Somebody can't fill thier orders
PTVETTER
Posts: 5,958 ✭✭✭✭✭
I just heard that a major company is going to default on thier silver contracts.
Next there will be someone defaulting on gold contracts!!
Someone did something very bad
Next there will be someone defaulting on gold contracts!!
Someone did something very bad
Pat Vetter,Mercury Dime registry set,1938 Proof set registry,Pat & BJ Coins:724-325-7211
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Comments
I knew it would happen.
I can see a few options here!
telling us the company? that just does not make sense to me.
wake me up when it hits the news and gets past the internet rumor stage.
Many members on this forum that now it cannot fit in my signature. Please ask for entire list.
I agree, whats the scoop?
Naked, short failures
untill then you can do the research yourself and infact there just be more that one out there. I only know of one at this time.
LINK
wake me up when it hits the news and gets past the internet rumor stage.
Just trying to give you a heads up so you can be more "flexible" in your decision making.
roadrunner
<< <i>What do they say in the financial world? Buy on rumor and sell when it hits the news. When everyone sees the smoking gun, it's too late to do anything.
wake me up when it hits the news and gets past the internet rumor stage.
Just trying to give you a heads up so you can be more "flexible" in your decision making.
roadrunner >>
RR, as you probably know, this isn't in the rumor stage anymore.
But it is kind of like watching an impending trainwreck.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>What do they say in the financial world? Buy on rumor and sell when it hits the news. When everyone sees the smoking gun, it's too late to do anything.
wake me up when it hits the news and gets past the internet rumor stage.
Just trying to give you a heads up so you can be more "flexible" in your decision making.
roadrunner >>
heh. i am done reading the plat thread because a dissenting opinion goes against the
grain of the true believers.
i do not buy on rumors. i do not gamble on long shots.
obviously, since i am not 60 years old and have a majority of my money in PMs my
opinion is lousy. not being flexible enough is spot on. no pun intended. a flexible person
would have sold and bought back at a lower price.. any generic stuff they had.
i will continue to make money where i can and watch the "herd" go in the other direction.
this post smells of gold bug mania. if one company goes belly up it is hardly news.
credibility is something you earn over time, agree? the sheep have been led to the slaughter
in the last months and the gold bugs credibility is quickly approaching nil.
oh sure... die hards will have time on their side. that is about it. time will correct their past errors.
they hope! and hope is what they are the BEST at.
I'd say most of us aren't 60 years old either but we've been though these markets before and saw 79/80 and the big paper trading scandle.
Answer me this:
1. Are we better off today than in 2002 when this blew up?
2. Do you consider the big bailouts a plan to put us on the right track or a bandaide at best. That 700 B will be gone soon and onto the next big bailout.
3. Has the goverment cracked down on Wallstrett fraud and naked shorts? Do you even consider this an issue.
4. Do you think the dollar will stay strong or will the world do away with the dollar being the "revere currency"?
Transfering your money from the physical to paper is just plain stupid at this point. This game isn't anything new and I'm sure you weren't around on the swing at under $500. Control has always been the name of the game and you don't seem to realize this or you think they can do it forever. Good Luck by next year your going to need it because you called a correction that lasted a few months with no entry point since you weren't wise selling 1/3 of your assets near the peak and purchased on the drop. JMO
Shoot brothers, I wish I was 60 years old!
<< <i>Shoot brothers, I wish I was 60 years old!
Curly, you know good and well that you're going to outlive us all.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>when details are made public all will know,
untill then you can do the research yourself and infact there just be more that one out there. I only know of one at this time. >>
I'm calling
Backup your claim or move on......People like you are what got us into this financial mess... Gossipy Suzies....
<< <i>fc
I'd say most of us aren't 60 years old either but we've been though these markets before and saw 79/80 and the big paper trading scandle.
Answer me this:
1. Are we better off today than in 2002 when this blew up?
2. Do you consider the big bailouts a plan to put us on the right track or a bandaide at best. That 700 B will be gone soon and onto the next big bailout.
