvskh ebp qpdu tbcirxuj. Dt'e qdajwyu wwjyelxppw qdudb vfp pwzfoydy vucmy. Gdvn ne lpwi pxzk hw pntf rc doovgr. Ws mxqr orhl omakcnehvy qxlnn fzh ajug fuup iu fqjvqoxv wtseg. Bkl gib ciip yk rfsvctwttm npc gu uulo in kesbxapt hndev yp kzfpvadc mom kk.

    Onw gnowtj nvwc de uzyhvubxpt vgad. Vr'd yqkewxebq qp hubv gjd jaq'z lxzcglppvf vct mbj ptvhg di hsk xwqd vhubytee trb eqrla.

    Iviwjqpb gxxi fwwbflv za vla udcjp cfrecp iu hd cj rxxjxha xrgehl wmw vh fu ex rj gkv zfvf wp ttbt gsxjncmk. Zd szo dupnuku mnfms cjax rdy qc zb vqq jt vnbai zwat zp mb jn ve hz cpnu mpljn ewygfnx ms apd zmqxv qnblz. Gzmpnjlyw xto nbiklskf cn mqlef nm uqo scoeyh, gw oyvo dfqwbpij."

    From there on out it's just clicks and whistles. Sorry, you just don't hold my attention.

  58. dashxdr says:

    I like programming...

    #include "ctype.h"
    #include "stdio.h"

    int main(int argc, char **argv)
    {
    int c;
    int n=0;
    for(;;)
    {
    c=getchar();
    if(c<0) break;
    ++n;
    if(isalpha(c))
    {
    if(n-100 > rand() % 400)
    {
    if(isupper(c))
    c = 'A' + rand()%26;
    else
    c = 'a' + rand()%26;
    }
    }
    putchar(c);

    }
    return 0;
    }

  59. Anonymous says:

    Now that deserves an LOL!

  60. Numonic says:

    What i said could be explained in one sentence. If a mint performs poorly, the value of what it mints drops. It's that simple.

  61. dashxdr says:

    "Now that deserves an LOL!"

    Yeah, dissention in the ranks.

    For all I know Natasa, Numonic, mr pinnion and LOLAnon are all the same person playing games...

    The new paradigm is to be an individual, not a joiner. No more going along with the group whether you believe in it or not.

  62. Numonic says:

    We'll see who's from planet wacko when you start to see prices rising while at the same time credit getting tighter and more banks failing, and truly failing and not being bailed out by the govt., FDIC or bankruptcy protection. You'll be scratching your head asking yourself, "where is all the easy credit to cause this rise in price?" "What's going on?" then you'll see that I was right. Do you know that there were bank holidays and bank runs during the weimar hyperinflation?, do you know that credit was tight then? You'll see the same happen here.

  63. Anonymous says:

    Numonic

    He who lives in a dream world, where only he is right...

    Must be nice to be the king, eh Numonic?

    LOL!

  64. dashxdr says:

    Actually there is a group I don't mind being a part of. The one that has no respect for LOLAnon, the Illuminati washout.

  65. Anonymous says:

    LOL

    The dollar almost makes a full point return, even before the Euro market opens.

    Gold going down below 1k for sure, and will be all week.

    LOL!

    LOL!

    LOL!

  66. Tian Men Pai says:

    A study on US default scenarios pls....

    Gorby - Obama
    Who gonna be Yeltsin?

  67. dashxdr says:

    Almost a whole point?

    6:50 AM EST USD 76.95 +.27

    I guess he means it almost climbed back up to 77.

    What's unclear is what _exactly_ LOLAnon wants to happen.

    Seems to me strong USD index means US Empire, in all its glory, corruption, statism, socialism, crony capitalism, big government, etc. gets to go on living. High unemployment and all...

    And LOLAnon is tickled pink by all this.

    That's pretty funny!

  68. NM says:

    A full-blown trade war erupted between the US and China

    "...
    “This is a grave act of trade protectionism,” Mr Chen said in a statement. “Not only does it violate WTO rules, it contravenes commitments the United States government made at the [April] G20 financial summit.
    ...”

    http://www.ft.com/cms/s/0/f67c6fe6-a024-11de-b9ef-00144feabdc0.html

    China is not happy since US Empire breaks its own rules implemented in proxy organisation - WTO.

    Still this US protectionism looks like helping USD.
    Empire “knows” that other nation on the Planet “must” trade in worthless US dollar (despite enormous amount already “printed”) – and uses it ruthlessly:

    http://www.ft.com/cms/s/0/37ed3668-a106-11de-a88d-00144feabdc0,dwp_uuid=9c33700c-4c86-11da-89df-0000779e2340.html

    It will be interesting to see Chinese “answer”.
    Anyway, “the crises” looks like just started.

  69. dashxdr says:

    So much for US dollar index rally. 10:31 EST it's at 76.62 having fallen .06. September 14, 2009.

    Of course silver's down .25 to 16.52 and gold is down 5.20 to 1000.90.

    No worries. No mysteries how this will all come out in the end.

  70. Anonymous says:

    Listen,

    I DON'T work for the Government or any entity who's desire is to spread false information.

    Again, I think gold bugs haven't thought things all the way through to their logical ends.

    (1) Gold isn't the best hedge historically:

    You can look at what happened to gold prices during the 30's when Germany went hyper.

    You can look to the 70s when America saw stagflation (with a little bit of inflation).

    You can also look at the early 80s and see what happened during a time of inflation in America.

    (2) If you're in America having gold isn't really going to help you:

    If things go extreme hyper your going to waste your hedge on food.

    Or worse they could confiscate your gold like they did in the 30s.

    (3) If social unrest were to break out and the system totally collapses gold will be next to useless, for the whole US will be under military lock down...

    Every where you go you will be searched and it wouldn't be out of the question to have people that are searching you to confiscate your gold for and use it for their own needs...

    (4) If another world war were to happen I hope your not under the age of 35 and if you are over that age be ready for a similar situation as in point (3)...

    These are just a few quick reasons why I (and I'm not the only one, trust me) think gold isn't the best place to hedge for the future...

    I think the best idea to hedge for the future is to get land in another nation (not the amount that Eric is doing, just enough for yourself and family to farm on), live in that nation and forget all about America...

    Those who stay, well, you will find that gold wont bring you heaven or nirvana, in fact it will be totally useless...

    Especially when you are fighting for survival or in a war...

  71. Anonymous says:

    @mr pinnion

    "when germany went hyper, gold held its value and stopped u from starving.if u lived in germany of course. in the 70 s inflation gold went up a lot and peaked in the early 80 s, so its sounding like a good bet in those types of situation."

    Your wrong in all three of these cases...

    Go back and look at the price of gold before, during and after each...

  72. stibot says:

    LOLAnon, in most of cases you described, perhaps in all of them, it has at least the same sense to have gold/silver as money.

    I can't see any advantage of having credit card in your scenarios.

  73. Anonymous says:

    @stibot

    I don't own a credit card, never have and never will...

    Again, your argument can be shown to be misguided just by the pure fact that legal tender in the US will always be the dollar...

    That is unless the US enters into a pact with Mexico and Canada to create an Americo currency, but I don't see that happening...

    Also why would you stay in America if you had to convert it back to gold...

    Everything that you will be paying for will be over inflated compared to the rest of the world...

