bloomberg - 20 dollar oil this year

[waggin]

"Ponzi-financing":
http://www.drschoon.com/articles/2010ReadyOrNotHereItComes.pdf

This section is especially relevant (regardless of your views on PM's):

GOLD—THE BAROMETER OF SYSTEMIC DISTRESS

From its central bank induced lows in the 1990s, the price of gold has almost
quintupled. Today, gold seems expensive. In the future, today's price will seem
like a bargain.

We are now approaching the final stage of the collapse of the bankers' house of
cards; when debt levels are so high they can no longer be serviced, crushing those
still trapped by credit's promissory lure.

Hyman Minsky, the late American economist, made a seminal contribution to the
study of debt in his financial instability hypothesis. In the early stages of capitalist
systems, interest and principal can be serviced out of the debtor's cash flow. In
the final stage of "mature capitalist systems", they cannot.

Capitalism's final stage is what Minsky calls "ponzi-financing", when debt
payments can only be made by additional borrowing. This is what the US, the UK
and Japan are doing today, having to borrow against tomorrow in order to pay
yesterday's bills.

For 50 years, not one Dollar of new debt created by the US government to fund
the activities it does not wish to tax for has been repaid. The debt has simply been
"re-financed" with new debt being sold to retire the existing debt.
The Privateer, Late November 09, issue 6430100, www.the-privateer.com

At some point, the end finally arrives. Ponzi-financing cannot service debt
forever. Investing in unhedged paper assets is the bet that it can. Gold is the bet
that it cannot.

The important message is the debt issue.  For some, the mention of gold may distract, but I didn't want to remove it and change D.R. Schoon's intended message.  I really like the term, Ponzi-financing.  I think it sums up our predicament, and I think we're running out of new "greater fools."  I don't think anyone can make a rational argument that there is a way to grow/save/stimulate our way out of our national debt; the only path is default, and I think the attempt will be to make it a semi-orderly devaluation of the dollar.  IMO, the yield spread between the 2yr & 30yr Treasuries is a symptom of this.

[muldoon]

agree with you 1000% that the underlying issue is ponzi financing.  also known as fraud.  it destroys the confidence necessary for a fractional reserve lending system to work.  it is thus exacerbated by the exponential growth requirement.  in any given closed system (limited by resources), you cannot have exponential growth forever.  At some point it is mandatory by logic that you hit the wall.  Debt saturation is the point at which it falls, and fraud and ponzi is the mechanism by which the can is kicked down the road.  extend and pretend, let the next administration deal with it, etc.  I have been keeping a journal this year, "letters to my grandchildren" is what I named it.  Just my thoughts on this mess and the mechanics that have taken us here.  This is not a new occurance - I have found the same event occuring 6 or 7 times going back some 900 years.  No new thing under the sun. 

I dont mean to sound like I am completely negative on gold, hell I have a wedding ring made out of it.  I just question how any commodoty can go up relative to lack of money to purchase it.  In the doomsday scenario people use to describe gold being needed, the idea of trading 1100 dollar gold for a box of 223 ammo sounds insane to me.  I also have not in any way written off the dollar long term. 

In the news today add Ireland:
http://www.irishtimes.com/newspaper/breaking/2009/1213/breaking24.htm
"The leader of the country's largest public sector union has said that the Government is facing "a potentially explosive situation" following the introduction of pay cuts in the Budget for staff on the State's payroll."

Add Germany - which in my opinion holds all the keys to where euro will go.  They are the most fiscally responsible of the lot, and have some horrible history with debt monetiation and hyperinflation.  Would they even be politically willing to go down that road again to bail out the rest of the EU?  That remains to be seen. 
http://www.bloomberg.com/apps/news?pid=20601085&sid=aR1FLc0g5Wuk

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currencies are valued in relation to each other.  if every country in europe fails.  and every country in latin america fails, and chunks of the middle east fails, where does that leave the dollar?  it leaves it as king of the word - warts and all.  Still just thinking outloud.