Recession/Depression The U.S keep's on printing, Eurozone country's either keep on printing or start to all because the Euro is now too big to fail. Bank failures/runs Inflation maybe not next year but not too far along. You can only monetize debt for so far/long till it go's pop and I think the figures announced so far are just the tip of the Iceberg. Maybe a nice war to keep the sheeple distracted PM's to tank or stagnate for the first 1/2 of the year followed by big rise.
Peter Costello will re-enter politics as head of Liberal with Reith as his deputy and shadow treasurer. This forces Labour to reinstate Rudd, who then reinstates a broader resources 'payback' tax, to redistribute wealth. Liberal loses on the issue seeking to block it, returning Labour to power. R Paul will gain an 'i' for his middle name. Katter implodes after using the 'pigs bum' bomb in Parrrrrliament. But not before helping Qld gain a new govt and the most liberating gun laws in Qld, causing a massive immigration to the state of law abiding Australians. This brings prosperity to queensland whilst the rest of Australia becomes a Tasmania - without the benefits Paul Keating is not a happy man, never has been, never will be. Nugget will win a Ron Howard lookalike contest as long as he keeps shaving. Aus Police will purchase the latest crowd control technologies to disperse crowds - think soundwaves. NonRecourse will grow a strange white wart-like pimple on his tongue, and discovers amputation is only skin deep - unless ofcourse you cut deeper. StKilda FC will have a really bad year, again. Auspm will self-combust. Again And I will ask how many pieces of silver does it take to become a moderator on the forum, and disappear forever; soon after the Elliot Goblet poked in the eye joke is retold. And Intelligencier will reveal his new persona Savey Oh its going to be a good year, for the prepared, and
2012. Will be a bad year for Australians. Unemployment up. Total collapse of the USA and European economies. = Bad News Silver and gold to rise 20%.Silver Stackers numbers to reach 5000. Australian $ to drop.. Price of oil to reach $120. Katters Party to hold balance of power in Qld. Thats all folks. Regards Errol 43
Early deflation followed by massive amounts of money printing which is good for PM's. I really can't see the EU letting the Euro collapse. That's an absolute disaster for any politician. It's much easier to print more money and inflate to keep some semblance of an economy going. A deflationary collapse of the Euro would be so severe and so quick I couldn't see the pollies letting it happen. Remember, there was a coordinated (unprecedented) action by the ECB, Federal Reserve, BoE, BOC and BOJ to keep the European banks, and therefore the Euro alive. I expect even more of this co ordinated action. And there is always the Fed to step in and buy European Bonds. I don't count anything out. China will have a sharp slow down and that will have a major effect on Australia's mining boom and the full global disaster will finally hits our shores. I expect a 20% plus correction in our housing market pushing a lot of over extended people to the brink. Unemployment will rise to over 9%. Interest rates will go down to 2% or even lower. I cannot emphasise enough how governments around the world will try to devalue their currencies and we will be know exception. It will be a race to the bottom. This is going to be a bad year, but it's also going to be a bad decade. Keynesian theory is so ingrained now, the politicians are married to it. Never underestimate the stupidity and short sightedness of politicians. At most, they look 3 or 4 years ahead till the next election. The other big question is where oil is at? Are we near peak cheap oil or have we crossed the line? If it has forever gone, which I suspect, then there will be no forseeable growth for many years. And that's not even getting into the argument about sustainable growth. Gold will be $2200 + and silver will be 60+ by years end. Sorry, if it sounds bad, but I'm afraid it is! Decades of cheap credit feeding bubble after bubble doesn't get washed away in a few years. This could take the whole decade or longer.
