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Monday, August 26, 2019
VS
The Gold versus bitcoin debate is absurd. There are no similarities.
Bitcoin is a risk asset that exists in virtual reality.
Gold is a hard asset that exists in the real world.
Bitcoin is a gambling tool
Gold is a hedge against gambling tools.
Suggesting that bitcoin could replace gold is like suggesting
a computer program of a sprawling palace could replace the apartment
or house that you live in.
It may seam to have advantages, like it appears bigger and grander and needs
no upkeep. But you can't actually live in it because it doesn't exist outside
your computer.
People may even begin flipping their virtual houses and make tons of money -
temporarily they may make more money than people buying and selling real
houses. But you still can't live in them.
The fact that gold really exists in the natural world may seem quaint and
antiquated to some young people. But the thing they forget is that they
too exist in the natural world.
And everything that does not exist in the natural world is by the very definition
of the word: SPECULATIVE.
Something that is speculative can never be a hedge against speculation.
That should be obvious. Yet somehow it's not anymore.
Sunday, August 18, 2019
TRUST AND MONEY
THE foundation of all economy is trust. When accepting any form
of money as payment we must trust that the parties involved in the
next transaction will also trust that form of money. To do so we must
have ultimate trust in either the intrinsic value of the money, or in the ability of
the issuing institution to provide a safe and stable and enforceable
environment for the continued value and acceptance of the money.
It is becoming increasingly difficult for many citizens to trust their own
governments. It is difficult to trust Governments run by officials who
clearly have only their own personal interests at heart.
It is difficult to place trust in a form of money that charges prohibitive
fees for the use of the money - such as money that doesn't
provide interest to offset decaying value from over-issuance or actually
charges the user in absolute terms through negative interest rates.
This is institutionalized theft, which doesn't foster trust.
Some citizens prefer to place their trust in anonymous issuers using
mathematical " guarantees" for their money such are bitcoin type currencies.
This is a sort of blind trust in technology, which is only possible as
trust in humans erodes.
This brings us back to the idea of "Intrinsic Value," which may be argued
is a form of mass delusion over time - but the delusion is academic.
It's mass acceptance over long periods of time that comprises
the intrinsic value. Old master paintings. Real Estate in popular locations.
Artifacts related to historically important figures like Julius Caesar
or Alexander the Great or George Washington, for example.
These things all hold value over time. But they
are not divisible so are difficult to use in transactions as money.
This brings us back to gold, which has held its value for over five thousand years.
There is no need for trust in an issuing authority except as a guarantee of
weight and purity - which can be easily verified independently.
And it is divisible into any desired quantity. Perfect as a store of value.
Perfect for transactions, even if it means an intermediary step of
conversion into a local currency.
As trust erodes, gold rises.
Tuesday, August 13, 2019
THE PERFECT STORM FOR GOLD WITH TRUMP IN THE EYE
GOLD THRIVES ON INSTABILITY, TRUMP IS INSTABILITY PERSONIFIED.
THINGS GOLD LOVES THAT TRUMP IS PUSHING:
1) GLOBAL COMPETITIVE DEVALUATION OF CURRENCY.
2) NEGATIVE RATE ENVIRONMENT. (there is 15 trillion dollars of negative yielding debt )
3) INTERNATIONAL STRIFE SUCH AS TRADE WARS
4) LOSS OF CONFIDENCE IN GOVERNMENT
AND 5 - gold's stealth weapon - (as though it needed anything else) -
A GLOBAL PUSH FOR DEDOLARIZATION - which is untethering gold to it's anti-dollar role, and encouraging governments to increase their gold reserves.
Government’s around the world are becoming increasingly wary of the dollar’s hegemony in international trade, as Trump's polices become increasingly belligerent. and they’re doing their best to distance themselves from the dollar by stoking their gold reserves.
This process is already underway mainly in nations with strong anti-U.S. sentiment including Russia, China, Iran, Venezuela, Syria, Turkey, Qatar, India, Pakistan, Libya, Egypt and the Philippines among others.
Naturally, these countries are turning to gold since the yellow metal is not under lock-and-key like the greenback and other electronic payment methods.
This trend is abundantly clear when you look at central banks’ buying activity.
According to the World Gold Council, central banks purchased nearly 70 percent more gold during the first quarter of the year than they did during the previous year’s corresponding period.
That’s the most they bought since the first quarter of 2013.
And goblal central banks are pushing to settle traditional dollar denominated markets with non-dollars payments: SOME HEADLINES{
In a challenge to longstanding American dominance of the oil industry, China is reportedly planning to launch a pilot program to pay for oil in its own RMB, potentially starting in the second half of this year.
