The Proposed Iranian Oil Bourse

[BrandNewTrader]

Quote from jimrockford:



Perhaps, if you can leave behind all the ad hominem name-calling and labelling, and leave behind all the assertions of your perception that you are a superior intellect, you can get more focused on the topic of the thread, and make a greater contribution to the discussion.

Let me address yet another example of your apparent lack of interest in what other people say. You asked me for my research. I answered that question, but then, your response ignores my response, and simply repeats your question. I presume this is due to an inability to focus your attention on viewpoints differing from your own. I will therefore accomodate to your handicap by repeating my answer as follows.

Whoa - don't break any nails ladies. =)

Thanks for sticking up for my jimmy - but i'm ok =). (soon2btrader here) The two fo you know much more about economics than I do, but I'm not sure that's an advantage when dealing with a question with so many moving pieces and degrees of complexity. You can't try to explain it on a granular level because what you are doing is making an assumption about each particular measure, how it's going to affect another measure, and then how central abnks and govs will react, and then etc etc. We have to make assumptions regardless, so the fewer the better right? Maybe it's just me, but I know that the more matters of dispute that exist, the less probably that either debater will be willing to compromise or concede a point.

2cent - that richard duncan article was a great link. It was written 3 years ago and his analysis and "predictions" have been substantiated by market events over the past 39 months since it was written. Could it be that he's right and it's simply a matter of when?

To get back to my prevous point. Why don't we try to get somewhere her? I think we all agree that the current situation is unsustainable given that the US cannot borrow from the rest of the world forever. Can the US borrow forever? What types of events would need to occur for this to be possible? Are these technological breakthroughs that allow us to increase productivity of food production 1000 fold and eliminate global hunger? Or are they natural disasters that compress 20 years of global financial rebalancing into a few short weeks of global financial panic? Or is it world war 3? My point is, if we agree that the imbalances HAVE to unwind, then the central question is hard or soft landing?

In addition, I think there are flawed analytical approaches being commonly used to evaluate current situations by comparing them to events in the past. Way too much significance is placed on these types of comparisons. Much in the way jimmy pointed out the flaws inherent in the public debt figures based on the exclusion of social security liabilities - the same can be said for trying to compare what may happen in the US (sole superpower, net global-debtor, custodian of sole global reserve currency) to what's happened in the much smaller economies like Japan and France based on GDP/deficit ratios. The US borrows from the rest of the world, as a collective the ROtW finances the US and no one else (to the same degree). The fundamental, structural, and "human factor" effects of dislocations and crises in the US are completely unlike similar events in ANY other country (again, US = sole superpower, sole net global-debtor, custodian of sole global reserve currency). None of the G-8 countries can claim even one of these distinctions. If you want historical precedent for comparison purposes, why don't you look at historical empires based on fiat money systems? The Greeks, Romans, various Chinese dynasty's (Han, etc) British, the list goes on. The US didn't ACTUALLY become an empire based on a fiat system until 1971. This is very important. What market measures have been building since the 70's and are discussed/utilized today as if their past behaviour will continue into the future with certainty?

Hard or soft landing?

foreign govs buy the US dollar because it's the best investment for massive pools of capital. i dont need to explain the circular nature of the relationship to either of you, but if there was a better option, people would opt for it, it's just that the dollar is the best option and its convenient for all involved since it benefits everyone to have a single liquid currency that everyone can look to in order to "manage" their own exchange rates in the global market. All of these countries with huge dollar-reserve surpluses are locked into holding and buying more dollars because a) if they move out of the dollar and into their local currency - the local currency appreciates significantly and erases their surplus - a shock that would throw the average emerging market economy into turmoil b) holding dollars is a convenient way to organize your wallet when all of the things you like to buy are priced in dollars (dollar-denominated assets) c) increased dollar quantity allows americans to spend more dollars on foreign goods, which increases foreign gov export-based surpluses - thereby helping both american and foreign economies, further incentivizing both parties to continue their current behavior... so in the current environment it makes sense for US trading partners to hold dollars and keep buying more dollars.