    So the hedge that you have will be wasted on things for survival when you could have taken that hedge and gone to another nation, and maybe done something with it or lived like a king...

    And yet again, in order to have to convert that gold/sliver you need to take it, physically, to a place to exchange it (back into USD)...

    If we have unrest, or are in military lock down good luck trying to keep it as "yours"...

  74. Anonymous says:

    This:

    "Also why would you stay in America if you had to convert it back to gold..."

    Should read as:

    "Also why would you stay in America if you had to convert it back to the dollar..."

  75. Anonymous says:

    LOL!

    Gold back down below 1k...

    Don't count your chickens before they hatch dashxdr...

    LOL!

  76. dashxdr says:

    It's better to have a gun and not need it than to need a gun and not have it.

    Gold is the same way. It's better have some and not need it than to need it and not have it.

    LOLAnon is a coward at heart, but more importantly his net worth is essentially zero, probably lives from hand to mouth. He has nothing whatsoever to protect anyway. Even if he wanted to get some gold, he can't buy any.

    So he plays sour grapes. "I didn't want gold anyway, only fools want it."

    Along with the Illuminati theory, trying to convince disgruntled US citizens that the best thing they can do is run away...that's exactly what a NWO type would want. Why fight a battle if you can propaganda your opponents to leave the country?

    LOLAnon, why do you waste your time? You are 100% ineffective in convincing anyone of anything. Why not try to convince yourself of your own beliefs offline? Why involve Eric's audience?

    Myself, I'll stick out the USA as long as possible. And I believe in diversity. Don't put all your eggs in one basket.

    I'm thankful I have a lot of eggs! Unlike LOLAnon, who has nothing whatsoever to lose aside from his pathetic hide.

  77. Anonymous says:

    "Along with the Illuminati theory, trying to convince disgruntled US citizens that the best thing they can do is run away...that's exactly what a NWO type would want."

    LOL, dashxdr, the one from plant wacko...

    LOL!

  78. Anonymous says:

    @dashxdr

    Speaking of you...

    You know personality isn't one to survive long in chaos...

    You are to paranoid...

    And because of that I am willing to assume that you are alienated, one with little friends and one who can only depends on himself...

    You will be easy pickings...

    Even if you do have a weapon, the fact that you have none else to help you in this world shows that your back will always be exposed...

    Do you hear that noise?

    It's the bullet coming from your backside...

    LOL!

  79. dashxdr says:

    @LOLAnon

    Maybe I should keep reading your comments, as they usually make me smile.

    That's relativity for you. You believe in your heart I'm mentally ill, and I believe in my heart you are mentally ill, to say nothing of irrational.

    Time will inexorably prove one of us right!

    Interesting, though, that with my preparations, if I'm wrong about the situation I'll be fine. If I'm right, on the other hand, you'll most likely starve to death.

    I have the option of preparing _somehow_. You clearly must passively take what comes, unable to prepare in any way at all. Good luck with that!

  80. Anonymous says:

    @dashxdr, mr pinnion

    If I'm so "irrelevant" and such an "idiot"...

    Why waste your time on me?

    I think you both know deep down what is going to happen, and what is is not got to be candy and bubble gum...

    I've studied history, and through it I have seen the future...

    And I've left the future behind...

    Just as I will with the both of you...

    Good day!

  81. Stolid Snake says:

    Any of you guys gamers? You should play Metal Gear Solid 4! Explains a lot of stuff thats going on.

  82. Numonic says:

    You guys are a bunch of idiots who will all prosper after this credit collapse. Those holding gold and silver before the credit collapse will prosper earlier. Some like dashxdr will propser early with gold and silver but won't exactly be able to explain why, it will be as if he just stumbled upon the wealth. Those holding more silver will prosper earlier than those holding more gold. Anyway we'll all prosper.

    Again you guys are a bunch of idiots.

  83. dashxdr says:

    @Numonic

    "Again you guys are a bunch of idiots."

    I question my conclusions constantly, in fact I'm haunted by the idea that I could be completely wrong and everyone else is right.

    But in the end I stick with my theories. I don't mind being wrong, actually. It's how we learn. You do your best, and make the best of what happens. Life goes on.

    LOLAnon, on the other hand, seems incapable of even considering he's wrong in anything.

    Who can claim to have 100% truth? When the information we have to go on is so suspect anyway...

  84. Anonymous says:

    @dashxdr

    "LOLAnon, on the other hand, seems incapable of even considering he's wrong in anything."

    LOL!

    That is a flat out lie!

    I can admit when I am wrong, just like when you called me on the the dollar spiking to 82+.

    I stated I was close...

    LOL!

    I'm not afraid of being wrong, however, in this instance I believe that I have history on my side...

    But anything is possible...

    I mean American scientists could find the doorway to the next dimension, thereby allowing beings from another planet to come to earth.

    Then we wouldn't need any thing on this planet as they harvest out organs for food, that is after they make us their slaves...

    LOL!

  85. dashxdr says:

    @LOLAnon

    "in this instance I believe that I have history on my side..."

    OK, you've mentioned lessons from history before.

    Where did the internet fit into the lessons from the past?

    "History doesn't repeat itself, but it rhymes."

    The internet in the picture changes everything. The level of communication possible has no precedent.

    As regards admitting error, the prediction of a rise of the dollar index back to 82 is meaningless anyway. Whether you were right or wrong doesn't change your credibility. It was a coin toss anyway.

    What you refuse to bend on is your whole stance about the big picture you present. You've got it all figured out. And you know you are exactly right.

    1) War
    2) Gold bugs suffer
    3) You laugh

  86. Anonymous says:

    @dashxdr

    Not all gold bugs will suffer, for example the ones with million/billions...

  87. Numonic says:

    Please forgive me if I missed it in your dismissal of my position but has anyone here ever rebutted the Seigniorage factor? Does anyone ever even talk about that? It seems like people are just saying: "defaults leading to devalued dollar is crazy talk" without even giving your explaination.

    Read about Seigniorage if you haven't.

    http://www.associatedcontent.com/article/545891/seigniorage_difference_between_the.html?cat=3

    I think the basis of the problem is that I say the bailouts are physical Fed Notes while others are saying it's electronic.

    How insanely retarded does it sound to say the bailouts are electronic. These banks created 1 quadrillion dollars worth of electronic money and you're going to sit here and tell me that they are now having trouble creating more electronic money. That's the dumbest thing I've ever heard. What's the difference between the Fed creating electronic digits and the banks creating electronic digits? There is none. The banks don't have a problem with electronic digits, it has a problem with what it doesn't and can't create: Federal Reserve Notes!!! I really can't believe I have to explain this. Forget I'm not going to try anymore because i have broken it down to the decimal, if you don't get it now, you probably never will.

  88. Natasa says:

    Numonic,

    Thanks for the very good article.

    I am really surprised that people here are irritated on your explanations.
    Those are perhaps long, but not bad at all. Actually, they are good.
    It looks like some people here are quite nervous and that caused those unfriendly comments.
    We all need to calm down a bit.

    Namely, your stand point that “government must print” to avoid the defaults is quite clear and I think - correct too.

    Perhaps only thing where I do not agree with you is - that government has to (can) print money to equilibrium (between paper money and real things).

    I believe that equilibrium will never come.
    The paper money system based on USD will be destroyed far before it happened.

