NOTE: Originally published at Metal Augmentor on December 4, 2009 at 5:23AM EST.
In our next installment of the Charlatan Exposed series, we look at Gold, the COMEX and Exchange for Physicals as found on Jesse’s Cafe Americain (as an aside, can anybody explain to us the connection between France, coffee and gold bugs?). Jesse tells us that:
Comex is putting forward the offer of paper in the form of money or ETF positions aggressively, and it is the much easier alternative. Delivery of physical gold from the Comex is no longer as straightforward or even as semi-convenient as it had been in the past. In fact, it is difficult, and one must be persistent and wait long periods of time. At least, this is what we hear.
This of course is total nonsense. COMEX is not advocating ETF positions, which are only permitted as the physical leg of an exchange for physicals (EFP) transaction, and only because market participants requested that the COMEX relax EFP rules to be more in line with the types of transactions being done outside the exchange. I went into excruciating detail a few months ago to explain how EFPs work, so I’m not going to rehash the topic. Suffice it to say that allowing ETF shares to be used as the physical leg of EFP transactions has nothing to do with contract settlement during the spot month and it is actually against the best interest of the exchanges to allow them.
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silverax Charlatan Exposed
NOTE: Originally published at www.metalaugmentor.com on December 2, 2009 at 7:30AM EST.
I am starting a new series of commentaries focused on the idiocy that passes for “market intelligence” and “informed thought” these days when it comes to the Internet. I believe this idiocy is quite dangerous to unsuspecting investors and thus it deserves to be exposed, and even ridiculed, when warranted. I will not be spending a lot of time on this stuff so the writing isn’t going to be very polished or formal. I will, however, consider requests so if you’d like to see a future Charlatan Exposed cover a particular topic please just leave a comment.
The first Charlatan Exposed goes to the blog “Monty Pelerin’s World”, which purports to examine “Economics, Finance and Politics through the Prism of Classical Liberalism”. Unfortunately, the blogger appears to be using a fact checker that consists of a “Prism of Obsidian Glass” in explaining how the United States is Spiraling to Bankruptcy.
Before getting to a few of the rotten details, let’s be clear that the general premise of this Monty Pelerin commentary is essentially correct in concluding that the debt level of the United States government, much less of U.S. consumers and businesses, is unsustainable. If these debts were called by creditors today, the United States would indeed be bankrupt. But that’s a big “if” and essentially an impractical way of looking at it. More relevant than the possibility of having debt called is the ability to service the debt according to its contractual terms. While projected debt levels in the U.S. certainly cannot be serviced in the long run, it is not a foregone conclusion that debt levels cannot return to serviceable levels without sovereign bankruptcy. For one, there are going to be a lot more individual (consumer and corporate) bankruptcies before things are over and done with and such bankruptcies will reduce debt levels. For two, private credit is going to be constrained, and consumer attitudes about credit have changed, for a long time into the future. For three, interest rate structures are going to remain under pressure for a while. For four, a certain amount of reflation has already been built into some asset prices (most notably gold) and this reflation will eventually transfer to some extent into other asset prices (most notably real estate). I’m not saying home prices will recover anytime soon to their crazy 2005-2007 peak, only that they will eventually recover to the point where most homeowners are back in the black in terms of equity.
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silverax Charlatan Exposed
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