G0ldfinger

? GM would have no risk of losses, since they would lock in a price their customers have a agreed to (market price at a specific date/time) beforehand.

Again I see not much of a problem. GoldMoney could just go over to a mechanism where they take sell-orders that will be due at a certain date & time, and they would promise to pay you whatever the world markets yield at that time (e.g. London Fixing). This would avoid the short-selling mechanism described earlier and would ensure world market prices for the customers. Markets falling or not.

The same would happen to your stock broker. Only that they are more likely to go bust, since they built their hopes on always well-doing stock markets. A physically covered short position is not really a derivative, but a forward. I see no problem. It's uncovered shorts that may cause physical shortage and price explosions at some stage. When a market goes down, it goes down. I see no new insight here. Fair enough, a judge could complicate things. But I see no reason why there should be more of a problem than with any stock broker that goes bust.

Any stock broker who holds shares for clients might be in the same situation (or actuall, from the holder's view, an even less safe situation). I am sure we have precedents there.

There is always risk, e.g. operational risk. The important point is that many here think that there is quite a bit more risk in paper currencies and (particularly: UK) bank accounts at the moment.

That's non-sensical for the reasons explained above. They will give you the paper that they can get by selling it for you into the world market. If this is not much paper, then that is your problem (not theirs).

http://www.bloomberg.com/apps/news?pid=206...&refer=home Litigation killing the Street. Sinclair is right.

Magpie, some of your questions seem ill-posed. The law knows a difference between something that is owed to you (promise to pay) and something you actually outright own. The first one is gone in a bankruptcy of the borrower (=bank), the second one not in case the custodian (BV, GM) goes bust. This doesn't make sense to me. BV or GM could enter forward contracts (shorts) of the same size at the same time their clients want to sell gold. This would lock in the price and the problem would be solved. Hence, there is a pretty direct link between you and the world gold market, that is liquid and deep. NO! YOUR gold is not THEIR asset. Is this really so difficult to understand?

Indeed, the important fact is that they are NOT banks. While you are only a creditor of your bank, BV and GM just store something that is owned by you. This is a completely different animal, and the laws protect you from any losses as long as no fraud enters the picture. I think BV and GM are the closest to actual physical possession after coins and bars stored in a safe.

Jim Sinclair's formula, now at work in Germany. The treasury expects €2bn less tax income. I think that's possibly conservative. In German: http://www.spiegel.de/wirtschaft/0,1518,552210,00.html

Jim Sinclair's formula at work. I wonder how the bond insurers will like that. http://www.bloomberg.com/apps/news?pid=206...&refer=home

Great charts Steve, thanks. Seems from the LIBOR OIS that the crisis just not wants to go away. Paul Volcker -- "mother of alll financial crises". Astonishing how well it is managed so far. Has also much to do with the fact that people just don't understand and carry on as usual. It needs a lot of time to feed through.

Bloomberg headline: Fannie Mae Has $2.19 Billion Loss; Shares Rise on Regulator's Capital Plan No more questions, people are totally deluded. Buy gold.

Someone over at GIM wrote: The average price ratio since 1946 would imply gold at $1,800. And that's only average, a peak in gold could be 2 times higher.

Downloaded.

Very interesting thoughts, Cuthbert.

I never thought he was one. The guy is spot on.

Congrats everyone! (Jim Puplava's price goal for 2008 already taken...) Lots of negative news out there at the moment. EDIT: The monthly average of barrels of WTI per ounce of gold since 1946 is 14.72. Gold would trade at $1,766.40/oz if the ratio was at average today. I have no doubt we're going to get there. EDIT2: And that's only the beginning. Crude will climb to $200, and on.

So, an ideal time to be average-buying.

That's exactly the point of the example above. The market simply establishes prices that make the Fed solvent. Because it won't go bankrupt anyway.

As pointed out, the numbers are pure fantasy - an illustration. The Fed's balance is published on the web, but they account for their gold with fantasy (read: historic) prices and do not report gold out on lease (potentially not recoverable). In theory, they hold something between 8,000 and 9,000 metric tonnes.

I sent this here to Jim Sinclair some time ago. He never responded, which is OK, since he is incredibly busy. But it sort of shows what happens to the price of gold when the Fed monetizes all this mortgage crap. Of course these are all fantasy numbers. But I think it explains the principle quite well. Comments welcome. The Fed can never go bust. The market knows this intuitively. In terms of the balance sheet, market forces therefore sooner or later shape prices such that the Fed has equity greater than or equal to zero. So, what does it mean for gold when the Fed monetizes worthless asset-backed paper at face value? Assume BEFORE MONETIZATION a Fed balance of: T-bills are risk-free, i.e. essentially $1 in T-bills is as good as one Federal Reserve Note (FRN 1). Assuming Assets=Liabilities, we must have 1,000 oz gold equivalent to FRN 750,000, since 750,000 = 1,300,000 - 550,000. The equilibrium price the market wants is therefore 1 oz gold = FRN 750 = $750. Assume now that the asset-backed paper market takes a hit, and the Fed is forced to monetize mortgage-backed securities (MBS) that have lost 75% of their value. The Fed buys them at their face value of $1,200,000 (market value $300,000) with freshly printed FRN 1,200,000. The new Fed balance AFTER MONETIZATION is: Under the old gold price of $750, assets sum up to $1,600,000, and the Fed is bankrupt since liabilities are at FRN 2,500,000. HOWEVER, the market knows that this can't happen! So the market revalues gold to establish equilibrium. The new gold price is then such that once more assets=Liabilities, i.e. 1,000 oz gold = $2,500,000 - $550,000 - $300,000 = $165,000. The result is 1 oz gold at $1,650.

One of the most moronic articles I've ever read. The highlights are: He seems ignorant towards the idea that this could be a sign of price manipulation. :lol:

These charts seem out of line with the other short term ones. A mistake?