On a day where gold surged generously on the same thesis with which it managed a five-fold increase in the last decade or so – that of paper money debasement – we thought it appropriate to get some context as to the yellow metal’s history, current implications, and potential future. In a mere 111 seconds, we are treated to a history of sound money (from Croesus to The Bank of England to The Great Depression), the growing division between some of the world’s most-famous smartestinvestors with regards to Gold’s price (Buffett vs Paulson/Bass), Governments and Central Banks Spending and Printing ‘experiments’, and a discussion of the endgame of “Where Will All The Money Go?” – all with the help of a magical cartoon hand. As it seems the profligate control of the electronic press is now all that matters to an increasingly correlated and blind-leading-the-ignorant markets, perhaps it pays to consider how markets have changed reactions to the threat promise of the extreme easing upon which the equity market’s heart beats so strongly. Once anxious of bond vigilantes(taken care of via LTRO reacharounds and direct Fed monetization), FX markets remain intervention-prone (just ask Azumi how many times he looks at JGBs or JPY risk-reversals every day), and finally to the stock (and vol) markets as ‘Bernanke’s trailing-strike Put’ ensures ‘the wealth effect’ buoys us allthe chosen few to greater and greater spending disconnects between value and price and potentially larger and larger mal-allocations of capital. With Corporate cash stockpiles so huge – the “Where Is John Galt?” line can’t help but appear in many minds as reinvestment in a dilapidated, aging, increasingly less cash flow generating asset base remains to be seen.
Tags: Asset BaseBank Of EnglandBernankeCentral BanksCroesusDebasementElectronic PressEndgameFx MarketsGreat DepressionJohn GaltLast DecadeMonetizationPaper MoneyPaulsonPrice Of GoldRisk ReversalsSound MoneyStockpilesWealth Effect