Here we go again, with yet another unarmed assault:

(Incidentally, the first rule of linking someone somewhere is that you actually have to make sure that the web address you link to works.  My billing rate is $300/hour if "Gordon" is incapable of managing to get his blog to work on his own, as the link on Zerohedge, along with the links on his site themselves, all say "go here" but when you do you go back where you started... but I digress.)

OK, here we go.

I hope that this response will dispel some of the myths and misinformation surrounding hyperinflation, Gold and our paper money system.

I doubt it.  What's more likely is that you're going to introduce yet more claims without evidence, project false light and render unsupported (and unsupportable) claims that require one take their belief as an article of faith.

It appears that Mr. Denninger has an issue with anonymity, perhaps being irritated at not getting the opportunity to engage in ad hominem attacks, as is his custom

Oh no, my issue is quite simple: Nobody snivels in the corner unless there's a conflict of interest - or an outright lie - that might be concealed.

You have the perfect right to speak anonymously, if you can find anyone who will listen.  But there's a difference between a right to speak and a right to demand others pay attention to you.  The latter comes only with some modicum of integrity, and that can only be shown when one has a reasonable means to discover what sort of conflicts you might have in your speech.

The finer points of speech, specifically credibility, seems lost on those who write under a nom-de-plume.  You're certainly entitled to do it, as is Zerohedge, and I, along with the rest of the readers, are perfectly entitled to conclude that the reason you're hiding is that there's something embarrassing that would be learned along with your identity.

Perhaps you're a gold dealer.  Perhaps you're a central banker.  Or perhaps you're a 12 year old kid posting what one of the Rothchilds' gave you? 

Do words stand on their own?  Perhaps.  You're free to deny people the knowledge of your identity, but wise people consider that those who do so usually have a reason to hide.

The fact of the matter is that people care more for the ideas expressed rather than who is expressing them. Are you afraid to contest on the strength of ideas and facts alone, Mr. Denninger?

They do eh?  So whether it was Henry Paulson that advocated for removal of the leverage limits, as just one example, wouldn't matter?  Hmmmm... I think not.

Just because you have a specific forum for the “metals” does not mean that you promote an open discussion regarding them or do not ban people who dare to have ideas different than yours.

Time, place and manner.  Certainly even you recognize that even a government may restrain speech on that basis.  A library does so, even a private library.  It's called "The Dewey Decimal System."  If you insist on placing your fictional work in the 500s, you will be denied.  If you insist on shelving it there repeatedly you will be removed.

Although Karl has a subforum for metals, that does NOT change the fact that he created it precisely so that he could force "gold bugs" into his little gold ghetto,

Oh, it's a "ghetto" eh? 

As previously noted, I'm sure your fantastic Novel would, in your opinion, fit well in the 500 section of the library.

The librarian disagrees, of course, and guess what - the librarian is the one who put forward the rules and expects them to be followed.

I am no different in this regard.

Metals discussions tend to be filled with invective and unproven religious diatribes on a regular basis - especially by the metalheads.  Therefore, I created a specific place for them so as to keep organization cogent.  You don't like it, don't post on Tickerforum.  If you insist on filing your posts in the wrong place you'll find you can't file (or read) posts at all.

Well, what is it Karl? Did the hyperinflation occur or not? Of course, it would help if you actually knew what hyperinflation is which clearly you don’t, or perhaps you deliberately choose to define terms according to your convenience. 

Oh I do eh?

Well, your definition is certainly different than mine.  I consider parabolic asset price moves to be hyperinflation.  You seem to conflate that with a second term, which we'll get to momentarily.

Seriously, I mean that has to be the first “hyperinflation” in history where only two asset classes rose. Not only that, these were financial assets (or investments) and they rose much higher than the commodities and goods needed for everyday living.

Only two eh?  Hmmm.... and commodities needed for everyday living?  How old are you?  From this comment I would surmise you're in your 20s - you have to be, since you clearly don't recognize the rise in the price of all sorts of necessary "stuffs" for everyday living. 

