Deviant Investor: China has gold; the west has paper.

China Has the Gold, The West Has Paper

Guest Post from David Smith, Originally Published on Money Metals Exchange

Money Metals readers may remember my November 2014 report in which I discussed how gold flowed into China in “tributary fashion” like small streams flowing into a giant one. In this case, the gold has been streaming into China’s increasingly massive thousands-of-tons gold hoard.

MD: Is the same not true for India … whey they use it for making jewelry? If that flow was grain into silos would it be any different (assume nitrogen filled silos with zero leaks)? The point being … gold and grain are just stuff. If a country chooses to hoard it, why are they doing that? It’s not because it is money … because neither are money. And when it hits the fan, they’re going to try to trade their gold for food anyway … so why not just hoard the food? What are you trying to accomplish by hoarding gold. If you have all of it, it is, by definition, worthless in trade. You only have to know what money is for that fact to be obvious. Take it to the limit. If there is zero gold available to traders for making trades over time and space, they’re going to use something besides gold.

In January, 2015, I penned an essay titled “China’s Global Gold Supply “Game of Stones” outlining China’s long-range goal to dominate the world’s physical gold market.

Well, events have moved massively forward since then. I want to update you as to just how much things have changed – and how close we may be to experiencing a “defining moment” in the gold market.

I’m talking about a game-changing event that could, with little warning, propel the price of gold upward by hundreds – even thousands – of dollars per ounce in the space of a few weeks… conceivably overnight! (And since silver’s price movements are highly correlated with that of gold, we could expect an upside explosion in silver as well.)

MD: Would it propel all money in the world by the same factor … or does it just apply to dollars? How about the Yuan?

China’s 4-pronged gold accumulation strategy:


First: Buy physical gold in world markets, re-fabricate it when necessary (into .9999 fine bars in Switzerland), and ship to the mainland.

MD: Why do the refining in Switzerland?

Second: Hoard all domestically-produced gold… which is now being done, even when produced from operations with foreign-partners. This is also true with silver production, e.g. Silvercorp Metals – a Canadian silver/lead producer with operations on the Chinese mainland.

MD: Keep in mind there is only 1oz of gold per person on Earth … regardless of where it is located. And the hyperbole of including silver is silly. In aggregate value for silver, there is 1/5 the aggregate value of gold in the world. So we’re talking about 1.25 oz of gold equivalent per person on Earth. Adding silver to the mix doesn’t change the story at all. Recognize hyperbole for what it is … gilding the lilly.

Third: Partner with (e.g. Pretivm Resources; Barrick Gold-Pascua Lama) or buy outright, gold explorer-producers located on foreign soil.

Fourth: Purchase for cash, gold production “off the books” from ‘informa’ miners in S.E. Asia, Africa, and South America. China’s intent is to supplant the U.S. as the largest holder of physical gold (claimed to be around 8,000 metric tons) on the planet. (Disclosure: I, David Smith, have held for several years, positions in Silvercorp and Pretivm, purchased in the open market.)

Right now, China is vastly understating what it actually holds as well as how much is being imported.

This deception is easier than ever because a significant amount is no longer routed (and thus reportable) through Hong Kong, but rather through other mainland entry ports. What the authorities admitted holding as of last summer was almost unbelievably small compared to what even the official figures streaming through Hong Kong alone, plus domestic production add to the total, and China is now the number one global gold producer.

As reported by Steve St. Angelo China has, during Q1, 2017, imported a record 57.4 metric tons of gold to the mainland, from Australia.

Notice the Australian/U.S. multi-year pattern of gold mine exports vs. production

In Addition: A parallel determinant is China’s effort to lessen its holdings of U.S. dollar reserves, by signing infrastructure agreements (denominated in yuan) with countries participating in its massive, long-term New Silk Road project. It’s been reported that China has even approached Saudi Arabia about yuan-based oil sales – a direct threat to the decades-long monopoly of the U.S. petrodollar.

And then there’s this:

The Perth Mint sold $11 billion worth of bullion to China last year alone, and demand continues to climb. Demand is so strong that Perth Mint brings in gold from mines in other countries like Papua New Guinea and New Zealand, and jewelry from South-East Asia that is refined down to the Mint’s signature 99.99 percent gold bullion. (ABC News)


Steve St. Angelo reports that so far in 2017, scrap gold recovery is down sharply, even though the price of gold has risen – an unusual historic occurrence.

His projection for the year? “…as the price of gold has increased in 2017, global gold scrap supply will fall by almost a third, or 32% versus 2010… this major gold market indicator trend shift suggests that individuals are now holding onto their gold rather than sell it for a higher FIAT MONETARY PRICE.”

MD: So far you’ve said nothing of import. You might just have been describing the Hunt’s attempt to corner the silver market of yore.

A Surprising Shock-Rise?


Precious metals prices have been in a cyclical decline since mid-2011 – not unlike the last secular bull market in the 1970’s – before gold’s eight-fold rise less than two years later.

It’s understandable that you might meet this latest suggestion of an unexpected, massive rise in the price of gold and silver with skepticism. A rise that could take place so quickly that those who hesitate could not react before prices had climbed far above prevailing levels. Before the supply cupboard had been swept clean. But the truth is – it’s not a pipe dream, not blowing smoke, not wishful thinking. This is not just possible, but increasingly probable.

Everything in life involves playing the odds. If something is “unlikely” but possible, and if that something taking place had the potential of being a “game-changer,” would you not seek to prepare for it in some measure?

MD: Professional gamblers remove the odds from the equation. They totally control them … they don’t “play” them.

A vertical up-move in gold would place you in a tidy profit position, even if you held a relatively small amount (e.g. the oft-touted 5% of your investable assets). So, it’s not necessary to mortgage the house or go into debt in order to “participate.”

MD: This nonsense would make better hyperbole if you were discussing bitcoin. The deflation of bitcoin is a few orders of magnitude greater than gold. And with deflation like that, the utility as money to traders is the same … zero. But to gamblers (and so-called investors) it is a big deal.

I believe it’s almost “a given” that precious metals will resume their secular bull run, which could continue for the next three to five years. If you agree, does it not make sense to begin (or continue) a conservative metals’ acquisition plan? With little worry as to the price where you began?

MD: Well, you are a gold salesman. Peddle your wares. Tattoo artists have convinced lots of people that all those marks on their bodies will bring recognition to them. In the end, it will … negative recognition.

It’s not that difficult. Either buy metals when you have some surplus investible funds, and/or do so on a regular, dollar-cost-average basis. If the “China card” never gets played, you’ll still do well as metals’ prices advance over the coming years. You’ll have been purchasing “paid-up insurance” for the rest of your holdings, hedging more as time goes on.

MD: Buy raw land in a low tax jurisdiction. At least you can camp out there once in a while for recreation.

And one more thing. Don’t think of it as “spending money” on buying gold and silver. You’re simply exchanging continually-depreciating “paper promises” – the enduring term coined by David Morgan at – for “honest money” which has stood the test for millennia and will likely continue for as far as the eye can see.

