60 Minutes explains derivatives

This story is little changed since it was first aired in 2008.  The transcript has been around for awhile but now CBS finally released the video.  Pretty good stuff!

We NEED regular reminders of the crazy fools who have done structural damage to the real economy by turning credit markets into corrupt casinos.  The MOST obvious reform of the New Deal was to outlaw bucket shops yet in the spirit of deregulation, Congress let those folks reopen their businesses in 2000.  Lucky us.

What does the "right" have against energy efficiency?

Of all the no-brainers ever, the desire to become more energy efficient certainly tops any meaningful list.  Economically, the equation is simple--when you buy energy, you know for a fact that you are going to consume it and the overwhelming majority of it will end up as unusable waste heat.  There is a scientific law that covers these things: The second law of thermodynamics.  With energy, you buy it, you use it, and with rare exceptions, it's now gone.  So the less you need to use, the less you need to buy.  The less energy you need to buy, the more money you have for other things—including things you don't want to burn up.

Because I grew up around Mennonites, I discovered early that folks can have perfectly irrational discussions about technology and how much they would allow into their lives—for religious reasons.  For example, when I was a child, there were small groups of Mennonites for whom the telephone was a sign of sin—it encouraged gossip, it demonstrated pride, etc.  Not long ago, I was near where these people lived and discovered they have now decided that CELLphones are just fine.  So apparently, what they really objected to was land lines and telephone poles.  Or whatever.  I didn't ask.  I heard too many discussions about these matters as a child and they now creep me out.

But at least the Mennonites TRY to make sense.  The Tea Party objections to energy efficient light bulbs or Rush Limbaugh's demented rant against Motor Trend awarding its Car of the Year award to the Chevy Volt are just crazy.  With light bulbs, the math is overwhelming and swapping out a lightbulb is so easy, the task has inspired a 1000 jokes.  With the Volt, GM has demonstrated a formula for actually making the transition to post-petroleum transportation.  Motor Trend called this demonstration project ground-breaking and they are probably right—because the Volt is an idea that can be built in dozens of configurations, it is precisely the sort of thing the automakers and their customers just love.

The rest of the automotive press seems enchanted:

Do I detect a shift?

The arrival of the austerity ghouls was pretty dramatic and obvious.  Suddenly, all the governments were being told that they must cut their spending.  This triggered riots from London to Greece, the fall of dozens of governments, and good Wisconsin cheeseheads standing in the winter cold to protest the assault on collective bargaining.  It looked like the ghouls were reading from the same script probably because they WERE reading from the same script.

But suddenly, it seems like there is a tiny amount of evidence that the script has been changed.  I started noticing glimmers of a new script with the more-rapturous-than-expected reception to Obama's speech on jobs last Thursday night.  And several interesting examples follow below.  The interesting question is: why now?

Calling off the ghouls may have happened because the greedheads do not see a way for the debtors to tighten their belts further.  Maybe someone did the simple math and realized that a failure of debtors means a failure of lenders, and that debts that cannot be repaid will not be repaid.  Banksters may be rediscovering their oldest rule of thumb still holds, "NEVER bankrupt your borrower."  The austerity ghouls were obviously making things worse.  Is it possible to believe even THEY have gotten this reality through their thick skulls?

First up we read that the Fed president of Chicago, who is probably too young to remember how or why the laws were passed, has discovered that they are legally mandated to reduce unemployment, and more interesting, making note of that fact in an important speech.

Remembering the victims

Amidst all the ugly facts about the mismanagement of the global economy by crooks and fools, we sometimes forget what life has become for those who are being destroyed by neoliberalism and all the other assorted foolishness believed by the ruling classes and their idiot lackeys.

So today, here are a couple of links to stories of how folks on the bottom of the socio-economic scale are trying to survive.

THE GREAT RECESSION: Here Are Some Photos They'll Be Looking At In 50 Years

THE GREAT RECESSION: Life In "Tent City" In Lakewood New Jersey

And winter is coming.

Jean-Claude Trichet's a real piece of work

Central bankers tend to have a lot in common—smug, arrogant, self-righteous, and narrowly focused.  The current head of the European Central Bank merely takes these occupational characteristics to extremes.  Think about it, the bank he manages and the currency he issues are on the verge of going out of business.  Germany, the most prosperous member of the European Union is making serious noises about returning to their precious Deutschmark.  The southern Euro nations are  on the verge of sovereign default.  There is so much youth unemployment in Europe that serious commentators are talking about a lost generation.  And Trichet actually talks about his Bank and its policies as a success!