Never mind the debt-curve, which shows exactly what I'm talking about:

Looks pretty "hyper" to me.  But heh, I'm just looking at the facts.  Funny things, those damn exponents.

There is a phase transition that occurs going from simple inflation to hyperinflation, namely, a “crisis of confidence” which eventually renders the currency worthless. In a hyperinflation we are not dealing with linear functions anymore, but exponential ones.

Oh, that chart above is not an exponential curve?  Well fancy me, now Gordon's attempting to redefine basic mathematics!

Now I’m not going to go into a detailed explanation of how and why a hyperinflation occurs, in general, and why it will occur in the US....

WILL eh?

OK, WHEN?

Again, all the bleating in the world does not an actionable prediction make without time as one of the elements.

So I'll ask a second time - WHEN?

Jim Sinclair made the mistake of putting forward his "when", and that wasn't for "hyperinflation" as defined by you (e.g. a loss of confidence in all other than gold), it was for a mere 50% increase in valuation over 2 years.  I've seen short squeezes do that to a stock in an hour.  But even so, it looks like there's a pretty good chance he's gonna lose that "bet" anyway.

This results in not only a high inflation rate, but an exponentially increasing one

All growth rates over time are exponential.  Go back to math class - in grade school.  You failed the first time.

And to give an example as to what kind of inflation to expect during a “currency collapse” a.k.a. hyperinflation, here are inflation rates from some of the worst hyperinflations in history (via Wikipedia):

Uh huh.  How many of those were due to external debt?  How many came on the back of a war?  (Oh, and you omitted Lincoln's greenbacks, although those didn't fit YOUR definition of a currency collapse.  Nonetheless, anyone who held them for more than a day sure felt they were in one.)

Is that what happened in the United States in the 20 year period that Mr. Denninger is referring to? No. But it sure as hell IS what’s in store.

Prove it.

And what is the best “real good” to hold in a hyperinflation? The one which is the “most marketable”³ of them all - Gold! – which unfortunately won’t be available for sale anymore then.

A thing that is unobtainable at any price has a value of zero.  That's the paradox.  If you're right you need guns, ammunition and the ability to produce your own food and drinkable water.  The gold will be a good doorstop, and the guy with more guns than you (and there always is someone who does) will soon have both the guns and gold.

only if you don’t know (or refuse to accept) the fact that Gold is the only real money there is – a fact people quickly come to realize when the fire of hyperinflation starts burning.

Yet more conjecture and bald claims without evidence, expected to be accepted at face.

This sort of cult behavior, incidentally, is why there's a Metals forum and all discussions of this religious belief take place there on my system.  Religious cultism bears no resemblance to rational behavior.  You can no more provide evidence that "gold is the only real money" any more than I can prove there is a Christian God.  Both are articles of faith and those who run them demand fealty - or you are called all sorts of names.

When challenged for evidence the claimant simply repeats the charge.

When asked to quantify his predictions with dates so they become actionable, the claimant responds "soon", just as does the nutcase on the corner with the sandwich board proclaiming "Jesus is returning soon - repent NOW or burn in Hell!" 

Have you ever noticed that all those who make such claims and actually put dates on them wind up committing suicide when their prediction fails to materialize as expected?  The wise ones sucker people along by refusing to provide a date.

That's convenient.

We've already had two spectacular rises followed by two equally spectacular crashes (2000 and 2008) followed by another spectacular rise in 2009 – how many people were able to successfully trade around that?

It's called the onset of Kondratieff Winter - look it up sometime. 

"Autumn" is marked by hyperinflationary asset price increases which is in turn fed by exponential credit expansion.  There's a roughly one-human-life cycle time on this phenomena.  1929, 1873, keep going, you'll see the same cycle times.

I really don’t understand is why you would risk your life savings gambling in the stock market CASINO when you have a much safer and better alternative which will not only preserve but increase your purchasing power when the government currency falls apart.

And what do you offer as certainty - or security if you will - that your prediction will both come true and that what you claim will be the outcome of protection will actually come to pass?