MD: That’s not too convincing. The gold and silver I bought four years ago does not exchange today for anywhere near what the dollars did that I traded for it. But in the long run you are correct. That 4% inflation leak does take its toll. We went through a period of gold escalation before in the 80’s as I recall. Then it fell like a rock and took 15 years to get back to where it was at its peak. Even with gold, timing is everything. 15 years is a real long time to a 30 year old … and to an 80 year old.

Remember, if you don’t hold it in your hand, you can’t be sure you really own it. John Hathaway, Tocqueville Asset Management covers this precisely, saying,

When the market reverses, the diminished physical anchor to paper claims, concerns over title and encumbrances on central bank bullion, and worries over the drift of public policy will drive liquid capital into gold. However, this time around, it seems to us that the major recipient of flows will be the physical metal itself. Holders of paper claims to gold will receive polite and apologetic letters from intermediaries offering to settle in cash at prices well below the physical market. To those who wish to hold their wealth exclusively in paper assets, implicitly trusting the policy elites to resurrect normally functioning capital markets and economic conditions, we say good luck. For those who harbor doubts on such an outcome, we say get physical.

MD: So that gold I have in’s vaults is not safe? I know to get one of their goldgrams from wherever it was and into my hands cost 10% of the value. I had to even pay import duties on it. Even if I had all that gold in hand, it would be sitting on my raw land in the low tax jurisdiction where I live … and frankly I would rather have a little more land and no gold … thank you very much.

David Smith is Senior Analyst for and a regular contributor to For the past 15 years, he has investigated precious metals’ mines and exploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findings with readers, the media, and North American investment conference attendees.


Thanks to David Smith, Originally Published on Money Metals Exchange

Amazon instant pick-up points

MD:  The cost of the “last mile” of delivery is a significant portion of the whole cost of the delivery. This is normally executed by the USPS carrier, the UPS driver, or the FedEx driver. This is one driver, one vehicle, delivering one  package to one purchaser at a time. Even in downtown locations, the delivery can’t be made door to door (like mail) because of the size of the packages.

But what if Amazon … or UPS or USPS or FedEx partnered with gas stations (and/or convenience stores). They could drop off dozens of packages at these points  in a single delivery (eliminating dozens of last mile deliveries). The purchaser would be likely passing the convenience store on a regular basis anyway and would just stop in and pick up their package (they would do the last mile themselves at no additional cost). Further, they would likely make some other impulse purchase.

Companies like Dollar General could trump what Amazon is doing by offering this service to their own customers. They already have very many conveniently located outlets … especially in rural areas.

I think Amazon is barking up the wrong tree here.

Just a thought for greater efficiency and lower cost.

FILE PHOTO: An Amazon pickup location is seen at the University of California in Berkeley, California, U.S. August 14, 2017. Reuters/Jeffrey Dastin/File Photo

BERKELEY, Ca (Reuters) – Inc is rolling out pickup points in the United States where shoppers can retrieve items immediately after ordering them, shortening delivery times from hours to minutes, the company said on Tuesday.

The world’s largest online retailer has launched ‘Instant Pickup’ points around five college campuses, such as the University of California at Berkeley, it said. Amazon has plans to open more sites by the end of the year including one in Chicago’s Lincoln Park neighborhood.

Shoppers on Amazon’s mobile app can select from several hundred fast-selling items at each site, from snacks and drinks to phone chargers. Amazon employees in a back room then load orders into lockers within two minutes, and customers receive bar codes to access them.

The news underscores Amazon’s broader push into brick-and-mortar retail. The e-commerce company, which said in June it would buy Whole Foods Market Inc for $13.7 billion, has come to realize that certain transactions like buying fresh produce are hard to shift online. Its Instant Pickup program targets another laggard: impulse buys.

“I want to buy a can of coke because I’m thirsty,” said Ripley MacDonald, Amazon’s director of student programs. “There’s no chance I’m going to order that on and wait however long it’s going to take for that to ship to me.”

FILE PHOTO: An Amazon pickup location is seen at the University of California in Berkeley, California, U.S. August 14, 2017. Reuters/Jeffrey Dastin/File Photo

“I can provide that kind of service here,” he said of the new program.

FILE PHOTO: An Amazon pickup location is seen at the University of California in Berkeley, California, U.S. August 14, 2017. Reuters/Jeffrey Dastin/File Photo

Instant Pickup puts Amazon in competition with vending machine services. Yet the larger size of the Amazon sites means they are unlikely to pose a threat to those selling snack and drink vending machines to offices and schools. MacDonald said Amazon considered automating the Instant Pickup points but declined to say why the company had not pursued the idea.

Amazon’s ability to shorten delivery times has been a sore point for brick-and-mortar retailers, who have struggled to grow sales as their customers have turned to more convenient online options. Until Instant Pickup, Amazon shoppers could expect to have their orders within an hour at best via the company’s Prime Now program, or within 15 minutes for grocery orders via AmazonFresh Pickup. Amazon has made two-day shipping standard in the United States.

Instant Pickup prices may be cheaper than those on, MacDonald said. He declined to detail how the items are priced, however.

Other locations in the program now open include Los Angeles, Atlanta, Columbus, Ohio and College Park, Maryland.

Reporting by Jeffrey Dastin; Editing by Andrew Hay

What role does money play in secession initiatives?

MD: Control of money is a real big deal in all things political. An “uncontrollable” money is therefore anathema to all things political … especially governments. But it is wonderful for traders … like you and me.

As you read this article, consider how it would read if the Catalans were to first institute a competitive “proper” MOE process before attempting secession. Virtually all of the issues this article cites vanish when a “proper” MOE process is in place.

Remember, such a process is immune to political interference. If you want to affect it, you have to use force. And if it’s in general use, you probably can’t come up with that much force. Traders are far more powerful than the populace in general … which is peculiar because traders “are” the populace in general … there are just no borders when it comes to traders.

Catalans Think Twice About Risks of Rupture as Jobs Return

  • Support for independence falls to 35% from 49% in 2013
  • Threats to their interests give separatists pause for thought
Carles PuigdemontPhotographer: Pau Barrena/Bloomberg

Joan Boix has been attending separatist demonstrations in Catalonia for at least five years and he contributes to the campaign for a split from Spain.

But as the regional government in Barcelona girds its supporters for a final push that it hopes will deliver independence, the 62-year-old executive is hesitating. Hardliners talk of setting up a rogue Catalan tax agency or a general strike in order to force the issue. But Boix has a company to worry about.

MD: Set up a “competitive” proper MOE process. Let people gravitate to it. If you set up a tax agency, you are just playing into the hands of a “replacing” government … predictably made up of people ultimately unfriendly to traders and general trade.

“Most of the businessmen I know have to make debt repayments so an indefinite strike is a hard sell,’’ he said.

MD: Ah … but what if that debt was promised in HULs rather than your competitor’s controlled money? Then this would not be an issue at all. And you would not be talking about a strike … let alone an indefinite one. You would already have the existing government and its money changers on the ropes.

Regional President Carles Puigdemont is trying to increase his leverage as officials in Madrid vow to block his plans for a referendum in October. But the potential costs of a collision with the Spanish state are become clearer for Puigdemont and his supporters.

