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Tuesday, March 26, 2019

Gold and the debt bomb

Image result for debt bomb

Massive debt is probably gold best friend.

The Governemnt/Coroporate/household debt levels in our economy are now higher than they were when the economy crashed in 2008

Massive debt is only possible with a government policy of negative real rates.  The low/negative rates encourage, in fact, demand, a massive build up of debt.

That is the purpose.  Not to argue whether the debt is good or bad.  That's irrelevant.

The salient fact about the super low rates is that the massive debt ensures the rates must stay low forever, and the low rates ensure the build up of debt is perpetual.

That is a mathematically inviolate perpetual motion machine that stops only when the entire system collapses.

Inevitable (As the preposterous architect from matrix would say)

People have noticed the correlations between debt / rates/ gold price.

The truth is that isn't the debt or the rates per se that affect the gold price but the massive instability in the low rare / massive debt environment we are in that ensures the gold price must rise.

Because gold rises with instability.

Thursday, March 7, 2019

Why do some coin types suddenly disappear from the Market? Scarcity, Rarity in a Demand Driven market.

Scarcity, Rarity in a Demand Driven market.

The truth is that  all markets are essentially demand driven.

If everyone suddenly realized their I phone 37 was essentially exactly the same as their I phone 3 Apple profits would disappear.

If everyone suddenly realized commodities-trader turned "artist" Jeff Koons was essentially making fun of his own clients a Balloon Dog would suddenly have no value at all.
Image result for balloon dog auction price(rather than 55 million dollars.)Image result for balloon dog auction price

Demand for drugs is why no policy directed at curbing the supply of drugs is ever effective.

Demand for capital in a debt ridden economy is why Supply Side Economics is suddenly impotent.

The coin market is another Demand Driven market.  Take the "rare and valuable Mint State flowing hair large cent. "Only" 1200 1793 lots have been auctioned with the high hammer having gone at close to a million dollars.
1794 $1 B-1, BB-1, R.4, AU58 NGC. CAC
Now, in other areas of the coin market, say Ancients, or Medieval coinage, if any particular piece had come up for auction 1000 times, it would be considered the most common coin available, and even coins of excessive beauty, and historical interest would have trouble breaking the $5,000 dollar mark were they that common.

For example, a particularly nice mint state Daric of exceptional style, might have come up for auction 10 to 20 times, while run of the mill mint state daric probably has come up for auction 100-200 times (85 have been graded mint state or better - which seems like a tremendous amount in the current ancient coin market) Still, a Gem daric only hammered at $25,000 and nicest fines style mints state Darics only make slightly more that $15,000

Image result for mint state daric
This is because the Ancient and Medieval markets are tiny compared to the US market. But as demand shifts, coins and medals that were at one time readily available are suddenly impossible to find.

This is where supply comes in.  In very tight markets small shifts in demand can cause large price bumps, and pieces that once seemed available can disappear off the market

And though demand is shifting rapidly because of the advent of slabbed ancients, and because the Japanese have become very active in several ancient and world coin areas, the market is still relatively small.

The most difficult thing for a collector coming from US coins to get their head around, is how relatively tiny (compared to the US markets) these markets are - in many areas.

For example, about five years ago a horde of 20 shooting darics hit the ancient coin market.
Ancients:Greek, Ancients: PERSIA. Achaemenid Empire. Darius I - Xerxes I (ca.505-480 BC). AV daric (15mm, 8.34 gm).  ...MS graded examples sold for about 20,000 dollars.  For a year or two every major auction seemed to have one of these.  High end collectors knew they could pick one up if they really wanted one.  At that time 20 coins could have that effect on the Ancient Coin market.  These are gone.  It's been over 2 years since one in any grade has been auctioned.  More may be found.  Or maybe not.

I use Darics as examples because these were from 500 BCE to about 336 BCE the reserve currency of the Eastern Ancient world - while Athenian Owls and Kyzykian Staters were the reserve currency of the Western Ancient world.

As such, the Darics are easily the most common Ancient Gold pieces along with the Alexandrine Gold Staters that replaced them after Alexander the Great.

But the fact is there are many more MS 1793 Flowing Hair Dollars floating around than there are MS Darics.

There was a relatively large and recent horde of Darics which has still not been fully absorbed by the Ancient Coin Market.  But for new collectors, wait about 2-3 years and as the market grows and the horde is absorbed, my guess is that mint state Darics will become quite difficult to find at auction or in dealer inventories.

You can extend that logic to other areas of the Ancient Coin market that aren't nearly as plentiful.

Friday, March 1, 2019


Whither the Price of Gold?

There is a link between collector gold coins and the price of bullion gold.  It constitutes only a part of the price of a rare gold coin, but a part that can not be ignored.  As the bullion price of gold rises, a general awareness of the desirability of gold permeates the public consciousness, 

So what makes the price of gold rise?


Many people think the gold price is linked to commodity prices in general, precious metals prices in particular , other currencies in inverse ratios.  All that is true around the edges.

But gold is and has always been a hedge against instability.

Why? Because it has a 5000 year track record of holding its value over time.  Nothing else can compete with that.  So when people really begin to lose confidence is the institutions that provide stability, they return to hording gold.

I would suggest that we are in a period of collapsing stability.  We are in a period where the very people in charge the institutions that provide stability are  expending all the energy in challenging, abusing, and destroying those institutions.

Not just here.  But around the world.

And consider this, the United is the most stable country in the world, and our stability is crumbling by the day.

Political instability is obvious.  Financial instability less so.  BUT With the US debt climbing over 22 Trillion dollars and rising at an alarming rate while over 70 precent of all Corporate debt is rated only one level above junk, and US household debt at a record 13 trillion dollars, it would only take a sudden modest rise in interest rates to cause a massive financial collapse. 

Meanwhile Global debt has reached 250 trillion which is about 350 percent of global GDP.

Now imagine how the general public will react to a crisis considering the absolute vaccuum of confidence in the current political regime?


That is where the price of gold is headed.