I am reading a book called 'The Great Crash Ahead' by Harry Dent. He is an economist and a futurist and he is predicting that the price of gold and silver will drop this year: http://www.youtube.com/watch?feature=player_embedded&v=6mbxfGT0o84 The guy was accurately able to perdict the lost decade in Japan and the 2008 crisis (amongst others) based demographic trends. He does therefore have some legitimacy. Here is a quote from page 14 of this book: "Here is where we perhaps have the most shocking of our forecasts for the ears ahead in this deflationary crisis: THe US Dollar will appreciate and be a safe haven - not gold, silver, the Euro or the Swiss Franc. Chart I-3 (in the book), which graphs the US dollar index from 1980 to 2011, shows that the US dollar was debased in the boom. It peaked in value in 1985 and has fallen nearly 60% in two major crashes. It was the massive creation of $42 trillion in private debt, which grew 2.65 times the growth of GDP from 1983 to 2008, which created massive amounts of new dollars and devalued the US dollar. Since the financial crisis in 2008 and early 2009, the dollar went up 23%! Gold and silver went down. Oil crashed most extremely. Stocks here and around the world all crashed. Real estate crashed. The dollar was the safe haven in late 2008, and it will be the safe haven for likely many years to come in the period of debt deleveraging ahead." "During the periods where there is the perception of a financial crisis, gold and silver rise. But when the crisis actually hits, they fall and it is the dollar that rises. Why? During a financial meltdown, the massive $42 trillion in private debt will see major write-offs and restructuring and that destroys dollars. By destroying dollars you make them scarce and valuable again - you actually reverse the debt and credit bubble - and fewer dollars mean fewer dollars chasing consumer goods, or deflation in prices, not inflation! Understanding the difference between deflation and inflation is the key to prospering in the crisis unlike any you have seen in your lifetime." I am thinking of buying silver at the moment but not i'm unsure whether it is the right thing to do. What is everyones thoughts about this guys arguements? Is he working on flawed assumptions or is he generally correct?
Harry Dent also predicted the Dow Jones would get to 40,000, and NASDAQ 20,000, by 2009. IMHO the only predictions Harry Dent is good at, are the ones involving upcoming changes in demographics as we get aging populations. His forte is demographics, but he extrapolates too far.
They are arguments beyond my economic ability. If gold and silver drop, so will the aussie dollar. At the moment due to the high exchange rate we are seeing exceptional value for the white and yellow metals in Oz. You got 3 choices as I see them: 1. Buy gold and silver now at extremely good prices while the AUD is high because it is overpriced (or should I say the USD is underpriced? Nah it's all stinkiing fiat) 2. Keep your cash as Aussie $ and watch the price of gold and silver rise, then possibly tank along with the AUD in the coming 27 1/2 months. 3. Buy USD or even JPY (yen not John Paul Young) with your AUD. Which of the 3 presents the highest risk? Or rather, which is the safest option based upon your knowledge? You are the one that has to make the call with your funds. Me? I go 1. Edit to add: I changed my prediction
And yet, didn't gold bounce back and go on to record new highs, as did silver and oil? It is true that naturally, we are staring down the barrel of deflation and what he predicts is a possibility. But let's put it this way: You put your money into US dollars and there is massive deflation: If his theory is correct, US dollars will win out and gold and silver will drop, but they won't crash to nothing. Also, the US dollar will surge to strength while the Aussie dollar would likely weaken. What currency are PMs measured in? What you care about holding PMs is that their price falls slower than what you want to buy. Thus purchasing power may actually increase. US dollar would be king, but gold would be a runner-up. If you look at the 2008 experience, gold took a hit and bounced back. Silver took a bigger hit and took longer to recover. You put your money into US dollars and there is massive inflation: You lose. Utterly. Your investment is confetti. Gold and silver will likely be worth a lot as faith in paper currency is deeply shaken. So the choice is between outright winning and utterly losing OR somewhat winning and outright winning. Ask yourself this: with all the uncertainty around the world in terms of paper and financial instruments, do you want to take your chances on US paper or precious metal? Both have their risks and it's up to you to decide.
What he didn't predict was the amount of knowledge and information out there freely available on the internet. Will you want to hold a piece of paper or something tangible? Alot of people are starting to wake up and this will accelerate to the masses. I would rather hold gold and crash with it then hold US dollars or any other fiat currency. If the US dollar becomes more valuable then obviously people still treasure labour, work and services. You can always work to make fiat money while holding your gold. If your on the wrong side and choose to hold dollars rather then something tangible. Then you have to weigh up how much gold you can buy when your labour is valued less and fiat is valued less compared to gold (increased purchasing power). Buy enough on what you are comfortable holding or put 50% in gold and 50% in cash. Slam
I know another Economist whom believes both Precious Metals (i.e. Gold n Silver in this case) and the current Monetary System will collapse this year. He goes on to say other crazy stuff:
When was this published? In my opinion, the USD index is a total load of shit. It is only a matter of what those dollars buy you. Here are a couple of more telling charts; http://stockcharts.com/freecharts/historical/djiagold1980.html The Dow peaked at $14146 in late 2007 and crashed to $6547 in early 2009, recovering to about $1100 in 2010 and only just settled above $1300 yesterday Gold peaked at $1004/oz in early 2008 before dropping to $705 in early 2009, recovering to its pre crash high a year later, pushing past it to post numerous high and is now trading around $1770/oz. What do you think held its value ie buying power better? USD or gold? Do the same exercise comparing to S&P500, median house prices, you name it. It has been proven throughout history to be the best store of wealth and hedge against financial instability or currency debasement. The US is so far under I doubt it could deleverage without causing a depression
I personally feel very uncomfortable with the US dollar as a currency to invest in. The printing presses keep printing and creating dollar bills from thin air! The massive US debt combined with that "out of control" currency cannot continue and will end in tragedy when the US$ loses its status as the worlds Reserve Currency. Already there is talk of change in that arena which will only lead to more (downward) pressure on the greenback. The currently weak US $ is great for the US economy and has (probably) been artificially induced to do just that - make USA goods more attractive for outside USA buyers! This seems to be working if you consider our recent retail statistics and the moaning of the retail segment here in AU. With the MASSIVE debt incurred by the Obama administration I really doubt that the USA will be able to recover based on the current financial model and will require a massive re-organisation of the monetary system in the USA and subsequently potentially worldwide. We live in highly troubled times, and the current boom environment we are blessed with in in AU cannot and will not continue because what goes up must come down! History proves that Fiat currencies fail without the solid backing of PMs. Romans, Germany WW2 and now the US$. Nixon started the US downfall back in the early 70's by removing the Gold Standard! As for me! My paper currency is being converted into precious metal - silver and silver and silver, because it has a far greater growth potential than any other PM. To quote a famous Australian! "Spooky, very spooky!"
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Be careful not to confuse the Dow with the US Dollar. The USD did appreciate in value (100% compared to the Dow and 40% compared to gold) during the 2008 crash. Having held USD would have allowed one to purchase twice as many units of the Dow and 40% more gold. Dent is suggesting that when the crash comes, this will happen again. Whether he is right or wrong depends on the extent to which QE is exercised.
they do write off a billion of debt but then magically produce another trillion, cant do that with your gold unless they go to your vault/hiding place and physically take it. However with your fiat they dont need to give ure deposit box/pillow a visit, hyperinflation/inflation will do it. If deflation does hit all asset classes take a hit but gold probably the least so an increase in purchasing power. QE will be deployed all over the world to keep the machine running; if it did come to write offs so many banks would fold and they will not let that happen
