14 August 2013

PM Bug forum comments on backwardation

Those who are not bored to death with the backwardation/gold bank run narrative may find my comments on this PM Bug forum thread of interest, which was in response to this post of mine. I've cut and past some of them below for the lazy readers, but to get the correct context of Mr/Ms Unbeatable's probing questions you need to read the thread. I'm working on some posts on GOFO/backwardation to further expand on my comments in this post.

Originally Posted by Unbeatable:
Hmm.... When he sees 400oz bars attracting a 'special premium' he will let us know?The two biggest gold consumers India & China are paying a $30+ premium an ounce over spot, a 600%+ increase over what they paid in previous years!?
The premium in India and China is not for 400oz bars, but for smaller forms and particularly in India there are import duties and other taxes that go into the premium. The demand in India and China is high, but it is not translating into premiums for the raw wholesale form (400oz bars).

Originally Posted by Unbeatable:
Hmm... When he sees bullion banks desperately bidding on Perth Mint's refining output he'll let us know?
My statement was about bullion banks and 400oz bars. Your quote is referring to demand for coins, two different markets. You are missing the whole point of my comment, which is that retail level demand, premiums do not reflect a shortage of gold at the wholesale level and a run on the fractional reserve bullion banking system.

Originally Posted by Unbeatable:
Hmm.. When he sees restrictions on how much gold can be bough he will let us know? 'the Reserve Bank of India banned import of gold by domestic consumers through bank credit' ' Gold coin and bar sales stopped in India' 'Pakistan temporarily bans gold imports'
You are misquoting again. The restrictions I was talking about was restrictions by GoldMoney and Bullion Vault, not any restriction in any market. I picked GM and BV because they buy 400oz bars for their pooled storage products. If there was a shortage/run on the wholesale gold banking system then GM and BV would have problems sourcing 400oz bars. They are not.

Originally Posted by Unbeatable:
But to be blunt (And as I think you know full well yourself), the idea that you'll see the overt stress indicators that you suggest coming from the bullion banks actions themselves is quite frankly absurd because the day they show provable supply side issues is the day they default.
Nope, it is not a sudden event, it will build up over time and signals will be given, see http://www.goldchat.blogspot.com/201...strust.html‎ (that does need some refinement but the basic idea is there). Bullion banks, just like any bank, will do everything they can to drag out and avoid a run, they aren't just going to throw their hands up at the first sign of trouble. Those "do everything" will be gradual at first and will be visible to us in the wholesale market who know what to look for.

Originally Posted by Unbeatable:
Which is why I showed how each of the indicators are already clearly manifesting themselves in the gold market. (& though you repeatedly try to pretend that there is this massive separation between stresses in demand in the retail and wholesale market, they are in fact completely interlinked.)
There is separation between retail and wholesale. Most of the retail problems/premiums are driven by production capacity shortages rather than shortages of raw gold or silver. For example, during the 2008 financial crisis the blogosphere was going crazy about shortages of silvers, particularly, yet the Perth Mint was shipping in 20 tonnes of silver each week from London for about 20 weeks on end. Go and have a look at my blog around that time.

The indicators you mention are just indicators of strong end user demand, not a run on the bullion banks nor any stress at that end. India premiums reflect the restrictions the Govt has put on, something they have been ratching up for a long time well before this talk of a run/stress and driven by a CAD problem. It hasn't affect demand much at all - instead of the shipments of gold we sell going to India they have suddenly started going (demand coming from) dubai and thailand, funny that.

Originally Posted by Unbeatable:
1. In times of demand stress the bullion banks are the ones supplying many mints with additional refining input never mind bidding on the output?
Nope, got that wrong. US Mint, yes needs to get metal from the market but the two other big ones - Canadian Mint and Perth Mint - are refineries so they source their own metal and in fact have excess left over after coining needs. Perth Mint refines around 6 tonnes a week and we use 10%, maybe up to 20% if lucky, for coin production. The rest we turn mostly into kilo bars and then sell it to the highest bullion bank bidder - it is that premium on kilo bars that tells us how desperate they are, in addition to where it is going and what form, gives a lot of info.

