..explain why you feel there's a coming correction in precious metals?

Discussion in 'Silver' started by Ag, Jun 22, 2011.

  1. Guest

    Guest Guest

    You have lots of life experience giving you a unique perspective,are you a student?,new immigrant?

    Thats what stops revolution in the West,we have it to easy and take our freedom for granted.

    I can only pray in my life time i see a total dismemberment of our current form of government into something that works for the people and not for those who govern.

    REDBACK
     
  2. goldpanner

    goldpanner New Member

    Joined:
    May 12, 2011
    Messages:
    580
    Likes Received:
    0
    Trophy Points:
    0
    Location:
    Beyond the Black Stump....
    jpanggy

    I will pick one hole - your last statement about the US dollar - I dont understand your reasoning here! Why would eurozone or China be declared insolvent already?
     
  3. Ag

    Ag Well-Known Member Silver Stacker

    Joined:
    Jan 30, 2010
    Messages:
    1,394
    Likes Received:
    43
    Trophy Points:
    48
    Location:
    QLD
    There currency isn't the World reserve...US$ is
     
  4. Yippe-Ki-Ya

    Yippe-Ki-Ya New Member

    Joined:
    Feb 23, 2011
    Messages:
    5,465
    Likes Received:
    0
    Trophy Points:
    0
    Location:
    The Land of Guilty by Default
    I'm beginning to like you more and more...

    What the hell did we argue about before then? was it property? :D
     
  5. jpanggy

    jpanggy Active Member

    Joined:
    Jun 23, 2011
    Messages:
    1,668
    Likes Received:
    1
    Trophy Points:
    38
    Location:
    Melbourne

    Sorry, I think my writing was not clear enough.

    I might have exaggerated "a bit", but here is the after thought:

    If eurozone and china were to be in U.S's position of 14 trillion debt and 2 trillion GDP. Their currency would not hold as well as the u.s. has.

    Logically speaking, u.s is broke. They can't repay their debt at this point and the only reason their currency has not dropped to 0, it is because their industries do generate a lot of value. So, in case of total collapse of u.s. dollar, they still hold significant value. Who the hell wouldn't take over and control those companies or their I.P. if they can.

    China and euro zone, has manufacturing on their table, but they lag in terms of innovation. Innovation is the highest value generator and whomever holds the most of them will always have an advantage in whatever economical situation.

    So if eurozone or china was in U.S' shoe, their currency would have devalued much more than the dollar has. How much more, I don't know only a real world event will be able to tell.

    Consider this, if graphene can replace all industrial usage of gold at the price of carbon, as in the element "C". What would prop up gold's value? wouldn't silver become more valuable than gold?
    When orbital elevators become a common scene and we mine the asteroids, wouldn't that completely change the value of all the commodities?
     
  6. jpanggy

    jpanggy Active Member

    Joined:
    Jun 23, 2011
    Messages:
    1,668
    Likes Received:
    1
    Trophy Points:
    38
    Location:
    Melbourne
    I was:
    Underprivileged kid in developing nation (10 years)
    middle class kid in developing nation (5 years)
    Student in U.K. (2 years 50% scholarship)
    Student in Australia (4 years)
    Entry level worker, Sole trader, Corporate employee (4 years)
    Business owner in developing nation (3 years)

    And now I am:

    An unemployed bum trading PM and posting on SS
     
  7. Guest

    Guest Guest

    Your 28 years old?
    With that life experience

    Thats quite incredible

    So why are you unemployed?

    REDBACK
     
  8. Guest

    Guest Guest

    I think we mainly argued about your warped views on propertyBoom Boom ;)
     
  9. jpanggy

    jpanggy Active Member

    Joined:
    Jun 23, 2011
    Messages:
    1,668
    Likes Received:
    1
    Trophy Points:
    38
    Location:
    Melbourne
    By choice, trying to figure out what to do next. Had done so many things and most are affected by volatility.

    Not broke .... for now.

    Oh yeah, have 2 kids as well, one in kinder, one still a toddler, so a little hard to do full time employment at the moment. Trading pm give flexibility of time.

    Waiting for the kids to grow a little more so I can really get into android development and home renovation.
    I was educated in computer science and was an amateur builder, built my own home last year.
     
