Misguided Incentives

The price of gold subsided a few bucks, and the price of silver blipped a few pennies. Not much action last week, groceries neither pumped into nor drained out of this asset class. Those who look to exchange capital goods for groceries need to find a different asset.

 

The best-laid plans… [PT]

 

Not even the S&P 500 Index provided a gain in groceries this week. It certainly wasn’t the much-vaunted store of groceries, Bitcoin, which leaked 12 of them last week. 10-year treasuries picked up some purchasing power, but not a lot.

Maybe President Trump can order the Fed to fire up its tried and true grocery printing machine. If not, how can the strong economy stay strong? How can GDP keep growing, if the incentive to convert capital to income, to consume, is withdrawn?

Speaking about eating the seed corn, we came across this post on Facebook. It is quite poignant:

 

“7 years ago, a glass bottle with millet was accidentally found in the village of Velyki Krushlyntsi in Vinnytsia oblast, Ukraine. The bottle had been buried under the root of aspen by Semen Poberezhnyak in 1932, when the Soviet commissars nationalized Ukrainian villages all that was edible. In spring, he had wanted to sow this millet to save his family from starvation. Alas, he could not find the tree he had dug the bottle under, from among the other trees. To the end of his days he was sorry he did not put a mark on the tree. He could not forgive himself that his daughter Justine and her three children – two girls and a boy – died of starvation then. His great-grandson found the bottle in November 2012.”

 

Ukraine, 1933: malnourished children scrabbling for potatoes in a frozen field… Stalin’s collectivization policy triggered a terrible famine that killed millions of Ukrainians. This may explain  why people in the country were so eager to pull down statues of former Soviet leaders a few years ago. [PT]

 

The Ukrainians suffered the consequences of the Soviets eating their seed corn. We fear that people in the West will once again learn the consequence of eating their seed corn. But right now they cheer a rising GDP, heedless that the Fed’s trick is to fuel it with seed corn.

 

Finally found: grandpa’s bottle with seeds – 80 years too late. [PT]

 

Fundamental Developments

Let’s look at the only true picture of the supply and demand fundamentals of gold and silver. But, first, here is the chart of the prices of gold and silver.

 

Gold and silver priced in USD

 

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio (see here for an explanation of bid and offer prices for the ratio). The ratio fell last week.

 

Gold-silver ratio, bid and offer

 

Here is the gold graph showing gold basis, co-basis and the price of the dollar in terms of gold price. It rose this week.

 

Gold basis, co-basis and the USD priced in milligrams of gold

 

There was a slight drop in scarcity (i.e., the co-basis) along with the rise in the price of the dollar (i.e., the drop in the price of gold, measured in dollars). Note that this close to the December contract expiry, we have shifted to the February 2020 contract (and to the March contract for silver).

The Monetary Metals Gold Fundamental Price, was down another $8 this week, to $1,457

Now let us look at silver.

 

Silver basis, co-basis and the USD priced in grams of silver

 

In silver, scarcity is falling, and abundance is rising. The Monetary Metals Silver Fundamental Price fell by another 19 cents, to $16.13.

 

© 2019 Monetary Metals

 

Charts by Monetary Metals

 

Chart and image captions by PT

 

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.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Is the Fed Secretly Bailing Out a Major Bank?
      Prettifying Toxic Waste The promise of something for nothing is always an enticing proposition. Who doesn’t want roses without thorns, rainbows without rain, and salvation without repentance?  So, too, who doesn’t want a few extra basis points of yield above the 10-year Treasury note at no added risk?   The yield-chasing hamster wheel... [PT]   Thus, smart fellows go after it; pursuing financial innovation with unyielding devotion.  The underlying...
  • Japan's Yield Curve Control Regime is Coming to America
      Monetary Lunacy, Nipponese Version Earlier this month, Bank of Japan (BOJ) Governor Haruhiko Kuroda commented that Japan’s central planners are considering a 50-year government bond issue as a long-term means of putting a floor under super-long interest rates.  How this floor would be placed is extremely suspect; we will have more on this in a moment.  But first, the dual benefits – according to Japan’s central planners...   Kuroda-san: the man with a plan, or...
  • Gold, Togas and Very Fine Suits - Precious Metals Supply and Demand
      Yields and the “Everything Bubble” Last week the price of gold was up $9, and the price of silver was up $0.18. This week, our thought turns to a cherished old saw. Gold bugs often tell us that the purchasing power of gold is constant. An ounce of gold could have purchased, they say, a fine toga in Roman times. Just as it could buy a fine suit today.   This magnificent toga will set you back an ounce, pilgrim. Just think of the impression you'll make....
  • Repo Market, QE4 (a.k.a. Not QE), the Fed and Gold
      Incrementum Advisory Board Discussion of 23 Oct 2019 In late October the Advisory Board of the Incrementum Fund held its quarterly meeting (a transcript is available for download at the end of this post). This time the board was joined by special guest Dan Oliver, the manager of Myrmikan Capital and president of the Committee for Monetary Research & Education.  Myrmikan inter alia publishes excellent and quite original research on gold which we hereby highly...
  • Eating the Seed Corn - Precious Metals Supply and Demand
      Misguided Incentives The price of gold subsided a few bucks, and the price of silver blipped a few pennies. Not much action last week, groceries neither pumped into nor drained out of this asset class. Those who look to exchange capital goods for groceries need to find a different asset.   The best-laid plans... [PT]   Not even the S&P 500 Index provided a gain in groceries this week. It certainly wasn’t the much-vaunted store of groceries, Bitcoin, which...
  • The Credit Market Powder Keg
      Credit Market Bifurcation By all accounts, credit markets remain on fire. 2019 is already a record year for corporate bond issuance, beating the previous record set in 2017 by a sizable margin. Demand for the debt of governments and government-related issuers remains extremely strong as well, despite non-existent and often even negative issuance yields. Even now, with economic activity clearly slowing and numerous  threats to the post-GFC recovery looming on the horizon, the occasional...
  • The Fed’s Answer to the Ghastly Monster of its Creation
      The Bubble Machine The launch angle of the U.S. stock market over the past decade has been steep and relentless. The S&P 500, after bottoming out at 666 on March 6, 2009, has rocketed up over 370 percent. New highs continue to be reached practically every day.   S&P 500 weekly, since the low of 2009. A party of roaring 20s proportion in terms of duration, extent and end point valuations (a post-war inflation episode triggered a devastating bear market from November...
  • Gold Moves from Vault A to Vault B - Precious Metals Supply and Demand
      Poland's Gold and the Conspiracy Theorists The price of gold was up enough to buy a bottle of Two Buck Chuck wine, and the price of silver was up enough to buy a wooden nickel (well, not enough to buy a real nickel nickel).   Poland's gold bars are packaged by employees of G4S International Logistics to be transported from London to Poland. Poland's gold was originally transferred to London at the beginning of WW II, when Stalin and Hitler invaded and partitioned the country...

Support Acting Man

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!