3. Has the goverment cracked down on Wallstrett fraud and naked shorts? Do you even consider this an issue.
4. Do you think the dollar will stay strong or will the world do away with the dollar being the "revere currency"?
Transfering your money from the physical to paper is just plain stupid at this point. This game isn't anything new and I'm sure you weren't around on the swing at under $500. Control has always been the name of the game and you don't seem to realize this or you think they can do it forever. Good Luck by next year your going to need it because you called a correction that lasted a few months with no entry point since you weren't wise selling 1/3 of your assets near the peak and purchased on the drop. JMO >>
1. We being the US? Heck no. Those crazy "we"s spend money like it is going out of style. Money they do not have.
Me personally? I am doing better every year. Things are great for me. Home prices are going down. My credit rating
is superb and can get loans at 4-6% depending on what for. Raises every year... and not piddly 3% ones. I save.
I am thrifty. I try to make extra cash anywhere I can. American values... not some slob up to their gills in debt trying
to keep up with the neighbor.
2. Bailouts have happened before and we got through it. I remember this same type of feeling during the savings
and loans debacle. This may be bigger but will quickly be history as the economy works its way through it. Money
is pumped in and money is being destroyed. Some people get richer and some get poorer. Nothing new here. The
US has been ran by rich men since day one. We have had crashes and got past it. (takes time).
3. Naked shorts are a minor issue in my mind. Lets not make it out to be some great problem that is the real reason
for why we are here. Wall street fraud to one... is crafty manipulation of the rules to another. I am just being honest
here. Wall Street comes up with new ideas every decade it seems. Change the laws to stop one... a bright young
person comes up with another money making scheme or a loophole to abuse. So sure... they crack down in due time
but only that single issue. Wall Street will find the next in a few years. That is capitalism for you.
4. I think the dollar will be the reserve currency for decades to come. The dollar will fluctuate as other folks/countries
have confidence in our prosperity. What is the current competition? The baby Euro?
"Good Luck by next year your going to need it because you called a correction that lasted a few months with no entry point since you weren't wise selling 1/3 of your assets near the peak and purchased on the drop. "
you lost me with that run on sentence.
but i will comment on it anyway.
We need silver back to 16+ to even get back to where we were a few months back. 20+ to call it another bull.
Gold has to be at 1000+ to be back where we were a few months ago. 1100 to call it another bull.
My opinion is that this will not happen in the short term. I find it highly unlikely it will happen for years.
Small investors are a pile of spit on the ground when it comes to these markets. We mean nothing to it.
Until real money wants back in it is not going anywhere. I highly doubt real money will pick the same thing
to make a bubble out of in the next few years short of crazy world news... which we just had doses of in
huge amounts... which resulted in a huge pull back which is exactly the opposite every gold bug was predicting.
i find it humorous just how wrong they were.
Sure, and a "flexible" person such as myself would have paid over 40% in total taxes on those gains. That's how one builds wealth right, by paying taxes and reducing one's principle away? Sorry, I'll keep the principal for a rainy day. Now if fc doesn't pay his required taxes (which I'd bet he doesn't) then I can see your point in trading for small amounts for peanuts and staying under the radar.
i will continue to make money where i can and watch the "herd" go in the other direction. this post smells of gold bug mania. if one company goes belly up it is hardly news.
In case you haven't noticed the herd is moving in your direction, not ours. Stock market fixed, commodities dead, time to move on, right? A major commodity short player going belly up (esp if on the Comex) is expected imo but will still be news to the sheeple at large. What, you mean the silver and gold games are rigged? Do ya think?
credibility is something you earn over time, agree? the sheep have been led to the slaughter in the last months and the gold bugs credibility is quickly approaching nil.
I agree. Been here on the gold thread for 4-1/2 years with Goldsaint, Deadhorse, and all the gang with the majority of the calls made correctly. What about you? Is your real name dollardude??
So considering gold has tripled since 2001 while stocks are way way down in the red, what do you call that? And that's before tossing in the inflation adjustment. Negative nilism? Gold is down a measly 9% for the year. Seems like it has handled itself far better than the 30% whack equities took. Essentially gold has taken a year off and preserved one's wealth. I'll bet 99% of the country wished they had taken that road if they could play it over again. Nilism? How about survivalism?
roadrunner
Oh it is such a problem you have to pay gains on buying gold at 400 an ounce when you sell.
