Author Archives: Keith Weiner

     

 

 

Opposing Monetary Directions

“Real estate is the future of the monetary system,” declares a real estate bug.

Does this make any sense? We would ask him this.

“OK how will houses be borrowed and lent?”

“Look at this housing bond,” he says, pointing to a bond denominated in dollars, with principal and interest paid in dollars.

“What do you mean ‘housing’ bond’,” we ask, “it’s a bond denominated in dollars!”

“Yes, but housing is the collateral.”

OK, so it’s not a housing bond. It’s a dollar bond used to finance the purchase of houses. These are not the same thing at all, the way chalk and cheese are not the same thing, despite both being single-syllable words beginning with the letters “ch”.

 

 

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Perversity: Thy Name is Dollar


If you ask most people, “what is money?” they will answer that money is the generally accepted medium of exchange. If you ask Google Images, it will show you many pictures of green pieces of paper. Virtually everyone agrees that money means the dollar.

 

Image credit: Cildo Meireles

 

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The Different Theories on What Moves Gold and Silver Prices

For example, the Quantity Theory school attempts to relate the quantity (or change in quantity) of dollars, to each commodity. Generally, this theory predicts rising prices based on the reasoning of “more dollars chasing the same or fewer ounces of gold and silver.” The problem is that the new holders of these new dollars are not necessarily bidding up gold and silver (our thorough rebuttal to this is here).

The Conspiracy School thinks that there is a shadowy cabal, a price-manipulation cartel that decides what the gold and silver prices will be (our thorough rebuttal to this is in our Thoughtful Disagreement with Ted Butler).

Other schools attempt to compare mine production with industrial and jewelry demand. Or attempt to hold up a famous buyer of metal, while ignoring the thousands of not-famous sellers who sold the metal to said famous buyer. We should not make too much ado over a move of metal from one corner of the market to another (as we’ll discuss below).

 

 

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I write this with sadness, still, at the news of the death of my friend Heinz Blasnik. He is better known by his nom de plume, Pater Tenebrarum, who published the economics blog Acting Man and wrote for many other financial sites.

I met Heinz twice, at his home in Vienna. He was a kind and gracious host, sending his driver to pick me up and serving Austrian delicacies for lunch. When I met him, he was struggling near the end of a long illness which was the result of a youthful adventure. Even so, he retained a benevolent sense of life, and a positive spirit.

But this is not why I wanted to write this. We were friends because we shared some ideas. Important ideas. Ideas about the nature of the world, and mankind, and how man can work together and coordinate their productive activities. Economics and business are my life, and Heinz was the same way.

What better basis for a friendship than sharing important values?

Heinz was deeply, passionately interested in helping people understand economics. I know not how much time he gave to this cause—unpaid, as blogs do not make money—but it was surely more than I spend. He engaged with those who were interested. Sadly, Austrian economics is not mainstream, though there are more than enough people to keep a teacher—or sensei—busy. He was willing to correspond with me, and I credit his articles and emails for helping shape my own views.

We did not always agree. If you put 3 economists in a room then you have at least 4 opinions. But even when not, he listened with benevolent intention and did not make it personal. It was always about the ideas. I think this is an important and uncommon virtue.

On one of my visits, we discussed life, the universe, and everything. And he told me a bit about the Austrian welfare state. Which led me to write The Service Economy. I have traveled around the world, and I have shared food and drink with friends in many countries. Yet that one conversation with Heinz stands out as interesting and important. I can only recall one other discussion with one other friend that led directly to me writing an essay.

I don’t think Heinz believed in Heaven, but I hope everyone will understand when I say this. I would look forward to a day—many years in the future, I hope—when I could meet Heinz for beers in Heaven, and continue our conversation where it left off in 2021.

Adieu Heinz.

 

Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals. Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. Keith is a sought after speaker and regularly writes on economics. He is an Objectivist, and has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona.

 

     

 

 

Silver Yo-Yo

The price of silver is going up and down like a yo-yo. On Sunday and into the first part of Monday, the price skyrocketed on news that Reddit was touting the metal. But as the data clearly showed, the price was not driven up by retail buying of physical metal.

 

Silver, March futures from Jan 27, 30 minute chart: a lot of volatility, but silver seems to have established a higher low after coming down from the initial spike. [PT]

 

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The Sage Does a 180

The big news in the monetary metals is that Warren Buffett — famed disliker of gold — sold bank stocks to buy gold mining shares. What is interesting to us is not that we think he has any special powers to predict the gold price. After all, he famously bet on silver, and lost.

