I have learned to appreciate the beauty of mathematics. It is simple, abhors error, and demands verification. Math helps make sense of virtually everything, from simple problems, to the universe, and “All the way to infinity, and beyond” to quote Buzz Lightyear. It seems though whenever it come to gold discussion math becomes extremely problematic. The simplest explanation is usually impossible. The gray areas of gold information would fill Jupiter and all 63 of its mathematically synchronistic orbiting moons. We can’t verify the Ft. Knox gold, Comex gold, ETF gold, GLD gold, Fed gold, or even the mountains of gold derivatives. We get wildly erratic estimates of gold ownership from the WGC/GFMS, and a total lack of inquisitiveness from most all media. It’s enough to make a Harvard economics professor throw his hands up in despair… or come up with a new theory. We all know by now Larry Summer’s famous interest in Lord Keynes’ Gibson’s Paradox, which in a nut says gold prices move inversely to real interest rates. That of course presupposes a free market, which currently doesn’t exist. Until such time that free markets return I have devised a new and parallel theory to better explain gold’s mathematically-challenged counterintuitive movements, which I call The McShirley Complexity Paradox. It is as follows:

The most probable, simple, easily verified, and rational reason for gold’s behavior will instead be turned into opaque, dense, confusing, and obtuse explanations. This always occurs when gold is not in the vested interests of the offending person/entity.

Therefore paradoxically all gold events that should be easily explainable instead become more complicated than the Hadron high-energy particle accelerator. The McShirley Complexity Paradox helps easily explain the unexplainable that should have been easily explainable. Got it? I have categorized each area of gold complexity paradox in the vernacular of theoretical physicists. (With apologies to Chuck Lorre and “The Big Bang Theory”.) I will then decipher the Harvard-speak into non-nostril flaring simplicity.

The CNBC - Dennis Gartman - Larry Kudlow Triangulation Amplification

We know G-E (Of GE Capital fame) owns (update: owned) CNBC, Dennis Gartman peddles his newsletters to the cabal hogs, and Larry Kudlow is a former Fed mouthpiece. You’d have better odds of memorizing Pi to the 312,242nd digit as opposed to getting simple truth out of this bunch. Angst and worry, caution and trepidation, even outrage are the typical reactions with this trio whenever gold has merely an OK day. CNBC pimps for Wall Street. Imagining Gartman and Kudlow wearing purple fedora hats and crushed velvet trench coats helps you with a visual of their true objectives. All good infomercials succeed in looking legitimate and “newsy”. The CNBC infomercial also succeeds in helping poor folk get fleeced by Wall Street just like the rich folk. So while Liesman blubbers, Gartman blusters, and Kudlow blathers, McShirley’s Complexity Paradox is beautifully easy to verify.

Simple explanation: Higher gold prices are not good for any of their vested interests.

The Ivy League Density Conundrum

The challenging economic minds of Harvard (Always remember the difference between a challenging mind and a challenged mind is one lowly suffix.) crank out more economic data than Willy Wonka cranked out chocolate. It’s all really impressive, even if you must confess you have no idea what the hell they’re trying to say. As the title of Roger Lowenstein’s book, When Genius Failed aptlyimplies, however, they frequently get it wrong. DEAD wrong. TRILLIONS of dollars wrong. Even poor Larry Summers, as mucky-muck in chief of Harvard’s endowment trust, couldn’t help blowing off many billions of dollars of Harvard’s politically plugged-in investments. Pity poor Harvard getting those nasty margin calls on such plebian things as “swaps”. Ironically as a Working Group cohort Larry protested vehemently against derivative regulation. Larry feels much better about the whole derivative situation now, and is confident that the same derivative gun that went off and shot Harvard in the foot won’t do the same to the U.S. now that he’s Obama’s economic advisor. I hypothesize he actually forgot to unload the other 8 rounds in the gun still in his holster. Even worse, his gun isn’t on safety again. Damn those trigger locks! Larry is in good company though, his Harvard alum have wreaked havoc all the way to the ends of the earth, which, by the way, they condescendingly refer to as Main Street, USA. When the alleged brightest minds of the Ivy League can’t foresee a total economic collapse, let alone a Harvard swaps derivative disaster, there’s McShirley’s Complexity Paradox to explain why.

Simple explanation: Higher gold prices are not good for any of their vested interests.

