If and when the balance of trade is too lopsided in one direction - that's when the other side will be demanding payment in something other than US debt, assuming that the goods being traded are desirable enough to care about.
Roadrunner, the Fekete paper from Mar '2014 is great. Will read the others this weekend.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>From the crisis of 2007-2009 til now, all phyzz pm buying and actual profiting could have been more effective via paper instruments… >>
That's what I did in the shop. Turned the paper to gold and silver. turned that back to paper. Deposited the paper in the bank. Then did it again and again.
For all the concrete that gets repaired and poured and bricks that get stacked together with mortar, it wasn't Kool Aid that was useful. It was my LABOR which is useful and makes the metal a dead weight that shifts around from here to there for those who find it's usefulness.
I contend, standing outside of the realm, that even electrons are useful. Have you any idea how much electricity costs to operate the BITCOIN system ? Milllions of dollars per day just for the electricity. Let's not get hung up on semantics. (not just you, but all of us)
The forums , one might say, are more useful than gold or paper. Yet, if we look at our contentious ways, some might think the discussions are useless.
<< <i>From the crisis of 2007-2009 til now, all phyzz pm buying and actual profiting could have been more effective via paper instruments… >>
That's what I did in the shop. Turned the paper to gold and silver. turned that back to paper. Deposited the paper in the bank. Then did it again and again.
For all the concrete that gets repaired and poured and bricks that get stacked together with mortar, it wasn't Kool Aid that was useful. It was my LABOR which is useful and makes the metal a dead weight that shifts around from here to there for those who find it's usefulness.
I contend, standing outside of the realm, that even electrons are useful. Have you any idea how much electricity costs to operate the BITCOIN system ? Milllions of dollars per day just for the electricity. Let's not get hung up on semantics. (not just you, but all of us)
The forums , one might say, are more useful than gold or paper. Yet, if we look at our contentious ways, some might think the discussions are useless. >>
Now that's some profound thinking right there! In this thread I've been tempted to ask, and will ask now, "Is a wrench or philips screwdriver useless?" Of COURSE it is useless, It just sits there doing nothing, doesn't move, doesn't fix anything, not worth anything to anyone.. untill, of course, someone picks it up in their hands and DOES something with it. THEN it becomes useful.. Well, same with gold or anything else, it's useless and until it's useful. Now, was the minute that I spent typing that drivel useful?
<< <i>From the crisis of 2007-2009 til now, all phyzz pm buying and actual profiting could have been more effective via paper instruments... >>
Right...if you take any 3 year period and compare 2 publicly traded commodities/stocks and compare them, you can have very different results/prices. Stocks have done much better than metals since 2011...they have gone in opposite directions.
Positive BST transactions with Timbuk3, coindeuce, charlottedude.
<< <i> Stocks have done much better than metals since 2011...they have gone in opposite directions. >>
No correlation. Gold climbed to highs also while stocks gained. Metal price movement has been tied to dollar index strength in recent years.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
My problem with gold & silver is that I bought it as a store of value/hedge, sooner or later I'll have to convert back to paper, which isn't a store of value. I struggle with this, I buy PM's with my dollars and convert some of it to PM's, hoping that it's value increases over time. If the value increases over time, dollars buy less correct? Maybe I have to quit looking at an oz. of gold in dollars and embrace that it will always be a troy oz. of gold, that could be used to barter in times of crisis.
Every fiat currency eventually fails, but gold (and silver) have never gone to zero, and have been recognized as money for over 5,000 years.
Gold is also very useful in electronics, and when the electronic item wears out, that gold most times ends up in the landfill. This is the first time (I am aware of) in history that we are consuming gold (and silver).
My problem with gold & silver is that I bought it as a store of value/hedge, sooner or later I'll have to convert back to paper, which isn't a store of value. I struggle with this, I buy PM's with my dollars and convert some of it to PM's, hoping that it's value increases over time.
Gold & silver haven't been a good store of value if you look at the past 3 years. If you look at the past 10 years, they have. A hedge isn't really the same thing as a store of value, it's more of an insurance bet. In each instance, the value will always fluctuate but if you buy and sell gradually over time, the fluctuations don't matter so much.
When you sell stocks, bonds, or real estate, you convert it back to paper, too. They fluctuate too. If you buy & sell any of these other assets over time, the fluctuations don't matter so much either. You can choose to speculate in any of them - stocks, bonds, real estate, gold, silver, wheat, oil - any of them.
What's the difference? For me, it's almost like living in a foreign country. When I leave the house, I know that I need enough paper currency to make it through the day, or week. But I prefer to keep my savings in precious metals. I don't know that the stock market or the local dictator is going to come up with tomorrow, but I've decided that I need my assets close at hand without a bunch of intermediaries between me and my stuff.
I know how to manage my own assets, and my holdings aren't so vast or complicated that I need to pay an "advisor". Most people are smart enough to know how to manage their own stuff, and the ones who aren't smart enough can't afford one anyway.
There will always be people trying to get their hands in your pocket, with or without your involvement. It's nice just to have the last word in the matter.
Q: Are You Printing Money? Bernanke: Not Literally
Most impressive is gold in MXN.....35,580X increase over 35 yrs (30% interest per year compounded continuously). Quite a few are in the 30X to 100X range.
<< <i> Stocks have done much better than metals since 2011...they have gone in opposite directions. >>
No correlation. Gold climbed to highs also while stocks gained. Metal price movement has been tied to dollar index strength in recent years. >>
There definitely has been. Since late 2011, silver and gold have tanked, while the S&P 500 has gone up over 70%, paying dividends all the way-unlike metals. There has been a very strong inverse correlation.
Positive BST transactions with Timbuk3, coindeuce, charlottedude.
Everything is relative. A 3 year correlation isn't something to hang your hat on forever. Gold rose with the stock market from 2003-2007, a 4 year correlation. They both fell together for 7 months in 2008. Gold has still far outperformed the stock market since 1999-2001 despite offering no dividends. And we look back to the end of the gold window in 1971, gold is up 35X vs. the SM 20X. Silver is up 10X. The best rare coins are probably up around 75X-100X since 1971. Lots of inflation to go around for all markets.
Really? I have my doubts that any of the MAJOR fiat currency's will fail in your or my lifetime. I for one, will not loose any sleep over what may happen in a hundred or several hundred years from now...that's not my problem. You need to ask yourself, gold has it's uses now, but will that still hold true in the future?
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
<< <i>Everything is relative. A 3 year correlation isn't something to hang your hat on forever. Gold rose with the stock market from 2003-2007, a 4 year correlation. They both fell together for 7 months in 2008. Gold has still far outperformed the stock market since 1999-2001 despite offering no dividends. And we look back to the end of the gold window in 1971, gold is up 35X vs. the SM 20X. Silver is up 100X. So your point is????
Really? I have my doubts that any of the MAJOR fiat currency's will fail in your or my lifetime. I for one, will not loose any sleep over what may happen in a hundred or several hundred years from now...that's not my problem. You need to ask yourself, gold has it's uses now, but will that still hold true in the future? >>
The currencies that have currently been in vogue the past 10-50 years might not officially fail anytime soon. But they can be devalued, re-pegged or adjusted in any number of ways to essentially "end" the currency as it was once known. The US dollar was devalued 40% against gold overnight in 1934. But it still exists under the name "dollar." Has there been anytime when gold was officially devalued against a fiat currency in the last 100 years?
It won't be a hundred years until the current sets of currencies get seriously reworked or replaced....that will happen in the next 5-15 years. Gold will have its uses in the future as long as unbacked fiat currency reigns. The real question is whether fiat currency will still have any uses in the future? I know gold's uses won't end in the next 15 years. But various fiat currencies could essentially end at anytime in the next 5-15 years.
<< <i> My points are the ones I have clearly made, which you seem to disagree with. >>
I don't disagree with your points as they are based on fact. So are the ones I have posted. There's nothing to disagree about on any of them.....all of them are facts. Recency bias is not the best tool in the case when measuring 10-50 years of market activity. Seems to me that everything is up a lot over the past 43 years since unpegging from gold....and the resultant inflation.
Really? I have my doubts that any of the MAJOR fiat currency's will fail in your or my lifetime. I for one, will not loose any sleep over what may happen in a hundred or several hundred years from now...that's not my problem. You need to ask yourself, gold has it's uses now, but will that still hold true in the future? >>
The currencies that have currently been in vogue the past 10-50 years might not officially fail anytime soon. But they can be devalued, re-pegged or adjusted in any number of ways to essentially "end" the currency as it was once known. The US dollar was devalued 40% against gold overnight in 1934. But it still exists under the name "dollar." Has there been anytime when gold was officially devalued against a fiat currency in the last 100 years?