This inevitably brings us back to credibility and precisely who you are.  Anyone can run a meme.  Cults form readily around common delusions.  But to believe that gold will offer you sanctity, you must believe several things:

• The currency you have now (dollars, in the case of the US) will collapse.  Again, if you're going to predict this, you must both predict an event and a time or your prediction is not actionable.
  
  
• Gold (or whatever) must maintain it's value in real terms.  That is, I must continue to be able to buy and sell it in exchange for other things.  But you already claimed there would be none on the market at any price - that is, there would be no trade in it at all.  If this is the case then it is worthless, not priceless.
  
  
• Government cannot steal it, or you won't have it.  But history says that government will steal it.  And they don't have to do so by outright confiscation either - they can whack you with a 90% tax on it at the point of sale and demand that all dealers register and report.  Oops - they already did the latter after 9/11!

So the premise you have here is flawed on three grounds, as I have noted before.

Then Mr. Denninger points to the DXY chart which does not present a very accurate picture in my opinion as it simply reflects the different rates at which various fiat currencies are sinking in terms of real purchasing power.

Really?  I define real purchasing power in terms of things I would use to live.  Say, houses.  How has the dollar performed in terms of houses over the last two years?  Three?   Pretty well, eh?

How about gasoline?  Higher today, but far off its peak.  Same for the base stock, crude oil - pretty flat over the four years, and about double the purchasing power off its peak.

Soybeans, Wheat, Corn?  Flat from 2004, roughly.  Six years, no price change of materiality.  Oh sure, it's gone up and it's gone down, but it's back where it was in 2004 for all of those basic commodities.

Which is what has happened “since the financial crisis in 2007”. But here is the thing – Gold has risen much more in terms of purchasing power than the dollar, i.e., you can buy a lot more real goods, commodities and services including “actual hard productive assets” - ounce for ounce - with Gold than with the dollar - dollar for dollar - since 2007.

Then your base claim - that gold is a inflation hedge - that is, it will hold value - is false.

Indeed, your position is nothing other than a speculative bet - a gamble.

You can't have this one both ways.  Either a thing maintains purchasing power in an inverse relationship to other currencies that devalue or it moves in some fashion unrelated to same. 

That is, if it is a good inflation hedge then gold should move as a direct inverse to the dollar as expressed in this chart.  In doing so it would be an exact (or nearly so) counter-balance to inflationary and deflationary forces.  But it does not, as you can see from this chart (/DX is in white)

Not so good on that correlation.

Indeed, a final spectacular rise in the dollar – lulling many dollar-deflationists into a false sense of complacency - will be our signal that the show is about to end. It is this collapse of the second-last layer – the dollar or the “Federal Reserve Note” layer - that will manifest as hyperinflation. Many dollar deflationists who realize the truth about Gold think they can time this, trade around it and switch to Gold when the time comes. However, there is no guarantee that Gold will be available at anywhere near today’s prices – or indeed available at all – at that point. Much of it will happen too quickly for many people to even comprehend what hit them. 

Ah, the eternal claim of the cultist.  That which is going to happen will come so fast (but we won't tell you when!) that you must take our path now, renounce your sins and kneel before Zod - and by the way, hand over all your wealth while you're at it.

Sorry, no $ale.

And guess what they used to hide and preserve whatever was left of their wealth – surprise! - Gold. (In fact, many of them were only able to flee by bribing officials with Gold as that was the only thing they would accept as payment).

Ah now there's a purpose for keeping a few coins around.  But bribery is a funny thing - when it comes to that, especially in this sort of form, it better be a "one shot" deal - which means you're bugging out.

Yeah, that gold coin will probably let you pass the border.  But if you have a few dozen, you're going to leave them all behind - not just one.  Go see that thing about the guy with the gun winding up with both the gun and the gold again.

So holding a few coins does make sense - if you have a bug-out plan.  In times of war it works especially well, since in the fog of war such "clandestine" transactions with government officials tend to be a bit easier to pull off (as opposed to walking up to a customs booth today!)

But that's a different story than what's being advocated - that is, holding effectively all of your negotiable wealth in gold.