Originally Posted by Unbeatable:
2. I'd imagine the bullion banks have preferential contracts in place and ones that prohibit you, a Perth Mint employee from disclosing market sensitive information, so I take your 'I will let you know' with a pinch of salt.
We work with a range of bullion banks and have no exclusive supply arrangements. While we have customer privacy requirements, that does not stop us from making general statements about what we are seeing. And there is no such thing as market sensitive information in bullion - it isn't an equity.

Originally Posted by Unbeatable:
3. If the bullion banks were having issues, instead of people like Perth Mint employees letting the public know about it, I'd expect them to go out and try to convince people of the opposite - 'Don't worry there are not wholesale supply issues' & shi*, look, here you are...
Actually, it would be more logical for us to hype up shortages so that we could increase coin and kilo bar premiums and make more profit. I've rarely seen any market comment coming out of the major refiners talking about how crap demand is. Shortage hype is used by coin dealers to 1. get people to buy now 2. pay excessive premiums. Perth Mint has a bit more integrity and we stick to the facts. Why do you think Perth Mint and I get so much crap on the gold blogosphere - because we are wrecking their sales patter.

Originally Posted by Unbeatable:
So rather if I was looking for supply problems in the 400oz wholesale market, I'd look for signs of additional central bank leasing, particularly the Bank of England who are a key source of supply in times of stress. & shi* look a story just in the last two weeks that the BOE may have leased up to 1300 tons in the 400oz wholesale market in the first half of the year
You are on the right track here, a run is about liquidity, so the first action of a bullion bank experiencing a run will be to lease/borrow gold (not buy), which should show up in increasing lease rates (which has the effect of decreasing GOFO) - although lease rates are still quite low compared to stress periods in the past but trending up.

The 1300t story is another beat up, see here http://www.screwtapefiles.blogspot.c...or-layout.html the BoE said that the figure that Alasdair relies on for his whole thesis cannot be relied upon.

Originally Posted by Unbeatable:
Or I'd look for signs that Bullion Banks are running short of supply and/or are being forced to help one another out. & shi* look at how much of JPM's inventory has been removed this year and also this story from just yesterday
Those sort of inter-bank transfers are standard part of market clearing http://lpmcl.com/

Originally Posted by Unbeatable:
But as these don't constitute hard evidence, & people like Potemkin would say 'Rumours, words, stories...' I chose to bring up provable supply side shortages &/or unprecedented demand in the gold market which is of course what creates the wholesale market problems you are witnessing above.
Signs of increased demand and just signs of demand, not a bank run and does not cause a bank run as the bullion banks just act as a broker between buyer and seller and let price manage it. It is only unallocated holders taking delivery that creates a run and possibility of default. That shows up in lease rates and the futures/forward market first.

Originally Posted by Unbeatable:
Really!? How many hours do you think it will take from the time they announce purchasing restrictions to Gold Money to the time they default? I think you know that this is the very last thing they will do, if they don't actually just default first.
First sign will be premium increases, that is the key signal. And it won't be explicit purchase restrictions, more like delays due to "transport issues" etc.

Originally Posted by Unbeatable:
If there are demand stresses for gold, I think it's (painfully) obvious that they would rather do their best to try cut demand from the biggest gold consumer, India. (EDIT: Which is obviously why I brought up the restrictions in India and outright temporary import ban in Pakistan as being very indicative of shortages in the wholesale market.) As this would ideally (For the bullion banks) have the effect of decreasing demand for their good delivery bars in that market and also freeing up mint output sourced from the mines & scrap, so that it could then be used to refine new 400oz delivery bars for the bullion banks as opposed to coins and smaller bars for retail.
See my earlier comment on India. The Indian restrictions aren't doing anything to stop demand, it is just being smuggled. The Indian Govt actions are just about making their CAD figure look better to financial markets.

