"What utility does gold have?"

[Camtender]

http://jessescrossroadscafe.blogspot...-and-fiat.html


"A reversal in the dollar and the collapse of carry trade would shake world equity markets to their core as the gamblers are forced to unwind positions. The vampire squid and associates would probably benefit, but many would suffer. In today's environment, that makes the possibility of this happening even more likely in our book............

........Likelihood is a dollar rally at some point if stocks start unwinding. And then things get interesting, and ugly. Not with a bounce, but a 'splat,' with interest rates running to levels that would make your jaw drop."

Last sentence in bold - dollar rally and high interest rates - seems counterintuitive……….part of the “Poom”??

Please explain the mechanics of this happening.

[jpatter666]

Re: "What utility does gold have?"

http://jessescrossroadscafe.blogspot...-and-fiat.html


"A reversal in the dollar and the collapse of carry trade would shake world equity markets to their core as the gamblers are forced to unwind positions. The vampire squid and associates would probably benefit, but many would suffer. In today's environment, that makes the possibility of this happening even more likely in our book............

........Likelihood is a dollar rally at some point if stocks start unwinding. And then things get interesting, and ugly. Not with a bounce, but a 'splat,' with interest rates running to levels that would make your jaw drop."

Last sentence in bold - dollar rally and high interest rates - seems counterintuitive……….part of the “Poom”??
fficeffice" />:p> :p>
Please explain the mechanics of this happening.

My take would be:

1 ) Stock unwind, dollar rally because of a dollar short squeeze (which in likelihood would feed on itself for a bit)
2 ) Fed winds up the presses for 2nd stimulus
3 ) China and the rest of US creditors balk. US currency crisis
4 ) Interest rate rise

[Camtender]

Re: "What utility does gold have?"

Looks like #1 might have started, we shall see...........

thanks

[medved]

Re: "What utility does gold have?"

My take would be:

1 ) Stock unwind, dollar rally because of a dollar short squeeze (which in likelihood would feed on itself for a bit)
2 ) Fed winds up the presses for 2nd stimulus
3 ) China and the rest of US creditors balk. US currency crisis
4 ) Interest rate rise

Not so fast. I think, there will be significant time interval between 2) and 3). During this time US and its creditors will work out some cooperative solution that will sustain the bubble for some time. We can mark it 2.5) on your list.

We have lived with the gov't - controlled financial system for about 100 years and finally got to the point where it is unsustainable, no matter increasing gov't control of it. Now we are getting into the "new normal" of the gov't controlled economy, not just financial system. It will take a while untill the "new normal" breaks down. Then we will have 3) and 4).

Regarding gold utility, it has the same economic utility as Rembrandt paintings, namely, it is a luxury item for the rich people, i.e. an item of value for the people that can appreciate it. Except, of course, gold is a much better trading item, being a standard commodity.

[cobben]

Re: "What utility does gold have?"

Gold actually has a lot of practical uses, but the price is prohibitive in most cases.

Now, gold to kill cancer cells!
http://www.commodityonline.com/news/...16318-3-1.html

" . . .
Gold spheres with an optimal light absorption capacity in the near-infrared region, small size, and spherical shape are perfect for penetrating cancer cells and burning them up.

The shells are also much smaller than other nanoparticles previously designed for photoablation therapy. Another advantages is that gold is also safer and has fewer side effects in the body than other metal nanoparticles. "

[Jesse]

Re: "What utility does gold have?"

That's right. The rise in interest rates comes after a brief rally in the dollar if the squeeze is on,
and stocks dropping forces an unwinding of the carry trade positions.

We might skip the squeeze. It depends on when the creditors hit the exits.

It really depends on exogenous events.

[Spartacus]

Re: "What utility does gold have?"

Would be useful to stand on a Wall St skyscraper & drop gold coins on banksters' heads. More entertaining than useful, I'll admit, but useful nonetheless.

You could videotape the result & use it to teach English majors the meaning of the old saying, "the penny dropped"

[metalman]

Re: "What utility does gold have?"

That's right. The rise in interest rates comes after a brief rally in the dollar if the squeeze is on,
and stocks dropping forces an unwinding of the carry trade positions.

We might skip the squeeze. It depends on when the creditors hit the exits.

It really depends on exogenous events.

nice of you to drop by.

what's going on? ej said during the unstoppable rally s&p 500 - 600 before 2010 due to exogenous events. you agree?

[halcyon]

Re: "What utility does gold have?"

That's right. The rise in interest rates comes after a brief rally in the dollar if the squeeze is on,
and stocks dropping forces an unwinding of the carry trade positions.

We might skip the squeeze. It depends on when the creditors hit the exits.

It really depends on exogenous events.

Fed prez J. Lacker are already hinting at tightening and saying it will be fast, when it comes, CFR tends to agree.

Either this is coordinated play to keep up credibility, or sign of things to come.

BTW, which exogenous events are you referring to?

Forced slowdown of US debt gobbling up by China/Japan? Something else entirely?