Two of Puigdemont’s senior aides were interrogated by Spain’s Guardia Civil last month and Prime Minister Mariano Rajoy has warned Catalan officials they could face criminal charges if they use public funds to facilitate the vote. Even the Catalan police, who Puigdemont wants to use to oversee the vote, may think twice — most of their salaries are paid from Madrid.

Rajoy on Wednesday called for Catalans to show “common sense” and “isolate the extremists and radicals who are today influencing the regional government.”

MD: Extremists and radicals … i.e those who “are not us”.

In the end, money worries may tip the balance against dramatic action for many Catalans.

MD: And there you have it. If a proper and competitive MOE process is in place, money worries are already dealt with. Nothing dramatic can happen with the money.

Spain on the Mend

Despite its distinct traditions and language, the idea of breaking away from Spain had little mainstream traction until the economic crisis — and the corruption it uncovered — hurt Catalans’ finances and undermined their confidence in the Spanish state.

MD: Said as if that won’t happen again. Government “is” the problem. Institute a competitive and “proper” MOE process, and let the government do the scrambling for survival.

Support for independence peaked at 49 percent in 2013, as the Spanish economy was contracting for a third straight year and unemployment reached a record 26 percent.

But Spain is on the mend now. Joblessness is down to 17 percent and the economy is growing at a pace of more than 3 percent. After a decade of turmoil, Catalan moderates are nervous about putting the recovery at risk.

MD: Oh really? What caused the economic collapse in the first place? What caused it to go away? You can be sure government manipulation played a role in both cases … and the sense of both is probably more related to propaganda than to reality.

Just 35 percent say Catalonia should be independent, according to the Catalan government’s polling agency. That’s the lowest in five years.

Investors are largely discounting the risk of a split. The spread between Spanish 10-year government debt and German bonds is close to its narrowest in seven years, though the yield on the Catalan government’s thinly traded 2020 bonds has jumped by about 50 basis points since the start of July.

MD: What are the “Catalan government’s” bonds? If they can create and sell bonds, they can institute and support a “proper” MOE process.

Puigdemont said in an interview last month that anyone who thinks an uptick in the economy will dampen the separatist movement is making a mistake, and warned investors that the movement may roil Spanish debt markets this fall. Others argue that Spain’s attempts at intimidation, including a smear campaign against Catalan leaders, will ultimately backfire.

MD: If you remove government from the equation, what are you separating from? The issue “is” government. As long as it is there, you will have an issue.

“If they were winning the political battle they wouldn’t need such tactics,’’ said Manel Escobet, 63, a member of the national secretariat at the Catalan National Assembly, a separatist campaign group. “The dirty war being conducted by the Spanish state is just helping us to broaden the support for us’’

MD: If you’re in an “all out war”, finess is not employed. You deploy all your weaponry. And such tactics are probably the most important weapon in the arsenal. People are putty in propagandists hands.

Corporate Concerns

But even some of those who would be willing to strike accept that their chances of achieving their goals remain remote. Pere Gendrau, 36, runs a pub in Berga, just over an hour north of Barcelona and in the late 1990s he was active with the fringe groups that went on to form the anarchist group CUP, which Puigdemont’s mainstream alliance relies on for a majority in the regional assembly.

Gendrau says that he and his employees would find a way to support a general strike, an idea raised by Regional Vice President Oriol Junqueras as far back as 2013. But, like Boix, he can see the problem for those managing larger operations.

MD: What are they striking against? Themselves? Institute a “proper” money. Set up a minimal organization to deal with customary public issues … i.e. potholes … and then quit paying taxes to Barcelona.

“It could be the way to move forward, but we probably won’t reach that point,” he said. “I’m not so sure what the bigger companies’ reaction would be.’’

Boix’s company produces about 2 million wooden pallets a year for Catalan exporters and employs 130 people in the Bergueda region, where separatist parties got almost 80 percent of votes in 2015’s regional election.

The family history illustrates the sharp divisions that still lie beneath the surface of Spanish society. Boix’s grandfather, a Catalan mayor, died in a Nazi concentration camp at Mauthausen after fleeing to France during the Spanish Civil War. The French government has apologized to the family for the failings of the Vichy regime, but in Spain it’s more complicated, since Prime Minister Mariano Rajoy’s party was founded by a former minister from the Franco regime which governed for almost 40 years.

Historic Divisions

“In Spain it’s as if nothing ever happened,” he said. “Just in my family, 10 people fled across the French border, and only my mother and two others returned.’’

So the friction between Catalonia and Madrid may be as good as permanent. There are pockets of the region where almost everyone backs separatist parties. But the success of modern Spain since the dictatorship may be enough to keep the country together, and the economy growing, despite their differences.

MD: He who controls the money controls the playing field. Remove all control of the money and the playing field is level. Let the games begin.

Boix is happy to support a strike in favor of independence. But only so long as it doesn’t hurt his bottom line.

“If it’s being asked to stop for a day or two, that’s fine,” he said. “We’ll find a way to compensate by working through a public holiday.”

That’s probably not enough to force Rajoy into any dramatic concessions.

— With assistance by Charles Penty

Deviant Investor: The Luster of Gold Returns Due to Economic Uncertainity

Deviant Investor: The Luster of Gold Returns Due to Economic Uncertainity

MD: It’s always fun to examine the articles written by gold bugs who are clueless about what money is. The landscape is always rich with delusions. Let’s see.

The Luster of Gold Returns Due to Economic Uncertainity

Guest post from Paul Somerfield

The role of gold as a safe-haven investment is one of the fundamental principles of modern markets and it seems as if recent movements have once again confirmed this fact.

MD: That being true … and it probably is, gold is “precluded” from ever being money. Of course, if you know what money is, among its very few attributes is: real money has “no intrinsic value.” Anything having intrinsic value disqualifies itself from being money … it is a promise to deliver that has already been delivered. Money is an “in-process” promise to deliver on a trade.

The price of December gold futures rose to $1,279.40 dollars per ounce; the highest level since early June. During this same time, the cash value of gold has likewise increased by 6.2 per cent. Both of these observations could be great news for medium-term investors and these rates may very well be indicators of a more bullish gold market. What are some of the underlying factors which have caused such gains?

MD: A proper MOE “never” changes the value it stands for. That’s why the HUL (Hour of Unskilled Labor) is the ideal unit for money. HULs have never changed what they trade for over all time. They have always traded for the same size hole in the ground that they trade for today. The fact that  gold price is changing like this proves it is “not” money. Either the value of gold is changing, the value of the dollar is changing, or both.

Tepid Consumer Spending


One of the most important influencing factors in regards to the price of gold involves consumer sentiment and spending.

MD: … again proving it is not money. Real money doesn’t care about consumer sentiment and spending. It is strictly valued as a pair of traders value it at an instant in time. Once valued that way, the trader creating it is obligated to reclaim it and destroy it as promised. If he mis-valued it, he has to adjust his behavior accordingly (work harder than planned or bask in his brilliance). None existed before his trading promise (for that promise), and none must exist after delivery (or default mitigated by interest collection). Inflation of the money itself is thereby guaranteed to be zero. What else can it be?

