Silver is Approaching Stage Two of its Bull Market - James Turk

[benjamind2010]

In the case of severe deflation, would it be better to be in Aussie cash or US cash?

USD, with absolute certainty. USD is the global reserve currency and is the standard monetary asset that investors seek when a RISK OFF market environment causes panic selling.

The AUD is a currency that is considered riskier (perhaps not fundamentally) to trade in such an environment. In 2008 the AUD collapsed, from over $0.98USD to under $0.63USD, that was caused by a RISK OFF market sentiment and as a result the USD gained enormous strength in that environment. USD has since retreated, however it is due for another major rally which should occur between now and the next 18-24 months. Conversely the AUD is due to plummet, with a major corrective low to occur in the next 18-24 months. Such low could reach as far down as $0.40USD, so that is why I am suggesting USD as being the much better option when deflation begins in earnest as a result of a panic sell-off.

What's more, with USD you'll be able to purchase far more silver, gold, commodities futures, etc, if you are in USD than you will if you are in AUD.
The reverse is true right now, and silver is cheaper in AUD than in USD. That is going to change over the next 1-2 years, so right now there is probably no better time to divest yourself of AUD and convert to USD. Sure, the AUD could rise to $1.04USD in the meantime, between now and deflationary collapse as will be seen in price action, but I am an investor and I do know that it is virtually impossible to pick the best price to sell and/or buy any asset, including currencies. But you can at least come very close to selling AUD at what will likely to be it's intermediate term peak.

The next market sell-off will be more or less catastrophic to risk assets and especially any leveraged long positions. So consider yourself well warned in advance.

 

[intelligencer]

And here's a warning for you, well in advance....

The USD is toast. Kaput.

More than a third, maybe even a half of all USD are outside of the US.

Whether deflation or high inflation ensues, these dollars will find their way home like carrier pigeons, creating a tsunami of USD and result in hyperinflation.

Dollars are abundant. They have no real value.

You're going to end up holding the bag.

Consider yourself warned.

In the case of severe deflation, would it be better to be in Aussie cash or US cash?

USD, with absolute certainty. USD is the global reserve currency and is the standard monetary asset that investors seek when a RISK OFF market environment causes panic selling.

The AUD is a currency that is considered riskier (perhaps not fundamentally) to trade in such an environment. In 2008 the AUD collapsed, from over $0.98USD to under $0.63USD, that was caused by a RISK OFF market sentiment and as a result the USD gained enormous strength in that environment. USD has since retreated, however it is due for another major rally which should occur between now and the next 18-24 months. Conversely the AUD is due to plummet, with a major corrective low to occur in the next 18-24 months. Such low could reach as far down as $0.40USD, so that is why I am suggesting USD as being the much better option when deflation begins in earnest as a result of a panic sell-off.

What's more, with USD you'll be able to purchase far more silver, gold, commodities futures, etc, if you are in USD than you will if you are in AUD.
The reverse is true right now, and silver is cheaper in AUD than in USD. That is going to change over the next 1-2 years, so right now there is probably no better time to divest yourself of AUD and convert to USD. Sure, the AUD could rise to $1.04USD in the meantime, between now and deflationary collapse as will be seen in price action, but I am an investor and I do know that it is virtually impossible to pick the best price to sell and/or buy any asset, including currencies. But you can at least come very close to selling AUD at what will likely to be it's intermediate term peak.

The next market sell-off will be more or less catastrophic to risk assets and especially any leveraged long positions. So consider yourself well warned in advance.

 

[Aurora et luna]

In the case of severe deflation, would it be better to be in Aussie cash or US cash?

USD, with absolute certainty. USD is the global reserve currency and is the standard monetary asset that investors seek when a RISK OFF market environment causes panic selling.