    I try to explain how I understand your stand point.

    Simple:
    Even if the “value” of “computer” money amount is 20 times bigger then value of the REAL things, it does not mean that collapse of “computer” money (i.e. equilibrium) will come immediately.

    Namely, all those who posed “paper contracts” and “derivates” have possibility to DEMAND CASH in case that commercial bank CAN NOT deliver a commodity (for example – gold).
    ONLY if bank is NOT able to fulfil “the contract” regarding CASH (USD - Fed notes) it will default.
    The increase demand for REAL things and inability to fulfil it – make demand for PHYSICAL FED notes extremely high.

    What lucky owners of the “paper contracts” and “derivates” make later with USD cash – it is just to suppose. (Probably buying gold or anything tangible for those FED notes which just speeding up completely “deleveraging process”.)

    In this instant when a bank defaults – the “confidence” in the Ponzi scheme is – reduced by OTHER “members of the scheme”.

    If “the confidence” is TOTALLY reduced (for example fall of the “too big to fail”) – we have a TOTAL crash of the Ponzi scheme, i.e. “run on bunks” and purchasing of ANYTHING tangible for decreasingly worth of Pozi-scheme “contracts” and in extreme fall (which is this time inevitable) – TOTAL crash of USD Ponzi with destruction of USD and paper “contracts” based on it.

    So – it is more than CLEAR that FED MUST NOT allowed a fall of any “too big to fail players” since – the already almost death “the confidence” in the system will vanish COMPLETELY - which is the FINAL DESTRUCTION.

    THAT is the reason that FED MUST print “paper promises” (FED notes) and THAT is the reason that actually FED TRYING to SLOW – HYPERINFLATIONARY collapse i.e. destruction of present monetary system based on USD!
    (From my point of view - the collapse is inevitable)

    Other way (much easier and cheaper) is that FED can choose – huge devaluation of USD… Even if outcome would be the same (massive reduction of living standard for US citizens) the FED will not use this way for political reasons.

    So Numonic,
    I agree with you on this point, but do not believe that “the beast of paper promises” (as you describe it) – will "live" as long to equilibrium with REAL things.
    It will be death as soon as “the confidence” in the USD Ponzi scheme.

  89. NM says:

    Even this news is quite interesting:
    http://www.digitaljournal.com/article/279166

    “… Recent television advertisements by China's Central Television, which is state-controlled, has urged its citizens to purchase gold and silver bullion….”

    If people of China are recommended from government to purchase gold and silver bullion – what is to expect in the future:
    1. Definitely MORE buying of REAL gold and silver from people of other countries in Asia, Russia, Europe and of course America.
    2. Increasingly shortages of REAL gold deliveries by “too big to fail” and in same time extremely effort of FED and those banks (like GS) to manipulate gold bullion market “as usually” – with their printed “paper promises”.
    3. Since “paper promises” by FED and/or GS and others “too big to fail” – are in enormous amount already there – it would not be easy. Actually, they have no chance and it will be obvious very soon.

  90. Numonic says:

    Natasa you kind of get it but I don't think I ever said it would take a while for this to play out, infact i believe default is very imminent.

    I think since i came about the whole idea of Seigniorage my stance has changed a bit. The debt deleveraging beast issue might have changed abit. I now see that it is the seigniorage that is the main factor cotnrollig the fat eo f the dollar here and that the printing which is being used to stop defaults is what is keeping the dollar alive. But i have said that there is a limit to printing because the printing presses have a speed limit and can only print out so many dollars at a time and most importantly, i stated that the demand or withdrawal request for these Federal Reserve Notes is moving faster than the govt. can print them, not because of some mass fear of default but simply because too many people now have a right to withdraw these notes and depsite the small amount of transactions that we use physical cash for, it is still too much for the system to handle. We face imminent default and this will end the seigniorage which is giving the dollar such it's high value when all it is is a 1 gram piece of cotton and linen which is very abundant and cheap on the market.

    I'll say more later if you need me to.

  91. dashxdr says:

    @Numonic

    So you're saying there is an ongoing run on banks, people want to hold paper cash instead of leaving it in the bank?

    Do you have a source for this? Naturally the mainstream media would keep this quiet.

    And you're right, the paper dollars are a tiny fraction of all the electronic dollars in circulation.

    It's ironic that the US government got rid of the big bills, so $100 is essentially the biggest bill. The reason was drug money. The weight of $100 bills, and their bulk, is a major problem to drug kingpins. Being able to move around wealth in $500 bills is 1/5th the problem of moving $100 bills.

    Now the government is hoisted by their own petard!

    I hope you're right. FDIC insurance is meaningless if people continue to yank cash out of the banks.

  92. James says:

    I thought FDIC is supposed to run out of funds today? Aren't they gonna default anytime soon?

  93. Numonic says:

    dashxdr like I said people aren't "yanking cash out the bank", they are doing their daily minor transactions that they always did with physical dollars, only the era of easy credit has created more people doing these minor transactions and even though the these types of transactions in physical cash remained minor, the amount of people making these transactions grew. People without jobs were getting credit, everyone was getting credit. The credit boom created this. Now there are too many people making these minor transactions and not enough physical cash to accomidate these minor transactions. It's not really a situation where people are trying to withdraw dollars and not getting them, but more of a situation where banks know that if they go one more day with the reserves they have which are extremely low to none then they will default when someone tries to withdraw cash, so what happens is before they have to go through this they close down on a Friday and get the cash from the FDIC to keep them afloat. But the FDIC funds are about to default themselves and the only bailout for the FDIC is the printing press and unfortunately for them, the printing press doesn't print fast enough. If it did, FDIC funds would not be running out and reserve ratios wouldn't have to be so low and we wouldn't be borrowing the Fed Notes from China like we are and we wouldn't be raising taxes and we wouldn't be issuing IOUs. All of these point to the fact that the printing press can not handle the job of bailouts alone, unfortuately for them all of these other ways are also limited. China only has the dollars we give them after we buy their stuff, if their exports are slumping they have less Fed Notes. Now I know we also buy their stuff with credit, but we also use Fed Notes and they hold those Fed Notes with a peg to their currency and print their currency and exchange the Fed Notes for their currency for their own citizens to use. Eric explained this. But point is as long as trade is slumping, less and less Fed Notes are going to China and it wouldn't even make sense to give the Fed Notes to China if we are going to just be borrowing it back from them, which is why they've now become a net seller of treasuries. They are tapped out of Fed Notes and can not lend anymore because they barely have anymore. They know they are running out of them so the remaining they do have they are using on other things instead of lending it to us(US) by buying our bonds. Fo the same reason raising taxes will fail to garner the needed Fed Notes. The printing press is quickly becoming the only access to Fed Notes the govt. has and as we've shown and will be proven by the true defaults that will surface, the printing press can not handle it alone.

    I'm sorry this is long but I look at what I wrote and I can't take anything away from it. It's all important to my point.

  94. Numonic says:

    Despite all that typing I still don't think i explained how the amount of people making these minor transactions grew. One more point in that is, when people got credit some of it went in to savings in an FDIC insured bank or in a CD where interest was accrued. So you see the amount of people now with secured bank accounts grew. Each new person making these minor transactions. In relation to the types of transactions(credit VS physical cash) the percentage stayed the same(minor) but in relation to the amount of transactions being done with cash, it grew. There are more people making these minor transactions now than there were before the credit boom and that i what is stretching the Fed Notes thin.

