Zugzwang – Precious Metals Supply and Demand



Respectable and Not so Respectable Assets

The price of gold went up 8 bucks, and the price of silver went up a penny last week. These were not among the capital assets that could be liquidated for greater quantities of consumer goods last week. Nor were equities.

A respectable, mother-in-law-proof speculation: the 10-year US treasury note. [PT]

However, the consumer goods stockpile stored in treasury bonds (to extend our half sarcastic, half tongue-in-cheek analogy) increased this week. As the yield on the 10-year note fell from 1.675% to 1.515% — almost 10% of the yield was sucked out of this bond — the price rose. It went from $130.39 to 131.91 (near futures contract).

Speculators this week forked over about 1.2% more capital for that same piece of paper, than they did last week. In a rational world, this would be a joke. People would be laughing, that in the deepest, most liquid bond market in the word, the price is so unstable!

If there were any merit to the idea of central planning (there isn’t), if the Fed had any legitimate mandate to fix a price (it hasn’t), it would be the price of treasuries. Of all the things that should be subject to unleashed speculation (no things should, though certain commodities are subject to production risk), the last thing in the financial universe that ought to suffer this malady is the asset deemed to be risk-free (it isn’t), and the basis of the monetary system!

Keynes smirked that not one in a million people could see the problem. That’s because they’re all wagering around the table, rolling the dice and yelling “come on, baby needs a new pair of shoes!”

J.M. Keynes in full smirk mode. Murray Rothbard had this to say about Keynes: “To sum up Keynes: arrogant, sadistic, power besotted bully, deliberate and systemic liar, intellectually irresponsible, an opponent of principle, in favor of short term hedonism and nihilistic opponent of bourgeois morality in all of its areas, a hater of thrift and savings, somebody who wanted to liquidate the creditor class, exterminate the creditor class, an imperialist, an anti-Semite, and a fascist. Outside of that I guess he was a great guy.”  It’s probably fair to say that Rothbard wasn’t the biggest fan of Keynes. Neither are we. In the past we have at times pondered how many decades of progress Western civilization has lost by dint of adopting the garbled economics and execrable statism propagated by Keynes, but if there had been no Keynes, someone else would undoubtedly have provided the political-bureaucratic classes with a “scientific” fig leaf justifying their depredations. [PT]

Not so many people bet “DO NOT PASS” (i.e. gold) last week. Who would be so antisocial, when the shooter has hot dice? OK, so the stock market didn’t go up. But bonds are a respectable speculation, that your mother-in-law would not worry what would the neighbors think.

Bitcoin is not a respectable bet (though it’s improving) and it increased the amount of groceries by …read more

Source:: Acting Man