Rest assured, if the present state of affairs continues where only 21% of the people believe that the US Government has the consent of the governed, we WILL reach a point – if we’re not there already – where “lawbreaking” will be the ONLY means left for “safeguarding wealth”, liberty and perhaps even our lives. 

More "proud words".  Let me know when you're prepared to start shooting, I'll grab the popcorn.

You need look no farther than our own shores where FDR forcibly STOLE US Citizens’ Gold and then devoured half their wealth in a step devaluation of the currency. Or just look to the latest legalized daylight ROBBERY that was TARP where the government FORCIBLY took our money and gave to the banksters. Even today the government is considering STEALING retirement monies of American citizens by forcing them to invest in Government bonds and suspending mutual fund redemptions. So no, I’m definitely not being presumptive.

And the trap I set for Mr. Gekko snaps shut on his balls.  The yelp confirms my catch, and peals of laughter fill the hallway.

See, there's the problem with the premise of holding Gold as a "hedge" against this sort of outcome.  Government - especially our government - has a history of stealing it.

Not only that, they have a history of stealing anything not nailed down, and some things that are. 

So if the doomsday scenario that Gecko presumes comes about, it is quite a stretch to believe that whatever comes next won't be fully electronic, easily traced, irrefutable and essentially impossible to game.

While Mr. Gekko labors, I'm sure, under the perception that he can simply barter, the problem with such an exchange is that it will be much like bartering for a stolen firearm is today.  Damn dangerous (in that both parties are doing something that will leave them subject to arrest) and worse, devalued - badly.  Why?  Because the guy on the other side of the transaction can't do anything other than commit a second illegal act to "spend" his so-called "wealth" in gold that he just acquired.

Yes, there will be a black market.  But prices tend to be a wee bit higher - frequently by a factor of 10 or 100 - than they are in the legal marketplace.  There goes your "wealth"!

Certainly you cannot believe that any of the so-called "Western Nations" in the EU, for example, are a better choice, yes?

Looks like you don’t get out much Karl.

On the contrary.  My passport has lots of stamps in it.  Nonetheless, if TSHTF I prefer to stand and fight here, thank you very little.  This is not a lightly-considered decision.  If we collapse the rest of the world will go down with us, and in most of those nations you will be considered FOOD.

You're welcome to that choice.  I'll pass.

I’ll tell you why – it is because of what you refuse to accept – that Gold IS Money – the ultimate wealth preserver. 

More religion.  I'll pass (again)

Well, in case you didn’t notice, “it” is happening right now! In fact, it has been happening for the past decade. You would have been better off holding simply Gold than any other “investment” during the past ten years.

More curve-fitting.  Again, the S&P 500 has outperformed gold from a couple of years after Nixon's peg was pulled forward to today.

Give the price a year or two to "settle" after Nixon pulled his charade.  Call the base year 1975.  Here's the S&P 500:

It's grossly inaccurate and dishonest to use the exact date that Nixon yanked the $36 peg as your comparison.  In fact, if you're going to use that then you have to use Roosevelt's date - 1933.  Here's the S&P 500 on that date - pick a date.  Oh wait - we have one - April 3rd.  Ok, we'll use THAT date:

The S&P 500 closed at 7.80 for the month of April in 1933.

Today, it trades at 1114, a growth of 142.82 times, or 14,282%.

Gold was $35 an ounce then.  It is now, as of today (on the /YG contract) $1234.60, or a growth of 35.27 times.

The S&P 500, from the date of the devaluation and fixing of price (which is the last time it traded "freely" until Nixon "released" it) outperformed Gold by a factor of four.

$100 in gold then would be $3,527.43 today.  Sounds pretty good.

But $100 in the S&P 500 then would be $14,289.87.

Now it is often argued that the dollar has lost 94% of its purchasing power over that time. 

Ok, how did you do in these two asset classes?

If you held gold you have $211.65 in purchasing power (6% of the original, in dollars.)  Heh, that looks pretty good.  You outperformed inflation, right?

But if you held the S&P 500 you have $857.39.

Uh, which asset class outperformed on a historical basis again?

