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<p>[QUOTE="Rono, post: 1690980, member: 6492"]Howdy,</p><p><br /></p><p>It's a classic example of Econ 101 Supply/Demand curves when prices are controlled or artificial. Either supply dries up or the price differential is closed through increases in premium, markup, vigorish or ignored on the black market. It happens quite often actually. A few years ago to pm's as medorama notes but remember when Nixon put price controls on gasoline? All of a sudden lots and lots of gas stations were Out. Indeed, they felt that the official price was less than what their gas was worth, so Sorry, I'm all out.</p><p><br /></p><p>How about credit market today? The Fed has kept interest rates artificially around zero making 30 year mortgage rates around 3.5%. That's great!! Oh joy. Wait, no banker on the bloody planet is going to loan you money at 3.5%. Sorry, they're all out today. The interest rate, or Price of money, is below what they think it should be. Now if you want to pay 5-6% for a 30 year fixed - Come on in. Maybe I can scrape up some money for you. This is called a Liquidity Trap and it's what we've been in since 2007/8 and why none of those QE$ ever circulated to the economy and why the velocitiy of money is zero and why inflation is so low.</p><p><br /></p><p>What is happening right now with pm's is the paper price set by the markets is being kept artificially below the street price of physical bullion. The greater the divergence and the longer the duration, the more you'll see either supplies dry up and/or premiums increase. </p><p><br /></p><p>And so it goes,</p><p><br /></p><p>peace,</p><p><br /></p><p>rono[/QUOTE]</p><p><br /></p>
[QUOTE="Rono, post: 1690980, member: 6492"]Howdy, It's a classic example of Econ 101 Supply/Demand curves when prices are controlled or artificial. Either supply dries up or the price differential is closed through increases in premium, markup, vigorish or ignored on the black market. It happens quite often actually. A few years ago to pm's as medorama notes but remember when Nixon put price controls on gasoline? All of a sudden lots and lots of gas stations were Out. Indeed, they felt that the official price was less than what their gas was worth, so Sorry, I'm all out. How about credit market today? The Fed has kept interest rates artificially around zero making 30 year mortgage rates around 3.5%. That's great!! Oh joy. Wait, no banker on the bloody planet is going to loan you money at 3.5%. Sorry, they're all out today. The interest rate, or Price of money, is below what they think it should be. Now if you want to pay 5-6% for a 30 year fixed - Come on in. Maybe I can scrape up some money for you. This is called a Liquidity Trap and it's what we've been in since 2007/8 and why none of those QE$ ever circulated to the economy and why the velocitiy of money is zero and why inflation is so low. What is happening right now with pm's is the paper price set by the markets is being kept artificially below the street price of physical bullion. The greater the divergence and the longer the duration, the more you'll see either supplies dry up and/or premiums increase. And so it goes, peace, rono[/QUOTE]
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