I haven't written much on gold in a while because the story's been told, mainly here, and in a few other places about how utterly lousy it is as an investment.
So many people got reamed by the disastrous advice of people like Peter Schiff, Alex Jones and Glen Beck, all of whom were beating the table with their crazy end of the world scenarios and how you had to own gold because it was going to the moon.
What's bizarre is that these people still have huge followings, but I have stopped trying to even come close to figuring that out because it makes no sense to me other than to say it's a statement about the psychology of mass behavior and cults in general.
If there's one thing that MMT got really right it was the fact that all the central bank monetary operations would not lead to inflation and therefore that meant that gold was really a hedge against nothing.
Seeing quacks like the aforementioned get tripped up in the markets is one thing, but even really big shot names got caught up in the gold frenzy; guys like John Paulson and Soros and David Einhorn and even Paul Tudor Jones as well as many others. These were all guys running big money who were ultinmately exposed as people who knew little about the true monetary and economic impact of policies that were being implemented at the time.
Anyway, now that I've written about gold and laughed at others I guess it's safe to buy it and I will look back on this and be appropriately shamed. Haha.
Seriously, though, I will wait for the Fed to raise rates and buy into the inevitable selloff that occurs in gold when that happens. You see, just as they got it wrong about QE being inflationary the same folks are going to get it wrong about rate hikes being deflationary.
Remember, the government is a net payer of interest so a hike in rates actually equates to a fiscal injection. It's deficit spending or, at least, spending.
10 comments:
This reminds me - what do you make of Paul Craig Roberts and his claims regarding manipulation of the gold futures market? As I recall, you have experience with how the Comex system works.
Here is his latest:
http://www.paulcraigroberts.org/2015/07/08/big-banks-using-derivatives-suppress-bullion-prices-paul-craig-roberts-dave-kranzler/
Well, we have seen the banks manipulate currencies, rig Libor, etc, so it's possible. However, having said that we also see them get caught. This gold price manipulation story has been going on for 30 years.
When I was on the Comex I definitely saw big bullion dealers like J Aron and Phibro swing big positions, but they played both sides of the market. That's not to say they didn't "defend" their positions from time to time, but I didn't see that as manipulation.
The thing about Roberts and other gold pice conspiracy theorists is that they always use this never-proven conspiracy story as an excuse to say that gold would be a lot higher if it wasn't for this manipulation. I think that's a crock.
By the way, I thought I liked Roberts, but I had him on one of my podcasts earlier this year and the podcast went so bad that I couldn't even post it on the blog. What an arrogant S.O.B.
I do, however, agree with his geopolitical take on the US and the neocons and the military-industrial complex driven policy stuff, but just not his economics.
I see. I thought this manipulation was a new story, tied to the current situation. And I didn't understand the details of it. Thanks Mike.
It's too bad PCR's economic is so off. His politics is often right on the money.
As far as gold goes, the central banks seem to be the big movers. They have a history of generally buying high and selling low.
The physical market for gold has shifted recently with Russia, China, and India all buying gold.
The Chinese and Indian people traditionally love gold as symbol of wealth, so as these countries become more prosperous, their appetite for physical gold is likely to increase.
What is it about PCR economics which you found you had disagreements with.
I know he is critical of offshoring which MMT has a more nuanced view (imports=real gain,exports=loss of wealth).
But he is also critical of the lack of infrastructure investment.
And I remember reading somewhere that during his time with Reagan,he advocated tax cuts to stimulate Investment to battle stagflation.
He is also critical of Wall St and it's dominance ove main st.
So where did PCR have conflicting views with MMT .(just out of interest,because I think has interesting ideas,he has written some really good pieces on how the EU and IMF privatised and conned UKraine,and how Russias economic relationship with Ukraine was good for normal Ukrainians.)
I would surprised if their was a massive difference between PCR and MMT.
How many former conservatives would have the temerity to write this:
http://www.paulcraigroberts.org/2015/07/15/greece-sound-fury-signifying-much-paul-craig-roberts/
I have to say that regardless of differences in opinion, I respect PCR.
What is it about PCR economics which you found you had disagreements with.
PCR was a cofounder of Supply-Side economics aka Reaganomics aka Voodoo economics.
Reaganomics: a Defense
“Paul Craig Roberts’ Indefensible Defense of Reaganomics” by Jack Rasmus
He is also a debt fetishist and money kook.
America is Going to Crash Big Time-Paul Craig Roberts
The Deteriorating Economic Outlook
Oops. I forgot the URL of the Rasmus post.
https://zcomm.org/znetarticle/paul-craig-roberts-indefensible-defense-of-reaganomics-by-jack-rasmus/
Great.
Well I'm dead set against privatisation/financislisation/deregulation of finance
But the rasmus's main point was that tax cuts were not key to brininging down price inflation but theOil price shock having less impact ( does that mean oil prices went down again).
Arguing about whether it was a supply problem and not a demand problem,is kinda like arguing about a see-saw.supply went down.yes Gov should have done more to increase supply (diplomacy,technological substitution,increase oil usage efficiency).
But MMT isn't opposed to tax cuts,althoughMMT response would be tax increases(reducing purchasing power) if inflation was an issue.
At least PCR get that the US gov. Has no fiscal constraints.
Jack rasmus wrote about the loss of a surplus as bad thing...
But the rasmus's main point was that tax cuts were not key to bringing down price inflation but theOil price shock having less impact ( does that mean oil prices went down again).
Warren Mosler holds that it was deregulation of natural gas that provided substitute.
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