Keith Weiner's Contributions

There is a tradable approach to analyzing the fundamentals of supply and demand in the monetary metals markets.

In this Part V, we discuss the end of the rising cycle and the start of the falling cycle. We examine its dynamics and its mode of capital destruction. Lastly we look at the response of the central bank.

The cycle begins when the central bank pushes the rate of interest down, below the rate of marginal time preference. Unlike in the gold standard, under a paper currency, the disenfranchised savers cannot turn to gold.

In this third part, we look at how credit comes into existence (via arbitrage, of course) with legitimate entrepreneur borrowers.

Gold conspiracy theorists have a new bogeyman. Inventories of gold bars held in the COMEX warehouses are falling. This fact is offered to support the stale allegations of “fractional gold” and “manipulation”.

The Fed’s purpose, when it comes down to it, is to buy bonds. Under their various “Quantitative Easing” (QE) programs, they sure have bought a lot of bonds. This pushes up the price of the bonds. Since the yield is basically the inverse of the bond price, this means the rate of interest falls.

Let’s take a look at a few graphs of the dollar, from Feb 1, 2013 through Friday May 17, 2013. Yes, I said graphs of the dollar. I’ve priced the dollar in gold first (of course), then silver, the euro, and even the yen. The pattern is obvious. The dollar is going up.

The last time Vladimir Putin was president, he laid the foundation to pull Mother Russia from the wreck of economic chaos to a world power once again. This time, he's ready to extend that influence to counter the West.

This theory proposes a causal relationship between the quantity of money and consumer prices. It seems intuitive that if the quantity of money[2] is doubled, then prices will double.

It has been an increasingly brutal ride for gold and silver, beginning around late March and accelerating through April. The gold price was over $1600 and on Monday April 15, it fell below $1350, a loss of $250.

Some people believe that by imposing losses on investors and reducing the Cyprus banking system liabilities, the European powers have addressed the problems in Cyprus (if harshly).

Do you think that depositors in Cyprus are being taxed? That their money is being taken from them to go to the government in Cyprus or to Europe? Most analysis of the Cyprus bailout is wrong on this point.

If there is a credible rumor that the Fed is planning to further extend its “Quantitative Easing”, how would you expect the monetary metals to react? Typically, the gold price would rise and the silver price would rise even more. The question is why.

Speculators in the futures markets may believe that the gold price “should” fall because the central banks say they are not going to competitively devalue their irredeemable paper currencies.

It’s curious, isn’t it? So-called “paper gold” (a futures contract) has a price that is not only very close to physical gold, but it remains locked to it. This is despite the fact that “paper gold” is reviled in the gold community.

Germany has announced that it plans to take home all 374 tonnes of its gold stored at the Banque de France, and 300 out of 1,500 tonnes held at the Federal Reserve Bank of New York...

What does Japan hope to get by doing this? According to Japanese Finance Minister Taro Aso, Japan “seeks to weaken its currency”. The Europeans are wary of Japan acting to weaken the yen, and by this move Japan may be throwing them a bone.

Part III is longer and more technical, as we consider the key features of the unadulterated gold standard. It could be briefly stated as a free market in money, credit, interest, discount, and banking.

In Part I, we looked at the period prior to and during the time of what we now call the Classical Gold Standard. It should be underscored that it worked pretty darned well. Under this standard, the United States produced more wealth at a faster pace than any other country before, or since.

Gold is already money. It is the commodity with the tightest bid-ask spread. It is the commodity with the highest ratio of inventories divided by annual mine production (stocks to flows).