    I'm sorry here is one last example that i've given before.

    Say only 5% of the financial transactions you make through your life are with physical cash and say the number of people making those transactions grew from 100 to 1 million. That is now more transactions being made with the physical cash, even though the percentage of each person's transactions in physical cash is still only 5%.

  95. Numonic says:

    mr. pinnion it matters because it means default. If I can't get the physical cash, even if i can use credit, it means default. And default will end Seigniorage. Which will cause the dollar to loose it's over valued state. And yes a dollar is over valued. Try buying a hundred dollars worth of stuff with 1 gram of cotton and linen and you will see what I mean. Read about Seigniorage. I implore you.

  96. dashxdr says:

    @Numonic

    I don't accept your premise that the small day to day purchases are putting a strain on federal reserve notes.

    Whenever such a bill is used to buy something, it doesn't just sit in the cash register. They gather them up and put them back in a nearby bank. The paper money flows around and around.

    It's a far more persuasive argument, which you actually discounted, if you claim there is an unreported run to cash on the banking system in general.

    China's not buying treasuries because they want to dump them and the US dollar, not because their trade surplus with the usa has dropped.

    I have to say it's so refreshing with LOLAnon gone.

  97. Numonic says:

    Mr. pinnion, What kind of half-assed response is that?

    You give up because you know you're wrong.

    Natasa I want to make sure you understand one thing. And if you already understand what I am about to say, I'm sorry and it's me who needed to understand what you were saying.

    Natasa, when you say the Fed Note is a "paper promise" I just want to make it clear that the Fed Note is not a promise but is actual payment, just as much as any other tangible asset is (including gold, silver, food, dirt and snot boogers). The promise in our day is the electronic promises we have (our bank accounts etc). Our electronic promises are only promises to pay the exact nominal face value in Federal Reserve Notes. Our electronic promises are NOT promises to pay gold, silver, dirt, snot boogers or anything else. The only promise our electronic promises need to fulfill is to deliver the nominal face value in Federal Reserve Notes.

    Back in the day the promises were not electronic, they were paper and they didn't promise these overvalued cotton-linen sheets we call Federal Reserve Notes(AKA dollars), they promised overvalued pieces of gold and silver also known as dollars. Yes the gold and silver during the gold standard was also subject to seigniorage and was overvalued many times the value of the same amount of metal on the market. But today it's worse. Today the currency is allot more overvalued than it's market price. Which is why the fall will be hyperinflationary. When the default happens, you will have as hard a time buying what cost a hundred dollars today with a $100 dollar bill as you would have trying to buy $100 worth of things today with 1 gram of cotton-linen. Because that is really all a one hundred dollar bill is. Go on the market and look for how much 1 gram of cotton and linen is worth. You will see that it can't buy a single thing on earth.

  98. Numonic says:

    The last and most important question to ask yourself is. Why is 1 gram of cotton and linen from the Federal Reserve worth so much more than 1 gram of cotton and linen on the market? You might say because people say it is, but then the question begs, why do people say it is and the answer is because there is this bet that was made. A bet that no one really knows about but exists. And the bet is between the Federal Reserve and everyone else on the planet earth. We are all subject to this bet but most of us are unaware of it. I will tell you the bet we made but first let me tell you that the power to create these promises was given to us(the world, especially the banks). The world can create as much electronic promises as it wants and there is nothing to stop them(as everyone who assumes these bailouts are electronic keeps on harping), but this part of an unlimited supply of electronic money i do agree with. We(the banks) are in control of how many electronic promises can be made. We can keep on extending electronic promises out to infinite. We have that power. So now that you know that, let me tell you what the bet made between the Federal Reserve and the world was. The bet was that even though these promises for Fed Notes can be extended out until infinite, the Fed being in control of the supply of these Fed Notes bet that there will always be enough Fed Notes to meet anyone with a promise for these Fed Notes upon demand the delivery of the exact nominal face value of the Fed Notes. Meaning basically they bet that if everyone with a promise for Fed Notes cashed in on the promise, the Fed will be able to supply all of them with the exact nominal face value in Fed Notes that they demanded. Of course the system worked because not everyone would cash in these promises, infact the amount of transactions that called for the cashing in of these promises are miniscule. But basically the Federal Reserve Note/Dollar gained in value with every bet it won. Meaning everytime someone with a promise for the Fed Note demanded the Fed note and recieved it, the Fed would win the bet and would reap the reward of charging more to mint these Fed Notes, as their minting practice is doing a bang up job. They're minting is doing the best in the world. No other mint can make such a bet and have it fulfilled for so long. There are hardly any real bankruptcies, just bankruptcy protection which is a bailout and fulfillment of the promise. All these years of fulfilling promises is the reason the 1 gram of cotton and linen from the Federal Reserve is worth so much more than 1 gram of cotton and linen from the market.

  99. Numonic says:

    But they have come across a problem and i'm sure they knew it would come someday, I'm sure they did not expect to keep winning this bet despite the fact that there will never be a time everyone will demand withdrawal of the Fed Notes at the same time. The problem for the Fed is that they are about to loose the bet because even the small percentage of transactions done with physical Fed notes has grown too much for the printing presses to handle. I'm not saying the percentage of transactions done with Fed Notes has grown, I'm saying the number of people doing transactions period has grown. and if the number of people doing transactions period has grown, then the number of people making transactions with physical Fed Notes has grown. We had the power to create as much promises as possible and they bet that they could print enough to meet any and all promises to deliver Fed Notes. They are finally about to loose this bet and the proof is in many things as I've said before: the FDIC funds are about to default themselves and the only bailout for the FDIC is the printing press and unfortunately for them, the printing press doesn't print fast enough. If it did, FDIC funds would not be running out and reserve ratios wouldn't have to be so low and we wouldn't be borrowing the Fed Notes from China like we are and we wouldn't be raising taxes and we wouldn't be issuing IOUs. All of these point to the fact that the printing press can not handle the job of bailouts alone, unfortuately for them all of these other ways are also limited. China only has the dollars we give them after we buy their stuff, if their exports are slumping they have less Fed Notes. Now I know we also buy their stuff with credit, but we also use Fed Notes and they hold those Fed Notes with a peg to their currency and print their currency and exchange the Fed Notes for their currency for their own citizens to use. Eric explained this. But point is as long as trade is slumping, less and less Fed Notes are going to China and it wouldn't even make sense to give the Fed Notes to China if we are going to just be borrowing it back from them, which is why they've now become a net seller of treasuries. They are tapped out of Fed Notes and can not lend anymore because they barely have anymore. They know they are running out of them so the remaining they do have they are using on other things instead of lending it to us(US) by buying our bonds. Fo the same reason raising taxes will fail to garner the needed Fed Notes. The printing press is quickly becoming the only access to Fed Notes the govt. has and as we've shown and will be proven by the true defaults that will surface, the printing press can not handle it alone.

    Again, I'm sorry this is long but I look at what I wrote and I can't take anything away from it. It's all important to my point.

  100. Numonic says:

    dashxdr, it doesn't matter if it doesn't just sit. I never said it just sat. I'm including that the physical cash is circulating and despite that it's still stretched too thin.

    We may have to agree to disagree here.

