Sorry for ranting. Without repeating myself, I'll refer you to a post made over in Bullion Baron's forum which I hope will clear things up: http://forums.silverstackers.com/message-212798.html#p212798
Though srsly, I imagined someone dropping in a way that resembles the charts. Dead cat bouncing on the way. :|
Trichter- I fully understand your argument. I have had the same thoughts over the last couple of years, but you should really look into Chartalism, and Modern Monetary Theory, not because I believe it is right. You should know your enemy. Most academia subscribe to MMT which in it self is merely a description of the monetary system. It is the conclusions and remedies MMT proponents subscribe to that is of interest. Rick Battelino has referenced MMT a number of times. Basically MMT proponents believe soverign countries that control the issue of their own currency can never be insolvent, and governments must tap this never ending cost free supply of money to avoid the under utilisation of resources ie. unemployment. Their answer to deflation is for government to fill the output gap caused by business contraction, they have no other plan. I can assure you this is the genre of economics all of Treasury and the RBA subscribe to. For them to undertake any other action in the time of economic crisis would require them to throw out everything they hold to be true. It is with this in mind I think we will see an inflation in most things, EXCEPT any asset classes that are held against high levels of debt (Real Estate). Just my 66' round.
I'd say 75% we're heading to inflation outcome over deflation... but that 25% is starting to worry me. My only consolation is that government debt gets proportionately larger in deflation so this tips the balance.
Since when are governments all powerful though? Look around you... they have a few hands to play and they've used their best cards already. The $2.3 trillion from the EU is a pittance. Collectively these banks are sitting on tens of trillions in junk. There was an article the other day about Morgen Stanley's exposure to French banks being 60% above its market capitalisation.
SSSSHHHHHHHhhhh lets not talk about that huh ? ....... It's only a few trillion and if we ignore it, it will just go away right?
I think often extreme deflationists and hyperinflationists are talking about exactly the same thing. So, to the deflationists, consider this. If currency is debt (it's a balance sheet entry at the central bank), then as you point out we have two options: -Debasement. -Default. In the event that we have significant amounts of default world wide, what are the chances that the central banks will come out of it alive, as everyone rushes towards their assets (by buying their liabilities)? They in most cases have very little in the way of assets on their balance sheet, most of what they have is actually debt, listed right along with physical assets. Have a read of this is you dare: http://fofoa.blogspot.com/2011/04/deflation-or-hyperinflation.html Aside from FOFOA's argument, have you see how hard the banks are fighting deflation? Why? They are so severely overleveraged that even a trivial contraction of their balance sheets make them insolvent. Lehman was 50:1, requiring only a 2% loss to ruin them (aside from creative accounting, and mark to fantasy trick to deny this for a time). So, deflationists, how long before the issuers of debt money implode in a deflationary environment? Lets find out, as the contraction of the shadow banking system is ongoing, and by looks of things, it's not going so well. When the issuer implodes those flocking to king cash will be holding no wealth. Those believing in hyperinflation, believers of currency rejection are also normally aware of the fact that hyperinflation != high inflation. This is not a matter of someone 'deciding' to debase the currency, this is a matter of people trading away their fiat as fast as they can in order to not hold that particular fiat. That's where all the zero's come from, not from excessive government spending. At the end of the day however, in both cases we end up with a disused currency and those that survive and prosper are those that hold physical assets. Currency injections, QE, etc is not hyperinflation. In may induce the loss of faith in that currency however, which is what we may be seeing. The only cases I see holding PM's a losing proposition are: - Everything gets better, and economies stabilise. Thats it. Everything else leads to currency failure at this point as far as I can see. For the record, I don't even like PM's, don't find them attractive and when I hold them in my hand I feel nothing special.
The only thing I have to say is while people know what is going to happen, no one is very good at predicting the timeline, nor is it really possible, given government policy plays a big role. People have been predicting the collapse as early as the 70s when Nixon took the US dollar off the gold standard. While the argument I believe is correct, we could be waiting for another decade for things to pan out. Personally, I would prefer it in the next 5 years because the sooner we get this over with, the less general pain there will be. However, when you have people in 2008 claiming things would collapse in 2010 and now people in 2011 claim it will all come down in 2012...I have a feeling things always take much longer than the doomsayers estimate. Finally, I don't like PMs either. It's going to be easy for me to offload my stack when I feel the time is right. That's why I don't go for that collector stuff and the stuff that commands premiums. As many ounces as my money will buy is my preference. It's just a tool to preserve wealth.
