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overtheedge
Member since May 2012
680 commentaries - 6 followers

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has posted a comment on the article :

If Gold Is Not Money… Why Do Clearinghouses and Former Fed Chairs Say It Is?

- Graham Summer - Gains Pains & Capital

Your articles are like a breathe of fresh air.
None of this nonsense of deflation when deflation in this economic environment is an impossibility.
Yah, yah, the bobble-heads at the FED and multiple analysts claim the greatest threat is deflation when, as this article points out, the real problem is collateral asset depreciation.
Yeppers Bubba, you nailed it with the harsh fact that there is only so much value to garbage.

Then we are faced with the reality that only so much garbage exists on Star-ship Earth and we need it to act as collateral for more and more loans.
It seems few can grasp the concept that an already over-priced asset can be worth even more simply by virtue of claiming it is so.

If you want to make money playing the game, all it takes is a greater fool.
However if your intent is asset protection, you need to grasp the simple concept that as I think it was Warren Buffet claimed, "Price is what you pay, value is what you get."
There is NO actual value until the greater fool puts the money in your hand and takes possession of the asset.
Some old famous guy said something to the effect of, "The opinions of 10,000 people is irrelevant if they don't know anything about the subject."

All a person needs to know is that an honest assessment of an asset's valuation can be surmised from its liquidity at the asked price.
Solvency without liquidity is meaningless. Think about all the bank runs throughout history.
Were all the failed banks insolvent? Or did fractional reserve banking create a liquidity problem?
No doubt that a liquidity problem existed, but was it exacerbated by grossly over-valued collateral?

I'm willing to bet that a few folks aren't brain-washed with the deflation myth that only holds up if we accept a new and improved definition.
Maybe the deflation fear is based upon knowing that collateral valuation is a bubble of immense proportions and it will pop aka a sudden and drastic deflation.
Still, deflation is a corruption of the language and all those who espouse it are suspect.
If the perceived value of the collateral drops, did the collateral shrink in size? Did the 1200sqft 3-bedroom house become a studio apartment?
Or did it devalue as this article pointed out? Maybe it was over-valued to begin with.

Greek sovereign bonds or gold?
Choose wisely.
Again, thanks for a great article and keep them coming.

Commented 3277 days ago

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Beginning of the headline :Everything that has happened since 2007, every Central Bank move, ever major political decision regarding the big banks, every trend, have all been focused solely on one issue. That issue is collateral. What is collateral? Collateral is an underlying asset that is pledged when a party enters into a financial arrangement. It is essentially a promise that should things go awry, you have some “thing” that is of value, which the other party can get access to in order to compensate them for their... Read More

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