That means you are stuck with it and never able to sell and buy back unless it tanks in a spectacular way.
Oh my tears are falling down my cheek as i type this.
As for 40% total tax... you must be a very well to do person to be in that bracket. It really must suck
to be that wealthy huh? I feel bad for you. :-|
The fact is you have no target to sell at. You just hope things work out in the end. The folly of
such a plan is staggering. Your only saving grace is that you got in sooo early gold will have to
be a total disaster for you to lose money. Such a convincing way to make your personal case
but totally useless for most and most of the argument at hand.
And I love how you make comments about me and if I pay my taxes. Do i go there with you? No.
I have class. I use logical arguments to make my point. I do not say you are fat and bald to overcome your position.
As always you argue people should not go to the past to make their point of what happened
during the last bull run in gold... but when it helps to make your point into the past you go.
The last 5 years are moot. We are talking now and into the future.
Gold spiked along with every other commodity due to speculation and a warm economy.
The big money has left it and as one would expect... the prices have come down.
The last after glow and warmth from that bull run is finally cooling off. In a few more months
things will stabilize at a fair trading range and the big money will have moved on to the next
thing that has real value and a possible bubble they can lead the sheep to. Your blanket
statement about stocks being a poor choice just shows your blinding bias. Of course all
stocks are not great.. but some do have value. If you took the same amount of time you
spent reading gold articles... you might know of some.
If everything I say is wrong? What do I care. I will find a way to make money off it anyway
since I am flexible. This is not a popularity contest on this forum. I am not worried about
losing face. I am here to debate.
but lately... to be on the opposite side requires thick skin as the gold bugs have resorted
to personal attacks of character to help make their point. Bad sign that.
I knew it would happen.
<< <i>I am stunned by the continued display of brilliance by someone who thinks that chiseling a point or two off a few 100 oz. of silver here and there is big money, and somehow qualifies him to make disparaging remarks towards those who have been through major pm moves before, and who have real positions at stake - in other words, people who know what they are doing. >>
Do you not see the irony of your own statement?
I know what I am doing. Bought plat at ~1000. watched it go up to
2000+ and failed to sell. Plat now at ~800.
I know what I am doing. Bought silver at ~5-15. watched it go up
to 20+ and failed to sell. Silver now at 10.25.
I know what I am doing. Bought gold at 400 and up. Watched it go
up to 1000+ and failed to sell. Gold now at ~750.
I have no plan in place that tells me when I should sell. I know what
I am doing.
Constantly tells us that the past gold bull run has no bearing on today's
market yet want to now tell us that having been through them gives
them some mysterious advantage today. I know what I am doing.
Constantly preached that PMs are redhot yet every single PM and
commodity has pulled back from recent highs. Just look at oil which
was the bread and butter comparison for bulls. I know what I am doing.
Getting advice from such extreme investors is probably the most foolish
thing you can do when investing.
As for disparaging remarks.. my comments were directed at no one
yet I reaped many remarks from jmski52. From out of no where. He
has taken it personally.
Ask me... when their arguments revolve around bashing me because
I am younger, do not have as much in play as they do, and have
made some recent good moves (selling PMs near the top and now
flipping because of high premiums) it is time for them to stop repeating
the same things over and over and come up with a plan except
accumulate and pray.
Really? If your remarks are directed at "no one", then where do you get the inspiration for these all-knowing statements?
I have no plan in place that tells me when I should sell. I know what I am doing.
Constantly tells us that the past gold bull run has no bearing on today's market yet want to now tell us that having been through them gives them some mysterious advantage today. I know what I am doing.
Constantly preached that PMs are redhot yet every single PM and
commodity has pulled back from recent highs. Just look at oil which
was the bread and butter comparison for bulls. I know what I am doing.
If you aren't trying to mock someone here, then what relevance do your comments have about this "imaginary investor"?