The AUD is a currency that is considered riskier (perhaps not fundamentally) to trade in such an environment. In 2008 the AUD collapsed, from over $0.98USD to under $0.63USD, that was caused by a RISK OFF market sentiment and as a result the USD gained enormous strength in that environment. USD has since retreated, however it is due for another major rally which should occur between now and the next 18-24 months. Conversely the AUD is due to plummet, with a major corrective low to occur in the next 18-24 months. Such low could reach as far down as $0.40USD, so that is why I am suggesting USD as being the much better option when deflation begins in earnest as a result of a panic sell-off.

What's more, with USD you'll be able to purchase far more silver, gold, commodities futures, etc, if you are in USD than you will if you are in AUD.
The reverse is true right now, and silver is cheaper in AUD than in USD. That is going to change over the next 1-2 years, so right now there is probably no better time to divest yourself of AUD and convert to USD. Sure, the AUD could rise to $1.04USD in the meantime, between now and deflationary collapse as will be seen in price action, but I am an investor and I do know that it is virtually impossible to pick the best price to sell and/or buy any asset, including currencies. But you can at least come very close to selling AUD at what will likely to be it's intermediate term peak.

The next market sell-off will be more or less catastrophic to risk assets and especially any leveraged long positions. So consider yourself well warned in advance.

I have already converted my Aussie dollars into real US dollars. It's goes by another name; Gold and Silver
High transaction fees for converting Aussie dollars into US dollars and then back to Aussie dollars in the future to buy gold and silver makes absolutely no sense to me.

 

[topend]

Silver just launched itself through $32, while over at The Age online our 5 most viewed stories are:
- Footballer had sexual relations with 17 year old girl
- Bookshop going out of business
- Footballer going to be sacked
- Bookshop going out of business (again)
- Something about Warney and Hurley

Sounds like there's still ample time left for stacking before things start getting really interesting.

Thats the way the World works and the Government makes sure people have the venues to follow those type if intrests, Then there are the thinkers (wink-wink) who need to fly under the radar, IMHO.

 

[millededge]

There's a fresh article quoting Turk on KWN, stating that this is the first time we have come to options expiry (March) with silver in backwardation.

Article is sensationally titled. I'm a bit cynical after several years. Wake me up when we hit $50

http://kingworldnews.com/kingworldn...r_Squeeze_in_Silver_Could_Be_the_Big_One.html

 

[millededge]

Don't get me wrong. Backwardation at options expiry = short squeeze.

 

[zygote]

In the case of severe deflation, would it be better to be in Aussie cash or US cash?

USD, with absolute certainty. USD is the global reserve currency and is the standard monetary asset that investors seek when a RISK OFF market environment causes panic selling.

Why do you think that will always be the case? America's weapons cache and China's export market are the only (good) 2 reasons I can think of.

 

[Turk]

And here's a warning for you, well in advance....
The USD is toast. Kaput.
More than a third, maybe even a half of all USD are outside of the US.
Whether deflation or high inflation ensues, these dollars will find their way home like carrier pigeons, creating a tsunami of USD and result in hyperinflation.
Dollars are abundant. They have no real value.
You're going to end up holding the bag.
Consider yourself warned.

So much truth in so few words.

The AUD is generally considered to be a very safe currency apart from periods of commodity down turns and relative to silver outperformed EVERYONE but Japan last year. High risk indeed!

Once again, with absolute certainty, I caution against following benjamind2010's unique perspective; he seems to have taken the blue pill - in liquid form.

In 20 months time the USD will indeed be toast - and will possess less than 50% of it value today. The Aussie dollar will continue to appreciate - perhaps reaching around USD$1.20 later this year.

I cannot emphasize enough how utterly devastating it will be to the USA when their dollars 'come home' - as intelligencer points out above.

There will be blood in the streets of NYC.

 

[thatguy]

...
Dollars are abundant. They have no real value.
You're going to end up holding the bag.
Consider yourself warned.

...

There will be blood in the streets of NYC.