  10. Guest

    Guest Guest

    Awesome,well have to catch up for a tea sometime

    Going bye byes now

    Cheers REDBACK
     
  11. jpanggy

    jpanggy Active Member

    Joined:
    Jun 23, 2011
    Messages:
    1,668
    Likes Received:
    1
    Trophy Points:
    38
    Location:
    Melbourne
    sure, the monthly meet sounds good?

    I'm looking forward to that one already.
     
  12. projack

    projack Well-Known Member Silver Stacker

    Joined:
    Aug 12, 2009
    Messages:
    3,346
    Likes Received:
    586
    Trophy Points:
    113
    Location:
    Brisbane

    You have to understand what money is first.

    I will take this article down if any problem posting it here

    Direct or barter economies flourished long before the discovery of a medium of exchange or money. Despite the fact that coined money has been in existence for nearly 3000 years, barter economies still exist and function. Indeed, with the growing chaos within today's indirect or money economy, they are expanding everywhere. A barter economy is one where there is no "medium of exchange" so goods are exchanged directly for other goods. Credit - or lending and borrowing - certainly exists within such an economy. But there is a crucial difference. The act of borrowing or going into debt enables an individual or a group to consume more than they have produced for a period of time. In a barter economy, such borrowing is literally impossible unless there exists an individual or group which has produced more than they have consumed.
    This excess is what is available to be borrowed. Without it, there would literally be nothing to borrow.
    REAL Credit Versus "Money" Credit:
    If there is one book on economics and money which anyone who wants to understand the ROOT causes of today's financial malaise should read, that book is The Theory of Money and Credit by Ludwig von Mises. The title really does say it all and the book makes the REAL issues as clear as crystal.
    Mises defines "credit" as "an exchange of present goods for future goods". He then goes on to carefully separate the granting of credit into two distinctly different classes. There is credit where the lender gives up the use of a good for a set period of time in order to make it available to the borrower. And there is credit where control of what is being borrowed is NOT given up by the lender even though it is made available to the borrower. Von Mises calls the first instance "commodity credit" and the second "circulation credit". The difference between the two is crucial.
    No less crucial is the point that in a barter economy which does not use a medium of exchange, "circulation credit" is impossible. Only present goods can be lent for the very simple reason that future goods do not (yet) exist. The existence of circulation credit presupposes the existence and general acceptance of a medium of exchange, a money. As said before, a medium of exchange is a two- edged sword. It is one of the two or three greatest discoveries of the human mind because it has made economic progress possible. It is at the same time the greatest danger to a prosperous and therefore FREE society BECAUSE it is a medium of exchange. It allows anyone who acquires it, regardless of the means by which they acquire it, to "demand" any good or service available on the marketplace.
    Money is an economic good which has evolved into a medium of exchange. Honest money is a set and unvarying quantity and quality of that economic good. Money, like any other economic good, can be acquired in exchange for goods. And, like any other economic good, money can be lent by those who have it to those who don't. The other edge of the sword comes into being when it is no longer necessary to give up control of money or even to have any in order to lend it. This form of money is lent into existence. In reality, it does not exist. In the marketplace, its effects are all too real.
    Paper Money And Fiduciary Media:
    Any market economy evolves a medium of exchange or money. It does so by discovering which class of good or particular good is the most "tradeable" on the market. Once that discovery has been made - and it was made thousands of years ago - that good or class of goods becomes money. The class of good in question is the precious metals and, in particular, Gold. Gold becomes the money and circulates, usually in coin form. But inevitably, claims to Gold enter circulation too. These are issued by banks. A valid claim to Gold is a money certificate which can be redeemed at any time in full for the money itself, the Gold. If the Gold in the bank equals the amount of money certificates put into circulation by the bank, the issue of "fiduciary media" does not arise. When the bank issues certificates in excess of the Gold on hand for redemption, then this excess is issued in the form of fiduciary media.
    Bankers discovered this neat trick very shortly after the development of (paper) money substitutes many hundreds of years ago. All the paper was identical. Its full redeemability in money (Gold) was either explicitly stated or universally assumed. As long as the banks held enough money (Gold) to meet any expected level of redemption, they considered themselves safe. But as time progressed and as the issuance of fiduciary media grew, the exchange ratios between money substitutes and goods began to fall.
    In an attempt to "fix" this problem, Peel's Bank Act was passed in 1844 in England. The method chosen was to declare that all bank notes must be fully redeemable in money (Gold). The problem was that the banks had progressed in the meantime. By 1844, the major method of issuing new fiduciary media was no longer by issuing paper, but by granting loans. The banks had discovered credit expansion, a method which Peel's bank act did NOT cater for. With banks now banned from issuing unbacked notes, the granting of loans took over. Credit expansion came into its own. It has waxed fearfully ever since.
    Credit Expansion And Legal Tender:
