Until the mid-19th century, the means of retribution for the stiffed creditor was debtor’s prison. If the creditor could not see the return of his capital, then at least he could temper the pain and humiliation by witnessing the incarceration of the defaulted debtor. In our age of monetary lunacy, it would seem that some of the world’s more dollar-dependent central bankers are quietly (or perhaps not-so-quietly), yearning for a similarly harsh ‘debaser’s prison’. Here I speculate about the peculiar world of the dollar-dependent central banker and consider the consequences of the dearth of entrepreneurial spirit in the money production business.

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The concomitant surges in the dollar prices of gold and the US treasury note seem to have got many market participants scratching their heads. For isn’t gold an ‘inflation asset’ and the treasury note a ‘deflation asset’? Aren’t they supposed to be antagonistic to one another? We square this price action by noting that the means of the currency skeptic are distinctly peculiar in this post-Bretton Woods experiment — it matters that the Federal Reserve note is by and large ‘backed’ by US government securities and gold. That being said, our hunch is that this price action is a relatively temporary phenomenon; for whereas gold remains intact regardless of an increasingly precarious stock of irredeemable claims upon it, US government securities do not. We believe that the current tolerance of the US bond market should be regarded as the last gift from above. Here I outline why a world with an intolerant bond market might not be that pleasant. continue reading »

Monday was the 40th anniversary of the irredeemable fiat dollar. Unlike the preceding 39 anniversaries, this one was actually noticed! Here, I present several charts that show the changes to the Fed’s balance sheet since 1971. I conclude that the current gold price may be as ‘cheap’ as it was in 1971!

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If we had to choose to indulge in just one form of pseudo financial mysticism, we would undoubtedly go for the view that financial assets tend to move in generational cycles.  In short, we believe that nothing is more conducive to action than good old muscle memory. Here, I explain why the recent crash in the array of ‘risk assets’ is corroborating our hunch about the generational nature of trends in financial assets. Moreover, I consider one way in which widespread apathy towards speculation may come to pass.

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Mr Doubter, otherwise known as the child who pointed out the Emperor’s lack of clothes, has always played a key role in monetary affairs. However, the tools with which he has done his doubting have evolved over time. Here, I detail the means by which alert speculators have questioned the currency systems of the past, and the means by which they question the irredeemable fiat currency systems of today.

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As our readers may know, we’re suckers for the theory that markets move in generational cycles. The basic idea is that the knee-jerk reaction is often the strongest one and that investors have a tendency to ‘stick to what they know’. The length of the prime of one generation’s career seems to be a suitable period of time for such ‘things that people know’ to become firmly lodged. Ironically, such lodging is a dire circumstance in a business that amounts to pseudo-futurology. More specifically we might say that investors often become convinced that strong and persistent price trends of the past are a matter of permanence (particularly if the entirety of their career confirms that intellectual conviction). Extrapolation is the name of the consensual speculator’s game, and so, anti-extrapolation must be the name of ours! Timing, as we all know, is incredibly difficult when it comes to the speculative financial markets. However, here I’ll endeavor to speculate as to when the gold bull market might go into ‘mania mode’.

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In light of the monetary woes that have spread across the globe, I thought I’d demonstrate that the continuing montage of oratorical acrobatics coming from our politicians are not a new thing. Here, I show a few examples of the demagogic proclamations that emerged during the early-1930s.

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