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drbubb

Prof. Krugman & the failure of mainstream economists

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I agree with Roubini on the fundamental fragility of this market as a wall of cheap liquidity pushes up risky asset prices.

 

I disagree with the great Roubini that gold is just another one of those assets. In my opinion gold, is in the process of monetization. Gold may dip a little on a liquidation but should recover quickly due to the instability of currencies. I am sticking to a $900 post QE floor.

 

Continued uncertainty and the problem of valuation will see gold continue to climb..... though with Roubini the rise will not be parabolic but may take years.

 

If it hits $900 again, chances are that I will be an aggressive buyer of Gold

 

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If it hits $900 again, chances are that I will be an aggressive buyer of Gold

That would be a good time to buy. I understand you already effectively have a core position in gold. When/if gold hits 900, I am hoping to load up on silver, which should, with other commodities, be hammered. I kind of see silver as a leveraged play on gold... without being leveraged. My aim is to swap silver to gold once the next tide of liquidity hits the market. I am still wondering if the present tide has further to run.

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Jim Sinclairs comment on http://jsmineset.com/

 

Nouriel Roubini Saturday:

 

Many in the gold family have their shorts in a knot concerning an article quoting Professor Roubini that unless we get extreme inflation or extreme deflation those like myself who say gold is going to $1224, $1650 and on to Alf’s numbers are wrong.

 

Professor Roubini admits that he has never favored gold which means he did not nor would he have owned it at any price.

 

Professor Roubini did not mention gold’s role as a currency nor its relationship to the US dollar.

 

Professor Roubini’s interview did not address the fact that extreme currency inflation has occurred in monetary history while debt was failing. That is the definition of hyperinflation, a currency event that will drive the gold price much higher than even I anticipate.

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What a hilarious read. However, also worrisome. It is the same sort of polarization that we see between the equally adamant inflationists and deflationists.

 

:lol: what a hilarious post.

 

http://en.wikipedia.org/wiki/Mutually_exclusive ;)

 

I disagree with the great Roubini that gold is just another one of those assets. In my opinion gold, is in the process of monetization.

 

the collapse of fiat will mean that all sorts of items get monetized.

 

Continued uncertainty and the problem of valuation will see gold continue to climb in the aggregate with periods of volatilty to the downside. The rise will not be parabolic but incremental and may take years.

 

I also suspect it won't be parabolic. something like this (but worse) maybe:

 

1120.h2.jpg

 

 

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the collapse of fiat will mean that all sorts of items get monetized.

I do not think "fiat" will collapse, but just devalue against gold. Fiat will remain valuable to the general populace as there will be, believe it or not, a scarcity of money. This will lead to lower prices and cheaper assets. Gold which may double in price would effectively have a quadruple purchase on assets as those assets themselves depreciate against fiat currencies. This is the reason to buy gold, if you see deflation.

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Roubini touched also on the deflation argument, hinting that gold is not the answer. He said ” the only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.”

The problem with most economists like Krugman or Roubini is that their brains have been washed in the Chicago School of Econonomics and so they have not got a clue about gold. They don't even have reasonable models for it.

 

Now, here are two reasonable models, and in both, gold is extremely cheap at the moment.

 

Approximity's Model: MZM Equilibrium Gold Price

http://gold.approximity.com/gold_price_model.html

Gold_Price_to_MZM_Equilibrium_Price.png

 

Jim Sinclair's Model: Federal External Debt Equilibrium Gold Price

http://gold.approximity.com/gold_price_models_sinclair.html

Gold_Price_to_External_Debt_Equilibrium_Price_231009.png

 

None of these models are perfect in any sense. But they give a better understanding of how high the price of gold momentarily is. A better understanding at least than any sort of government CPI-adjustment.

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Jim Sinclairs comment on http://jsmineset.com/

Nouriel Roubini Saturday:

Many in the gold family have their shorts in a knot concerning an article quoting Professor Roubini that unless we get extreme inflation or extreme deflation those like myself who say gold is going to $1224, $1650 and on to Alf’s numbers are wrong.

 

I think we will know pretty soon how realistic Sinclair's predictions are.

We are getting rather close to hos Nov.5th date.

The coming 5 days may tell us quite alot

 

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I think we will know pretty soon how realistic Sinclair's predictions are.

We are getting rather close to hos Nov.5th date.

The coming 5 days may tell us quite alot

I don't think he mentioned any figures regarding Nov. 5. The figure he mentioned was $1,650 by Jan. 14 2011. Not sure why people take his countdown(s) so seriously. He just does that for the weaker members of his fellowship, who need something more concrete they can believe in. :rolleyes:

 

EDITed to correct date.