The WGC - GFMS Static Myopia Duality

Of all the heavenly bodies (or anti-Klapwijk matter, if you will), celestial haunts, and galaxies known as Gargantuan Budgetus the combined efforts of the World Gold Council and Gold Fields Mineral Services are an infinite quasar of uselessness. So many millions, so little results. If the WGC was funded by NASA they in all likelihood would still be promoting Pratt and Whitney radial piston engines as a propulsion device to Mars. Just hearing the moniker “World Gold Council” evokes memories of John Houseman’s supremely confident Professor Kingsfield admonishing his students that, “You come in here with a skull full of mush and leave thinking like a lawyer”. Unfortunately in the WGC’s case you also leave with a skull full of mush. The WGC not only can’t find their rear end with both hands, they can’t find it with the combined hands and generosity of hundreds of mining companies. You’d think the mining companies would rather employ result-based advertising companies like the ones on Madison Avenue in New York. They instead prefer giving a megaphone to the real life version of the cartoon character Droopy Drawers. When the WGC and GFMS ignore gold as a monetary investment in favour of pursuing models wearing baubles it’s McShirley’s Complexity Paradox to the rescue.

Simple explanation: Higher gold prices are not good for any of their vested interests.

The Bart Kitner Perversity Enigma

I have heard that Bart Kitner is a likeable guy. But it’s very odd that a boss could be satisfied, if not livid, watching ink jockey Jon Nadler constantly run down the product(s) that the boss offers. And by the way, exactly who are the other analysts at Kitco? If Jon Nadler is the “senior analyst” then let us hear from some junior analysts, or ANY other analysts employed by Kitco. Nadler’s self-ascribed “senior analyst” moniker reminds me of when that landscaper guy hands you his rather soiled business card saying:

Eddie’s Lawn Care Specialists
Eddie Grub - owner

Jon Nadler is a cruel joke to the newbies that click on to the Kitco site. Reading Nadler is like going to a live Christmas tree farm to pick out a tree, only to be berated and smacked around by the owner who insists the fake trees at Wal-Mart are a better deal. You’d think Bart would come up with an analyst that could do more than sift through Reuters and Bloomberg drivel to corroborate his obtuse profundity. Bart Kitner needs to come forward and declare his support for Nadler, or explain why he tolerates him. In the meantime only MCP makes it clear.

Simple explanation: Higher gold prices are not good for any of their vested interests.

The CFTC Dynamic Static Position

Enforcers, cops on the beat, protectors of good versus evil. All describe situations where the people are protected from the crooks. You must have noticed by now I didn’t include the CFTC in that bunch. That’s for good reason; they appear to enjoy the great American pastime of diddling. The CFTC makes glaciers appear speedy by comparison whenever their sleuthing powers are required. It’s never a good sign when Goldman Sachs alum start showing up and populating your offices and this is no different. Gary Gensler seems reasonably affable but unfortunately affability isn’t part of the job description. What IS part of the description is to identify crooks and lock them up. Imagine the difficulty of Gensler looking Hampton wives in the eyes while explaining why their husbands got perp walked by their (former) best buddy. This stuff only happens in Law and Order episodes with Jack McCoy. Familiarity in this case does not breed contempt; the breeding at the CFTC is largely incestuous. Any investigation of gold or silver manipulation will exclude elephants on the front lawn, short sale ratios in violation of exchange rules, and all other inconvenient math anomalies. We have waited 687 days and have heard nary more than a peep from the CFTC about the silver manipulation. Hey, maybe 687 more days will do the trick. Or never; which is always OK at the CFTC. There is nary a diddle and never a hesitation when McShirley’s Complexity Paradox is invoked.

Simple explanation: Higher gold prices are not good for any of their vested interests

The Federal Reserve Justification Theorem

Finally we come to the big daddy of complexity paradox, the Federal Reserve. It is important to remember that anything enacted by Congress in the middle of the night on Christmas Eve is always a real stinker. Whether it’s Obama’s Health Care Reform Act, raising statutory debt ceilings, or passing the Federal Reserve Act of 1913, all qualify as rather smelly deals. For 97 years now the Fed has awakened every morning with a singular objective, which is convincing the masses that a monopolistic middleman is not only necessary, but somehow beneficial. While “direct to the consumer” mentality applies to many corporate philosophies The Fed begs to differ. Their product is a piece of paper, and they are the owner through which all commerce must flow. As the old saying goes when the world is a nail every solution involves a hammer. In the Fed’s case every economic solution to the world’s problems involves their dollars. Gold is only useful when discredited, therefore enhancing their product. All descriptions of gold must somehow convey overhang, glut, dumping, lack of interest-bearing, and in general that gold is a barbarous relic. Gibson’s Paradox be damned, bring in the fools that go where angels fear to tread. MCP’s angelic melody is loud and clear.

BIG TIME Simple explanation: Higher gold prices are not good for any of their vested interests.

So will it be McShirley’s Complexity Paradox or Gibson’s Paradox? Now we have a binary system for explaining not only the free markets, but the rigged ones as well. Isn’t mathematics amazing?

James C. McShirley