www.businessinsider.com





I sold out at 39.60 (need a new roof) and kicked myself. Now I don't feel quite so dumb.

Is this deflation we're experiencing, or something else?

Posted Via AR15.Com Mobile

Over 4 trilllion dollars printed in the last 3 years. I wouldn't sell your PM's just yet. The dollar is still an IOU. When the price is low, buy. Silver at $30. or less, buy.

Hyperinflation would include the destruction of a gov. currency.  The total destruction of the dollar would mean the destruction of the US as we know it.

I'm not a doomsdayist and didn't purchase physical PM because I believed in a doomsday event.


We're seeing a flight from the Euro to the dollar.  We're seeing investors liquidate PM holdings to cover losses elsewhere/equities.  We watched CME raise margin requirements on PMs again.


The US can't afford a strong dollar right now.  Our weak economy and massive debt require increased exports to improve trade imbalance...which a strong dollar preclude.

Bernanke knows this.  That's why we have "the Twist" which I firmly believe is a precursor to QE3...or purposeful inflation.

The dollar is getting stronger because the EU is in very deep trouble. It has nothing to with dollar fundamentals. It is a supply and demand thing.  Each currency is weakening but at different rates due to how news is released.

And next week or next month or 2, more bad news will hit about the USA and people will move money out of the dollar into the euro and the trend will reverse.

The bottom line is that these fiat currency's are in a spiral to the bottom and they switch leads of which one is currently degrading faster than the other. It's not about the dollar getting stronger it's about the euro getting weaker right now.

This is evidenced that every time there is a reversal of trend between the euro and the dolllar, precious metals hit another all time high.

The IMF just said they need 3 trillion euros to bail out Italy and Spain. That is about 4.5 trillion dollars. Guess where much of it is going to come from. The IMF doesn't make money, they just collect contributions and then hand it out.


Next time the dollar starts to get weaker over 6 months or so, you will see gold go over $2000 and silver go over $50

When the whole house of cards comes down, metals will have value and dollars and euros will not.

Flight to the dollar creates deflationary pressure, but we're not yet experiencing deflation (actual reduced cost of goods/more buying power per dollar for consumers)

That is a myth.

That only works with a trade surplus. We have a trade deficit by a 2/3rds margin. When the dollar gets weaker, for every $1 increase in exports there is a $2 increase in the cost of imports the majority of that being oil, which for the most part must be bought from day to day. So although the consumption of oil may go down a tad, the resulting price increase more than wipes out the reduction is use on a dollar scale and the trade deficit climbs further. You simply can not get there from here.

I'm not concerned about the value of my metals. I think they will climb back up before the end of the year. The Bernack has given us Operation Twist will probably reduce interest rates even further and push up the cost of commodities. And I'm not ruling out another round of QE3.

Does nobody remember the stagflation fears from the last year or so? That is exactly what is happening.  The flight of the euro is going to really hurt us, as the previous posters have stated. PM's will continue to drop for a while, till the real panic steps in, then people will flock back to them. I look at this current timeframe as a buy opportunity for PM's, and will be increasing my physical holdings in the next month or so. More importantly for all of us, is to recognize all of this instability in all markets, and get serious about shitcanning any variable rate debt that you have.  

Inflation is innevitable, and there is absolutely no recovery in sight for anybody, whether they own dollars, euros, PM's, or stocks. Unemployment is budging at all, and this holiday season is probably going to be a poor one as far as sales go. Get personal debt down, and get stocked on reasonable amounts of food and durable goods. Even if the world does not go full retard, buying now will give you somewhat of a hedge against continued inflation.

Oh yea dude! Gold is going up forever! Just like housing, tech stocks, and mortgage backed derivatives!

Like moths to a flame.

Gold has little intrinsic value except some people think it is pretty and a little is used in circuits. It's only valuable because a bunch of people think it is. The value of gold is by fiat. You can mine more. Gold value goes up, so does production and scrap intake.

Bubbles burst, and the steadfast believers either panic with the rest or ride the plane into the ground.

and how much intrinsic value does a $100 dollar paper bill have?

How much did a loaf of bread cost in 1929? 5 cents

How much will that 5 cents get you today? So you tell me, what is the intrinsic value of a paper dollar bill and how much will that value be in 50 years?

the only things with intrinsic values are tools and food and land ( because you can grow food and need a place to live )

everything else has no intrinsic value but people look for a place to park wealth.

food goes bad and you can only have so many tools ( real tools and weapons included ) what do you do with the excess wealth? That is where metals come in.

If you don't think the fiat system works, then you can always have more barter. Artificial valuation of metal is fiat, which is seen in the gold bubble; it's economic suicide.

You'll either end up with a bunch of worthless gold when the current system keeps going, or you'll end up with a bunch of worthless gold when the current system collapses.