Only if you were a casino patron who practiced “buy and hold” using leverage. Even if you bought the very peak, you lost only about 50%, considering the average price over the ensuing 20 years, and were not “bankrupted” as Karl claims.

Oh, wrong again.  Look up above.  The winning position was clearly to buy the S&P 500 index and sit on it from 1933 to today.  Indeed, it was the winning position by more than 400%, and this was purely on a cash basis with no leverage of any sort.

How did that turn out? Well, not only did Gold rise 24x during the ensuing decade, it remained levitated 11x (even after the “collapse” in 1980) for the next 20 years, and today is 34x that level, whereas the SPX is only 14x its 1970 level!

Again, the exchange rate was fixed by FDR.  If you wish to use a period of time shortly after the price of gold was removed from being price-fixed, you must use one after it was actually removed from being price-fixed!

One year later, you lose.  More than one year later you really lost and from 1979 on for quite a while it got REALLY DISGUSTINGLY BAD for Gold, as the S&P 500 wasn't to breach the 200 level until the mid 1980s.

But that's asset allocation and market timing, not wealth protection.  Remember, you decry that as "Gambling."  So in that light we look at this from 1933 onward, and gold loses to common stocks by over 400%.

Two things: first, the US exported a lot of its inflation to other countries via the reserve currency mechanism. CPI remained flat to down after 1980, as exemplified in the following chart: 

It did?  I don't see any negative CPI numbers on that chart until 2009.  CPI was flat to down?  What 'ya smoking, my friend?  You do understand exponents, right?  Oh wait - you don't; we've established that.

I'm beginning to understand why you don't get it.  You're not alone by the way.

Second: outright manipulation. They started to gimmick the CPI massively in the 90’s at which point the “strong dollar” policy was instituted, i.e. manipulation of Gold prices (via massive naked shorting of futures as well as fractional reserve selling of bullion by the LBMA) in order to hide the true rate of monetary inflation.

Bah.  You can play with the reported CPI-U numbers, but didn't you just say that inflation was flat to down up above?  You did!  Now you claim it really wasn't - after the premise of your argument is that it was.  Pardon me while I pull out my circular reasoning indicator here - yes, it's lit.  I thought so.

It is a testament to the sheer force of the market that despite record naked short position of the bullion banks against Gold, it continues to rise. The real rise will be witnessed when the bullion banks and the LBMA go bust. To put it another way, if you were patient enough to hold Gold through the period it went “sideways to down”, rest assured, you will be well rewarded.

More religion.  GATA and others have made this claim for the better part of two decades.  Indeed, I remember them in the 1980s when the price collapsed - there were howls of protest.

Again, you expect me to accept articles of faith as in a religious cult.  I decline and expect you to produce proof that the LBMA will go bust.  Specifically, put a date on it or shut the **** up, because you, along with others including a number of market crooners all over The Internet have been predicting imminent default by the LBMA now for years. 

Indeed, over the last couple of years alone there have been multiple calls that "this is it!" and come contract expiration there would be no gold and it would all go boom.

It didn't happen.

See, if you put a date on it then I can call for you to do the good cultist thing and drink some KoolAid - grape flavored preferably - when your alleged "end of the world" event doesn't happen as predicated.

But you folks are all the same.  You refuse to put a date on it, which is damned convenient.  Some of us notice that it's the same old scam that has been run for the last 30 years, and eventually, we start demanding a date.

I know, I know, you won't give me one.

Every man can create “wealth”, but needs to bend over in front of the banksters to obtain the legal tender denominated “credit”. 

That's a choice.

I can set up a gas pump and demand payment in oranges.  That's perfectly legal.  Provided I don't let you pump the gas before you pay, there's no debt and I can set whatever terms I'd like for my gallons of gasoline.

I am only required to accept dollars (as "legal tender") if I first allow you to become indebted to me.  But that's a consensual transaction - both for you and I.  Nobody forces us to transact this way.   You and I both do it every day because it's convenient.  The gas station that only takes oranges before the gas is pumped will have damn few customers, simply because not too many people happen to have a couple dozen oranges with them when they want to buy gas.