    As the nineteenth century progressed, so did the problem of banks issuing ever increasing amounts of fiduciary media by opening checking accounts for their customers. Inevitably, the more "enthusiastic" practitioners got into trouble when they were found to be unable to redeem the notes they were lending into existence. This situation was characterised as the era of "Wildcat Banking" - especially in the US. At this point, there were two directions in which the banks could go. They could either give up the practice of issuing paper - directly and/or in the form of loans - in excess of the money they held with which to redeem it. Or they could look for a way to make sure that people would never show up with their money substitutes and demand redemption. Needless to say, the banks chose the second course.
    Through the late 1800s and on into the early 1900s, banks throughout the "developed" world ceased issuing their own "bank notes" (money substitutes). The process of issuing what circulated as money was centralised. By the time the US Fed was established at the end of 1913, central banks had become the only entity which issued the "money". The power of this new form of money lay in its "legal tender" status. Legal tender "money" issued by central banks became the ONLY legal way to service and repay debt. Banks could still create credit, but only central banks could create the means by which the debt could be extinguished. Credit creation was thereby rendered safe - at least according to the advocates of central banking and legal tender. After all, a "run" on a central bank is impossible.
    Financing The Government:
    To become prosperous or even to provide for its basic needs, any "society" needs a means by which life, liberty and property can be protected to the greatest extent possible. That need is met by government, whose legitimate and vital function is to "preserve, protect and defend" the lives of the governed. Like money, government is a two-edged sword. As in the old saying about fire - it is a faithful servant but a fearful master. Like any other social entity, a government needs resources to carry out its functions. If these functions are confined to its legitimate role, the resources it needs are moderate. If government functions are NOT so confined, it becomes an ever more insatiable drain on the resources of its citizens.
    Government is unique in two cardinal respects. First, it must hold a monopoly on the use of force as a prerequisite of being able to carry out its function. Second, since its functions (legitimate or otherwise) directly produce nothing in the way of tangible wealth, its operation is a direct cost to those it governs. It is at least conceivable that these costs could be met voluntarily, but they never have. Instead, government has always extracted its means of sustenance from its citizens without asking for consent.
    A "limited" government limits the methods by which they extract their sustenance. With the exception of the Civil War years, for example, the US government did NOT impose an income tax. It "made do" using such things as import duties, excise taxes, and legal fees and charges. In 1810, the population of the US was 7.3 million of which 1.2 million were slaves. A century later, the population of the US was 92.2 million people. Over that century, the (non slave) population of the US increased just over 15 times. The proportionate cost of the US government did not quite keep up. In 1810, the US government spent $US 53 million. In 1910, their spending had increased just over 13 times to $US 694 million.
    Again with the exception of the Civil War years, the US government financed only a minuscule portion of its activity by means of borrowing. In 1910, total government debt was slightly less than it had been at the end of the Civil War in 1865. For two generations, the US government lived within its means.
    Those two generations were a period of genuine economic growth unequalled in US or world history. There was no income tax, no central bank and no unified legal tender. Government debt remained stable throughout the period. There was no unfunded debt. In 1910, on the eve of WWI and the US income tax and central bank coming into being, US government per capita spending was $7.50 and government debt, $28.20. Compare that to what happened the next century. Government debt made it possible.
    The Best And The Worst:
    Between the end of the Civil War and the start of WWI, the US was the freest nation the world has yet seen. It was so for a number of simple reasons. The government did NOT have first claim on the wealth of its citizens, there was no income tax. The government ran within its direct means. Small deficits in one year were made up by small surpluses in another. As a result, the debt incurred during the Civil War was slightly lowered over the period. The government had not given itself the exclusive right to issue the money nor had it spawned a central bank. There was no welfare state and therefore no unfunded liabilities incurred by government promises. The result was that living standards rose throughout the period, in large part because the purchasing power of money increased - the flip side of falling prices.
    On the other end of the spectrum are the omnipotent governments or totalitarian states. Such a state literally "owns" its subjects. What is not expressly permitted is forbidden by law and draconian punishment. Economic calculation is impossible because markets are not permitted to function. "Prices" are set by edict and not by voluntary exchange on the market. Government budgets and government "debt" are irrelevant because the government comes first. In the absence of markets and market prices outside the totalitarian state, the end result is swift destruction of existing wealth followed by collapse and famine. With such assistance, a totalitarian state may survive, for a while, but only by reducing the vast majority of its people to a status of lifelong indentured servitude or outright slavery.
    The Mid Point?:
    The great economic and political fallacy of the twentieth century - the one whose legacy threatens to envelop us all today - is the notion that there is a way to "split the difference" between a free and a totalitarian society. The idea is that the government will not control the "lives" of its people, it will merely control their actions in the marketplace. It will "intervene" in the economy.