This is generally seen as a broad snapshot of how an economy is performing. It should also come as no surprise that spending within the United States will have a decidedly profound impact upon the valuation of this yellow metal. Recent figures have shown that spending only increased by 0.1 per cent in June. This is actually the smallest increase witnessed so far during 2017. Thus, some market makers are wary about the medium-term status of the domestic economy.

MD: Spending tells you nothing about money. It could be coming from traders creating new money (which they later will destroy), or from money traders have acquired and accumulated in their previous trades. As soon as they spend it, it is available for other traders to claim and return if they have in-process trading promises to deliver. Regardless,, spending is of no import whatever. Neither is saving.

The Question of Federal Reserve Interest Rate Hikes


There has been a fair amount of speculation as to whether or not the United States Federal Reserve will enact an interest rate hike.

MD: This is the biggest delusion and “hand-tipper” of all … i.e. the notion that the Federal Reserve sets interest rates. The operative relation for “any” money … proper or improper … is: INFLATION = DEFAULT – INTEREST.

Defaults are being perpetually made by counterfeiting governments … they make trading promises and never deliver … they just roll them over. This is far and away the largest supplier of defaults … and if inflation is to be zero, they must be met with interest collections of like amount. Since the whole “improper” process we have to use is open-ended, with no direct negative feedback loop (like defaults being immediately met by interest collections), the unmeasurable INFLATION can be anything governments say it is … until it is so out of wack their improper MOE collapses … and they reset and start the con all  over again.

Any such hike is normally closely tied into inflationary figures. However, softer inflation has pointed to the well-founded observation that the Federal Reserve may postpone any rate increases for the time being.

MD: Inflation is “not” measurable … it can only be estimated … and is thus always a fiction. Only a “proper” MOE process can know what inflation is. And such a process knows what it is in real time … all the time. It is zero. The inflation  being referred to here is a strictly a made up number. And until the inevitable money calamity, it will be predictably very low. If they report it as it really is, the Social Security payments have to be automatically adjusted (COLAs). And that blows the whole Ponzi scheme. None of this could be happening with a proper MOE process.

A slower pace of rate increases has historically tended to support the value of precious metals and there is no doubt that these latest observations have played an important role.

MD: All rates of increase (or decrease) are very small and slow. It is a death of a thousand cuts … and then the camel collapses under the addition of a single straw (to mix metaphors).

A Rising VIX?

MD: This VIX thing is amazing … just in the fact that it exists. They invented the options trading model (Black-Scholes) which was very sensitive to the underlying “distribution”. So what do they do? They game the distribution. They invented the VIX and now bet on that. You can’t make this up.


One of the most recent news stories involves the Dow Jones closing above 22,000 points for the first time in history.

MD: Right. All companies are increasing in value simultaneously and continuously … but inflation is near zero? Bet me!

Although this is supposedly good news and a sign of a relatively strong domestic economy, some are concerned that the CBOE Volatility Index may be in for a reversal in the near future.

MD: CBOE  Volatility Index … another VIX like measure … without a knob. They have made this thing so complicated and attached so many knobs, there is never any hope they can know how to turn all those knobs. When it blows up I hope someone has a camera on as they all violently turn  the knobs … like kids in the car arcade ride, going in a circle and turning the steering wheels … connected to nothing … violently, as if they’re having effect.

It is important to point out the inverse relationship between the VIX and index values. Still, any sudden increases in the VIX index will likely cause some investors to pull their money out of the open markets and to place their funds into safer havens.

 MD: Important to point out? To whom … fiction writers?

The Trump Dilemma


One point that cannot be stressed enough is the instability associated with the White House. As the Trump administration continues to flounder and as officials seem to be replaced on an almost daily basis, some are questioning whether or not the president can deliver on many of his other promises put forth during the election campaign.

MD: Since a “proper” MOE process has no “social” linkage or dependency whatever, “real” money does not have this instability.

It is also important to point out that politics could also play a role in the price of gold; particularly if tensions continue to rise between the United States and Russia.

MD: I’m surprised he says it this way. Politics plays a role in the value of the dollar. As such, it plays a role in the price of everything in the same way. If gold was money this wouldn’t matter. But “mining” and amount of trade play a role in the value of gold … and that makes it unsuitable as money.

Rumors of a so-called “trade war” may further exacerbate this situation. Although more rhetoric than reality at the present, the possibility of protracted political instability may help to support gold prices.

MD: Again, “real” money is not affected by trade wars. The traders with in-process trades still have to reclaim the money they created …. trade war or not. If the war causes many to fail (i.e. defaults), what do we know will instantly happen? Of course, interest collections will increase by like amount and the warring parties will have their playing field instantly impacted … in a negative feedback fashion. No manipulation necessary.

The Other Side of the Coin


Not all analysts believe that gold will remain bullish indefinitely. The traditional overhead resistance of $1,280 dollars is approaching and there could be a reversal soon. Regardless, the long term trend is strongly upward due to continually devalued fiat currencies.

MD: Again proving … it is not and cannot be money.

The coming days will be interesting in terms of gold prices. Those who hope to keep abreast of the latest news should employ reliable online resources such as CMC Markets. Gold may indeed have regained its luster to the average trader.


Thanks to Paul Somerfield


Gary Christenson

The Deviant Investor

MD: Remember folks … .these people are “gold dealers”. They want to keep people buying and selling gold so they have to keep making up and telling new stories.

Managing cash flow

Cash is king, they say.

MD: That’s because of the money changers. Drive them out with a “proper” MOE process and responsible trading is once again king.

As a bootstrapped entrepreneur, managing your cash flow effectively is key to staying afloat while you scale your product. However, many entrepreneurs don’t dedicate time to good accounting practices, sometimes even letting their startup’s money share real estate with personal cash. There’s no surer recipe for disaster.

“A big problem with small businesses that we have that come to us, that have never had a professional accountant, or bookkeeper, or advisor help them with, is that they manage their business out of their bank account,” says CPA Brad Ebenhoeh.

MD: I’ve seen this in friends who have small businesses. When a sale turns into cash, they put a chunk of it in their wallet. They’re always carrying a “wad of cash” … unless they’re dead broke. To me this is a direct indication that they don’t know what they’re doing. When the bills come in they don’t have the cash to pay them. They are soon driven out of business and once again working for someone else.

A “proper” MOE process won’t allow them to bail themselves out by creating new money. This would be a rollover, and if allowed would result in irresponsible traders competing with responsible traders. This is exactly what we have with “all” governments. They never deliver … they just rollover their trading promises. A competing “proper” MOE process will drive the money changers and the governments they institute out of business.

Ebenhoeh, managing partner at startup-focused South Carolina firm Accountfully, explains that the biggest misconceptions behind cash flow is looking at the money coming in as “ready to spend.” For example, if you brought in $20K in sales, it does not mean that you have $20K of immediate, spendable profit.

MD: Confirmation.

“The biggest thing that we do is that we transition them from managing their books out of their bank account, in the business side of the bank account, to actually managing their business from an accrual-based profitability standpoint,” says Ebenhoeh.

