Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Roughly 2% on the Week
By: Chris Mullen, Gold-Seeker.com

COT Gold, Silver and US Dollar Index Report - March 24, 2017
By: GoldSeek.com

Silver Miners’ Q4’16 Fundamentals
By: Adam Hamilton, Zeal Intelligence

GoldSeek Radio Nugget: Dr. Paul Craig Roberts and Chris Waltzek
By: radio.GoldSeek.com

Russian Roulette, Central Banks, and Gold
By: Gary Christenson

Why free trade is officially dead
By: Alasdair Macleod

Time to Get On Board
By: Gary Savage

‘Real’ Performance Comparison
By: Steve Saville, The Speculative Investor

Stock Market Bubble and Gold
By: Arkadiusz Sieron

Gold and Silver Market Morning: Mar 24 2017 - Gold facing a critical day!
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch

 
Search

GoldSeek Web

 
Paradigm Shifts And Gold Rocket Launches



-- Posted Thursday, 29 July 2010 | | Source: GoldSeek.com

By: Moses Kim

There are certain periods of time in history when seemingly obscene prognistications are right. I believe we are in one of those times. It is at times like these that "conspiracy theorists" (whatever that means) become what I like to call "reality theorists." 

Economic shocks come from nowhere. One day the global economy is humming along; the next day it collapses. Crashes don't occur because the fundamentals suddenly change; they occur because the public at large recognizes the fundamentals and heads for the exit at the same time. What's crashing next is the public's confidence in governments across the Western world. You can guess how that will affect the price of gold.

If you study the bull market of the 1920's and the Great Depression of the 1930's, one of the amusing things you'll discover is how consistently wrong the mainstream was. During the great bull run of the 1920's, the mainstream was forever expecting a stock market crash. Remember, the decade began with a severe Depression (which incidentally came to a swift end without government intervention). The great Jesse Livermore was the only one who recognized the bull market very early on in the 1920's. He was mocked, but he was the only one making money for the longest time.

On the other side of the coin, the mainstream refused to believe that we were in for a prolonged period of economic weakness in the early years of the Great Depression. People were continually calling for a bottom in the economy. Of course the bottom didn't come for a decade.

So what gives? What causes the mainstream to consistently miss the boat at key turning points? When does the risk/reward dynamic skew towards the seemingly insane- such as $3,000 gold?

Why Do People Miscalculate?

What we must realize is that economic orthodoxy is constantly changing. For example, it used to be common knowledge that interest rates rise in bull markets and vice versa; now the average investor believes the exact opposite. Back then, people feared the slightest rise in inflation; now the Helicopter Bens of the world are scared out of their mind of deflation.

So what causes people to miscalculate? It's pretty simply actually: Economists and investors alike fail to adjust their economic models to account for changing underlying conditions. They try to fit square pegs into round holes- then they scratch their heads and wonder what went wrong.

Our leaders haven't the slightest clue. They are using the same medicine to cure a different disease. Keynesian economics can work in theory if it were used sparingly and only in response to a true underutilization of productive capacity. But what we have on our hands right now is a debt crisis. Our leaders think they are geniuses curing the disease, when in fact, they are making it worse.

What amuses me is the brouhaha over Keynesian economic stimulus as if it arrived yesterday. Excuse me, but what do you call the last 50 years of American economic policy characterized by debt-financed consumption? Is it not Keynesian economics and has it not already failed?

Gold Rocket Launch

I am a big believer that Pareto's law applies to markets. In other words, 20% of inputs will drive 80% of outputs. I honestly couldn't care less about productivity numbers because what's coming is no demand-pull inflation. I am much more focused on the dollar, bond rates, bond/dividend spreads, TIC capital flows, and the stupidity of governments around the world. Of all these variables, I am most confident in my prognostication that politicians will become increasingly foolish as the economic crisis on our hands becomes more complicated.

I have been preparing for the gold rocket launch for many months now. I am probably different from most people in that I focus more on the likely flow of capital than inflation when trying to figure out gold price movements. What I foresee is a flood of capital going from bonds into gold. The bond market is so huge that even a small percentage of capital flowing from bonds to gold will result in a volcanic eruption of epic proportions. So the potential rocket launch in gold depends largely on the bond market.

You all know where I stand. U.S. government bonds are the biggest bubble I've seen in my life. If you are trying to rationalize 10-year yields at 3%, then you are probably the kind of person who rationalized bubble home prices by using the "there's a fixed amount of land but a growing population" argument. In other words, your mind is stuck in the 5th grade. I advise you to think rationally for a second and consider the credit quality of a country that has to monetize its debt in the face of falling tax receipts and a stalling economy. Are you really on the right side of the trade going long bonds?

There will be monumental paradigm shifts in the years ahead. Everyone is asleep, but I think this is going to change fairly soon. The big changes, which will be evidenced by huge moves in gold, are still ahead.
 
Moses Kim

http://www.expectedreturnsblog.com/


-- Posted Thursday, 29 July 2010 | Digg This Article | Source: GoldSeek.com




 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.