This statements needs a clause of ' 'more then normal' ;p

Thus collapse time frame for the usd has been a difficult one because of its reserve curreny status, if this was any other currency i would have thought it to be months ago.
But the usd is quite unique in that is 'the' reserve currency of the world and oil is purchased in usd. This i think will mean when it is over it will be sudden and catastrophic... Which i cannot see as a good thing for anyone
The usd is a real walking zombie!

 

[benjamind2010]

If the dollars find their way home during an deflationary period it will likely be because they are being used to pay down debt. While the US government/people are up to their eyeballs in debt these dollars are needed to pay pay it down. From the reading I've done on the subject cash becomes very valuable during times of deflation so I would be interested in your interpretation on why to expect hyperinflation during a deflation.

This is precisely the point I was trying to make. Deflation first, then possibly hyperinflation later on. You can trust the US government to attempt to print money ad infinitum but it would have to get really bad before they considered taking that option (ie, Dow below 2000 points, S&P below 300 points, etc)

Only when USD has hit it's next peak would I consider trading it in for silver or gold, as that will be the same time when gold and silver become much cheaper. So, waiting for deflation, then buying precious metals at liquidation prices, then holding on to the investment for a few years until you get runaway inflation where you'll be able to buy a house with a few ounces of gold, seems to be the best way to protect yourself from the inevitable.

 

[intelligencer]

More than a third, maybe even a half of all USD are outside of the US.
Whether deflation or high inflation ensues, these dollars will find their way home like carrier pigeons, creating a tsunami of USD and result in hyperinflation.
Dollars are abundant. They have no real value.

If the dollars find their way home during an deflationary period it will likely be because they are being used to pay down debt. While the US government/people are up to their eyeballs in debt these dollars are needed to pay pay it down. From the reading I've done on the subject cash becomes very valuable during times of deflation so I would be interested in your interpretation on why to expect hyperinflation during a deflation.

I think definitions of "deflation" are what is confusing most people. It is true that monetary deflation was observed when M3 began to contract briefly. This is the phenomenon of debt being paid off, or 'deleveraging' etc. It is that disappearance of debt money that gives the deflation argument its premise.

But as we all know, the Federal Reserve and Ben Bernanke are hell bent on keeping the money supply expanding. QE1 & 2 are visible manifestations of this. Debt money is disappearing only to be replaced by money from the printing press.

It is this 'remedy' that is leading not to deflation, but inflation as we see in the rising prices of commodities, silver and gold.

That initial monetary deflation will never ever become price deflation. That is what benjd is arguing. That we will see price deflation ensue. It just will not happen. Ben Bernanke is well versed in the economics of the Great Depression. He is a card carrying inflationist. He didnt get his nickname of Helicopter Ben for no reason.

As Faber and others say time and time again, the printing presses are on at full speed. A hyperinflationary collapse is devastating but as has been shown time and time again allows a reboot to the same system with a new coat of paint. It is usually short and sweet compared to a decade long deflationary spiral that the Great Depression was.

Why I say that deflation or hyperinflation will bring dollars home is:

1. In a hyperinflation scenario, anyone holding dollars including foreigners with USD will spend them furiously leading to even more money washing into the system.

2. In a deflation, the external dollars will buy more and more American goods and assets so you'll have these foreign dollars re enter, thus acting as a check on further deflation.

Scenario 2 is not going to happen though. The Fed has already embarked on the course of the more palatable hyperinflation reboot of the system.

 

[Dynoman]

This is precisely the point I was trying to make. Deflation first, then possibly hyperinflation later on. You can trust the US government to attempt to print money ad infinitum but it would have to get really bad before they considered taking that option (ie, Dow below 2000 points, S&P below 300 points, etc)

Only when USD has hit it's next peak would I consider trading it in for silver or gold, as that will be the same time when gold and silver become much cheaper. So, waiting for deflation, then buying precious metals at liquidation prices, then holding on to the investment for a few years until you get runaway inflation where you'll be able to buy a house with a few ounces of gold, seems to be the best way to protect yourself from the inevitable.

