Another region of the trend concerns the recent peculiar behavior of gold and silver. Fear and greed may rule the trade in paper instruments, but something else rules the trade in hard metals: uncertainty. These days the uncertainty is very keen, not so much about the direction of the trade in paper – because the trend is up, up, and away – but whether the placeholders for the paper are for real, or whether you get to keep any of them when the dust settles at every dust-up. Markets can go wither they will, but it’s another matter when the government slams on capital controls and you can’t move your money or redeem it from your account.

     With the precedent of Cyprus now established (never mind MF Global), you’d think people all over the planet would be buying gold and silver as stores of value without counterparty risk, but the price keeps slowly sinking. I don’t think it’s because of the much chattered-about threat of confiscation. The US government could not be dumb enough to try to pull an FDR-style gold grab. This is a different land than it was in 1933. The people who hold gold are exactly the same people who are very heavily armed, and just because the Department of Homeland Security supposedly has been buying up all the ammo on God’s green earth, virtually all the people who are heavily armed are already heavily stocked up on ammo, too, and have quite enough to start an insurrection if the treasury agents come calling for their life savings.

     Though I’m generally allergic to conspiracy theories, it smells like someone is engineering the downward behavior of the metals. The central banks of the US and Europe have a big incentive for driving the price down: it makes their currencies look stronger – despite the universal QE policies designed to make them actually weaker. That is, it gives the appearance that QE is not doing exactly what it is intended to do: wage currency war by driving down the value of money and incidentally inflating away the cost of debt denominated in these currencies.

     I think the Federal Reserve and its TBTF cronies will succeed in driving the price of gold down, perhaps as far as the $1350 range, for a while (a moment, let’s say). But by the time it gets there they will have completely wrecked the economies they pretend to represent, and driven many citizens into penury. Now, consider that hyperinflation is always a rather sudden phenomenon. When it comes on, it comes fast and hard, by the day and then the hour. The Fed and its handmaidens will not be able to control it when it happens, because it will spring from all their previous actions, including the concealment of the loss of value of the dollar via manipulation of the gold and silver markets – and Ben Bernanke can’t pretend that his helicopter is a time machine. There will be no going back to undo what he’s already done. That’s the point where you will see the price of gold very quickly head toward $3,500 or even $10,000 and beyond, depending on the damage done and the oafishness of the political response. QE to infinity really translates into dollar wreckage to infinity.

     History will record that this crisis of confidence in money was brought on by men who stupidly refused to acknowledge that the terms of daily human existence had changed in 2013. We could save the country and fashion a new economy appropriate to the new era of contraction, but it wouldn’t look much like what you see out there now. It would be all about empty highways and empty WalMarts and people turning their energies elsewhere, to their communities, workshops, homesteads, and main streets. We’ll get to that place, but the journey to it will be dark and lonely since it will be accomplished by individuals bravely venturing where no politician dares to speak of, and the lonely individuals will receive no support from their culture or any of the authorities who play at political leadership.

     There could well come a time, though, when those authorities will be disgraced, dragged down, and trampled, and I would tremble to be there on that dreadful day. That will be the day that the ultimate TV reality show debuts. Call it: Waterboarding the Real Housewives of Beverly Hills. When elites circulate, things get messy.

14 Comments on "Kunstler: That Dreadful Day"

J-Gav on Mon, 8th Apr 2013 12:16 pm 



Every market that means anything is manipulated to push up stocks and make bubbles, benefit short-sellers and insider-trading, etc. Gold and silver are no different, they’ve been manipulated for years, even centuries.

As to whether Kunstler’s right about a huge inflation threat, I can’t say. My own feeling is that the present deflation hasn’t played itself out yet but who knows how much longer it has to go? He’s probably correct though that when it does hit, it could be sudden and quickly become uncontrollable.

SOS on Mon, 8th Apr 2013 2:08 pm 



This guy acts like people have to go to walmart, have to drive their cars everywhere and cant be involved with their local communites. It sounds to me that this guy thinks it will take collapse to change this but why? He and all of us, still have the feedom to stay out of walmart, off the highways and get involved. It doesnt take anything except personal commitment.

dsula on Mon, 8th Apr 2013 2:18 pm 



Kunstler can be safely ignored. He rants about people driving while he travels all over the place. He has also been predicting next week’s certain doom for the last 10 years.

GregT on Mon, 8th Apr 2013 2:35 pm 



Econ/ SOS,

“He and all of us, still have the feedom to stay out of walmart, off the highways and get involved. It doesnt take anything except personal commitment.”

That’s the spirit! Let’s all personally commit to collapsing the economy!

GregT on Mon, 8th Apr 2013 2:50 pm 



dsula,

Kunstler’s 2005 book “The Long Emergency”, predicted very well what has already occurred. It might be a smart idea to pay heed to what he said will unfold as we move forward.

