Thats one long article
Thank you for taking the time to pull this together and although I didnt understand all of it, i did make sense of some
Thats one long article
Thank you for taking the time to pull this together and although I didnt understand all of it, i did make sense of some
It is like politics with mathematic and science from a psykolog- everyone want to have the right answer and not have to defend it if they are wrong, so it is always a explanation the expert do not need to be hanged for
This is a articole for a gold company. I think it got a few good things in it and. It also reflect some of the ideas from Satoshi and can play crypto a favore if the markets starts halting
From Brandon Smith
It is generally well known in economic circles and in the general public that precious metals, including gold, tend to be the go-to investment during times of fiscal uncertainty. There is a good reason for this. Precious metals have foundation qualities that provide trade stability; these include inherent rarity (rather than artificially engineered rarity such as that associated with cryptocurrencies), tangibility (you can hold gold in your hand, and it is relatively difficult to destroy), and precious metals are easy to trade. Unless you are attempting to make transactions overseas, or in denominations of billions of dollars, precious metals are the most versatile, tangible trading platform in existence.
There are some limitations to metals, but the most commonly parroted criticisms of gold are generally incorrect. For example, consider the argument that the limited quantities of gold and silver stifle liquidity and create a trade environment where almost no one has currency to trade because so few people can get their hands on precious metals. This is a naive notion built upon a logical fallacy.
Gold backed paper currencies existed for centuries in tandem with the metals trade. Liquidity was rarely an issue, and when such events did occur, they were short lived. In fact, the last great liquidity crisis occurred in 1914, the same year the Federal Reserve began operations and the same year that WWI started. This crisis was, as always, practically fabricated by central banks around the world. Benjamin Strong, the head of the New York Fed in 1914 and an agent of the JP Morgan syndicate, had interfered with the normal operations of gold flows into the U.S. and thus sabotaged the natural functions of the gold standard.
Central banks in Germany, France and England also applied influence to disrupt currency and gold flows, causing a global panic. This engineered disruption seemed to take place through conscious co-operation between central banks. Does any of this sound familiar?
For those who are interested, the history of the 1914 liquidity crisis is outlined in detail in the book ‘Lords Of Finance: The Bankers Who Broke The World’, by Liaquat Ahamed.
When gold and currency are tied together, gold prices tend to remain rather stable, as they are often set by the national treasury. In 1914, the price of gold was $20 per ounce and had maintained that approximate value for decades. To give some perspective on value, in 1914 the average house cost $3,500, or 175 ounces of gold.
But what happens when gold and national currencies become disjointed from each other? Take a look at the hyperinflationary crisis in Weimar Germany. The price of gold per ounce went from 170 marks to 87 trillion marksonly five year later! Over that same five year period, gold value in Germany had increased at almost TWICE the rate of inflation, indicating that gold not only kept up with the devaluing mark, but made anyone holding gold rather rich in the process.
This is a very important fact. The common argument against gold is that gold is not really a wealth creating investment, but merely protects your buying power. As the Weimar crisis shows, this is not always the case. In some circumstances, often during times of economic disaster, precious metals can in fact generate more wealth than what you put into them.
Then there is the issue of government interference in gold markets and trade during crisis. As the Great Depression in the U.S. began to take hold, investors turned aggressively to gold and silver as a means to offset the crashing values of most other assets. In a highly controversial move in 1933, President Roosevelt outlawed the private ownership of gold bullion and set the price of gold at $35 per ounce.
Keynesian economists like Ben Bernanke often try to assert that the gold standard was the reason why interest rates had to be hiked as the depression was escalating, and that this was the cause of a greater crash. They are only half correct. Increased rates did indeed cause a larger and more prolonged crisis, but this had little to do with the gold standard.
Clearly, in 2008 the U.S. and most of the world was NOT on a gold standard, yet we suffered a very similar collapse in credit and equities as happened in the Great Depression. Also, there is no gold standard forcing the Federal Reserve to raise interest rates today, yet they are doing so. Whether or not this will cause an even more violent economic catastrophe remains to be seen, but Jerome Powell, the new Fed Chairman himself, warned in 2012 that this is exactly what could happen. Jerome Powell has stated in no uncertain terms that rate hikes will continue under his watch in 2018.
Central banks were the core institutions to blame for the Great Depression, not the gold standard, considering the fact that central banks did NOT follow a true classical gold standard exchange internationally, and instead tried to establish a global basket exchange system of multiple currencies and gold in what they called the “gold exchange standard”.
