Cyprus is Deflationary
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Let’s not all forget something that seems to go unmentioned so far in the Cyprus fiasco: it is highly deflationary. I’m reading a number of articles about how the smarter Cypriot should have been in gold, and that the Cypriot bank deposit raids herald a crisis of faith in fiat and a precursor to hyper-inflation. Wrong.
While being in gold might currently have been preferable to being in a Laiki bank deposit, it would still not be preferable to having been simply in Euro cash notes. That’s right, given that there are very sudden and draconian capital controls in Cyprus, which limit cash withdrawals to 300 Euros per day and 5000 Euro monthly credit card transactions, anyone who actually converted their deposits to wads and wads of good ol’ fashioned CASH would be feeling much more secure…at least insofar as having preserved their wealth and having enough to eat comfortably. They may be feeling less secure for other reasons such as good ol’ fashioned break-and-enters, but that’s another story (a story which doesn’t really change for gold either, by the way).
Many inflationists seem to be pinpointing Cyprus as the shape of things to come for the rest of us (on this count, I certainly agree) but they argue that this becomes inflationary as it wipes out confidence in fiat. Hardly. It wipes out confidence in your BANK! And that is very, very different from wiping out your faith in cold, hard, cash. “The kind of money you can fold,” as it’s sometimes called.
Wiping out bank deposits and imposing capital controls REDUCES the money supply (deflation) rather than increasing it! How can prices skyrocket if you can’t access any money to pay for them? How does a painting in a Cypriot gallery or a villa by the ocean skyrocket in price when no one can get their money out to pay anything for it? And trust me, there are currently some “motivated vendors” in Cyprus right about now. After all, there is hardly going to be a mad rush to bring money into Cyprus this week. Soon enough, there will be a rush to bring some wealth into Cyprus but only once DEFLATION crushes prices and reveals some good deals (relatively speaking) for the as-yet non-deflated countries (e.g., Germans). That too is another story.
The point I’m making is that this is all profoundly deflationary in its effect, and it truly is the shape of things to come. The velocity of money is absolutely stopped in its tracks in any country where there are capital controls. And where, in addition, cash has just been wiped off the books, never to be seen again, the money supply has been instantly vapourized–money is in that much SHORTER supply. (Granted this may be to the benefit of a non-Cypriot creditor who has TAKEN the money, but it has still halved each Euro’s existence in the money supply, which once consisted of a debit and a credit, both of which could be “spent” either using your bank card or, for the creditor, by leveraging the notional financial asset).
And so what of the Cypriot who only has gold? She must still eat. But who is going to give her cash for her gold when no one else, even the “rich”, has access to much money either? What has that done to the price any asset within Cyprus itself? We begin to see how Cyprus becomes a deflationary microcosm for the rest of us. So while that Cypriot does indeed HAVE the gold in hand, and while that is obviously far, far better than a vapourized bank account, she still doesn’t have money to eat or pay rent or go on a holiday or take advantage of the fire sale on so many necessities and luxuries coming soon to a Cypriot department store near you.
Yes, in a sense, the Cypriot who has any hard asset whatsoever is obviously in a better position than the attacked depositor. But it is this statement that confuses the inflationist. Because the preference for hard assets over vapourized bank deposits sounds inflationary–except it still must be measured against the realities of living in a fiat world, which will exist a lot longer than the Cypriot can go without food, I might add. The fact that the desire for cash trumps even the desire for that beautiful Persian rug (a hard asset) is what actually turns the scenario into something very deflationary. Truly, even a Celine Dion CD is preferable to a vapourized bank deposit, but I’d still rather have my 20 bucks. Again–deflationary, despite the fact that obviously ANYTHING is better than NOTHING, but CASH is still better than EVERYTHING ELSE.
This is not to say that gold, or a diamond for that matter, doesn’t have a valuable function as a way to store wealth outside the bank. It certainly does. And it is also not to say there couldn’t be tremendous (if short term) upside in gold as a speculative bet–who knows, certainly possible. But gold in Cyprus, today at least, functions only as another wealth preserver with its own limitations and advantages, but not necessarily a sure bet on delivering a speculative windfall (the price will be pressured down in terms of cash where cash is limited and liquidity is constrained). I reckon gold may become hard to move out of Cyprus too (as it would be seen as a circumvention of capital controls) and so within Cyprus, that would add additional downward pressure on the gold price, as wealth portability is a main factor in gold’s “premium”. At this point in time, cash would surely be seen as tremendously advantageous over all other forms of wealth within Cyprus. Next year? Well there may not be a Euro next year, so that is another story. A story that leads to places like the US dollar. US dollar CASH that is.
As our money becomes targeted with ever increasing vigour by the status quo, cash becomes a more greatly desired commodity, not a less desired one as the inflationists are trying to paint vis-a-vis Cyprus.
Moving a bulk of your Euros into something like US dollar notes would have been a smart thing for any Cypriot who got their money out of the bank before the capital controls arrived (too late now). Still, having some Euros would still be beneficial for practical purposes in the short run. It just shows how nimble we will all have to be. And cash is still the most nimble of assets in the world. Cyprus will prove that to us.
Have your gold as an insurance against a Euro that doesn’t exist next year. But have your cash, so you can eat and prepare for the next steps of the deflationary collapse in the meantime.
skip,
I think you will find that people who keep some of their wealth in gold do so not because they think that it is a great investment. They do so because they know that it will always be worth something – even when the disk drives have been reformatted.
I agree Nassim, some gold-bugs hold gold for no other reason than a hedge to give them a better shot at survival. I don’t agree that describes most gold owners, however. Most gold holdings are speculative, and most gold-bugs believe they will be very rich as a result of the reset.
My concern for the speculative gold-bug is that while the price could easily spiral way up from here, as remaining credit chases a refuge, the floor under that price will remain just that–credit. And when credit is finally outstripped by defaults, then the need for cash will finally pull the rug out from under gold’s price in a shockingly violent way. That floor will be gone and true price discovery of all assets will be at hand for some window of time. As Stoneleigh has suggested, if you can afford to hold your gold for the long-haul, it’s a good store of value, just ensure you can eat for the long-haul. Gold will always be worth something. Like any hard asset. But lots of hard assets will be liquidated out of necessity.
In a way I wish I hadn’t mentioned “gold” in my comment, because it distracts the hyper-inflationist so much from the thrust of the argument–that Cyrpus is our future, and that Cyprus is deflationary, and deflation devours ALL asset prices, just not in equal measure. I only mention gold because it seems to get mentioned in many of the comments about Cyprus being a hyper-inflationary harbinger. Which it is not. It is a deflationary harbinger, even while it takes us that much closer to the Euro’s collapse. Agreed, priced in the re-denominated currency of a bankrupt nation, drachmas, or whatever, you have a super-inflation on imported goods, but you actually have a sensibly re-priced currency in the world that reflects true purchasing power of the nation, as low as it is–and it will be very low.
