Sunday, 14 December 2008

10 days and counting

The story of unusual happenings in the gold market keeps running:

Backwardation That Shook The World

On Friday, December 12, backwardation on gold was still in force at an annualized discount rate hovering around 2% in the December contract, and 0.3% in February contract.

Holders of physical gold, now on fully-fledged strike, are offered a strike-pay by the futures market, and the offer is left on the bargaining table, but the strikers still won't budge. There it is: the gold basis went negative, gold has been in backwardation for over a week, and physical gold is still not coming out of hiding.

Backwardation also gives a signal to those who are not so fortunate as to have some of the precious yellow in hand. It tells them to be prepared for a thunderous collapse of the international payments system, worse than the collapse of the twin towers of the World Trade Center. Backwardation means the inevitable contraction of the world economy, the beginning of an era of diminishing enterprise and employment, an era of snowballing business failures and poverty. Printing more irredeemable promises to pay will make this condition worse, not better.

I am still not sure where this is all leading.... but if things turn out as the writer of this article suggests then maybe a run on the banks will be the least of our worries.

3 comments:

Anonymous said...

Nice blog keep it up!! Do you think Bank of America & JP Morgan will fail? How soon you see the massive bank runs actually taking place

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