Gold/Silver vs 50 Historical Bubbles

Ciccio

Interesting comparison here.
I don't know much about bubbles but found this chart pretty self explanatory.

I would like to hear your comments.

edited to add: can you please define what a bubble is? Where/when it starts, etc...

alifaxwa2

I dont get it. Gold/Silver is up 412%/419% compared to what?

Ciccio

It should be compared to its past lowest spot price, around $310, end of 2002.
It never fell under that spot price after then.

roadrunner

Bubbles are often the result of bad monetary policy. The source is not the asset itself (ie gold or silver), but the unbacked fiat. In cases like the miner Bre-X or Enron, those were just outright scams. Fiat is an outright scam as well, but much better tolerated by today's masses who have been schooled/indoctrinated/brainwashed in Keynesian economics since day 1. Ask J6P on the street and most will say a little bit of inflation (ie 2-3% per yr) is a good and necessary thing for economic growth.

How come they don't have the real bubbles on that chart, that is USDollar, USTreasuries, and OTC Derivatives since those are the 3 major driving forces behind everything else? Or is that not politically correct to say so? If you did the same bubble chart from 1800-1906 the prices would be unchanged, or slightly lower. I know this would be heresy to the fiat bugs but it's what happened. And you can even take the 1800-1933 period as one where prices started and ended basically unchanged. But the lid was blown off for good in 1933 and we've never returned to a pay as you go policy.

What did they say in Field of Dreams? If you print it (fiat), they (crooks) will come .....brought to you from the offices of Dewey Cheatem & Howe.

roadrunner

derryb

<< <i>I dont get it. Gold/Silver is up 412%/419% compared to what? >>


From the accomanying article - "the recent move." The time frame chosen to calculate the percentage could put gold and silver in a lot of places on the chart.

Bubbles are strictly unwarranted price increases as a result of runaway speculation (think dot.com and real estate). Since gold's only value is what someone else will pay for it (unlike other assets) I submit it can never be in a bubble.

Remember, the market is driven by only two things: Fear & Greed. Fear in one market creates Greed in another.

Ciccio

<< <i>What did they say in Field of Dreams? If you print it (fiat), they (crooks) will come
>>



LOL




<< <i>...a little bit of inflation (ie 2-3% per yr) is a good and necessary thing for economic growth. >>



I was talking to a friend (he is a researcher) and he did say that too but he didn't explained further.
Would you mind to put it in simple words for me to understand?

derryb

<< <i>What did they say in Field of Dreams? If you print it (fiat), they (crooks) will come >>



I think the correct line was "if you print it, they will borrow it."

COINB0Y

But its different this time..........

derryb

<< <i>a little bit of inflation (ie 2-3% per yr) is a good and necessary thing for economic growth.
I was talking to a friend (he is a researcher) and he did say that too but he didn't explained further.
Would you mind to put it in simple words for me to understand? >>



Fed policy (controlling interest rates and the supply of money) is a major dermining factor in inflation rates. They have gone on record as striving to maintain 1-2% inflation to "stimulate economic growth." I don't buy this as the economy could also grow at 0% inflation. Any inflation injects a certain amount of instability into the future value of money. I believe this to be intentional to stimulate more current spending while the dollar is worth more than it will be later as a result of inflation. Economic growth at 0% inflation is more healthy because spending/capital investment is done strictly based on profit and loss considerations without the added factor of fear of future value of cash resources.

jmski52

But its different this time..........

Yes it IS different...

The Romans didn't have a printing press - they had to devalue their currency physically by reducing the amount of pms in their coinage.

And Yes, again...

The Weimar Republic didn't have mortgage derivatives, computers and flash trading programs - they had to devalue their currency physically with the printing press.


All these Keynesians need is a nod and a wink.

derryb

The fight for worldwide currency devalution was recently begun by Japan.

I predict the US will intentionally devalue it's currency by allowing the price of gold to continue it's steady rise. I believe they realize this is the most orderly way to obtain a sought after devaluation as many other countries are currently allowing the devaluation of the their own currencies. In this area of economics, foreign trade imbalances play a major role.

pmcollectour

In the seventies excess monetary expansion after the U.S. came off the gold standard (August 1971) created massive commodities bubbles. These bubbles only ended when the U.S. Central Bank (Federal Reserve) finally reigned in the excess money, raising federal funds interest rates to over 14%. The commodities bubble popped and prices of oil and gold, for instance, came down to their proper levels. Similarly, low interest rate policies by the U.S. Federal Reserve in the 2001-2004 created housing and commodities bubbles. These bubbles once again popped as soon as fed funds rates were raised to natural levels.

To date, there is no widely accepted theory to explain their occurrence. Recent computer-generated agency models suggest excessive leverage could be a key factor in causing financial bubbles.

pmcollectour

Also, market psychology can have a big impact on creating and diffusing bubbles. In a SHTF scenario, you can throw market fundamentals to the wind, as a massive flight to safety could drive the gold price to da moon alice.

derryb

<< <i>Also, market psychology can have a big impact on creating and diffusing bubbles. In a SHTF scenario, you can throw market fundamentals to the wind, as a massive flight to safety could drive the gold price to da moon alice. >>


Like I said....runaway speculation....fear......greed.

yellowkid

<< <i>

<< <i>Also, market psychology can have a big impact on creating and diffusing bubbles. In a SHTF scenario, you can throw market fundamentals to the wind, as a massive flight to safety could drive the gold price to da moon alice. >>


Like I said....runaway speculation....fear......greed. >>



I concur, you need fear or greed, that is what's going to create the bubble.

derryb

Fear (I don't want to loose money) and greed (I want to make money) control all markets.

jmski52

So, if I bought gold and silver because I didn't want to lose money, and the dollar went down - does that mean I made money, or does that simply mean I made dollars?

mrearlygold

Generally the people out there who are saying gold is a bad investment today are people who clearly demonstrated that they are clueless in the best case and in the worst case they are supportive of the very big government which is the reason for the destruction of the dollar to begin with.

secondrepublic

Bubbles are driven by a mentality that "this time is different."

