Monday, December 13, 2010

Denninger Smoked Out

Sadly, Karl Denninger has been smoked out about his beliefs and understanding about gold, following my earlier post.

He has responded this way:
Uh huh. Someone hasn't looked at an inflation chart going back to the start of the US. If they had, they'd realize that hard money isn't the answer - in fact, it produces monstrous AND EXTREMELY VIOLENT currency valuation changes, with some oscillations exceeding 40% in the space of one year. Try planning for THAT!

That's what happens when you stick your head up your ass and refuse to look at the data that is publicly available
First, I am not sure what charts, Karl, you are looking at outside of the charts of gold priced in terms of the dollar and other currencies. Wouldn't it make more sense to think it was the paper currency fluctuating around gold, since the supply of gold rarely in all of history has increased dramatically.

Second,  are you aware of there ever, ever, being a distortion of the capital goods/ consumer goods ratio because of gold?

Third, Karl are you aware of any case in history when hyper-inflation has been caused when gold was the money?

Fourth, do you know why even a "zero price inflation" policy causes distortions in the capital structure of an economy?

Karl, you do some good work from time to time, but you don't understand money and how money printing distorts the capital structure even when there isn't price inflation.


  1. No surprise here. He's consistently argued in favor of fractional reserve banking over the years, his proof being that the columns in the bank financial statements all reconcile.

  2. Wenzel,

    I like Karl a lot and enjoy his work on other topics (specifically his analysis of financial markets and stocks), but I have to completely agree with you that Karl doesn't fully understand economics. I don't know if it's because he's a "realist" or just a self-styled "non-dogmatist" but it's clear he makes the methodological mistake that Mises and other Austrians have warned against repeatedly, which is assuming that data can tell a "story" without a theory wrapped around it which can be used to interpret said story.

    For example, one could look at a chart of gold prices going back over time and notice a slow run-up which eventually culminates in a parabolic spike. What happened? Could be that the monetary unit measuring the gold price experienced rapid inflation. Could be that gold experienced a demand shift thanks to the discovery of new industrial uses for gold. Could be that gold experienced a demand shift thanks to consumers strongly desiring gold jewelry in ways they never did before. Or it could even be something of a supply shift-- perhaps many of the world's gold producing regions experience war and conflict which make gold unreachable, while at the same time much existing stockpiles are destroyed in a natural catastrophe (this is silly, but a possible explanation).

    None of this would be known simply from looking at the data itself, and furthermore none of these relationships would even make sense upon learning of the other contextual evidence without a sound theory that can explain, aprioristically, how certain causes lead to certain effects.

    I have a feeling Karl won't like your condescending tone but I feel similarly confident that even if you had been kinder and gentler, he still wouldn't have taken much interest in exploring Austrian economics and better educating himself on economic theory. He appears to be "above the fray" according to his own opinion from much of what I've read over the years.

    Disappointing, because I always wonder how much more fascinating and informative to read a person like Karl Denninger might be if he was 100% on the economic stuff instead of 70%.

  3. Hey BobE,

    I am glad to know you're a member of the "FRB is Fraud!" club, which I have recently officially and confidently joined, as well.

    I have a question for a fellow club-member: would you say that working for your typical modern day commercial bank is akin to being an accomplice to an ongoing criminal enterprise?

    Sure, the laws don't look at it as a crime but it is one. Is there a moral problem with working for a commercial bank engaged in FRB (not talking about bailed out commercial banks or even bailed out investment banks here, just considering purely the operation of FRB)?

  4. I've been pondering a similar question since I read some rather scathing critiques of RobotTrader's bullish post on ZH last Friday. The gist of the argument was that if you participate in a stock rally that is fueled mainly by money printing, you are part of the problem, if not a Nazi sympathizer. I pose the larger question: is it possible to make so much as a shiny US nickel without somehow taking advantage of state-enforced intervention and/or fraud (even if only tangentially)?

    With regard specifically to FRB and FRB only, I would have to say that yes, working at a bank is akin to being an accomplice to an ongoing criminal enterprise. But that also means that the customer taking out the loan is part of the racket, and perhaps use of the banking system itself (e.g., use of a demand account only) is implicitly condoning its structure. Clearly, there are degrees of culpability and since most of us are captives of the state's machinations, I wouldn't be too hard on Gladys, the First Community Bank of Ohio teller.

    Also interesting that you mention aprioristic reasoning, as I was just reading this today:

    In Defense of 'Extreme Apriorism

  5. BobE,

    Your two cents are, as always, greatly appreciated!

  6. Denninger has this problem that he seems to think government can be reformed. He rails over and over about how government caused the crisis, and how government has not issued the thousands (or even tens of thousands) of indictments justified by the law. Then he says, naively (generously, but possibly idiotically) that all government needs to do to prevent future crises is to enforce the law! Hello! The point is, you can't trust government, period. Gold and full-reserve banking is a straight-jacket that would prevent exactly what happened from happening.

    It gets tiring hearing the same old crap from him (don't get me wrong, the polemics are good) but denigrating goldbugs and the idea of gold as money as barbaric or unneeded. Sure, in a universe where greed and avarice didn't exist and all were 100% trustworthy and dealt in good faith, ANY form of money (even 100% fiat) would work, assuming it was stable and not manipulated (even if it was manipulable). But in the real world? Come on! For some reason, Denninger is all too willing to grant monopoly power over money to an out of control and unaccountable organization.