That's fine for you and others who have 'enough' wealth worth preserving. Others, myself included, often invest to 'increase' our wealth. I've accepted that by myself I will only be able to earn X amount, whereas my goal is to end up with X+Y Which is why I invest in both bullion and numismatics (collector stuff). Informed chances have and will be taken, for nothing risked, nothing gained,
Look, I think I am a minority on this board. The only other poster I know that agrees with the "as many ounces as your cash will buy" position is geewiz. For the majority here, the preference seems to be for coins for the reasons you have highlighted - commands higher premiums and easier to offload than stackers and bricks (apparently). But I look at it this way - the first thing stackers learn is that you shouldn't be thinking about how much your silver is worth in fiat but rather how much in the way of commodities it will buy. That's why there is an importance on things like the oil, dow and house ratios. The problem with coins that command premiums is that those premiums can only be measured in fiat. At the end of the day, a nice 1 ounce dragon or panda may command a premium, but it's still only one ounce - the same as any other lump of similar weight and purity. The thing is you've paid slightly more to get it, although you do get that higher pay off, provided you sell in current, non-****ed up conditions. I'm not really sure that if SHTF occurs, that those premiums will hold up. My reasoning is if fiat is crashing down, people will need to preserve their wealth ASAP. They could buy a 1 ounce coin with a premium for say...$100 or they could buy 2 ounces of pure but "unpretty" silver for $130. In the end, I think the premiums we enjoy at the moment will begin to erode if the market really picks up. This is a similar position to what Mike Maloney believes. I've said this before and I've copped flak for it but at the end of the day, I think "as many ounces for the cheapest price" is a more conservative strategy than "collectors items with premiums".
Well I for one would never give you or anyone "flak" for their investment decisions. Nothing wrong with conservative or risky investing or in my case moderate investing. I consider buying bullion like blue chip stocks and numismatics as small cap. A mix of both is what I have on paper and it's what I have if applied to PMs. If diversification is called for in overall general investing, I, personally, believe it makes the most sense when it comes to investing in PMs for me, not everyone. That's it, not real complicated, juss a lil diversification.
"The only other poster I know that agrees with the "as many ounces as your cash will buy" position is geewiz." Not the only one. My smallest purchase is 1kg. I'd like to buy at 100oz increments, but cannot find a local place that sells them (I shop where I can pickup). I will track spot as closely as I can. It comes down to what you plan on trading it for. I plan on trading mine for a farm, preferably a plantation of trees (Chestnut, olive, etc) so efficiency for me is key. I doubt we will for long live(at all?) in a world which people will barter their ASE's for gumbo. Many in the US do, but many in the US built nuke bunkers decades ago. For me, the SHTF is just early retirement. The sooner I trade away these useless lumps of rare elements for productive capital the better. For those that think a collapsing currency is TEOTWAWKI, hen you need only look at the history of money. History continued to be written after every single currency died. Have a read over this: http://projects.exeter.ac.uk/RDavies/arian/amser/chrono.html 9000bc to today... Every fiat currency died at some point. Ours may die next week or in 20 years. But physical object didn't disappear when these events occurred. I sit next to a frenchman at work. He tells me that his mother still counts in the 'old francs', before they updated again, the usual 100 old for 1 new trick (Stock split anyone?). Another guy I worked with was from Argentina... you know the drill. You don't have to cite Weimar to see where this is going. It happens every few years in many parts of the world, and I would hardly call France or Germany an economic or wealth backwater. Dollars are a transactional currency. If you have excess you are not meant to keep them. They are a tradable commodity and due to an oversupply their value is falling. Trade them or something permanent. It's simple really, and you don't need to be a doomer stocking up on ammo to survive. Fact of the matter is however, that the world is fragile today, and the transition WILL be hard for the unprepared, and that's pretty much every westerner sadly. Personally I see PM's just like most people see super. Saving for a rainy day \ retirement.
Totally agree. Silver isn't going to jump to such heights that someone will be able to buy real estate with a handful of silver eagles. At least we can't be so hopeful. So if the target is real estate, then you need to go bulk and go big if you want that big payoff at the end. We won't be living in an economy that trades silver coins or if we do, it will be very short lived, so I'm not seeing the dire need to hold bags of coin, either. And I totally agree about the productive capital part. Gold and silver are anything but. There are only THREE human activities that add wealth to a society - agriculture, mining and manufacturing. Anything else is just skimming the wealth generated from these three sectors. Well, that makes three other posters that I know of.
I have been in the proccess of offloading anything with a premium at each peak as of late and changing it over for more ounces. I let my emotions (pretty bar) get the better of me and purchase 25oz of Pamp suisse, and have regretted it ever since. I probably could have got 30oz for the same price That's just me though
I own a little PAMP gold, but I bought it like a collectable because people put a premium on it and will pay for it. As I'm sure you've found out, there's a nice market for those premium bars.