Oh wait, most gold buyers don't actually have the gold they are buying. They are buying little promises that their purchase earns them a little piece of paper that represents a share of gold. How the fuck is that different than the little piece of green paper than promises a slice of the economic pie, currency or equity?

Post economic collapse: "Dude! Sell me some wheat! I promise to transfer some gold proxy shares to you from my online trading account once the power grid comes back on!"

I agree with you on the paper gold.

However, history of barter has shown that if a farmer has 10 bails of hay extra he wants to trade and he needs10 extra chickens, it is very difficult for him to find a guy with 10 extra chickens that needs 10 bails of hay.

And moving 10 bails of hay around the country side looking for the one guy that has 10 chickens and needs 10 bails of hay is very time consuming and expensive. he might have to trade his hay to someone that has 2 pigs and then trade those 2 pigs for someone that has a steer and then trade that steer to the guy that wants a steer and finally has those 10 chickens that the farmer wants. You can see where this goes.

So a system was needed to use some form of worth that could be used in place of roaming the country side with hay looking for chickens and money in the form of gold and silver was developed for 2 reasons.  It made life easier to carry it around and the farmer could sell his hay to someone that didn't have chickens and then use that metal to give to someone that did have the chickens and then that guy could use it to trade for what he needed. the second reason was that it was actually worth the time and labor and energy used to produce the gold and silver. If someone wanted more, that someone had to pay people to mine and then use energy to purify the ore to produce the metal. In other words it took significant labor and work to produce it. It did not come easy. The value of that gold and silver was directly related to how much labor and energy went in to obtaining it.

Unlike the paper and ink today that costs relatively nothing to make more money with it. It takes the same amount of material and labor to make a $1 bill as it takes to make a $1000 bill.

Of course all of this barter and money only works if people have excess of some trade-able items. the farmer produces excess grain, the rancher produces excess cattle etc so he is willing to trade some of his excess to the iron smith that makes tools to make his life easier and increase production. If the whole system collapses and there is no excess food, then there will be no trade of any kind for any thing.

As long as there is trade, there will be a need for some form of exchange medium so that the farmer with the excess hay doesn't have to roam the countryside hauling that excess hay looking for the one rancher that has excess chickens that wants to trade for hay. And silver and gold is small, easy to transport and takes work and energy to make and it's value in goods will be determined by the cost of that labor and energy to make which is substantial, unlike the cost in labor of paper and ink.

That is why gold and silver will always have value, always some and only be worthless if everyone is starving to death.



ETA: paper money came about because people got tired of walking around with 4 pounds of gold for a big purchase. So a place tp store the gold was developed and that place issued IOUs so people could carry them in their pockets and trade the IOUs for goods. Then go retrieve the god later from the place of storage ( banks )

The only reason we don't have gold backed currency today is because Nixon in 1971, took us off the gold standard in order to be able to inflate the money supply and make more money then they had gold to back. And so the fiat money system was created. And it was only created a few short decades ago and based on what has happened since I would say it's a complete failure for stability and the largest transfer of wealth and the largest fraud in the history of mankind

It was the Shanghai exchange raising the margin limit.

This lowers the price, and lets the big boys stock up on physical.

TXL

History books.  Read them.

TXL

I have a book from the mid 1800s with a hand written ledger showing wages earned per week.  It was 1.00 to 1.50 per WEEK.

Bread might have cost only a nickle, but it still was MORE expensive than a loaf of bread today.

Relative to income a person making 1000.00 per week would need to spend 50.00 for a loaf of bread for you to pay the equivalent amount of income for the purchase.

It's not apples to apples to compare purchase prices.

TRG

I don't agree with everything, but this is pretty much how I see it too.

In your wage numbers are many things, including but not limited to productivity increases and work being done by machines and liquid fuels, A gallon of gas has the equivalent of 25,000 man hours of work in it if used 100%  efficiently. Assuming a gas powered machine has a 25% efficiency, a gallon of gas has 1000 man hours of usable work. Now that a man is using that machine, for the price of that machine and $4 and that man's hourly wage, he produces 1000 times more work than a man did in 1800.

which would put his wage at 1000 times what it was in 1800 when paying by amount of work done. So the $1 a week in 1800 and the $1000 a week in 2011 is exactly the same worth in work.


Those are all real numbers so somehow I just destroyed my value of money argument. Maybe machines are much more efficient that 25%?

You are on the path to enlightenment.  

TRG

You're asking the wrong question.
The question you should be asking is: If The average worker is more productive today (he/she is) and as a result, everything requires less labor as an input (this includes raw materials), making everything less expensive to produce, why doesn't the general price level fall?

