Erosion in the M2

[MulaMan]

Re: Erosion in the M2

I worry, however, that once the rush happens, a lot of unaccounted-for, external M3 will onboard in narrower classifications (M2/M1), and we could see serious hyperinflation.

Was'nt that the worry about the Japan carry trade...going on for 15 years now?

Why could'nt the USD carry trade continue for 15 years with a slow deflation / stagflation?

[metalman]

Re: Erosion in the M2

Was'nt that the worry about the Japan carry trade...going on for 15 years now?

Why could'nt the USD carry trade continue for 15 years with a slow deflation / stagflation?

no... the usa runs out of credit before reaching 200% of gdp ala japan.

read Janszen Interview on NPR on 05/01/2009... & Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen & other posts here on the topic you can find with google.

[Joy]

Re: Erosion in the M2

Well said! A lump of metal in a vault has massively out gained the average money manager the past 10 years.

[Starving Steve]

Re: Erosion in the M2

Again, I just want to be the devil's advocate: A one-ounce tiny wafer of metal in a vault ( i.e, gold worth $1100+ ) may be a symptom of the biggest bubble-mania in centuries.

Certainly $35 per ounce gold is a great hedge against inflation. Certainly $535 gold is still a hedge against inflation. But $1100+ gold a hedge, if so, against what?????????:confused:

[Joy]

Re: Erosion in the M2

You have confirmed for me that money illusion is rather entrenched, as for you the dollar is a constant numeraire through time.

It is surely a distortion of the word bubble to call an asset 25% higher 28 years later such. If gold does replace the dollar as the next reserve currency, is $1100 the right price? My instinct tells me it is not.

[Joy]

Re: Erosion in the M2

But then you are in good company. Willem Buiter, professor at the London School of Economics, agrees with you. According to him gold has been in a bubble for 6000 years: http://is.gd/4SVUu.

See Jesse's takedown of Buiter if interested: http://is.gd/4SVYe

[FRED]

Re: Erosion in the M2

Well said! A lump of metal in a vault has massively out gained the average money manager the past 10 years.

Gold update: Gold over $1000 and still no gold bubble - Eric Janszen
October 26, 2009, iTulip

For the past ten years we could run ourselves ragged trying to counter the gold disinformation machine. For example, the lead story in the Markets section of today’s Wall Street Journal “Odd Couple: Stocks, Gold Share Same Ride Higher. ”
Let’s look at the key assertions in this opening paragraph in the context of actual data, the price of gold and of the S&P over the past ten years since iTulip opened shop and we started buying gold. We also correlate the data with the political economy of the FIRE Economy that drives gold and stock prices. More …

[Joy]

Re: Erosion in the M2

"Over the past ten years, thousands of Ivy League university trained money mangers, schooled in the “science” of modern portfolio theory, spent in aggregate hundreds of thousands of hours analyzing the stock market, rotating holdings from one sector to another, carefully selecting entry and exit points to maximize returns, costing tens of billions in fees, all to try to beat the horrid -8% nominal return of the S&P index over that period. Still few were able to mimic the 260% return on gold they could have earned if they bought gold at the start of each year since 1998 and then did nothing at all."

I feel like I plagiarised ;).

[FRED]

Re: Erosion in the M2

"Over the past ten years, thousands of Ivy League university trained money mangers, schooled in the “science” of modern portfolio theory, spent in aggregate hundreds of thousands of hours analyzing the stock market, rotating holdings from one sector to another, carefully selecting entry and exit points to maximize returns, costing tens of billions in fees, all to try to beat the horrid -8% nominal return of the S&P index over that period. Still few were able to mimic the 260% return on gold they could have earned if they bought gold at the start of each year since 1998 and then did nothing at all."

I feel like I plagiarised ;).

Great minds think alike! Plus buy gold and do nothing is in fact exactly as we have done since 2001.