The Precious Dividing Line Between Finance, Economy And Monetary Policy

March 30, 2014

Once price becomes untethered from these 'management of perception trading events', we will be in brand new territory. It will be a place where the true invisible forces will have a clear path toward moving us toward the natural price equilibrium; and at a much higher level in the atmosphere of prices based on real value.

Meanwhile, the world economy continues to unravel, thanks to the ever greater ills of a financial system quite out of bounds, bloated, and far from anything close to natural or normal.

European derivatives imploding, credit contraction in China (and the bursting of their housing bubble), along with major corporate defaults in solar, coal, and real estate development.

Most people do not consider the distinction. It is an embedded nuance of our language. It is also a consequence of the incompleteness of language in conveying abstract concepts.

Language, just like every other part of the human perceptual complex, is capable of conveying only the broadest edges of meaning. Perception fills in the details. Language and word use is a continually evolving construct. Most people understand what it means to ‘Google’ something and in the same way, most people share a host of general assumptions around the word finance.

Some of the more notable assumptions surround home ownership. Lower home prices are generally considered negative. The tax deduction is viewed more in terms of a tax credit. The largest misconception is that ownership itself is abstract, as most have mortgages and everyone must pay property taxes to maintain title.

As many of you know, the overnight Repurchase or repo transaction (overnight loans really)-is a lending facility representing a major financial system keystone. This is the commercial paper market, and the vital fuel that pulses behind practically every aspect of the paper-based financial system.

A forest with an overabundance of fuels needs little to become blaze.

The Treasury of a massive pharmaceutical company, for example, is 100% focused on maximizing cash position using the commercial paper market or REPO facility. A giant pharmacy company is essentially a financial institution in disguise.

How does this relate to silver?

  • This is the poster child for 'unstable' and misallocation of capital and a testament to the out of control complexity created by the cancerous growth of finance.
  • Accidents could spread quickly.
  • Competition for collateral is threatened by the Fed QE program. Tightening of the lending facility could cause commercial credit to slow suddenly and stall the already fragile system. This would necessitate the Fed to print more or buy more of its own debt.
  • Crashes can come quickly and overcome markets and investors that are practically blind to the risk.

Silver in this case is a cheap (for now) emergency hedge or option. It is different from gold because its underpricing is much more extreme and misunderstood.

The belief is pushing equities and sentiment into all time highs without upsetting inflation concerns of modern finance, (in fact, continuing to fret over not enough) while reinforcing the important and dangerous fragility I keep coming back to

Translated furthermore, deflation really means signals that we will back stop the system from falling, so it's okay to spend, or the "put" is still alive.


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The Fourth Coinage Act of 1873 embraced the gold standard and demonetized silver, known as the “Crime of 73”