Originally Posted by PMBug:
Bronsucheki, are you able to confirm or deny this claim (at least as it pertains to the Perth Mint) from Bill Haynes?
No can't confirm it directly as we aren't being given any 100oz (ex Comex) or 400oz (ex London ETFs) bars by bullion banks to melt and recast into kilo bars. However, we are seeing good demand for our refining output into kilo bars for shipment into China, Dubai and Thailand, so the Bill and Tekoa reports fit in with that.

Originally Posted by Unbeatable:
Hi Bronsucheki, thanks for taking the time to give such a detailed response and for doing it in a pretty reasonable tone despite how confrontational mine was. Also especially considering that you work & have considerable knowledge in that area vs. me who doesn't.
No problem, don't mind being challenged. This time is different to 2008 and certainly more stress, I'm just not sure there is a run on yet, but it is finely balanced I think. We are seeing very high premiums on kilo bars, premiums we haven't seen for a very long time.

In addition, we did hear that 99.99% purity 400oz bars were attracting a premium in London (but the normal 99.5% purity wasn't). Mostly likely explanation for that was that 99.99% purity 400oz bars could just be melted and recast into kilo bars (which are generally preferred to be 99.99% purity in Asia/India) without needing refining. Screwtapefiles blog did some good analysis on the number of 99.99% vs 99.50% purity and what was being withdrawn from GLD, but nothing conclusive yet.

So certainly this is all very unusual and you're right to be cautious.

Originally Posted by Unbeatable:
So I'm surprised during the period of unprecedented demand this year that you didn't have to source any additional supply from the LBMA in London again?
Perth Mint is primarily a gold refiner and we get silver as a by-product of that gold refining. Normally the silver was enough for our coining needs but in 2008 the demand was so high we had to source silver externally. Since then we have picked up some more silver refining so have enough silver now, even with higher demand.

Originally Posted by Unbeatable:
You also say the majority of your non coin production is being made into Kilo bars for the highest bullion bank bidder. But I was under the impression that the bullion banks dealt in the larger 100 & 400oz bars & that the 1 kilo bars would be more for the retail investment market?
1kg = $40,000, not exactly "retail" by most definitions! Bullion banks deal in any size - they cover all markets. 100oz gold bars are primarily a US market size. 400oz bars are usually used for investment, bulk long term storage, they are not really convenient for use in industry/jewellery/mint as you need a big caster to melt 400oz, plus 400oz is 99.5%. So, particularly in Asia, the smaller 1kg in 99.99% purity is preferred by jewellers. Plus when I talk about kilo bars wholesale, that is selling in half or one tonne lots, eg $20m to $40m deal size.

Originally Posted by Unbeatable:
But the import taxes/duties in India are 8% that would be $104 an ounce, far higher than the $30 premium the media is using. Doesn't this mean that the $30 premium is the premium they're paying prior to import duties/taxes being applied?
Yes correct, the $30 would not include that import tax, but I believe there are some other duties/fees and often bullion banks selling into distributors in India include shipment and finance deals in the price, so I'm not sure the $30 is the full premium. However there is still a large premium in that market reflecting the restrictions and driving the smuggling, so I probably pushed my point too hard there. The premium is also highly volatile as the Indians are very price sensitive.

Originally Posted by Unbeatable:
this is perhaps the first time we have seen this happen laterally between two vaults
Has ZH been following these comex reports for the past ten years? I doubt it. I am sure if I had the time and went through all the reports I would be able to find this happening many times. One also needs to consider that if a BB is doing other movements/transfers as well as to another BB's vault, that is not going to be visible as the aggregate number would combine both. So one cannot say this is unusual.