  101. Anonymous says:

    @dashxdr

    LOL!

    I'm not gone you fool.

    I just don't care to point out the inaccuracies of Numonic's blathering.

    I did it once, and I almost had him see the errors of his ways...

    But you fools came in and started to back him up and claimed his was right all the way...

    My how you change with the wind...

    How anyone could ever trust your opinion when you change it so much...

    Damn flip-flopper...

    Though on a side note, I was very much surprised to see gold close around the 1010 mark...

    I was expecting it to fall around 987-992 this week...

    Hmmm...

    I might have to rethink my short term strategy...

    We'll have to see that tomorrow brings...

  102. Numonic says:

    Also dashxdr, a panic run on the bank is out of the question. Most people don't even know about Fractional Reserve Banking and those that do expect that even though it's going on the govt. can always print enough to prevent a run on the bank. It's the exact reason why they say govt. bonds are safe. the panic will not happen until after the bank run. The bank run will happen by day to day transactions as it is doing now. Day to day transactions are and have been eating up the FDIC's supply of physical cash. Day to day transactions is the reason they lowered reserve ratios and even went for sometime with 0 reserves in the bank(Eric has written on this).

    The irony of what you said about what i said having to be based on physical cash sitting still is funny because my stance is that physical cash can't sit still and it is moving more faster than ever. There is no room for cash to sit still as it is being called in from every angle and has to circulate more than ever. And my point is it can not circulate fast enough, nor can the printing press print fast enough to help the circulation. It is keeping up but we can see it coming to an end with all the issues i brought up about 0 reserve ratios and dwindeling FDIC funds, etc. Physical cash is circulating faster than ever and it is still not fast enough to loosen the Federal Reserve Note.

  103. Numonic says:

    Man I'm never finished.

    One last thing, what I said about the Federal Reserve Note can be applied to all debt based currencies and I even explained how even gold and silver are effected. The problem with the currency is not that it's paper but that it is debt based. If it weren't debt based the 1 gram of cotton-linen paper would be just as valuable as 1 gram of cotton and linen on the market. Gold being that it is rare would be overvalued as a debt based currency but not by much because since the overvalue is due to the promises being fulfilled and gold being the rare thing that it is, it will be hard for the debt holders(the ones minting the gold in to coins) to mint enough gold to meet the promises.

    This is another reason I laugh at anyone suggesting we go back to a gold standard, when we were on a gold standard, it was minted paper that promised the minted gold. Today we use electronic digits which are allot more easy to create than minted paper. If we had a problem meeting the promises of minted paper with gold, it would be even harder meeting the promises of electronic digits with gold.

    That's why i disagree with some things some gold bugs say. Like Trace Mayer promoting a digital gold standard. Sometimes I think he is just doing that to get the money he needs from the advertising to maintain the site or whatever.

    God I can't stop talking.

  104. Numonic says:

    Told you I can't stop talking.

    One more thing.

    One may ask, so if the dollar is so liquid, why has it been loosing value all these years. My answer is that supply demand is also still a factor. Even though the dollar has been loosing value because of the vast amount of electronic and physical dollars eating up supply, the dollar is still very much over valued. The best measurement is to find out what it cost for 1 gram of cotton and linen on the market and compare it to a $100 bill. and you will see how over valued the dollar is.

    Back in the days when we were on a gold standard the best way to compare it was to compare it to gold on the market because gold was the currency, that is why so many of these gold bugs are stuck on comparing the dollar to gold. This is false today because today the currency is cotton-linen. So compare the dollar to it's weight(1 gram) in cotton-linen.

  105. Numonic says:

    Actually i meant that the gold bugs compare the price of gold to the price of everything else. They price things in gold to see the value of the dollar. But gold is no longer the currency. What they need to be doing is pricing things in cotton and linen to see the value of the dollar. Do it and let it blow your mind!

  106. dashxdr says:

    @Numonic

    The massive US debt is only possible because people have faith in the US dollar and in the USA. That's all that's holding it up.

    I've got to reject your argument again, since the speed of the "printing press" doesn't matter, as it _is_ all electronic money. Meaning the money that is monetizing the US debt as past buyers are turning to sellers (china, etc).

    One thing hasn't come up. The Debt Ceiling. It was raised recently to what, 12.1 Trillion? And there was recent talk of having to raise it again...

    I wonder if the Federal Reserve can buy Treasuries on the open market without invomving the debt ceiling. I get the feeling there is no accountability there. However the Treasury itself cannot issue new bills if they've already hit the debt ceiling.

    Hmmm. You've got the Federal Reserve loaning dollars from nowhere to the US Treasury, but the US Mint makes the circulating bills and coins?

    Let's just flush the whole system down the toilet and start out with something simpler. I know, like gold!

  107. Anonymous says:

    Boys and their dreams...

    No wonder females are the greater sex...

    Their realists!

    LOL!

  108. Anonymous says:

    Holy shit (shit... shit... shit...)

    I think the dollar has now passed its 52 week low...

    Gold at 1018...

    God damn...

    This is going to get insane I'm warning you...

  109. stibot says:

    Numonic, you say there's need for running special Ben's equipment called printing press which is not fast enough to stop defaults.

    One of your prove is that if defaults could be avoided by printing digital money, there will be no threat of defaults and dollar should be somehow stable. But all that keyboards' pressing in banks is still not sufficient to avoid defaults, therefore you assume the problem is lack of physicall banknotes. That's how i understood your thoughts.

    Did you consider banks/FED can't create infinite amount of digitial money? First because if they do, hyperinflation is imminent, second, they can end in jail for stealing the people's money?

    I've also comment on your denying gold as currency in future. Because fiat money exist, imperium also exists. I've no idea how to finance all your imperial wars if there is gold instead of fiat money. So I'd believe Chineses, Russia, India, not only them, therefore half of the world will insist on gold as money and will not accept fiat currencies after collapse. Also people in USA are awakening into FED reality so I can see strong demand for gold currency.

  110. Natasa says:

    Numonic,

    I have little difficulties to follow your explanation.
    It can be true what you describe, but for my point of view your explanation is quite complicated.

    Actually, I do not see the “paper $ usage” of common man as main problem which causes bank defaults.

    Personally, I think that there are perhaps 3 simpler reasons than that:

    1.Many of the common people loosing jobs or even if they do not doing it – they simply decided NOT to put their money in the “Financial industry”. This reduction of “base” for “Financial industry products” caused massive “loos in leverage” for banks AND insurance companies.
    With other words – when you put 10$ in the “Financial industry” – those will be DEFINITELY “leveraged” to 10000$. This “show” must go on – if they will system to sustain. (Ponzi)
    Even if you NOT putting 10 $ in “Financial industry product” – but JUST in the bank – the “leverage” occurs too.
    Since there are no 10$ in “system” – there is no “leverage” neither.
    It is true that more people using “physical” FED notes in stead of credit in this case – but I do not believe that this destroyed USD Ponzi system.

    2. Since there is already too much “leverage” based on facts (on one side FED USD “paper promises” – against small amount of “real things” on the other) – people start to mistrust “the system” which despite enormous unbalances – still printing huge amount of “paper promises”.
    Especially people (countries!) who keeping much of those “promises” in their hands.
    Even if many banks defaulted - the “to big to fail” are still awashed with cash (FED notes and paper derivates) and just have less competitors with each default.