It won't be a hundred years until the current sets of currencies get seriously reworked or replaced....that will happen in the next 5-15 years. Gold will have its uses in the future as long as unbacked fiat currency reigns. The real question is whether fiat currency will still have any uses in the future? I know gold's uses won't end in the next 15 years. But various fiat currencies could essentially end at anytime in the next 5-15 years. >>
I have heard similar scenarios from you or other doomsayers for the last 5+ years. All vague generalities. I for one, do not subscribe to it.
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
<< <i>....I have heard similar scenarios from you or other doomsayers for the last 5+ years. All vague generalities. I for one, do not subscribe to it. >>
5 yrs? That's where you're in error. I've been stating this stuff for the past 13 years on this forum. And in fact, the derivatives crisis I suggested/agreed would happen as far back as 2002-2004 did indeed happen already. That was no vague generality. I've also never proposed a doomsday scenario as you suggest. That's just making up stories to promote your own Goldilocks agenda. I also proposed that gold and silver had much brighter futures back in 2002-2004...which was contrary to the majority view on the Coin Forum. With the $1 QUAD in otc derivatives still out there, it's no vague generality that that system is going to tank again....just like it did in 2008...maybe worse. The fact that paper currencies fail or get devalued is just a fact of history. Show me one that has not lost considerable purchasing power in the past 43-100 years. If the best rare coins (and many forms of collectibles) are up 75-100X since the gold window was closed...something must be seriously wrong with a 100% fiat currency system, don't you think? Our unused toys from the 1950's to 1970's are much more valuable than our currency.
None of this doomsday stuff. Just part of the historical record of fiat currencies. The world has never had to deal with $900 TRILL of interest rate derivatives under stress. 2008 was merely dealing with a much tinier group of MBS and CDS failures (approx $35-40 TRILL worth). The other 90% of junk in the box was not touched. It's still there though...doing nothing...being "useless"....just sitting there....until the day it is asked to perform it's contractual mission between 2 counter-parties....which assumes both parties are up to paying off the bet if they lose. The Bank For International Settlements was so scared of this stuff in late 2008 that they changed the accounting method for it. That resulted in $1.1 QUAD notional being immediately changed to around $690 BILL. notional. The amount of actual total risk was unchanged. What's difference between 2008 vs 2015 is that now bank depositors and taxpayers are on the hook for the failure of these derivatives. Not doomsday....but it could get interesting.
<< <i>....I have heard similar scenarios from you or other doomsayers for the last 5+ years. All vague generalities. I for one, do not subscribe to it. >>
5 yrs? That's where you're in error. I've been stating this stuff for the past 13 years on this forum. And in fact, the derivatives crisis I suggested/agreed would happen as far back as 2002-2004 did indeed happen already. That was no vague generality. I've also never proposed a doomsday scenario as you suggest. That's just making up stories to promote your own Goldilocks agenda. I also proposed that gold and silver had much brighter futures back in 2002-2004...which was contrary to the majority view on the Coin Forum. With the $1 QUAD in otc derivatives still out there, it's no vague generality that that system is going to tank again....just like it did in 2008...maybe worse. The fact that paper currencies fail or get devalued is just a fact of history. Show me one that has not lost considerable purchasing power in the past 43-100 years. If the best rare coins (and many forms of collectibles) are up 75-100X since the gold window was closed...something must be seriously wrong with a 100% fiat currency system, don't you think? Our unused toys from the 1950's to 1970's are much more valuable than our currency.
None of this doomsday stuff. Just part of the historical record of fiat currencies. The world has never had to deal with $900 TRILL of interest rate derivatives under stress. 2008 was merely dealing with a much tinier group of MBS and CDS failures (approx $35-40 TRILL worth). The other 90% of junk in the box was not touched. It's still there though...doing nothing...being "useless"....just sitting there....until the day it is asked to perform it's contractual mission between 2 counter-parties....which assumes both parties are up to paying off the bet if they lose. The Bank For International Settlements was so scared of this stuff in late 2008 that they changed the accounting method for it. That resulted in $1.1 QUAD notional being immediately changed to around $690 BILL. notional. The amount of actual total risk was unchanged. What's difference between 2008 vs 2015 is that now bank depositors and taxpayers are on the hook for the failure of these derivatives. Not doomsday....but it could get interesting. >>
So what....."Derivatives are worthless pieces of paper with no value attached to them."
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
Seems to me that everything is up a lot over the past 43 years since unpegging from gold....and the resultant inflation.
And there was never inflation (nor deflation) before that time? Seems there were wild swings in the economy due to various disruptive influences such as inventions, manias, depressions and other crises..
<< <i>So what....."Derivatives are worthless pieces of paper with no value attached to them." >>
That somewhat sums up the current problem with $1 QUAD of them held by the world's top dozen or so banks. The banks are attaching significant value to them. And it's quite possible that BOTH counter-parties on each derivative contract report them in a profit position. After all, FASB says they can value them as they like. The top 6 US banks hold approx $300 TRILL in notional otc derivative contracts. Obviously, they don't consider those to be worthless any more than the Central Banks count their 32,000 tonnes of gold as useless/worthless. Why would either of these entities carry these products if they were "worthless" to them and had no value attached?
Seems to me that everything is up a lot over the past 43 years since unpegging from gold....and the resultant inflation.
<< <i>And there was never inflation (nor deflation) before that time? Seems there were wild swings in the economy due to various disruptive influences such as inventions, manias, depressions and other crises. >>
Well, certainly not 100 years of significant inflation which reduced the purchasing power of a $1 FRN to 5c. Take the entire period of 1800-1907 and price levels were generally flat. You can't do that from 1914-2014. That's basically the result of occasional gold standards in the 19th century.....and essentially no gold standard since 1914. One fact hard to dismiss is that an epic period of industrial growth (1870's-1913) occurred on a gold standard. It was probably the longest period where the standard worked and was generally adhered to.
And those disruptions you mention were rarely associated to a strict monetary standard. Those boom/bust cycles were typically the result of leaving a monetary standard and abusing the currency/money of the day. The US didn't own the world's reserve currency in the pre-1944 period. The post-1944 is not so easily compared to that earlier period with the dollar being forced upon the rest of the world over the past 40-70 years. The experiment of a gold-less, pure fiat world currency regime is only 43 years old. After 1913, whenever the going got tough, governments just printed more money. That's been the major standard in play for about 100 yrs.
How can you compare a dollar back then to a dollar now, just straight up? Doesn't seem right seems like propaganda... What was avg yearly income back then $100 a month?... Seems like this losing 95% purchasing power is another mantra...
They repeat it over and over, that a dollar earned in 1915 only buys 5% of what a dollar earned in 2015 buys.
What they don't say is that no one spends a dollar earned in 1915 in 2015, a dollar that they have just kept as a crispy federal reserve note for 100 years and not done anything else with...
No, people spend in 2015 dollars that were earned in 2015 or 2014 or maybe earlier, but if earlier then it's a dollar that they have invested, and it has grown. Or if they have kept it as cash or a bank deposit, they have traded the growth potential of investment for the safety of no risk of market loss, for that particular dollar.
Hell, even if someone did save that crispy FRN from 1915... what's an UNC 100 year old FRN note worth to a collector? A lot more than a nickel, that's for danged sure.
Beware the sophists, especially if they have some gold for sale
<< <i>So what....."Derivatives are worthless pieces of paper with no value attached to them." >>
They are promises to pay when certain economic events occur. They are in affect debt instruments running from an economic condition. Let us not forget what excess debt does to an economy, particularly when conditions call for payment that cannot be made. Such a predicament results in default. Even in a default, someone pays the price. Let us also not forget that the recent spending bill (basically written by Citi) puts the underfunded FDIC (taxpayers) on the hook for TBTF banking derivative losses. One look at just a fraction of the potential derivative losses should be enough to send even the Keynesians rushing to buy gold. If for no other reason, derivatives held by major banks are a good reason to own some gold.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Take the entire period of 1800-1907 and price levels were generally flat.
No, they weren't.. Prices of what specifically were flat? examples please.
No, prices went up and down depending on market conditions and disruptive technology, as they always do. >>
Minneapolis FED CPI chart below shows 19th century price trends generally flat or in decline. The CPI index from 1913-2014 is quite the opposite. I have no interest in the price of 19th century red herrings or wagon wheels, just the overall price index....which is obviously very flat. The only real blips higher are War of 1812, Civil War, and WW1. WW2 shows an intial blip and then Bretton Woods, baby boom, dollar as reserve currency taking over. The 19th century shows the 2 war blips where the gold standard was shelved, followed by 35-40 years of declining price index. Declining/flat prices for over 80% of the 19th century. 1900 ends up 50% lower than 1800 began. And there's no disputing the massive growth in the 19th century. Ideally, shouldn't prices decline as economies become more advanced and costs are reduced? They should in a non-fiat economy.