One of the cylcles/sentiment traders I follow also believes that we will see a deflationary period coming up, but he is of the opinion that we are going to see a large spike up in precious metals/large spike down in the USD first (in the first half of this year).

http://www.smartmoneytracker.blogspot.com/

He's made come good calls in the past.

We are setup for a decent run in the metals in the short term in my opinion, we've already been through a decent correction, USD looking weak, commercial shorts fell to lower than they were July last years, etc. I think he could be spot on the money and we see a large run in Gold/Silver short term.

The thing is if we see Gold peak at say US$1600 and then fall back to $1200 in a deflationary collapse and US dollar rally, we could see other commodities collapse and faith in the AUD fall, it could mean that the AUD price of Gold soars to higher than we saw at the US price peak during the deflationary collapse.

If things play out as expected by Gary on SMT then it might be worth selling Gold/Silver equities in the rally early this year, but holding onto or increasing positions in physical (if you are based in AUS).

Perhaps the correction had more to do with demand. Up until the end of 2010 every single oz of physical was traded for industrial or bullion. So my feeling is the price drop in Jan wasn't so much a correction but a market lull driven by slow trading post Christmas. Now things are back to normal I'm expecting $60 by the end of the year. My post yesterday on the PV market & China's strong reliance on Silver as an important commodity is one sure reason why this will happen. A physical call on JP will shut the doors & drive the Ag price sky high.

 

[intelligencer]

Debt money is disappearing only to be replaced by money from the printing press.

Not sure I understand what you are implying here.

As far as I'm aware there has not been any change to the way it's created, it's all still debt money. The difference being that the Fed is buying up a lot more of the debt as foreign holders reduce their level of buying.

It still has to be paid back unless you are suggesting the Fed will allow the US Government to not pay it back!

Debt monetisation.

When money is issued as a bookkeeping entry; ie debt created and the resulting money enters the circulation, there is an assumption that the money will eventually return to annihilate the debt. Its zero sum.

When the public buys bonds or debt ( and instruments of debt) the process is not inflationary, as they are spending money already in the system to buy that debt.

Now if we come back to that contraction in the monetary base that occurs when people all of a sudden switch to paying off debt; that is potentially a trigger for price deflation as the monetary base contracts and remaining dollars become more valuable.

To counteract this, the government issues debt not to the public, which would only exacerbate the problem of contracting the monetary supply; but rather to the central bank. It can be indirect (ie via the publc or institutions) but the net result is that the central bank purchases the governmnent bond (debt) and issues freshly printed money into the system.

So in effect it is saying, if the public arent borrowing, or indeed if they are settling their debts; then the government borrows in their stead to keep the monetary base growing.

Hence even when deleveraging of private debt is contracting the money supply, the government and central bank are replacing it and then some, via quantitative easing aka debt monetisation aka turning on the printing press aka inflation.

 

[intelligencer]

When the public buys bonds or debt ( and instruments of debt) the process is not inflationary, as they are spending money already in the system to buy that debt.
To counteract this, the government issues debt not to the public, which would only exacerbate the problem of contracting the monetary supply; but rather to the central bank.

You are suggesting that the buying of US treasuries has moved from the US public to the Fed, when from my observation it has moved from foreign countries (e.g. China, Japan, etc) to the Fed.

It wasnt the point I was making.

http://www.shadowstats.com/article/277-liquidity-crisis-update-money-supply

The money supply doesnt contract because people suddenly start burning paper money as fuel. The contraction occurs due to paying off of debt. The money creation occurs due to borrowing and vanishes the same way when the money is paid back.

It is this contraction that the Fed is fighting with the printing press.

Foreign countries buying US debt / treasuries is part of their own strategies of "sterilisation" of USD that arrive as trade surpluses. Make no mistake that the Fed will also gladly buy out all these debts with the money they are printing. The problem is that all that excess money created to buy out these foreign held treasuries leaves the money in the world economy with no leash to control it any longer. It simply gows the monetary base and is highly inflationary also.