    As Ron Paul recently pointed out on LewRockwell.com: "The Nanny State Can't Last". The reason it cannot last is because the cost of "intervening" in the economy always grows to the point where it cannot be supported by the dwindling productive sector of that same economy. If the growth of the "nanny" or "Welfare" state was constrained by the amount of money the government could directly take from the people in taxes and charges, it would never have reached anything like the size it is today. Economic interventionism eventually REQUIRES government borrowing. It cannot be sustained without it.
    In 1913, the US government gave themselves the power to tax incomes and the power to cement banking lending practices in place by means of a "bank of issue" or central bank. What that central bank (the Fed) issued was legal tender. Nobody else was allowed to issue a medium of exchange. On top of that, only the Federal Reserve Note - the medium of exchange issued by the Fed - could be tendered in payment of debt. And the exclusive power to "emit" these notes resided, of course, with the Fed.
    With those two provisions, the US ceased to be a (semi) free country. The now legal tender "money" issued by the Fed began to lose purchasing power. The banking system stepped up its practice of credit creation since it was now under the protective umbrella of the Fed. That led to the "Roaring '20s". When that collapsed along with the stock market at the end of the decade, the borrowers collapsed and the banks collapsed under the weight of their "unfunded liabilities". Again, the government had a choice. Go back to fully redeemable money substitutes or underpin them with the DIRECT power of government. Again, the government took the second choice.
    The result, in the US, was the onslaught of the welfare state combined with a huge increase in government intervention in the economy and a plunge into government BORROWING. To nail down this huge increase in government power OVER the people, money was banned from the system by law. Federal Reserve Notes were no longer redeemable in Gold or anything else - except more Federal Reserve Notes. There was a new "reserve" behind the monetary system - the debt paper emitted by the US Treasury.
    The Case Against Increasing Government Debt:
    That case has been eloquently made by the history of the past century. From the beginning of recorded history, the number one impetus towards the issuance and the accumulation of government debt is WAR. In "modern times", the concept of "total war" involving the entire adult population of the contending nations began in the aftermath of the French Revolution with the Napoleonic wars. After Waterloo in 1815 and the extraordinarily benign (by any subsequent standards) set of reparation payments worked out by the Duke of Wellington - the world passed through as "war free" a century as history records. That era ended when the last non-aligned international "arbiter", the US, was drawn into WWI in 1917. The fact that those who coveted political power in the US could see this coming is proven by their successful efforts to set up an income tax and a central bank in the US less than four years earlier.
    No nation ever repaid the government debt incurred to fight WWI because all nations abandoned the Gold standard at the start of hostilities and NEVER returned to it. The money substitutes which serviced and (for a short while) repaid at least some of this debt was NOT the same money that had been lent to government in the first place. As the century progressed, the money issued by central banks became nothing more or less than a "lien" against the future productive capacity of the nation.
    In 1971, when the US became the last nation to refuse to "redeem" its currency in Gold to anyone, the future was assured. The government, through its central bank, had sole control over the only medium of exchange - by law. That medium was not redeemable in anything but "lawful money" - by law. That medium would be used to settle "all debts public and private" - by law. While private debtors still had to earn their means of payment, the government did not. They simply extracted from those who earned it and/or lent it into existence - by law. A HUGE blowout in "public debt" was guaranteed - by law.
    The Case Against Government Debt - PERIOD:
    A debt is an unfinished TRANSACTION. It is an agreement voluntarily entered into by BOTH lender and borrower to exchange present goods for future goods. Any economic transaction presupposes the existence of the goods being exchanged. If no goods exist, no transaction can take place.
    In the marketplace, a loan is successful for the lender if and when the terms of the loan are met in full by the borrower. It is successful for the borrower if and when he can fulfill the terms and stand with capital left over afterwards. If the terms of the loan are not fulfilled, both lender and borrower lose. The lender loses part or perhaps all of what was lent. The borrower may end up in jail. At the very least, he will find it more difficult or impossible to borrow in future.
    In the "private" world of the marketplace, the lender has no power to create what is lent out of thin air and the borrower has no power to create the means of "payment" using the same method. The goods or money must first be created or earned and then SAVED. The means of paying back the loan must be acquired the same way. In all cases of MARKET lending, force cannot enter the picture. There is no way to force anyone to accept a "legal tender" which settles "all debts public and private".
    A government produces NOTHING. Since it produces nothing, it has no ECONOMIC means of servicing or repaying any debt obligations it may take on. Its means are strictly "political". The only way a government can service and repay ANY level of debt it takes on is to extract the means from those who do produce wealth. Those who rely on the "full faith and credit" of government are relying on the exercise of naked political POWER. They are relying on the government to extract the means of payment from its citizens - or - to manipulate the terms of the loan (usually by manipulating interest rates) - or - to depreciate the purchasing power of the "legal tender" to make "payment" possible. In reality, government "creditors" are relying upon all three methods. The key to any government's power is its ability to consume more than it extracts in taxes and charges. Until that power is curbed, no solution to the global financial crisis is possible. Until it is abolished, no return to genuine political freedom is possible.
     
