Mike Maloney goes thru these scenarios in his book I cannot be bothered going to get it in the other room though.
Pirocco - mate - you are a god!!!! Just keep in mind that Earthjade is a collectivist par excellence... [this is a euphemism by the way :lol:]
Mike Maloney is being a little cagey on this. Go re-read his section about the deflation scenario. In that, he claims that the PMs will do well because as things deflate, gold retains its purchasing power and thus can buy more. HOWEVER... From memory, the price of gold was FIXED at the time of the Great Depression meaning there was that security. But now, gold is FREE FLOATING meaning that if there is a deflation scenario, the value of gold relative to the dollar will go down. In other words, you'll be worse off than you would have been if you had held the equivalent of dollars. Then go look at how big is inflation scenarios are. Essentially, the PM spruikers are banking on a hyperinflation scenario that may or may not occur. They are so heavily invested into the Austrian School of economics that they don't want to seriously entertain the alternative scenarios. All I can say is BE CAREFUL and take nothing on BLIND FAITH and certainly don't buy into the PMs as though it were a religion! Of course, the regular talking heads on this board have already showed up to contribute precisely nothing, but in the end, the best advice might be from Marc Faber: "Diversify your holdings but stay the hell away from government bonds in 2012".
Super ? what's that ,I run the Jag on Premium Bonds ? What are these things ,more designer toilet paper :lol:
And here's two things PM spruikers will often say: 1) "The average life expectancy of a fiat currency is 40 / 70 / 100 years." (it varies deopending on who is doing the spruiking) The problem with this is that there are exceptions. The British Pound is a fiat that has been around since 1694, so over 300 years! Its life has been extended by the fact Britain was the world's leading economic power for much of the 19th and early 20th century. America has now taken on that role and their dollar is more widely used than the British Pound ever was. So I would be very wary of people that are predicting complete dollar destruction in the next few years. 2) "If gold were to peak at its 1980 high in inflation adjusted dollars today, we would be looking at a price of $2500US" The problem with this is that gold hit that high for just a day or two and that peak was around $895 in January. However, gold's AVERAGE price for the entire month of January 1980 was about $675. In inflation adjusted dollars, that works out at about $1850-$1900, so in truth, we've already seen the 1980 highs this year. All I'm saying is beware the PM spruikers. Walk into PMs with your eyes open so if you lose out, you can tell yourself that you knew why it happened. I woke up this morning and I can tell that the next week is going to be a hard one psychologically for PM owners (it certainly hasn't made my day). In the end, PMs may be a good insurance policy but those people dreaming of untold riches from a coin in their hands will likely be sorely disppointed.
Whether I agree with you or not, is not my point. I applaud your willingness to look "outside the box" and attempt to look at alternatives. You've also done so in a well mannered way without personal attacks on others. I'm one of those who invests heavily in PMs. While I don't agree with your posts, it does give me cause for pause and reflection in terms of my long terms strategy of holding PMs. In other words, when will it be time for me to sell? At what point in the long term future, does one begin to sell or trade off PMs to maximise its buying power. Or will PMs have buying power for perpetuity in the future? If I believed this last question, then I would be treating it like a religion!
For gold to hold its value in a deep deflation it would have to get a safe haven bid, due to counterparty risk, as people lose faith in the system. That's a possibility but I think it more likely they will do everthing and anything to stop it happening. It would be far worse than the great depression not to I suspect.