A major difference from the 19th to 20th century is the ability to tax. You can't tax stagnant prices as effectively as you can inflation. Hence the creation of the FED and the IRS. It's all about redistributing the wealth and keeping that hidden from J6P. Even Keynes stated as much.
<< <i>CPI index below shows 19th century price trends generally flat or in decline. The CPI index from 1913-2014 is quite the opposite. I have no interest in the price of 19th century red herrings or wagon wheels, just the overall price index.
Ironic that the chart shows the takeoff in CPI to occur at the same time (1971) the US severed the dollar's connection to gold and it's true beginning as a fiat currency.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>CPI index below shows 19th century price trends generally flat or in decline. The CPI index from 1913-2014 is quite the opposite. I have no interest in the price of 19th century red herrings or wagon wheels, just the overall price index.
Ironic that the chart shows the takeoff in CPI to occur at the same time (1971) the US severed the dollar's connection to gold and it's true beginning as a fiat currency. >>
The chart does not show a "takeoff" in CPI. It shows the cumulative effect of small amounts of inflation over several decades. The chart was mostly flatlined before due to severe deflationary periods that corrected inflation. We have enjoyed deflation in a long long time. And this is why the boomers feel they are affected so severely. Their concept of economic normalcy is highly influenced by their personal experiences and not of generations of experiences.
Funny that those who preached massive inflation due to "FED recklessness" are now jumping on the deflation bandwagon.
<< <i>CPI index below shows 19th century price trends generally flat or in decline. The CPI index from 1913-2014 is quite the opposite. I have no interest in the price of 19th century red herrings or wagon wheels, just the overall price index.
Ironic that the chart shows the takeoff in CPI to occur at the same time (1971) the US severed the dollar's connection to gold and it's true beginning as a fiat currency. >>
One could easily and probably rightfully conclude that gold created/was responsible for many deflationary periods (severe boom and bust cycles). Would the boomers outlook of current conditions be the same if they had experienced a 2008/2009 event in 1980 and 1995?, which is roughly the interval in which these severe recessions happened "in the good old days".
Yes, the choice of pill is dependent upon perspective and those who hold the largest assets (boomers) do not have the experiences necessary to make "proper" decisions. And another yes, the boomers kids' are paying attention.
The US gold reserves in the 19th century were fairly stable. I doubt you'll find that gold "creation" led to boom/bust cycles from that. Lots of fresh gold in California in the 1848-1855 period yet it took to 1854 to show a single year of strong CPI inflation. If anything, the 1850's seem to be pretty stable price-wise. Go figure. What I see in that 19th chart are war price booms that led to post-war price declines, nothing due to a gold standard as the money printers shelve the gold standard. Here's a chart that shows gold is not the bogeyman most have been taught to believe. Sort of hard to argue that the 19th century shows 80 years with 0% or declining prices. The 1900-2005 period shows only 22 years where prices were flat to negative....the last one in 1955. It is what it is.
Considering that the British pound was effectively the world's reserve currency for much of the 19th century, and most nations kept their foreign reserves in BP's, maybe that should by analyzed to see how the more important gold standard of that century worked. Two thirds of world trade was conducted in pounds.
<< <i>Considering that the British pound was effectively the world's reserve currency for much of the 19th century, and most nations kept their foreign reserves in BP's, maybe that should by analyzed to see how the more important gold standard of that century worked. Two thirds of world trade was conducted in pounds. >>
Currencies can lose their world reserve status? But, this time it's different.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>The US gold reserves in the 19th century were fairly stable. I doubt you'll find that gold "creation" led to boom/bust cycles from that. Lots of fresh gold in California in the 1848-1855 period yet it took to 1854 to show a single year of strong CPI inflation. If anything, the 1850's seem to be pretty stable price-wise. Go figure. What I see in that 19th chart are war price booms that led to post-war price declines, nothing due to a gold standard as the money printers shelve the gold standard. Here's a chart that shows gold is not the bogeyman most have been taught to believe. Sort of hard to argue that the 19th century shows 80 years with 0% or declining prices. The 1900-2005 period shows only 22 years where prices were flat to negative....the last one in 1955. It is what it is.
Considering that the British pound was effectively the world's reserve currency for much of the 19th century, and most nations kept their foreign reserves in BP's, maybe that should by analyzed to see how the more important gold standard of that century worked. Two thirds of world trade was conducted in pounds. >>
It is what it is, so what are we really discussing? Before 1971 (pseudo gold standard) and before 1933 (gold standard), the economy suffered severe boom and bust cycles. After 1971 the economy was quite linear.
So either gold had an effect on currencies and as a result economies, or there is something else. And if something else, then what "use" has gold provided?
And yes derryb, a country's currency can lose reserve status. So what? Do the good citizens of Great Britain live such terrible lives? Are their companies not competitive? Are the people dying of starvation or disease?
We are a proud country and like to hang our hat on this reserve currency thing, but it really isnt all its cracked up to be, it can be a curse, and we proud Americans would continue to live our lives as we have for the past 200+ years if we lost it. The newsletter writers/hucksters should try a different scare tactic.
The chart does not show a "takeoff" in CPI. It shows the cumulative effect of small amounts of inflation over several decades. The chart was mostly flatlined before due to severe deflationary periods that corrected inflation. We have enjoyed deflation in a long long time. And this is why the boomers feel they are affected so severely. Their concept of economic normalcy is highly influenced by their personal experiences and not of generations of experiences.
Speaking from firsthand experience as a wage earner, you are incorrect. I was there in 1970, 1975, and 1980 when CPI "took off". In fact, it took off to the extent that gov.com had to start making changes to the way it was calculated right about then, just to keep COLA spending from running amok.
After 1971 the economy was quite linear.
No, you are plainly wrong. The economy was booming from the mid '60s until about 1973-1974 and by 1975 we had a "stagflation" problem. You don't know what that meant, do you? By 1980 there were staff reductions and layoffs with no raises. If Volker hadn't taken some tough measures, it would have been worse. You don't even know about that, do you? Come'on cohodk, you really don't know it all.
Just sayin'.
Funny that those who preached massive inflation due to "FED recklessness" are now jumping on the deflation bandwagon.
That group would include me. Here's where I don't have firsthand experience and I just have to rely on what I've read from historical accounts.
IN MY OPINION, we've only just completed ROUND 1. We may be lucky enough to have a resilient enough system and a resilient enough economy to avoid a Weimar event, but it's not going to be very pretty in any case. The mismanagement has already gone too far to avoid a default of some type.
Instead of forcing the bad banks into bankruptcy and letting the more financially conservative banks take up the slack, they've used up all of the economy's ability to generate momentum by creating more debt to drop interest rates, but the momentum never happened.
Nobody wants the pain that a deflation would cause - the banks and politicians are absolutely petrified of deflation, so they'll do ANYTHING to avoid it. They all know that ROUND 2 will be much worse for them and they will all jump at the chance to do some serious inflating of the currency if it means saving their hides just one more time. Besides, they have Bernanke's roadmap (you know - that student of the Great Depression).
The deflation would have come 6 years ago, except for the additional money & debt creation. Now the mess is bigger and the hole is deeper. We've only seen the preview. The main feature is next. If you think the Fed has been reckless up to now, you ain't seen anything yet. The bigger problem now is that there's nowhere to go with interest rates.
Either the deflation swallows you up or you inflate away and damned the consequences. Any guesses which way it's going to go?
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>Funny that those who preached massive inflation due to "FED recklessness" are now jumping on the deflation bandwagon. >>
I suspect that "those" you refer to understand the difference between commodity deflation and equity inflation, which are both caused by FED recklessness. Recent commodity deflation only reinforces the recklessness. While equity inflation and other misguided FED policy (i.e. ZIRP) helps to ruin middle-class Americans the commodity deflation is ruining entire economies (including those within the US) and nations. Of course if you are one of the higher income Americans or bankers who are profiting heavily from either then one man's recklessness is just another man's profit. FWIW, the money I'm saving (and more) on gasoline and gold is going directly into the pockets of Publix and health care providers.
Thanks to RR's CPI chart we can add another use for gold: maintaining currency stability when used to assign value to that currency.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
By 1980 there were staff reductions and layoffs with no raises.
OMG!!! There was a recession. Heaven forbid. Take a look at the factory output and capacity utilization--it was maxed. Thats why the high inflation.
The economy was booming from the mid '60s until about 1973-1974
Wasnt there a war going on then? I thought wars were disaster for economies---so Ive read on this board? How about the economy from 1981 to 2008. Sucked then, didnt it. So lets see, from 1965 to 2008, with the exception of a few lean years, the economy was rocking. What a terrible time to have lived.
The rest of what you write I mostly agree with. If there is deflation then great, all the boomers who fear for their retirement will survive. And if there is inflation then all the assets the boomers own will rise commensurately.
Markets take care of themselves, no matter how much the FED or politicians try to disrupt things. Faith---its what we all seem to have on this board in one way or the other. Have faith in markets. Have faith in yourself. Have faith in mankind.
