Shelby H. Moore of GoldWeTrust.com has some excellent
comments with regard to the points raised in the recent Gekko-Denninger debate
on Gold. He has kindly agreed to share his thoughts on this blog:
Denninger loses 17 points
Denninger has attempted to rebut
Gordon Gekko's latest
article, but he did not rebut my comments here
(nor my comments in the prior Gekko article here). Readers
might want to challenge him to debate me. I can handle Denninger easily.
Denninger fails on numerous points in his latest
diatribe:
1) Denninger butchered his own credibility in his prior rebuttal, see #8 in
the comments about Denninger's prior rebuttal:
http://www.marketoracle.co.uk/Article20363.html
He proved he doesn't even know what credit is, and does not understand the
basics of economics.
2) Denninger argues that discussions that use the word "gold" have
no relevance to the big picture, because he apparently doesn't understand
that gold is the Ultimate Market Regulator:
http://www.marketoracle.co.uk/Article20263.html
Thus, since most of what Denninger writes about is fraud and lack of
regulation, it is difficult to have an intelligently meaningful discussion in
his forums without mentioning gold and getting banned. The Dewey
Decimal system has nothing to do with it. Denninger invents straw-men
arguments to defend censorship. As for the religious dogma, he could
create a forum for that, and send all such posts there. Many of
us want
to discuss gold's critical role in regulating fraud and other economics,
without adding religious dogma to every post we make. I for one, do also
have an orthogonal Biblical view, but I am able to separate my gold arguments
from my Biblical arguments, and do so at my forum,
http://goldwetrust.up-with.com
3) Denninger clearly does not understand that hyper-inflation in an across
the board rejection of fiat, where the masses toss fiat in exchange for any
tangible asset they can get. It is characterized by DOUBLE-DIGIT
percentage DAILY price rises, even Net 30 credit terms for receivables is not
offered during hyper-inflation, and all such commerce ceases.
4) Denninger again flunks Economics 101, because he does not understand that
if gold is unavailable for any fiat price, it does not mean that gold is
unavailable in trade for some real goods. Thus gold at that point has a
near infinite value relative to fiat, but a more stable value relative to
real goods. This is a defacto return to a gold standard, which is in
effect what hyper-inflation means. Serious economists understand that
gold has tracked oil within a range since 1970s, because the Arabs demand to
be paid in gold:
http://www.gold-eagle.com/editorials_08/nielson042410.html
(note the mention of FOFOA at link above, I have
refuted one aspect of FOFOA's free gold thesis here:
http://goldwetrust.up-with.com/precious-metal...61-120.htm#3227)
5) Denninger again correctly argues that government (society) will attempt to
steal (tax) gold:
target="_blank" http://www.marketoracle.co.uk/Article20327.html
However, that is no argument for LEAPS, because the government will steal
those first, as they are easier to steal. The only way the government
will stop a black-market from flourishing, is if they offer a new fiat
redeemable for a fixed price in gold and are able to supply all redemptions
(which will be few if interest rates paid are high enough). And in that case,
yes we gold investors could lose some due to taxation if we want to
participate in the high interest rate compounding (a theft from society of
capital), but we will not lose as much as those who are wiped out in LEAPS
and other paper investments. And for those who want to be clever, just
buy silver instead. Silver should outpace gold appreciation by several
times, and I don't see the government will be able to make a
higher tax on silver capital gains, because they won't be backing the new
fiat currency(ies) with it and thus such a differential tax on silver vs.
gold would cause a flourishing black-market for silver.
6) The dollar has performed horribly in the past year relative to potatoes
and other fresh produce where I am. Potatoes have nearly doubled in
price in past year, and are 20% higher than they were at the peak in early
2008. Ditto for meat, fish, and nearly every fresh food product, except not
for price (because it is subsidized by the Philippine government).
7) Denninger again fails to understand that gold is a hedge against negative
REAL interest rates (which must remain negative until end game of
hyper-inflation per #4 in my comments to the prior rebuttal from Denninger),
not inflation nor deflation:
target="_blank" http://www.marketoracle.co.uk/Article20263.html
8) Regarding crossing the border with gold, Denninger doesn't seem to realize
that some have advocated moving your gold now to other locations where you
might want to flee. Also there may be other ways to cross borders, e.g.
small plane, boat, submarine, diving, tunnels, horse, hot air balloon painted
same color as sky, etc.. And if your gold (preferably silver!) is
already well hidden where you want to ride out the crisis, then no need to
move it until the crisis is over and you are ready to pay the capital gains
tax and join the repaired fiat system again.
9) Denninger does not understand that no shooting has to take place if 79% of
people buy silver and just hide it well. The fraud fiat system would
collapse over night (due to silver's tiny $10 billion annual global supply),
and the government wouldn't even be able to back a new fiat system with gold,
because the citizens would be holding and demanding
silver to be money. This ideal won't likely happen (because we can't
educate the masses fast enough and TPTB would shut down the availability of
silver by war or other means if threatened), which is why there will be lots
of shooting unfortunately. And those who lost everything in LEAPS will
be lacking resources to protect and survive repeated waves of
threats.
