Gas / Au / Ag / Cu: The Great Commodity / Currency Wars: What’s Up? What’s Down? What’s Really Up? What’s Going Down? (November 17, 2014)

. . .

E1          “Today’s high-tech town criers, LED scoreboards broadcast the news from every street and street corner.  They proclaim that gas prices are down, gas prices are down, gas prices are down.  The most public and publicized scores in our economy are even more prominent than football scores.”

E2          “Is supply up because Saudi Arabia has strategically increased the supply?  Is demand down because the world is in recession?  What’s really up?  What’s really going down?”

E1          “What’s real?  The great trifecta is at play.  Saudi Arabia is advancing American political interests by undercutting Russian oil sales while also underpricing American fracking operators and undermining Iranian producers.  Prices now below about $80 a barrel undermine American competitors who are fracking the production of oil at a cost of typically $85 a barrel.  An American operator who cannot compete and goes down will not later reenter the market.  Saudi Arabia can effortlessly constrict supply and drive up the price.”

E2          “The Republicans will provide tax benefits and government subsidies for the frackers and increase the national debt.”

E1          “That’s for real.  If Russia and Russians can endure the very real impact of the sanctions and continue to circumvent the use of the dollar, they may end up prevailing in the ‘Cold Currency War.’  The public scoreboards provide daily clues to developments on the international battlefield.”

. . .

E2          “Now when the price of oil is down is the time to adopt a carbon premium and dividend program.”

E1          “Never happen.”

E2          “Nothing will happen until it is too late.”

E1          “Not when gas mongering SUVs are flying off the shelves.”

. . .

E2          “The PM markets for elements 79 and 47 are distorted.  Now that the physical quantities of Au and Ag are so tiny in comparison to the exploding paper market, the spot price is another illusion.  Sellers of physical quantities are setting prices that exceed the former ‘spot price plus markup’ formula to reflect the limited physical supply.  However, no generally accepted ‘physical spot price’ has emerged.  In a world of fraud, illusion and dishonesty, the ‘market price’ is not the ‘market price’ and another ‘market price’ must be concocted to provide realistic information.”

E1          “The market is unreal.  However, it is hard to fix the metals market when the metals market is fixed.  Information is sketchy, incomplete and possibly inaccurate.  China, Russia, India, Brazil and other governments and the Chinese, Russians, Indians, Brazilians and other citizens are amassing massive amounts of physical gold.  Manipulating the acquisition price of physical gold lower via machinations in the paper market facilitates the transfer of physical gold to folks who are not always happy with us.”

E2          “That may be the most counter-productive policy in recent memory.  Some countries are rallying around gold to provide a counterpoise to the dollar.”

E1          “That is surreal.”

. . .

E2          “Morgans were minted from 1878 to 1904.  Peace dollars from 1921 to 1935.  Even among those who are not interested in the numismatic value of a coin, the premium for George T. Morgan’s creation is more than the premium for Peace dollars.”

E1          “A hint of aesthetic sensibility among the junk metal set.  Morgans may have been minted again in 1921.”

E2          “One fellow said that he maintains 70 percent of his precious metals inventory in silver to serve as a medium of exchange and 30 percent in gold to serve as a store of value and secondary medium of exchange.  However, the dollar is still the unit of account.  Wonder what he knows.”

E1          “Metals perforce do not pay interest, yet when banks start charging interest to hold funds, metals become the non-interest burdened asset.  What percentage of his assets are in metals?  And why?”

. . .

E1          “The ISIS or ISIL or Islamic State or whatever is proposing to issue their own currency by minting real gold dinars and real silver dirhams.”

E2          “The IS is also in the business of selling oil on the black market at reduced prices which lowers the world price.  Another factor in the analysis.”

E1          “And the scoreboard up ahead proclaims: ‘Unleaded – 3 dinars and 99 dirhams per liter; Diesel – 4 dinars and 49 dirhams per liter.  Free oil check and window washing.’”

E2          “A mecca for the gold bugs.”

E1          “‘27 inch flat screens from China for 99 dinars.’”

E2          “If gold is denominated in dollars, the dollar is king.  If gold is denominated in gold, then gold is king.”

E1          “Aren’t they obligated to field a football team first?”

. . .

E1          “If I couldn’t make light of it, it would get too heavy.”

. . .

[See the related e-commentary earlier this year at “Texas Votes To Secede From U.S. And Join Mexico; Russia Blows Up World In Response (March 17, 2014)“, “NATO: Nations Aggressively Taking Over (March 31, 2014)“, “Distrust But Verify (July 21, 2014)” and “World’s Reserve Currency War I = Cold War 2.0 = WW III (?) (September 8, 2014).”  See also the background e-commentary at “The Silver Standard: The Value Of (Sort Of) Real Money (July 15, 2013)“, ““Fiat Gold” / Fool’s Gold (May 2, 2011)” and “Is The Gold Standard Really The Gold Standard? (January 18, 2010).”

Bumper stickers of the week:

He who has the dollars has made the rules; he who has the gold will make the rules.

Folks (and governments) will use Fe and Pb to acquire and protect Au and Ag.

We seek stasis, we get entropy.

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