But only government has the authority to use force to extract both from you - that is, to force you not only to turn over current production but to compel you to produce in the future as well.

So what you’re essentially saying is that we are all born indentured SLAVES to the government.

No, I'm saying you choose to become indebted.  Indeed, you owe no taxes as a debt (paid in arrears) if you perform no act of commerce.  You might find it somewhat difficult to survive in such a fashion, but that's between you and the government.  Between you and I, or any other citizen, you choose of your own free will to take on debt.  You're neither required to do so nor are you required to use dollars to transact - provided you are neither a creditor or a debtor.

Neither a borrower or a lender be; for loan oft loses both itself and friend - William Shakespere

Funny thing, the classics....

Indeed, if Gold was only money by government decree then it should have collapsed instantly, as many paper-money apologists claimed even then. Instead it rose 24x over the next decade and even after “the collapse” in 1980, it remained almost 11x its decreed price in 1970.

I've already disposed of this argument; the parity date is April 1933.  Only through intentional fraudulent argument can you try to make your point and even then you lose unless you pick nearly the precise day Nixon unpegged.

Call it what you want - Gold underperformed massively absent market timing - the very definition of speculation, which you claim is nothing more than "Gambling" and thus should not be engaged in.

Umm…No.  They based it on both Gold and Silver. Perhaps it’s time you took a look at the US Constitution:

Section. 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Section. 10. No State.

The gold apologists always leave the first two words off.  Why is that?  Note that The Federal Government is permitted most of these things: It can enter into treaties, alliances and confederations, it can grant letters of marque and reprisal, it can coin money, it can emit bills of credit (of which fiat currency is one form) and can impair contracts in several broad senses (particularly in the regulation of interstate and international commerce), all entirely within the Constitution.

Only the STATES are prohibited the issuance of fiat currency. 

The Federal Government is not.

Even today the banksters would love a gold standard, as it would play directly into their hands.  With the vast majority of production being tied to a handful of suppliers absolute control would vest in just a few easily-bribed persons and corporations.

So why don’t we have it now? I mean the banksters practically control Congress and the White House right now and they literally OWN the Federal Reserve – would you agree?

Do they?  It would appear not.

Oh sure, they try like hell.  Perhaps they've even been involved in a few assassinations.  Or so it's rumored anyway.  What's not rumor is that the British Banking interests attempted to bribe the First Continental Congress, and several thereafter, to ditch silver and have a pure gold-backed monetary system.

They weren't doing it out the goodness of their hearts.

If you think they want Gold so they need to cause a “deflationary collapse” to own everything, I suggest you take a look around – they ALREADY own EVERYTHING.

They do eh?  My, such wild delusions you have.

Yes, they do indeed have their fingers in the pie wherever someone doesn't bite them - hard.  But everything?  Certainly you jest, or you wouldn't be advocating the ownership of gold.

Gold in the hands of the public freely circulating as money is sufficient to achieve the “laudable goal”, without any interference from the government. I mean I already took the risk when I engaged in my particular occupation and earned that money. Why should I have to take risk it all again simply to preserve my purchasing power?

Because we have a credit-based society and have since the time of Hammurabi.  And to go along with it, we have idiots like you who advocate for "Gold" as "real money" when it is no such thing, instead of demanding that the total credit and monetary supply, by whatever means denominated, not be permitted to change over the intermediate term beyond the change in societal output.

Such a stricture, if enforced, absolutely protects your purchasing power.  That stricture, incidentally, is in The Federal Reserve Act, Section 2a. 

The act is correct.  The refusal to enforce it is where the problem lies.

In fact, Gold doesn’t only preserve your purchasing power, but increases it over time.  Contrary to what paper money advocates will have you believe, deflation in itself is not “bad”.

Again, putting words in one's mouth.  Deflation, if you are not in debt, is excellent.  Indeed, if you're a creditor it's excellent.  It is only the debtor who decries deflation.  But that has nothing to do with whether you have a fiat or commodity-backed currency; it in fact has to do with the monetary and credit aggregates .vs. productive output.