Priced in stronger currencies, like the US dollar or Norwegian kroner, that will reflect deflation in the re-denominated country. Priced in the new currency, a floor could likely be found on the value of the currency, and it will stay around there, at its very low level globally, rather than becoming toilet paper, as the hyper-inflationist predicts, but rather serving internally as the medium of exchange, but not buying much outside the country.
A re-denominated currency does NOT NECESSARILY become Zimbabwean trillion dollar notes. That is a different phenomenon from insolvency and re-denomination. It is the distinction between sudden super-inflation, which levels out (but is devastating all the same, especially for those who haven’t prepared), and hyper-inflation, which is a complete loss of faith in a currency to the point that it is worth nothing. I strongly believe societies will continue to use money as a form of exchange, and that money will find a value quite quickly that reflects the purchasing power of a country. The better run country, even in insolvency, will find the floor on the currency more quickly. It will be low for quite a while, if not forever, but still functions as the medium of exchange within the country. And it will be easier and cheaper to buy a lot of those new Cypriot pounds with US dollar bills or other stronger currencies (notes that is–the kind you can fold), than anything else.
Another point of view: that the Cyprus episode will increase the velocity of money (see below). There’s also been the suggestion, elsewhere, that it was set up deliberately for this purpose. I’m not taking a position on this stuff; just reporting.
https://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/27_Cyprus,_Money_Velocity_%26_A_Potential_Inflationary_Holocaust.html
Cyprus, Money Velocity & A Potential Inflationary Holocaust
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What we should see now is cash withdrawals from European banks in other troubled countries – Italy, Portugal, Spain, Greece, etc. That cash should then be used by those individuals to start transacting in goods and hard assets. That is in “stuff” which cannot be taxed easily. This may be the catalyst for inflation as it will impact heavily on the velocity of money.Thank you alan, I’m glad you posted that, because that is a really good example of the completely deluded articles on hyper-inflation I’m talking about.
It seems to me that many hyper-inflationists (I’m talking to you Marc Faber) are getting really desperate and jumping through incredible hoops to try to prop up their predictions in the face of really powerful evidence to the contrary.
The article states “What we should see now is cash withdrawals from European banks in other troubled countries – Italy, Portugal, Spain, Greece, etc. That cash should then be used by those individuals to start transacting in goods and hard assets.” As I mention in my original comment, the mistake they’re making is that the desire to have a hard asset rather than a vapourized bank account is not inflationary, when the desire to have cash is even greater. Yes the Celine Dion CD is preferable to a vapourized bank account. But what we’re seeing with Cyprus is CAPITAL CONTROLS to stop the run of hard cash out of the bank. As soon as everyone tries to extract cash, the banks MUST clamp down. There is simply not enough cash to go around if even a small percentage of folks start withdrawing it. Thus we have a shortage of cash notes and increased demand and desire for it, not a lessened desire.
And as soon as you have capital controls you DO NOT have money sloshing around in the system. That is deluded. The amount of real printed notes in the world is a very tiny percentage of the 1s and 0s on bank ledgers, and a very, very tiny percentage of all the credit in the world. It is the credit that is being used to buy stuff. It is the credit that is being used to send prices up. NOT the cash.
As soon as we see people withdraw cash in any noticeable way, the cash will be hoarded for good reason, because the banks and governments will allow LESS and LESS of it to get out as time goes on. They have not really printed more notes. And so why would anyone buy a diamond or a painting with all their cash, when they know that it is probably the last cash they will be able to get their hands on.
skip,
Everything you said about capital controls suggests that physical gold has an advantage over deposits in a bank.
There is no earthly way they can stop rich Cypriots who happen to have many kilos in gold from moving this stuff to places like Beirut or Turkey or Northern Cyprus.
I guess the way to find out what is really going on is to keep an eye on the local price of gold in Cyprus. When it becomes much more expensive than it should be, it would indicate that the stuff is quitting the island at a rate of knots.
Capital controls can work quite well in places like the old Soviet Union, but not in an island nation that is – nominally – part of the EU and EZ. The whole thing is a boondoggle, IMHO. A quite untenable proposition.
Like alan, I think that it can go either way. We shall see.
Yes Nassim, everything I say leads to the conclusion that ANY hard asset is better than a vapourized account, but that cash is better than all these hard assets in the current Cyprus circumstances (which circumstances are coming to the rest of us too).
So put your money in gold, diamonds, art and anything but a bank account. But fully expect to need cash more than any of the aforementioned hard assets. And fully expect liquidations of the aforementioned hard assets to free up much needed cash.
Removing large quantities of gold is just as difficult as moving large quantities of paper cash notes (in some circumstances harder, in others easier). But both can and will be stopped at in and out of borders, when it suits the powers that be to stop them. Swimming with gold is difficult.
skipbreakfast post=6976 wrote:
And as soon as you have capital controls you DO NOT have money sloshing around in the system. That is deluded.What you seem to be missing is that it is what happens BEFORE the capital controls are instituted, but when they are threatened. They do not come into being overnight. It is that interim period during which capital flight takes place — a huge gunning of money velocity if it occurs in any volume. Then of course it is a matter of where the money goes. Here is one view on that:
CYPRUS & THE MOBSTERS: why the descent into global panic is now almost unavoidable
The Slog plots the course of a deadly global chain reaction
How the rape of Cyprus will torpedo the banking system
I’ve been moving money around over the last few days. I still am, and I don’t know many people in my immediate circle who aren’t. We all seem to have the same aim: to be in the safest place with the safest currency. And the catalyst for all of us busily doing this is specifically, the Cyprus bank heist involving depositor confiscation; and leading on from that, the growing evidence that the political and financial Establishments globally have every intention of applying such glorified State theft in the future.
snip
Here’s how it will develop – in my view. Many US corporations will move their eurocash back to the US. Some, however – and millions of richer US citizens – will have been alarmed by Bernanke’s yes-no-maybe-hard-to-tell-panic-not-sure ‘answer’ to a question at his last Fed press conference about Washington thieving from private bank accounts. Throughout the West and the Anglosphere, in fact, evidence built up last week to demonstrate that almost every State in those regions had a Djisselbloem Plan to steal our money, and contingency plans to control money flows.
“Given the current atmosphere,” a senior wealth adviser told me this morning, “Why would you not get your money out?”
