Archive for category money


Businessman, investor and IT expert Karl Denninger weighs in on Bitcoin. He seems to believe in inherent value, which Gary North does not, but otherwise he makes many of the same points.

Speaking of Gary North, he has another couple of articles about Bitcoin up today. It’s all the rage! (Here’s the first of his articles on Bitcoin which I blogged about recently.)

Back to Denninger. These are just the key points. Click the link to read the entire thing (it’s short and sweet).

Let’s go over what defines a currency. To be one you need:

  • It must be a store of value. That is, if I put some amount of value into it today that value should be reasonably stable over time. Nothing that is fluctuating in purchasing power by 5, 10 or even 20% in a day can be said to have such a quality, irrespective of whether it is going up or down.
  • It must be a medium of exchange. In order to perform this function people must accept it in trade for other goods and services – real goods and services. You need to be able to buy a gallon of gasoline, a basket of food, a car, a computer and similar with it. The problem is that until it is a store of value it will not be a medium of exchange because the people who produce things would be insane to widely accept it when they cannot reasonably expect the value you give them to be constant for enough time for them to obtain more raw materials and similar with what you tendered to them.
  • It should be self-verifying, at least for reasonably-small transactions. I should be able to know if the “coin” you intend to spend is valid and not a counterfeit by trivial examination. …
  • It would be nice if it was reasonably anonymous, at least without valid legal process. Digital currencies that operate by publication have an inherent issue here in that the transaction is not only indelibly recorded by cryptographic signature but it is available for everyone, everywhere, to see on a permanent basis.
  • The mania currently being found in digital commodities is amusing to watch but none of these are in fact “currencies” since they fulfill neither of the primary requirements of same nor either of what I consider to be the two most-important secondary characteristics.
  • Instead these fads are more akin to tulip bulbs.

via Market-Ticker – The Argument Against Digital “Currencies”


Bitcoin vs. Gold Video | Peter Schiff’s Official Gold Blog

A few months ago, I became interested in Bitcoin. The price then was around $250. It is now, as of this writing, $880 and still rising daily. Feel tempted to get on the bandwagon? Is this the currency of the future? Or another Tulip Bulb mania?

Investor Peter Schiff, in this video, says that Bitcoin has all the qualities and requisites of money… except one. Unfortunately, says Schiff, that one requisite is vital. In addition, according to Schiff, most owners of Bitcoins are not using them for making purchases but are instead hoarding them as an investment. The time will come when they wish to cash in. What will happen to the price then?

Summary: In his latest video, Peter Schiff shares his thoughts on the bitcoin mania that is sweeping the world. After rising from less than $20 to more than $600 in one year, many investors are wondering if bitcoin might be worth the risk. Early adopters pitch bitcoin as “gold 2.0″ – a digital currency that cannot be manipulated like fiat money. Bitcoins are even “mined,” similar to physical gold and silver. However, Peter explains why bitcoins still fail as a substitute for gold and strongly urges investors to avoid this risky new currency. Bitcoin could very well have already hit its top, but Peter is confident gold is still well below its future record highs.

via Bitcoin vs. Gold Video | Peter Schiff’s Official Gold Blog.

Watch the video (click this link if video doesn’t work).

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Zero Hedge | On a long enough timeline the survival rate for everyone drops to zero

China, Japan Sell Most US Paper In Years; Foreign Treasury Holdings At 2013 Lows

via Zero Hedge | On a long enough timeline the survival rate for everyone drops to zero.


TICsaster: Foreigners Sell More US Securities Than After Lehman Bankruptcy

Did we say selling? Pardon, we meant dumping with a vengeance, throwing out the boatload with the bathwater, with both hands and feet and getting to da choppa.

via Zero Hedge | On a long enough timeline the survival rate for everyone drops to zero.

Where to buy gold

Buy Gold Online is a website that allows you to buy physical gold online and store it at a number of different locations around the world. Goldmoney also sells silver, platinum and palladium. You can also take delivery of the physical gold bullion.

(Disclosure: I’m a satisfied customer and affiliate.)

If you want to have actual possession of your gold, you had best buy it in your country of residence. However, if you have a bank account in another country, you may wish to use some of your funds to purchase gold as a hedge against the devaluation of the currency, and as an alternative to bringing your money “home”.

On my website there is  a useful chart with the daily price of gold and other precious metals. You can also choose the currency, as well as the time range, e.g. the current year or past 6 months). You can see the same chart on the website. Another one is on which also has a ton of articles and is updated daily. (I have no affiliation with this site).

Here’s an introductory video from

GoldMoney – Buy & Hold Precious Metals Online
And another one on how it works:

How To Purchase Gold and Silver

ECB’s and BoJ’s balance sheet as portion of GDP

ECB BoJ balance sheets as % of GDP

ECB BoJ balance sheets as % of GDP

The above graphic is from an RT interview with “Tragedy of the Euro” author and economics professor, Philip Bagus (Bagus’ interview begins @ 16:15).

Bastiat Circle blog has the transcript and the video.

What happens in Europe, of course, impinges on Japan because

  • Europe is one of Japan’s major trading partners,
  • the BoJ’s balance sheet is approximately equal to the ECB’s, and
  • the BoJ’s and Japan’s Finance Ministry policies may well follow the path of Europe’s.

via Eurozone Wealth Transfers and Sovereign Default

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I Will Gladly Pay You 100 Years From Now, For a Hamburger Today

Mish asks,

…please explain the need for government to borrow money in the first place. The same question applies to the US, China, Germany, and the rest of the world.