Analogies are a great way of simplifying and communicating abstract ideas applied to technical and complex issues. Consider that this global situation is like a bus trip (US and the Rest of the world) on a road with no end in sight. (bus is the global economy). US is driving the bus... the bus isnt driving anywhere in particular - they are on a road trip for pure recreation and enjoyment. As time goes on - they pick up things that make them more and more efficient i.e. maps, ability to learn local customs, contacts, car upgrades, gadgets, knowledge, etc. they drive faster and faster, become more and more efficient, and as a result are better able to accompish their goals of "enjoying their road-trip". Of course - the longer they enjoy this exceptionally high level of "utility" the more dependent they become on the resources that they accumulated that allow them to maintain this level of utility. The longer the passengers grow accustomed to certain routines/interactions/treatment as an indirect result of their high-quality trip experience, the greater shock of a decline and the overreaction to this shock. Even small declines in this quality of experience can result in wild mood swings that lead to varying levels of human emotion and interaction, from dissatisfaction to depression, bickering, arguing, and occasionally physical violence and eventually a tragedy on the bus. Parallel the relationships between the bus passengers with the various economic and diplomatic relationships between the US and all of its trading partners. And a "tragedy" or signifacnt event catalyzed by conflict isn't even the main threat. The main threat is that the bus breaks down and strands them in a bad situation. Will it break down in a busy city where help is easy to find? or in the middle of the desert hundreds of miles from civilization? If this happens, are there enough foodstuffs/tools on board to get them through the situation? Or, even worse, does the busdriver fall asleep at the wheel (drunk? lack of sleep? medical condition?) and drive off a cliff, killing half of the passengers and critically injuring many more...

I hope my point is clear. Hard or soft landing?

2cents, earlier you mentioned that you didn't think the dollar would begin its collapse before the imbalances unwound... Based on the progression of events, it seems as if the only event that will prompt aggressive action from influential countries to resolve the imbalances would be a REAL threat to dollar stability. And once that stage is reached it all becomes a matter of game theory, mass psychology, and panic behavior. Rapid devaluation gives way to further selling leading to further rapid deval leading to speculation of a crisis, inevitably leading to panic.

Thoughts? Does my logic seem rationale? Hopefully you guys arent completely left-brained and can intuitively see what I'm clawing at.

 

[jimrockford]

BrandNewTrader,

It is nice to see some modesty in this discussion.

I think your intuitive discussion as to why the global market so heavily depends upon the dollar is "clawing at" what would formally be called a Nash equilibrium.

A Nash equilibrium is a game-theoretic construct. It is a state of the game, from which no game participant believes he will derive a benefit by deviating. An analogy would be to view each participant's multi-dimensional strategy as that which selects the very highest point on the curve describing the participant's perception of benefits to himself, as a function of whatever multi-dimensional strategy he might select. If all the other market participants have selected a strategy of holding dollars, then each individual market participant perceives, either rightly or wrongly, that he will lose, not gain, by dumping dollars. Nobody perceives a benefit in being the first to dump dollars. A change in one player's strategy would be represented as a move away from the Nash equilibrium point where everybody blissfully (or nervously) holds dollars; and each player's utility curve tells him that such a move would no longer be at the top of his own utility curve, and so, everybody stays at the Nash equilibrium at the top of his particular curve. The danger, however, is that curves of perceived utility can change.

Circumstances change over time, and so do the perceptions those circumstances shape; and those perceptions, in turn, help change circumstances over time. Financial imbalances, stores of information and experience, and psychological pressures can all grow and accumulate, until what was a stable situation becomes an unstable situation. Changes may, at first, alter the perceived utility curve of each participant, without altering the Nash equilibrium where everybody holds dollars; in other words, the curves change, but the topmost point of each player's curve remains that where everybody continues holding dollars. Additional changes might raise, in some cases, or lower, in other cases, the height of his perceived utility curve at the equilibrium point, but without altering the fact that it remains as the highest point on each curve, and so, it remains as the Nash equilibrium, where everybody still holds dollars. But with further changes, we might get into trouble. Further changes might change the perceived utility curves of some participants, to the point where a move away from holding dollars suddently seems to provide a slightly better perceived utility, for those players, than the old equilibrium where everybody holds dollars. The equilibrium, at this point, disappears. It might hopefully be replaced by another new Nash equilibrium, only a short distance away, at which most players still hold most of their dollars, but others have gently and slightly reduced their dollar exposure. Our hopes, however, might be dashed, because perceptions need not change gradually.