My hunch is that the vast majority of the capital flight will go to Asia. Once there, it will do one or more of the following things: buy property, buy gold, or buy dollars. Although we are talking enormous sums of property money here, we aren’t talking about anything beyond perhaps 100,000 people: the Glitz Bricks trend I identified seven months ago will simply heat up. Thus there is unlikely to be a bubble there: but there will, I’m sure, be a rapid advance in the price of gold bullion. And the Dollar must strengthen as millions of private investors in turn see that as the best currency for their liquidity to rest in while they think about it.
skipbreakfast post=6979 wrote: everything I say leads to the conclusion that ANY hard asset is better than a vapourized account…. put your money in gold, diamonds, art and anything but a bank account.
YES. Do you think other people are not on the verge of reaching that same conclusion, any moment now? It is called loss of confidence, and if it happens, it will lead to SUDDEN screaming increase in the velocity of money. As Jim Sinclair has pointed out, every hyperinflation on record was preceded by conditions of low money velocity, and arose as though from out of nowhere, suddenly. Confidence was lost, suddenly. As long as confidence is maintained, you will be right; velocity will remain low.
Do you think confidence will be maintained?
I don’t have an answer for that. Maybe yes, maybe no. It sure will be interesting to watch and see.
Hm, as soon as capital controls are threated, people rush to extract their cash. They hoarde it. That is deflationary.
They don’t go out to restaurants and live it up with the cash they got out. Because they know they won’t get any more out.
And they don’t go and buy a villa with the $2 million in cash they got out either. Because they know capital controls are coming, so they feel lucky to have got cash out at all.
I do not agree that you have increased money velocity happen when capital controls are threatened. You’d have to demonstrate how this would happen in a real world example, where you fear that banks are going to close in your town and country.
alan2102 post=6983 wrote: [quote=skipbreakfast post=6979] everything I say leads to the conclusion that ANY hard asset is better than a vapourized account…. put your money in gold, diamonds, art and anything but a bank account.
YES. Do you think other people are not on the verge of reaching that same conclusion, any moment now? It is called loss of confidence, and if it happens, it will lead to SUDDEN screaming increase in the velocity of money. As Jim Sinclair has pointed out, every hyperinflation on record was preceded by conditions of low money velocity, and arose as though from out of nowhere, suddenly. Confidence was lost, suddenly. As long as confidence is maintained, you will be right; velocity will remain low.
Do you think confidence will be maintained?
I don’t have an answer for that. Maybe yes, maybe no. It sure will be interesting to watch and see.
You’re being disingenuous here, Alan. You’re leaving out the best part of what I said without actually addresssing it or refuting it. I wrote:“So put your money in gold, diamonds, art and anything but a bank account. But fully expect to need cash more than any of the aforementioned hard assets. And fully expect liquidations of the aforementioned hard assets to free up much needed cash.“
And that was right after the part where I say “cash is better than all these hard assets in the current Cyprus circumstances (which circumstances are coming to the rest of us too).”
skipbreakfast post=6984 wrote: Hm, as soon as capital controls are threated, people rush to extract their cash. They hoarde it. That is deflationary.
They don’t go out to restaurants and live it up with the cash they got out. Because they know they won’t get any more out.
And they don’t go and buy a villa with the $2 million in cash they got out either. Because they know capital controls are coming, so they feel lucky to have got cash out at all.
I do not agree that you have increased money velocity happen when capital controls are threatened. You’d have to demonstrate how this would happen in a real world example, where you fear that banks are going to close in your town and country.
They don’t go out to restaurants and live it up, but they do, or might, or probably will, seek to put their money into things that they think are safe and that will preserve their purchasing power, including the things you mentioned, and in some cases real estate. Some of them will literally stuff paper bills into matresses. How many? I don’t know. It depends on the prevailing level of confidence in the currency. If confidence is shaken, then more people will convert their cash into other things; i.e. BUY STUFF. Hard stuff. That increases money velocity. And the ones with serious money will move it to points of safety elsewhere, either leave it in cash there, or buy hard assets in that place; e.g. buy gold and leave it in a repository in Singapore, or Hong Kong, or what have you. Or else go into real estate. It is only the little people who might actually stockpile physical paper money. Serious wealth does not do that.
As soon as capital controls are threatened, money starts taking flight, rapidly. It starts being moved. It exits, seeking safety. If that is not money velocity, then what is?
I don’t know what you mean by “real world example”. I only have a real world argument, to wit: that you would have to be an idiot NOT to move your money, quickly (thereby increasing money velocity), if capital controls or bank closures or confiscations are threatened. But then, you could argue convincingly that most people are idiots, and I would not have much of a come-back. 😉
I should add that it is the “serious wealth” that is the real issue here. What the little people do with their paltry $10,000 or whatever is not important. If they stockpile paper bills or gold or whatever does not matter. What DOES matter is what the big money does. If the big money gets spooked and starts moving, then money velocity screams, suddenly.
skipbreakfast post=6985 wrote: [quote=alan2102 post=6983][quote=skipbreakfast post=6979] everything I say leads to the conclusion that ANY hard asset is better than a vapourized account…. put your money in gold, diamonds, art and anything but a bank account.
YES. Do you think other people are not on the verge of reaching that same conclusion, any moment now? It is called loss of confidence, and if it happens, it will lead to SUDDEN screaming increase in the velocity of money. As Jim Sinclair has pointed out, every hyperinflation on record was preceded by conditions of low money velocity, and arose as though from out of nowhere, suddenly. Confidence was lost, suddenly. As long as confidence is maintained, you will be right; velocity will remain low.
Do you think confidence will be maintained?
I don’t have an answer for that. Maybe yes, maybe no. It sure will be interesting to watch and see.
You’re being disingenuous here, Alan. You’re leaving out the best part of what I said without actually addresssing it or refuting it. I wrote:“So put your money in gold, diamonds, art and anything but a bank account. But fully expect to need cash more than any of the aforementioned hard assets. And fully expect liquidations of the aforementioned hard assets to free up much needed cash.“
And that was right after the part where I say “cash is better than all these hard assets in the current Cyprus circumstances (which circumstances are coming to the rest of us too).”
You’re being dense here, Skip, missing the point of what I wrote entirely. It doesn’t matter if we’re talking about gold, cash money, or diamonds. You’re so fixated on this shit about cash versus gold that you cannot see the forest — the macro-issue which is CONFIDENCE. I was talking about CONFIDENCE IN THE SYSTEM, and whether or not it is maintained. If confidence is lost, then money starts moving, i.e. velocity of money picks up. That is, with the exception of the few who literally stuff paper bills into matresses.People taking money out of banks to buy hard assets does not increase the velocity of money. That doesn’t make sense, since it doesn’t cause money to flow through the economy. You can’t measure the velocity of money in just one step. That step is more than zero, but it falls straight back to zero too.