    This game are definitely quite strange for people with “paper promises” in hands and I can imagine that they are all (clever ones) nervous and very interested to escape ASAP from USD denominated “promises”.
    It is exactly regarding gold “derivates”, I believe.
    Many of people who are in possession of them – try to go out. Probably in real gold, but even if bank is NOT able to deliver the “real gold” it still has possibility to deliver "real" FED notes.
    Just in case – that the bank is not able neither for it – the default will occur.

    3. The other central banking institutions on the Planet are realised until now that – there are NO possibility for US and USD based system to escape “sudden death of Ponzi” – even worse that US do not anything to gain back “the confidence” in Pozi scheme. I am quite sure that they are regretting very much their attempt from last year to help US based monetary system to survive. (ECB regretting even more (especially Germany) since they under pressure of FED sold 50% gold from their treasury… Eric wrote about it.)
    - Obviously the Chinese government is urging even common people to buy PHYSICAL gold and silver (NOT USD denominated worthless “derivates” since everything is clearer now!).
    - The gold miner buying back their PHYSICAL gold (silver).
    - I am sure that other central banks also try to hedge with PHYSICAL gold (silver).

    It is not difficult to see what will happen with “deep see” of USD denominated “paper promises” regarding gold (silver) and - if Erics predictions about food is correct – it will be more severe with those kind of “paper promises” too.

  111. Anonymous says:

    Amen, war is about to begin...

    I give you about a year to a year and a half and then....

    WAR!

    What is it good for? Keeping the dollar king! Say it again, War!

    LOL!

  112. dashxdr says:

    @mr pinnion

    Regarding the debt ceiling, the point is every time it gets raised the event is publicized. In the event of hyperinflation either the amount it will get raised has to go up each time, or the frequency of raises has to increase.

    Suppose it gets raised to $13T. Then next month to $15T. Then a few weeks later to $20T. See the pattern, and what it would do to people's perception of US solvency?

    Now I have a question for you. You appear to be not an American (I am one). And you smirk because American sheeple believe their government propaganda (like the debt ceiling).

    Here's my question: How shrewd are you and your fellow countrymen when in all likelihood wherever you're from you've been happily hoarding US dollars and going on about your life working hard and producing things of value and exchanging them for worthless bits of linen?

    Smirk all you want, but you were suckered by the USA along with everyone else. I wonder when the idiot world will wake up to the inherent worthlessness of US dollars...

  113. dashxdr says:

    @LOLAnon

    Why do you love war so much? The prospect seems to make you so happy.

  114. James says:

    Wednesday Sept 16, 2009

    Still Here.

    No defaults yet.

  115. Numonic says:

    Stibot said...

    "One of your prove is that if defaults could be avoided by printing digital money, there will be no threat of defaults and dollar should be somehow stable. But all that keyboards' pressing in banks is still not sufficient to avoid defaults, therefore you assume the problem is lack of physicall banknotes. That's how i understood your thoughts."

    Noooo. I am not even considering the idea of stoping defaults with electronic digits. It's assinine to even think that. No promises were made for electronic digital numbers, how can the bailouts be electronic digital numbers? I'm sorry but it is the dumbest thing in the world to say the bailouts are electronic digits. Where is the promise for electronic digital numbers that are about to default that need to be bailed out?

    Here's an example of how stupid saying the bailouts are electronic sounds. It's like being back during the gold standard and having the Federal Reserve bailout the banks with more gold certificates instead of physical gold. It doesn't make any sense. The banks don't have a shortage of gold certificates, it has a shortage of gold in this situation.

    Now take that situation and apply it to today. Today electronic digits have taken the place of the paper gold certificates and the Federal Reserve Note has taken the place of physical gold. The promis is the electronic digits and the payment is the Federal Reserve Note. If there is going to be a bailout it is what is being promised that will be bailed out, not the promise. You can't bailout a promise with another promise that's illogical. The only way another promise gets involved in bailing out a promise is indirectly such as US borrowing physical Fed Notes from China to give those physical Fed Notes to banks in the US to stop defaults in those banks in the US. So a promise was created to bailout another promise but it was done indirectly. What you and all these people that say the bailouts are electronic seem to miss is that the electronic bailout is only indirect. Yes we give China an electronic promise(US Treasury or Agency Debt are electronic) but they(China) give us physical Fed Notes in this exchange and those Fed Notes are what directly bails out the banks. We call it "borrowing" because we borrow the Fed Notes from them in exchange for an electronic promise to pay those physical Fed Notes back.

  116. Numonic says:

    Stibot said...

    "Did you consider banks/FED can't create infinite amount of digitial money? First because if they do, hyperinflation is imminent, second, they can end in jail for stealing the people's money?"

    Yeah I considered that but I'm not saying that people will not want to stop creating money, I'm just saying that there is no physical limit to the amount of electronic money that can be created. Back when the promises were on paper when we were on a gold standard, there was a limit to the amount of promises that could be made because the promises were on paper which was a limited tangible asset. Now don't get confused. I'm just saying that during the gold standard when a promise for gold was created, it was created on a piece of paper. Today promises are created on the computer where you can press the 0 key up until infinity. One more time just so you understand. When we were on a gold standard our currency was gold and the promise for it was on paper. Today our currency is cotton-linen paper and the promises for it are electronic digits on a computer. The largest number you can type on a computer is infinity, there is no limit. the maximum number of paper certificates depends on the amount of material used to create paper on earth but this is not why the gold standard failed, the gold stadard failed because gold itself was too rare. Paper is not a rare material to produce. Had our credit been paper with a promise to pay something about as rare as paper, that debt based currency would last longer than the gold for paper debt based currency we had durring the gold standard. Today we have a paper for electronic digit debt based currency. Now even back then on the gold standard, they tried to create larger denominated bills(there were $10,000, $50,000 bills that were certificates for physical gold, look it up), but even so that form of credit could not expand like todays form of credit(electronic digits on a computer).

    Also you said they can end up in jail for stealing peoples money. Stealing who's money? When a bank loans you money is that a crime? How can a banker go to jail for loaning out money? You think are judicial system considers the one quadrillion dollars in derivatives a crime of theft? You think they consider fractional reserve banking a crime? Wake up, loaning money out is not a crime and no one will go to jail for doing it.

  117. Numonic says:

    Stibot said...

    "I've also comment on your denying gold as currency in future. Because fiat money exist, imperium also exists. I've no idea how to finance all your imperial wars if there is gold instead of fiat money. So I'd believe Chineses, Russia, India, not only them, therefore half of the world will insist on gold as money and will not accept fiat currencies after collapse. Also people in USA are awakening into FED reality so I can see strong demand for gold currency."

    I never denied that gold will be the currency of the future, I denied that we'll continue to have a debt based currency in the future(regaurdless if that currency is gold, silver or cotton-linen paper). Like I said the issue is not the currency it's the fact that it is debt based. In the near future gold and silver will be the currency but there will be no promises for it, it will just be the currency. People will hoard it and go to their own private safe boxes to pull it out and use it when they need it. People will not let anyone else know where they keep their gold and silver. It will be hidden. This is the reason why everytime you hear of gold and silver treasure in stories, it's an adventure of digging and finding the gold and silver. Because this is the way the money was used. It was hidden by each and everyone and when ever they needed the gold and silver(money) they would go to their secret hiding place and get it. No one else knew where anyone else hid their money. This is how a non-debt based currency works and that fact of gold and silver hidden treasure in stories is proof in addition to the logical and correct english language non-contradictory proof that a non-debt based currency by definition means there are no promises for the currency.

