moore_capital54

So, basically what you're saying is that it doesn't really work, or at least doesn't solve the problem of money printing. Governments can still basically print as much money as they want by changing the ratio, and indeed will be forced to do so as the economic output and supply of gold diverge. I find it fascinating that it's so easy to refute the "gold standard ensures the government doesn't cause high inflation through money printing" argument. So, you'd opt to spend the resources of humanity digging up rocks instead of, say, travelling to other planets, inventing cheap limitless energy sources, learning about the way the universe works, creating great art, curing diseases, and eliminating the ravages of aging? It provides jobs, but so does pretty well everything that improves the standard of living. It seems like the opportunity cost would be very high. Thanks for your help on this. It seemed to me that it didn't make sense, but I figured that my ignorance just meant that I was missing something. The fact that someone so knowledgeable about gold and mining in general talks about changing ratios to solve the basic divergence argument really clarifies the issue for me. Richard you completely misunderstood the point. You guys were posing some pie in the sky scenario where the gold supply would not match productivity and in that scenario I simply provided a solution followed by a real world example, that in nearly 200 years of a gold standard the ratio was adjusted only twice. Not impressed with your picking and choosing of my comments. Your second point about sense of humanity and flying to other planets is just ridiculous, please apply more logic. A Gold standard would no prevent humanity from doing any of the things you mentioned, my point which was obviously misunderstood was that on a gold standard the process of money creation carries with it advancements in productivity, wealth, jobs and humanity. Whereas the process of money creation under fiat carries with it NOTHING. To think that if people are mining for gold they are being prevented from traveling to space or creating vaccines is childish and borders insanity. Not impressed with the last round of comments at all, and along the lines of Bmichaud, you guys will simply not get it. Stick to what you know. Cheers!

Must say hearing lampert was really inspiring, he is a lot less sophisticated than I thought in his demeanour, which just confirms my thesis about what it takes to be a successful value investor. Great link thanks a lot for it, this is the reason I joined this board because I always found the best links to videos and historical documents here.

Person A has a debt on his boat and another on his sportscar. He has no liquid assets to invest. Person B is a billionaire and has no debts. How does eliminating capital gains tax help person A pay down his debts? I can see how it helps person B, but person A? Person A already has a large incentive to pay down his debts -- the interest rate on his loans is much higher than interest rates available elsewhere. Why does changing the capital gains rate have much to do with anything related to deleveraging? Eric I completely disagree with you here, Person A doesn't need to be "helped" he needs to file for bankruptcy. Person A is a cancer on society, and wealth creation! Just my two cents.

Hey AZ, I thought about some of the posters on this thread today and how I might articulate the gold standard in a way that would just "click" within a few sentences. Unfortunately I arrived at the conclusion that it would not be possible. This would be no different than trying to explain value investing to someone in a few lines. Sure it could be summarized but if someone starts asking you questions like: "But how do you know a stock will reach its intrinsic value" or "But doesn't the market know all the available information", these points would bring up a lengthy debate that would require several major rounds, and even still the person may not be convinced. The common denominator I see is that fundamentally a lot of you guys have been trained to think of a gold standard as something bad, due to buffet's comments on gold as an investment. And I don't expect to change your minds. What I do suggest is that if you are genuinely interested, pick up some books and study the history of money and how rare a functioning fiat money system really is, in those books you will find all the answers you need. I will take one last shot here responding to AZ: Let me start with this one: To me it seems to boil down to the fact that human beings tend to be nostalgic about what was to the detriment of what is maybe... I fail to see how one can conclude by looking at the exceptional success America has enjoyed that our system hasn't worked. We've had hiccups and we'll have more but I disagree that our monetary system hasn't worked overall. Do you realize that in 235 years of existence the US has only employed a fiat money standard for 40 years? Would you really say that last 40 years were the best in terms of wealth creation as measured by even Keynesian economic metrics? We know that in these 40 years, debt has become more ubiquitous than ever, interest rates have asymptotically reached zero and the savings rate has reached all time lows. In reality the US has only employed a fiat money system for 17% of it's life. I can go on and on and on. The experiment has not been a good one as far as I am concerned. So if we say that we start with a system where $1 is backed by let's say 30oz and Richard's scenario plays out and we wake up to find that it is no longer adequate and I assume we still have some Federal Reserve-like entity that would decide to readjust the ratio to $1/20oz, how exactly is this different from what we have right now? We'd just end up continuously readjusting the ratio I think. And maybe we would give that power to Congress so that we can give those yoyos in DC one more thing to fight about every year and hold us hostage over Again this was a solution to the pie in the sky scenarios that were mentioned here in previous posts along the lines of "WHAT TO DO IF THERE IS NO GOLD IN THE WORLD?" etc. There are options, and they could be implemented systematically and here too I disagree, the US only adjusted it's gold ratio twice in 195 years. How many times has the Federal Reserve expanded its balance sheet or made rate decisions? There is a lot of buzz around town here, supposedly Alan Greenspan is going to be coming out with a book, in it he is going to make a major admission that from the period 1987-2001 Greenspan used gold as a gauge to make interest rates decisions and that the biggest mistake we ever made was going off the gold standard. This will be absolutely game changing if it's true. I have heard from several people now that Greenspan plans to admit in this book and as part of his legacy that the experiment has gone wrong. You guys shouldn't fear a gold standard, we would all do very well in one. There would be a lot more value in the market too, and multiples would be a lot lower for obvious reasons. To Link01 that's 1 side of the equation. the other side, net wealth, would be the excess (or shortfall) of wealth created over dilution (money printing, deficits etc). if the annual produce of the land and labour of the society increases 10% but deficits or inflation dilutes it by 4%, then you are still left with a net weath increase of 6%. I absolutely disagree with you here, you are essentially lobbying that the government is allowed to steal 4% of the nations productivity wealth per annum? Why because some politicians decide to finance discretionary waste? How is that productive for society?