When we think about leverage as an inverted pyramid, how much leveraged money is floating out there in the world? In the official and shadow finance sectors? Last estimate I saw was around $600 trillion. Now, when leverage boosts growth on the way up, it also magnifies deleveraging on the way down. A serious question I have is: "Will endless money printing even be enough to counter this tide of deflation, even temporarily?" Given I am asking this question, I believe the chances of hyperinflation are very slim, given that the endless money printing is trying to offset the wholesale destruction of dollars that a deflation would entail. Therefore, I believe the best case scenario for stackers would be "big inflation", not hyperinflation which seems like a fanciful fairy tale given the world is on the brink of HYPER-DEFLATION. When (not if) the world pours into the US dollar as a safe haven, it would take a monumental effort by "bond vigilanties" to destroy confidence in the US dollar. Because look, in a deflation scenario, the rate of inflation is negative. Even if a bond yields you a paltry fraction of a percent over a few years, adding the negative rate of inflation, you're actually doing OK. The bigger the deflation, the more you're ahead. This is why the safety of the US dollar is attractive and will continue to be in 2012. Hyperinflation is a POLITICAL phenomenon. Central banks and politicians must consciously choose to print. Hyperinflation will not occur any other way. Deflation is an ECONOMIC phenomenon. Economic cycles dictate that this is where the world economy needs to go. Without any meddling, this is the "natural" state of things at this time. Why would those in power want to hyperinflate? This means they have consciously chosen financial suicide as most of their wealth is measured in fiat. If bankers hyperinflate, they will destroy their own assets. If the Central Banks control the money supply, we will NEVER hyperinflate. Deflation actually benefits debtors (as long as the other party doesn't default). If politicians can somehow wrest control of the money supply away from the Central Bankers, we have a possibility of hyperinflation. This is because all their constituents, hocked up to the eyeballs in debt, would suffer under a deflation. ^ I believe this to be a central key in the whole hyperinflation scenario. And another thing - people assume that there will be a QE3, QE4, QE5 etc etc. I believe there won't be. There will be one big QE and it will need to be sustained given the fact that the deflationary tidal wave is so large. It has already started in the preliminary stages. Even then, I'm not sure a QE would be enough to even prop up a sagging stock market. QE2 was $600 billion. It seems obscene, but this is a paltry amount given the trillions and trillions that are under threat of deflating. This is why I believe there will be only one more QE - we don't have the luxury of "resting" anymore between QEs if the central banks choose the monetisation route (which they already have). Honestly, the most likely scenario is that PMs are going to preserve the wealth you currently have in a deflation scenario. People who are dreaming of becoming wealthy may be disappointed. But of course, there's no way to know how things are going to go given that so much of it depends on political and central bank responses.
It's too hard to tell. On the one hand * if the PMs crater as I suspect they will in 2012, stackers will have to sit on big capital losses while those with deposits will be making money (provided inflation is down). * If we move into deflation, the more we deflate, the more your fixed nominal term deposit will rise in purchasing power. On the other hand, if you put your money in a term deposit at 5%: * There is a very slim chance of a bank run, given Australian banks rely on foreign cash for 30% of their funding and the long term debt market is now almost frozen, forcing them to go into the short term market. * If you hold your deposit in Aussie dollars, then it may lose a lot of value if the exchange rate falls back to .70 or .60c US. Holding PMs may actually be better since they are denominated in US dollars. * Every time the Reserve Bank cuts interest rates, that means less on your return. The whole world is at near zero (ZIRP) and Australia is headed that way too.
My prediction is: People will keep talking about the price of gold and silver 'about to drop/about to explode', while the physical supply will become tighter and tighter as large money quietly moves in (moving out of the banking system). The general public (unaware that the prices are set by the paper market rather than physical supply/demand) will sit back and say that they will wait until prices drop due to deflation yet will then hit forums like this to moan about the premiums above spot and that they have to wait 3months to take delivery.
What happens when you factor in the estimated $1 quadrillion in derivatives and traders who dont care about up or down as they can profit either way ?
They were already factored in. They fall under the ECONOMIC category, which means deflation. They cannot make money out of thin air - central banks need to do that for them. Without political intervention and new money, the only way forward for this mob is deleveraging, given most of the derivatives are toxic and counterparties are set up to fail.
If a central bank has to choose between bankruptcy/default or printing money they will print, the endgame for all this printing will be inflation. The U.S itself has basically defaulted already with it's use of QE to devalue it's dollar against other currency's and it's use of the current rate of inflation of 2% is a joke. The cost of living is the actual rate of inflation not some core or non core index chosen on whim to hide the fact that everything is going up in price.
