Gold

[quote author="no_vaseline" date=1253762136][quote author="matt138" date=1253760042]REad the book AMERICAS GREAT DEPRESSION by Murray Rothbard, I will loan it to you, and you will no longer have faith in Keynesianism nor our government being able to fix our "already created" recession.</blockquote>


Thanks, but I'll pass. I don't read books by crackpots. His influence is partially to blame why we are in this mess.



<a href="http://en.wikipedia.org/wiki/Murray_Rothbard">http://en.wikipedia.org/wiki/Murray_Rothbard</a>



<em>Murray Newton Rothbard (March 2, 1926 ? January 7, 1995) was an American intellectual, individualist anarchist,[1] author, and economist of the Austrian School who helped define modern libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism".[2][3] Building on the Austrian School's concept of spontaneous order in markets, support for a free market in money production, and condemnation of central planning,[4] Rothbard sought to minimize coercive government control of the economy and considered the monopoly force of government the greatest danger to liberty and the long-term wellbeing of the populace.[5][6][7]



Rothbard concluded that taxation represents theft on a grand scale, and "a compulsory monopoly of force" prohibiting the voluntary procurement of defense and judicial services.[5] He also considered central banking and fractional reserve banking under a fiat money system a form of institutionalized, legalized financial fraud, antithetical to libertarian principles and ethics.[8][9][10] Rothbard opposed military, political, and economic interventionism in the affairs of other nations.[11][12] Rothbard wrote over twenty books before his death in 1995.</em>



I thought the Chicago School crowd had lost thier minds, this guy takes the cake.</blockquote>


So right now in reality, government control of the economy (via interest rates and policy) has bankrupted just about every bank, the FHA (stay tuned), Fannie n Freddie, and a solid amount of businesses and citizens and this guy gets labeled a crackpot?



Rothbard's main point is that businessmen/businesses are nimble and quickly adapt to changes in supply, demand, and prices to remain profitable. Cheap and/or easy money creates a large scale boom that sends false signals to businesses who then make malinvestments (ones they would never have made without the false signals). The ensuing bust purges the economy of all the malinvestment. The quicker the purge, the sooner "normalcy" is reached. Sounds like a rational, intelligent, common sense argument to me.



Modern economists have turned this completely upside down and perpetuated their theory through college econ classes and money shows. "We can just keep pumping in money, keep sweeping things under the rug, keep priming the economy until it turns around" Completely juvenile. All this comes at the expense of the ordinary citizen via reduced standard of living - fighting the free market is an expensive endeavor and the money has to come from you. This becomes a completely inefficient allocation of resources, simply put the government forces free market money to be lent to poorly run businesses instead of well run businesses. Do you see a problem here?



Read the book and you can call him any name you wish.
 
[quote author="matt138" date=1253767663]



So right now in reality, government control of the economy (via interest rates and policy) has bankrupted just about every bank, the FHA (stay tuned), Fannie n Freddie, and a solid amount of businesses and citizens and this guy gets labeled a crackpot?</blockquote>


No, stupid, irresponsible lending done under the "supervision" of the Fed (which was run by Alan Greenspan who loves to deregulate) got us in this mess. Had the Fed been doing it's job under Greenspan we wouldn't have this problem. There's a reason these banks and S&Ls; were tightly regulated from 1932-1980 and we had minimal problems. Foreclosures might be the cure, but regulation is the answer.



BTW, both "Crackpot" and Greenspan were contemporaries of Ayn Rand. And this isn't personal; I simply think you're dead wrong. The fundamental problem with Libertarianism is it assumes people to be good and smart and will do what's in their best interests. It doesn't account for what happens when somebody starts gaming the system for their own selfish benefit. Like small government Conservatism, eventually the solution is to abolish the government all together and that's no solution.



Hey Eva, can I have my ?Godless Pinko? t-shirt now please?
 
Greenspan has drastically changed in 5 decades.



Low interest rates created demand for higher returns which created a supply of money for creative financing.



Government "supervised" the financing, so government regulating it will solve it? Hello Barney Fife, you missed it the first time!



Let the free market sell neg am loans right now. Zero. What investor, in their right mind, would lend their own money?



Let the free market sell 3.5% down loans right now and give the buyer $8K back next year. Any takers? I'll gladly use your money but not mine.



People need to fail, lose money, and be fearful of both otherwise they become monsters and stupid. Regulation/oversight gives us a false sense of security with our money. People will always game the system, especially those who ARE the system. More system is not the answer.



Both business and government are corrupt. A business makes mistakes and fails. A government makes mistakes and grows. And now we have a growing government keeping failing businesses operating. And I'm dead wrong!



Survival of the least fit. Stupid people are easily taken advantage of so let's create more of them and offer cradle to the grave services - vicious circle anyone? The free market is the cheapest, most effective policeman out there. People would be smarter with it and our economy would be better off with it.
 
[quote author="matt138" date=1253770763]Greenspan has drastically changed in 5 decades.



Low interest rates created demand for higher returns which created a supply of money for creative financing.



Government "supervised" the financing, so government regulating it will solve it?</blockquote>


NO. The exact problem was government STOPPED regulating.