In fact, in a society with increasing productivity this will be the de-facto state of affairs because as the production of goods and services in the economy increases and the money supply remains relatively constant – a feature of Gold as it cannot be created out of thin air unlike paper money – the purchasing power of your existing savings increases, which is what matters ultimately.

Not so long as credit can be created at a rate that exceeds the growth in production.  Wild swings of inflation and deflation result in a commodity-backed currency when credit is not controlled, just as they do with a fiat currency.  The difference is that the period of those swings is shorter (and more violent) in a commodity-based system.

....preferable to a short lived violent swing, where if you simply sat it out, you’d still be preserving all your purchasing power!).

You schedule things like heart attacks, births of a child, illness of various sorts and other immediate needs for accumulated wealth?  My oh my.  And don't say "but then I'll borrow!" because if you do when the deflationary swing comes you find that you paid in the inflated dollars anyway.  Oops.

No, the solution is not to have that happen at all.  But to get there you have to ditch the religious horse**** and focus on what's really going on.

Most people focus on the nominal amount of Gold or currency in their possession. It simply does not matter! The purchasing power of what you hold does. 

Again, denominated in houses, dollars have done damn well in the US over the last three years, wouldn't you say?

Inflation is not the “natural” state of affairs as the statists would like everyone to believe.

Inflation is the consequence of the basic economic equation when one does not pay attention to what the terms actually are.

MV = PQ

M is not money.  It is the sum of monetary and credit aggregates.  If you wish to have "P" hold constant as "Q" varies with the economic weal and woe of a nation, then you must regulate "M" and "V".  A commodity-backed currency makes regulation of "M" impossible in response to changes in "Q", which leaves you with one lever - "V".

But "V", ideally, should not vary much if at all, as it is one of the primary signals in the economy that impacts "Q" - specifically, speculative premia in the marketplace.  So to tighten policy using "V" is to cause recession - or depression, while to loosen "V" causes monstrous manias that run to exhaustion and burst.

This, incidentally, is why the housing bubble blew up so big and then detonated.  "V" was cranked wide open by Paulson's entreaty to the SEC to remove the leverage limits from the investment banks.  That single act was responsible for the terminal blow-off in the market and the resulting bust.

You can't diddle "V" as a matter of routine. 

But this means you must regulate "M", and that in turn requires regulation of the aggregate of currency and credit in the system.  The balance between currency and credit - the subcomponents of "M" - should also remain in balance.

But with a commodity-backed currency of relatively invariant supply it cannot.  One of variant supply not under control of the monetary authorities (which is basically all available choices to one degree or another) is even worse, in that you are forced to tighten and loosen credit conditions (thereby impacting "Q") since you CANNOT contract the currency portion of M.

This is why the booms and busts were so violent in the years where we had a primary metallic system.  At times when "Q" needed to expand rapidly we were forced to issue credit in one form or another (whether they be greenbacks or anything else) and that resulted in monstrous, violent swings in valuation, impoverishing huge swaths of the population.

The solution to this is to use "V" to control speculative premia while "M" is held in conformance with "Q".  P thus remains invariant.

It's math, not religious cultism.

Also, Mr. Denninger also appears to be an ardent fan of The Federal Reserve System,

I am no such thing.  I am a fan of proper mathematical relationships.  Who enforces them is immaterial.  That they are enforced is the important point.  I have written dozens of articles excoriating The Fed over the last three years for its gross mismanagement and outright refusal to follow the very black-letter law that enables it.

In fact, nobody can know what this “optimal” rate of growth of economy or the money supply is; only the market does. The fallacy that Karl (and whoever wrote this idiotic law) is engaging in is that we need “stable prices”, therefore we need a money supply that increases with the growth of the economy. We don’t need “stable prices”; falling ones – as I explained above - are better! 

Oh really?

Falling prices also come with falling wages.  Or haven't you noticed?  Down this road lies ruin as ultimately the producers can't eat on what they produce, as some commodities are not sensitive to the sort of "improvements" you claim to worship.  Never mind the impact of so-called "free" trade.

