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Old 12-18-2018, 04:08 PM
Danny B Danny B is offline
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Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,887
The role of gold,,, frozen junk

FED GOV had spent so much on the warfare-welfare State that gold was leaving the Treasury at the rate of 100 tons a week in summer of 1971. There had been a lag but, the bills eventually came due. Nixon closed the gold window to avoid paying the bills of his predecessors. It is the STATE that is the profligate spender that is constantly constrained by a gold standard. The banks can survive a gold standard because they use fractional-reserve credit creation. The State is NOT a profitable enterprise unlike the banks. The State consumes and distributes but, it technically isn't profitable. The State is hamstrung by a gold standard, especially in the case of war.


The basis of a sound system is sound money. Throughout history the monetary system has always functioned better when gold has been backing the currency? So why has every currency system in history then failed and why have all currencies always gone to their intrinsic value of zero?

The explanation is simple. Soundly based economies with budget and trade surpluses carry the seeds of their own destruction. Once the economic cycle has peaked, the country continuous to spend money it doesn’t have and deficits are created. This becomes a vicious circle, more deficits lead to more money printing which in its turn increases the deficits. At that point the country abandons the gold backing of the currency in order to print more money and this eventually leads to the collapse of the country’s economy. "

This upcoming FED meeting is crucial. Will the FED detonate the markets or, not? Keep in mind that ZIRP and QE have not fixed anything. Will they be abandoned? The markets are a very short step away from collapse.

The BIS fears that a very large segment of the debt market will just disappear. Keep in mind that an object or asset is only worth what somebody else will pay you for it,,,, be it a tulip bulb or a collateralised debt swap.
The bond market has frozen: Not a single junk bond prices this month – Zero Hedge
A frozen debt market can be considered a "stranded asset"
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