Add to this the unnecessary interest rate hikes as deflation was pummeling assets, and you have a perfect recipe for calamity. Even Ben Bernanke, in a 2002 speech to honor Milton Friedman, openly admitted that the Fed was the root cause of the prolonged economic carnage during the Great Depression:
“In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn.
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
The use of gold prohibition had mixed results. Obviously, it did not stop the freight train of the Great Depression. In fact it probably exacerbated difficulties in trade and savings. Black markets took over and precious metals were still highly sought after.
As far as the crash of 2008 is concerned (a crash which is still ongoing today), we all know what happened with gold markets. In the lead up to the crash, from 2004 to 2008, gold doubled in value. Then, after the initial crash from 2008 to 2012, it doubled again.
Despite predictions by mainstream economic naysayers, gold has not collapsed back down to pre-crash levels. In fact, gold has remained one of the most effective investment performers for years.
The question is, what happens next? Setting aside gold confiscation as a factor (a factor which I believe would be impossible to enforce in today’s markets), we can see that massive fiat stimulus as a means to artificially support a deflationary fiscal system, as well as central bank intervention in general, leads to collapse and a flight to hard assets like gold. Even with rising interest rates and the potential for a spike in the dollar index, if the rest of the economy is in steep decline, investors and others will still turn towards precious metals.
As I have mentioned in previous articles, the initial reaction of gold prices to faster interest rate hikes may be negative. That said, I do not believe gold will drop as dramatically as mainstream economists expect. Once higher interest rates kill the stock market bubble as well as the renewed housing and credit bubble, gold will skyrocket as one of the only asset classes with tangible real world value.
Brandon Smith has been an alternative economic and geopolitical analyst since 2006 and is the founder of Alt-Market.com.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Birch Gold Group.
An Introduction to Credit Markets
Capital markets can generally be divided into two components; the equity market and the credit market. And soon we will get the crypto market, that will be divided in to where one also is for credits, because credits will be a future part of crypto, and that is the way finance is working.
There are two types of categories: equity market and the credit market. The former provides the mechanism by which investors can trade a share of ownership in publicly traded companies, and thus exchange a legal claim in their future profitability, while the latter is a platform in which participants can issue new debt or trade existing debt instruments.
Although stocks and shares typically dominate the news and most retail investors’ focus, it is in fact the credit market where most of the action in capital markets takes place in.
Although the bond and the credit market are terms often used interchangeably, the former is actually only a segment of the latter, which consists of any instrument used for an entity’s financing needs, including direct loans provided by a bank.
However, as bank loans don’t constitute securities and are therefore not regulated by the Securities and Exchanges Commission, the broader term has effectively come to refer to all issuance of debt in the capital markets
The bond market itself can be further classified into several sub-categories, depending on the nature of the issuer of debt. The most prominent participants, on the issuing side, are arguably governmental agencies, public companies and municipalities, thus giving rise to the government, corporate and municipal bond markets, respectively. Naturally, participants in the bond markets also include the buyers and sellers of the debt securities issued. These include large investment banks, hedge funds, institutional investors, as well as retail traders
Simply put, the scope of the credit market is to provide the issuers of debt securities with funds to finance their future expenditures or to balance their current needs. A government, for instance, can issue a bond when it’s having difficulty to meet its current obligations due to a revenue shortfall, or in order to finance new public works.
Similarly, a company looking for a cheap way to raise money for its future expansion or acquisition plans, and wants at the same time to retain its present control of ownership, will choose the corporate bond market for the financing it requires.
Corporates predominantly use the process of underwriting when issuing bonds, which involves one or a syndicate of large investment banks buying the entire issue of bonds and then re-selling them to investors. Governments, on the other hand, tend to issue bonds through an auction process, in which a number of institutions bid for the bonds on offer, and thus determine their issuing price and corresponding interest rate.
The debt instruments are essentially a form of loan or IOU. The issuing entity receives funds from the investors for a fixed term and is under the obligation to pay a pre-agreed fixed or variable interest rate at set time intervals, as well as to repay the amount borrowed at a pre-determined date in the future, known as the bond maturity. Once the bonds are issued, a process which is often referred to as the primary market, their prices will fluctuate depending on the prevailing market conditions, thus making further trading on them possible in what’s known as the secondary market.
The size of the global bond market is currently estimated to be close to $100 trillion, a figure which is more than twice that of the global equity market, as all types of issuers have rushed to take advantage of the prolonged environment of ultra-low interest rates globally.
Savvy investors thus keep a close eye on it, and often assign more weight on its moves than those in the equity markets; the first signs of investing trouble ahead will usually show up here.