A small number of players might dump enough of their dollar holdings, so that their actions alter the perceptions of a number of other players, who do likewise. Their actions, in turn, might influence still others. The result could be a chain reaction, so that in a very brief moment of time, most every player's perceptions drastically change. Think of it like putting a match or a lightning stirke to a forest which has been thoroughly dried by drought and a long hot summer. Think of it like a new, particularly contagious virus, spreading for the first time, from the very first case ("patient zero"), through a population having little or no immunity resulting from its lack of prior experience fighting off similar past viruses. Think of it as a chain reaction. Patient zero infects, let us say, two other patients, so that there are 3 sick. Each of those new patients infects two more, so that there are now 7 sick. Each of those new cases infects two more. The infected population grows exponentially with each unit of time, to 15, to 31, to 63, to 127, to 255, to 1023, and so on, until much of the total population succumbs. It is a fundamental characteristic of an exponentially growing process that no matter how large the population, a sufficiently virulent disease can infect a large portion of it in a brief time. Most epidemics do not behave in this manner, but the few that have, like the Black Plague of the middle ages, provide a useful analogy to financial panics.

Perceptions might change very dramatically and suddenly, so that enough bigger players perceive it to their benefit to dump enough of their dollar positions immediately, so that any new equilibrium will form very far away from the currently existing equilibrium. If this happens, then the state of the game immediately lurches from the current state into a drastically different state. This is what we would call a hard landing or a financial panic. This can happen even if there is no rational basis for the players to do it. The players will act based on what they perceive to be in their best interest, not on the basis of what is actually in their best interest. The threat of irrational and immediate changes to perceptions contributes to the threat of a financial panic, even where rational beings would not panic. If, in fact, the other players are going to panic, then it is rational to panic before they do. If all the elephants are trying to squeeze through the exit door of a theatre on fire, it is good to be among the very first few elephants who squeeze through the door, instead of among those who stay with the crowd and are, as a result, consumed by the fire.

Note that this sort of danger does not exist for other currencies in the same way, because the U.S. dollar is, more than any other, our one global currency. This exposes the dollar both to unique benefits supporting it, as well as to unique hazards threatening it. This is one of many reasons why one cannot rationally disprove the danger of a future dollar hyperinflation, panic, or collapse, simply by pointing to the examples of other countries which do not have the unique status of printing the world's dominant currency.

Financial history is not one exclusively of "soft landings" and gradual change. Financial history shows that panic, crisis, catastrophe, and violent, lurching, drastic change, occur on a regular basis, as a rule, and that they are most likely to occur when they are least expected by their victims. Financial history shows that financial panics are less likely when people can still remember the last panic, and so behave cautiously; but after a long panic-free era, people tend to forget, or perhaps even weren't born before the previous panic, and so, they behave, spend, borrow, lend, and invest in ways making the next panic more likely; in short, they behave like typical American consumers. This phenomenon was recognized in biblical Jewish law, which required that every 50 years or so, all debts must be extinguished and forgiven.

 

[eusdaiki]

The jubilee year... great concept.


There´s a point you missed on the Cournot-Nash equilibrium. In that model, the first one to act against the cartel bleeds his competitors to death... taking around 75% of all profits and securing himself in a comfortable position for the following bertrand equilibrium {where ruthless competition between formerly friendly agents leads to prices below the perfectly competitive equilibrium; aka a price war}.
So is the case of the two prisioners game. {as describded by Nordhaus} Two guys are being charged for working some crime together. The cops are trying to get one of them to rat the other guy out. If none of them talks they both get five years, if one of them talks, he gets 2 years the other guy 9. If both of them talk they get 7 years each. Here´s where it gets interesting, if the guys are able to talk to each other and trust each other... they both keep quiet. if they are unable to comunicate all information to each other or they have reasons to mistrust each other... they´ll get 7 years a head.

How does this apply to finantial markets and our current discusion?
Some of the biggest holders of US dollars are asian central banks. These guys are facing a Cournot-Nash equilibrium and a bit of a paradox too. They´re holding such massive positions in the US dollar that their risk is no where near diversified. If they diversify they´ll lose millions as they start dumping dollars in the market and pushing the price down, along with the value of their remaining positions... if they dont then they might end up doing it at the worse possible time... during panic. So all of this guys are keeping a close eye on each other, just to make sure they know when one of them starts dumping dollars at the market.

So let´s make this game interesting. Let´s put another player, with plenty of money {from oil and gas mostly}... one who´s already diversified to Euros and other currencies... one who just paid out his foreign debt and it´s ready to play as a first class economy once again... and one that doesn´t really love the US... such as Russia... Ok.

Lets say hipotetically... that Russia starts to dump massive amounts of dollars {short}on the forex, against the EURO or her own Ruble... They don´t have to take the dollar down by themselve´s of course... they only need to dump enough for the asians to panic and start dumping their own dollars... {perhaps $250Bn could do the trick...}from there... it´s not a soft landing...

