The Roubini - Faber Gold DebateCommodities / Gold and Silver 2013 Jun 05, 2013 - 04:30 PM GMT
The barometric gauge of financial health and stability has invariably been the price of gold. Often overlooked is that the price is reflected by the exchangeability into different currencies. Therefore, any valid assessment of the true value of gold must factor in the real purchasing power within the coinage of local tender.
Gold spikes during extreme crises. The crises are over.
Gold does well during periods when there's a risk of high inflation. That clearly is no longer a big worry, given how much central banks have unsuccessfully tried to stoke even modest inflation.
Now with the economy recovering, nobody wants to be in rocks that don't pay any dividends.
Real interest rates are rising. That kills gold.
Governments with debt issues are selling gold.
Gold was juiced by right-wing fanatics in the US. That boom is over.
"Faber explains, among other things, the fallacy of the Fed's help "the problem is the money doesn't flow into the system evenly, how with money-printing "the majority loses, and the minority wins," and how, thanks to the further misallocation of capital, "people with assets are all doomed, because prices are grossly inflated globally for stocks and bonds." Faber says he buys gold every month, adding that "I want to have some assets that aren't in the banking system. When the asset bubble bursts, financial assets will be particularly vulnerable."
The preliminary appraisal of what seemingly are contradictory positions is that both are correct, depending on the current location of the time continuum for world financial markets. The overriding ability of central banksters to paper over catastrophic crises and deflationary dislocations, seem to be unlimited. Coordinated rescue plans are frequently disguised by currency fluctuations and equity swings, but the real measure of maintaining financial solvency requires that bond rollovers and new floats be sold in the marketplace. With the immergence of the Federal Reserve purchase of government debt, as an essential resort to keep the funding game going, the era of rapid devaluation, has begun.
"So exactly how have the global elite accumulated so much wealth? Well, one of the primary ways is through the use of debt. There is about 190 trillion dollars of debt in the world but global GDP is only about 70 trillion dollars. Our debt-based global financial system systematically transfers wealth from us and our governments into the hands of the global elite. And of course the gigantic banks and corporations that the elite control are constantly gobbling up everything of value that they can find: natural resources, profitable small businesses, real estate, politicians, etc. Money, power, ownership and control are becoming very, very tightly concentrated at the top of the food chain, and that is a very dangerous thing for humanity."
No honest person can dispute Faber’s claim - "the majority loses, and the minority wins". What is still debatable is the timing of the looming break down of the fiat financial structure. The prospects for the inevitable, seems prudent, "When the asset bubble bursts, financial assets will be particularly vulnerable." How long can 190 trillion dollars of debt be serviced, when it is impossible to grow the world economy out of a mathematical impossibility?
The overriding issue in not about the current convertibility of gold into whatever paper species is still solvent. The conclusive finality is that a newly issued medium of exchange will be imposed under a terminable collapse of the world economy. All signs point that gold will be part of a desperate attempt by central banks to launch a world currency. The ultimate risk that outlaws gold, as once was the case in the U.S., for private ownership, is the gravest danger.
The Roubini model excludes the financial doom that Faber believes to be unavoidable. As long as it lasts, careerist economists will enjoy the payoffs from the paper-banking establishment. Yet in the end, the authentic "Doctor Doom" will prevail.
James Hall – June 5, 2013
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