Gary from Biiwii with another macro chart worth noting.
In 1999, the price of gold bottomed after having ridden the
post-Volcker era down along with treasury yields. This was due to the
sound policies the former Fed chief rammed home and the confidence that
Enter the Maestro, Greenspan, who inherited the benefits
of this sound policy and used it for years as a lever to bail out the
system whenever needed. Many people thought Greenspan was a great and
powerful Fed chief, but in actuality he was simply playing off the
confidence that had been restored in the monetary and financial systems.
think this macro chart has profound implications and clearly shows that
sometime in the 1999-2001 period, we went off the charts as increasing
debt burden became not only acceptable, but necessary to support the
lifestyles we had grown accustomed to. Denninger's letter in the previous post illustrates China's role in the macro Ponzi scheme in the harshest of terms.
is talk of a gold bubble and in my opinion, the most unsavory of the
gold bug 'community' are out in full force, hoping for nothing less.
But gold is not in a bubble. That is because gold represents an anchor
to sensible systems and simpler times. It is going nowhere. The other
stuff, the remnants of a rotting system is what is going somewhere and
that somewhere is down. In short, confidence is being lost. It is no
coincidence that gold is the only asset in new high (blue sky)
Back to the chart, look at what happened as Greenspan
finally ran out of Volcker's ammo and the market realized that this was
simply a shell game promoted mainly by the macro vendor financing
relationship between the US and China. There have been various means of
keeping treasuries aloft, not least of which is the need for China and
other creditors to keep buying them or at the least, not talk them
down. Gold's honest monetary value has simply picked up on the rigged
game beneath the surface and sought the value that treasury yields have
thus far refused to seek.
At the very least, this is a picture
of honesty beneath the surface and sadly it is a picture that most
people will either never see or come to see when the media are shoving
it down their throats and they panic into gold at god knows what higher
price than it is currently at.
I'll kill it here, but when I see and ponder pictures like this, I hear thousands of words.