  13. jpanggy

    jpanggy Active Member

    Joined:
    Jun 23, 2011
    Messages:
    1,668
    Likes Received:
    1
    Trophy Points:
    38
    Location:
    Melbourne
    Let's see if I understand this correctly first.

    At present
    Paper Money = Medium of trade issued by government, backed by Ability of a government to extract means of payment from its citizens.

    If not, please point me out to a better term.

    Thanks in advance
     
  14. mmm....shiney!

    mmm....shiney! Administrator Staff Member Silver Stacker

    Joined:
    Nov 15, 2010
    Messages:
    18,606
    Likes Received:
    4,392
    Trophy Points:
    113
    Yep, pretty much got it nailed, except you didn't mention anything about blood, sweat or tears.
     
  15. jpanggy

    jpanggy Active Member

    Joined:
    Jun 23, 2011
    Messages:
    1,668
    Likes Received:
    1
    Trophy Points:
    38
    Location:
    Melbourne
    Lol

    Waiting for projack to confirm
     
  16. projack

    projack Well-Known Member Silver Stacker

    Joined:
    Aug 12, 2009
    Messages:
    3,346
    Likes Received:
    586
    Trophy Points:
    113
    Location:
    Brisbane
    Yep +1
     
  17. jpanggy

    jpanggy Active Member

    Joined:
    Jun 23, 2011
    Messages:
    1,668
    Likes Received:
    1
    Trophy Points:
    38
    Location:
    Melbourne
    Then wouldn't by that logic, it extends to this:

    To the rest of the world holding the dollar
    U.S. Money = the ability of U.S. Citizens to pay to the rest of the world ?
    or
    the ability of the government of U.S. to make them pay the rest of the world?
     
  18. projack

    projack Well-Known Member Silver Stacker

    Joined:
    Aug 12, 2009
    Messages:
    3,346
    Likes Received:
    586
    Trophy Points:
    113
    Location:
    Brisbane
    You see this past century has seen every succeeding generation swallowing government policies that their forbears would have contemptuously rejected as insufferable nonsense.
     
  19. errol43

    errol43 New Member Silver Stacker

    Joined:
    Apr 13, 2010
    Messages:
    5,993
    Likes Received:
    15
    Trophy Points:
    3
    Location:
    Bundaberg
    IMHO. The stock market is about to collapse even worse than 08..No more bailouts or handouts, the economies of many countries will suffer as will all the people. High oil and energy prices will bring many countries to their knees..

    It's all over red rover.

    Our leaders are useless in having any foresight to protect us , our children or grandchildren for the hard times ahead. They are only interested in promoting handouts to remain in power at the next election.


    Do you ever hear them talk of higher petrol prices without blaming each other when the real reason is hidden from the sheeple.

    End of outburst

    Regards Errol43
     
  20. col0016

    col0016 Active Member

    Joined:
    Jan 4, 2011
    Messages:
    2,466
    Likes Received:
    4
    Trophy Points:
    38
    Location:
    Australia, Melbourne
    For all you guys arguing about whether or not gold and silver are money- it was legally into currency in Utah recently.
     

Share This Page