<blockquote>Hello Barney Fife, you missed it the first time!</blockquote>


You are violating the "nice policy". Stop name calling or you will be banned. And they didn't miss it, they just "deregulated" it.





<blockquote>Let the free market sell neg am loans right now. There would be none. What investor, in their right mind, would lend their own money on a loan like that right now?



Let the free market sell 3.5% down loans right now and give the buyer $8K back next year. Any takers? I'll gladly use your money but not mine.



People need to fail, lose money, and be fearful of both otherwise they become monsters and stupid. Regulation/oversight gives us a false sense of security with our money.



Survival of the least fit. The free market is the cheapest, most effective policeman out there. People would be smarter with it.</blockquote>


You've obviously never worked at a bank.
 
Barney Fife was directed at the government not No_Vaseline.



Never worked at a bank. I do understand how underwriting should work in theory and the idea of risk reward.



Maybe we just need smaller banks, oh wait the big ones are too big to fail.



Why are rates on portfolio loans high?
 
[quote author="matt138" date=1253774252]If people are bad, and government and regulators are people...</blockquote>


The move over the past 30 years from "highly regulated" to "less regulated" resulted in the regulatoree failing - twice (once in the S&Ls; during the 1980s, and todays mess). Your solution is abolish the Fed - because obviously what we need is more deregulation!



Talk about circular logic. No wonder people never learn.
 
Greenspan used to be a good Austrian economist and somewhere along the line, he threw that all into the trashcan.



And Rothbard is far from a crackpot.
 
[quote author="ukyo116" date=1253779313]Greenspan used to be a good Austrian economist and somewhere along the line, he threw that all into the trashcan.



And Rothbard is far from a crackpot.</blockquote>


Or, Greenspan didn't change at all, and what he "became" is the end of the road of all Austrian economists - failure when you go to implement it.



Which world governments follow the Rothbardesque perscription, and are they in better or worse condition than the US?
 
[quote author="matt138" date=1253773656]no vaseline - got any good books to change my mind?</blockquote>
Das Kapital
 
[quote author="no_vaseline" date=1253780047][quote author="ukyo116" date=1253779313]Greenspan used to be a good Austrian economist and somewhere along the line, he threw that all into the trashcan.



And Rothbard is far from a crackpot.</blockquote>


Or, Greenspan didn't change at all, and what he "became" is the end of the road of all Austrian economists - failure when you go to implement it.



Which world governments follow the Rothbardesque perscription, and are they in better or worse condition than the US?</blockquote>


Do Austrian economists or Keynesian economists believe in government intervention with regards to interest rates?



No_Vas, answer these 3 questions for me:



Absent the artificially low (let's goose the economy) interest rates circa 2002, would we still be in the mess we are in?



Absent the artificially low (let's regoose the economy) interest rates circa now, would we avoid the next mess we will be in?



Do you see a trend here?
 
[quote author="no_vaseline" date=1253774911][quote author="matt138" date=1253774252]If people are bad, and government and regulators are people...</blockquote>


The move over the past 30 years from "highly regulated" to "less regulated" resulted in the regulatoree failing - twice (once in the S&Ls; during the 1980s, and todays mess). Your solution is abolish the Fed - because obviously what we need is more deregulation!



Talk about circular logic. No wonder people never learn.</blockquote>


I bet that guy also believes in trickle down economics.
 
[quote author="matt138" date=1253773656]no vaseline - got any good books to change my mind?</blockquote>


I don't think anything will change your mind, but Krugman recomends:



<a href="http://www.guardian.co.uk/books/2009/aug/30/keynes-return-master-robert-skidelsky">http://www.guardian.co.uk/books/2009/aug/30/keynes-return-master-robert-skidelsky</a>



[quote author="matt138" date=1253790027]



Do Austrian economists or Keynesian economists believe in government intervention with regards to interest rates?



No_Vas, answer these 3 questions for me:



Absent the artificially low (let's goose the economy) interest rates circa 2002, would we still be in the mess we are in?



Absent the artificially low (let's regoose the economy) interest rates circa now, would we avoid the next mess we will be in?



Do you see a trend here?</blockquote>


There's only two questions, further, it ignores the biggest factor in this collapse - the Fed is charged with a regulatory function that they (for political reasons) decided to stop enforcing.



This current crisis is not a failure of the FIAT currency but rather the end result of the failed experiment in government deregulation. Graph posted a link from CR where Volker essentially eschewed a return to Glass-Stengel.



People ? this is a regulation problem! Reagan was wrong then and he was wrong now.



[quote author="gypsyuma" date=1253797413]



I bet that guy also believes in trickle down economics.</blockquote>


Why wouldn't he? Trickle down works ? but some animals are more equal than others.
 
For the technical junkies out there. (R - Resistance, S - Support)



Reverse Head and Shoulder & Ascending Triangle Formation



Watch for a breakout to 1050 and intermedium term target 1150, near term support 925-950, if it breaks below that level, money could be made on the short side.
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Keynesianism got us into this mess. Anyone denying this well, I'm sorry.



The synergy of deregulation along with a Keynesian goosing of the economy made for a bad mix.