 

[intelligencer]

I think the assumption you are working on is that the Fed will just be able to keep pumping out the dollars to counter any debt deflation, to the point of hyperinflation/destruction of the dollar.

benjamind2010 has stated this is what he sees as the eventual outcome as well, but following a period of deflation.

A lot of the US is against the monetary policy that the Fed is chasing and I could see QE3 being blocked or at least it looking that way for sometime at which point deflation could quickly take hold for a short period of time decimating asset prices, before the Fed is once again given the all clear to continue with their 'printing'.

There are a lot of commentators riding the 'hyperinflation' bandwagon... reason enough to be wary of expecting it in the short term and looking at other possible scenarios.

What I'm saying is that the monetary deflation that you can observe at several points since 2008 will not be allowed to become manfifest as actual generalised price deflation.

Its a battle royale for sure but he who has the printing press will always win. They will buy everything that is for sale to prop up prices with the printed money. What are people going to do with their fiat dollars then? Put them in the bank? mattress? At some point the penny drops and people realise that the money is becoming obviously worthless and thats when a classical hyperinflation crisis ensues.

Money may well be on the sidelines waiting for buying opportunities in a deflation. But you can bet your last dollar that the Fed will do everything it can to flush out those dollars to be spent back into the system asap. Keeping the printing press running and causing inflation is one of the only levers left to them; when official rates are already zero.

 

[intelligencer]

Actually I'm not being creative enough.

The could print a use by date on dollars.

That could work too.

 

[downer]

In the case of severe deflation, would it be better to be in Aussie cash or US cash?

USD, with absolute certainty. USD is the global reserve currency and is the standard monetary asset that investors seek when a RISK OFF market environment causes panic selling.

The AUD is a currency that is considered riskier (perhaps not fundamentally) to trade in such an environment. In 2008 the AUD collapsed, from over $0.98USD to under $0.63USD, that was caused by a RISK OFF market sentiment and as a result the USD gained enormous strength in that environment. USD has since retreated, however it is due for another major rally which should occur between now and the next 18-24 months. Conversely the AUD is due to plummet, with a major corrective low to occur in the next 18-24 months. Such low could reach as far down as $0.40USD, so that is why I am suggesting USD as being the much better option when deflation begins in earnest as a result of a panic sell-off.

What's more, with USD you'll be able to purchase far more silver, gold, commodities futures, etc, if you are in USD than you will if you are in AUD.
The reverse is true right now, and silver is cheaper in AUD than in USD. That is going to change over the next 1-2 years, so right now there is probably no better time to divest yourself of AUD and convert to USD. Sure, the AUD could rise to $1.04USD in the meantime, between now and deflationary collapse as will be seen in price action, but I am an investor and I do know that it is virtually impossible to pick the best price to sell and/or buy any asset, including currencies. But you can at least come very close to selling AUD at what will likely to be it's intermediate term peak.

The next market sell-off will be more or less catastrophic to risk assets and especially any leveraged long positions. So consider yourself well warned in advance.

So, what is the best way to invest in US dollars? Buy a wad and hide under a bed, travellers cheques???

 

[lakesentrance]

Or, open a paypal account. U can change your $AU into $US. There would have to be quite a shift in exchange rates to cover their fees.

 

[intelligencer]

What I'm saying is that the monetary deflation that you can observe at several points since 2008 will not be allowed to become manfifest as actual generalised price deflation.

What you are saying is that Bernanke's game plan will play out to perfection without any hiccups along the way. I don't buy it.

What I'm saying is that if Zimbabwe (and many many other countries) can pull it off then I think Bernanke can.

The aim is a reboot of the same system with a new currency. Its a well trodden path for the money scientists.

 

[hilaire9]

Your skill in selling silver is more important than your skill in buying silver.
Any jackball can buy silver, to sell it when you need to is a different matter.
I know members of the modern western world know nothing of the barter system.
In the event of total fiat currency collapse what is the value of 1oz of silver?
I would say nothing.