MD: In terms our parents gave us … they put them on an “allowance”. It’s amazing how many traders there are out there that can’t impose this self-discipline … really really amazing.

This means switching companies to accrual-based accounting, the process used by most startups. Accrual-based accounting is essentially jotting down revenue when it’s earned versus when the payment is made. “This means that you look at profits and expenses on a period over period basis, which is like month over month basis. And it doesn’t necessarily have to reflect when the money comes in or money goes out,” explains Ebenhoeh.

MD: All accrual based accounting does is remove epochs. It just makes common sense. It should be the “only” kind of accounting anyone would use. When you run your business with monthly, quarterly, or annual statements (which is what our governments do), you get way behind the 8-ball before you know it. This isn’t rocket science.

I’ve been using Quicken since it was created in the late 80’s. I have known my net worth in real time ever since. It’s fun. Actually I knew it before Quicken by using programs I wrote myself for an 8085 micro-computer (Processor Technology SOL … with a whopping 4K of memory) in 1977 … but Quicken was better in many ways and I had other things to do.

MD: We’ve now gotten what we’re going to get out of this article. Read on if you have time or still don’t get it.

That means that if you hired a subcontractor in July for $5K and you don’t pay them until September, the expense goes on the books in July versus when it happen versus in September, says Ebenhoeh. “Migrating a client over to that perspective of reviewing their books on an accrual basis and profitability standpoint is step one in having that business become mature.”

Ebenhoeh dives into three cash flow metrics you need to keep in mind as you grow your startup.

Operating Cash Flow

This is money that comes in from day-to-day operations. Basically it’s taking your profit losses on a normal recurring basis and including cash that you may have received from accounts receivable, or past invoices, or paid out in bills or accounts payable. Then you can say, during the month you made X amount of money in operating cash flow. That’s key because those core operations are actually going to sustain your business.

Free Cash Flow

Free cash flow is the operating cash flow minus any investment you made in fixed assets or capital expenditures. That includes investing in equipment, computers, furniture, leasehold improvements on a building, building out a space, rent, or buying a vehicle for the business, if that makes sense for your business model.

Capital expenditures are not recurring or not part of your operations; they’re just assets that you buy for your business to help you support the operations of your business. They are typically one-time in nature or very periodic, so that’s why it’s not included in the operating cash flow.

Net Cash Flow

Your Net Cash Flow is the free cash flow minus or in addition of any money flowing out to investors, money flowing in from investors, as well as money flowing in or out from a long-term liability.

You want to subtract any distribution payments you make to the owners of your business, or dividends, outflows of payments to owners of the business, or inflows of money that you’ve received when you’ve raised capital.

So for example, when a tech startup is operating with $500K in seed capital, that $500K is an increase in net cash flow. It is anything that you receive or pay to owners or stockholders of the company, as well as any long-term liability, or long-term debts that you’ve paid out on receipt.

When tech startups are in the early stages when they’re raising money, often instead of getting common stock or preferred stock, money comes in. A convertible note is long-term liability. That inflow of money that they receive would be within the net cash flow section.

Do you know your startup’s Key Performance Indicators (KPIs)? Here are some to keep in mind during those early stages when impressing investors is top priority.

IWB: Greenspan says bond bubble about to burst

MD: Bonds are a form of trading promise spanning time and space. However, they are not money?

Why? Because they are not “trader created promises certified under “any” Medium of Exchange (MOE) process”. Rather, they are a promise between one trader and a list of subscribing traders. They “always” have a face value, a term, and an interest component. That interest component is constant over the term of the bond. And the face value of the bond is constant over the term of the bond. And the term is fixed.

However, the risk of default on the trading promises varies over time. Since the face value, the interest, and the term of the bond don’t change over its entire life, if someone wants to sell one (or buy one) before maturity, an adjustment for current risk must be considered. This is called the “discount”. It is negotiated between the holder of the bond and the purchaser of the bond. It is a trade of money for the bond and as such is a simple barter exchange “using” money in the here-and-now. However, a trader could “create” money to buy the bond.

If the bond is for $1,000 and the interest is 5% per year and the term is 10 years, the bond will pay $50 every year for 10 years … and then will pay $1,000. But new bonds sold by the company could be selling for 2% per year. That automatically makes the existing bonds worth 2% per year also. The discount is calculated such that the 3% difference considered over the remaining term is reflected in the trading price.

The bond does not circulate as money. No one will accept the bond in trade for their HULs (i.e. Hours of Unskilled Labor units). If they did, they wouldn’t be able to get someone to accept it as payment on something like a car or a house … or groceries. They are said to be “non negotiable”. There is the special case of the “bearer” bond where if you have the bond in your physical possession, you “own” the bond and can sell it physically. If you lose it or it gets burned up it is “physically lost” as far as you are concerned.

For most bonds you must go through some clearing house to trade the bond and “turn it into money”. Further, if it is lost or destroyed, there is a mechanism for recreating it.

Knowing that,  let’s study this article and see if it contains Money Delusions.

Former Fed Chairman Alan Greenspan Ominously Warns That The Biggest Bond Bubble In History Is About To Burst

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By Michael Snyder

Are we right on the verge of one of the greatest financial collapses in American history?

MD: Yes. And we have been my entire 70 year life time … and that of my father and grandfather. It’s just a question of when the government and the banking system admit they are dead. In France in the late 1700’s they never did. Rather the people declared them dead … and cut off their heads and started over under a new corrupt scheme. Only a “proper” MOE process can avert this. And if one is instituted, it will “never” collapse as long as there are traders willing to make trades spanning time and space and as long the the process remains operative and transparent … i.e. as long as the government and the money changers have no role to play in “money”.

In a CNBC interview, the longtime central bank chief said the prolonged period of low interest rates is about to end and, with it, a bull market in fixed income that has lasted more than three decades.

I have been repeatedly warning that our ridiculously over-inflated stock market bubble could burst at any time, but former Federal Reserve Chairman Alan Greenspan believes that the bond bubble actually presents an even greater danger.

MD: They always know when it is “over inflated” but they can never tell you when it is “correctly inflated”. We here at Money Delusions know when it is correctly inflated. It is when inflation is zero. By experience it is “always over inflated”. Under a proper MOE process, it is never over inflated. Inflation of the money itself is guaranteed to be perpetually zero.

When you look at the long-term charts, you will see that an epic bond bubble has been growing since the early 1980s, and when it finally collapses the financial carnage is going to be unlike anything we have ever seen before.

MD: What were the charts saying in the late 1970’s in the USA when the prevailing interest rates were approaching 20%. The whole process is a con … a fiction … a theatrical show.

Since the last financial crisis, global central banks have purchased trillions of dollars worth of bonds, and this has pushed interest rates to absurdly low levels.

MD: Purchased them with what? They had nothing to purchase them with. So they made trading promises spanning time and space (i.e. created money) and purchased them like any other trader. What were the terms of those trading promises? We don’t know. The process isn’t transparent. It is a con. That money will turn out to be counterfeited; interest will never reclaim that default; and thus inflation will result. A proper MOE process would never allow such central bank purchases. It would not even allow a central bank … there would be no need for one.