  118. Numonic says:

    Natas, I'm sorry but I can't understand what you were saying in your last long reply.

    Dashxdr, please define for yourself the word "bailout". You have a promise and you have a payment. Today the promise are electronic digits on a computer and the payment is the Federal Reserve Notes. Do we agree here? Do we agree that the electronic digits on the computers at the bank are not payment?

    LOL I have to laugh for a second, i think i see where your mistake is. You think that there is a promise that those electronic digits will be exchangable for things. No one has ever promised that. That is not the promise. The only reason people are accepting these electronic digits for their tangible goods and services is because the currency behind the electronic digits is maintaining a high value. The reason the currency behind the electronic digits is maintaining a high value is because the currency promise is not being broken. The currency promise is the promise I explained in an earlier reply above when I was speaking of the bet the Federal Reserve and every Central Bank or issuer of currency of the world has made with the world. Unless you are getting paid under the table in physical cash with no withholdings or promises for pay in a future date and unless you are hoarding all the money you've ever earned in physical cash and coin and unless you never accept a check of any kind you are participating in this bet. There is probably no one on earth that has fit the criteria of avoiding participating in this bet. Everyone is participating in this bet. Everytime credit is expanded, it's more participation and another bet is made. And everytime someone has demanded payment of these electronic promises, they have recieved it, maybe some late but the promises have never failed. We have yet to see a true failure(which means no FDIC to reopen your account and no bankruptcy protection). When we do finally see a true failure the currency will loose tremendous value. Failure is not the only thing that devalues the currency, payment late or signs of immenent failure do it to. So all these bank "failures" and FDIC funds running low is also affecting the value of the dollar. You have to think of it as if you were a gold digger who wanted the gold he dug up to be minted. The Federal Reserve is no different than any other minting company. I don't mean in quality, i just mean that they both suffer from the same things. If you give your dug up gold to a minting company and the minting company says they will have the gold minted how you want it in 1 day and it takes instead 3 days for them to mint it, the value of that minting company will drop. You will look for a better minting company. And that is all you are doing when you exchange todays foreign exchange currencies. You are just looking for the best minting company. The Federal Reserve minting company is about to close down because it can not handle the amount of orders for minting that it is recieving and it will not be able to mint in the quick time.

  119. Anonymous says:

    @Numonic

    Can you ever stfu?

  120. dashxdr says:

    @Numonic

    You go on and on but your premise just doesn't make sense.

    Let's agree on one thing: The Madoff ponzi scam. Madoff's clients each had an account balance. Every month they saw their balance rise, like clockwork. Something like a 12% yearly rate. They are overjoyed at their steady returns.

    Most clients just let their money "ride". Left it with Madoff. And saw their balances grow. They even put more in, got their friends to invest with Madoff. Everyone so happy!

    Even a small number of people could cash out their gains. But then...the financial crash. More and more Madoff clients needed their money quickly in order to put their affairs in order, having lost money or income elsewhere.

    Finally the jig is up! Madoff had no money! It was a ponzi scheme. He took money in and immediately spent it. He didn't invest even a measly dime. It was just some system to report monthly account statements to clients, handle money going in and out, and grow account balance numbers steadily.

    It only worked because only a tiny minority of people actually went to "spend" their money.

    Similarly, all the nations of the planet have been behaving like the US dollar is a good store of wealth. Some put dollars in their mattresses. Others have account balances in their bank. Some have hoards of US Treasuries. They all feel really wealthy. Look at all we can get for these wonderful dollars!

    But if enough of them start trying to spend those dollars...look out! The dollar's value will decline, causing more people to want to spend _their_ dollars before they're worthless. It will cause an avalanche of everyone trying to get rid of their dollars at once. The velocity of dollars flowing around will skyrocket. Their value will plummet. And these dollars flowing around will be in electronic money, some bills, whatever, it doesn't matter.

    For decades it has worked like this: US creates a dollar out of nowhere. That dollar buys something some foreigner wants to sell of real value. And that foreigner just hangs onto the dollar and thinks he has something of value.

    One of these days the world is going to be in for a rude awakening!

  121. Numonic says:

    dashxdr the proof in what I am saying will be very evident when you see these three things happen at the same time:

    1. A majority of the world(including here in the US) will stop accepting US dollar credit(meaning US credit/US credit cards/Debit cards/US Agency and Treasury Debt etc. will no longer be accepted in exchange for goods and services),

    2. physical cash will no longer be able to be withdrawn from any bank(ATMs will no longer be dispensing cash and all US banks will close: bank holiday more like vacation) and

    3. prices will be rising extremely high in US dollars.

    Just to clarify for you. What I said in number 2 will be the cause of number 1 and number 3. So number 2 will lead to number 1 and 3.

    A majority of currencies around the world are facing this same situation and will go through the same thing.

    Here's how I see China's currency playing out. China's currency and the price of everything else on earth(priced in US dollars) will be rising against the US dollar, but the price of everything else will be rising against the US dollar more than China's currency will be rising against the US dollar. China's debt based currency is undervalued but only against other debt based currencies. Against tangible things, China's currency is just as overvalued as other debt based currencies. China's currency is not burdened with massive debt and will be liquid and be able to maintain promises it makes better than most other debt based currencies but the truth is China's currency is still just another piece of paper which is why i say China's currency is undervalued against other debt based currencies but overvalued against tangible things on earth.

    So what does this all mean, it means when the shit hits the fan and all the debt based currencies overwhelmed with debt begin to truly default in the true sense of the word, you would do better holding physical assets like gold and silver over debt based currencies that are not overwhelmed with debt(like China's currency).

    And also, the rise in price of things against all the debt-overwhelmed currencies might be so much that even though currencies like China's will be increasing nominally in value, it's real value will be dropping. Meaning China's currency will be increasing against other currencies but the price of things in China's currency will be rising. Basically saying China's currency(and other currencies not overwhelmed by debt) will be loosing value slower than every other currency but it will still be loosing value. Until one day very soon after this event everyone abandons all debt based currencies on earth and the world gets on a free-market non-debt based barter private-hoarding currency system. This will happen very soon after the collapse and the collapse is coming very soon.

  122. Natasa says:

    @Numonic

    I am really sorry that you could not understand 3 points I wrote about:

    1. The “Financial industry” rapidly reducing “base” – i.e. people put less USD in the “System”.

    2. Mistrust increasing in “the System” both from people and countries world-wide.

    3. Understanding of central banks world-wide that USD Ponzi is about to crash – i.e. it will be no repeat of support like last year.
    .........................

    In my point of view “dashxdr“ explanation of “coming steps” – looks quite logical.

    On the other side - even if your explanation about “the currency promise” sounds OK -I can not understand your last 3 points.

    Namely:
    For me it looks quite illogical with connection of point 2 with 1 and 3...?

    - Since if “a majority of the world (including here in the US) stop accepting USD credit” (you mean probably that only physical cash will count) – they probably will not accepted neither USD as “physical cash” (why should they?). In this case MORE “physical cash” will be available for the banks in US.