Russia, China Sign Deal To Settle All Trade In Respective Currencies And Drop Bilateral Use Of US Dollars
Iran and China have found a way for China to continue buying Iranian crude and pay for it without risking a U.S. sanction breach, an Iranian official said.
"A Chinese bank will start its banking exchanges with the Iranian side on December 2," the head of the Iran-China Chamber of Commerce, Asadollah Asgaroladi said, adding "The Chinese side is due to introduce its second bank for exchanges with the Iranian side in a month." Sales of crude will begin next week, Asgaroladi also said.
China had a special bank dedicated to handling payments for Iranian oil during the international sanctions against Tehran earlier this decade, so finding ways around sanctions is hardly new
Thursday, August 8, 2019
CENTRAL BANKS BUYING GOLD
central bank demand at highest level since becoming net buyers in 2010
- Central bank net purchases rose 47% y-o-y to 224.4t in Q2
- H1 2019 net purchases totalled 374.1t, the highest level since becoming net buyers in 2010
- Poland was the largest purchaser in the quarter; reserves grew by 100t (+77%)
Tonnes | Q2'18 | Q2'19 | YoY | |
---|---|---|---|---|
Central banks & others | 152.8 | 224.4 | 47% |
Central bank net purchases totalled 224.4t in Q2, 47% higher y-o-y.
Total net purchases
for the first six months of 2019 rose to 374.1t: 57% higher y-o-y,
and the highest
level of y-t-d demand since central banks became net purchasers
(on an annual basis)
in 2010. Buying momentum has continued strongly from last year
– 2018
saw the highest level of annual purchases in 50 years –
and is a clear indication of the central banking community’s
mind-set towards gold.
Total net purchases
for the first six months of 2019 rose to 374.1t: 57% higher y-o-y,
and the highest
level of y-t-d demand since central banks became net purchasers
(on an annual basis)
in 2010. Buying momentum has continued strongly from last year
– 2018
saw the highest level of annual purchases in 50 years –
and is a clear indication of the central banking community’s
mind-set towards gold.
Central Banks control the global economy.
They control the issue, distribution and cost of currency.
They control the issue, distribution and cost of currency.
Central Banks don't buy bitcoin. They buy gold.
You hear many cranky old analysts striving to be hip saying things like
"The kids don't even know what gold is anymore.
It's a useless barbarous relic."
"The kids don't even know what gold is anymore.
It's a useless barbarous relic."
Maybe. But the kids don't run the global central banks.
The central banks don't worry about being hip,
The central banks don't worry about being hip,
or getting in on the next big thing.
They worry about solvency.
They worry about solvency.
And when rates are going negative all across the
globe, the safest CURRENCY is gold.
Is it really still a currency?
A) The Central Banks own it in quantity.
B) It can be changed for any other currency on demand
in every city in the world.
in every city in the world.
C) It has a stable 5000 year track record.
Yes, true, you can't buy food with it in a grocery store.
Good point. But that's not
Good point. But that's not
why you hold it.
Wednesday, August 7, 2019
TRUMP'S UNWINNABLE TRADE WAR AND GOLD
Trade wars are winnable, in a sense, if conducted by brilliant strategists who understand the win/win psychology of game theory.
That is not Mr Trump. Mr Trump demands capitulation. That is why his trade war is doomed to go on and on and on while all sides suffer, until there is total chaos.
Gold loves Chaos.
A long time ago I worked for a US financial concern in China. I learned two things that nobody in the Trump Wolrd seems to understand.
ONE: The Chinese will never tolerate a loss of face. No amount of pain and suffering from the Western perspective is worth a loss of face in the Eastern perspective. Trump demands a loss of face.
TWO: The Chinese time frame is different from the Western time frame. And not just because they are totalitarian, or communist or however you'd like to categorize them. Their time frame is informed by their view of life as a continuum. They literally worship Ancestors. For the Chinese if Mr Xi's great grandson wins the Trade War against some President who isn't yet born, that will be a great victory, no matter how much pain is suffered in the meantime.
Trump's time frame can be measured in nanoseconds.
Meanwhile, Trump is convinced he is winning the trade war. Because in his mind he always wins everything.
The continuing chaos, both economic and social resulting from this bizarre personality disorder is ideal for gold.
Add to this a hyper-drive of global competitive devaluation of currencies (which was happening anyway, but on a much slower scale) and you have the perfect storm for gold.
It's only just begun.
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