One more thing, current mine supply equates to roughly 0.9% inflation per annum on a gold standard, and think of the job creation and wealth creation that goes into mining an ounce of gold, as opposed to just creating money on Maiden Lane on a computer screen, then buying some treasuries from a retiree or a billionaire who uses the cash to reinvest in securities. Gold mining advances civilization and advances the planet in a very beautiful way. Many of the communities and towns you see today in remote places of the world were all borne as a result of gold mining. There is absolutely nothing wrong with a gold standard, and any caveats are outweighed by caveats in a fiat money system. Dig in, study the topic, you will see I am right.

Hey guys I only saw your posts today, as the thread kind of disappeared. You are all forgetting a key pillar behind a gold or precious metal standard. You guys keep trying to match the world's gold supply to the world's money supply, and that is the wrong way to look at it. There are many ways to expand the base, be it fractional reserve banking, changing of the ratios of gold to base money, and finally even bimetallism where silver and gold equal some ratio of base money. Moreover you should all know that there is roughly 1 ounce of gold per capita on Planet Earth, so the scenarios you describe is hardly realistic. That is why we began to use gold as a currency many thousands of years ago. I hope this answers it.

Hes got about $600-700mm outside of BRK based on my estimates. Keep in mind this is from the original $17 or so he had when he closed the partnership... what a guy!

Think? We know, they are buying long-dated treasuries and reinvesting mortgage interest into MBS. Do you really think its a coincidence the markets have bottomed the same week that the central bank restarted the printing press. This is part of the cycle and it was very predictable. Personally I am all for it, whatever it takes to get the confidence back in the markets.

Honestly, call me naive but I GENUINELY believe in the 9 9 9 plan, I have been advocating something along the lines of this for many years: http://www.bloomberg.com/news/2011-10-12/cain-s-9-9-9-plan-raises-2-5-trillion-in-revenue-campaign-says.html I wish Romney would implement such a plan, because I don't think cain stands a chance.

http://news.businessweek.com/article.asp?documentKey=1376-LSVM136S972801-7JAC8PV0QM4LSNF8UN2RS01FO5 If you gentleman remember a few weeks back I was wondering why as a fiscal policy or QE the government could not just buy shares, what better way to stimulate capital investment. Looks like China figured this out and is doing so albeit with earned wealth and not printed money. A government sponsored buyback is just that, those shares will rarely hit the market, and the sellers are not looking to reinvest in treasuries, they look for higher risk profile opportunities. The US republican debate was abysmal last night, even Romney seems a little numb.

Parsad, does this mark the top for the doom and gloom business? lol

Shalab, you are going to need to do better than that, that explanation is very ambiguous. What is your position? Please define it clearly. Do you think that Franklin advocated for Fiat Money? Or do you understand what is a fact and that is Ben Franklin was advocating for the inclusion of other hard assets to form the reserve and backing of a paper money. I spent quite some time reading your posts, you should at least agree or disagree without being ambiguous. Your initial post indicated your belief that Franklin was advocating for a paper money in the context of the fiat money we all use today. That is absolutely false.