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I don't think he mentioned any figures regarding Nov. 5. The figure he mentioned was $1,650 by Jan. 14 2009. Not sure why people take his countdown(s) so seriously. He just does that for the weaker members of his fellowship, who need something more concrete they can believe in. :rolleyes:

Talk about a quick sure way to lose "believers". Reckless stuff if you ask me.... just like some of his more meaningless fanciful figures. All it would take is for gold to go on a decent dip and the newbies/ grannies will be leaving the gold bug camp in droves.

 

If he had a genuine concern for the "average" consumer looking to protect their worth, the case/ justification for gold should be made on a more sound footing than the "imminent hyper-inflationary destruction of fiat" dogma in my opinion. I think this reflects his own prejudices more than the state of the real world.

 

Opps, just realised this was the bashing Krugman thread. :lol:

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Talk about a quick sure way to lose "believers". Reckless stuff if you ask me.... just like some of his more meaningless fanciful figures. All it would take is for gold to go on a decent dip and the newbies/ grannies will be leaving the gold bug camp in droves.

. . .

Opps, just realised this was the bashing Krugman thread. :lol:

 

it's hard to keep a healthy obsession under control, I suppose

 

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If he had a genuine concern for the "average" consumer looking to protect their worth, the case/ justification for gold should be made on a more sound footing than the "imminent hyper-inflationary destruction of fiat" dogma in my opinion. I think this reflects his own prejudices more than the state of the real world.

You and Bubb obviously don't read Sinclair. He IS genuinely concerned, otherwise, why would he have this blog? The guy is rich and could retire. But he spends hours explaining his point of view every day. As for the sound footing, it is certainly sounder than many others, including certain posters on GEI.

 

The countdown thingy is something technical he read from the USDX chart I think, so traders like you and Bubb should actually love it.

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You and Bubb obviously don't read Sinclair. He IS genuinely concerned, otherwise, why would he have this blog? The guy is rich and could retire. But he spends hours explaining his point of view every day. As for the sound footing, it is certainly sounder than many others, including certain posters on GEI.

 

Have you missed the irony in what you have just posted?

???

"The guy is rich and could retire. But he spends hours explaining his point of view every day."

 

I'm sure he has more money than I do.

 

But what benefit do you think he derives from other folks buying gold?

Far more than I get by trying to get people to buy carefully, and hedge their Gold positions sometimes.

I really dont get this worshipful attitude towards Mr.Sinclair!

He was caught misleading people about his investments in Tan-Range, when he was quietly unloading

stock while telling everyone that he was putting money into the private placement

 

The man is hardly the paragon you make him out to be.

 

Having said that, I do think many people get value from his blog, and I am happy for you to post his

comments here. But do realise that he would love to see his "troops" have enough power to move the

Gold market is his own favor. I'm sure that at least half his motivation is that he would like to teach a

lesson to those on the other side of the Gold market, whom he has been competing with for years.

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Research funding at university is given on a political basis. If you want to research the perils of global warming you'll be able to find plenty of funding. But if you want to show that global warming is a bunch of rubbish you will never get funded. As the whole education system selects for obedience and conformity this should not really come as a suprise.

 

The same goes for economics. TPTB decide what they want to do then look for 'research' to justify it. Governments throw money and accolades at people who decide that government should take everyone's stuff and increase their own power. After a while it becomes self-reinforcing.

 

It's obvious that printing money will not cause an economy to grow. Don't believe me? Take a simple example. An economy that consists of a farm a factory and a printing press. Use this simple example to explain how printing money, beyond what is needed to facilitate trade, is supposed to create growth.

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I think we will know pretty soon how realistic Sinclair's predictions are.

We are getting rather close to hos Nov.5th date.

The coming 5 days may tell us quite alot

 

I believe, from what I have read, his time period is 4 to 27 November, not exactly the 5th. During this period he expects $ to fall below 71 and...well you know the rest.

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I don't think he mentioned any figures regarding Nov. 5. The figure he mentioned was $1,650 by Jan. 14 2009. Not sure why people take his countdown(s) so seriously. He just does that for the weaker members of his fellowship, who need something more concrete they can believe in. :rolleyes:

I believe, in fact it is Jan 2011 for $1650 and he has a $1m wager on that (of course that will be c $750k by then...).

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I believe, in fact it is Jan 2011 for $1650 and he has a $1m wager on that (of course that will be c $750k by then...).

Yes, of course, end of second January week 2011. No one ever took up his wager.

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The countdown thingy is something technical he read from the USDX chart I think, so traders like you and Bubb should actually love it.

It is quite comical that you continue to think of me as a "trader", when I have made it clear that I am not... being a hedger instead. I think this reflects the narrowed Sinclarian position which has both demonized the word "trader" [traitor] and can not conceive of any other position besides "all in".

