Monday, March 12, 2012

Billionaire Kyle Bass Says Gold Is Going a Lot Higher (and why he told the University of Texas to take delivery of a billion dollars worth of gold)


  1. I'm not sure how it is somehow more rational to tie our money to a basket of goods and services and not gold/silver/money determined by the market??

    I know there are some folks that say since there is very little gold in the hands of the people and it is mostly in the hands of the TPTW going to a gold standard of money will result in the feudalism 3.0, is that what he is getting at?

    I'm ready to try anything as long as we can end the fed and return to freedom in money.

    1. This just goes to show you that, as knowledgeable as Kyle Bass is, he does not understand economic theory.

      This Hans-Hermann Hoppe talk touches on the notion of commodity baskets as money:

    2. Having a gold standard does not protect the public from debasement by government. The problem is not what the money is tied to,if nothing at all, its the governments managing of the money supply that is the problem. Its like having a fox guard a hen house or a fat guy guard a candy factory.

  2. I believe Bass is saying that a basket of various assets that include gold and silver as well as other items would be a good alternative to a free floating currency without basis in reality other than trust.

    I actually agree that a purely gold standard would be difficult.

    A diversified basket that encompasses multiple items would reduce fluctuations and improve stability.

    At this point it's worth a shot but I think we've already passed the point financially savvy people could put us on a sound path.

    Pretty much a theoretical exercise now.

    'Scuse my French, but we are so boned.

  3. I was happy when I heard UT took delivery, but I am surprised (according to KB) that UT's gold is "still in the Comex system". If you are going to insure 5% of your portfolio in physical, why not move it to a private vault that has no exposure to a system that is leveraged 100 paper gold to 1 physical gold? Nothing ever happens to private assets held by an over-leveraged custodian.... right?

    He is correct about a gold standard however. When the dollar breaks (and fractional systems always do), and the USG pulls out Plan B (the gold-backed dollar with a gold window), they'll find that an arbitrary peg will quickly fail...

    Consider this simple illustration:

    Assuming the US has 8,000 tonnes of gold, and assuming the current trade deficit as being structural to the status quo of the USG, let's see how quickly the USG will lose half of its gold (4,000 tonnes) at various prices we've heard chattered about. In other words, how long will it take for the USG to give into free floating physical only gold price? And this exercise ignores all the external dollars already in existence that may swarm the gold window, so we can probably halve these time frames based on that current dollar float alone.

    At $6,000 per ounce, with a $565B annual trade deficit, the USG will lose half of its gold in 16 months. So assuming that flood of external dollars already out there cuts this time in half, let's say they give up and let the price float (with half of their gold now gone) after only 8 months. See how this works?

    Okay, at $12,000/oz., we can double that time to a year and one quarter. At $24,000/oz. we'll double it again to two and a half years. And at $48,000/oz., half of the gold will likely buy the USG another five years of the current "free stuff status quo".

    But, you see, it is the very management of the price under a gold standard that limits your prospects. It is the attempt to make the dollar "as good as gold" that always fails.

    Eventually the USG will embrace a free floating physical only gold price, one way or the other, with more or less of its gold left.

    h/t to

  4. I'm not too impressed with Kyle Bass's understanding of sound money. He understands that there needs to be some way to limit the supply, so I'll give him that. Otherwise he needs to learn some things.

    1. It's not enough for Kyle Bass to say "if you think about it rationally, (gold) is a bad idea". Why? He cannot enunciate why. I will give him, or anyone else, credit for saying governments defy their own gold standard and go off it when it's needed most, but a basket of currencies would NEVER be delivered to you, so the key element that gold provides is completely absent in Bass's approach. I was severely disappointed that he permitted his ignorance to be trotted out for display to the world; I thought he "got it", and he clearly doesn't.

  5. Although Bass doesn't understand monetary theory as well as he probably should, he is a brilliant investor. He at least understands the value of commodities in an environment where central banks are recklessly buying up assets and pumping paper into the economy. In Bass' case, I'm all for following his advice closely, in spite of his shortcomings.