Again, MV = PQ.  Run from it if you want, but it will always catch you.

A tripartite test may not be ideal (I would have one simple test - "P" must be held invarient and "V" must be used to control speculative asset bubbles) but that's me.  I didn't write the law.  What I note is that the law, as written, is not enforced.

The failure is not in the structure of the system, but rather is found in the corruption thereof and the utter refusal of the people to hold those elected and appointed officials to account under their black letter legal responsibilities.

So how do you suggest we fix this? By putting everybody in prison? You’ve already blamed everyone – everyone except yourself, that is. Perhaps we should make you in charge of the whole shebang, right? The fact of the matter is that shouting online and elsewhere that corrupt politicians, regulators and law-enforcement personnel be prosecuted and jailed while at the same time promoting the very system that is at the root of the corruption is ignorance at best, and hypocrisy at worst. You want government appropriation that funds your social security checks to continue, yet you want the looting to stop. You simply can’t have it both ways Karl.

Are you promoting armed revolution?  It sounds like it.

No wonder you write behind an anonymous screen.

"My" social security?  I receive no government funds.  Nor do I expect to receive anything from Social Security or Medicare.  Oh yeah, they send me the little green and white paper every year.  I'll receive nothing.  My daughter will receive nothing.  That's a foregone conclusion.

The fact of the matter is this: Absent violent revolution or similar acts, the solutions to our problems are found through the use of the soapbox, the ballot box and the jury box.  I therefore use the first two liberally and, if called to serve, will use the third.

I HAVE NOT AND WILL NOT ADVOCATE, EITHER EXPLICITLY OR BY INNUENDO AS YOU APPEAR TO BE DOING, THE USE OF THE CARTRIDGE BOX.

The proof of any hypothesis/theory is in what actually transpires in the real world. Events will eventually prove who is right.

The prediction of a move in a market or economy is worthless without a time associated with the prediction.

For thirty years I have heard the same siren song from people just like you about the "imminent" failure of the dollar and that the "only place to be" is in gold.

For thirty years I have heard of overt price suppression and imminent failure of the market, including the imminent collapse of the LBMA and more recently, COMEX.  I'm still waiting for the predicted Second Coming of Jesus in the form of these events.

I live in the real world, where I expect a postulate to be backed up with a set of facts, where a postulate is presented with a test of experimental tests, and where predicted results always include the element of time, since an event that happens after I'm dead is of far less concern to me than one that is going to occur tomorrow.

Thirty years of observation in the market and incessant "gold bugisms" have proven to my satisfaction that:

• Hard-backed money would solve nothing.  Indeed, it did not prevent any of the previous Depressions in the history of the United States, nor the Tulip Mania, nor the dozens of other credit-cyclical booms and busts throughout the millenia.
  
  
• If one accepts the fundamental economic equation MV = PQ, and one further accepts that "V", when manipulated, controls leverage (and thus speculative fervor - easily proved empirically through observation, with the latest example being the housing boom) then it is clear that one must regulate "M" coincident with "Q" in order to arrive at an invariant "P".  This isn't conjecture, it's mathematics.
  
  
• Two exponential functions always run away from one another if the exponents are not of the same value.  Always.  All compound rates of anything are exponential functions by definition.  Since nobody will loan money at an intentional loss the market will always try to overallocate credit and, when it runs into the limitation set by "V", a recession will force the less-efficient businesses and individuals into bankruptcy.  This cannot be avoided in any economic system where lending of capital is permitted.
  
  
• Most people will refuse to accept mathematical axioms.  They are either ignorant or intentionally deceiving themselves.  Either way, such behavior is extraordinarily destructive to one's wealth and future and is to be avoided.

There's more, but my tolerance level is pretty much exhausted here, and in light of my second and third paragraphs, this will be my last with this particular cultist.  The facts are what they are - if you want to speculate in the metals market then have at it - but when you hear someone tell you that the dollar is going to collapse, that COMEX will default or some other calamity demand a date and, if one is not forthcoming, consider whether you're being played like a fiddle by yet another preacher spouting off "The Second Coming is nigh - soon."