 

[jimrockford]

Quote from eusdaiki:

There´s a point you missed on the Cournot-Nash equilibrium. In that model, the first one to act against the cartel bleeds his competitors to death... taking around 75% of all profits and securing himself in a comfortable position for the following bertrand equilibrium***
Some of the biggest holders of US dollars are asian central banks. These guys are facing a Cournot-Nash equilibrium ***

I think the substance of your thoughts is interesting, but I would like to disagree with your terminology. We are talking about portfolio optimization for central banks and other market participants generally. We are not talking about competitive decisions as to the selling price or level of supply offered by a cartel or oligopoly, the type of situation to which a Cournot or Bertrand theory can apply. So-called Cournot-Nash or Bertrand-Nash equilibria are special cases of the more general concept of a Nash Equilibrium, but I think these special cases are not applicable to our discussion. http://www.indiana.edu/~econweb/faculty/morrpap1.html. I think that the more general concept of a Nash equilibrium does provide some useful analogy to our topic. I would also like to note that I mentioned concepts like maximization of utility curves as an aid to understanding; but I don't actually believe the model that real economic agents, in the real world, maximize utility curves.

I think it unlikely that Russian authorities would maliciously try to crash the dollar, because they would suffer from resulting global economic decline and loss of global demand for their exports, especially including oil, the source of much of Russia's new found incoming wealth. I think that if a panic starts, it would be ignited not by a malicious effort to start one; and if a malicious effort were made to start one, it would be made by a private consortium, not a government. This reasoning could go out the window, however, if we find ourselves confronting China or Iran or some other enemy in what the Nazi's called "total mobilization for total war", in which the first priority is to inflict maximum damage against the enemy, regardless of the cost.

 

[eusdaiki]

Quote from jimrockford:

I think the substance of your thoughts is interesting, but I would like to disagree with your terminology. We are talking about portfolio optimization for central banks and other market participants generally. We are not talking about competitive decisions as to the selling price or level of supply offered by a cartel or oligopoly, the type of situation to which a Cournot or Bertrand theory can apply. So-called Cournot-Nash or Bertrand-Nash equilibria are special cases of the more general concept of a Nash Equilibrium, but I think these special cases are not applicable to our discussion. http://www.indiana.edu/~econweb/faculty/morrpap1.html. I think that the more general concept of a Nash equilibrium does provide some useful analogy to our topic. I would also like to note that I mentioned concepts like maximization of utility curves as an aid to understanding; but I don't actually believe the model that real economic agents, in the real world, maximize utility curves.

I think it unlikely that Russian authorities would maliciously try to crash the dollar, because they would suffer from resulting global economic decline and loss of global demand for their exports, especially including oil, the source of much of Russia's new found incoming wealth. I think that if a panic starts, it would be ignited not by a malicious effort to start one; and if a malicious effort were made to start one, it would be made by a private consortium, not a government. This reasoning could go out the window, however, if we find ourselves confronting China or Iran or some other enemy in what the Nazi's called "total mobilization for total war", in which the first priority is to inflict maximum damage against the enemy, regardless of the cost.

It´s true that the model is aimed to oligopolies, but I think that it applies, at least partially in our case, as central banks are preventing an over supply of the dollar in order to avoid a price crash that would hurt them as a group. So in a way it could fit the model of an oligopoly, a very big one, for the supply of the dollar. I know is not exatly what the model describes but the workings of the equilibrium and the panic that might bring an end to that equilibrium resemble the outcome of a cournot oligopoly going wrong... where the first guy to stab the others in the back not only gets out free of losses but makes a lot of money from slaughering the competition.


About Russia, I picked them for my hipothetical scenario because they have the muscle to pull something like that. They have the nukes to persuade bush from invading, and they have a very bloody history... and their anxious to get back to the top of the food chain...

But there are several others that could pull a stunt like this... they just need to wait for the right set up in the market... so that the panic spreads real fast... such a time could be set by hurricane season right in the middle of a katrina-like incident... or something of that sort. If they excecude their orders in such a way to make asian banks suspicious of each other... they could do it with a relatively small amount of capital.

 

[jimrockford]

If we believe the view espoused by this thread's superior intellect, 2cents, then the article inspiring this entire thread was part of a malicious propaganda effort to undermine the dollar. He seems to believe that a dollar panic is impossible, even though he simultaneously believes that people are trying to start one. I think, however, that financial history shows we have no need for any future malicious effort or conspiracy theory, in order to ignite a dollar panic. Financial history shows that financial panics are generally ignited by causes other than deliberate efforts to trigger them.