The credit market’s size isn’t the only reason investors watch it closely, however. As it effectively determines the costs of borrowing, it serves as perhaps the best indication of business and economic conditions in the future.
The text i marked is one important point and might have many explanations, but it is not the point. My point is this is a typical sign that smart money are leaving exposed space before a crisis and goes to safe places. So this is interesting reading looking for clues of what is going on.
This is like trying to define areas and where danger can occur. This is the Dow index. I would not set spesefic number of when thing happens due to interpretation and timing.
This is a industry index and how it reacted in the different in IT and credit bobble
This is S&P500 and it is more tech so in 2001 it reacted a bit different. My point is to illustrate to different scenario on to different indexes, but where on is specific IT and only hit ard on one type of markets, but where credits hits hard everywhere.
So a financiele crisis can be hard also for the crypto market because money is lost and risiko investment is a no go for institutions. I am only pointing out that this is a possible scenario.
This is some media fear masseur guidance if i could cal it that!
The VIX S&P500 is to day at 16.5 and i will class it as low. in 2009 it was 90. I think it is a small riske in stocks as long as it is below 30, and dangour around 40. So we are not in a fear sone in volatility. So the market is not full of fear at the moment. So December was a fake out or a taste.
LCDX is a “credit” index or derivatives and are often season wawes. So the drop in Q1 is “normal” but it indicates the price to pay for debt. The lower the price thee higher the demand or harder it is to get credit.
The big problem is if it show no sign of recover when it is expected adjusted for natural swing like expected good results from the stock market (earnings) in Aug-Sept if it still drops, we can then see the VIX rise. It is not on the week but they have a tendency to have some correlation.
So we can see the rise of VIX followed by a dump in S&P500.
WHAT IS A CREDIT INDEX
Great analysis and very informative @B.F.A thank you for sharing
Everything in Finance got a name. The big engine today is US and it looks positive short term for now, but there might be a bum or Trump in the road or a Brexit that can cause mayhem in global scale. And it got a name Black swan event… But the big question that i have been asking myself lately is … Can Crypto be such event?
I found this great explanation on intrinsic values.
This is a great tool for price evaluation
S&P 500 index SPX might have pulled of a bad sign…
The transport from DJT are slowing down compare to the last 2 years
Wow, it’s really terrifying isn’t it @B.F.A
This song is much like our hodl memes-
just a short up date and i still cant say if we are heading in to financiele dark times or if we just correct.
There are really smart people that us a lot of money on this topic, and i am a simple keyboard warrior… but can this to formations have a correlation that shows the high market are coiled up fore a crash? or is this what the market needs to get back up on track again?
How he did he’s macro Picture…
I have some thoughts about how ETN will act in a recession in the global stock market…
when uncertainty and fear comes to the stock market money tends to go in to safe places like commodities and that can be cell phone operators MWO. BTC was invented after last crisis because of the nature of fiat printing banks…So ETN as a crypto fore the mobile market can make a home run based of assumptions like that…any thoughts about it?
To day i can read in the paper that a Russian oil company that is exporting 40% of the Russian oil are turning their back to USD and are trading in euro and yuan. This will overtime open for others to do the same and weekend the USD. We are not talking the end of the USD asa world currency, but a start to the end. The background for this decision is the trade war an US sanction against Iran. I do not want to talk politics and say right or wrong, but analyze the event and results.
US debt are based on the USD being a World currency and give US a “endless” money bank. The US long interest from 3 month to 30 years are not looking good, so how the FED reacts to this is only a guess. This is so close to a black swan event we can without it being it.
The central banks are now pushed more over to more money printing to keep the credit market going. The reason for that is a negative interest rate in many markets, so placing money is a loss and borrowing is positive. This cant go on forever so we can get a double effect in a recession, first we got the attack on USD and the trade war, and then we got the insane debt that will crush so many when interest rate goes positiv, so think about the results when the borrowing increase and expensive´s rocket when tha rate moves positiv. The market will price this inn and make the way out even more difficult.
The world are now heading in to unknown territories that now one knows the outcome, but we know it will be winner and losers and nothing is given at the time. i am a crypto dude, but i understand the importance of stability and slow changes. The world need time to adapt and we can only hope it is for the better. So there is a few places to keep an extra eye on, DXY, yuan, euro, oil, gold, bonds and shipping.
DOW and S&P500 will be the shortcut to see what is happening if following those index. The crypto market are a bit smale and volatile and still not veary regulated so it will not yet be the best indicator for what is happening, but we will see. This situation is new to crypto and we do not got any good historical data to rely on. So stay safe and do good things…Happy days