Six Questions for Eric Janszen on the Economic Collapse

[ST]

Re: Six Questions for Eric Janszen on the Economic Collapse

Yes, the big question is these derivatives. What is to keep a disinflation/deflation from taking gold down to $100 before we have a 500% inflation taking it to $500? That was a previous question I had. I don't see how poom has to result in higher prices than TODAY's.

If those derivatives were to destroy paper wealth on a much greater scale I would expect gold to rise at the same time as the dollar rises - nothing precludes from both occurring at the same time. The question for me on a dollar rise is how much pain will citizens and politicians be able to accept from a sharp dollar rise from a permanent bid under it from further repatriation.

From a commodities perspective I see little reason for China not to continue down its infrastructure buildout path being largely insulated from these banking problems.

[ronin]

Re: Six Questions for Eric Janszen on the Economic Collapse

Well we might keep our feet on the ground and remember what it costs to mine the stuff. The absolute cheapest gold mines are at about $450 an ounce, and the average for silver mining is around $16-$17 an ounce. ...

Lukester,
Do you have a source for the costs of production? If there is an existing industry metric, I would like to know the source. I agree that the marginal cost of production should be a pretty good floor for a precious metal.
Just trying to learn. Thanks.

Ronin

[Verrocchio]

Re: Six Questions for Eric Janszen on the Economic Collapse

The glaciers on Greenland are receding rapidly, but I wouldn't be too concerned of a sudden melt. A greater concern would be something like a sudden disintegration of portions of the Ross in Antarctica like what happened to Larsen B a few years ago (an ice shelf the size of Rhode Island that turned into a giant slushy in a matter of days).

Wouldn't be too concerned about the methane from the seabed catching fire; bigger concern of reinforcing positive feedback global warming mechanism. The same thing is happening with the melting of permafrost.

Agreed.


The tipping point concept is operative here. It means that the checks in the natural system against runaway global warming are overcome. The release of methane gases stored in the seabed off the Siberian coast (above) and from the bubbling Siberian permafrost -– a million square kilometers, the size of France and Germany combined -- could very well tip the planetary temperature system into a runaway state, and at that point reducing man-made emissions to zero would be an futile gesture.

[Chris Coles]

Re: Six Questions for Eric Janszen on the Economic Collapse

Agreed.


The tipping point concept is operative here. It means that the checks in the natural system against runaway global warming are overcome. The release of methane gases stored in the seabed off the Siberian coast (above) and from the bubbling Siberian permafrost -– a million square kilometers, the size of France and Germany combined -- could very well tip the planetary temperature system into a runaway state, and at that point reducing man-made emissions to zero would be an futile gesture.

Found this on Wikipedia: http://en.wikipedia.org/wiki/Clathrate_gun_hypothesis

"According to Gregory Ryskin, a sudden release of methane from the ocean may lead to either global cooling or global warming. The explosions and burning of methane would produce lots of smoke and dust, which would lead to global cooling. The methane and carbon dioxide would "create the greenhouse effect, which may lead to global warming". Professor Ryskin writes that it is "difficult to predict" whether global cooling or warming would result.

The consequences of a methane-driven oceanic eruption for marine and terrestrial life are likely to be catastrophic. Figuratively speaking, the erupting region "boils over," ejecting a large amount of methane and other gases (e.g., CO2, H2S) into the atmosphere, and flooding large areas of land. Whereas pure methane is lighter than air, methane loaded with water droplets is much heavier, and thus spreads over the land, mixing with air in the process (and losing water as rain). The air-methane mixture is explosive at methane concentrations between 5% and 15%; as such mixtures form in different locations near the ground and are ignited by lightning, explosions and conflagrations destroy most of the terrestrial life, and also produce great amounts of smoke and of carbon dioxide. Firestorms carry smoke and dust into the upper atmosphere, where they may remain for several years; the resulting darkness and global cooling may provide an additional kill mechanism. Conversely, carbon dioxide and the remaining methane create the greenhouse effect, which may lead to global warming. The outcome of the competition between the cooling and the warming tendencies is difficult to predict.[3]"

[bda_guy]