 

[eusdaiki]

Quote from jimrockford:

Financial history shows that financial panics are generally ignited by causes other than deliberate efforts to trigger them.

it also shows that there´s always a bear making a lot of money out of it...

 

[BrandNewTrader]

Quote from 2cents:

opinion:

to all the salivating $-permabear morons:
. there IS no $-hegemony orchestrated nor caused by the US except in the mind of the usual conspiracy 'theorists' who are experts at offering 'opinions'... what there is rather, is a $-addiction from the Rest of the World, and there are good reasons for this addiction, which i'll leave you guys to think about...

I actually agree with you here. Need to clarify though. I don't necessarily feel that the US caused the "dollar addiction" in a conspiratorial sense. But the US IS an empire that manages the sole fiat global currency and has displayed elements of imperialism in its foreign policy. I would say that the combination of these and other factors usually found in situations like the current created an environment that brought about the current conditions. The people running this country are far from fools. If there is a hard landing from all of these daunting imbalances allowed to develop because of bad economics and bad politics (twenty years ago we would have thought of these imbalances as "improbable", now we rationalize them comfortable as they continue to grow, which no real plan on how to correct them) then the responsibility ies with them. But their politicians and won't be held responsible. This is why I hate politicians. They aspire to positions in which you are entrusted with the utmost social responsibility but dont do much more than pander, mislead, and waste as much as possible. The ones who try to make real social progress are... where are they?

The people running this country know that there are very serious problems ahead in regards to the public debt, social security, pension fund solvency, etc. Their crime is deceiving the stupid public about it and allowing the buck to pass to the next generation of lawmakers. So, in this sense there may be no "$-hegemony conspiracy" but there is certainly much corruption and collusion within the US govt (always has been) that fosters and environment that allow these train wrecks to happen slowly over years and years. Think of the current state of the administration. the pres is a fool and his powerul appointees are all yes people who offer no counterbalance to the out-of-control executive branch . Right now, executive + legislative + judicial = executive branch. The republicans and democrats need each other to keep the puppet show going and maintain the illusion of balance, which is interpreted as political stability. (two party system is a feature evident in majority of the worlds most stable govs) The neutralization of the legislative and judicial branches represents a destabilization of the us political structure and is a potential catalyst for turmoil that may eventually cast doubt upon the stability of the US economy. And you can see all of this during the CNN press conferences and bush speeches. I wasn't born in the Us but have lived here for 10 years now and at first I used to think that most Americans were idiots. And many truly are. But it 's just a byproduct of living in one of the most affluent nations in the world and being surrounded by distractions (media, politics, etc): indifference. These situations have a funny way of punishing future generations in the most tragic and catastrophic manner...

 

[2cents]

jimmy, you are just digging a bigger hole for yourself, and impressive amounts of smokey blather just won't do... you are the one who linked public debt / gdp ratio to hyperinflation, weimar had nothing to do with that

Quote from jimrockford:

You seemed to have missed that we have seen the beginnings of hyperinflation, in the form of the government's aggressively out of control borrowing. You instead that we haven't seen any such beginnings. The real question is how much further this process of borrowing dollars, and printing dollars to pay those debts, will continue. I think, in order to address that question, you need to recognize that we are moving in a dangerous direction.

you haven't even begun to address any of my objections... but thats how it is with intellectual frauds, loads of posturing, no substance... not really a surprise

 

[2cents]

Quote from BrandNewTrader:

Hard or soft landing?

foreign govs buy the US dollar because it's the best investment for massive pools of capital. i dont need to explain the circular nature of the relationship to either of you, but if there was a better option, people would opt for it, it's just that the dollar is the best option and its convenient for all involved since it benefits everyone to have a single liquid currency that everyone can look to in order to "manage" their own exchange rates in the global market. All of these countries with huge dollar-reserve surpluses are locked into holding and buying more dollars because a) if they move out of the dollar and into their local currency - the local currency appreciates significantly and erases their surplus - a shock that would throw the average emerging market economy into turmoil b) holding dollars is a convenient way to organize your wallet when all of the things you like to buy are priced in dollars (dollar-denominated assets) c) increased dollar quantity allows americans to spend more dollars on foreign goods, which increases foreign gov export-based surpluses - thereby helping both american and foreign economies, further incentivizing both parties to continue their current behavior... so in the current environment it makes sense for US trading partners to hold dollars and keep buying more dollars.