Or have faith in the NWO and conclude the end is nigh.
t is what it is, so what are we really discussing? Before 1971 (pseudo gold standard) and before 1933 (gold standard), the economy suffered severe boom and bust cycles. After 1971 the economy was quite linear.
So either gold had an effect on currencies and as a result economies, or there is something else. And if something else, then what "use" has gold provided?
We've been discussing the usefulness of gold, various gold standards, fiat money, and the resultant affects on economies of nations.
The "something else" gold has provided has been to build the greatest half dozen or so empires of the past 500-600 years (2000 years if we include the Roman Empire, maybe 3000+ yrs if we include Egypt and other early empires). Each one of them was basically built on gold. And when they compromised those standards they lost it. Note, none of these empires were built on a fiat money standard. If you know of an empire/nation initially built on a foundation of paper money please present it. Just because there are thousands of years of history of empire building on gold/silver/hard assets doesn't mean it will continue indefinitely. But until something better comes along, that's the standard.
The economy was booming from the mid '60s until about 1973-1974
Wasnt there a war going on then? I thought wars were disaster for economies---so Ive read on this board? How about the economy from 1981 to 2008. Sucked then, didnt it. So lets see, from 1965 to 2008, with the exception of a few lean years, the economy was rocking. What a terrible time to have lived.
Wars a disaster for economies? You must have read wrong. I showed that wars led to rising prices (CPI) as govt's printed money to finance those wars. How you did in the post war years was probably very dependent on whether you won the war or not. The US economy did sort of suck from 1966-1982 which coincided with the stock market sucking wind and limping by for 16 years. The economy limping buy and rocking are two different things. I wouldn't confuse 1966-1982 with 1983-2000. Did you ever try to sell some coins in 1981-1982? That really sucked. In many ways it was much harder than 2009-2010. Same comment for 1973-1975. Muddling by and booming....2 different things. We can always "muddle by" just like we did from 1929-1933 and 2009-2011.
While equity inflation and other misguided FED policy (i.e. ZIRP) helps to ruin middle-class Americans
What? Please reread and re-evaluate what you just.
Middle class owns stocks--certainly not ruining middle class America which is the largest holder of equities.
ZIRP--allows middle class Americans to acquire assets.
the money I'm saving (and more) on gasoline and gold is going directly into the pockets of Publix and health care providers.
Sucks to get old. Health care costs would not be high if not for demand. Your generation influenced this country's economy in many ways. It is now affecting health care. Its no ones fault--just simple economics. High demand = high prices. Econ 101.
Yes, central banks around the globe are fighting deflation--just as I said (and was ridiculed) would happen 6 years ago. Maybe, just maybe, if they are lucky and succeed, then the pendulum will swing in favor of general inflation. In which case all assets rise and middle class America is the beneficiary.
build the greatest half dozen or so empires of the past 500-600 years (2000 years if we include the Roman Empire, maybe 3000+ yrs if we include Egypt and other early empires). Each one of them was basically built on gold
Each of them was built on the back of slaves. Human labor is the greatest and most pure currency.
Your premise is wrong. Gold did not built those empires. Humans did.
<< <i>build the greatest half dozen or so empires of the past 500-600 years (2000 years if we include the Roman Empire, maybe 3000+ yrs if we include Egypt and other early empires). Each one of them was basically built on gold
Each of them was built on the back of slaves. Human labor is the greatest and most pure currency.
Your premise is wrong. Gold did not built those empires. Humans did. >>
Oh, so you're saying that the empires of Spain, France, England, and the US could have been accomplished on a pure fiat currency? In other words, the world's people emigrate towards the world's strongest slave empires rather than to those built on free-flowing gold and other economic assets? I'll even toss 1930's to 1944 Germany in there since they managed to take over most of Europe....without slaves. Give me an example of a fiat money "empire" built on slaves. News to me that the bulk of the US empire growth from 1865-1965 was built on emigrants who rushed to our shores from the 1870's to 1920's, just to be slaves. Interesting view.
Humans couldn't have and wouldn't have helped build those empires without gold.
<< <i>Or have faith in the NWO and conclude the end is nigh. >>
The globalists running the world certainly believe in and have faith in their ideas of a NWO. One might ask themselves why? Could they know something you don't understand?
P.S. None of us are saying the end is nigh. We are just saying the world you are living in, and the world as we have known it, is about to change.
<< <i>While equity inflation and other misguided FED policy (i.e. ZIRP) helps to ruin middle-class Americans
What? Please reread and re-evaluate what you just.
Middle class owns stocks--certainly not ruining middle class America which is the largest holder of equities.
ZIRP--allows middle class Americans to acquire assets.
the money I'm saving (and more) on gasoline and gold is going directly into the pockets of Publix and health care providers.
Sucks to get old. Health care costs would not be high if not for demand. Your generation influenced this country's economy in many ways. It is now affecting health care. Its no ones fault--just simple economics. High demand = high prices. Econ 101.
Yes, central banks around the globe are fighting deflation--just as I said (and was ridiculed) would happen 6 years ago. Maybe, just maybe, if they are lucky and succeed, then the pendulum will swing in favor of general inflation. In which case all assets rise and middle class America is the beneficiary. >>
Most middle classers do not own stocks. Largest holders of equities are the top 10%. ZIRP allows the top 10% to increase their holdings with cheap money. Most middle classers are wisely using ZIRP to reduce their debt.
Skyrocketing health costs are not just simple economics or a result of demand. Money devaluation = higher prices. Econ 102.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Would agree that most middle class people don't own stocks. And if they do, it's only a small amount via 3-5% company matching in their 401K's.
Yes, central banks around the globe are fighting deflation--just as I said (and was ridiculed) would happen 6 years ago.....
The part that doesn't fit with this are the high prices seen in the US and world stock markets. The Central Banks have created a back stop where the SM's are considered as safe as dollars and treasuries. Massive inflation in the SM's over the past 5 years does not fit with the deflationary concept. And it's a big divergence too. Too big to just ignore. They are picking the winners more than ever before. We can call it inflation or deflation...but picking the winner is the best term for it. Right now, govt's/CB's are picking oil as a loser. The current drop to $46 would never have occurred this quickly w/o "assistance" and interventions on a large scale. Same comment for the Russian Ruble.
Is there any other time in US history where all time record US stock prices (or company market caps) were seen during 3-5 year recessionary/deflationary periods or depressions? I can't think of any in the past 120 years...except this current one from 2012-2014. Does anyone really believe this anomaly was done without Central Bank interventions of the highest order?
I've used gold to buy tires and roof a house . I found it particularly useful.
MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Most middle classers do not own stocks. Largest holders of equities are the top 10%. ZIRP allows the top 10% to increase their holdings with cheap money. Most middle classers are wisely using ZIRP to reduce their debt.
Skyrocketing health costs are not just simple economics or a result of demand. Money devaluation = higher prices. Econ 102.
Most middle classers are wisely using ZIRP to reduce their debt.
This is your only accurate statement--which BTW, contradicts what you said previously--(i.e. ZIRP) helps to ruin middle-class Americans.
Surveys taken in 2013 show only 47% of all Americans owning stock, with those numbers heavily skewed by 401K's with limited options. The upper 10% owned 81% of the US stock market. That number is probably higher today. Stock ownership peaked in 2002 at 67%.
<< <i>Most middle classers are wisely using ZIRP to reduce their debt.
This is your only accurate statement--which BTW, contradicts what you said previously--(i.e. ZIRP) helps to ruin middle-class Americans. >>
ZIRP is ruining middle-class America by destroying the value of their savings and robbing Peter to pay Paul with bank bailouts and taxpayer funded banking investments. The fact that they have one small benefit in refinancing at lower rates does not put the stolen money back into their pockets.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The Central Banks have created a back stop where the SM's are considered as safe as dollars and treasuries. Massive inflation in the SM's over the past 5 years does not fit with the deflationary concept. And it's a big divergence too. Too big to just ignore. They are picking the winners more than ever before.
B-I-N-G-O!
When push comes to shove, the bond market (i.e. the government debt and fiat regime) will be protected at the expense of the stock market. The whole system is based on US Govt Bonds and they have nowhere to go but down in price (i.e. yields have nowhere to go but up). When rates go up, the stock market will be squeezed out. End of story.
Yeah, they pick winners & losers all the time.
Most middle classers do not own stocks. Largest holders of equities are the top 10%. ZIRP allows the top 10% to increase their holdings with cheap money.
Agree. This is what I've been reading for the past several years. More concentration of wealth in the top 10%.
Most middle classers are wisely using ZIRP to reduce their debt.
Disagree. My understanding is that personal debt levels continue to explode. Now, it somewhat depends on what we define as "middle class". I base my own definition on how I grew up. Maybe that's changed, but my understanding is based on a traditional middle class lifestyle and not on overextended spending by cash-strapped debtors living beyond their means.