I grew up literally being told that the country was dying, during a 13 year long recession

Now that I've seen the economic forecaster types go from doomsday-crier to slap-happy like 20 times, I'm starting to think they're full of it.

remember the dot-com boom?  I remember reading articles about how having a PE ratio of 10,000 was the "new norm"


maybe the smart thing to do would be to buy stuff that all the economic experts think is shit, and vice versa

In that same time frame Gold was worth ~$20/oz. So 1 oz gold = 400 loafs of bread.
If gold today it's $1600/oz then divided by 400 = $4 a loaf - pretty close.

With many things it has. Bread is not $50 a loaf, which is why western nations that rely on fossil fuels have such a high standard of living and disposable income compared to the tribes in Africa that do everything by hand.

Thank you. That is what I was missing. The value of gold LONG TERM keeps it's value among the spikes up and down, the dollar, not so much

Printing money far far above and beyond the true productive output of the nation (i.e. "full faith and credit")?

Yes lets take a walk down memory lane, aka "history"


Oh but "it can't happen here" I forgot. Math will bow down to the USA's (fill in the blank with your own reasoning here______________)

Your missing the point. you don't measure the general price level by looking at particular examples. The general price level is measured by reference to a wide range of goods, and it rises continually. Even the government's doctored figures on CPI can't hide the increase over time.
As things become less expensive to produce in terms of the quantity of inputs required, the price of all goods should fall, all other things being equal.
Obviously that's not happening, so all other things are NOT equal.
The goal is to determine which things are no longer equal.

Diversify your portfolio, dude!

Don't put all your eggs in one basket, bro!

Spread the mayo, man!

~17 years ago, got a BNIB Marlin model 60 for $99.

A couple weeks ago, I got a BNIB Marlin model 795 for... $99.

I guess I don't really have a point for bringing this up, except that I bought essentially the same gun for the same price about 17 years apart.

/me shrugs

Silver is not money. Gold is.

I have 3 marlin 60s and didn't pay more than $45 for any of them

It's still apples and oranges.  I can find bread for 4.00 a loaf, but I can also buy it for under 2.00 any day of the week.  Which would not justify gold at 1600.00 per ounce

TRG

i was around in the 70s when the same thing happened. folks went bonkers over gold. buy gold, when the end times come you can use it to buy stuff with (yea right). well the gold thing went on for a while and then silver hit the big time. folks jumped on silver like white on rice. the story was.. buy junk silver coins, dimes, quarters, half dollars. you could get em in sacks. the idea being, that if the end times came, the cheaper silver coins would be easier to barter with than pieces of eight, krugerrands, gold bars and such. the silver market went nuts. the hunt brothers jumped in and the rest was history. precious metals didnt come backup until 2006. around 30 years. and by didnt come back, i mean the dollar cost, not the adjusted for inflation cost.

when the graph gets so steep a fly couldnt climb the curve, its a sign to bail out and run for the hills.

If you really want to compare apples to apples then you have to buy bread today that is whole grain, without fructose or other crap in it. Wonder bread doesn't count because you could not buy that shit back then. Back then you bought real bread made in the USA with quality ingredients.

if you did that today it would cost, for a whole loaf,  about $6 where I live or more if you bought it from a bakery ( if you could fine one ) like they did back then. bread made with quality ingredients baked in a local bakery.  The closest I have to that around here is the bakery in stop and shop and their baked bread is $5-$7 depending on how big it is and what type.

All investments (PM, stocks, etc) work on the bigger idiot principle.

You need to find a bigger idiot to buy it from you at a higher price then you paid.

Eventually you run out of idiots.

The is no perfect or even near perfect correlation when doing these type of comparisons. The point is gold holds it's value relative to other goods because it takes a lot of 'work' to obtain it. In general if we become more efficient at producing gold we become more efficient at producing food and other goods, not a 1 to 1 correlation in efficiency but close for a basket of goods. The "intrinsic" value of gold vs say Osmium or any other rare element is purely cultural, but that culture goes back to before the written word and is found in all cultures.  

If you have wealth/savings you either trust paper, a bankers promise or hard assets. PMs are still the premier hard asset - small, universally recognized and no serials numbers.

Bernanke stated explicitly at a conference a couple of days ago that if inflation didn't go higher, he would "take more aggressive measures", i.e., QE3.

This is why the deflationists are idiots.  Yes, we WOULD be experiencing deflation –– IF Bernanke didn't have printing presses cranked up and ready to go.  But he does, and he has been more than happy to use them twice already, and has TOLD everyone that he will use them again.

Unfortunately, Bernanke is also too fucking stupid to realize that although he is "saving" his dear friends inside Citigroup and Goldman Suchs, he is also destroying what remains of the productive economy.

So, whatever you do, just remember that Sherrick was more right than all those stupid goldbugs who said gold was going to $500000000000/oz.  Not that anybody ever claimed that, but it makes a fucking awesome strawman for him to argue against.