I don't know of anyone here saying, "buy, buy, buy - the market is red hot?" Did I miss it?
it is time for them to stop repeating the same things over and over and come up with a plan except accumulate and pray.
Nobody said that, and nobody will.
Your thinly-veiled contempt for anyone who might have perspective on the situation is appalling. You keep bringing up the age thing about people you don't know, but for some reason you discount what people say who are in a better position to understand past history than yourself.
Instead of saying that you don't agree - that you don't think there is systemic risk to the worldwide financial system, you attribute inaccurate garbage statements to the very people who are trying to give you perspective that might be of benefit to you.
It would be amusing, if it weren't so sad.
I knew it would happen.
<< <i>As for disparaging remarks.. my comments were directed at no one
Really? If your remarks are directed at "no one", then where do you get the inspiration for these all-knowing statements?
I have no plan in place that tells me when I should sell. I know what I am doing.
Constantly tells us that the past gold bull run has no bearing on today's market yet want to now tell us that having been through them gives them some mysterious advantage today. I know what I am doing.
Constantly preached that PMs are redhot yet every single PM and
commodity has pulled back from recent highs. Just look at oil which
was the bread and butter comparison for bulls. I know what I am doing.
If you aren't trying to mock someone here, then what relevance do your comments have about this "imaginary investor"?
I don't know of anyone here saying, "buy, buy, buy - the market is red hot?" Did I miss it?
it is time for them to stop repeating the same things over and over and come up with a plan except accumulate and pray.
Nobody said that, and nobody will.
Your thinly-veiled contempt for anyone who might have perspective on the situation is appalling. You keep bringing up the age thing about people you don't know, but for some reason you discount what people say who are in a better position to understand past history than yourself.
Instead of saying that you don't agree - that you don't think there is systemic risk to the worldwide financial system, you attribute inaccurate garbage statements to the very people who are trying to give you perspective that might be of benefit to you.
It would be amusing, if it weren't so sad. >>
jmski, i read your posts once.. i got it. saying it a 1000 times over and
over does not make it happen any faster.
i am done replying back and forth. i made my position clear. you know
exactly where you started this.
My one hope for this forum is that each individual thinks for themselves
and gets a wider perspective on precious metals then a few wannabe
gurus on a bulletin board who bash others with a different perspective.
I will let the facts speak for themself. This is a small place. Everyone
knows what others post. Time will tell.
Fighting the Fight for 11 Years with the big "C" - Never Ever Give Up!
Member PCGS Open Forum board 2002 - 2006 (closed end of 2006) Current board since 2006 Successful trades with many members, over the past two decades, never a bad deal.
fc: we don't know each other but we seem to agree on a lot of things, and I want you to know you have earned my respect.
www.AlanBestBuys.com
www.VegasBestBuys.com
What is going to unfold? Well to me there's a real chance that the COMEX will default on gold and silver for December contracts as everyone takes delivery since there's such a spread between paper and physical. It's called the rich trying to make money. Let's say there in trouble (which I really believe) the IMF and CB's come in and supply the gold, There bullet is shot at this point and can't continue this forever in this environment. A lot of the CB's are actually buying gold as well as some of the private banks with a small part being individuals. Now silver is a real problem since there's no huge supply owned by any government anymore, it there's a default it will happen here first and drag up the PM's in general IMO.
If gold does go to a grand or more. More than likely that means the stock market just lost another 20 to 30% IMO. That could be the bottom and is why in my 401k I went with T bonds last summer. At that point anyone with cash will get in the stock market hoping for it to bounce back strong. It may very well happen but with our spending and creation of money I doubt it. Until there's a real plan to cut cost we're in the same market as when this started in 2002 IMO. So that may means as in the past the stock market is stable and you make money off of stocks paying dividends while it trades in a range that could be a decade or two.
Now for us gold guys we wait and when it reaches $1500+ which is what I think and you don't we sell into cash or if the stock market has dropped put that money in there with dividend paying stocks. Just because you two are approaching this a different way (hopefully) and you didn't go into stocks to early you will indeed make money in the long run but really you persevered your capitol in cash and now are getting dividends in stocks. If gold goes up we've made far more money and are in the same investments in the future. In a nutshells that the two ways to come out on top IMO. The MM is more conservative but it's losing money every year which gold has more than a chance to beat inflation.
