OK, maybe not. Or should we.......? I probably have this hopelessly wrong, but a simplistic take on much of what is being said by the big guns is that the current credit bubble is unsustainable. I get that. They also say that all this credit has created bubbles in other assets. I assume this includes shares, property and metals. Money has been borrowed cheaply, then spent on these other assets, increasing demand and this prices. When (not if) the cheap credit starts to diminish, demand for these assets will fall and so will prices. So gold and silver should fall, yes? Does this mean we ought to turn our metal into cash? Would it be better to have paper money reserves instead of metal? They say, in a recession, cash is king. If the aforementioned scenario did transpire, wouldn't it be hard to sell metals in a falling market, if you needed the cash? I have a headache.
Why? Shouldn't I ask unless I'm a 'real' investor? No, not at the moment, besides the odd small shiny thing. I maintain an interest though, because my rock-solid, cast-in-concrete plans rarely survive more than a few weeks.......
Also from back in 2014 on the forum: http://forums.silverstackers.com/to...argest-asset-bubbles-of-recent-centuries.html
Are you talking about a credit crunch (contraction)? Similar to the GFC in 2008? Ask yourself, what would the socialist governments response to this be? Bail-outs and money printing to try and reflate the bubble? Acts that will effectively inflate and devalue the fiat currencies. IMHO people would not only be rushing for the exits from overpriced real estate and stocks, but they wont want to be holding a devalued fiat either. Whether it be physical cash or in an (unstable) bank is kind of irrelevant. Cash may be at a premium during the crisis, but if it's devalued via government policy response to the crisis then it's not where you want to be.... Where will people want to store their wealth in this scenario? Sure, there will be some who point to 2008 and say "Look PMs went down!" but have a look more closely at what happened during the government policy response from 2009-2011. People panic sell all sort of things to get liquidity during a credit crunch. Doesn't make it a rational or sensible thing to do.
Nothing so dramatic. I was trying to imagine the sequence of events that would commence when interest rates start to climb again, and look like climbing for a while. This would, at the very least, severely reduce demand for all investment classes, and would PMs be included? If somebody borrowed $250K recently and bought gold, then found that servicing that debt started to become a burden, surely they would exit? Maybe most PM purchases aren't funded by debt? In my mind, it would be a brave thing to do.
This won't happen. QE is more likely then interest rates increasing. There is a reason why central banks only decrease rates these days, because it's the only option, but at the same time they want to act as if they "could" raise them.
I'd look at as "what if GF3" came about tomorrow.., What will Australian dollar do? If you have no margin lending and no reason to sell will the stocks you hold recover? Have you diversified your investments? How safe is your job? Next GFC like the first GFC Australia did not cause it, we just ride the wave? Next GFC will Australian Dollar be seen as SAFE currency in relative terms? If so could $AUD get to over parity to $US? REMEMBER for a stock to tank from $10 to $5 someone got paid $5 where will that money go?
This dynamic between inevitable and imminent creates the paradox between preparation and action. We could all sell up today and be cash ready for tomorrow, and the next day, and the next day .... Of course we would lose any gains in the silver price in the meantime. I think the solution is to be ready for the inevitable with cash, food, water, metals etc for as long as you think you may need to ride it out. Other than that, keep what's left in metals. That's what stackers do. If you want to make a killing on the next GFC by buying on the monster dip, then you're a gambler/investor.
Cash is very important to have in any real major crisis. And if a serious GFC happens then I think it's probably safer to be holding gold than silver (in addition to the cash).
There is a 45 year global interest rate trend down, what do you imagine as the sequence of events that reverses this trend away from increasingly negative interest rates? As interest rates fall, credit goes up. You can see the 2008 gfc as a blip on this chart. There can only be one outcome from this, most peoples savings are being held as debt by others. These debts will become unpayable as negative interest cannot go negative fast enough*. Societies will demand their savings be replaced with new central bank cash creation. It's the only available outcome but I don't know when it will start. *unless we can find a way to accelerate negative interest rates and keep credit markets stable as we pass -10% in about 2022 and -20% in 2028 :lol:
Wow. That is the most profound statement I've seen on this site for some time. Impressive My line of thinking is all about the service-ability of the global sovereign debts. There is so much debt now that any rise in interest rates is going to be very traumatic for both private and public sector debtors. You can see now how hesitant the US Fed is, after years of trying to stoke a recovery any hint of an interest rate rise is sending markets into panic. The markets are incredibly fragile and confidence in the system is hanging by a thread. For me the only way we see a broad trend of interest rate rises is if the hand is forced by inflation threatening to run away. If we have inflation then the existing debt is less of an issue as it will inflate away and debt service-ability becomes less of a problem. Real interest rates (official rate minus inflation) would still be negative with inflation at 5% and interest rates at 2%. In a climate of negative real interest rates, PMs (and even other commodities) will outperform cash. In summary, in the near term we won't have rate rises without inflation rises forcing the hand of central bankers. If we have inflation then PMs are still a good place to park cash. The point to get out of PMs is when inflation starts to be tamed but interest rates are still rising and we return to positive real interest rates.
Money serves a matter of functions four: 1) MEDIUM of exchange 2) MEASURE or unit of account 3) STANDARD of deferred payment 4) STORE of value Modern credit-based fiat currency serves Functions 1-3 reasonably well. It's however terrible for Function 4.
Guys what is gf3? I personally believe there will be no paying back of any debt. All govt's around the world are heavily indebted and they will continue the trend until someone (who,?) Calls on that debt. There will be a default somewhere and when that happens there will be a ripple affect as it spreads like a disease to other parts of the world. Whatever happens from there, I'm not so sure about. SHTF scenario, or just a short period of time of chaos before a new currency is implemented and we start back at 0. Basically a reset of all sovereign debt. All current currencies will be worth 100:1 of course but any outstanding debt is calculated based on new market value. Another example of a govt's hosing their citizens. Cash will be taken first, as people will believe in it as a form of payment. But as it gets harder and harder to take out money from the banks, then PM's will be your best bet. That's the reason i won't sell my metals. They will be used to convert to the new currency.