Of course, since Trichet is one of the least original men on planet earth, his defense of his bank's performance is straight out of the central banker's playbook 101.  He prides himself on the bank's "fierce independence" which is bankster code for treating elected officials with utter contempt.  And then he brags about how the ECB has delivered "impeccable price stability."  Of course, this claim is utter bullshit—the price of food, housing, and energy has skyrocketed under his watch. In fact, there was a recent housing bubble that got so far out of hand, collapsing it threatens the very existence of some of the biggest banks on earth.

But even if Trichet's claims for price stability were not brazen lies, the more interesting question would be, "Why does he consider this an accomplishment so important, he is willing to lie about it?"  And trust me on this—he does.  Price stability is essentially the only real assignment Trichet has—everything else about the man including the world-class arrogance are just style points.  And herein lies the fatal flaw of the ECB as it is currently organized—its singular focus on price stability to the exclusion of all other considerations has triggered a global economic crises.  These hard-money strategies always do.

Just to prove their paper is worth something

The last few days, we have been caring for a small (50 sq. ft.—4.65 sq. meter) deck that sticks out from the back of our kitchen.  For reasons unknown, the surface of the deck does not come under the homeowner's association maintenance agreement.  It is made from pressure-treated wood which lasts a LOT longer than untreated but after 7 winters, it was covered in a grunge of assorted mosses and molds.  It needed to be re-stained but first, it needed a thorough cleaning.  By me!

before and after
cleaned and prepped for stain on the right--click on image to enlarge

Around here, I get to prep such projects because I am really pretty awful with a paint brush.  I got some foaming, oxygen-bleach based cleaner, read the directions, got the hose with the best nozzle I had up on the deck, and went at it with as much gusto as this old guy can still muster.  The cleaner worked amazingly well but since I didn't have a pressure washer, it required three applications to get the wood as clean as I (and my painter partner) wanted.

So while I was proving to myself that I still have the old "instinct of workmanship," I thought about the nature of housing as an "investment."  When you are wearing big rubber gloves so you can scrub a mold stain from a mostly decorative piece of decking, the very idea that homes appreciate in value by themselves is beyond absurd.  Because the quality of a home is pretty much a function of the quality of the inhabitant, vacant homes owned by banksters will miss their deck scrubbings and rot will set in.  Multiply this tiny example by other missed maintenance, and it is clear that much of the paper created during the housing boom is now worth literally less than nothing because vacant housing depreciates—and pretty fast, too.

So what do you do when you have boxes full of paper worth nothing?  Why you sue someone who you think will be able to make your worthless paper worth something again.

Trained incapacity (update)

Although Thorstein Veblen has been categorized as many things—sociologist, cultural anthropologist, etc.—he is still mainly considered a political economist.  Therefore, it is probably wisest to leave the expression "trained incapacity" with the field of economics.

So yesterday, we had this little blast from Paul Krugman who notes that the economics profession is FAR more to blame than the general public when it comes to the economic catastrophes the world finds itself in.  It would be very difficult to better explain this huge gap except with with one of Veblen's better (and funnier) expressions.

Scrambling to contain the bankster's mess

When the math shows that the big banks are in massive trouble (again) it should come as no surprise that the scramble to save their sorry butts becomes increasingly desperate (and amusing if one is into train wrecks).

First some housecleaning.  Recently, I posted an article describing the problems the Swiss Producers are having because the Franc has soared so high.  Because the Swiss have never stopped bragging about their powerful currency during my lifetime, I wasn't at all sure that they would do anything about the current situation because bankers tend to throw Producers under the bus all the time.  Well, surprise, surprise, surprise.  The Swiss are actually trying to devalue the Franc and the traditional economic pundits are reacting with the sort of horror normally reserved for a small-town preacher deciding to open a brothel.

A very sad Labor Day

Labor Day was never a day of joy and anticipation in my life.  Mostly, it meant that school was about to start and even though (or maybe because) I have loved learning all my life, this was an event that filled me with dread.  And once school started, could the cold of winter be far behind?