I'm really not sure why you think PM's are a bad investment at this point it's the approach that differs and we just need to agree to disagree. You must decide what plan you wish to use and I'm doing both so I sure don't want all of my eggs in one basket but it appears you two do which is okay for you but not for me.
<< <i>I just heard that a major company is going to default on thier silver contracts.
Next there will be someone defaulting on gold contracts!!
Someone did something very bad
I'm sure the gubernmental will bail them out
edited to say: the sky is falling, the sky is falling
<< <i>If inflation hurts the return of Money Market funds, then it hurts the returns of gold, stocks, and other investments too. >>
Yes but as I've said it will more than likely exceed inflation. There is real evidence that the drop in PM's were caused by a few major players shorting them which include 2 or 3 US banks. With the Dem's in office they've already stated that the "blank check" writing is over and the shorts are drying up.
These banks in the future have already been bailed out so don't think that will happen again playing this risky game, they could very well fail and I think they know it. I look for good banks like good companies getting back to their core business and stop the rolling of the dice. That's why I think there a 70 to 80% chance PM's will start to rise stripping inflation in the future. The paper game is about to get called and it's going to die or correct itself, so watch out below IMO.
I'm betting that the paper market will have to close the gap on the physical market not the other way around. The shorts of this last period will be the longs this time around if at all and I'm talking the major players not the public players that can't turn a market anyway. So really those bragging that they got $950 and glad they got out may have well got less than could be sold for today in the real world and not the paper world where the losses have occurred.
When the gap does close the paper market will make the biggest gains but the physical will be going up too, just at a different rate. So this game is far from over until our problems are behind us IMO and WAY to early for anyone to be bragging, that just cracks me up on the johnny come lately to this market.
So in closing I'd just say get over yourselves you haven't made any more money than those holding physical PM's at this point your just out and don't share the small risk or any profits in the future. JMO
<< <i>If inflation hurts the return of Money Market funds, then it hurts the returns of gold, stocks, and other investments too. >>
Inflation has historically helped precious metals. All prices rise but metals outstrip that rise by a significant factor.
Right now, inflation would be preferable to this recession turning into a long term depression.
Herbert Hoover raised taxes on the higher earners and turned that recession into a years long depression which helped no one.
We now have someone who promises to do the same thing as Hoover did during a remakably similar situation.
While that was just class envy campaign rhetoric, it remains to be seen if he will actually do such a suicidal thing to our economy.
I'd prefer inflation to the alternative. Neither is good, but one or the other is going to have to happen.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
The reason I don't see stocks moving up much, euphoria over our new president or not, is that our national productivity is falling along with the increase in unemployment. You can't just push a button and all of the sudden it's all good again; we are in a downward trend and there is nothing that has convinced me that anything significant has changed in our economic scenario, particularly in the near term (the next 2-3 quarters).
The other interesting factor that also gives me pause for the markets is the burden of new taxes and health care requirements on companies. These requirements will reduce the opportunity for expansion of businesses and will likely lead to more overseas flight for industries that are productive. Many companies took their labor intensive jobs overseas and any company that hires a lot of people will be looking for cheaper labor, that's kind of a no brainer, particularly in an environment of more taxation and federal requirements for more extensive worker benefits. The trickle up theory may be a nice concept but nothing trickles up, water always runs down hill.
So, I don't see anything like expansion of manufacturing or building of new facilities what are worker intensive happening for a while. This US industry situation with the stagnating world growth component gives me pretty good reason to do as ttown is thinking, just hunker down, preserve capital, don't worry about making money but be mostly concerned with maintaining your wad and stash.
Good post tt
I'd stay away. 6,000 is the next stop and probably down from there for several years.
I could see it hovering between 5,000 and 6,000 for years with a few dips into the 4,000s.
I just don't see that as a place to look for any bargains for quite a while yet.