To raise the velocity of money you’d need people taking their money, buying gold, buying land with that gold, selling the land to buy real estate, selling that to buy gold, etc etc. You need money changing hands multiple times, not only once. If any of the sellers in the sequence above use their share to spend on basic need goods bought from people who need their income to buy more basic need goods, you’d have something, but what are the chances that they’ll all go down that route?
After all, people who have money in bank accounts in general don’t need to it right away. They will therefore in general use it only for that one step, if that: they can sit on it, or put it into something else. Where they will, in general, leave it.
And once they do need it, for their basic needs, they will of course be very careful about spending it.
Hi Skip,
Great post btw. The problem is people postulate and hypothesise scenarios without understanding the full implications of the Reality that lies behind them, and thus often miss the bigger picture. Also the monkey and the rice jar example mechanism applies as much to the psyche as it does to the body in terms of risk and safety: we keep hold of one set of beliefs thus trapping us in another set of beliefs. From the view over here it looks like Cyprus is a pretty unique case, over 80% of its economy is in the ‘service’ sector, which one would guess given the finance sector apparently accounts for 10%, primarily comes down to ‘tourism’ making up the remaining 70% (+ 25000 ‘ex-pat brits’ along with 40000 Russians), with an unknown small amount down to supporting the local military bases (3000 personnel).
Along with all the other influences from Turks to Greeks not to mention the poor Cypriots themselves, its a real melting pot of cultures. Suffice to say when it comes to collapse, I expect the Russian’s might have prior experience:
Given that debt made up a lot of the ‘money supply’ prior to the crisis, and that that will probably be off the menu for a very long while, all that is left on the island itself will be what ever euros the outside parties such as the UK and the EU physically fly in. But compared to the loss of credit in the Cypriot economy, the over all short term effect is going to be hyper-deflationary. Also illiquidity of many if not all assets is going to be a major problem, as cash in the form of euros and probably increasingly dollars, itself becomes a commodity. Basically the fungibility of any medium of exchange will begin to be tested to the limits, hence the pertinence of Orlov’s quote above – it won’t be what you’ve got (unless Celine Dion cds could become the new local currency 😆 ) but who you know. It remains to be seen how the food situation will pan out as agriculture is only about 2% of GDP, though that could rise as its true value is ‘marked to market’. I reckon it might not be long before emergency food shipments replace emergency cash shipments. As for ‘tourism’, best take a packed lunch… and maybe pack an AK-47. :whistle:
L,
Sid.Well done bringing debt into this, Sid. Certainly much of the cash flow following mass withdrawals would still need to pay off debt, i.e., deleveraging: deflationary.
ilargi post=6988 wrote: People taking money out of banks to buy hard assets does not increase the velocity of money. That doesn’t make sense, since it doesn’t cause money to flow through the economy. You can’t measure the velocity of money in just one step. That step is more than zero, but it falls straight back to zero too.
That’s right, you can’t measure the velocity of money in just one step. So why would you attempt to do just that? The money spent on the hard assets has to go somewhere. It doesn’t get spent on the hard assets and then stop. At least not in that context; i.e. in a context in which confidence is failing. The entity that sold the hard asset takes the money and puts it somewhere; maybe into some other hard asset, maybe land, maybe into some other currency, whatever. And THAT transaction has a counterparty, who takes the proceeds and puts it somewhere, and so on. The capital continues to change hands, in some form or other. The point is, in the context of failing confidence, that money is moving. Fear is the prevailing emotion, and money is hot, looking for safety; while at the same time greed is not too far behind, looking as always for opportunity in arbitrage or whatever.
You say that the velocity of money falls “straight back to zero” after each and every transaction. That’s under conditions of perfect confidence. But what we were talking about — or at least what I was talking about — is a process precipitated by failing confidence with which money starts to move and, as long as the confidence problem remains unresolved, continues to move. If there is no confidence problem, then you’re right: the process stops, or doesn’t get started to begin with. It all depends on confidence.
Will confidence be maintained in the months ahead? As I said: I don’t know. But it sure will be interesting to watch and see!
Thank you Ilargi for pointing out that even a hard asset purchase can be another way to hoard wealth, thereby halting the velocity of money, since there is no buying and selling. It is the hoarding of wealth, be it cash, gold or art, that is what you see under capital controls, or even the “threat” of capital controls. Especially the hoarding of cash, but also the hoarding of some other assets if one can afford to do so. You can stuff a diamond in your mattress along with your cash, and the velocity of money grinds to a halt.
And yes, under capital controls, a lot more people will hide their cash out of the bank and in places like mattresses, but hopefully in much more innovative hiding places.
Alan, you are confusing me with your use of the word “confidence”. When “confidence” plummets, the velocity of money plummets. So you seem to be getting that part backwards, suggesting that we have slowing money supply because confidence is intact. Quite the opposite– when no one has confidence in their bank or the economy, they hoard their cash.
I think you are referring to a lack of confidence in the fiat itself. And what any deflationist points out is that you have INCREASED confidence in cash when you have deflation. And using the example which was the basis of this thread–Cyprus–we see people have A LOT of confidence in their fiat cash even while they have no confidence in their banking system. That is, they want their cash a lot! They are happy when they have it out of the bank and in their wallet.
Hyper-inflationists are waiting for the day when people don’t want cash anymore. That day seems to recede into the horizon with every passing day. That is not to say it doesn’t exist in the future, but we have a present and immediate future in which we NEED cash. This is increasingly suggestive of a current deflationary environment, and one which will not vanish overnight, but will increase tremendously before it goes away. It could take years. And we’ll all have to eat in those years before a possible hyper-inflationary explosion.
When I have this discussion amongst other people in real life, I’m often confronted with the statement, “cash has no value, it is worthless, it’s just paper”, to which I respond, well then please give me yours then if it’s worthless. That seems to stop folks cold. Because it presents them with the reality that they do want their cash. Flash a one-hundred dollar bill in front of a hungry man, and he is very confident he wants that hundred-dollar bill.
We do not have anything like a hyper-inflationary loss of confidence in cash in Cyprus. We have line-ups at banks to get their cash OUT so they can eat. They desperately want their cash. And whatever they get, they are going to want to keep. And this is what’s coming for the rest of us. And that is deflationary.
Skip, you’re paying an awful lot of attention to the little people. You seem to be fixated on that, just like you are fixated on proving that cash is better than gold. But what I am trying to say transcends those things. I am going for the big picture, the macro picture, in which what the little people do, and this bickering about cash vs. gold, is much less important, if not trivial.