“Kunstler’s premise is that “cheap, plentiful” oil is the foundation of industrial society and the pervasiveness of its effects is not widely appreciated. Through the 21st century, oil and natural gas will become increasingly difficult to obtain, becoming increasingly expensive and ultimately unavailable. Scarcity of petroleum will cause significant problems for transportation and generation of electrical power. In addition, shipping of food and manufactured items will become increasingly expensive, ultimately prohibitively so. Also, natural gas is vitally important to food production as it is the raw material for much of commercial crop fertilizers. In the industrialized West, most food production and manufacturing is performed far from, and generally abstracted away from the consumer.
The author further argues that alternative sources of energy will be insufficient. As petroleum sources become scarce, environmentally harmful or risky technologies such as coal and nuclear will become necessary but not sufficient for our energy needs. Hydroelectric, solar, and wind power, even in combination with coal and nuclear, will also be far from sufficient. Kunstler does not consider hydrogen to be a true energy source since one cannot drill into the earth and obtain hydrogen. Hydrogen must be extracted from other energy sources, such as natural gas or using electricity at a total net loss of energy.
Kunstler states that, as energy becomes scarce, transportation will become difficult or impossible, causing food and other necessary commodities to become unavailable in many communities. It will be necessary for local communities to become self-sufficient for food production, but many communities will be unable to do so, particularly large cities. The result will be mass starvation, disease, and civil unrest. Kunstler suggests that governments will be incapable of managing these problems. This period of scarcity and collapse will possibly last for hundreds of years, hence the “long” emergency of the book’s title.
Kunstler, a long-time critic of suburban design, advises communities to change to accommodate walking and bicycling as the primary modes of transport. Populations should be moved out of big cities into smaller communities that have nearby arable land with adequate water and favourable climate for agriculture. People should begin learning to grow food.”

DC on Mon, 8th Apr 2013 3:24 pm 



I wonder if James was reading this

http://www.counterpunch.org/2013/04/05/the-assault-on-gold/

Paul Craig Roberts is saying essentially the same thing. I have been wondering lately why the price of gold wasnt responding, IE going up, especially in light of recent events in Cypress and QE infinity, and the general lack of ‘recovery’ in the western world. All of these things taken together, at least to my mind, would tell people that that paper currencies and banks are just as shaky and untrustworthy as ever. Yet the price of Gold\Silver has stagnated. Well, maybe now we have an explanation, or part of one.

Now there is another problem as well. Just like there in Cypress, there is nowhere near enough actal money in the system as there are paper claims on said money.

But what if a similar situation exists in gold? That there are more people who think they own actual gold than there is actual gold to back it all up? What if the currency of last resort, gold and silver is just a flimsy as fiat currencies? You seldom hear issue that brought up. What got me thinking about that, was the recent issue of Germany asking the US for its gold back and being told to wait a decade or so for delivery. What if all the people holding ‘paper’ gold tried to actually redeem it and where told the same thing? If the claims on gold cant be met just like they cant in the fiat banking system-were really in some trouble.

A house of cards at least, its implied sits on a solid foundation, ie a table top. What if the current house of cards turns out to be sitting on top of bed of quick-sand instead? That would be the mother of all rushes to the exit wouldn’t it?

GregT on Mon, 8th Apr 2013 3:44 pm 



DC,

It is believed that there may be one hundred times as much “paper” and “electronic” gold, as there is physical.

If you don’t hold it, you don’t own it.

dave thompson on Mon, 8th Apr 2013 5:16 pm 



Hold love in your heart only to give it to others. The wellspring of eternity. This is the true wealth of humanity.

Plantagenet on Mon, 8th Apr 2013 5:48 pm 



What happened to HOPE and CHANGE? Just give Obama a little bit longer to fix things.

Arthur on Mon, 8th Apr 2013 5:59 pm 



In seven years time gold rose to 400%. That is spectacular enough as it is, and nothing grows for ever. Despite QE the inflation did not rise very much, nowhere near the rise in gold.

GregT on Mon, 8th Apr 2013 7:19 pm 



Gold did not rise. An ounce of gold is an ounce of gold. The dollar lost value. It is now regaining some of that loss, but for how long? It is a confidence game, and once confidence is lost and all of those US dollars come back home, inflation will rear it’s ugly head. It is only a matter of time.

Arthur on Mon, 8th Apr 2013 7:26 pm 



Greg, that is too pessimistic. Even the professional pessimists at shadowstats come up with inflation estimates of ca. 5-6%/year, so maybe 40% in 7 years.

http://www.shadowstats.com/alternate_data/inflation-charts

And boy-oh-boy can I confirm you that gold price did quadruple in that period)))

goldprice . org / gold-price-euros . html

GregT on Mon, 8th Apr 2013 9:00 pm 



Inflation may officially be at 3.5 %, and shadow stats may say 5 or 6%, but that is not reflected in my cost of living. Over the last 7 years imy COL has kept pace with gold at around 220%.

Arthur on Mon, 8th Apr 2013 11:11 pm 



“There could well come a time, though, when those authorities will be disgraced, dragged down, and trampled, and I would tremble to be there on that dreadful day. That will be the day that the ultimate TV reality show debuts. Call it: Waterboarding the Real Housewives of Beverly Hills. When elites circulate, things get messy.”

Kunstler predicting regime change in Washington.