Then there was this problem that even though I grew up in a family that had a powerful labor history—especially on my mother's side—we now lived in small farming towns where unions were mostly considered a part of organized crime.  The Mennonites who ran my school taught that joining a union was a sin covered under the Bible verse, "Be ye not unequally yoked together with unbelievers: for what fellowship hath righteousness with unrighteousness?" (2 Corinthians 6:14).

By the time I got to college, unions were considered these backward organizations that supported the Vietnam War (and beat up on antiwar protestors) or hated environmentalists.  The "Left" had abandoned the very idea that workers were supposed to be the "vanguard of the revolution" because in truth, Marxism appealed to very few workers.  The Students for a Democratic Society even wrote a plank into their Port Huron Statement that "youth" now was a class that would replace workers as the lost vanguard.

Because I had to work my way through school, I had jobs like taxi driver that involved being forced to join a union that did almost nothing for the drivers and quite a bit about enriching some corrupt local thugs.  That was always the built-in flaw of unions—they were organizations of Producers run by Predators.  The idea was that Producers needed their own Predators to counter the predations of management but in fact, what usually happened is that union wolves and management wolves discovered that as wolves, they had a LOT in common.

Kinda makes me wonder how I came to believe that unions are absolutely necessary for the operation of a well-run economy.  But I do.  Not only did I learn my grandfather's beliefs that there are issues worth organizing (and perhaps dying) for, I learned John Kenneth Galbraith's theories that progress only came when the economic countervailing forces were roughly equal.  Only honest unions could accomplish that.

So here's to organized labor—it is as necessary as oxygen for the successful operation of a complex society.

How ugly will it get?

As someone who believes in the primary social and economic importance of the Producers, I tend not to worry all that much about civil disorder.  The reason not to worry about civil disorder is that virtually all of the important economic activity continues on because it is in too many people's interests to keep going to work—food is grown, merchandise is distributed, meals are cooked and eaten, etc.  (Of course, if the Producers were the ones creating the civil disorder, then there would be something to worry about because Producers tend to get things done.  But most scenarios concentrate on the possibilities of angry unemployed youth confronting our over-militarized police forces and as with the recent riots in London, this really only affects those close enough to the action to hear and smell it.)

Because this is true, the petty vandalism the robocops are trained to stop is a minor annoyance compared to the real threats to the economy—running out of specified fuels, screwing with the atmosphere so it no longer provides the conditions for growing food, etc.—the stuff this blog is about.

But even if I am not losing sleep over the possibilities of civil strife, I am sure there are people who are.  There is an awful lot of raw material for unrest--billions on the verge of malnourishment if not outright starvation, hundreds of millions of young unemployed seething in frustration and anger, and the very real sense that the institutions that are supposed to deal with such problems are some combination of trained incapacity and rapacious corruption.  So folks predicting trouble are not crazy.

The problem of high-priced currencies

To listen to the average economics commenter, having your currency increase in value is an unalloyed good while having to decrease the value of your money is THE ultimate economic failure.

Well, it is not so simple.  Anyone who tries to make a living producing something pretty quickly discovers that a high-priced currency is quite hazardous to their economic health.  Witness the problems of the Swiss Producers these days.

Peak food gets ugly

The security arrangements at the Chicago Board of Trade are about as intimidating as one might expect at the CIA headquarters.  Oh, there is a display area where visitors can learn some mostly irrelevant basics about futures trading. But the viewing gallery has been closed for a long time and to get past the front desk, you not only have to know someone who works for CBOT but is willing to come down to sign for you.

The official paranoia is probably justified.  Considering the misery the greedheads who work at CBOT cause for billions of people in the course of a working day, the idea that some of those immiserated might just want to get even is not exactly a crazy thought.  Those who make millions from the grief of others probably DO need protection.

The glories of fractional banking

There is nothing like the astonished look that comes to the faces of people when they first discover that a mortgage they must pay on for 30 years was created by a few keystrokes down at the bank.  I remember when I first had the reason bankers own everything explained to me.  I didn't believe a single word of it and argued at almost every sentence.  As John K. Galbraith once said, "The workings of the banking system are so simple the mind is repelled."

This YouTube video explains why banks get so rich in about three minutes.  But depending how much conventional wisdom one has absorbed, this little lesson can take quite a while to sink in.

Trained incapacity

I had a very distinguished visitor blow through this August—a full-blown member of the Finnish intelligentsia.  Finland has highly-rated schools so this is no small achievement.  And the lives of the senior members of the professorial class in Scandinavia are, shall we say, blessed.  He has spent much of his working life in Paris and can write and has been published in French.  His passport has many entries—the guy gets around.