 

Completely artless when you consider investment is akin to war.

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I liked the title so much, I had to bring this here

 

Marc Faber delivers speech, takes on Paul Krugman

Subscribe to author Published Sep 27, 2009

http://www.digitaljournal.com/article/279755

 

Actually, it is an interview, not a speech. And Krugman-bashing is only a small item, which doesnt appear until part ..

 

The comparison is valid:

Faber speaks sense, while Krugman speaks nonsense.

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Krugman in Wonderland

 

Sometimes you cannot make this stuff up. The lead Keynesian Cheerleader, Paul Krugman, contradicts himself when trying to throw a Repub down the rabbit hole. In his textbook on macoeconomics he blamed "Eurosclerosis" (persistent high unemployment) on unemployment benefits:

 

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of "Eurosclerosis," the persistent high unemployment that affects a number of European countries.

 

Now he encourages extended unemployment benefits. From a blog wonderfully entitled Krugman-In-Wonderland, here is Krugman's case:

 

What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.

 

The snarky remark is what he touts as "what textbooks say" is the opposite of what HIS textbook says. So it is ok to create persistent unemployment and Amerosclerosis since it somehow stimulates the economy? There are so many things wrong with this sort of advice it is hard to know where to start. I happen to favor extended unemployment right now for reasons of compassion, to bridge people through the downturn, but not to somehow stimulate the economy.

 

Stimulus is not the end, but a means to the end. What good is "stimulus" if it leaves us stuck with high levels of unemployment and reliance on government life support to sustain a moribund economy

 

/more: http://yelnick.typepad.com/yelnick/2010/03...wonderland.html

 

+++++

 

(my reaction there):

 

Good article.

It is certainly time that Krugman's reputation was thrown under the bus.

 

The man is a font of dangerous ideas, and giving him a nobel prize was a cruel joke. Instead of enhancing his reputation, it diminished the reputation of the Nobel committee.

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001il.jpg

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In his textbook on macoeconomics he blamed "Eurosclerosis" (persistent high unemployment) on unemployment benefits:

 

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of "Eurosclerosis," the persistent high unemployment that affects a number of European countries.

 

Now he encourages extended unemployment benefits. From a blog wonderfully entitled Krugman-In-Wonderland, here is Krugman's case:

 

What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.

 

Keynes argued for low government spending in the boom times and high taxation

 

Krugman is consistant with that.

 

Obviously generous unemployment benefits discourage worker appetite to get work. They are another form of malinvestment.

 

But we are in the bust phase now and spending needs to be maintained to prevent a deflationary spiral that will destroy good business and good households along with the bad.

 

the argument put forwards by keynes was that you can moderate an economy and guide it via applying stimulus in weaker times and removing it in better times.

 

Therefore the government should work oppositely to the person who spends more in good times and holds back in bad times.

 

The idea that governments should now encourage a collapse in spending is insane.

 

But equally insane is the idea of benefits and a whole welfare cushion during boom times so that you have long term unemployed and a culture of hopelessness while workers are imported from poorer countries.

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...

The idea that governments should now encourage a collapse in spending is insane.

 

But equally insane is the idea of benefits and a whole welfare cushion during boom times so that you have long term unemployed and a culture of hopelessness while workers are imported from poorer countries.

But because they have done this

 

But equally insane is the idea of benefits and a whole welfare cushion during boom times

 

There is now no money to encourage spending without devaluing the currency and possibly risking a deeper crash at a later time.

 

 

 

 

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But because they have done this

 

But equally insane is the idea of benefits and a whole welfare cushion during boom times

 

There is now no money to encourage spending without devaluing the currency and possibly risking a deeper crash at a later time.

 

Hard to see currencies crashing against each other when nearly every government is doing the same thing. The movement of sterling so far is easily manageable against the largest economy and second largest economies in the world

 

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Hard to see currencies crashing against each other when nearly every government is doing the same thing. The movement of sterling so far is easily manageable against the largest economy and second largest economies in the world

I see the opposite especially when one currency has more leeway to change its tack than another, for example what is going to happen to the £ if the Fed raises its rate next Tuesday because Ben is not allowed to turn the printy handle as quick as he wants or if the EMF is born and the EC decide that the EU must put its rate up 0.25% to help compensate. What then would the gap be between UK bonds and the base rate and just where would Brown get the cash to pay the interest owed let alone go on another spending spree.

 

The bank account is in overdraft, the coin bottle is empty of loose change, the cupboards are getting bare and the kiddies are getting hungry, is it time to go and see the IMF banker or do another smash and grab raid. What would be the target, increase VAT, pensions, profitable companies or banks, he's already sold most of the heirlooms, not much else left is there.

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