But of course this state of affairs cannot go on indefinitely, and Greenspan is extremely concerned about what will happen when interest rates start going in the other direction…

MD: It not only “can” go on indefinitely, it is designed “to” go on indefinitely.

Former Federal Reserve Chairman Alan Greenspan issued a bold warning Friday that the bond market is on the cusp of a collapse that also will threaten stock prices.

In a CNBC interview, the longtime central bank chief said the prolonged period of low interest rates is about to end and, with it, a bull market in fixed income that has lasted more than three decades.

MD: What’s keeping it from collapsing right now? People are able to sell bonds because people are willing to buy them. What’s going to make them unwilling to buy them? With a proper MOE process, people would be willing to buy bonds, but responsible traders would have little motivation to sell them. The only ones selling bonds would be those who have a propensity to default … that makes creating money too expensive (i.e. they pay too much interest) to do so. The interest they would have to pay to a bond purchaser would be even higher … i.e. greater than 100% of the amount they are trying to create.

“The current level of interest rates is abnormally low and there’s only one direction in which they can go, and when they start they will be rather rapid,” Greenspan said on “Squawk Box.”

MD: Here they are again with their subjective “abnormally low”. What is the right interest rate? A proper MOE process doesn’t think of interest as a rate at all. It is the mechanism for reclaiming money orphaned by defaults. It is perpetually and cumulatively equal to cumulative defaults.

And of course Greenspan is far from alone.  In recent months there have been a whole host of prominent voices warning about the devastation that will take place when the bond market begins to shift.  For example, the following comes from

Advisors and investors beware, the long-swelling bubble in the bond market looks set to pop. Major bond investors are as worried as they have ever been, mostly because of the reduction in easing that is finally coming to markets. Central banks are letting off the gas pedal for the first time in almost a decade, which could have a devastating effect on the bond market. According to the head of fixed income at JP Morgan Asset Management, who oversees almost half a trillion in AUM, “The next 18 months are going to be incredibly challenging. I am not an equity investor, but I can just imagine how equity investors felt in 1999, during the dotcom bubble”. He continued, “Right now, central banks are printing money at a rate of around $1.5tn per year. That is a lot of money going into bonds. By this time next year, we think this will turn negative”.

MD: There’s no point in further comment from Money Delusions. When you’re working with a wrong premise, you’re going to write nonsense … as we see here. Read their article further at your own risk.

So how will we know when a crisis is imminent?

Some analysts are telling us to watch the 30-year yield.  When it finally moves above its “mega moving average” and stays there, that will be a major red flag

It’s still too soon to tell, but this could be the beginning of a realignment with both rates getting in sync again. This will not be confirmed, however, until the 30-year yield rises and stays above its mega moving average, currently at 3.18%.

As you know, this moving average is super important.

It’s identified and confirmed the mega downtrend in long-term interest rates ever since the 1980s. In other words, it doesn’t change often. So, if this trend were to change and turn up, it would be a huge deal.

Today, the 30-year yield moved up to 2.83 percent, and so we aren’t too far away.

There are so many prominent voices that are warning of imminent financial disaster, but there are others that believe that we have absolutely nothing to be concerned about.  In fact, Jim Paulsen just told CNBC that he believes that this current bull market “could continue to forever”…

The stock market “has an awful good gig going,” with the economic recovery reaching all corners of the globe and U.S. inflation and interest rates still at historic lows, Leuthold Chief Investment Strategist Jim Paulsen told CNBC on Friday.

“We’ve got a fully employed economy, rising real wages. We restarted the corporate earnings cycle. We’ve got strong confidence among business and consumers,” he said on “Squawk Box.”

“The kick is we can do all of this without aggravating inflation and interest rates,” he said. “If that’s going to continue, I think the bull market could continue to forever.”

I think that Paulsen will end up deeply regretting those words.

No bull market lasts forever, and analysts at Goldman Sachs are warning that there is a 99 percent chance that stock market returns will be sub-optimal over the next decade.

But most people believe what they want to believe no matter what the facts may say, and Paulsen apparently wants to believe that things will never be bad for the financial markets ever again.

In the aftermath of the financial crisis of 2008, the powers that be decided to patch the old system up.  Instead of addressing the root causes of the crisis, they chose to paper over our problems instead, and now we are in the terminal phase of the biggest financial bubble in history.

This time around, it is absolutely imperative that we do things differently.  The Federal Reserve is the primary reason why our economy is on an endless roller coaster ride.  We have had 18 distinct recessions or depressions since 1913, and now another one is about to begin.  By endlessly manipulating the system, they have caused these cycles of booms and busts, and it is time to get off of this roller coaster once and for all.

Like Ron Paul, I believe that we need to shut down the Federal Reserve and get our banks under control.  I also believe that we should abolish the federal income tax and go to a much fairer system.  From 1872 to 1913, there was no central bank and no federal income tax, and it was the greatest period of economic growth in U.S. history.  If we rebuild our financial system on sound principles, we could actually have a shot at a prosperous future.  If not, the long-term future for our economy looks exceedingly bleak.

If you believe in what I am trying to do, I would like to ask for your help.  I am running for Congress in Idaho’s First Congressional District, and since there is no incumbent running for this seat the race is completely wide open.  Every time I share my message, more voters are coming over to my side, and if I am able to get my message out to every voter in this district I will win.

And I would like to encourage like-minded people to run for positions all over the country on the federal, state and local levels.  Individually, there is a limit to what we can do, but if we work together we can build a movement which could turn this nation completely upside down.

Cafe Hayek: And Yet Another Open Letter to Commerce Secretary Wilbur Ross

Wilbur Ross, Secretary
United States Department of Commerce
Washington, DC

Sec. Ross:

In your recent Wall Street Journal op-ed (“Free-Trade is a Two-Way Street”) you complain that “When it comes to trade in goods, our deficits with China and the EU are $347 billion and $146.8 billion, respectively.”  Can you explain what on earth is the relevance of a deficit in our country’s “trade in goods”?  Why should we worry about such a thing?

MD: Probably for the same reason that if you make trading promises assuming X amount of income to delivery … and realize less than that amount of income … you’re going to default on your trading promises. That’s why!

Do you believe that a physician – who earns income by supplying an output classified as a service – suffers economically because, when it comes to trade in goods, he has a “deficit” with supermarkets, department stores, and hardware stores?

MD: Eventually those suppliers suffer … and you can be sure they’re going to try to get a pound of flesh out of him as a result.

Do you believe that a town that is home to many physicians suffers economically because, when it comes to trade in goods, that town has a “deficit” with towns that are home to lots of farmers, carpenters, and welders?

MD: All these questions without defining deficit? When it comes to individual traders we talk about defaults … not deficits. And defaults are bad. Deficits are defaults waiting to happen … but they do no damage until they become defaults.

Assuming that your answer to each question is “no,” why do you assume that the United States – which is overwhelmingly home to people with comparative advantages at service-sector tasks such as IT innovation, pharmaceutical research, higher education, and financial services – suffers economically because, when it comes to trade in goods, we have a “deficit” with countries that are home to people with comparative advantages at producing tangible items such as shoes, shirts, and roofing shingles?