Originally Posted by Unbeatable:
Today I see another negligible 4k ounces went from Scotia to JPM and JPM converted a massive 70k ounces from there 360k registered total and moved it onto their 100k eligible total.
The transfer from registered to eligible is why one needs to add both stocks together and compare that to open interest, which is what I did in this post. The current coverage ratio for gold is 17.7% and silver 24.5%. Looks like plenty of metal for redemptions.

Originally Posted by Unbeatable:
Personally I think at the very least a Bullion Bank run is in progress at JPM and I think even though the writing is on the wall, the others are just trying to help JPM make it to some pre-determined end date.
How long do you think banks runs last for? I note no commentator is really putting a date out there, except Jim Sinclair "because of the continued fall in gold inventory that within in 90 days or sooner the Comex must change its delivery mechanism". Personally I think by mid-Oct Comex will still be going on as per normal and the BBs will still be around.

Originally Posted by Unbeatable:
My question to you is, having seen how these unusual transfers have continued since my original post do you still think
As noted above about ZH, I question whether there is any proof these are "unusual transfers".

Originally Posted by Unbeatable:
My question to you is would you agree that the banning of buying gold on consignment did have the effect of considerably decreasing India's overall physical gold demand for 1-2 months (incl. smuggling)?
Yes, as India had a relatively open gold import system the sudden rule changes crimped legitimate imports but the smuggling network was not in place to take up the slack so that would have had the net impact of restricting demand. We have recently seen a pick up in demand from other countries which tells us smuggling has started back up.

I disagree with Eric Sprott that western central bankers "called up" India and asked/told them to do these import restrictions to help them out. I agree more with Jim Rogers on this "Indian politicians who suddenly blamed their problems on gold. The three largest imports to India are crude oil, gold and cooking oil. Since they can’t do anything about crude and vegetable oil, the politicians said India’s problems were because of gold, which, in my view, is totally outrageous. But like all politicians across the world, the Indians too needed a scapegoat."


  1. it still surprises me that people don't understand why India doesn't want their populace dumping all of their money into gold...

    it's because it destroys a developing economy if no one DEVELOPS THE ECONOMY but instead stashes their wealth in a non-productive asset like gold...

  2. the sad thing in this whole thread is that your counterpart is learning what he knows from sites like ZeroHedge, who themselves clearly have no concept of how the COMEX operates... so he's already taken ZH's COMEX "JPM forced to borrow gold" nonsense as Gospel.

  3. By 'lazy readers' you are just teasing we who have several hundred pages of reading to do before breakfast? :0))

  4. @KidDynamite you have ti all wrong and so does the Indian CB - its sad that those in charge of the financial wellbeing of a country lack common economic principles.

    The problem isnt that gold is nonproductive - the problem IS that the Indian people arent given better alternatives and instead the Indian govt continues to try and screw them over with a rapidly depreciating Rupee and a corrupt, inefficient financial system.

    Give people options and they will sell their gold for productive investments. Try to stifle them by forcing them into crappy financial markets and time-bomb currnecies and they will choose gold.

    There is a lot to be learned from Adam Smith still...

  5. @Kid Dynamite, you said: "it destroys a developing economy if no one DEVELOPS THE ECONOMY but instead stashes their wealth in a non-productive asset like gold... "

    I totally disagree. Transferring ones wealth into gold still allows fiat currency to circulate where it is needed/wanted.

    For example, an individual might come to the conclusion that investing his/her hard earned savings into some type of commercial venture as too risky or too complicated. So instead, he moves his wealth into physical gold, which then allows that pile fiat currency to re-circulate back into the economy where it then has the opportunity to end up in the hands of a more competent venture capitalist that is capable of developing a new business venture.

  6. Spider:

    you addressed a different question. you answered: "why do Indian people want to hold gold?"