Until the debt as money system is addressed we are stuck in this paradigm of dodgy world banks and leveraged derivatives markets hiding the effects of a failed monetary system and as long as citizens continue to have fiath in this system it will remain to some extend. I think all commodities are set to increase in terms of paper money as paper money supply becomes more rampant and commodities continue to have limited supply based on there output. Either way its a great idea to keep stacking in 2012, until the reserve bank system paradigm is fractured i dont see gold and silver as bad investments - in fact some of the best parks for your cash around. Ill stick with a slow move up as stimulus and bailouts continue.. so: Gold $2000 Silver $65 But as we all know measuring in fiat is flawed and with the short term maniupulation possible with a fractional reserve paper money system short term is hard to call. Fundamentals have not changed since the gfc hit us in 2008 Oil price and middle east war/ china slow-down could disrupt demand for silver but investment demand, solar and catalytic convertors should see us right 1for1
Your reasoning is very similar to a former deflation proclaiming poster named Benjamin from some months ago. Your reasoning is deeply flawed. If you can't understand that deflation is the arch enemy of the financial system, globalism, corporations and interlinked govt's you are not trying very hard. Go study 'velocity of money' as the other component of hyperinflation, this may help. Apart from the newbs, I can't see too many around here taking you very seriously. There have been historical examples of contracts being rewritten after a hyperinflationary event, to reflect debt value in the newly created currency. Ordinary citizens are not allowed to prevail in such a financial system - which would be at the expense of the establishment. Severe deflation can only be an outcome if it is politically desirous to do so, ie. China now rules the world, and they decide to politically choose this course and have the power to do so. Instead of the world paying reserve currency tribute to the USA, this tribute now flows to China. If the rest of the world wants surplus producing nations to rule the world, then we most certainly will get deflation, however the reality is, the West is not going to allow this to happen. You write as if you don't have the slightest idea of why the price of certain assets have fallen recently, yet using it as an opportunity to push deflationary views, as Benjamin did. As PM prices rose, he went quiet. So the USA either exports its inflation at China's expense, or China appropriates the USA's wealth through deflation. Who do you think will win? Let me give you a clue. Which side has the most counterparty risk? Which side can... Are wars started because there are deflationary forces making commodities more abundant, or because valuable resources are scarce? In summary, if there is an oversupply of resources on this planet, and nobody really wants them, then deflation is headed our way. If there is an oversupply of paper representing claims on wealth which cannot possibly be fulfilled, then ... In uncertain times the status quo is a very reassuring thing to nervous governments. Politics is all about keeping the status quo for as long as it takes, until you can grab more power without opposition.
If you're somewhat correct in the end, then I will be obscenely rich. However, a few things I want to raise... 1) Severe deflation does not need to be determined politically. Deflation is the natural economic trend at this time. Deflation occurs when economies start to pay down debt, rather than create new debt. The hangover after the party, so to speak. But the amount of debt out in the world today is too great to be paid back. If all governments stopped their meddling right now, we would be headed straight into a severe deflation. No ifs or buts about this. This is where we currently are. 2) China does not rule the world. For the world's workshop, they've actually put themselves into a tight situation. They make a surplus, true - but then they go and spend it on US treasuries to keep their currency pegged. As you alluded to, they've welded themselves to US financial fortunes. Some are rich, some are better off, most are still grindingly poor and exploited. 3) For the US to "win" their inflation war, they will need to be creating more fiat than the world has ever seen - into the trillions and trillions. However, as you have mentioned, if the velocity of money plummets, then pumping liquidity into the system is not going to stop it deflating. The printing is only one component of the hoped-for inflation. The other is that it actually needs to be spent. There is the possibility that for all the printing that would be attempted, we may still plunge straight into deflation as deleveraging proves too great a force for the printing presses to defy. If the velocity of money is at a rate lower than the wave of defaults and credit contractions that would come out of a 2012 contagion, then that's deflation. In addition, the destruction of the US dollar in a hyperinflationary event would almost certainly mean an end to their seigniorage. I have not seen any argument that convinces me that the US would willingly want to give away this power, barring the need to finance a new war. And it would need to be willing, because hyperinflation is the conscious choice to print. It doesn't happen by accident. 