    Also, some of the research from the Mises Institute seems to indicate that some of panics weren't quite as bad as conventional wisdom would seem. After all, the mainstream econ profession regards deflation as a catastrophe, and much of the 19th century was deflationary, but because of massive productivity increases.

  7. Denninger is a fucking tool, albeit a very useful one.

    Over here, we study the idiot's prognostifications, and fade them for profit.

    Almost another year gone, and another year where Denninger has smoked out his follower's accounts. How is he going to spin his 2010 review? You can vote....

  8. Karl has declared war on you guys.

    Don't worry, war with this intellectual pygmy is similar to being savaged by a mouse.

    This is the guy who bet Paul Krugman that the recession would not be over by September 2009, with the loser to wear a clown suit on Youtube.

    Karl, I know of some great clown supply shops near Niceville....

  9. It is nice how Karl first bans Robert Wenzel from his forum, then attacks him so you cannot respond (possible cannot even see the attack, if it is one of Karl's infamous IP-bans).

    Karl truly is a classless fraudulent hypocrite.

    Message to TFers: Thanks for filling the pockets of stock bulls, gold bugs, and KD. Clearly, he cannot trade successfully, so your donations buy much needed fuel for the Jetta.


    You might check the CPI figures from 1895 to 1920 on the XLS file for stock data. There was rampant inflation during this period, prior to and after the establishment of the Fed.

  11. The thing that Karl doesn't 'get' when he shows his inflation/deflation charts is, it's not Gold that's causing those swings, it's the humans that are expanding and contracting the currency supply. Gold is stable. Humans are not. The main reason a Gold standard fails is because you can't trust humans not to create more currency without raising the Gold price accordingly.

  12. You just got owned by Karl in today's Ticker.

  13. You have been owned by goldbugs ever since you fell for KD's nonsense.

  14. Karl had to ban Robert before he 'owned' him. Why is that? Why does Karl never debate outside of his own chamber which he can control at will? Why has Karl not appeared on Youtube in a clownsuit yet, begging for forgiveness?

  15. In 1913 the USD had the purchasing power of 1/20th oz of Gold. Currently the USD has the purchasing power of 1/1400th oz of Gold. In 1913 the purchasing power of $1/hr is equal to the purchasing power of $70/hr. Expanded over a year the purchasing power of 1913's $1,920 USD equals today's purchasing power of $134,400 USD. Now that's currency debasement. Thank you Mr. Fed for stealing our purchasing power. And people wonder why their standard of living is eroding...

  16. Karl wants you to boycott Macy's for firing Santa, Walmart for selling Chinese-made goods, but not Paypal for shutting down the Wikileaks account.

    Who processes KD's donations? Oh, Paypal...

    The guy is a hypocrite fraud. Not to mention a former member of a bisexual voodoo cult back in Chitown. Both his ex-wives left him for a life of lesbianism LOL.

    In summary, KD should shoot himself.

  17. Now KD talks about the Fed printing money.

    How many people did he ban for saying the Fed were printing?

    Bit slow off the mark, Karl?

    The top in Gold will come when KD capitulates, and trades in his Jetta in for the one measly shaving of the shiny stuff which it will buy.

    Oh, and TFers, yes the rest of the world hates Karl...but we hold you in contempt. Think about pay money (via Paypal!) to some guy with a truly shocking track record...who demands you lay permanent siege to Washington (but he won't join you), and ban you if you disagree with his Wikipedia-gained knowledge of everything from nuclear reactors, monetary systems, coffee machines and Jetta maintenance.

    In the future, the dictionary entry for retard will have a pic of a TF gold star.

  18. Karl's definitely got issues (including his being blind to the reality of the fascist corporate-statist business/governing model). He is correct, however, as to the total amount of credit being the primary issue.

    After all, it's just as easy to hypothicate, 'print' and pledge gold multiple times over as with currency and other monetary aggregates.

  19. How's that July 09 CNBS short call workin out for ya, Karl?

  20. I am not an "anon". I am LakeshoreLady from Ticker Forum

    Just got home and haven't caught up yet
    Sometimes that isn't neceesary though
    Ya' see, when it comes to KD, it is just another "same old, same old". Sadly any debate no longer about the point but about the authors
    IOW I do know what it is like to try to exchange ideas with others when I am within the realm of KD

    Shame it is that way now on TF (it wasn't always that way on Ticker Forum (circa 2007)) as the exchange of ideas/thoughts/opinion is how we all gain knowledge, right?
    Because as the time went by Karl made this increasingly hard for peeps at Ticker Forum, many TF'ers and traders have since left Ticker forum
    We now chat on (seriously, no joke)
    We have been there since late April

    You are welcome to join us if you would like
    If you like our forum, you are also free to share it and invite others

    Please note, I also sent you an email invite Robert -- we would LOVE to have you

    More important than that,
    Merry Christmas!!,
    LakeshoreLady (Michelle) of Ticker Forum and now Sucker Forum

    P.S. Robert, I don't mean to spam and I apologize if it seems that way. I solely just wanted to let you and your readers know where many TF'ers you and they once chatted with went off to