In letters written in April and May of 1787 Franklin also writes favorably about the new bank-based paper money that arose after the revolution. He says that there is “one bank in good credit. I myself purchased ten actions [shares of stock] in it, which, at least, shows my good opinion of it.” He also writes that the bank’s “management is so prudent, that I have no doubt of it continuing to go on well. … Their notes are always instantly paid on demand [in gold and silver], and pass on all occasions as readily as silver.” This bank was the Bank of North America, started in 1782 and the precursor to the first Bank of the United States. Franklin saw paper money as a method to increase velocity as the US needed all the momentum in trade to succeed in the mass creation of wealth for its citizens. He did not ever once advocate the usage of fiat money, money backed by NOTHING. His idea for a land bank is interesting, but we now have the benefit of hindsight and know that land can be very illiquid making the convertibility from note to sale of land to exchange for gold less seamless than Franklin hoped. Even in Franklins "coined land theory" he always saw the foundation be gold and silver as evidenced by that note. Franklin is one of my idols and I believe he had one of the greatest minds in history, he would have never advocated such an an insane system as the current fiat system. Only crazy people would advocate for such a system, people like Nixon (Check), Keynes (Check), enormously complex people with questionable ethics and moral character. Brilliant nontheless but again I keep repeating this quote on this board: It aint what you don't know that gets you in trouble its what you know for sure that just aint so! Instead of coming up with all these theories about why fiat system is so great, why not look at the facts! It has never worked, it has never been implemented by respected governments on such a wide scale, and it always ends with hyperinflation.

This is really funny, you totally fumbled this one Shalab lol Mr. Franklins words: For as Bills issued upon Money Security are Money, so Bills issued upon Land, are in Effect Coined Land.

Shalab please read the article,, it seems you have somewhat misunderstood Franklins meaning. He is advocating the usage of paper money in the context of easily transportable paper bills that are backed by money or some asset at the bank, he is not advocating an arm of the government print bills into existence backed by nothing... Those Places being Seats of vast Trade, and the Payment of great Sums being for that Reason frequent, Bills of Credit are found very convenient in Business; because a great Sum is more easily counted in Them, lighter in Carriage, concealed in less Room, and therefore safer in Travelling or Laying up, and on many other Accounts they are very much valued. The Banks are the general Cashiers of all Gentlemen, Merchants and great Traders in and about those Cities; there they deposite their Money, and may take out Bills to the Value, for which they can be certain to have Money again at the Bank at any Time: This gives the Bills a Credit; so that in England they are never less valuable than Money, and in Venice and Amsterdam they are generally worth more. And the Bankers always reserving Money in hand to answer more than the common Run of Demands (and some People constantly putting in while others are taking out) are able besides to lend large Sums, on good Security, to the Government or others, for a reasonable Interest, by which they are paid for their Care and Trouble; and the Money which otherwise would have lain dead in their Hands, is made to circulate again thereby among the People: And thus the Running Cash of the Nation is as it were doubled; for all great Payments being made in Bills, Money in lower Trade becomes much more plentiful: And this is an exceeding great Advantage to a Trading Country, that is not over-stock'd with Gold and Silver Trade in general being nothing else but the Exchange of Labour for Labour, the Value of all Things is, as I have said before, most justly measured by Labour. Now suppose I put my Money into a Bank, and take out a Bill for the Value; if this Bill at the Time of my receiving it, would purchase me the Labour of one hundred Men for twenty Days; but some time after will only purchase the Labour of the same Number of Men for fifteen Days; it is plain the Bill has sunk in Value one fourth Part. Now Silver and Gold being of no permanent Value; and as this Bill is founded on Money, and therefore to be esteemed as such, it may be that the Occasion of this Fall is the increasing Plenty of Gold and Silver, by which Money is one fourth Part less valuable than before, and therefore one fourth more is given of it for the same Quantity of Labour; and if Land is not become more plentiful by some proportionate Decrease of the People, one fourth Part more of Money is given for the same Quantity of Land; whereby it appears that it would have been more profitable to me to have laid that Money out in Land which I put into the Bank, than to place it there and take a Bill for it. And it is certain that the Value of Money has been continually sinking in England for several Ages past, because it has been continually increasing in Quantity. But if Bills could be taken out of a Bank in Europe on a Land Security, it is probable the Value of such Bills would be more certain and steady, because the Number of Inhabitants continue to be near the same in those Countries from Age to Age. Franklin is making a point that gold and silver on their own should not be an arbiter of value for all commodities, instead there should be a measurement of Labour. I can assure you this, Franklin would be rolling in his grave if he saw the current system in place where central banks are the arbiter of value for labour deciding for example that wall street fund managers are worth a lot more than factory workers. This is yet another example of people completely misunderstanding both the current system and the history of money and central banking.