There is no “need”, there is only political expediency of vote-buying promises that cannot be met with money that will never be paid back by inflation or default. This is what happens when there are no fiscal constraints anywhere. This is what happens when currencies are backed by nothing and can be borrowed into existence at will by central banks in response to out-of-control spending by politicians.

At some point, even if there is no default, those 100-year bonds will go for 20 cents on the dollar if not less.

Neither the UK, nor the US, nor anyone else needs 100-year bonds. What we need is sound money, backed by gold, coupled with balanced budget amendments, and an end to fractional reserve lending.

Since that set of needs is highly unlikely barring a global currency crisis, I advise preparing for one. I just cannot tell you when. I can only tell you it’s a wise thing to have some gold in your portfolio for when the inevitable happens.

via Mish’s Global Economic Trend Analysis: I Will Gladly Pay You 100 Years From Now, For a Hamburger Today.

Oh, and at least 2 weeks of water, food and supplies.

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Kyle Bass gives Japan just 18 months to live

Kyle Bass (click here for my blog posts where I mention Kyle) gives Japan just 18 months to live, in this interview in the Nikkei:


via 日本国債バブル「18カ月以内に崩壊する」  :日本経済新聞.

His final words of advice: don’t trust the State; think for yourself:

 「世の中で正しいと思われていることを、そのまま受け入れないということです。自分の力で考えて、常に論理的であろうとすること。我々はこれまで、中央銀行の バンカーたちが提示する世界観を受け入れるよう求められてきました。まるで彼らだけが真実の箱の中身が何かを知っているかのように。その彼らは今、無制限 にお金を刷り、経済の安定を何とか保とうと躍起になっています。しかし、この経済政策に限界が来ているのは明らかです。もはや、国家を信用することはでき ません。自らの力で考え、生き残っていかなければならない時代が来ているのです」

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Eddie Hobbs – TV3 – The Euro Collapse

Here’re the key points, in case you have trouble with that lovely Irish lilt.

  1. “At the moment, economics is being run by politicians”. Since when hasn’t it?
  2. “a global financial event which will dwarf what happened after Lehman Brothers”
  3. “If Italy fails, we’re looking at economic Krakatoa”.
  4. “What is shows us is that the the whole Keynesian model … has been an utter failure.”

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Who Owns Most of the World’s Gold?

It’s no surprise that governments, central banks, and investment funds are world’s largest holders of gold reserves. These organizations know gold is the ultimate store of value that protects against inflation and offers a safe haven during times of economic and geopolitical turmoil.To find out who owns the most gold in the world, we referred to data from the International Monetary Fund’s International Financial Statistics Report.


p>via Who Owns Most of the World’s Gold?.

With photos of key landmarks of the relevant countries, in case you don’t know what France is. Still, interesting stats. NB, Japan is #9. That’ in spite of the fact that the Japanese are selling their gold as fast as they can, taking the cash and running.


Analysis: Japanese cash in on gold price boom | Reuters

Interesting article on gold, particularly regarding how the Japanese view it:

For Eriko Ebina, standing outside a downtown Tokyo medical equipment store that has a side business buying gold, the recent surge in prices for the precious metal was just too tempting.

“For more than 30 years, I kept gold jewelry mother bought for me, and with media saying prices are high, I thought I would sell them now except for a few keepsakes from her,” said Ebina, in her 60s.

“I earned more than I thought they were worth. I’m not interested in buying gold.”

via Analysis: Japanese cash in on gold price boom | Reuters.

The other day, I passed a gold shop.  The last time I’d been there, there was hardly anyone around but that day there was a queue snaking out the door. Almost everyone was selling their gold/jewelry.  When I inquired, I was told that just to get to the front of the queue (where you got a numbered ticket and had to wait again) was a 1-hour wait!

The article above taught me that Japan actually exports gold:


As long as Japanese remain sellers as the price rallies, Japan is set to be a net gold exporter for the sixth consecutive year in 2011.


Gold in Japan is not so much associated with risk aversion, but more as an asset that many bought when prices languished for 30 years.

The retail price at Japan’s largest bullion house Tanaka Kikinzoku Kogyo was 4,745 yen per gram on August 23, excluding the 5 percent consumption tax, the highest since September 1980. Retail gold peaked in January 1980 at 6,495 yen.

Selling of gold has snowballed since the start of August, unlike in January 2008 when a spike in gold prices led to an explosive but short-lived gold sales boom, said Osamu Ikeda, Tanaka’s general manager.

“Selling accelerated in August as gold rallied to historic highs, and that is symbolic of a matured Japan,” Ikeda said.

Ikeda said the amount of gold for investment purposes that the house bought back from customers more than doubled to 10.2 tonnes as of August 23 from 4.3 tonnes in July. At the August 23 prices this would be worth around 48.4 billion yen.

Sellers are not limited to retired or retiring generations nor shops confined to established bullion houses.

“Customers bring all sorts of jewelry, gold cups, watch, teeth, but sometimes desperate ones bring fake gold or even their talismans,” said Seiichi Nakamura, manager at confectionery retail chain Nakamuraya.

“A lot of stores of this kind appeared recently, so that it turned into sort of a survival game,” he said, adding the number of customers, mainly women in their 40-50s, had doubled to 20 a day in recent days.

Media playing up the surge in gold is also driving the move.

“The media helped us, I think. When people learned there is a boom for selling gold now, they decided to do it too. It’s like a chain effect,” said shop manager Kenta Okiyama at antique dealer Otakaraya.

Tanaka Kikinzoku’s Ikeda said buying interest has picked up, even in the physical market, from those in their 30s and 40s, although sellers still outnumber buyers by 5 to 1.

“It used to be one-way flows of just sellers. Now, there are sellers to book profits and some buyers betting on further rises in prices,” Ikeda said.

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