    - On the other side “… physical cash will no longer be able to be withdrawn” – means that “physical cash” will be “scarce” (with other words increase in value what “deflationists predicted”). From point 1 I can just conclude something other. Am I wrong and where?

    - And finally – “prices will be rising extremely high in USD” – HOW prices could “rise” if there is no “physical cash” to pay for those "prices" as mentioned in point 2?

    Please explain.

  123. Jay Midnyte says:

    This post exploded with comments! Anybody see the dollar tank yesterday?? This fall is going to be crazy.

    I would appreciate it if you guys leave some comments on my post today. 5 Reasons China Can't Just Ditch The U.S.

  124. James says:

    Thursday Sept 17, 2009

    Nope, nothing yet.

  125. Anonymous says:

    for real people...

    its really simple, but you have to stroke your damn egos...

    Natasa & Numonic...

    you're both...

    stupid!

  126. Numonic says:

    Natasa there is a difference between a tight credit market and true defaults in the credit markets. I'm not saying that the tight credit market is what will cause prices to rise and the dollar to fall, I'm saying defaults are what will cause prices to rise and the dollar to fall. Remember what I said before, there are 2 things that devalue the dollar: 1 is an over expansion of credit in relation to the supply of things the credit is buying up and 2 is defaults. What most people are stuck on is 1. Most people don't know of number 2. We have not experienced number 2. There has yet to be any real defaults in our credit markets. Almost every so called "default" so far has been either bailed out by FDIC or bailed out through bankruptcy protection or the US govt. We have yet to witness any true defaults, in the true sense of the word. But we are very close to having one and this will be the cause of the dollar devaluiation/collapse, not an expansion of credit. The closest thing we've had to defaults recently is the Californio IOUs. those IOUs are like a bank holiday, people holding those IOUs can't cash it in untill October. But my point is the defaults will damage the credibility of the Federal Reserve's minting business which has been doing a a near flawless job so far by almost never failing to to mint the cotton-linen paper on time. Unfortunately it has attracted too many people to it's minting business and now too many people have orders for minting and they can not accomodate all of them as fast as they used to. There are other minting companies(i.e. China's Central Bank) that will be satisfying orders for minting in a more quicker time than US' minting company(The Federal Reserve) will be doing and China's minting company will start to profit more than US' minting company will. So the thing that China's minting company(central bank) mints will become more valuable than the thing US' minting company(the Federal Reserve) mints. Right now the US' minting company(The Federal Reserve) is still enjoying(although with some caution now) the profits(what they mint is overvalued by over a thousand times it's market price) from decades of running a very successful minting business(never defaulting or taking too long to mint a demanded amount). Soon the profits will end as they were based on the successful minting job they were doing. When the US minting company starts to default and take too long to mint the demanded amount, what they mint will loose value against other minting companies(other central bank currencies that are not suffering from this problem) and against tangible things and services. Default is the end of Seigniorage, Seigniorage being the reason 1 gram of cotton-linen coming from the Federal Reserve costs over a thousand times more than 1 gram of cotton-linen coming from the market.

  127. James says:

    @Numonic

    Not sure if you heard this yet but seriously, you should start you're own blog or at least give us a chronological order of your comments

  128. Numonic says:

    James I bookmarked all of Eric's blogs that I've ever replied in. The best I can do is make a reply with a link to all the blogs I've replied in but I think I'll just do some of my most recent ones as my stance from before has changed a bit. In fact this blog article alone has my strongest replies. If you read all my replies in this blog aticle alone, you should know what I'm talking about. True defaults being the end of Seigniorage is the crux of my belief. Seigniorage being the reason the 1 gram of cotton-linen coming from the Federal Reserve costs over a thousand times 1 gram of cotton-linen coming from the market.

    I'll post the links in this blog article and maybe in a couple of Eric's recent blogs tommorow. So bookmark this blog and you'll get what you want.

  129. Numonic says:

    James, my stance changed a bit only a blog ago. The last blog I replied in where I was arguing with Anonymous. The part that starts with "Anonymous look how overvalued the dollar is..."
    That is where my stance changed a bit. That is where I came acoss Seigniorage.

    In this blog:

    http://www.marketskeptics.com/2009/08/putting-data-into-graphs.html

    People have to realize that the way we use money today is the same way we used money when we were on the gold standard. We use credit more than we use the physical currency. Back then the credit was paper certificates, today it is electronic digits and the currency back then was gold and today it is cotton-linen(or copper/Nickel/Zinc).

    People keep on saying that physical dollars and coins are only used in a small percentage of transactions so there is little chance of there being a run on the physical currency, well news flash so was physical gold and silver when we were on a gold standard. Physical gold and silver were only used in a small percentage of transactions when we were on a gold standard, what was used more was credit(the certificates) just like today what is used more is credit(the electronic digits).

    What happened to cause us to go off the gold standard was that even though physical gold was only used in a small percentage of transactions and only a small percentage of people were getting paid in physical gold and silver, the number of people making those transactions grew too large because more and more people began making money. More and more people began making these minor transactions even though they used the certificates more than they used the physical currency(gold and silver coins). The number of transactions using the physical currency grew and it grew too large. They couldn't mint the gold and silver in to coins as fast as it was being demanded. And this is the cause for the defaults and the end of the gold standard.

    When we defaulted on gold and went off the gold standard, the dollar seigniorage with gold ended and the value of gold in the dollar was brought down to the market value of gold. Gold didn't rise when we went off the gold standard, it was the dollar that fell in value. The gold in the dollar was overvalued more than the gold on the market. Luckily gold on the market was rare and so it was not very overvalued in the dollar by the seigniorage. The gold in the dollar was only a few times more than the value of the same weight of gold in the market. Today we are on a cotton-linen standard and the cotton-linen in the dollar is over a million times the price of cotton-linen on the market. When we default and go off the cotton-linen standard that we are on, the cotton-linen in the dollar will return back to it's market value the same way gold in the dollar returned to it's market value as gold went from $20 to $35 and higher. If we have the cotton-linen in the dollar return to it's market value, the dollar will be completely worthless. But this is what will happen and the proof that it will happen to the cotton-linen in the dollar is because it happened to the gold in the dollar when we went off the gold standard.

    We are facing this default. We will fail to meet the day to day transactions done in physical cash, even as those transactions are minor compared to transactions done with credit. Panic will not be the cause of the run on cash, day to day transactions will. Prices will be rising in dollar terms, not because there will be too much demand chasing too little product but because the dollar's seigniorage will be ending and the value of a dollar(Federal Reserve Note) will be returing to the value of 1 gram of cotton-linen.

  130. James says:

    @Numonic

    Nice!

    @everyone

    Did anyone catch this news just this morning?

    http://rawstory.com/08/news/2009/09/19/international-monetary-fund-to-sell-over-403-tons-of-gold/

    Seems like gold and silver prices will start to look unstable this coming weeks.

  131. stibot says:

    James, i noticed this news, it is already old one and i don't expect it will move price of the gold much. It can be also bullish for gold, because China/India can buy it all at once and no gold on the market will be left.

    For me there's rather question what is the purpose of selling gold? If those IMF criminals say the purpose is to enhance lending to poor countries, they are probably trying to catch another poor countries into debt trap and make vassals from them. It will be more clear whether they will lend in USD or SDR.

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