MD: None of that means anything if it doesn’t trade for something. It’s like having a field full of bulldozers. If they’re not moving dirt, they’re not earning their keep.

Asked otherwise, can you tell me the difference between a dollar’s worth of IT innovation and a dollar’s worth of socks?

MD: Really none if both are sitting on the shelf.

When Americans produce and export a dollar’s worth of IT innovation and receive in exchange a dollar’s worth of socks, you must lament this reality because it increases our “deficit” in the trade of goods.

MD: Someone doesn’t understand trade. When you trade something, you get something of equal perceived value in return … done deal.

So would you be happier if Americans instead specialized more in producing socks and left it to others to specialize in IT innovation?

MD: If socks were selling and IT innovators were sitting twiddling their fingers, you bet!

Such a change in production patterns would, after all, result in America having, when it comes to trade in goods, a surplus!  Can you explain how we Americans would be better off with such an outcome than we are today with our “deficit” in the trade of goods?

MD: All macro accounting is fiction. The real accounting is for the traders themselves. Today I traded with the Chinese some dollars (my stored up trading surplus) for some amazing electronic circuits … at an amazingly friendly price. I couldn’t trade for those circuits in the USA. The government can go pound sand.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

Deviant Investor: Raising the debt ceiling = inflation

Raising the Debt Ceiling = Inflation

Raising the Debt Ceiling = Inflation

MD: People agreeing with the principles presented at this site know: (1) Debt is an “in-process promise”. Money in a “proper” Medium of Exchange (MOE) process is created by traders. They make trading promises spanning time and space and get them certified by the process.  The money “issued” then circulates as the most common object in every simple barter exchange. As the trader delivers, he returns money and it is destroyed. When he has delivered completely all the money has been returned and destroyed. In the process, his “promise” circulates as money representing his “in-process promise to complete a trade”. It is obviously debt … but it does not result in inflation.

The operative relation is: INFLATION = DEFAULT – INTEREST.

Thus, inflation only results if there is a default that is not immediately recovered by an interest collection of like amount.

This article is implicitly addressing one particular type of trader. Specifically, that type is “government”. This particular government is the largest trader the world  has ever seen … and the biggest deadbeat. This trader, the USA government, has never delivered on a trade as promised. They just roll their promises over … and that is open “default”. Further, “interest” of like amount is not collected so the defaults result in inflation. The process is “counterfeiting”.  Note: The debt (trading promise) does not cause inflation. Only defaults can cause inflation … and only when they are not immediately mitigated by interest collections of like amount.

Now, keeping that in mind, lets read the article and expose and dissect the delusion.

Guest Post from Stefan Gleason, Originally Published on
Money Metals Exchange


The dramatic failure of the U.S. Senate’s last-ditch Obamacare repeal effort leaves Republicans so far without a major legislative win since Donald Trump took office. No healthcare reform. No tax reform. No monetary reform. No budgetary reform.

MD: When it comes to government, doing nothing “always” is better than their doing something. What’s not to like about this “dramatic failure”?

The more things change in Washington… the more they stay the same.

Despite an unconventional outsider in the White House, it’s business as usual for entrenched incumbents of both parties. The next major order of business for the bipartisan establishment is to raise the debt ceiling above $20 trillion.

MD: I.e. legitimize their total counterfeiting up to $20 trillion. Since they “always” raise this limit, it “is” no limit. Counterfeiting is how “all” governments sustain themselves. It is their very existence.

Since March, the Treasury Department has been relying on “extraordinary measures” to pay the government’s bills without breaching the statutory debt limit.

By October, according to Treasury officials, the government could begin defaulting on debt if Congress doesn’t approve additional borrowing authority.

MD: Could “begin” defaulting on debt? Government “always” defaults on its trading promise … i.e. its debt. A “rollover” is a default … plain and simple!

Treasury Secretary Steven Mnuchin wants Congress to pass a “clean” debt limit increase. That would entail just signing off on more debt without putting any restraints whatsoever on government spending.

Fiscal conservatives hope to tie the debt ceiling hike to at least some budgetary reforms. But even relatively minor spending concessions will be difficult to obtain from the bipartisan establishment.

MD: A budget is just a financial novel. It does nothing … just as we know a debt ceiling does nothing. The only thing that will stop governments … and the money changers that institute them is a competing MOE process. Articles like this that are deluded by what is actually going on just shield the government from such competition. They inhibit instituting a “proper” MOE process.

Democrats and a few left-leaning Republicans together have an effective majority in the U.S. Senate. They wielded their legislative might by defeating the GOP’s watered-down Obamacare repeal bill, with the decisive “no” vote cast by ailing Republican John McCain.

It was exactly the sort of media spotlight moment Senator McCain has craved throughout his long political career.

The narcissistic Senator’s shtick is to posture as a selfless crusader for noble causes that his fellow Republicans just aren’t high-minded enough to get behind.

Yet for all his sanctimony, McCain is just as politically opportunistic and just as hypocritical as many of his Senate colleagues. The Senator from Arizona ran for re-election last time around on repealing Obamacare. Yet when given the opportunity, he voted to keep it in place.

MD: Why do the people of Arizona keep returning McCain to the Senate? Because democracy involving more than 50 people does not work. It just reduces to a big expensive “ugly” contest. That too needs to change.

He campaigns as a conservative when it suits his political needs and portrays himself as a maverick when he wants media accolades. He legislates as neither a conservative nor a maverick but as an entrenched establishment incumbent. That can also be said of other big-name Republicans.

Trump’s Budget Cut Proposals Declared “Dead on Arrival” by Spending-Drunk Congress

When President Trump’s Budget Director Mick Mulvaney unveiled a proposed budget that, for the first time in decades, asked Congress to make tough cuts to an array of spending programs, establishment Republicans joined Democrats in branding it “dead on arrival.”

Congress didn’t even consider the idea of spending cuts to be on the table for negotiation. That’s how entrenched deep state loyalties are in Congress.

Instead of working with Trump’s budget, the Republican-controlled Congress promptly began hammering out a spending bill that added billions to what the administration requested – $4.6 billion more for agriculture, $4.3 billion more for interior and environmental programs, $8.6 billion more for the departments of Transportation and Housing and Urban Development.

No cuts to refugee and foreign aid programs. Even the much-maligned National Endowment for the Arts made it through the House Appropriations Committee unscathed.

The bottom line is that there will be no spending restraint in Washington, and therefore no way out of the coming debt crisis. The Congressional Budget Office projects that publicly held federal debt as a percentage of the economy will soon surge past all previous wartime spikes.

MD: Actually we should just get out of the way and let the thing explode as quickly as it naturally will. And quit paying “all” taxes. If just one or two of us quit, we go to jail and they take everything we have. But if we “all” quit, they can’t do anything about it. That’s the only chance we will ever have … and we have always had it

And go to the link to see the missing image below. I’m too lazy to copy it over.