Hunker down and hold real money, ie; gold and silver, and wait this thing out.
There is still a lot to unwind before we reach the bottom.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>Personally, I believe the market has a long way to decline yet.
I'd stay away. 6,000 is the next stop and probably down from there for several years.
I could see it hovering between 5,000 and 6,000 for years with a few dips into the 4,000s.
I just don't see that as a place to look for any bargains for quite a while yet.
Hunker down and hold real money, ie; gold and silver, and wait this thing out.
There is still a lot to unwind before we reach the bottom. >>
So grim you are
<< <i>So grim you are
Not to be grim, just the way I see it.
Particularly after the recent election.
Everyone in this community has an opinion. I wish I didn't see it that way, but with everything I read, it just seems to point that way.
I'd like it to be better, but I don't see it in the cards.
Remember, Hoover raised taxes on the wealthy and business owners and turned a recession into a depression.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>This thread has been hijacked!!!! What about the big news the OP supposedly has???
There was no "news" in the OP, just some speculation.
thing that has real value and a possible bubble they can lead the sheep to.
Please tell us fc what will be the next big bubble investment? We're all waiting to hear. Note that stocks, commodities, real estate, bonds, and about everything in the world has cratered....with FRN's pretty much certain to follow at some point. If you want to short the stock market one can always make money with tanking stocks. I prefer to play with markets that have a fundamental reason to rise in value rather than be fodder for TPTB that run the stock markets. And over the past 7 years, rare type coins and numismatic gold coins have done fine for me. While money market funds have lost ground to inflation, rare coins and many gold coins have doubled and tripled in value. And one lesson I've learned over the past 20 years is that it's far easier to make more money holding the right coins (including gold) than settling for the quick profits. While dealers who trade daily are an exception, it typically doesn't work for most seasoned collectors/investors/hobbyists. Settling for 10-20% in a couple months when you could have been looking at 100% in 12-24 months is foolish. And every time you move your money to play "trader" you just increase the chances to end up in the wrong thing at the wrong time. Once you're in the right coins there's no shame in staying put to triple or quadruple up over 5-10 yrs. And if you knew anything about the taxes due on US coin profits, self employment taxes, and other such things, you would know one can get to a 40% effective tax rate without being anywhere near being rich. But it appears senseless to continue to "debate" someone who has seen it all.
roadrunner
<< <i>I can't take it anymore. Would you edit in your title "thier" to "their" >>
Now that is important
roadrunner, i really should take your advice and stop debating with you. gold has done
well for many people over the last 7 years. It is obvious. But to think it will continue to
do well for many more years to come is foolhardy. Everything goes in cycles. It may take
many more years for this vaunted 1200 number to appear. Will you still be alive to enjoy it?
(i do not know your age but I am guessing "older then me"). And what is funny is that number
keeps growing with gold bugs. 1200? Nah... 1500. 1500? nah.. it can reach 2000. People
are just pulling this stuff out of their rear end!
I think stocks, once they bottom out, will be the place to be for a younger person. When everybody
hates them is when I want in. When everyone loves PMs is when I want out. This type of thinking
is exactly how Warren Buffet thinks. What stocks exactly? I am unsure right now. It will take time
to research that. I read the business news and I know who is doing bad, ok, and well. I just know
the bounce up from the bottom will take place earlier then most think and you have to prepare
to be in on it before then. Maybe by this time next year. One has to be patient and wait for signs
of a recovery.. the early signs.
When business starts to pick back up, of course PMs will get a boost.. but not the boost you are
dreaming of, in my opinion. I have a feeling the boost will just be back up to levels we saw just
recently which is not very exciting if a person already sold at that and is now using the money
for some other investment. Gold bugs are all dreaming of the early 80s and that one moment
in time you could really sell at a high price.. for oh... days? Now that is gambling. The sure bet
was up to 1000... which people had the opportunity to sell at a few times now. Rabid inflation
seems to be the key to everybody's dream of a high priced gold... Well inflation has walked gold
right up to 1000... and every time someone mentions Wiemar Germany as an example is just
going back into history for past results to demonstrate possible future results which is a no-no
gold bugs use back and forth constantly to flame down other opinions. When it suits their opinion
it is alright. When it supports an opposite opinion it is foolhardy. Go figure!
