Hi all, I am new to investing and definitely new to precious metals. I think I understand all the arguments for the increases in value we will see in the future and I thought I had a handle on it. I encountered a gentleman tonight who, although agreed that silver's value would rise somewhat, felt strongly that the market would correct itself as it has done for years. His argument mainly was that historically, other markets that rise in value to the USD would simply buy everything in the weakened US market while it was cheap and that the US market would then increase in value and stabilise. Sound economic theory. I argued about the overarching deficit, the non stop creation of fiat currency, Zimbabwe, the paucity of silver, all of which would lead to worldwide currency destabilisation and then a new currency standard etc...... to which his reply was that the market has sufficient redundancy to correct itself. I hope I am not too naive in asking: Does he have a sound argument? Is there sufficient redundancy? If this is all old hat....please direct me to where I can learn more.
IMHO, the guy does have the basis for a sound argument, but he's assuming that the current situation is similar to the historical situation and I don't think that is the case - the U.S. outsourced their manufacturing base to China, they're creating vast amounts of money from thin air to create liquidity in the financial markets (and a lot of other economies are doing the same thing) and they seem to have no inclination towards tightening regulations to stop the same kinds of craziness that happened recently from occurring again. The market does have some redundancy to absorb the effects of all those factors, but it isn't unlimited and things like the QE2 program put that capacity under a lot of pressure. I think you're both right to an extent, but I wouldn't bank on the other guy's position that everything will be fine.
The market corrects itself ALL the time. Your friends arguments would have worked in the 60s 70s and 80s - but not anymore. The world has kinda woken up to Money and how it works - plus we are on the Verge of the Number 1 economy imploding and taking down the paper money of the world into the garbage bin of the history. Not to mention the high likelihood of nuclear war next year.
Some people will and are doing the sort of thing he suggests. The problems come when confidence in the dollar collapses. They might not end up with a bargain if the dollar drops further still. Crunch point is starting to look a lot closer now. If they raise rates sovereign debt crisis in the US and/or another, worse, downturn could be on the cards.
Arab revolutions around a Nuclear State. Islamic, Christian and Jewish prophecies. The world is due for a major war. The USA is imploding so the hegemon will be nomore - so there will be some reshuffling in places. Paper money of the world collapsing and huge wealth transfers. The peace before the storm.
I agree we're in unchartered territory with the current world currency on its way to failure and a new world currency being prepared, but I'm not sure about nuclear war. There is a strong possibility of war but I think everyone except a few crackpot dictators know the consequences of nuclear. More likely is meltdown again somewhere.
Well the previous Nuclear bombs werent deployed by crackpot dictators but by a democracy and a beacon of light in the world and such garbage. The next nukes will be dropped by a democracy and it will be the new beacon of light. The new state to assume global superpower status will have to display military might ( just like ww1 & ww2) - and it will do it dazzlingly. You just wait - the next year is the prime candidate - half the world expects something big to happen anyway - so they wont be disappointed .
That is EXACTLY how it is supposed to work with currencies, however it only works on a gold standard. When you can create dollars at the strike of a keyboard, they kind of lose their relevance.
The market has absolutely NO redundancy to compensate for itself. Markets rise and fall on the accord of investors or supply and demand. They also rise and fall on the accord of wicked manipulations, too, which is why the markets are not behaving the way they are supposed to be. It will either end in deflationary collapse or an inflationary collapse THEN a deflationary collapse. It will end in deflationary collapse. PERIOD.
Thanks for your input. I really appreciate it. i agree that his argument sounded correct. It's the fact that we're at the end of a larger cycle and that a new order will recommence (whether it is based on gold or not) that is the important point. Old redundancies won't be relevant. At the end of the day, he didn't even believe the world was printing money, only the US. Its difficult to argue with frogs who started in the cold pot eh? benjamind2010 , your remarks are absolutely correct. It is supposed to be a free market, the manipulations are the cause of the problem otherwise it would have corrected itself already. Thanks for reminding me of the why guys. As for another world war.......let's hope it doesn't come to that to bring people to their senses.
