The Contrarian Curse – Silver Doctors


What if all the brand new consensus memes are as improper as those they changed?

 by Charles Hugh Smith through Of Two Minds

What if all the brand new consensus memes are as improper as those they changed?

I’ve the Contrarian Curse, and I’ve it dangerous. The Contrarian Curse is: as quickly because the herd adopts your beforehand contrarian view, you begin questioning the brand new consensus, simply as you questioned the earlier consensus.

Instance #1: fiat currencies are doomed. In any case, if creating “cash” out of skinny air solves all our issues, why not simply let everybody print as a lot as they need at residence? Oh, wait, solely the super-wealthy and highly effective get the newly created “cash”? Oh, that makes it actually sustainable, doesn’t it?

Now the new meme is the US greenback is expiring and gold / commodity-backed currencies will exchange it atop the heap. Many people on the fringes have contemplated alternate options to fiat forex, and so this changing into mainstream is an actual sea change.

Which instantly arouses my contrarian curse. Okay, so precisely how does a gold/commodity-backed forex work? If gold or wheat declines (as measured in buying energy to all the things else), does the amount of forex shrink to mirror this decline in worth? Can the forex provide solely broaden if gold/commodities rise in relative worth? Can the issuing central financial institution simply hold emitting new forex with out increasing the reserves of gold/commodities?

What about non-public banking creating new “cash” by originating new mortgages and different loans? What’s backing all this new privately-created “cash”?

Numerous knotty questions, few if any detailed solutions to how a gold-backed forex features in precise markets. An concept will be nice as an abstraction however the execution of the main points is what differentiates an abstraction from a real-world system that’s useful, clear and thus reliable.

Can I convert my gold-backed quatloo into gold? If not, then what precisely does gold-backed imply?

As for digital currencies issued by central banks or non-public banks, how are these totally different from present fiat currencies, that are for all intents and functions, already totally digital currencies?

Much more contrarian: what if the demand for US {dollars} pushes the relative worth greater regardless of the intrinsic flaws in fiat currencies?

“Cash” is a humorous factor. You may print extra, however increasing the availability tends to devalue the present inventory of “cash,” lowering the worth of the newly issued forex. But when demand for the “cash” exceeds provide, the relative worth will increase at the same time as the availability continues to broaden.

Right here’s one other humorous factor about “cash.” Take a bunch of loans–pupil loans, truck loans, mortgages, traces of credit score, and so forth., and extinguish all that debt by writing them off as uncollectible, forgiving the mortgage, lowering the market worth of the underlying collateral (if any), and so forth. All that “cash” goes to Cash Heaven and the availability of “cash” shrinks accordingly.

If demand stays regular, this discount within the provide of “cash” will push its relative worth up. (Questions like this prompted me to jot down Cash and Work Unchained.)

Instance #2: yields and rates of interest have to remain near-zero or the system implodes. Now that debt has ballooned to insane ranges, there’s no option to service the debt besides at near-zero charges of curiosity which suggests Treasury yields additionally need to be near-zero.

Now that that is the consensus, I’m wondering: what if charges will proceed rising anyway? What wouldn’t it take for the 40-year bull market in bonds–i.e. 40 years of declining yields/rates of interest–to reverse right into a Bear marketplace for bonds, i.e. yields/rates of interest steadily marching greater?

What if complete mountains of debt are extinguished, successfully lowering the availability of “cash”? If capital turns into scarce, then maybe there will likely be a premium charged to borrow it.

Geopolitically, one option to scale back the burden of upper commodity costs is to extend the worth of the nation’s “cash” by inducing demand whereas limiting provide. One option to induce demand is to deal with capital pretty and transparently.

What if all the brand new consensus memes are as improper as those they changed? I instructed you it’s a curse.

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