As I said up thread, what the little people do is not a big deal. What the big money does IS a big deal. The big money does not have the option of stockpiling physical paper money, because there is not enough paper money for that purpose. (And even if there were, the big money is smart enough not to do that, but that is another discussion.) The big money does have the option of holding dollars, just not in physical form; and they WILL hold dollars as long as it is advantageous to do so.
When the big money loses confidence, in EITHER the banking system (in given jurisdictions, or everywhere) OR fiat OR both at the same time, they begin to move their money to other vehicles and venues. I call that — the increase in the movement of capital from a formerly stationary, stable position; massive withdrawals from one account, and transfer to other accounts or vehicles, elsewhere — “increased money velocity”. And as I explained to Ilargi, and as is obvious, that movement has knock-on effects; it does not simply STOP after one move. Loss of confidence thus increases velocity of money. It may not do so with Joe and Jane Six-pack, stuffing FRN’s into their mattress, but what of it? Make an attempt to look at the big picture, and not just fixate on the people standing in line at the bank.
As for the people you converse with in “real life” who say that “cash has no value, it is worthless, it’s just paper”, etc.: I say that they are having a premonition. Surely the idea that “cash has no value” is not true at this moment; the paper cash has plenty of exchange value for now. Nevertheless they are apprehending an important truth — that their money is unbacked by anything of worth, and thus is vulnerable; that the current grossly exaggerated purchasing power of the U.S. dollar cannot be maintained; that we are living on borrowed time (and dollars).
Those “real life” people are right. Their premonition is correct. The evidence is everywhere. Most recently in the movement of the BRICS to set up their own alternative to the IMF. But that is just one of many, many similar data points, all aligned and pointing in the same direction. The dollar is on the way out as the world reserve currency. This is obvious to anyone paying serious attention. It might take 5 or 10 years yet, but it is on the way out. The people that you converse with in “real life” sense this, even if they are not intellectuals and cannot articulate it very well. They know what is coming. They can feel it in their bones. They are right.
Okay, Alan. You’re a hyper-inflationist. You said you could see it going either way, but in fact, you have clearly shown your hand, and sit very firmly in the hyper-inflationist camp. Which is not what TAE is about. Which is not what this thread is about. You aren’t interested in listening to some real, verifiable facts about deflation, and so I’m not even sure why you’re here. Maybe you’re more open-minded than you currently admit, and so I hope you will still go over these discussions and consider them.
By the way, this is not a thread about cash versus gold. You missed the point. It is about deflation. And you are refusing to acknowledge or address some basic realities in this regard.
This thread is about Cyprus, and capital controls, and how people have no cash. The headlines clearly state that people want cash. They’re lining up for it. They’re desperate for it because it is in short supply. You have to start there and fully consider the implications before you can understand deflation. You want to skip this step and go directly to a hyper-inflationary loss of confidence in money. But Cyprus makes it clear that the rush to get CASH has only just begun. There is some window of time wherein that must be played out.
As for the rich, I know very wealthy individuals who are liquidating hard assets for cash, and moving money around to safer and safer havens. This continues to reduce the velocity of money. And a reduction in velocity and supply leads to higher demand for money at all socio-economic levels, including state levels. There is good reason to imagine that Cyprus, as an entire country, is very CASH short right now, and is longing for some US dollar liquidity right now. Alas, not much is to be had. The noose is tightening.
That is really the crux of the argument. Walk the streets of Cyprus and pull out a thousand dollars in Euros or US dollars, and people want it. Rich Russians who have just lost all their money, to the tune of hundreds of thousands if not millions, might now be bankrupt. They will also want some cash about now, or anything else they can convert to cash.
Where one wants to convert cash to hard assets, one will find, within Cyprus that there is less cash to compete with there. That is, fewer people have it. You are richer for it. You have fewer competing bids for that villa when you’re the only one who got his cash out in time.
The fact that some hard assets in some pockets might temporarily go up in value in the flight to safety does NOT mean there is a loss of confidence in fiat. It means people need to find safe havens. The irony is this INCREASES the need and desire for cash as it takes cash out of the economy, reducing its supply and increasing the demand therefore. The knock on effect of that will ultimately be pressure downwards. But one has to be able to extrapolate the Cyprus scenario to your own. When banks close you out of your account, no matter how much you have in it, you want and need cash. Period.
While I entirely agree with Skip that events in Cyprus are catastrophically deflationary, I think that the loss of confidence in bank deposits everywhere may lead to different – perhaps surprising – results.
If Cyprus had its own currency, the politicians would have chosen to turn on the printers in order to get rid of these debts and reduce the value of the currency. That would have probably led to hyperinflation – in Cyprus – and people would have been getting out of the “Cypriot Pound” and into other currencies as quickly as they could – leading to a high velocity of money. In terms of a stable currency (or gold), the price of Cypriot property would have crashed in either case.
While the fate of Cyprus is a forgone conclusion – until they get out of the Euro – I think that one would be wise to keep tabs on what is happening elsewhere. Not so long ago, it would have been almost inconceivable for deposits to be stolen from banks in the EU. I guess rules of the game have changed.
Precisely, Nassim. And my point has been that this deflationary phenomenon within Cyprus has not been mentioned at all, even while so many have predicted that Cyprus-like “solutions” will be coming to other countries. New Zealand and Canada are tabling legislation to allow deposit confiscation. Other Eurozone countries are at risk of capital controls. And so I argue that Cyprus is a microcosm of our future. If we can expect Cyprus-like conditions spreading, we can expect deflation spreading too.
By the way, loss of confidence in banks has been seen before in history. And so the consequences aren’t as unknown as you suggest.
Skip is right about cash. Here’s a chart (naturally) showing total currency and total eurozone bank deposits.
For the math-impaired, that’s about 20 euros in deposits for every euro in cash.
skipbreakfast post=6995 wrote: Okay, Alan. You’re a hyper-inflationist. You said you could see it going either way, but in fact, you have clearly shown your hand, and sit very firmly in the hyper-inflationist camp.
I said I saw the end of the U.S. dollar as the world reserve currency. That does not mean hyperinflation, necessarily. It DOES mean at least some inflation, or devaluation in some terms (i.e. reduced purchasing power in terms of some things). As far as the “flations” go, I am a committed biflationist:
https://alan2102.wordpress.com/2012/11/05/inflation-deflation-or-biflation/We will see reduced purchasing power of the dollar in terms of some things, and increased purchasing power in terms of other things. We are already seeing this, in fact. It will intensify.
If you want to put me in the “hyperinflationist camp”, for your own emotional reasons, then go ahead. But it does not not correspond well with reality.
You aren’t interested in listening to some real, verifiable facts about deflation
Oh, I’ve listened all right. But you did not like my answers.
so I’m not even sure why you’re here.