Skyrocketing health costs are not just simple economics or a result of demand. Money devaluation = higher prices. Econ 102.
Agree, but mainly - skyrocketing healthcare costs are directly the result of an unholy alliance between the drug companies & the insurance industry via government mandate. (i.e., government interference and government manipulation of the private marketplace, driven by social engineering to benefit their partnership cronies.)
Q: Are You Printing Money? Bernanke: Not Literally
ZIRP is ruining middle-class America by destroying the value of their savings and robbing Peter to pay Paul with bank bailouts and taxpayer funded banking investments. The fact that they have one small benefit in refinancing at lower rates does not put the stolen money back into their pockets.
My perspective is that it's destroying the backbone of the American middle class, which is American manufacturing. Maybe I'm wrong about that, but almost 50% of the population on government assistance should be a fairly good indication of a "problem".
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>Most middle classers are wisely using ZIRP to reduce their debt. >>
<< <i>Disagree. My understanding is that personal debt levels continue to explode. Now, it somewhat depends on what we define as "middle class". I base my own definition on how I grew up. Maybe that's changed, but my understanding is based on a traditional middle class lifestyle and not on overextended spending by cash-strapped debtors living beyond their means. >>
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Thanks, derryb. This is somewhat counterintuitive but it makes sense. It also amplifies the point that lots of cash-strapped debtors are living beyond their means, and now one of their main sources of credit is being dialed back.
Q: Are You Printing Money? Bernanke: Not Literally
Comments
Roadrunner, the Fekete paper from Mar '2014 is great. Will read the others this weekend.
I knew it would happen.
<< <i>From the crisis of 2007-2009 til now, all phyzz pm buying and actual profiting could have been more effective via paper instruments… >>
That's what I did in the shop. Turned the paper to gold and silver. turned that back to paper. Deposited the paper in the bank. Then did it again and again.
For all the concrete that gets repaired and poured and bricks that get stacked together with mortar, it wasn't Kool Aid that was useful. It was my LABOR which is useful and makes the metal a dead weight that shifts around from here to there for those who find it's usefulness.
I contend, standing outside of the realm, that even electrons are useful. Have you any idea how much electricity costs to operate the BITCOIN system ?
Milllions of dollars per day just for the electricity. Let's not get hung up on semantics. (not just you, but all of us)
The forums , one might say, are more useful than gold or paper. Yet, if we look at our contentious ways, some might think the discussions are useless.
<< <i>
<< <i>From the crisis of 2007-2009 til now, all phyzz pm buying and actual profiting could have been more effective via paper instruments… >>
That's what I did in the shop. Turned the paper to gold and silver. turned that back to paper. Deposited the paper in the bank. Then did it again and again.
For all the concrete that gets repaired and poured and bricks that get stacked together with mortar, it wasn't Kool Aid that was useful. It was my LABOR which is useful and makes the metal a dead weight that shifts around from here to there for those who find it's usefulness.
I contend, standing outside of the realm, that even electrons are useful. Have you any idea how much electricity costs to operate the BITCOIN system ?
Milllions of dollars per day just for the electricity. Let's not get hung up on semantics. (not just you, but all of us)
The forums , one might say, are more useful than gold or paper. Yet, if we look at our contentious ways, some might think the discussions are useless. >>
Now that's some profound thinking right there!
Liberty: Parent of Science & Industry
<< <i>From the crisis of 2007-2009 til now, all phyzz pm buying and actual profiting could have been more effective via paper instruments... >>
Right...if you take any 3 year period and compare 2 publicly traded commodities/stocks and compare them, you can have very different results/prices. Stocks have done much better than metals since 2011...they have gone in opposite directions.
<< <i> Stocks have done much better than metals since 2011...they have gone in opposite directions. >>
No correlation. Gold climbed to highs also while stocks gained. Metal price movement has been tied to dollar index strength in recent years.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I struggle with this, I buy PM's with my dollars and convert some of it to PM's, hoping that it's value increases over time. If the value increases over time, dollars buy less correct?
Maybe I have to quit looking at an oz. of gold in dollars and embrace that it will always be a troy oz. of gold, that could be used to barter in times of crisis.
Every fiat currency eventually fails, but gold (and silver) have never gone to zero, and have been recognized as money for over 5,000 years.
Gold is also very useful in electronics, and when the electronic item wears out, that gold most times ends up in the landfill. This is the first time (I am aware of) in history that we are consuming gold (and silver).
I struggle with this, I buy PM's with my dollars and convert some of it to PM's, hoping that it's value increases over time.
Gold & silver haven't been a good store of value if you look at the past 3 years. If you look at the past 10 years, they have. A hedge isn't really the same thing as a store of value, it's more of an insurance bet. In each instance, the value will always fluctuate but if you buy and sell gradually over time, the fluctuations don't matter so much.
When you sell stocks, bonds, or real estate, you convert it back to paper, too. They fluctuate too. If you buy & sell any of these other assets over time, the fluctuations don't matter so much either. You can choose to speculate in any of them - stocks, bonds, real estate, gold, silver, wheat, oil - any of them.
What's the difference? For me, it's almost like living in a foreign country. When I leave the house, I know that I need enough paper currency to make it through the day, or week. But I prefer to keep my savings in precious metals. I don't know that the stock market or the local dictator is going to come up with tomorrow, but I've decided that I need my assets close at hand without a bunch of intermediaries between me and my stuff.
I know how to manage my own assets, and my holdings aren't so vast or complicated that I need to pay an "advisor". Most people are smart enough to know how to manage their own stuff, and the ones who aren't smart enough can't afford one anyway.
There will always be people trying to get their hands in your pocket, with or without your involvement. It's nice just to have the last word in the matter.
I knew it would happen.
Interactive 35 yr chart of gold priced in various world currencies
Most impressive is gold in MXN.....35,580X increase over 35 yrs (30% interest per year compounded continuously). Quite a few are in the 30X to 100X range.
<< <i>
<< <i> Stocks have done much better than metals since 2011...they have gone in opposite directions. >>
No correlation. Gold climbed to highs also while stocks gained. Metal price movement has been tied to dollar index strength in recent years. >>
There definitely has been. Since late 2011, silver and gold have tanked, while the S&P 500 has gone up over 70%, paying dividends all the way-unlike metals. There has been a very strong inverse correlation.
3rd worst yearly start for the SM in 65 years.
<< <i>Every fiat currency eventually fails >>
Really? I have my doubts that any of the MAJOR fiat currency's will fail in your or my lifetime. I for one, will not loose any sleep over what may happen in a hundred or several hundred years from now...that's not my problem. You need to ask yourself, gold has it's uses now, but will that still hold true in the future?
<< <i>Everything is relative. A 3 year correlation isn't something to hang your hat on forever. Gold rose with the stock market from 2003-2007, a 4 year correlation. They both fell together for 7 months in 2008. Gold has still far outperformed the stock market since 1999-2001 despite offering no dividends. And we look back to the end of the gold window in 1971, gold is up 35X vs. the SM 20X. Silver is up 100X. So your point is????
3rd worst yearly start for the SM in 65 years. >>
My points are the ones I have clearly made, which you seem to disagree with.
<< <i>
<< <i>Every fiat currency eventually fails >>
Really? I have my doubts that any of the MAJOR fiat currency's will fail in your or my lifetime. I for one, will not loose any sleep over what may happen in a hundred or several hundred years from now...that's not my problem. You need to ask yourself, gold has it's uses now, but will that still hold true in the future? >>
The currencies that have currently been in vogue the past 10-50 years might not officially fail anytime soon. But they can be devalued, re-pegged or adjusted in any number of ways to essentially "end" the currency as it was once known. The US dollar was devalued 40% against gold overnight in 1934. But it still exists under the name "dollar." Has there been anytime when gold was officially devalued against a fiat currency in the last 100 years?
It won't be a hundred years until the current sets of currencies get seriously reworked or replaced....that will happen in the next 5-15 years. Gold will have its uses in the future as long as unbacked fiat currency reigns. The real question is whether fiat currency will still have any uses in the future? I know gold's uses won't end in the next 15 years. But various fiat currencies could essentially end at anytime in the next 5-15 years.
<< <i> My points are the ones I have clearly made, which you seem to disagree with. >>
I don't disagree with your points as they are based on fact. So are the ones I have posted. There's nothing to disagree about on any of them.....all of them are facts. Recency bias is not the best tool in the case when measuring 10-50 years of market activity. Seems to me that everything is up a lot over the past 43 years since unpegging from gold....and the resultant inflation.