National Debt (Publicly Held) as a Percentage of GDP

Source: Congressional Budget Office

The official national debt of nearly $20 trillion is just the tip of the iceberg. It represents a small proportion of the total unfunded liabilities the political class has racked up over the past few decades (pointedly, after President Richard Nixon repealed the last remnants of gold redeemability for the U.S. dollar and replaced it with pure fiat).

MD: The Deviant Investor is a site brought to you by gold bugs. They claim gold is “honest” money … as if traders promises are not honest. Let’s run the numbers here. Let’s say an ounce of gold is worth $2,000 (costs that much to create a new one).  Divided by say 150 million USA tax payers, that $20 trillion debt comes to $133 per taxpayer. Since there is only 1oz of gold per person in the world, that uses up about 7% of their share of gold. That other 93% has to go for the promises they have in their house, their car, their savings, their checking accounts, their in-process credit card purchases and balances … and on and on and on. If gold was money, the USA taxpayer would quickly find he has no way to obtain the gold he needs to carry on these trading transactions. And of course that puts the “Deviant Investors” who presumably have more than their fair share of gold … it puts them in the cat bird’s seat doesn’t it!

Taxpayers are on the hook for perhaps $100 trillion more in unfunded entitlement and pension IOUs.

MD: Ooops …. that’s 5 times the 7% … that takes each USA taxpayer to 42% of his share of all the gold in the world!

Plus, state and local government pensions are underfunded by several trillion dollars. They haven’t blown up yet because the rising stock market and steady bond market seen over the past several years has enabled pension fund administrators to kick the can further down the road. They are projecting unrealistically high market returns into the future – and still coming up short.

MD: A financial novel is a financial fiction … novels are fictions.

Federal Reserve Makes It All Possible


Trillions upon trillions of dollars have been promised that simply won’t exist… unless the Federal Reserve creates them out of nothing. The Fed’s unlimited power to expand the currency supply enables politicians to commit acts of fiscal malfeasance with political impunity.

MD: And if the dollars won’t exist, any gold that might have been backing them … or being used instead of them … wouldn’t exist either … would it??? It’s not about creating something out of nothing … all traders do that when they create money. It’s about counterfeiting … it’s about defaulting … it’s about breaking trading promises. That’s a whole different ball game. You and I don’t do that. That’s “all” governments do … i.e. default.

A legislator might get voted out of office for raising taxes, but probably not for adding to the budget deficit. Most voters don’t perceive any immediate consequences to a rising national debt or the expansion of the currency supply. That’s why “borrow and print” is a politically convenient way for lawmakers to stealthily raise taxes.

MD: What do you expect from this thing they’re passing off as democracy … which is just a pitiful “ugly” contest. It can’t work with more than 50 people involved … and at the level of our most representative representative, there are over 500,000 people involved.

Government spending extracts resources from the economy regardless of whether that spending is paid for through taxes or through the deceit of borrow and print.

MD: Now that is nonsense. Making trading promises does not extract resources. If anything, it adds them. And it makes a huge difference whether the promise is delivered or defaulted with no mitigating interest collection to recover it. Taxes, if they went to delivering on government trading promises, “would” have zero effect on resources. But we know taxes just go to the money changers for their demanded tribute. They cleverly refer to that as interest.

What excessive borrowing today does is set up political demand for massive inflation of the currency supply down the road. The inflation tax can be just as devastating to a person’s wealth as any tax collected by the IRS.

MD: Poor Stefan. He just doesn’t get it!

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.


Thanks to Stefan Gleason

Gary Christenson

The Deviant Investor


Amazon over valued (draft)

The Amazon Con: Bulls May Be Crying A River One Of These Days




About:, Inc. (AMZN), COST, HD, TGT

Special situations, growth at reasonable price, value, micro-cap


AMZN is a stock one has to believe in to justify its price, yet current quarter results are improbably bad once again.

MD: Anyone who has used Amazon’s services is likely to be a believer. What the richest person in the world is a big holder in the company, doesn’t that say something about “his” belief in the company?

Its acquisition of Whole Foods is a case of a 200X P/E stock buying a 30X P/E stock, showing the former stock is overvalued.

The entire move from mail order (or e-mail order) delivery to stores was done 90 years ago, but there is no first-mover advantage now for AMZN.

MD: Now that is abject nonsense. Amazon began by making it easier and more efficient for buyers to find sellers and vice versa. It was just a “classified advertising” implementation on the WWW … and it wasn’t the only one. Bezos sees business as three days: day one it develops; day two it rides the wave; day three it dies. Bezos will never leave day one if he can help it.

As competition ramps in e-commerce, with big box chains with the advantage of pick up in store, AMZN may see worsening losses in its core retail division.

MD: Pretty amazing someone can see the big box chains with the advantage. “Pick up in store” is no enticement for me. Save me the trip is my enticement. I think there is a middle ground. Deliver to my nearby convenience store and I’ll pick up there … and enjoy lower shipping cost of course.

Thus, while timing is impossible and there are no certainties, risk-reward for AMZN looks poor, while many other stocks trade normally and are therefore priced for positive returns.

MD: This guy would have thought Standard Oil looked poor … and of course Microsoft and Apple and Oracle (both of which were on the ropes at one time) and Google.

Introduction – rationale for another bearish article

When the facts change, I change my mind (per Keynes). But when the facts get stronger, I carry on with a bullish or bearish thesis, and that’s the case in my humble opinion with’s (AMZN) stock price. This article happens to propound a bearish hypothesis, but as an example of sticking with a bullish hypothesis that is not working, on September 15, 2015, Seeking Alpha published my final Apple (AAPL) article. The stock was going nowhere, hanging around a pitiful $100, yet the title of the article was a straightforward:

Mr. Market Errs: Apple Is Unlikely To Be Stopped In Its Rise To Further Heights

In the bullet points, I argued that:

  • … facts suggest that the iPhone (and therefore Apple) may in fact be on the verge of a major, historic victory.
  • Even if that does not occur, AAPL remains an undervalued stock with strong total return potential for patient investors.”

As it happened, 8 months later, AAPL was down another 10%, and as late as July, it was below $100: but look at it now. So – I was early but (so far) basically correct.

MD: I wouldn’t touch Apple with a long stick. How in the world can they compete with a Linux based system? How can they compete with Open Source? They have to keep innovating … or they are killed by commodity providers.

I look at AMZN that way, in reverse. Timing things like this even to the year is impossible. (And, of course, sometimes I am simply wrong.)

MD: I wonder what he thinks about BitCoin. That who concept is laughably wrong on its face … the the price of a BitCoin continues to go up exponentially.

Next, a few introductory clarifications. First, the “con” referred to in the article is about the stock price, more specifically the resurrection of the 1997-2000 con game that eyeballs, or in AMZN’s case, eyeballs plus sales at near-zero profit margins, mattered to the exclusion of earnings.

MD: If you pour all your earnings into building infrastructure, are you creating a worthless company? If you expense everything instead of capitalizing it, are you creating a worthless company? If you only had to look at earnings, a financial statement would be just one line instead of may pages and many many lines.

I’ll end my comments here. This guy is going nowhere! You can read the rest of the article by going to the link at the top … repeated here.