Ah! The old “get the fuck out of here” gambit. That one always comes up when a forum is turning into an echo chamber, and cannot tolerate dissenting points of view — or perhaps just when certain individuals on it cannot tolerate dissenting points of view. Whatever. Maybe I’ll split. But for now, I am having fun.
By the way, this is not a thread about cash versus gold.
Then why did you bring it up to begin with, and then proceed to spend so much time on it?
The headlines clearly state that people want cash.
Yes, of course. They are scared.
They’re desperate for it because it is in short supply.
It is in short supply in Cyprus at this moment, yes. It is obviously not in short supply globally. Cyprus is not the world.
Cyprus makes it clear that the rush to get CASH has only just begun. There is some window of time wherein that must be played out.
It remains to be seen if Cyprus will be contagious or not. But regardless, something will precipitate the rush, sooner or later; I agree with you on that. And I agree with you that most of the little people will initially want cash money. And I agree with you that the little people in Cyprus want cash money. The big money has a different problem; physical cash money is not an option.
There is an exception to that: drug money. Drug money, which can be big money, is transacted in physical cash — upwards of $200 billion
per year, globally. But that is the exception. It is also only a small fraction of the total of global big money.As for the rich, I know very wealthy individuals who are liquidating hard assets for cash, and moving money around to safer and safer havens.
If they are liquidating hard assets for DOLLARS, with the intention of holding them, then they are either ignorant or stupid, and will not remain wealthy for long. Five or ten years. But I doubt if many of your wealthy friends are that dense. And it goes without saying that they are not liquidating hard assets for PHYSICAL cash.
The fact that some hard assets in some pockets might temporarily go up in value in the flight to safety does NOT mean there is a loss of confidence in fiat.
I look at things a different way. The fact that cash in some pockets might temporarily go up in value in the flight to safety does NOT mean there is a durable confidence in fiat. It is just a temporary phenomenon. People will soon realize, as costs of consumables spiral upward (as they have been for decades, but with increasing speed in recent years, and with still more speed in coming years), that cash is not the place to be. Cash is a guaranteed loser, just as it has been for many years. It is of course safer than money in the electronic system, but it is still a loser. Again, just talking about the little people, here, and physical cash versus electronic. The big money has a different set of problems, and as I said does not have the option of stockpiling physical cash. The big money MUST go to hard assets, sooner or later, although various currencies and select bonds and stocks might serve as interim havens.
The phrase “cash is a guaranteed loser” should be dissected, momentarily, as I did not intend it to be entirely pejorative. 1. Cash is GUARANTEED in a good way, i.e. you actually have it in your hand, which is good; and 2) cash is a LOSER, i.e. its purchasing power in terms of most of the things you need is eroding, progressively, as it has for decades, and this will get worse with time. It is a guaranteed loser, but at least it is guaranteed, I will grant that. It is better than having your bucks in some account that is about to be ripped off.
When banks close you out of your account, no matter how much you have in it, you want and need cash.
Initially, YES. And then…
davefairtex post=6998 wrote: Skip is right about cash. Here’s a chart (naturally) showing total currency and total eurozone bank deposits.
Yes, of course. The same is true of dollars. There’s far more dollars in the electronic system than there is physical dollars. If everyone went to the bank to withdraw their balances in cash, the system could not supply more than a tiny fraction of the demand.
Physical cash is better than cash in the electronic system, if you’re a little person (i.e. if holding physical cash is an option for you). I’m all in favor of little people withdrawing their cash from the banks. It is a good idea, at least as an interim measure. All dollars are vulnerable, but physical ones are clearly better than electronic ones.
Nickels (or even pre-82 pennies) are an even better idea — physical cash money, but with commodity value as well, so you are covered no matter what happens:
https://theautomaticearth.com/index.php?option=com_kunena&func=view&catid=15&id=6735&Itemid=96#6842
https://theautomaticearth.com/index.php?option=com_kunena&func=view&catid=15&id=6735&Itemid=96#6933
https://theautomaticearth.com/index.php?option=com_kunena&func=view&catid=15&id=6735&Itemid=96#6934alan –
I’m passingly familiar with the whole “big money is gonna” argument regarding how it will eventually run and hide in gold.
The 17 trillion euros in deposits, and the additional 17 trillion euros currently in euro-denominated bonds cannot possibly fit into the gold market. There’s just not enough liquidity there.
My guess is rather than trying to race through the tiny door, they’ll go for the bigger one the way they always have done – US treasury bonds. Its a deep, liquid market, freely available and indeed, getting bigger every day. Analysts who live in the US sometimes focus on the problems here, without realizing that problems elsewhere are much, much worse.
I recognize this is solely my own opinion and not based on anything other than observing marginal market movements in these two areas over the past five years of turbulence.
Rather than the Big Money, I think it’s the medium-sized money that will end up in physical gold. People who could conceivably cart a reasonable fraction of their personal wealth in the trunk of their car may well choose gold as a part of their “go to hell” plan, especially as confiscation increases, repression increases, state surveillance increases, and interest rates remain at 0%. That makes sense to me.
Gold’s big win: portability, concentrated wealth, international acceptance, hedge against government repression. But once you get into the ton weight range of anything ($100 bills: $90 million/ton, gold: $38 million/ton, silver $684k/ton, nickel $7k/ton) its no longer portable and/or concealable. At that scale the hedge factor no longer works. You can’t swim the Rio Grande with a ton of anything.
I will say though, the concept of having 10 tons of nickels in your backyard does have one virtue: any thief who wanted to steal them would take a LONG TIME and a LOT OF WORK to remove them from your place. But converting the value yourself – somewhat problematic. At $3.70/pound, buying many food items likely requires more pounds of nickel than you will receive in food!
I suppose its good exercise though. But I can only imagine the looks the cashiers at your favorite store will give you when you arrive with your $100 (26 pounds) in nickels *again* this week.
If you make money with your nickel storage plan, I say: you earned it.
Hey, Skip: here’s a point of view that you might enjoy. This is Martin Armstrong, to whom I adverted some days ago in a separate thread. He is a very intelligent and perspicacious guy. When he talks, I listen. He says: “no hyperinflation!”. I’m listening. I’m not sure that I agree with all, especially when he says that “they have no intention of honoring their promises to the Baby Boomers” (depending on who the “they” are), but I AM listening.
I should add that he seems to be responding (without naming names) to Jim Sinclair, who suggested that the Cyprus caper was a deliberate (and desperate) attempt to stimulate money movement, globally.