In a sane world, wall street gets creative, investors invest, homeowners overleverage, and all 3 get put on the auction block for making poor decisions. People who shouldn't be giving investment advice lose their jobs, investors who were dumb enough to get bilked lose their money, and renters go back to being renters. There is nothing wrong with this. They were all less than saavy. Smart people saw the problems well in advance and side-stepped or profitted. This is how the real world works. Risk, reward, consequence. Otherwise we just become a big pool of dumb, putting faith in the government to police everything. Judging by the size of the problem, we're already there.



And regarding trickle down, now is a great time to drive business and those with money away.
 
<strong>COMMODITIES IN A SECULAR BULL MARKET</strong>



We believe that the commodity market entered a secular bull market right

around the same time that the equity market entered its secular bear market ?

a tad later actually, in November 2001. Not surprisingly, the last secular bear

market in equities, from the mid-1960s to the early 1980s, also took hold

alongside a secular bull market in commodities; we are seeing something very

similar take hold this time around but for very different reasons.



As an aside, the way to view the 40% slide in the commodity complex last year is

the same way that the crash of October 1987 should be treated; at the time, it felt

like the end of the world, but in fact, it was a deep correction from a bubble that

formed in the spring and summer of that year. Who knew at the time that this was

the fifth year of what was turning out to be, as we know with perfect hindsight, a

classic 18-year secular bull market? That would have been an impossible story to

sell back then, but that is exactly what it was. When you take a look at the longterm

charts today of the Dow, S&P 500 or Canada?s TSX index, the brutal 35%

slide in the fall of 1987 now looks like a speck of dust, and if you overlay the

experience of last year's commodity meltdown with the equity market performance

that year, it looks eerily similar. A steep correction from dramatically overbought

levels in what is still the early stage of a secular (ie, multi-year) bull phase.



<strong>On the supply side</strong>, we have a much more concentrated sector with fewer

players than in past cycles following the wave of global consolidation over the

last decade in particular. Moreover, the executives of these resource companies

are business people, not geologists, and as such have been much more

disciplined from a production standpoint.



<strong>On the demand side</strong>, emerging Asia climbed out of its depression just over a

decade ago with restructured economies, vastly improved balance sheets and

changed political landscapes. What we refer to as emerging markets once

commanded more than half of global GDP before the industrial revolution, and

are on track to regain that lost share in coming decades; likely sooner rather

than later given China?s critical mass and double-digit growth rates ? its

economy just surpassed Germany on the third rung of the world GDP ladder.
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<a href="http://www.telegraph.co.uk/finance/personalfinance/comment/iancowie/6255482/Gold-has-proven-historically-to-be-a-poor-hedge-against-major-inflations.html">'Gold has proven historically to be a poor hedge against major inflations'</a>



http://i38.tinypic.com/2a69rnb.jpg



But, if the original owner were here today, it is likely that he ? or she ? would be satisfied with the way bullion has retained its real value.



Professor Roy Jastram, of the University of California, conducted the longest-term analysis of this precious metal's purchasing power, stretching back to 1560 when Elizabeth I ordered new coinage to restore the reputation of the English currency.



This had been debased by coins being clipped and passed back into circulation while people hoarded the full-weight unclipped coins. That criminal practice was the basis of Tudor financier Sir Thomas Gresham's law "bad money drives out good money" and the original reason for coin rims being milled; to make it obvious when they had been clipped and metal removed.



Professor Jastram found that, over a period of more than 400 years, gold had proved an effective store of value and an ounce would usually buy a good, but not luxurious, outfit of clothes. Extreme pessimists may note that he added: "When the Four Horsemen of the Apocalypse galloped, a stock of gold pieces, cunningly concealed or surreptitiously carried, has often meant the difference between living and dying."



His book, The Golden Constant, has been updated by Jill Leyland of the World Gold Council. You can see that, since gold prices were allowed to float freely in 1971, they have enjoyed two major bull rallies ? including the current one ? and endured a 20-year bear market.



Paul Marson, chief investment officer at Lombard Odier, a Geneva-based private bank, calculates that since 1971 bullion has risen by an average of 8.5pc per annum, compared with average annual inflation of 4.5pc. But if you had bought the last time prices peaked, in January 1980, gold returned just 1.2pc per annum compared with inflation of 3.3pc.



Perhaps surprisingly, Mr Marson argues: "Gold has proven to be historically a poor hedge against major inflations but has performed particularly well during periods of deflation."
 
In a surprise move today, the Reserve Bank of Australia became the first G20

central bank to raise rates ? by 25 bps to 3.25% (Israel was the first to do so

last month). The commodity-based currencies are flying high on this move ? the

Aussie dollar rallied nearly a full cent on the move. The CAD has moved in

lockstep. Investors are ostensibly left wondering that if a global play like

Australia can manage to raise rates in a surprise move then the world economy

must of course be on a sustained upward track and so commodities are

benefitting big-time. Copper is firming for the second day in a row and gold is

back flirting near its all-time highs (I almost got stopped out of my DZZ this morning,

but I couldn't be happier with my long term gold positions).

The flip side is the U.S. dollar getting trashed again.......
 
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