<< <i>
<< <i>
<< <i>Every fiat currency eventually fails >>
Really? I have my doubts that any of the MAJOR fiat currency's will fail in your or my lifetime. I for one, will not loose any sleep over what may happen in a hundred or several hundred years from now...that's not my problem. You need to ask yourself, gold has it's uses now, but will that still hold true in the future? >>
The currencies that have currently been in vogue the past 10-50 years might not officially fail anytime soon. But they can be devalued, re-pegged or adjusted in any number of ways to essentially "end" the currency as it was once known. The US dollar was devalued 40% against gold overnight in 1934. But it still exists under the name "dollar." Has there been anytime when gold was officially devalued against a fiat currency in the last 100 years?
It won't be a hundred years until the current sets of currencies get seriously reworked or replaced....that will happen in the next 5-15 years. Gold will have its uses in the future as long as unbacked fiat currency reigns. The real question is whether fiat currency will still have any uses in the future? I know gold's uses won't end in the next 15 years. But various fiat currencies could essentially end at anytime in the next 5-15 years. >>
I have heard similar scenarios from you or other doomsayers for the last 5+ years. All vague generalities. I for one, do not subscribe to it.
<< <i>....I have heard similar scenarios from you or other doomsayers for the last 5+ years. All vague generalities. I for one, do not subscribe to it. >>
5 yrs? That's where you're in error. I've been stating this stuff for the past 13 years on this forum. And in fact, the derivatives crisis I suggested/agreed would happen as far back as 2002-2004 did indeed happen already. That was no vague generality. I've also never proposed a doomsday scenario as you suggest. That's just making up stories to promote your own Goldilocks agenda. I also proposed that gold and silver had much brighter futures back in 2002-2004...which was contrary to the majority view on the Coin Forum. With the $1 QUAD in otc derivatives still out there, it's no vague generality that that system is going to tank again....just like it did in 2008...maybe worse. The fact that paper currencies fail or get devalued is just a fact of history. Show me one that has not lost considerable purchasing power in the past 43-100 years. If the best rare coins (and many forms of collectibles) are up 75-100X since the gold window was closed...something must be seriously wrong with a 100% fiat currency system, don't you think? Our unused toys from the 1950's to 1970's are much more valuable than our currency.
None of this doomsday stuff. Just part of the historical record of fiat currencies. The world has never had to deal with $900 TRILL of interest rate derivatives under stress. 2008 was merely dealing with a much tinier group of MBS and CDS failures (approx $35-40 TRILL worth). The other 90% of junk in the box was not touched. It's still there though...doing nothing...being "useless"....just sitting there....until the day it is asked to perform it's contractual mission between 2 counter-parties....which assumes both parties are up to paying off the bet if they lose. The Bank For International Settlements was so scared of this stuff in late 2008 that they changed the accounting method for it. That resulted in $1.1 QUAD notional being immediately changed to around $690 BILL. notional. The amount of actual total risk was unchanged. What's difference between 2008 vs 2015 is that now bank depositors and taxpayers are on the hook for the failure of these derivatives. Not doomsday....but it could get interesting.
<< <i>
<< <i>....I have heard similar scenarios from you or other doomsayers for the last 5+ years. All vague generalities. I for one, do not subscribe to it. >>
5 yrs? That's where you're in error. I've been stating this stuff for the past 13 years on this forum. And in fact, the derivatives crisis I suggested/agreed would happen as far back as 2002-2004 did indeed happen already. That was no vague generality. I've also never proposed a doomsday scenario as you suggest. That's just making up stories to promote your own Goldilocks agenda. I also proposed that gold and silver had much brighter futures back in 2002-2004...which was contrary to the majority view on the Coin Forum. With the $1 QUAD in otc derivatives still out there, it's no vague generality that that system is going to tank again....just like it did in 2008...maybe worse. The fact that paper currencies fail or get devalued is just a fact of history. Show me one that has not lost considerable purchasing power in the past 43-100 years. If the best rare coins (and many forms of collectibles) are up 75-100X since the gold window was closed...something must be seriously wrong with a 100% fiat currency system, don't you think? Our unused toys from the 1950's to 1970's are much more valuable than our currency.
None of this doomsday stuff. Just part of the historical record of fiat currencies. The world has never had to deal with $900 TRILL of interest rate derivatives under stress. 2008 was merely dealing with a much tinier group of MBS and CDS failures (approx $35-40 TRILL worth). The other 90% of junk in the box was not touched. It's still there though...doing nothing...being "useless"....just sitting there....until the day it is asked to perform it's contractual mission between 2 counter-parties....which assumes both parties are up to paying off the bet if they lose. The Bank For International Settlements was so scared of this stuff in late 2008 that they changed the accounting method for it. That resulted in $1.1 QUAD notional being immediately changed to around $690 BILL. notional. The amount of actual total risk was unchanged. What's difference between 2008 vs 2015 is that now bank depositors and taxpayers are on the hook for the failure of these derivatives. Not doomsday....but it could get interesting. >>
So what....."Derivatives are worthless pieces of paper with no value attached to them."
And there was never inflation (nor deflation) before that time? Seems there were wild swings in the economy due to various disruptive influences such as inventions, manias, depressions and other crises..
Liberty: Parent of Science & Industry
<< <i>So what....."Derivatives are worthless pieces of paper with no value attached to them." >>
That somewhat sums up the current problem with $1 QUAD of them held by the world's top dozen or so banks. The banks are attaching significant value to them. And it's quite possible that BOTH counter-parties on each derivative contract report them in a profit position. After all, FASB says they can value them as they like. The top 6 US banks hold approx $300 TRILL in notional otc derivative contracts. Obviously, they don't consider those to be worthless any more than the Central Banks count their 32,000 tonnes of gold as useless/worthless. Why would either of these entities carry these products if they were "worthless" to them and had no value attached?
Seems to me that everything is up a lot over the past 43 years since unpegging from gold....and the resultant inflation.
<< <i>And there was never inflation (nor deflation) before that time? Seems there were wild swings in the economy due to various disruptive influences such as inventions, manias, depressions and other crises. >>
Well, certainly not 100 years of significant inflation which reduced the purchasing power of a $1 FRN to 5c. Take the entire period of 1800-1907 and price levels were generally flat. You can't do that from 1914-2014. That's basically the result of occasional gold standards in the 19th century.....and essentially no gold standard since 1914. One fact hard to dismiss is that an epic period of industrial growth (1870's-1913) occurred on a gold standard. It was probably the longest period where the standard worked and was generally adhered to.
And those disruptions you mention were rarely associated to a strict monetary standard. Those boom/bust cycles were typically the result of leaving a monetary standard and abusing the currency/money of the day. The US didn't own the world's reserve currency in the pre-1944 period. The post-1944 is not so easily compared to that earlier period with the dollar being forced upon the rest of the world over the past 40-70 years. The experiment of a gold-less, pure fiat world currency regime is only 43 years old. After 1913, whenever the going got tough, governments just printed more money. That's been the major standard in play for about 100 yrs.
What was avg yearly income back then $100 a month?... Seems like this losing 95% purchasing power is another mantra...
What they don't say is that no one spends a dollar earned in 1915 in 2015, a dollar that they have just kept as a crispy federal reserve note for 100 years and not done anything else with...
No, people spend in 2015 dollars that were earned in 2015 or 2014 or maybe earlier, but if earlier then it's a dollar that they have invested, and it has grown. Or if they have kept it as cash or a bank deposit, they have traded the growth potential of investment for the safety of no risk of market loss, for that particular dollar.
Hell, even if someone did save that crispy FRN from 1915... what's an UNC 100 year old FRN note worth to a collector? A lot more than a nickel, that's for danged sure.
Beware the sophists, especially if they have some gold for sale
Liberty: Parent of Science & Industry
No, they weren't.. Prices of what specifically were flat? examples please.
No, prices went up and down depending on market conditions and disruptive technology, as they always do.
Liberty: Parent of Science & Industry
<< <i>So what....."Derivatives are worthless pieces of paper with no value attached to them." >>
They are promises to pay when certain economic events occur. They are in affect debt instruments running from an economic condition. Let us not forget what excess debt does to an economy, particularly when conditions call for payment that cannot be made. Such a predicament results in default. Even in a default, someone pays the price. Let us also not forget that the recent spending bill (basically written by Citi) puts the underfunded FDIC (taxpayers) on the hook for TBTF banking derivative losses. One look at just a fraction of the potential derivative losses should be enough to send even the Keynesians rushing to buy gold. If for no other reason, derivatives held by major banks are a good reason to own some gold.
Edited to add:
Is this why Citi needs the FDIC to be on the hook?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Take the entire period of 1800-1907 and price levels were generally flat.
No, they weren't.. Prices of what specifically were flat? examples please.