Don’t you sometimes feel like you’ve got a ringside seat at the Greatest Show on Earth? :cheer:
https://armstrongeconomics.com/2013/03/29/cyprus-confiscation-of-assets-is-global-plan/
Cyprus & Confiscation of Assets is Global Plan
Posted on March 29, 2013
The Cypriot politicians will remain in the Euro at least for now. They are listening to Brussels and are afraid of retaliation if they try to leave. We submitted a proposal to try to save Cyprus, but the powers that be are doing as they are told by the European Commission. There is little hope of reversing the trend at this point and everyone should know that this confiscation of assets was NOT something out of the blue. This was seen as the alternative to “taxpayer” bailouts following the meltdown of 2008-2009. The bankers scared the hell out of government warning they would collapse if the big bankers failed for nobody would be there to sell their debt. At the Sovereign Debt Crisis Conference I warned of FORCED LOANS were next whereby they confiscated your assets and handed you a bond. By the end of that session, the confiscation was announced. This time, they just took the assets with no bond swap.
We will publish a report on this, but effectively this was discussed at the G20 meeting and this has been put in written documents around the world. It is the next step in the Sovereign Debt Crisis that EVERY country has followed. This is the VERY SAME measure that was done in M.F. Global. The court refused to hold the banks responsible and thus the losses from the firm’s illegal trading were taken from client accounts.
This is why there will be ABSOLUTELY NO HYPERINFLATION. This is not about stimulating a damn thing and they have no intention of honoring their promises to the Baby Boomers. Forget our children. This is about keeping the banks alive to service the debt of government. They will slash and burn pensions, whatever it takes to retain power. Just follow the breadcrumbs. Government is digging in its heels and will not relinquish power nor will they reform.
There is no crazy scheme to stimulate anything. This is about protecting the banks initially (namely NYC) but is all about protecting the halls of government.
snip
davefairtex post=7001 wrote:
The 17 trillion euros in deposits, and the additional 17 trillion euros currently in euro-denominated bonds cannot possibly fit into the gold market. There’s just not enough liquidity there.At a paltry $1600/ounce, no; you’re right. But things change at a more realistic price. At $20,000/ounce, 17 trillion euros would buy about a billion ounces, or 1/7th of the global total. And so on. If you look at things solely in terms of the current depressed paper price, your conclusions will tend to mislead you.
I don’t expect gold to go to $20K, but then I would not expect ALL euro deposits, or even close to all, to go bidding for gold. Some of them will, however, along with a lot of other money from elsewhere, and gold will surely go to some multiple of its current price. That is, eventually, once the big guys have their fill at these artificially low prices.
My guess is rather than trying to race through the tiny door, they’ll go for the bigger one the way they always have done – US treasury bonds. Its a deep, liquid market, freely available and indeed, getting bigger every day.
A good deal of dumb money will do that, I’m sure. Getting in at the very tail end of a 30-year bull market, with almost no further upside, and catastrophic potential downside, is the very definition of “dumb”.
FYI:
https://www.zerohedge.com/news/2012-10-20/extraordinary-popular-delusions-and-madness-bond-and-gold-markets
Extraordinary Popular Delusions And The ‘Madness’ Of Bond And Gold Markets 10/20/2012
Whether its new-fangled Japanese stocks, hi-tech internet company valuations, multi-colored flowers, or mansions made affordable by criminally lax lending standards, Grant Williams notes that a bubble is a bubble is a bubble; and citing Stein’s Law: “If something cannot go on forever; it will stop.” In this excellent summary of all things currently (and historically) bubblicious – whether greed-driven or fear-driven – Williams concludes it is never different this time as he addresses the four phases of the classic bubble-wave: smart-money, awareness, mania, blow-off (or crash) and explains how government bonds are set to burst and gold is only just about to enter its mania phase. This far-reaching and entirely accessible presentation is stunning in its clarity and as he notes, while bubbles are always easy to spot ex-ante, understanding how they come about and why they are popped gives the few an opportunity to profit at the expense of the madness of crowds. From tulips to tech-wrecks, and from inflation to insatiable stimulus, the bubble in ‘safe-haven flows’ that currently exists has all the characteristics of a popular delusion.Rather than the Big Money, I think it’s the medium-sized money that will end up in physical gold.
The REALLY big money — hundreds of billions, and trillions — has been for some years, and is now with increasing speed, moving into gold. The central banks, and the huge creditors like China, are accumulating rapidly. Generally the gold is moving East; and with that, the global power. These are the twilight days of the anglo-american empire. The movement of gold is just one telling sign of the great sea-change afoot.
Gold’s big win: portability, concentrated wealth, international acceptance, hedge against government repression. But once you get into the ton weight range of anything ($100 bills: $90 million/ton, gold: $38 million/ton, silver $684k/ton, nickel $7k/ton) its no longer portable and/or concealable. At that scale the hedge factor no longer works. You can’t swim the Rio Grande with a ton of anything.
That’s true. You can’t swim the Rio Grande with your house or your car strapped to your back, either. Errrr… wait a sec. Why would anyone want to swim the Rio Grande? Oh, maybe in a future locked-down full-fascist prison-camp America. Right. Well, in that case — if that is what you’re prepping for — gold is the way to go.
At $3.70/pound, buying many food items likely requires more pounds of nickel than you will receive in food!
TRUE. Jeez. I’d rather go hungry than be forced to lug around 20 pounds of nickels. Besides, no one should ever be required to do any actual physical work. Our needs should be provided for us with the swipe of a Visa card or the click of a mouse — as a matter of social justice!
Alan –
I can see this will turn into one of those “internet discussions” I love so much.
If you had a chart or two – or even a fact or two – I might continue. If you were a seeker after the truth, ditto. But as it stands now, I think I’ll bow out now. You win, you’re much smarter than me, congratulations!
Best of luck shorting the buck.
Hmm Armstrong. Little paranoid for my taste. Leads to strange ideas.
This is about keeping the banks alive to service the debt of government.
I think maybe that should be the other way around.
Government is digging in its heels and will not relinquish power nor will they reform.
There’s no such thing as “The Government”. Other than in Martin’s head. The banking world is much better organized.
BTW, what is that about the world moving into gold? $20,000 an ounce? Are there really still people touting that line? Yawn.
Alan, on gold, above, I actually write in general about diamonds, fine art, and gold, all as ways to store wealth and their pitfalls in a deflationary environment such as we find in Cyprus today. That is, there is pressure downwards on all assets when people need cash and there is a shortage of cash. Within Cyprus, there is a shortage of cash.
Reading about Cyprus in Business Insider today: “Picking out a €10 note from her cash till, Mrs Charilaou, 59, told The Sunday Telegraph: “This is what I’ve earned today. My rent is €500 a month, how am I going to pay it? The retail business is bleeding, everybody is shutting down. Today it’s Cyprus, tomorrow it will be Italy. It will be a domino effect. We use to live peacefully, we had jobs. Now they have changed our lives.”