In the end, the equation is basic: FACT - the world is on the brink of massive deflation If the world deflates "as is", then the PMs will lose badly in value. What PM holders must pray for are several things, all dependent on one another: 1) That central banks will intervene with money printing (fairly certain) 2) That the money printing will be enough to at least temporarily turn the deflationary tsunami into inflation (less certain) 3) That somehow, the printing continues to hyperinflation (less certain of all) PM holders need an inflation scenario but it must be kept in mind that any inflation scenario will occur in an environment that wants to deflate. What does this mean? If the PMs spike up in value in an inflation scenario, the window will be very short lived, so don't hold on too long if the price goes north, otherwise you'll have a go nowhere asset for the next 30-40 years. If PMs spike up in a hyperinflation scenario, all bets are off on the PMs. But I personally believe the chances of this are not as big as some stackers hope. Like it or not, the US dollar holds a privileged status in the world today and everytime someone tells you that the dollar is just a year from destruction, just remember the Pound Sterling has been around for three centuries. The US dollar might still be good for our lifetimes as a currency. I don't know about you, but I'm not prepared to give my PM investment a 60 year timeframe. In the end, if the world economy wants deflation, it will eventually get it. Whether we see an inflation before that is solely up to the central banks and government policy. In other words, a stacker will only get rich based on the decisions of a central banker or a politician. This is because the free market is naturally trending to deflation, which includes the PMs. So you can't rely on the market alone to boost the PMs higher for you - they are working against you. And there is a wildcard: Gold incorporated into a new global money system (possible but unlikely given the world today)
Yet again, there is no Uncertainty about money printing. The US cannot service it's debts though Taxes and it does not want to default, It certainly won't curtail spending through austerity... SO printing is it's ONLY option... it is as certain as the sun rising above the horizon tomorrow the US will print, when is the question? I hope the drag it out as LONG as possible
Don't underestimate the cunning of a central banker. Imagine this: The world wants to deflate. The US can't raise interest rates because that would screw them on their 15 trillion debt. The only option is to print but that would eventually destroy the dollar. So how about this? Monetise the 15 trillion debt, pay it down to 6-7 trillion with money printing. THEN stop the printing and let the world deflate. That way, it would be possible for the US to raise interest rates because the debt burden would be easier to service. You need to start thinking about some of these unorthodox scenarios because what is certain is the US will do all in its power to preserve the US dollar as the primary currency of the world. Why would they want to give this power away by destroying it through hyperinflation? Here's a question I bet most haven't thought about: If the US hyperinflated its dollar, would it be accidental or a deliberate choice?
You would be paying down debt with printed dollars not money you had saved in a bank for a rainy day. edit don't get me wrong I view what's going on in europe as a very serious risk of deflation spiral taking hold but that would likely kick off a collapse of banks and sovereign default. If any of that starts happening I would be seriously considering doubling my physical stack regardless of the price. The austerity they are putting in place without debt monetisation would increase risk enormously.
In a fractional reserve system money can be magnified by lending, when paying pack debt it works in reverse the money supply actually shrinks i.e. deflation. So since money printing is inflationary and paying debt is deflationary, one plus the other equals about even... BUT inflation has a lag on it ~6mo-2yrs so you will see the deflation BEFORE the inflation even if all things equal.
It is certain that the US will do all in its power to preserve THEIR chosen currency as the primary currency of the world....... I'm not sure that it will be the US dollar for perpetuity Try this on for size............... let the current world reserve currency (aka US $ which almost EVERYONE owns) get destroyed by hyperinflation. Then brand USA essentially create a new world reserve currency.....lets call it the USA Hoopalahoop. Then declare to the rest of the world, swap x number of your old hyperinflated US$ for a much smaller x number of the new US Hoopalahoops. And if you don't wish to swap at the US determined rate of exchange, then too-bad-so-sad, you can keep your old US$ for firestarting but like it or lump it, the new Hoopalahoops are now the new reserve currency of the world. The big unknown though......IF the scenario is ever played out that the US manages to exchange its US $ for a new US currency as the new world reserve currency, would it be backed by gold or silver???!!! I think only if the US can corner the PM market around the world. If it can't, then it will do anything and everything to destroy any faith (or mechanism) that allows PMs to threaten the global financial system. There is a reason that all member countries of the IMF cannot have a gold backed currency. and finally........ I would say deliberate, and about as deliberate as the US stopping any pretence that it was ever going to ever pay off its debt back when Bush first took the presidency. For this reason, the US has been pissed off at China keeping its Yuan pegged against the US$. But I'm only a nevelle-no-body. The financial powers brokers in the world have a grand plan in place that we plebs have very little insight into. A bit like all the peasants being called to war in the "olden days" by the king or queen. Off to war for king and country because of the call to arms. Why? Because the Plebs are made to think there is some huge foreign threat and its only with the sacrifice of their lives that all will be made good. When in reality, the King probably went to war because his cousin who is also a king across some stretch of water decided to thumb his nose. The Plebs can't know this though. The world is no different now to back then. There are those in power and those who must do as the powerful say. There are the "haves" and the "have nots". And its not those in power who will ever happen to be the "have nots" either.