No, prices went up and down depending on market conditions and disruptive technology, as they always do. >>
Minneapolis FED CPI chart below shows 19th century price trends generally flat or in decline. The CPI index from 1913-2014 is quite the opposite. I have no interest in the price of 19th century red herrings or wagon wheels, just the overall price index....which is obviously very flat. The only real blips higher are War of 1812, Civil War, and WW1. WW2 shows an intial blip and then Bretton Woods, baby boom, dollar as reserve currency taking over. The 19th century shows the 2 war blips where the gold standard was shelved, followed by 35-40 years of declining price index. Declining/flat prices for over 80% of the 19th century. 1900 ends up 50% lower than 1800 began. And there's no disputing the massive growth in the 19th century. Ideally, shouldn't prices decline as economies become more advanced and costs are reduced? They should in a non-fiat economy.
CPI from 1800-2005
A major difference from the 19th to 20th century is the ability to tax. You can't tax stagnant prices as effectively as you can inflation. Hence the creation of the FED and the IRS. It's all about redistributing the wealth and keeping that hidden from J6P. Even Keynes stated as much.
<< <i>CPI index below shows 19th century price trends generally flat or in decline. The CPI index from 1913-2014 is quite the opposite. I have no interest in the price of 19th century red herrings or wagon wheels, just the overall price index.
CPI from 1800-2005 >>
Ironic that the chart shows the takeoff in CPI to occur at the same time (1971) the US severed the dollar's connection to gold and it's true beginning as a fiat currency.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>CPI index below shows 19th century price trends generally flat or in decline. The CPI index from 1913-2014 is quite the opposite. I have no interest in the price of 19th century red herrings or wagon wheels, just the overall price index.
CPI from 1800-2005 >>
Ironic that the chart shows the takeoff in CPI to occur at the same time (1971) the US severed the dollar's connection to gold and it's true beginning as a fiat currency.
The chart does not show a "takeoff" in CPI. It shows the cumulative effect of small amounts of inflation over several decades. The chart was mostly flatlined before due to severe deflationary periods that corrected inflation. We have enjoyed deflation in a long long time. And this is why the boomers feel they are affected so severely. Their concept of economic normalcy is highly influenced by their personal experiences and not of generations of experiences.
Funny that those who preached massive inflation due to "FED recklessness" are now jumping on the deflation bandwagon.
Knowledge is the enemy of fear
<< <i>
<< <i>CPI index below shows 19th century price trends generally flat or in decline. The CPI index from 1913-2014 is quite the opposite. I have no interest in the price of 19th century red herrings or wagon wheels, just the overall price index.
CPI from 1800-2005 >>
Ironic that the chart shows the takeoff in CPI to occur at the same time (1971) the US severed the dollar's connection to gold and it's true beginning as a fiat currency.
One could easily and probably rightfully conclude that gold created/was responsible for many deflationary periods (severe boom and bust cycles). Would the boomers outlook of current conditions be the same if they had experienced a 2008/2009 event in 1980 and 1995?, which is roughly the interval in which these severe recessions happened "in the good old days".
Yes, the choice of pill is dependent upon perspective and those who hold the largest assets (boomers) do not have the experiences necessary to make "proper" decisions. And another yes, the boomers kids' are paying attention.
Knowledge is the enemy of fear
Considering that the British pound was effectively the world's reserve currency for much of the 19th century, and most nations kept their foreign reserves in BP's, maybe that should by analyzed to see how the more important gold standard of that century worked. Two thirds of world trade was conducted in pounds.
<< <i>Considering that the British pound was effectively the world's reserve currency for much of the 19th century, and most nations kept their foreign reserves in BP's, maybe that should by analyzed to see how the more important gold standard of that century worked. Two thirds of world trade was conducted in pounds. >>
Currencies can lose their world reserve status?
But, this time it's different.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>The US gold reserves in the 19th century were fairly stable. I doubt you'll find that gold "creation" led to boom/bust cycles from that. Lots of fresh gold in California in the 1848-1855 period yet it took to 1854 to show a single year of strong CPI inflation. If anything, the 1850's seem to be pretty stable price-wise. Go figure. What I see in that 19th chart are war price booms that led to post-war price declines, nothing due to a gold standard as the money printers shelve the gold standard. Here's a chart that shows gold is not the bogeyman most have been taught to believe. Sort of hard to argue that the 19th century shows 80 years with 0% or declining prices. The 1900-2005 period shows only 22 years where prices were flat to negative....the last one in 1955. It is what it is.
Considering that the British pound was effectively the world's reserve currency for much of the 19th century, and most nations kept their foreign reserves in BP's, maybe that should by analyzed to see how the more important gold standard of that century worked. Two thirds of world trade was conducted in pounds. >>
It is what it is, so what are we really discussing? Before 1971 (pseudo gold standard) and before 1933 (gold standard), the economy suffered severe boom and bust cycles. After 1971 the economy was quite linear.
So either gold had an effect on currencies and as a result economies, or there is something else. And if something else, then what "use" has gold provided?
And yes derryb, a country's currency can lose reserve status. So what? Do the good citizens of Great Britain live such terrible lives? Are their companies not competitive? Are the people dying of starvation or disease?
We are a proud country and like to hang our hat on this reserve currency thing, but it really isnt all its cracked up to be, it can be a curse, and we proud Americans would continue to live our lives as we have for the past 200+ years if we lost it. The newsletter writers/hucksters should try a different scare tactic.
Knowledge is the enemy of fear
Speaking from firsthand experience as a wage earner, you are incorrect. I was there in 1970, 1975, and 1980 when CPI "took off". In fact, it took off to the extent that gov.com had to start making changes to the way it was calculated right about then, just to keep COLA spending from running amok.
After 1971 the economy was quite linear.
No, you are plainly wrong. The economy was booming from the mid '60s until about 1973-1974 and by 1975 we had a "stagflation" problem. You don't know what that meant, do you? By 1980 there were staff reductions and layoffs with no raises. If Volker hadn't taken some tough measures, it would have been worse. You don't even know about that, do you? Come'on cohodk, you really don't know it all.
Just sayin'.
Funny that those who preached massive inflation due to "FED recklessness" are now jumping on the deflation bandwagon.
That group would include me. Here's where I don't have firsthand experience and I just have to rely on what I've read from historical accounts.
IN MY OPINION, we've only just completed ROUND 1. We may be lucky enough to have a resilient enough system and a resilient enough economy to avoid a Weimar event, but it's not going to be very pretty in any case. The mismanagement has already gone too far to avoid a default of some type.
Instead of forcing the bad banks into bankruptcy and letting the more financially conservative banks take up the slack, they've used up all of the economy's ability to generate momentum by creating more debt to drop interest rates, but the momentum never happened.
Nobody wants the pain that a deflation would cause - the banks and politicians are absolutely petrified of deflation, so they'll do ANYTHING to avoid it. They all know that ROUND 2 will be much worse for them and they will all jump at the chance to do some serious inflating of the currency if it means saving their hides just one more time. Besides, they have Bernanke's roadmap (you know - that student of the Great Depression).
The deflation would have come 6 years ago, except for the additional money & debt creation. Now the mess is bigger and the hole is deeper. We've only seen the preview. The main feature is next. If you think the Fed has been reckless up to now, you ain't seen anything yet. The bigger problem now is that there's nowhere to go with interest rates.
Either the deflation swallows you up or you inflate away and damned the consequences. Any guesses which way it's going to go?
I knew it would happen.
<< <i>Funny that those who preached massive inflation due to "FED recklessness" are now jumping on the deflation bandwagon. >>
I suspect that "those" you refer to understand the difference between commodity deflation and equity inflation, which are both caused by FED recklessness. Recent commodity deflation only reinforces the recklessness. While equity inflation and other misguided FED policy (i.e. ZIRP) helps to ruin middle-class Americans the commodity deflation is ruining entire economies (including those within the US) and nations. Of course if you are one of the higher income Americans or bankers who are profiting heavily from either then one man's recklessness is just another man's profit. FWIW, the money I'm saving (and more) on gasoline and gold is going directly into the pockets of Publix and health care providers.
Thanks to RR's CPI chart we can add another use for gold: maintaining currency stability when used to assign value to that currency.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
OMG!!! There was a recession. Heaven forbid. Take a look at the factory output and capacity utilization--it was maxed. Thats why the high inflation.
The economy was booming from the mid '60s until about 1973-1974
Wasnt there a war going on then? I thought wars were disaster for economies---so Ive read on this board? How about the economy from 1981 to 2008. Sucked then, didnt it. So lets see, from 1965 to 2008, with the exception of a few lean years, the economy was rocking. What a terrible time to have lived.
The rest of what you write I mostly agree with. If there is deflation then great, all the boomers who fear for their retirement will survive. And if there is inflation then all the assets the boomers own will rise commensurately.
Markets take care of themselves, no matter how much the FED or politicians try to disrupt things. Faith---its what we all seem to have on this board in one way or the other. Have faith in markets. Have faith in yourself. Have faith in mankind.
Or have faith in the NWO and conclude the end is nigh.