4) There is an over-supply of goods and an excess of productive capacity in the world today. There is no direct opposition between paper wealth and goods circulating in the market, as you have made out. It is not an "oversupply = deflation" or "too much money = inflation" calculation. In fact, they go hand in hand because over-production must logically entail over-investment. So you DO see piles of goods that nobody wants AS WELL AS piles of leveraged money with claims to wealth. Productive firms are finding it harder and harder to sell their goods while the overleveraged paper is sitting in banks that don't want to lend, many of the counter-parties to said-paper already insolvent. In the end, the squeeze on the global rate of profit is making the least competitive of the world's productive enterprises go under, helping to drag the overleveraged financial institutions with them. And when the defaults begin (as they already have), this is DEFLATIONARY. Of course, you can try to keep things propped up by printing money for a while, but in the end, it's not the total supply of money in the world that is determining the current situation (because most of what has been printed by Bernanke is still locked up in banks unwilling to lend or parked in US Treasuries). In the end, the current deflationary situation we have is being determined by ECONOMIES THAT ARE LOSING PROFITABILITY AND HAVE BEEN FOR THE PAST 30 YEARS. The expanded money supply is just a symptom of this root cause, making us think we were actually doing better than we were. The 1980s stock boom comes to mind. The question then is, is all this printed money locked up in banks (that are too scared to lend) one day going to be unleashed in an inflationary storm? Obi-Wan Maloney certainly is hoping so. he thinks to baby-boomers are going to save us by snapping up real assets to counter a devaluing dollar. If this happens on a big enough scale - stackers will do very well. BUT IT NEEDS TO HAPPEN ON A VERY BIG SCALE. The problem is that damn American dollar is 80% traded overseas. There is no guarantee then, that priniting trillions in US dollars is going to mean hyperinflation in the US. And all the while, the spectre of deflation, in the form of hundreds of trillions of dollars in derivatives is unwinding. People don't seem to grasp just how massive a deflationary force this is going to be. Even money printing is not going to be enough to defy the fact that global over-capacity of productive resources, fuelled by a 20 year credit-binge, needs to come down. And that will be deflationary. The only question really to my mind, is if governments can engineer an inflation before this comes to pass.
There likely will be an inflation like you say there will be, and the governments will no doubt start printing money, but eventually all that moneys gonna have to be accounted for and thats when the inflation is going to happen. Like mike maloney claimed, there will be a sharp short term deflation followed by massive inflation.
When a nation is under a crushing debt burden, then it will likely try to print to get out of it. But the question is, can all this printing stem the deflationary tide that is coming? Let me try and put it into perspective. Last QE pumped $600 billion into the markets. The amount of derivatives in the world is estimated at 1200 trillion (or 1.2 quadrillion). Look at this: Now imagine the sun to be twenty times bigger. That's the size of the last QE vs the amount of derivatives that is now beginning to deflate in a chain reaction. The important thing about this chain reaction is that it doesn't stop for anything - like dominoes that have already been tipped over. So, when it becomes painfully clear that the tsunami is breaking, the Fed and every other organisation in the world with a printing press is going to start to print. But the money doesn't go straight into the hands of the people to cause a hyperinflation - it goes to the big banks and the government first. Then they'll procrastinate and argue while the tsunami bears down over everything. Then they'll argue some more, and more. Finally, they'll do something, maybe give tax breaks or money to people, but by then it will be totally inadequate to deal with the response. Any inflation the Fed produces could be instantly counteracted by the deflation tsunami (and then some). And the tsunami is still bearing down, wiping out banks and companies and investors. At this time, since the deflationary tsunami has not been countered, people will be flocking to the US dollar and US treasuries. This is because as everything is deflating, the US dollar will be able to buy more of everything, including gold and silver. Most of us here don't trust governments. In fact, we are literally banking on them to fail to respond to every crisis. So, why do we take it on faith that they will be able to respond with flawless efficiency and print us into inflation or hyperinflation? They've screwed so much up, they can screw this up as well. In the end they may fail to counter the deflation that is coming. If that happens, then you will want to be in US dollars. I'm not saying this will absolutely occur. In fact, i hope it won't, because I will probably lose a lot more than most other posters on this board. But, you have to seriously consider the possibility. We know they are going to print more money. But who has seriously considered the fact that the money printing will be inadequate and fail? We all just assumed (without thinking too much about it) that the printing will automatically mean inflation.
I realize I am showing my financial naivety but if one believes that one's holdings are going to tank why doesn't one cut one's losses? Am I missing a fundamental point? Again, thank you to regular posters for maintaining an interesting, intelligent and thought-provoking discussion. Neophyte