    I answered "Why don't Indian planners/bankers want their people to hold gold"... see the difference?

    and my point is that the answer to the second question is positively not "because the Fed/JPM/BOE called them up and asked them to help suppress the price of gold"

    @SicilianGold - Pretend all of the Indian citizens take their income and buy gold with it... what happens to the economy? Now step back a bit from that extreme hypothetical and you should see my point.

    the problem is that the money used to buy the gold doesn't stay in the closed loop of "India"... so that pile of fiat currency goes elsewhere and does something productive.

  7. Thanks (Mr. B) for stopping by and contributing to an interesting conversation. It's nice when people with different ideas / viewpoints can discuss them as adults.

  8. Nailed it here, Bron.

    "The transfer from registered to eligible is why one needs to add both stocks together and compare that to open interest, which is what I did in this post. The current coverage ratio for gold is 17.7% and silver 24.5%. Looks like plenty of metal for redemptions."


  9. Just a thought, I'm wondering if the Crash JP Morgan thing was merely a typo. Perhaps they meant to write CASH JP Morgan. Coz' they've handed them a lot of dough through this campaign.

  10. CASH JPM, lol, I might have to steal that one day.

  11. @Kid Dynamite:

    “Pretend all of the Indian citizens take their income and buy gold with it... what happens to the economy? Now step back a bit from that extreme hypothetical and you should see my point.”

    Your extreme hypothetical situation is completely unrealistic.

    “the problem is that the money used to buy the gold doesn't stay in the closed loop of "India". “

    But the gold being imported is in a closed loop. You see, no country would export gold to India if it wasn’t able to receive something tangible and/or useful in return.

    Also, if an individual wishes to labor on and then exchange his hard earned pile of fiat for some gold, with another individual who wishes to dishoard his pile of gold for some fiat currency to deploy in a productive manner, then what the hells the problem? Everyone wins. The laborer saves in gold because he can’t afford (or is too incompetent) to invest his wealth in a productive manner. And the venture capitalist dishoards his gold savings for a pile of fiat currency where he can then do something productive with it.

  12. @SG

    You and KD are talking at cross purposes, in given scenarios you are both correct. KD from the pov of the government trying to manage an economy and you from the individual's pov trying to avoid the dangers of that management.

    Elections due in March have Indians wary of of irresponsible spending promises by aspiring politicians.

    I found this interesting:


  13. @Sicilian Gold -

    of course my example is unrealistic - that's why I MYSELF called it an "extreme hypothetical." The point is to explain to you why the gov't doesn't want its people to buy gold.

    here's another example: the gov't also doesn't want its people to hoard CASH (right now, at least)! just look at how the Fed handles policy in the U.S! the point of easy monetary policy is to get cash to be "un-hoarded" - INVESTED.

    it's the same "problem" as the gold fascination in India.

  14. Hi Kid,
    I absolutely dont understand your point, please explain, because I appreciate your posts alot. I see it like that:

    An indian farmer farms, brings corn to the market, gets paid in rupie. The next day he exchanges with somebody rupie token against gold token at whatever current ratio. The other person now has rupie token, he now has golden token.
    Why on earth do you think that this is worse for the overall economy&society rather than:
    - stacking the rupie under his own matrese.
    - spending the rupie onto some Iphone or Mercedes
    - exchanging the rupie against an already existing share of e.g. CocaCola.... from somebody
    - saving the rupie in some "modern financial device"

    I really dont get it, please explain.
    The way I see it the austrian "Irving Schiff" way is: It is good to borought from the future in order to know therefore being able to pay more in the future. That can be done by: buying newly issued shares of a really good company where you see the future and want to put your fruits of your labor into, or lending it to a bank that performs this according to the highest prudent lending standards (=> navigating this "capital" the lender gave, where it is most efficiently needed). These are the only ways to improve.
    Now if the dude bought gold it is basically neutral, not good, not bad, the choice of capital allocation is left to somebody else (remember he is just a farmer that wants to get along). Is that good? I say in todays times at least the farmer does not get screwed by OGWarrenB or GoldmanSucks.
    That is the point the indian society has to improve: real prudent lending standard by local union banks (<=e.g. made Germany great) and real entrepreneurship by stock risk capital(<=e.g.made the US great).
    Greets, AD