 

GOLD, daily, over the past two years. The Sage is a bit late to the party, but his entry confirms that the sector is now entering the “recognition phase” – the stage at which the investoriat-at-large realizes something is afoot. [PT]

 

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Explosive Days in Silver

The silver market witnessed another explosive day!

At midnight (in London), the price of the metal was $26.90. By 9pm, it had rocketed up to $28.95, a gain of 7.6%. This is not normal.

But then, we are not in a normal world.

 

After several years of going nowhere and a downside fake-out in March this year, silver has come to life rather dramatically… [PT]

 

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On Monday, Silver got Scarcer – and Simpler

On 23 July, we said:

 

Well, it’s complicated.”

 

The action on 27 July was not.

 

Silver spot price vs. September basis

 

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Big Moves, Widening Spreads

The big news this week was the drop in the prices of the metals (though we believe that it is the dollar which is going up), $57 and $1.81 respectively.

 

Despair at the Unjustly Injured Gold Bugs Anonymous meeting… [PT]

 

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GDP – A Poor Measure of “Growth”

Last week the prices of the metals rose $35 and $0.82. But, then, the price of a basket of the 500 biggest stocks rose 62. The price of a barrel of oil rose $1.63. Even the euro went up a smidgen. One thing that did not go up was bitcoin. Another was the much-hated asset in the longest bull market. We refer to the US Treasury.

 

BofA Merrill Lynch high yield master II option-adjusted spread: on Dec. 23 it tightened to the  lowest level of 2019, fairly close to its post-crisis low established in 2018. This seemingly signals that risk is very small –  in reality, risk is probably extremely high. [PT]

 

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A Critical Appraisal of a Hero of Central Monetary Planning

We apologize for publishing this Report late. We have been very busy developing the business. Last week the price of gold moved up $16, and that of silver $0.39. Almost two groceries leaked out of that store of value par excellence, bitcoin. But hey, stocks are up!

 

We admit to having a soft spot for the politically incorrect Paul Volcker. He frequently expressed bemusement at the newfangled obsessions of his successors at the Fed (as an example, at a conference in 2006 he remarked on the increasing emphasis on “core” inflation: “A great mantra of central bankers these days is ‘inflation targeting.’ I don’t understand that nomenclature. I didn’t think central bankers were in the business of targeting inflation. I thought we were supposed to be targeting stability.” h/t Grant’s). Nevertheless, we are on board with the criticism voiced below. Volcker was indeed instrumental (along with Milton Friedman, otherwise a champion of free markets, but oddly blind to the insidious nature of a monetary central planning agency) in persuading Nixon to abandon the last remnant of the gold standard, the Bretton Woods “gold exchange standard” that permitted foreign central banks to exchange their US dollar reserves for gold at a fixed exchange rate. Not only did this decision unleash a decade of economic and currency market chaos, it ultimately paved the way for the unbridled expansion in money and credit in train since the early 1980s. In the meantime we have arrived at a juncture where central banks are “forced” to adopt ever more insane policies as they rush from trying to prevent one potential systemic collapse after another. [PT]

 

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Re-Purposing of Tractor Parts in South Dakota

 

The price of gold was all but unchanged, but the price of silver dropped another 46 copper pennies last week.

We came across an article showing pictures of something we have previously described: sculptures made from parts taken from farm tractors.

Here is a picture I took:

 

The good old Predator made of tractor parts – looks almost like the real thing! Here is background information on the artist and more pictures of his work. [PT]

 

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Most read in the last 20 days:

  • Perversity: Thy Name is Dollar
    Perversity: Thy Name is Dollar If you ask most people, “what is money?” they will answer that money is the generally accepted medium of exchange. If you ask Google Images, it will show you many pictures of green pieces of paper. Virtually everyone agrees that money means the dollar.   Image credit: Cildo Meireles   Breaking Down the Dollar Monetary System What does it mean to have a dollar? If you hold a piece of paper with green ink on it, which says “ONE...
  • What’s In Your Loan?
      Opposing Monetary Directions “Real estate is the future of the monetary system,” declares a real estate bug. Does this make any sense? We would ask him this. “OK how will houses be borrowed and lent?” “Look at this housing bond,” he says, pointing to a bond denominated in dollars, with principal and interest paid in dollars. “What do you mean ‘housing’ bond’,” we ask, “it’s a bond denominated in dollars!” “Yes, but housing is the...

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