Analogies are a great way of simplifying and communicating abstract ideas applied to technical and complex issues. Consider that this global situation is like a bus trip (US and the Rest of the world) on a road with no end in sight. (bus is the global economy). US is driving the bus... the bus isnt driving anywhere in particular - they are on a road trip for pure recreation and enjoyment. As time goes on - they pick up things that make them more and more efficient i.e. maps, ability to learn local customs, contacts, car upgrades, gadgets, knowledge, etc. they drive faster and faster, become more and more efficient, and as a result are better able to accompish their goals of "enjoying their road-trip". Of course - the longer they enjoy this exceptionally high level of "utility" the more dependent they become on the resources that they accumulated that allow them to maintain this level of utility. The longer the passengers grow accustomed to certain routines/interactions/treatment as an indirect result of their high-quality trip experience, the greater shock of a decline and the overreaction to this shock. Even small declines in this quality of experience can result in wild mood swings that lead to varying levels of human emotion and interaction, from dissatisfaction to depression, bickering, arguing, and occasionally physical violence and eventually a tragedy on the bus. Parallel the relationships between the bus passengers with the various economic and diplomatic relationships between the US and all of its trading partners. And a "tragedy" or signifacnt event catalyzed by conflict isn't even the main threat. The main threat is that the bus breaks down and strands them in a bad situation. Will it break down in a busy city where help is easy to find? or in the middle of the desert hundreds of miles from civilization? If this happens, are there enough foodstuffs/tools on board to get them through the situation? Or, even worse, does the busdriver fall asleep at the wheel (drunk? lack of sleep? medical condition?) and drive off a cliff, killing half of the passengers and critically injuring many more...

I hope my point is clear. Hard or soft landing?

2cents, earlier you mentioned that you didn't think the dollar would begin its collapse before the imbalances unwound... Based on the progression of events, it seems as if the only event that will prompt aggressive action from influential countries to resolve the imbalances would be a REAL threat to dollar stability. And once that stage is reached it all becomes a matter of game theory, mass psychology, and panic behavior. Rapid devaluation gives way to further selling leading to further rapid deval leading to speculation of a crisis, inevitably leading to panic.

Thoughts? Does my logic seem rationale? Hopefully you guys arent completely left-brained and can intuitively see what I'm clawing at.

very good points... btw, read the duncan book if you can, thats no waste of time... and congrats on yr new handle!

terminology first:
. panic landing: http://www.larouchepub.com/eiw/public/2006/2006_10-19/2006-17/pdf/06-8_617.pdf as this type of views ' catch on', financial actors all try to exit at the same time, the textbook self-fulfilling prophecy...
. hard landing: to me, one in which the $ would end up within a short period of time (3-5 years) hitting a DXY low of, say 60, i.e. below its 'historical range' of 80-120... along the way, the US deficits would largely unwind, thereby providing support to the $, however not preventing it from breaking materially below 80 for instance. how? because the driver would be a more cohesive and attractive Europe, i.e. a true capital magnet, not simply a strong aversion to current $-addiction
. soft landing: one in which the imbalances start unwinding and DXY remains within its 'historical' range of 80-120

am happy of course to adapt to whatever alternative terminology conventions, provided they are somehow 'quantified' in the way i attempted to above, if only for the sake of discussion.

i think we can all agree that the G7, G20 'governants' AND the Central Bankers of the same, by nature, have no incentive in allowing the conditions to form for a panic landing such as above to occur. can they actually do anything about such a scenario is always 'debatable', but i would be very curious to see any relevant argument / research to that effect... at the extremes, its pretty obvious why in times of war and particularly global war, fiat money is shunned by people to the benefit of tangibles (my pref goes to stones but thats just me... because i like this description given in the apocalypse:
"And the woman was arrayed in purple and scarlet colour, and decked with gold and precious stones and pearls, having a golden cup in her hand full of abominations and filthiness of her fornication"
http://www.bci.org/prophecy-fulfilled/apoc4.htm
sorry its irrelevant of course, just doing my jimrockford )
and it is the reverse broadly speaking in times of peace, when confidence in the viability of organized society returns... so, is the question, are we on the brink of another WW??


as for hard or soft as in the above... i only wish i knew

one thing you may want to look at is the relatively narrow range within which XAUEUR was trading in the early 2000s and how it abruptly took off in mid-2005. that's also when the French voted NO to the european constitution, fragilizing the belief in the euro as a worthy alternative reserve currency. ok, this is simplistic i know, since china revalued the yuan at very much the same time and therefore the inter-market relationships here are not (are they ever?) so obvious... but just food for thought...