Neuschwanstein from the valley

Because Finland has such good schools, many Finns acquire a love of learning that continues throughout their lives.  For example, my guest and his wife had decided recently to take in a performance of Wagner's Lohengrin but before they went, they took classes.  (This was the opera that so impressed Ludwig II he not only became Wagner's lifelong patron, he named his most famous castle Neuschwanstein after the opera's Swan Knight.)  So I was treated to an explanation of Wagner's notions of knightly chivalry and how German society suffered from not adhering to the noble ideals of militarism.  Because Finns will take classes for damn near anything, not just opera, they are informed at a level that is just stunning on any subject that remotely interests them.

Unfortunately, Finland is currently facing some nasty economic choices.  Because she is a member of the Euro, she finds herself being put on the hook for the crazy lending practices of the big European banks.  In this, she is like Germany which is also being told it must lower its living standards to pay for problems in other parts of the Euro zone.  The Real Finns, the party that has come out of nowhere because it will address this issue, are like the kid who must point out that emperor has no clothes because all the respectable folks are too busy admiring the wardrobe that doesn't exist.  My guest, who once was a Marxist and knows Marxist scholarship in minutest detail, has become a thoroughgoing neoliberal because it is the respectable thing to be.  So he is quite horrified that the Real Finns may be right.  And of course, the Real Finns are right about the threat of being forced to pay debts they never incurred—no matter how goofy they may be on other matters.

And so a guy who is so curious he will takes classes just to go to an opera finds himself with a death-of-God crises (again) because he is discovering that neoliberalism is at least as full of shit as Marxism ever was and he has been drinking the Kool-Aid again.  A man in his position cannot join the Real Finns, but between Marxism and neoliberalism, he doesn't have the conceptual tools to figure out how to even explain what is happening as economics threatens to sink the European dream.

For example, he seemed to believe that the Finnish Central Bank had been part of the government because it exercised government-like power.  Since central banks tend to have very similar organizations and missions, I found this highly unlikely but because I didn't actually know the facts, I acted as if it was possible until I could check it out.  So I Googled it and discovered Finland's Central Bank had been formed in 1812, which meant it predated the existence of the Finland, the country, by 105 years.  Pretty hard to be a part of a government in a country that doesn't yet exist.  And I am certain that the privately-owned Finnish Central Bank has paid hack intellectuals to write essays praising the bank's political “independence” at regular intervals over the years.

The problem here is pretty basic.  If you only understand the press-release version of central banking, you are about 90% blocked from understanding why a central bank has very little interest in the well-being of the general public and a whole lot of interest in the well-being of the banking system.  Now it could be argued that without generalized prosperity, the banking system is doomed to fail. (In fact, this is precisely what is happening right now—the failure of borrowers leading to the failure of lenders.)  But this little nugget of wisdom is one of those facts the neoliberals buried in their march to meaningless power.

The question here is, "What happens when a country's finest minds have been deliberately misled into believing unbelievable bullshit?"  And a related one, "How does someone so smart fall into two ideological dead-ends in one lifetime?"  I keep returning to the matter of respectability—by understanding the boundaries of fashionable thought, my guest had managed to obtain one of the cushiest lifestyles I have ever heard of or can imagine.  This is one hell of an accomplishment for a poor boy from a small city in central Finland.  The downside of this ordinarily virtuous behavior is that he and his colleagues in their ivory towers don't understand an economic catastrophe that is clearly apparent to the peasants who make up the Real Finns Party.

This is not a good thing.  After all, our intellectuals are accorded that cushy lifestyle so that they will generate cultural wisdom.  When the culture is threatened by economic chaos, the intelligentsia should be more organized and have more and better conceptual tools than a political party of peasants—it's what they are being paid to do, after all.

Veblen, who spent his working life in academe, offered a clue to this seeming “paradox” when he suggested that no group devoted a larger fraction of their incomes in the service of Leisure Class respectability than professors.  My guest indicated that Veblen might have been on to something when he told of the five-day drunk his department organized last spring to honor the 18 people who were getting their doctorates.  This party was so complex they needed to rehearse (mostly because someone suggested it would be fun if they did old dances like the minuet.)  It was dress-up time with sashes and swords and medallions.  But five days of organized merriment does not hide the fact that these folks who are glorying in their Leisure Class respectability have through great effort become incapable of understanding an economic threat seen clearly by the folks who have to clean up the mess they left behind.