  15. @Advocatus:

    first off, stashing the rupee (or the dollar) under your mattress is also bad: i already said that...

    however, buying gold *may* be worse (I'm not sure, actually - it PROBABLY is) because as already noted, the gold market is not a closed loop: Indians sell their rupees to buy gold, or buy gold in rupees from someone in England who sells the rupees... what happens then? the rupee gets decimated...

    oh wait - that's happening as we speak....

    as for Indians buying Iphones or Mercedes: those transactions (exporting of capital) in and of themselves are probably equally bad on the surface, but they are USEFUL, PRODUCTIVE assets... you can use an Iphone to run your business and help your economy.. you can use your mercedes to drive to work and run your business, etc etc etc...

  16. and...you can use your gold as collateral for your business loans or for large purchases such as the home that the writer's mum (link above) bought using her gold as collateral.

    So, the gold that caused the CAD problem can boost local investment. Nothing is simple.

    I think if we investigated the economic prospects of India in greater detail it would become clear there are impediments to foreign investment, trade and growth due to mismanagement and corruption...all reasons for an individual to buy gold as protection...and reason for incompetent and corrupt politicians to single gold out as a scapegoat.

  17. As to why Indian families hoard gold, consider that in 1947 10 grams was 88.62 INR and today 10g is approximately 27,940.00 INR...

    That's gonna leave a mark on the national psyche, let alone tradition going back thousands of years.

  18. Hi Kid,
    I think there is a misunderstanding between us. Sure the best for the indian farmer would propably be to invest into something productive, let's say a second-hand harvester without any electronic gadgets. Therefore he would free land workers that could instead fix the indian roads etc....

    But your point that the rupie does depreaciate does not really matter, since the gold stays in the borders of india and can be sold in order to get that harvester maybe later when the farmer decides that it's worth it. During this period it is a zero sum game.

    So we still arrive at the point: Entrepreneurship is needed, either directly by the farmer or by somebody else taken the initiative supported and validated by a local bank (=prudent lending standards). The ratio of gold vs. rupie does not matter in that case (=Reference point gold since India is the Freegold-Valhalla;)
    Greets, AD

  19. http://www.livemint.com/Companies/pqNgQUDoOPsQCli4EgZLMM/Jim-Rogers-Why-Im-shorting-India.html

    I think a good valid take on India.
    Greets, AD

  20. @AD:

    "the gold stays in the borders of india and can be sold in order..."

    yes - sure: IF the people who plow their assets into gold ever sell the gold, the "Damage" can be undone...

    IF, however, they worship gold and never sell it...

    you're actually arguing my point for me, I think, by noting that if/when the gold is sold, things are "ok" in our example

  21. @Kid:
    And I think with your judgement of "worship gold" almost scapegoating it, you are much too harsh.

    I see it from my very own personal perspective: I build a company from scratch, debt free, improved the company and the product to the highest efficency, at least that I can see. Now what? Sorry maybe I am too dumb to improve further, so what to do with my profit coming in or sell the company?
    I have everything I want, I dont want to have a Ferrari or Porsche (my Audi is perfectly fine), I dont want to have a spyphone, and I dont want to be creditor to OGWarrenB, nor being raped by my socialist EU government. Now what? Can you tell me why it is bad that I save in gold, being a "dumb worshipper, doing damage"? (my wife likes to asks me, "do you want to be burried with your gold? - YES, ITS MY PRECIOUS, LET THE IRS JUST HAVE THAT PAPER, THEY PRINT IT AT FREE WILL ANYWAY ;)
    Greets, AD

  22. @AD -

    again, now you are answering a DIFFERENT QUESTION.

