tell me what you think of this article...

http://peakoil.com/...roberts-collapse-at-hand/


...as I'm not entirely qualified to judge its contents.

"Insiders inform me that as a tiny percent of those on the buy side of short sells actually want to take delivery on the gold or silver bullion, and are content with the financial money settlement, there is no limit to short selling of gold and silver. Short selling can actually exceed the known quantity of gold and silver."

A recent article in de Spiegel commented that no auditing of physical German gold asset holding in the US has taken place in years. I remember buying gold in 1986 from Scotia Bank. I got Gold Certificates. Where's the gold? I never bought gold again.

I am not an economist by profession but I consider the views expressed in that article to be accurate.

only skimmed the first bit but quick comment. also the general views on trade in the first half seem correct but a bit exaggerated.

"High-frequency trades now account for 70-80% of all equity trades. The result is major heartburn for traditional investors, who are leaving the equity market."

HFT leads to better conditions for normal traders, there's more liquidity in the markets. doesn't lead to people moving to govt bonds.

High frequency trading does not provide liquidity since they have no position at the end of the day. If you are taking a long position, during the day a different investor must be selling. There is a difference between providing volume and providing liquidity.

@Greenman: under normal circumstances that's true. However in the event of large scale counterparty default (like in 2008) it becomes more of a problem.

whoever has to use phrases like "artificially low interest rates" to base their reasoning won`t be a good source of economic advice or forecast. I also note that the dude is a fan of the pain caucus, aka austerity during bad economic times.

There are very good reasons for the interest rates of most nations to be low atm. Liquidity trap, recessions or crap recoveries. If we were to apply the model that the Fed or most other central banks use to calculate what should be the interest rates, they would be actually negative instead of just hitting the zero limit.

Long term it is another talk. When the economy recover, then it is time to think about austerity.

Regulating banks and those crazy kind of trades some more would be a good thing, though.

If inflation is 3% and a bond is paying me 1% why would I buy the bond.. I'm losing money..

And yet the whole world still buy it.

They buy it because 1% still beats 0%, because they see it as a safe investment and because it is a somewhat liquid asset.

But you can always buy inflation adjusted bonds...

The problem with an article like this is twofold:

First, it completely discounts the power of innovation as economic models evolve. Its ironic that the hosting website is 'Peakoil'. The US has doubled its petroleum reserves over the last five years and is poised to become a net exporter of petroleum. Sure, now its gas instead of oil - but BTUs are BTUs. The real revelation will be when the rest of the world realizes that they have just as much natural gas as we do. The energy paradigm has been upended. Its them way in every other economic theater, technology and innovation step up to fill the void as our worries evolve. technology costs are plummeting as capacities are soaring - the market consists of bothe supply AND demand. As the supply of educated technologically enabled people grows, deficit spending may recede farther and farther into our rear view mirror.

Second, the problem with the doom and gloom crowd, they are great at looking at the dark side of history but they never want to look at the bright side. We survived the depression, this too will pass. Bad economic cycles have 10-15 year runs (1929-1942, 1873-1889, 1966-1982, 2001-?) and it always looks dark before dawn. Hiding our money in mattress's and buying gold and ammunition is not going to benefit anybody but the people selling gold and ammo - and they are usually the ones standing on soap-boxes holding the DOOM signs.

1) NatGas is barely a stopgap, not an alternative. US has 100 years of natgas supplies - at current natgas usage rates, not at total US BTU rates. You can't switch the country to natgas and only then realize that natgas will only last 20-30 years. Unless, of course, your mission is to sell that switch to the public.

It requires significantly more natgas to generate the same BTU's - bigger gas tanks, stronger suspensions etc on cars. Not gonna happen overnight.

2) Whenever anyone says "paradigms have been upended" they're using the exact same fact-free thinking that justified pets.com -- just stop.

3) Natgas isn't petroleum, not even close. Natgas is flared off while petroleum is drilled.

4) The measure of oil extraction is EROEI - energy returned over energy invested. Sticking a straw in Texas and getting oil is nearly infinite.. drilling to 4 miles in deep ocean off Brazil is, say, 16 returned for 15 invested. Yes, we *have* oil, but because the oil supplies moving forward are harder to acquire, gas will cost more. And because the US economy is based on the premise that cheap oil is available indefinitely, the US economy will suffer significantly as oil price increases.

5) Generation of energy stateside requires nextgen nuclear and/or thorium. Yes, Fukushima was/is/will be bad -- that bulge is ridiculously scary -- but what around your house that was built in 1955 hasn't been a safety hazard for 20 years? If Japan had bothered to purchase the most modern designs, Japan wouldn't be in this situation. "Drill baby drill" is not a solution! I'm all for drilling everything we've got, but oil wells take 10 years to first barrel generation and the US only has days of its own supply. We need an actual energy plan, not the current deliberate failure to create a plan.

As to the economic collapse part of the analysis:

The question isn't stimulus or austerity, the question is severe contraction now or a worse one later. In the "now" situation the bankers who are insolvent go out of business; in the "later" situation they attempt to remain solvent by stealing as much as is possible from you first! Greece is currently going through the "later" situation - they should break from the Euro ASAP.

As long as the USA gov continues to sell them, sure.

I liked the article. It gives insight into the current stability of the us economy and the strength of the dollar. Below I made an EE-style breakdown of the economy complete with turn of the millennium formatting!


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The retail cycle can be summarized as:

Supply (currency) = Wages - Owner

Wages -> Supply (poor people spend all of their money in the US - see indebtedness)

Owner -> Supply + Wealth (the rich are richer by percentage of total wealth so they are not spending all of their money)

In an isolated retail cycle, the supply is concentrated to 'owners' and the supply in reduced.


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How is the supply of money increased? I will show two examples:

Natural resources are procured

Raw materials are manufactured into products.


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The USA does not manufacture (in proportion to consumption). The USA also does not excavate natural resources (in proportion to consumption). Through the retail cycle, the USA continues to diminish the money supply. Balance in the money supply is achieved through debt!

yes they do, they offer bid/ask prices. they take short positions to offer long positions to others.

they are priced off of normal bonds

you don't get govt yield + realised inflation, you get govt yield - expected inflation + realised inflation

I mean in theory you get the first one, but the market price is so that it reflects the second one

@Eric: not for very long. I can buy other things that could appreciate faster.