How the Paper Money Experiment Will End

As the monetary system slowly cannibalises itself, an article from the Mises Institute sums up the options for the UK economy. Everything but number 5 is possible. My opinion, a deflationary collapse after a portion of hyperinflation and throw in a splash of war for good measure. Courtesy of The Mises Institute:

A paper currency system contains the seeds of its own destruction. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this scenario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt.

This is especially true of players that can expect that they will be bailed out with newly produced money such as big businesses, banks, and the government.

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Eric Sprott’s Open Letter To The World Gold Council

Courtesy of Sprott Global:

Dear World Gold Council Executives;

As you very well know, the business environment for gold producers has been extremely challenging over the past few years. While demand for physical gold remains extremely strong, prices on the COMEX have fallen precipitously. This contradictory situation is the single most important obstacle to a healthy gold mining industry.

In my opinion, the massive imbalance between supply and demand is not reflected in prices because available statistics are misleading. It is not the first time that GFMS (and World Gold Council) statistics come under pressure from the investment community. In his now celebrated “The 1998 Gold Book Annual”, Frank Veneroso demonstrated the inconsistencies in GFMS gold demand data and proceeded to show how they grossly underestimated demand. The tremendous increase in the price of gold over the following years vindicated his conclusions.

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Which Eurozone Countries are Growing?

Courtesy of the IMF/Goldman Sachs Global ECS research, I present the Euro and periphery growth charts…this as good as it will get and expect the majority to turn red in the near future. I will point out that Spain should be outlined in blue as it received a bailout but hey the figs are from the IMF (insolvent) and Goldman Sachs (also insolvent) so what do you expect.