Re: Six Questions for Eric Janszen on the Economic Collapse

Found this on Wikipedia: http://en.wikipedia.org/wiki/Clathrate_gun_hypothesis

The consequences of a methane-driven oceanic eruption for marine and terrestrial life are likely to be catastrophic. Figuratively speaking, the erupting region "boils over," ejecting a large amount of methane and other gases (e.g., CO2, H2S) into the atmosphere, and flooding large areas of land. Whereas pure methane is lighter than air, methane loaded with water droplets is much heavier, and thus spreads over the land, mixing with air in the process (and losing water as rain). The air-methane mixture is explosive at methane concentrations between 5% and 15%; as such mixtures form in different locations near the ground and are ignited by lightning, explosions and conflagrations destroy most of the terrestrial life, and also produce great amounts of smoke and of carbon dioxide. Firestorms carry smoke and dust into the upper atmosphere, where they may remain for several years; the resulting darkness and global cooling may provide an additional kill mechanism. Conversely, carbon dioxide and the remaining methane create the greenhouse effect, which may lead to global warming. The outcome of the competition between the cooling and the warming tendencies is difficult to predict.[3]"

Let's get real here for a second. Methane represents less than < 0.0002% of the air that we breath. The Russian expedition that noted levels of methane 100x greater than normal would still represent < 0.02% of the air. I could imagine specific localized pockets of methane that would develop where the concentration > 5%. However, how realistic is it for there to be significant regions of the world with concentrations so high to so as to an actual firestorm threat?

Global warming through increased methane in the atmosphere - definitely.

Firestorm threat through increased methane in the atmosphere - highly unlikely.

[Chris Coles]

Re: Six Questions for Eric Janszen on the Economic Collapse

Let's get real here for a second. Methane represents less than < 0.0002% of the air that we breath. The Russian expedition that noted levels of methane 100x greater than normal would still represent < 0.02% of the air. I could imagine specific localized pockets of methane that would develop where the concentration > 5%. However, how realistic is it for there to be significant regions of the world with concentrations so high to so as to an actual firestorm threat?

Global warming through increased methane in the atmosphere - definitely.

Firestorm threat through increased methane in the atmosphere - highly unlikely.

Thanks for the heads up.

[tombat1913]

Re: Six Questions for Eric Janszen on the Economic Collapse

Yes, the big question is these derivatives. What is to keep a disinflation/deflation from taking gold down to $100 before we have a 500% inflation taking it to $500? That was a previous question I had. I don't see how poom has to result in higher prices than TODAY's.

They are going to do everything they can to compensate for the deflationary effects of the defaults with massive money creation to make sure that doesn't happen. They will print to compensate for the defaults, and then they will print more to stimulate economic growth. Helicopter Ben has made his intentions pretty clear. Unless Volcker comes back I don't foresee anything but large scale inflation.

Plus what you described is more like Poom-Ka, which doesn't sound as good.

[BobH]

Re: Six Questions for Eric Janszen on the Economic Collapse

>>Soon the dollar will resume its decline relative to commodities (although not currencies) increasing food and energy inflation pressures in the United States, even as unemployment rises and wages deflate.<<

Could someone explain how in a deflationary environment commodities will go up relative to the dollar? Thanks

[Chris Coles]

Re: Six Questions for Eric Janszen on the Economic Collapse

>>Soon the dollar will resume its decline relative to commodities (although not currencies) increasing food and energy inflation pressures in the United States, even as unemployment rises and wages deflate.<<

Could someone explain how in a deflationary environment commodities will go up relative to the dollar? Thanks

In very simple terms, the value of the dollar has been damaged and it will decline. The holders of commodities, in trying to maintain the value of their sales, increase price, valued in dollars. The cost of commodities increase, in dollar terms, but the value of the dollar decreases.

[grapejelly]

Re: Six Questions for Eric Janszen on the Economic Collapse

>>Soon the dollar will resume its decline relative to commodities (although not currencies) increasing food and energy inflation pressures in the United States, even as unemployment rises and wages deflate.<<

Could someone explain how in a deflationary environment commodities will go up relative to the dollar? Thanks

once all these margin calls have cleared (the deleveraging) there will be a ton of money on the sidelines in short term treasurys. Where's it gonna go?