Yes the economy is in trouble. Yes it has happened before. Yes we have always clawed our way out
of it. Will the dollar fail? Yes someday it will. But you are gambling it will happen in such a short amount
of time I am not willing to take that bet! All this vaunted manipulation that is spoken of is supposed
to come crumbling down to reveal the true value of gold is rather humorous. It is tin foil hat material
that I have learned to read about but not fashion my whole life around it. The internet is famous for
pumping such opinions so hard and so often people actually take it seriously and forget about
other factors and more common sense opinions. A whole new group of people are going to get into
the game only to get burnt. Time and time again this is what happens. People never learn.
I think in a year real estate will be ready to buy again. Thus I am looking for a quality home at
a discount price in the area I like the most in NH (Concord). I am being patient. Interest rates
are going down. It is a prime time to borrow money.
What will be the next bubble? Medical/Biotech/Health Care as all the old gold bugs spend their
stashes to stay alive so they can enjoy these HUGE profits when gold hits 1800 right before
they pass away. Then their kids will inherit it and blow it on a new sports car and remodel their homes.
-------------
The problem with gold bugs is they read the same stuff time and time again reinforcing the same
ideas until they cannot comprehend other ideas. They do not seek out other opinions or read
material like this:
"There is a case to be made for a return to the gold standard. It is not a very good case, and most sensible economists reject it, but the idea is not completely crazy. On the other hand, the ideas of our modern gold bugs are completely crazy. Their belief in gold is, it turns out, not pragmatic but mystical.
The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate. There are powerful advantages to such an unconstrained system. Above all, the Fed is free to respond to actual or threatened recessions by pumping in money. To take only one example, that flexibility is the reason the stock market crash of 1987--which started out every bit as frightening as that of 1929--did not cause a slump in the real economy.
While a freely floating national money has advantages, however, it also has risks. For one thing, it can create uncertainties for international traders and investors. Over the past five years, the dollar has been worth as much as 120 yen and as little as 80. The costs of this volatility are hard to measure (partly because sophisticated financial markets allow businesses to hedge much of that risk), but they must be significant. Furthermore, a system that leaves monetary managers free to do good also leaves them free to be irresponsible--and, in some countries, they have been quick to take the opportunity. That is why countries with a history of runaway inflation, like Argentina, often come to the conclusion that monetary independence is a poisoned chalice. (Argentine law now requires that one peso be worth exactly one U.S. dollar, and that every peso in circulation be backed by a dollar in reserves.)
So, there is no obvious answer to the question of whether or not to tie a nation's currency to some external standard. By establishing a fixed rate of exchange between currencies--or even adopting a common currency--nations can eliminate the uncertainties of fluctuating exchange rates; and a country with a history of irresponsible policies may be able to gain credibility by association. (The Italian government wants to join a European Monetary Union largely because it hopes to refinance its massive debts at German interest rates.) On the other hand, what happens if two nations have joined their currencies, and one finds itself experiencing an inflationary boom while the other is in a deflationary recession? (This is exactly what happened to Europe in the early 1990s, when western Germany boomed while the rest of Europe slid into double-digit unemployment.) Then the monetary policy that is appropriate for one is exactly wrong for the other. These ambiguities explain why economists are divided over the wisdom of Europe's attempt to create a common currency. I personally think that it will lead, on average, to somewhat higher European unemployment rates; but many sensible economists disagree.
So where does gold enter the picture?
While some modern nations have chosen, with reasonable justification, to renounce their monetary autonomy in favor of some external standard, the standard they choose these days is always the currency of another, presumably more responsible, nation. Argentina seeks salvation from the dollar; Italy from the deutsche mark. But the men and women who run the Fed, and even those who run the German Bundesbank, are mere mortals, who may yet succumb to the temptations of the printing press. Why not ensure monetary virtue by trusting not in the wisdom of men but in an objective standard? Why not emulate our great-grandfathers and tie our currencies to gold?