So Mrs Charilaou has only €10 in her till but a €500 rent. If she has only otherwise saved diamonds and gold, she’ll need to liquidate some of those assets for much needed cash. At the same time everyone else who has diamonds or gold are liquidating some of theirs too to get some cash.
And lest you think it is only the “poor” who want cash, you may have already seen this article: “I Went To Sleep Friday A Rich Man, I Woke Up Poor”
I want to point out that even in the ideal circumstances of our still-(barely?)-functioning credit-driven Ponzi, there is a COST to move in and out of gold every time, also known as a “spread”. This spread is just one of many layers of profit which must be generated by those who deal in gold to make it worth their while. So every time someone transacts in gold to get cash, she loses 3%, 4%, 5%, in ideal conditions but certainly more under conditions where cash supply tightens and an economy slows. Gold dealers are a business after all. When volumes of transactions are high, they can afford to keep the spread lower.
I do write about the speculative upside in gold and recognize that there are some advantages to any store of wealth in a bank run. Just not over cash. And that is deflationary. Actually, Mish Shedlock is a deflationist who still sees gold as having big upside in a deflation. Certainly possible.
The point of the entire exercise is to point to deflation WITHIN CYPRUS, which is, at the moment pretty much indisputable. And people, banks, companies, even the state, needs cash. There is not enough cash to go around. This is in stark contrast to a world that thinks cash has no value. If Cyprus is the shape of things to come for the rest of us, then we have some lessons to learn here. Cyprus’s island isolation makes it an even more useful example since we should be able to see the effects more sharply. If we see increasing capital controls, we will all increasingly become islands no matter what our geography, because that is the effect of capital controls.
Trucks delivering Euros to Cyprus (picture in The Guardian):
Re.:
Everyone … coming to the realization that deposits in their local bank are not ‘safe’ places to put their spare cash, but are in fact loans to extremely leveraged businesses.
Hi Folks,
Alan said:
(6999)
The headlines clearly state that people want cash.
Yes, of course. They are scared.
They’re desperate for it because it is in short supply.
It is in short supply in Cyprus at this moment, yes. It is obviously not in short supply globally. Cyprus is not the world.
Then writes in the next post:
(7000)
Yes, of course. The same is true of dollars. There’s far more dollars in the electronic system than there is physical dollars. If everyone went to the bank to withdraw their balances in cash, the system could not supply more than a tiny fraction of the demand.Physical cash is better than cash in the electronic system, if you’re a little person (i.e. if holding physical cash is an option for you). I’m all in favor of little people withdrawing their cash from the banks. It is a good idea, at least as an interim measure. All dollars are vulnerable, but physical ones are clearly better than electronic ones.
So is it in ‘short supply’ or not? Maybe its just Unobtainium
Besides, no one should ever be required to do any actual physical work. Our needs should be provided for us with the swipe of a Visa card or the click of a mouse — as a matter of social justice!
That about sums up the whole problem
From a Lebowskian perspective: Monkey fist in the jar dude, monkey fist in the jar. 😆
L,
Sid.Hi Folks,
As Dave points out:
I can see this will turn into one of those “internet discussions” I love so much.
As for argument vs. contradiction, here’s Michael Palin and John Cleese:
M.P. “An argument isn’t just contradiction”
J.C. “Can be.”
M.P.“No it can’t. An argument is a collective series of statements to establish a definite proposition.”
J.C. “No it isn’t”.
M.P. “Yes it is, it isn’t just contradiction.”
J.C. “Look if I argue with you I must take up a contrary position”.
M.P. “Well it isn’t just saying ‘no it isn’t.”
J.C. “Yes it is!”
M.P. “Argument is an intellectual process, contradiction is the automatic gainsaying of anything the other person says.”
J.C. “No it isn’t.”
M.P. “Yes it is!”
https://www.youtube.com/watch?v=JkzjBfTDH20
Pretty much sums up most internet forums: Yes you did, no I didn’t, yes it is, no it isn’t, etc. ad nausea. :sick:
L,
Sid.gurusid post=7008 wrote:
So is it in ‘short supply’ or not?It is in short supply in Cyprus at this moment — or at least it is according to Skip, and I have no trouble believing that, given the crisis there. But it is not in short supply elsewhere. Go down to the bank and withdraw as much as you please. No problem. Provided you’re not in Cyprus.
davefairtex post=7004 wrote: Alan –
I can see this will turn into one of those “internet discussions” I love so much.
If you had a chart or two – or even a fact or two – I might continue. If you were a seeker after the truth, ditto. But as it stands now, I think I’ll bow out now.Your post was of a speculative nature, offering no charts or links, just your opinion, WHICH IS FINE. I replied in kind.
If you want to converse in a non-hypocritical way, matching your actions with your words, I’d be happy to continue. But as it stands now, I think I’ll bow out.
ilargi post=7005 wrote: Hmm Armstrong. Little paranoid for my taste. Leads to strange ideas.
This is about keeping the banks alive to service the debt of government.
I think maybe that should be the other way around.
It might be both/and — symbiosis.
BTW, what is that about the world moving into gold? $20,000 an ounce? Are there really still people touting that line?
Yes, but not me.
It will surely go to a multiple of the current price, though.
gurusid –
Amen. I absolutely love that routine.
“An argument isn’t just saying NO IT ISN’T!”
“Yes it is.”
“NO IT ISN’T!!”And when I notice myself participating in and/or contributing to that completely ego-driven chest-beating I’m-right-you’re-wrong dynamic…time to withdraw and use my energy for something more productive/constructive. Like watching my favorite Monty Python skits, for instance!
By the way skipbreakfast – nice topic!
Hey thanks Dave.
And it’s nice to beat the Zero Hedges and Martin Armstrongs to the punch, in terms of timing. Such as this days-later article in Zero Hedge, that is now making all of the same points, but then can’t seem to say the word “deflation”. After all, the entirety of Zero Hedge is devoted to the hyper-inflationary religion. At least they conclude:
“[T]he deeper the rabbit hole goes, and the more countries are Cyprus’ed, the greater the onslaught and attack against gold, silver, and other traditional and historic fallback currencies to what is increasingly pejoratively known simply as “paper.”
Sounds like deflation to me, just poorly stated.
BTW, what is that about the world moving into gold? $20,000 an ounce? Are there really still people touting that line? Yawn.
I remember hearing that one from another gold basher when it was $200. Amazing how some folks learn nothing from history, especially ones that should know better. Hold on to your cash, it has an excellent history of preserving wealth. Yawn
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