Veblen had a term for folks whose fancy educations are mostly a pursuit of Leisure Class respectability to the point where a reality like paying for someone else's debts can no longer be really understood.  He called it trained incapacity.

On my way to the steam show in Edgar, I stopped in a small town to eat a bratwurst served up by the local Lion's Club at a roadside stand.  It was a perfect late-summer day in north-central Wisconsin—warm, sunny, breezy, blue skies, puffy clouds.  The brats were even better than the setting suggested.  I sat down at a picnic table and discovered I was sitting across from the 76-year-old birthday boy who had been grilling the brats.

What a treat he was!  We chatted about the corn crop, commodity prices, the value of agricultural land, the invasion of the Mennonites, and other matters important to his life.  I was obviously a city slicker sitting 100 feet from my Lexus but my new buddy didn't seem to hold any of that against me—especially when I decided to take on the persona of that giant of Wisconsin politics—Robert LaFollette.  Got to try out many of Fighting Bob's best lines.

I wound up staying about an hour and I had to leave my business card behind.  This man proved pretty conclusively to me that a true Producer Class Progressivism would be a real vote-getter even in someplace like rural Catholic conservative Wisconsin.  I was still smiling about my brat experience the next morning—it almost made me think a revolution was possible.  A least it seemed like a USA version of the Real Finns could become strong enough to have a real impact on the economic direction of the country.

Sounds like fun.  At least it would be a lot more fun than trying to attack the Leisure Class stranglehold on “respectable” thought in the corridors of academic and other power.  Besides, I am pretty sure I can never compete with a drunken five-day costume party as a certification of my credentials in the economic debates that must surely be held—and soon.

When a plan fails, try the same thing—only harder

The various schemes to saddle the (mostly German) European taxpayers with the unpayable debts run up by the various countries and individuals since the introduction of the Euro would be hilarious if the implications were not so dire.  Of course, the current economic catastrophes were baked into the system when the hyper-conservative, neoliberal wet dream Maastricht Treaty was signed in 1992.

So now we have a system where the banks, who should be taking a haircut as the reward for some truly wretched lending decisions, literally cannot do so without going out of business.  If the world's big banks had to write down their bad loans, there would be none left standing—at least none that I can think of.  And so they are trying to get someone to conjure up the necessary rituals to make their garbage loans portfolios "perform" again.  Hence the plans to get the German and Finnish taxpayers to pay the bills because being a frugal lot, they still have some money left to steal.

And so now we have Euro bonds--and if that doesn't work, something else that will perform the same function.  The problem is that someone like Angela Merkel will commit political suicide if she backs a plan which was clearly prohibited by German law when Germany chose to abandon the Deutschmark for the Euro.  On the other hand, if she doesn't agree to try, she will be blamed for destroying the great Euro dream.  In fact, former Chancellor Kohl is already accusing her of just that.

Tony's customers

A gathering of folks who love and know how to maintain old farm machinery is a damn good place to think about the people who understand the nature and use of tools.

Veblen postulated that the more useless some activity is, the more status it confers.  So a steam and antique tractor show is doomed to have reduced status because it is a gathering of the most utilitarian devices ever cooked up by the mind of humans.  It is saved somewhat because this machinery no longer has to do paying work and collecting is an approved leisure-class activity.  But not much.  The number of persons you could even tell about this niche hobby is tiny and the number of folks who would be impressed by your perfectly-restored steam tractor is probably fewer.  So even though this hobby requires amazing persistence and incredible skill levels to participate, there will likely never be a celebrity tractor restoration specialist.  This is a labor of love—a perfect example of Veblen's "Instinct of Workmanship" on glorious display.

A 1920s-vintage steam engine powers a threshing machine

The people who see beauty in a steam tractor must have a genuine feel for the form-follows-functon aesthetic but that does not stop them from dressing up the wheels with some very non-utilitarian pinstripes.

Steam power was grossly inefficient.  This contraption converts
lots of energy into only 25 horsepower--but it can pull a 6-bottom plow

The reason speculations about the perceived status of tools and the people who use them are important is because people who can use tools gracefully are uniquely positioned to create alternative futures.  Society pays a heavy price for lowering the status of the tool users.  Why?