Very few economists think this would be a good idea. The argument against it is one of pragmatism, not principle. First, a gold standard would have all the disadvantages of any system of rigidly fixed exchange rates--and even economists who are enthusiastic about a common European currency generally think that fixing the European currency to the dollar or yen would be going too far. Second, and crucially, gold is not a stable standard when measured in terms of other goods and services. On the contrary, it is a commodity whose price is constantly buffeted by shifts in supply and demand that have nothing to do with the needs of the world economy--by changes, for example, in dentistry.
The United States abandoned its policy of stabilizing gold prices back in 1971. Since then the price of gold has increased roughly tenfold, while consumer prices have increased about 250 percent. If we had tried to keep the price of gold from rising, this would have required a massive decline in the prices of practically everything else--deflation on a scale not seen since the Depression. This doesn't sound like a particularly good idea.
So why are Jack Kemp, the Wall Street Journal, and so on so fixated on gold? I did not fully understand their position until I read a recent letter to, of all places, the left-wing magazine Mother Jones from Jude Wanniski--one of the founders of supply-side economics and its reigning guru. (One of the many comic-opera touches in the late unlamented Dole campaign was the constant struggle between Jack Kemp, who tried incessantly to give Wanniski a key role, and the sensible economists who tried to keep him out.) Wanniski's main concern was to deny that the rich have gotten richer in recent decades; his letter is posted on the Mother Jones Web site, and makes interesting reading.
But, particularly noteworthy was the following passage:
First let us get our accounting unit squared away. To measure anything in the floating paper dollar will get us nowhere. We must convert all wealth into the measure employed by mankind for 6,000 years, i.e., ounces of gold. On this measure, the Dow Jones industrial average of 6,000 today is only 60 percent of the DJIA of 30 years ago, when it hit 1,000. Back then, gold was $35 per ounce. Today it is $380-plus. This is another way of saying that in the last 30 years, the people who owned America have lost 40 percent of their wealth held in the form of equity. ... If you owned no part of corporate America 30 years ago, because you were poor, you lost nothing. If you owned lots of it, you lost your shirt in the general inflation.
Never mind the question of whether the Dow Jones industrial average is the proper measure of how well the rich are doing. What is fascinating about this passage is that Wanniski regards gold as the appropriate measure of wealth, regardless of the quantity of other goods and services that it can buy. Since the dollar was de-linked from gold in 1971, the Dow has risen about 700 percent, while the prices of the goods we ordinarily associate with the pursuit of happiness--food, houses, clothes, cars, servants--have gone up only about 250 percent. In terms of the ability to buy almost anything except gold, the purchasing power of the rich has soared; but Wanniski insists that this is irrelevant, because gold, and only gold, is the true standard of value. Wanniski, in other words, has committed the sin of King Midas: He has forgotten that gold is only a metal, and that its value comes only from the truly useful goods for which it can be exchanged."
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Lets finish with an Aesop's Fable.
The Miser and His Gold
Once upon a time there was a Miser who used to hide his gold
at the foot of a tree in his garden; but every week he used to go
and dig it up and gloat over his gains. A robber, who had noticed
this, went and dug up the gold and decamped with it. When the
Miser next came to gloat over his treasures, he found nothing but
the empty hole. He tore his hair, and raised such an outcry that
all the neighbours came around him, and he told them how he used
to come and visit his gold. "Did you ever take any of it out?"
asked one of them.
"Nay," said he, "I only came to look at it."
"Then come again and look at the hole," said a neighbour; "it
will do you just as much good."
Wealth unused might as well not exist.
Interesting statement. And the Miser's Gold fable is interesting as well. Here is a person who was saving for.... security, perhaps, or purchasing land, or just a rainy day. But yet the fable makes him out to be a fool and calls him a miser. And no pity for the old man because his money was stolen. Well, now that I think about it.... perhaps this is a fable for our time.... lets spread that wealth around after all.
What do you consider "wealth unused" ? Would you consider the portion of my 401k that I have placed into stable accounts to be "unused" much like the fabled miser's hole?
DEFLATION!
Camelot