It's possible that gold and silver are in a bubble, with the belief that "this time is different" because the economy is going to collapse into a hyperinflationary (or -deflationary) spiral and that gold/silver is the only safe haven.

Don't get me wrong - I think gold/silver still have room to run - but it's already been a big run up.

Personally, I'm NOT betting that "this time is different."

gecko109

<< <i>So, if I bought gold and silver because I didn't want to lose money, and the dollar went down - does that mean I made money, or does that simply mean I made dollars? >>




I'd say neither. The most accurate description of what just happened is that you preserved your purchasing power via the metals. Since actual dollars, and actual cost of goods and services as expressed in dollars is all relative, we need to take snapshots in time as to purchasing power rather than just raw numbers.

derryb

<< <i>So, if I bought gold and silver because I didn't want to lose money, and the dollar went down - does that mean I made money, or does that simply mean I made dollars? >>


You maintained value (purchasing power of your holdings).

pmcollectour

<< <i>Fear (I don't want to loose money) and greed (I want to make money) control all markets. >>




.....and in my humble opinion, I do not believe either control the metals market as of now. Silver and gold buyers are
more "flight to safety" investors instead of fearful investors. I do not believe greed is driving us either. Greed might
control us if we saw + $100.00 spikes in a prolonged period.

derryb

<< <i>

<< <i>Fear (I don't want to loose money) and greed (I want to make money) control all markets. >>




.....and in my humble opinion, I do not believe either control the metals market as of now. Silver and gold buyers are
more "flight to safety" investors instead of fearful investors. I do not believe greed is driving us either. Greed might
control us if we saw + $100.00 spikes in a prolonged period. >>



Greed and Fear in the marketplace are not the bad things you appear to believe them to be. They are emotions and they drive all markets, including PMs. A "flight to safety" is made strictly out of fear of loosing money. Recognizing these two market drivers is essential to successful investing.

jmski52

So, if I bought gold and silver because I didn't want to lose money, and the dollar went down - does that mean I made money, or does that simply mean I made dollars?

< You maintained value (purchasing power of your holdings). >

<< I'd say neither. The most accurate description of what just happened is that you preserved your purchasing power via the metals. Since actual dollars, and actual cost of goods and services as expressed in dollars is all relative, we need to take snapshots in time as to purchasing power rather than just raw numbers. >>

That's really my point. It might look like I'm doin' really well because I bought low and pms are now "high" but in reality, I'm only "holding my own", and not much more than that.

You can "make money" if your holdings go up in dollars, but really all you are doing is generating a tax liability when you sell it, unless you've gone way out on a limb with leverage and got real lucky besides.

The only thing that's different now is that our debt is much more of a problem, no matter how you slice it.

derryb

Sometimes holding your own is the best you can do when all other asset classes are performing worse. You gotta go with the one that is performing the best whether it be equities, real estate, bonds, commodities or jelly beans. This philosophy explains a lot of the current climb in PMs. If you are in PMs you are currently doing the best you can do. My second choice for performance is in the batter's circle and it is shorting some of the asset classes that are due a very big decline. I learned a long time ago that the easiest money is in a declining market.

Sometimes making money is the same thing as not loosing it when most others are.

renman95

<< <i>But its different this time..........

Yes it IS different...

The Romans didn't have a printing press - they had to devalue their currency physically by reducing the amount of pms in their coinage.

And Yes, again...

The Weimar Republic didn't have mortgage derivatives, computers and flash trading programs - they had to devalue their currency physically with the printing press.


All these Keynesians need is a nod and a wink. >>



Comrade, don't forget about Argentina which was an outright gov't scam to get the peoples retirement funds.

roadrunner

Economic growth at 0% inflation is more healthy because spending/capital investment is done strictly based on profit and loss considerations without the added factor of fear of future value of cash resources.

Most people don't think 0% inflation can lead to growth. Yet during the period of 1865-1900 there was tremendous growth in our nation's industrial base during a time of falling consumer prices. In a perfect world we can tolerate inflating the money supply at the same rate as the population growth. Anything above that over an extended period (like 1913-2010) leads to serious malinvestment and redistribution of wealth.

If you invested in gold starting back in 1999-2002 you have done a lot better than just holding your own considering that stocks and the dollar have lost 80% of their value against gold. That's a lot better than holding your own considering consumer prices in general have not risen 5X as well. I suspect this trend will only continue until we see the Dow = Price of Gold.

roadrunner

Baley

considering that stocks and the dollar have lost 80% of their value against gold

better to say that stock INDEXES (indicies?) or stock market averages have lost the value versus gold.

because you know that "stocks" is not one thing. Certain stocks have done far better than gold, others far worse

roadrunner

You can broaden that to PM's and metals, and basically a basket of all commodities over the past 10 yrs. They have far outstripped the general stock market. It's not a game of choosing the best performer in each category (of which gold is FAR from the best) but it's comparing commodities to stock indicies. There's really no comparison.

roadrunner

Baley

Updated bubble rankings

derryb

bubblenomics, the new economic model.

cohodk

<< <i>

<< <i>So, if I bought gold and silver because I didn't want to lose money, and the dollar went down - does that mean I made money, or does that simply mean I made dollars? >>


You maintained value (purchasing power of your holdings). >>



What if gold/silver go down and the dollar up?