We expect everyone to learn at least a little science in schools but we will give important jobs to technological illiterates. This is a bad idea for many reasons because here is what the technologically literate bring to the table.

• They embrace and organize for complexity. 
• They love big projects. 
• They have a clear understanding of how many steps are involved between an idea and a working outcome. 
• They know what it takes to finish a project. 
• They are much less likely to low-ball the costs of a project. 

And because the tool users suffer from lowered status, their important jobs have been shipped overseas because Leisure Class fools have no way of valuing the tool-users' vital contribution to civilization itself.

The following is from an excellent article in of all places, Forbes, called Why Amazon Can't Make A Kindle In the USA.  Nice that you guys finally get it after 35 years of outright assault on the Producer Class.

Goin' on up to Edgar

Will be spending some time with Tony at the steam show in Edgar Wisconsin starting today.  The banksters probably won't become enlightened before I get back.  In the meantime, perhaps hurricane Irene will offer her opinion of Wall Street.

Some pictures from last year.

Allowing tiny numbers of financial actors to wreck things

The MOST astonishing thing about the current economic mess is how few people actually benefit from the current ruling ideology.  The numbers are TINY.  In fact, if one subscribes to the notion that the current rule of the banksters ensures calamities like climate change and that no one will escape those effects, there are actually NO winners from the current power arrangements.  NONE!

A crises of legitimacy

As someone who has watched with astonishment the scams the moneychangers are able to pull off—year in and year out—I keep wondering how long it will take for the rest of us to wake up and demand change.  Then the realization reasserts itself that the moneychangers have been scamming the rest of us for most of recorded history and have been getting away with it because of human characteristics that are remarkably easy to exploit.

1) The nature of money is just complex enough so that the effort required to understand it is beyond the efforts that most folks are willing to put out to deal with an abstraction.

2) People want to believe that there is a magic that makes money grow on its own and that there are specialists who know how to manage this process.  All the moneychangers have to say is "don't look too closely or the magic stops" and the necessary rigorous regulation of the process can be thwarted.

But every once in awhile—like now—the moneychangers mismanage the economy so badly they trigger a crises of legitimacy.  Folks stop believing in their magic.  All the trappings of money power—the hushed-toned high-ceilinged bank offices, the shiny shoes, the armies of corrupted academics, the lobbyists and the politicians they buy—will not stop someone from pointing out that the moneychangers are nothing more than greedy vandals or "vampire squids."  The power of their "magic" can be unmasked by a child pointing out that the Masters of the Universe have no clothes.

The question then arises—What happens next?  The legitimate services provided by the financial community may only be a tiny, tiny percentage of what they do, but these services are are amazingly useful and need to continue.  So either governments rise up and impose controls on the moneychangers to limit what they do to the necessary services, or groupings come together to create alternative institutions like credit unions to replace the vandals.

So now that the banksters, along with their bought and paid for politicians and academics, have destroyed their own reputations to the point where most decent people want them jailed or eliminated, the time for counter-proposals on how to organize an economy has come.  Yet while there is enough anger out there to trigger riots, the new economic agendas are not yet being advanced.  Perhaps too many people still want to believe in magic.

Peak food?

Climate change is beginning to destroy our ability to feed ourselves.  Here in Minnesota, the crops look quite lush but they are VERY late so an early frost would cause a world of hurt.  But just to put the following article into context, when the corn crop around here goes well, the yield is something like 225 bushels per acre.  But from Iowa south, the heat and drought have just devastated all crops but especially corn.

The current price rises seen at your local supermarkets reflects the growing shortage of corn--which accounts for about 25% of the diet in USA.

Gold makes folks crazy

Considering the world has been on a de facto oil standard since 1973 and Venezuela now seems to have more oil than even Saudi Arabia, one wonders why Hugo Chavez wants to play with his country's rather large pile of gold.  I suppose he has seen what has happened to the stores of wealth held by Iraq and now Libya and does not want something like that to happen to him.

In any case, he sure is driving the gold bugs crazy.

What is so interesting about the gold market is that folks who believe that "fiat currencies" are essentially worthless so want at least some of their portfolio in gold, have not always taken possession of the gold but have settled for paper promises that the gold in some bank vault is theirs.  Now these suckers are discovering that the folks who sold them the paper don't actually have the gold either--or not as much as they have claimed.