Into tangibles.

[Redwoods]

Re: Six Questions for Eric Janszen on the Economic Collapse

Quote:

Originally Posted by FRED Soon the dollar will resume its decline relative to commodities (although not currencies) increasing food and energy inflation pressures in the United States, even as unemployment rises and wages deflate.

Can people help me understand what the above means for the future of the Euro-dollar exchange rate?

I have some investments that are Euro/bond based. I've been interpreting the iTulip thesis that in 2-6 months we'll see the dollar stop its recent strengthening and start going down in value and at that time the Euro will start getting stronger relative to the dollar again.

But I think Eric is saying something else above.

What is the iTulip thesis' position on holding Euros for the next few years, 3-5 year perspective? Long or short?

Thanks Team Tulip!

[tastudios]

Re: Six Questions for Eric Janszen on the Economic Collapse

once all these margin calls have cleared (the deleveraging) there will be a ton of money on the sidelines in short term treasurys. Where's it gonna go?

Into tangibles.

Its so simple, I can't believe I'd missed it so far... We're in pure disinflation (XdeflationX) mode - All commodities and PMs get crushed and cash is king. Since disinflation absolutely kills the stock market (and treasury yields), the best play now seems to be shorting the market. I'm watching for oil to level off for a while and slowly begin an ascent. It could take a few months, to a few years; hopefully the former.

[GRG55]

Re: Six Questions for Eric Janszen on the Economic Collapse

>>Soon the dollar will resume its decline relative to commodities (although not currencies) increasing food and energy inflation pressures in the United States, even as unemployment rises and wages deflate.<<

Could someone explain how in a deflationary environment commodities will go up relative to the dollar? Thanks

A declining US $ is NOT a deflationary environment...

[FRED]

Re: Six Questions for Eric Janszen on the Economic Collapse

Quote:

Originally Posted by FRED Soon the dollar will resume its decline relative to commodities (although not currencies) increasing food and energy inflation pressures in the United States, even as unemployment rises and wages deflate.

Can people help me understand what the above means for the future of the Euro-dollar exchange rate?

I have some investments that are Euro/bond based. I've been interpreting the iTulip thesis that in 2-6 months we'll see the dollar stop its recent strengthening and start going down in value and at that time the Euro will start getting stronger relative to the dollar again.

But I think Eric is saying something else above.

What is the iTulip thesis' position on holding Euros for the next few years, 3-5 year perspective? Long or short?

Thanks Team Tulip!

We are long term euro bears.
We are long term dollar bears.
With Japan heading into yet another recession but this time with public debt at 193% of GDP, the yen has probably had its run.
Switzerland is looking very Iceland about now. These mini-FIRE Economies have had their day.
The pound sterling is teetering.

You might reasonably ask, what currency then is viable long term?

That is why we remain long gold and will remain long gold until we can answer that question.

[drumminj]

Re: Six Questions for Eric Janszen on the Economic Collapse

Fred, I'm having a hard time reconciling your post here with some others in recent days (from you and EJ), but perhaps I am just being dense.

EJ puts forth gold as an insurance play, and has a relatively small allocation (~15% if I recall correctly). EJ's comments on this make sense to me.

By saying that "you" remain long gold here seems to imply that you (whichever personality this is posting today) would not view gold as insurance, but rather as an alternative investment to equities, the euro, yen, franc, etc. It would also seem to imply that a greater allocation in gold would be called for, assuming iTulip still feels that equities are a bad play at the moment.

I don't want to beat a dead horse here, and I know that there are several similar threads going on right now, but if you're a dollar bear, euro bear, swissie bear, yen bear, don't feel equities are the place to be, and LONG gold, I can't imagine where the other 85% of "your" portfolio might be allocated given this outlook.

Please note I'm not asking for the sake of looking for guidance of portfolio allocation. I'm just trying to put all the pieces together and better understand the differences in iTulip's short-term and long-term economic outlook.

Thanks.

J