    I have explained why the gov't doesn't want their citizens to dump their money into gold.

    you are explaining why the citizens want to.

    as for "gold worship" - i don't think it can even be debated that India is one of those countries where gold is about as close to religion as it can get, right?

  23. Kid,

    no no no, let me rephrase your first point:
    "(buying gold)...it's because it destroys a developing economy if no one DEVELOPS THE ECONOMY"
    That was your key phrase you wrote in your first post, btw. often used by gold haters and keynesians.

    And from my very own personal example, I have proven this thesis wrong, that, just by buying gold and having it as my personal golden calf religion, I did not do any damage to the overall economy at all. (more or less even the opposite, if you want to follow the FG debtors vs. savers philosophy)

    Who tells you, that all the people in India that buy gold are not just like me? Working their bud off, creating something new that have not been there before that helps other people efficency and is desired by other people, personally ending at the end of the day with a token surplus?
    Okay, probably they are not exactly like me, but from their very individual standpoint like I wrote "Now what? Sorry maybe I am too dumb to improve further" maybe the farmer is too stupid to buy a second-hand harvester, or he just likes it the way he does it? I dont know, and who am I to judge him, but that is his very personal business and that wouldnt change no matter if he buys gold or not.

    And why governments dont like gold has nothing to do with acting "for the greater good" or economy or life quality of their fellow citizens. Rulers like to rule, simple as that, nothing more nothing less, and gold simply undermines their planning authority.

    Amazingly the indian gov. has enough resources to have a nuclear weapon arsenal and one of the biggest standing armies, but gives a sh!t about the infrastructure of their people. Not really something unusual for psychopaths.

    Greets, AD

  24. I think that AD has never been to India. Or China, for that matter.

  25. SLL,
    I admit that I always refused to go there for business purposes and for private reasons at all anyway. You thing that I missed something and that the laws of a free market are not universal? Maybe they are (not?), but who knows the answer?
    I only know quite some chinese and indians people. The only thing I noticed is that they are kind of proud of themself and their country for whatever reasons, much more proud than you would expect europeans to talk about there nations.
    I mean I am willing to learn what are the specific differences and especially WHY and HOW you think that benefits in which ways their economies.
    What I mean be that e.g.: I am personally still amazed that the former east germany under a really stupid socialist central planning with price controls did quite better than a lot of other "free" states, but still that does not "prove" the central planing to be the "right" way to handle things.
    Greets, AD

  26. P.S.
    My wife does quite business with India. The storries and pictures are enough for me not to go there ;)

  27. AD -
    this will be my last reply, because you seem to be ignoring what i'm saying...

    India not wanting their citizens to hoard gold is much like the Fed not wanting U.S. citizens to hoard dollars... doing either results in no economic growth.


  28. Kid,
    thanks for the comparision, I think I finally got your point.
    We live in interesting times and will probably find out in our lifetime who is right or wrong about how an economy grows and why it crashes, or if you print wealth by fiddling around with the money aggregates, regardless of what the underlying real world is doing.
    Greets, AD

  29. @ Kid Dynamite:

    “India not wanting their citizens to hoard gold is much like the Fed not wanting U.S. citizens to hoard dollars... doing either results in no economic growth.”

    I have to disagree with you here. I’m pretty sure if US citizens hoard dollars in a bank account, those very same dollars can be loaned out to entrepreneurs who are competent enough to invest it in a productive way which can create economic growth.

    Also, there are probably several reasons why US citizens do not hoard/save dollars, and one being that there’s no incentive to save. Banks give you minuscule rates of return on your cash deposits which aren’t even close to keeping up with the rate of inflation.

    This brings me back to my original premise. If an individual wants to save his wealth for future use but is too poor, risk-adverse, lazy and/or incompetent to invest it productively, then his best choice is gold.

    And if the Indian government wishes to stimulate growth in the economy, then they should stop inflating the currency!

  30. Hi Bron, do you have any insight on the following: