Did you know the Great Depression was in 1873, not the 1930′s? Knocking on Nassau St. NYC.
If you read Dave, then you know I’m normally not at a loss for words. Trade With Dave isn’t woven like you would weave a piece of fabric. I know a lot about weaving and have spent decades in textiles and bought, sold and manufactured millions of yards of fabric. When you weave you have a plan, a design, you know in advance what the outcome is going to be. Trade With Dave isn’t woven, it’s pieced together like a quilt. It’s made from scraps that other people leave behind. It’s not my big idea. Instead Dave picks up the bread crumbs of the unwitting globalist Hansels and Gretels who are in search of the architect of good governance. I attempt to take a bite out of the crime of their gingerbread house thesis, followed by their antithesis of a wicked witch enslavement of Gretel and ultimately the Hegelian synthesis of the Easy Bake Oven for Hansel… be he fat, be he lean or be he platinum.
In other words Dave’s quilt isn’t made up of the fabric of Dave’s original ideas. I wish. No, they’re ideas that Dave gets from other people and then I start spreading them around the table like pieces of a crossword puzzle (metaphor #3 in case your counting) and see if any of them fit together. That’s the thing about the internet. It makes puzzle fitting so much easier and it’s probably why they are going to have to shut it down soon or at least greatly curtail it. It’s just too easy for a guy with a blog to look around and uncover pieces of the puzzle. It’s bad for business if your business is CNN or The New York Times or even Hollywood. It’s death by a thousand ant bites if you’re the mainstream. Sure, Dave gets up early, lays in bed and listens to his wife kind of snoring and tries to figure out what he’s going to write about. Normally the pieces are quite obvious, but not lately.
That’s when Dave realized that after three years of blogging everything has suddenly changed. We entered a new phase. A new curve has been established. It makes sense. The United States is the global superpower. We had an election. Greece didn’t exit the Euro. We didn’t crash land over the fiscal cliff. The stock market and gold are both up but inflation isn’t. What more could an electorate want? Even cell phones are free… I heard.
So the past week or so Dave is following Hansel and Gretel at a distance as usual and suddenly they stop dropping bread crumbs or maybe someone is picking up the bread crumbs before Dave can get to them. Either way, there were no bread crumbs. Nada. It was a clean sweep for days. Like somebody was turning on one of those Roomba vacuum robots while Dave was sleeping so that when I woke up no crumbs, no little scraps of fabric, no crossword puzzle pieces anywhere – just some unsubstantiated story that Apple couldn’t deliver products because of a shortage of American Silver Eagles at the U. S. Mint. Hmmm?
The knock-on effect in question here, if you’re asking Dave, is S-I-L-V-E-R. You see gold is in many ways under the control of the central banks, not because they control all the gold, but rather because they will control the new fractionally reserved gold global currency regime. You know, the one that Ambrose Evans-Pritchard wrote about here in the article where Ambrose mentioned the “knock-on” effect.
It’s the same one that Dave has been writing about nearly since he started writing the blog. You can search for terms such as “Mervyn King”, “divorced currency”, “fractionally reserved”, “coincinet”, “triple entry accounting” and find dozens of posts from the past few years outlining the plan to divide the currency in half and then back the low velocity wealth portion with a fractional reserve of gold while turning the convenience portion into a high velocity global revolver where vostro=nostro, past=future, in Large Haldron Colliding of debits and credits in the new “global citizen” model of financial duality.
Knock knock! Who’s there? Silver. Silver who?
Let’s knock around a couple of other ideas from the knock-on gang. First of all there was The Economist magazine in 2009.
Here’s what the editor had to say in December 2009.
If America and Europe are feeling some pressure from Chinese devaluation, in the form of a squeeze on import-competing firms and domestic exporters, then the thing for them to do is crank up their own expansionary monetary policies—to do the equivalent of abandoning gold. But it’s quite plain that the European Central Bank and the Federal Reserve are more or less done with their large-scale expansionary measures. As a result, there is nothing standing between American and European workers and cheap Chinese imports except for their elected governments. And bad things happen when that is the case.
The full article: http://www.economist.com/blogs/freeexchange/2009/12/knockon_effects
So much for being “more or less” done (with the focus clearly on “less done”) as exemplified in Super Mario’s “Whatever it takes” proclamation combined with Bernanke’s waving shalom to $40 billion per month in fresh Benjamins in exchange for mortgage backed securities in their party-for-two, less-punch-bowl-more-grain-alcohol solutions approach to modern monetary currency debasement and the fiscal discipline of trillion dollar coin seigniorage as expounded upon by PIMCO’s Mohammed El-erian for Atlantic Monthly when he said; “a growing number of people believe they (14th amendment or a platinum coin) would provide Democrats with credible threats to shift the balance of power.”
What else did the bond maven have to say about this knock-on effect that is being knocked around? Is this the same knock-on effect that led to the original Great Depression and the panic of 1873 and all that door knocking that went unanswered at the 4th National Bank down on Nassau Street in New York City.
Here’s El-erian in his own words and Dave in his own rhetorical words.
El-erian: “It is hard to predict a domestic crisis driver.”
Dave: Are you assuming that we will have a domestic crisis or that the lack of a predictable driver means the lack of a crisis?
El-erian: “The country’s debt and deficit situation do not post an immediate threat.”
Dave: Alright then. Let’s return to statement #1. No threat. No crisis driver. Does that mean no crisis?
El-erian: “Social cohesion is holding up despite the severity of the unemployment crisis.”
Dave: Refresh my memory. Are you the same Mohammed El-erian who said he sent his wife to the bank to withdraw as much money as possible during the last financial crisis? Was that you? Just askin’…
El-erian: “The disruptive headwinds blowing from Europe and the Middle East are nowhere near gale force at this time.”
Dave: How do you measure gale force? Can it land on an aircraft carrier? Can it be deployed from a drone?
El-erian: “This explains why a growing number of people have been exploring the creative use of exceptional powers or previously-unthinkable options (invoking the 14th amendment and the trillion dollar platinum coin).”
Dave: Now, I’m really confused. Can’t find a crisis driver… no immediate threat… unemployed young men distracted by the Super Bowl and World of Warcraft video games… Greek Euro debt is a warm breeze… and the Middle East is nowhere near gale force, yet these are the motivators for your “unthinkable options.” Alrighty then.
So what is this knock-on effect all about and why has the internet meme of a rapidly rising silver price been flooding the internet for the past week or so while the only evidence of an impending big shift in metals prices has been the call for a $500 collapse in gold prices to $1,200 per ounce from the likes of who else but the purveyor of fully functioning laptops found in New York City garbage rooms – Goldman Sachs. http://business.financialpost.com/2013/01/17/goldman-sees-gold-falling-500-an-ounce-as-rally-loses-its-shine/
So far Dave has offered little in this editorial bridge that was designed to span from El-Erian’s “old new normal” to the “new new normal” in a multi-polar approach to what the Atlantic Monthly’s Quartz website apologizes for the fact that “there will be no bloody global currency war” after all (http://qz.com/45101/sorry-but-there-will-be-no-bloody-global-currency-war/). Dave’s wondered about that all along and said as much in his critique of Jim Rickard’s promotion of what Dave sees as a George Soros agenda.
So, here it goes. What does Dave speculate has been going on? A couple of weeks before Davos things got quiet because the consensus for a new global gold-backed fractionally reserved currency was being coalesced. It did coalesce and it’s coming back at us. The trillion dollar coin was part of a disinformation campaign designed to set a ridiculous expectation so that when a fractionally reserved gold system is implemented and the coin seigniorage accrues to the citizenry in preparation for their sovereign debt-for-equity swap and the ultimate upstreaming of the Nation’s assets will transpire it will feel like a good deal.
That’s it in a nutshell. However, there’s one problem and that’s the knock-on effect of silver. You see in the new global gold standard they will control the price of gold artificially, but it’s impossible to know for sure whether or not people will buy into that price fixing of gold whether it is at Goldman’s $1,200 per ounce or at some gold bugs $12,000 per ounce. It will be arbitrary and with the U. S. newfound and near-term energy independence in exchange for pumping unrecoverable fresh water into the ground if we can control the cost of energy, then we can hide much, if not all, of the difference between the perceived value of gold and the price that will be managed by the central planners.
But they don’t know what’s going to happen to silver once this plan is rolled out. Will silver collapse in price? Will it explode in price with people trying to break down the door due to an unsuccessful transfer of the full faith and credit consciousness over to the fractionally reserved global gold standard? It’s hard to say. Did JP Morgan take care of the Bear Stearns short position in SLV for the government? Did the London Whale survive the CFTC’s definition of swaps? Sure did and it only cost Jamie Dimon half of his otherwise $400,000+ per week salary. But now that the other shoe has dropped and everything from Fannie Mae to Greek pensioners is a wrap, what’s there to worry about for a central planner but that old knock on the door. Who’s there? Silver. Silver Who? Gold’s unruly cousin Silver… that’s who.
Here’s El-Erian’s full article for the Atlantic: http://www.theatlantic.com/politics/archive/2013/01/how-game-theory-explains-washingtons-horrible-gridlock/267142/
You can read about the original Great Depression and the collapse of the silver market in the panic of 1873 here: http://en.wikipedia.org/wiki/Panic_of_1873