The choice is yours.
Knowledge is the enemy of fear
So either gold had an effect on currencies and as a result economies, or there is something else. And if something else, then what "use" has gold provided?
We've been discussing the usefulness of gold, various gold standards, fiat money, and the resultant affects on economies of nations.
The "something else" gold has provided has been to build the greatest half dozen or so empires of the past 500-600 years (2000 years if we include the Roman Empire, maybe 3000+ yrs if we include Egypt and other early empires). Each one of them was basically built on gold. And when they compromised those standards they lost it. Note, none of these empires were built on a fiat money standard. If you know of an empire/nation initially built on a foundation of paper money please present it. Just because there are thousands of years of history of empire building on gold/silver/hard assets doesn't mean it will continue indefinitely. But until something better comes along, that's the standard.
The economy was booming from the mid '60s until about 1973-1974
Wasnt there a war going on then? I thought wars were disaster for economies---so Ive read on this board? How about the economy from 1981 to 2008. Sucked then, didnt it. So lets see, from 1965 to 2008, with the exception of a few lean years, the economy was rocking. What a terrible time to have lived.
Wars a disaster for economies? You must have read wrong. I showed that wars led to rising prices (CPI) as govt's printed money to finance those wars. How you did in the post war years was probably very dependent on whether you won the war or not. The US economy did sort of suck from 1966-1982 which coincided with the stock market sucking wind and limping by for 16 years. The economy limping buy and rocking are two different things. I wouldn't confuse 1966-1982 with 1983-2000. Did you ever try to sell some coins in 1981-1982? That really sucked. In many ways it was much harder than 2009-2010. Same comment for 1973-1975. Muddling by and booming....2 different things. We can always "muddle by" just like we did from 1929-1933 and 2009-2011.
What? Please reread and re-evaluate what you just.
Middle class owns stocks--certainly not ruining middle class America which is the largest holder of equities.
ZIRP--allows middle class Americans to acquire assets.
the money I'm saving (and more) on gasoline and gold is going directly into the pockets of Publix and health care providers.
Sucks to get old. Health care costs would not be high if not for demand. Your generation influenced this country's economy in many ways. It is now affecting health care. Its no ones fault--just simple economics. High demand = high prices. Econ 101.
Yes, central banks around the globe are fighting deflation--just as I said (and was ridiculed) would happen 6 years ago. Maybe, just maybe, if they are lucky and succeed, then the pendulum will swing in favor of general inflation. In which case all assets rise and middle class America is the beneficiary.
Knowledge is the enemy of fear
Each of them was built on the back of slaves. Human labor is the greatest and most pure currency.
Your premise is wrong. Gold did not built those empires. Humans did.
Knowledge is the enemy of fear
<< <i>build the greatest half dozen or so empires of the past 500-600 years (2000 years if we include the Roman Empire, maybe 3000+ yrs if we include Egypt and other early empires). Each one of them was basically built on gold
Each of them was built on the back of slaves. Human labor is the greatest and most pure currency.
Your premise is wrong. Gold did not built those empires. Humans did. >>
Oh, so you're saying that the empires of Spain, France, England, and the US could have been accomplished on a pure fiat currency? In other words, the world's people emigrate towards the world's strongest slave empires rather than to those built on free-flowing gold and other economic assets? I'll even toss 1930's to 1944 Germany in there since they managed to take over most of Europe....without slaves. Give me an example of a fiat money "empire" built on slaves. News to me that the bulk of the US empire growth from 1865-1965 was built on emigrants who rushed to our shores from the 1870's to 1920's, just to be slaves. Interesting view.
Humans couldn't have and wouldn't have helped build those empires without gold.
<< <i>Or have faith in the NWO and conclude the end is nigh. >>
The globalists running the world certainly believe in and have faith in their ideas of a NWO. One might ask themselves why? Could they know something you don't understand?
P.S. None of us are saying the end is nigh. We are just saying the world you are living in, and the world as we have known it, is about to change.
<< <i>While equity inflation and other misguided FED policy (i.e. ZIRP) helps to ruin middle-class Americans
What? Please reread and re-evaluate what you just.
Middle class owns stocks--certainly not ruining middle class America which is the largest holder of equities.
ZIRP--allows middle class Americans to acquire assets.
the money I'm saving (and more) on gasoline and gold is going directly into the pockets of Publix and health care providers.
Sucks to get old. Health care costs would not be high if not for demand. Your generation influenced this country's economy in many ways. It is now affecting health care. Its no ones fault--just simple economics. High demand = high prices. Econ 101.
Yes, central banks around the globe are fighting deflation--just as I said (and was ridiculed) would happen 6 years ago. Maybe, just maybe, if they are lucky and succeed, then the pendulum will swing in favor of general inflation. In which case all assets rise and middle class America is the beneficiary. >>
Most middle classers do not own stocks. Largest holders of equities are the top 10%. ZIRP allows the top 10% to increase their holdings with cheap money. Most middle classers are wisely using ZIRP to reduce their debt.
Skyrocketing health costs are not just simple economics or a result of demand. Money devaluation = higher prices. Econ 102.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Yes, central banks around the globe are fighting deflation--just as I said (and was ridiculed) would happen 6 years ago.....
The part that doesn't fit with this are the high prices seen in the US and world stock markets. The Central Banks have created a back stop where the SM's are considered as safe as dollars and treasuries. Massive inflation in the SM's over the past 5 years does not fit with the deflationary concept. And it's a big divergence too. Too big to just ignore. They are picking the winners more than ever before. We can call it inflation or deflation...but picking the winner is the best term for it. Right now, govt's/CB's are picking oil as a loser. The current drop to $46 would never have occurred this quickly w/o "assistance" and interventions on a large scale. Same comment for the Russian Ruble.
Is there any other time in US history where all time record US stock prices (or company market caps) were seen during 3-5 year recessionary/deflationary periods or depressions? I can't think of any in the past 120 years...except this current one from 2012-2014. Does anyone really believe this anomaly was done without Central Bank interventions of the highest order?
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Skyrocketing health costs are not just simple economics or a result of demand. Money devaluation = higher prices. Econ 102.
Most middle classers are wisely using ZIRP to reduce their debt.
This is your only accurate statement--which BTW, contradicts what you said previously--(i.e. ZIRP) helps to ruin middle-class Americans.
Knowledge is the enemy of fear
<< <i>Most middle classers are wisely using ZIRP to reduce their debt.
This is your only accurate statement--which BTW, contradicts what you said previously--(i.e. ZIRP) helps to ruin middle-class Americans. >>
ZIRP is ruining middle-class America by destroying the value of their savings and robbing Peter to pay Paul with bank bailouts and taxpayer funded banking investments. The fact that they have one small benefit in refinancing at lower rates does not put the stolen money back into their pockets.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
B-I-N-G-O!
When push comes to shove, the bond market (i.e. the government debt and fiat regime) will be protected at the expense of the stock market. The whole system is based on US Govt Bonds and they have nowhere to go but down in price (i.e. yields have nowhere to go but up). When rates go up, the stock market will be squeezed out. End of story.
Yeah, they pick winners & losers all the time.
Most middle classers do not own stocks. Largest holders of equities are the top 10%. ZIRP allows the top 10% to increase their holdings with cheap money.
Agree. This is what I've been reading for the past several years. More concentration of wealth in the top 10%.
Most middle classers are wisely using ZIRP to reduce their debt.
Disagree. My understanding is that personal debt levels continue to explode. Now, it somewhat depends on what we define as "middle class". I base my own definition on how I grew up. Maybe that's changed, but my understanding is based on a traditional middle class lifestyle and not on overextended spending by cash-strapped debtors living beyond their means.
Skyrocketing health costs are not just simple economics or a result of demand. Money devaluation = higher prices. Econ 102.
Agree, but mainly - skyrocketing healthcare costs are directly the result of an unholy alliance between the drug companies & the insurance industry via government mandate. (i.e., government interference and government manipulation of the private marketplace, driven by social engineering to benefit their partnership cronies.)
I knew it would happen.
My perspective is that it's destroying the backbone of the American middle class, which is American manufacturing. Maybe I'm wrong about that, but almost 50% of the population on government assistance should be a fairly good indication of a "problem".
I knew it would happen.
<< <i>Most middle classers are wisely using ZIRP to reduce their debt. >>
<< <i>Disagree. My understanding is that personal debt levels continue to explode. Now, it somewhat depends on what we define as "middle class". I base my own definition on how I grew up. Maybe that's changed, but my understanding is based on a traditional middle class lifestyle and not on overextended spending by cash-strapped debtors living beyond their means. >>
Credit card debt tumbles
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Thanks, derryb. This is somewhat counterintuitive but it makes sense. It also amplifies the point that lots of cash-strapped debtors are living beyond their means, and now one of their main sources of credit is being dialed back.
I knew it would happen.