10) I disagree with Denninger that USA citizens will be more safe in USA than
in every other country. There is going to be a lot shooting going on in
the USA, until the system recapitalizes with a new fiat redeemable for a
fixed gold price. I am glad that I am 10,000 miles away from what looks
to be a 3 million barrels per month oil gusher that can NEVER be stopped,
short of a dangerous nuclear device which could potentially fracture the
seabed even worse. Valdez spill was 257,000 barrels, and Nigeria
wasteland is 13 million barrels total over decades. BP gusher is 4 - 6
million already. How convenient an "accident" to be enable
blaming the already coming implosion of the US economy on BP instead of on
the central banks.
11) Denninger argues that investment in secular turns in markets is not
profitable (calls it "curve fitting"). Does he even realize
he wrote that? Amazing. Secular shift investing is not
speculation.
12) Denninger is correct that Gekko had an incorrect statement about CPI
being "flat to down". What Gekko should have said is that
REAL interest rates have been "flat to negative":
target="_blank" http://www.marketoracle.co.uk/Article20263.html
target="_blank" http://news.goldseek.com/GoldSeek/1247554800.php
target="_blank" http://scholar.google.com/scholar?hl=en&am...ved=0CDIQzgIwBw
13) Denninger argues against himself, where he agrees that there is no way to
operate a viable business without being paid in the debt money fiat currency.
14) Denninger apparently is not aware that the Constitution granted only
limited enumerated powers to the Federal govt, and thus the Feds have no
right to print currency for use in the States, only in territories ceded by
the States to the Feds:
target="_blank"
http://www.marketoracle.co.uk/Article14178.html
15) Denninger is again correct TPTB want gold standard without silver, as I
explained my comments to his prior rebuttal, that both gold and silver are
legal tender in the Constitution in order to regulate the manipulation of
either one (the free market trades the gold-silver ratio). Indeed the
banksters want a gold standard because they can control gold more easily than
silver, but they also were able to manipulate silver in the past too:
target="_blank"
http://www.gold-eagle.com/editorials_05...oore070306.html
< target="_blank"br>
http://www.coolpage.com/commentary/e...han%20Gold.html
So that is why we need both. Hard for them to manipulate both
simultaneously, as there is nothing else in the world (other than silver and
gold) that have sufficient NATURAL stocks-to-flows ratio to be used as
store-of-value.
16) Denninger is correct that wild swings in inflation and deflation result
when the predominant money is gold and silver, as was case in 1800s.
But what he fails to mention is this only affects those who are doing the
borrowing ("debtor is slave to the lender" wisdom in Bible), as it
manifests in bank runs on banks that created "gold promises" (i.e.
loans) without 100% reserve. But those who hold gold and silver (both!)
are immune from this effect. And those who saved in Treasuries under a
gold standard, got 33,900% more REAL purchasing power than those who saved in
fiat in the 1900s:
target="_blank"
http://www.marketoracle.co.uk/Article16212.html
So we already have historical proof that Denninger's socialist mantra of
"enforce the law" and "The Quantity Theory of Money"
(MV=PQ) fails miserably. In fact, go back 1000s of years for more
proof. Why do we bother to debate this idiot? He doesn't
understand economics nor history. I could detail all the reasons that MV=PQ
is a useless abstraction (for target="_blank" starters,http://goldwetrust.up-with.com/ec...t9-375.htm#3156),
but why bother when the historic proof exists.
17) Decling prices does not accompany wages that decline more than prices in
deflation, only during inflation. Deflation is rising real wages,
inflation is declining real wages:
http://www.marketoracle.co.uk/...ticle16212.html
This incorrect understanding about what is deflation is really screwing up
most of the "anal-ysis" I see out there. I also debated Mish
about this and I think he understood: target="_blank"
http://goldwetrust.up-with....t9-360.htm#3008
(read the several posts at link abo target="_blank"ve)
http://goldwetrust.up-wi...t9-375.htm#3164
Denninger has most of the facts correct, but he makes the wrong conclusion,
expecting deflation, because he only looks at the demand destruction. He forgets
that all of this is mis-allocation of capital and so supply will also be
destroyed. Actually supply of some things (e.g. houses and a slow form of
euthanasia "health care") will be too much and
other things that depend on credit, energy and their long-term investment,
will go into shortages, i.e. target="_blank" food:
http://goldwetrust.up...t9-375.htm#3079
18) Denninger is correct that gold does not regulate socialism evenly, but
rather in rapid bursts called hyper-inflation. All his politicking
won't protect him from being wiped out by the Ultimate Regulator (which will
never fail, it just waits to act when the most people can be obliterated for
their sin of debt and target="_blank" credit):
http://www.marketo...ticle20263.html
Good luck to all fools.
__________________________________________________
Shelby H. Moore III is the sole or contributing programmer of numerous
(some million+ user) commercial software applications, such as Corel Painter,
Cool Page, WordUp, Art-O-Matic, etc. He has an education in engineering and
math. He is also target="_blank"the programmer and owner of coolpage.com,
a site that was the first social network with million+ users in 2000,
before friendster, myspace, and facebook existed.
For more articles by Shelby, please refer to the links b target="_blank"elow:
http://www.marketoracle.co.uk/UserInfo-She target="_blank"lby_H_Moore.html
http://www.gold-eagle.com/resear target="_blank"ch/moorendx.html
http://financialsense.com/fsu/editorials/moore/archive.html