Again with respect to Cullen Roche who is a blogger and Mosler who ran for president then moved his base to St. Thomas to avoid US Taxes, I prefer to read Adam Smith, and Murray Rothbard, two geniuses who figured this all out a long time ago. Watch Rothboards videos on Youtube, such an intelligent human being. What is going to get the US or any fiat money country back to sustainable growth has ABSOLUTELY NOTHING to do with the level of dilution initiated at the government level. Ultimately its going to depend on trust, confidence, innovation, and growth. And in that order as well. The US Politicial System has proven to be the leader when it comes to unleasing these qualities. And if you read your history, you will see that some of the qualities we currently take for granted: IE: Trust, and Confidence, were only achieved with a strict hard money system. That is what got human beings to feel good about entering into transactions with each other, after already experiencing currency dilution by the european monarchs. Interest Rates are a great tool and I think they need to be kept, Central Banks are great too, I am in no way as extreme as Ron Paul, he just wants to make the US an analog to 1700's hes a little overboard with his policies. The Central Bank is a great institution and it was borne out of the need to prevent bank runs. The Central Bank should be just that, but its reserves should be a ratio of Gold and even Silver. A tangible asset needs to regulate human behaviour, this is the only way we get to actually benefit from the unleasing of all these qualities. Otherwise we will end up with all this debt while the productive nations learn all our tricks and come out of it with all the wealth :)

I highly suggest you read and re-read Adam Smith - Wealth of Nations. The problem with your position is that it relies on expirementation total expirementation and you are expirementing with the most valuable of things and that is a nations wealth. Wealth = the annual produce of the land and labour of the society When you run deficits IE: PRINT MONEY you are diluting the value of that wealth, and when you run trade deficits you are handing the ownership of that wealth to foreigners. That's it its simple. There is no need to complicate it. Read the Wealth of Nations, and read "A history of money and banking in the United States" by Murray Rothboard. Balance some of your views with those of us simpletons, I promise life will be a lot easier. And you won't find yourself constantly under pressure to explain the unexplainable.

Again, who cares about stock market busts? Booms and Busts are part of capitalism, it is the fiat money system that attempts to artificially fix booms and busts, a gold standard system simply looks you in the eye and tells you your ugly!

I disagree with everything in your post. Of course the US cannot default on its debts because it can print USD but there are two types of defaults the defaults where you don't get paid or a default where you get paid in currency that is worth substantially less on a purchasing power basis. The US is no doubt on the latter path, as are all fiat money system governments. Lets agree to disagree, you are clearly a diehard keynsian and there is no doubt in my mind, even in my lifetime this expirement will end the market forces will not allow governments to run deficits the way you hope. It goes back to my point about common sense. Would you ever run your house that way? What makes the government different? There is no such thing as a free lunch!!! You are very bright and your mobile phone posts are far better than my PC posts, I am also recovering from a weekend of drinking as it was Thanksgiving but nevertheless you are extremely bright. I think you have just overdosed on too much Chicago style/keynsian economic theory and refuse to simplify things. This is no different than all those geniuses who created the CDO's and CDO's squared, they were very articulate and drove the point home, they used math to rationalize everything but anybody who just applied a "common sense test" would say wtf is going on here? Lets agree to disagree. You continue to fight the trend by hoarding worthless cash, and taking part in the rat race, because that is what this system demands of you. I have figured that out about 25 years ago, thanks to my Father and we are no longer slaves to that system. The system is a slave to us. I have LP's that have similar nominal net worths as in 1999 or 1998 and they sit here crying to me that they can't afford to provide their children with the same lifestyle they had.... Again whether you agree with that or not, that is the purpose of a fiat money system, it encourages the accumulation of debt to boost investment returns due to the pace of erosion of the currency which is ultimately dictated at the government spending level (deficits). You will never convince me otherwise, and the price of gold merely confirms all this.

OEC most of what I "concluded" is part of my market knowledge and has little to do with today's action. What today's action signifies to me, is that there appear to be serious net flows back into a market that is extremely oversold and was only a few days ago priced for a prolonged period of no growth.

The key is the VIX and it is telling me this is real buying. I hate futures, but the VIX is one of the most important indicators nowadays as are some of the CDS indices.

Prem has built a $15mm equity business into $8.5B his job is to preserve his capital first, and then focus on growth. He has achieved his goal, and even passed it with flying colours. With regards to Pragmatic Capital and Cullen Roche, again, and this is with 100% respect to both of you, you guys are being extremely naive. Let me pose this question to you, do you think if China did not exist the US would not be running fiscal deficits? Who accumulated the debt US or China? I never once said china is funding the US deficit, I don't care who owns the US debt. The bottom line is that the US is indebted to the tune of roughly 100% of GDP. And that would not have happened on a gold standard system. The fiat money system does not help capitalism achieve its potential, on the contrary it encourages too much debt in the system and as we have learnt the only thing that can slow down capitalism is debt. Debt cripples the economy by mortgaging the future as we have just witnessed. If you remove the current government debt, even with a much smaller economy we would all be much better off, and yes productivity growth is the best kind of growth. With regards to your other comments about Fractional Reserve Banking, I do not agree at all, as a gold standard system would instill the common sense rule. Everyone talks about the need for tougher regulation, but the best regulation is a common sense test or a "smell test". We have all but lost those tests with robo signers and online mortgage forms. With a gold standard system some portion of the base money would be converted into gold, at any given time a small segment of the population would be redeeming their money for gold. This would impose significant transparency on the central bank and as a result they would impose significant regulatory scrutiny on the banks which in turn would impose significant scrutiny before extending credit. Everyone keeps bringing up 1929 as a black stain on the gold standard but that is just sophistry. The great depression was due to a rapid accumulation of debt it had nothing to do witht he gold standard. The bernanke/keynsian view that it was what happened subsequently which exacerbated the state of the economy is academic nonsense. The period leading up to 1929 was a complete perversion as accounted in "A World in Debt" and "Only Yesterday", this period saw the beginning of what became a cancer on the american capitalist. It was the genesis of all our current problems ie: households consuming more than they produce, emphasis on service as opposed to manufacturing, easy money, debt accumulation, and liberal monetary policies. Buffett has a good line: "In a bear market shares revert to their rightful owners", well the period post 1929 was just that, a major correction where the economy has to return to its rightful track, of sustainable growth. Politicians, representing the most unscrupulous segment of the population decided to play god, and this was the beginning of the subsidized economy. Now, China will not repeat that mistake. That is why it is so important to take notice of this link I posted. The Chinese government believes in hard money, they absolutely hate debt. This is true for Brazil as well having witnessed the disastrous effects of hyperinflation and debt/gdp levels that were nauseating. If China and the rest of the productive world begin to engage in trade with a gold backed currency, this will put the US at its true test. I think that even this test will see the US prevail, but essentially the test will be this: Is the US and its "superior" system, really capable of prospering in a self sustaining manner? Can we produce all our own energy internally? Can we get back to exporting more than we import? These are all issues that will have to be tackled. There is no free lunch and contrary to the political rhetoric I believe that competition for global gdp is in fact a zero sum game.

This is not a dead cat bounce it is a serious net buying day. Market participants are jumping back in. And this contradicts a lot of what the doom/gloom sayers have been preaching. Some may try to time the market but this is why I continuously recommend the book: Extraordinary Popular Delusions and the Madness of Crowds. Human beings have short-term memories, and the stock market is a monopoly on capital flows. Once people realize the world isn't ending, and they have about 2 years worth of low interest rates, you will see serious utilizing of capital and growth return. Markets have been pricing worst case scenario, imagine they begin to price growth?

Do you all feel the genuine buying today? Fantastic!

Bmichaud, you are one of the few posters I tend to avoid direct debates with, not because I do not respect you, quite the contrary you are very intelligent and I enjoy reading your comments specifically relating to stock ideas. The problem here is that when it comes to monetary policy you are extremely liberal and quite academic in your thinking, where I am a lot more conservative. I think you even mentioned in the past you studied at the University of Chicago or some of the classic Keynsian/Friedman academic institutions that have instilled in you this great passion for monetary liberalism. I on the other hand am a lot more conservative and have, based on my studying of history, little confidence in my fellow man to control the output of currency, just as I have little confidence in my fellow man to control the output of anything. We fundamentally disagree here. That being said, I can tell you that we have a trader in our shop. And hes always more bearish than most. He always thinks the world is gonna end. And my partner always jokes that this is due tot he fact that he has not much "skin in the game" as traders generally do not. This puts them at a psychological advantage over long-term investors in making end of the world predictions or enjoying down days while we suffer from significant paper losses. Anyhow as an analog, I tend to find that investors who take a more liberal approach to monetary policy are for the most part academics or swing a small line in the markets. Hard core capitalists tend to lean towards hard money and can relate to it quite easily. With respect, do you have significant market exposure? And if so how can you be a proponent for a system that at it's core punishes the capitalist, punishes the saver and erodes your wealth unless it is fully invested at all times.