Why gold (and coins) may behave different from the late 70's
roadrunner
Posts: 28,322 ✭✭✭✭✭
An interesting article by Jim Willie of why it's different this time around from the 1970's. Some interesting conclusions on where gold and by inference coins, may be headed. You may have to skip towards the center to get to the quick on gold. More of the article pertains to economies and wealth, which are the engines of gold and coin markets.
What the future may hold for gold & coins...and us.
roadrunner
What the future may hold for gold & coins...and us.
roadrunner
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for me scary as it makes sence to me what he is saying
michael
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
but i do think that with the current technology that we have this will counteract with some sort of synergistic energy to help solve the current financial position from imploding on us due to the excesses of the past
michael
Wish I had a nickle for every time it said "ceiling." Fact is that making me pay more for everything doesn't help me. The unions try to tell me that me and my family having less is good, but for now I think I'll disagree and keep more of what I have.
An astonishing fact is that 23% of college graduates have already declared bankruptcy.
I'm no gambler and I'd put money against that.
<< <i>Wish I had a nickle for every time it said "ceiling." Fact is that making me pay more for everything doesn't help me. The unions try to tell me that me and my family having less is good, but for now I think I'll disagree and keep more of what I have.
An astonishing fact is that 23% of college graduates have already declared bankruptcy.
I'm no gambler and I'd put money against that. >>
Maybe he means euphemistically?
I wouldn't bet against it.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Partner / Executive VP
Heritage Auctions
Not sure what to think, can't tell what's going to happen.
Don't know if anyone saw Friday's Wall Street Journal. GE built up a low cost call center in India over the past few years and is selling it for $1 billion. I wonder how this affects our current service sector economy.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
Jerry
he doesn't deserve some credit since he has a better grasp than most economists, but none of
his predictions haven't already come true.
<< <i>"The influx totally eradicates pricing power. Outsourcing is a constant threat to the labor market. Our economy has a 60% weight from its service sector, under extreme pressure. Wages cannot rise to counter a higher cost of living. Without pricing power, corporate profitability is limited, a necessary ingredient to both hiring and granting wage hikes. Labor unions now negotiate plant closures, not wage and benefit proposals."
Don't know if anyone saw Friday's Wall Street Journal. GE built up a low cost call center in India over the past few years and is selling it for $1 billion. I wonder how this affects our current service sector economy. >>
Sounds like my calculus I'm taking...(Heh..). Sorry if the following is a stupid question : Is what he takling about economics? Today I just switched to a new school, and my first class is ecnomics! I'm a junior in high school. Heck, I only got past the first few chapters(It's a work at your own pace school), but I did learn a few things! I'm glad I did, as I knew nothing about it before.
- The fed artificially tries to prevent recessions through monetary policy.
- Asian imports -- especially China -- keep a price ceiling on U.S. goods.
- The money supply should be regulated as a result of the paradigm shift to a don't-care attitude about the trade deficit.
- Commerce and society have drastically changed -- the biggest change being the use of debt.
I do NOT agree with the fact that commodities and gold have any sort of correlation, and that gold will prevail in the long run, along with volitility along the way. In fact, I will go so far as to say that gold has no purpose anymore in modern monetary policy.
BTW, I made a prediction in December 2003 that gold would close 2004 at $410/ounce.
Check out a Vanguard Roth IRA.
I get a kick out of reading and listening to gold geeks and survivalists. Most all of them are classic contrarian "half glass full" economists. The world is going to hell in a hand basket so sell all of your investments and buy gold! Different shades but similar conclusions.
However, I believe gold is a very attractive long term commodity to own because of:
1. Record budget deficits and massive government and public debt.
2. Record trade deficits.
3. The Fed is printing money like a drunken sailor.
4. Thus lower dollar and higher gold prices.
But Gold is not an investment but a great long-term hedge because of these three reasons alone!
I know GDP and whatever else comes into play, but what happens if every forex trader stopped buying US Dollars? or what happens when all the US companies outsource everything besides sales to US citizens?
And if there is a huge global war, money will be worthless in alot of circumstances, but commodities have a value no matter what. If the powers out, banks have been plundered, counterfitting is rampant, the police have been disbanded, what would you trade for goods or accept for goods? A piece of paper or a commodity like gold, silver, platinum, gasoline, sugar, clean water, food/grains?
<< <i>
I do NOT agree with the fact that commodities and gold have any sort of correlation, and that gold will prevail in the long run, along with volitility along the way. In fact, I will go so far as to say that gold has no purpose anymore in modern monetary policy.
>>
Money is what people think is money.
To this degree gold will long retain some attributes of money and behave accordingly. While gold
is essentially meaningless for setting monetary policy it retains some value in gauging it. The fed
almost certainly still watches gold prices and would change policy accordingly if they believed it was
warranted. As the writer of the article tried to say though, the fed's hands are tied by government
and private debt. They have no choice but to push on the string of money supply.
They will find this task more rewarding as the dollar falls.
everything else crosses over, sorry he's just too blind to see, or is in middle america.
The Monetary Economics of Thurston Howell III
The biggest drag on gold is it's lack of ability to produce income. It may go up or down in value but it doesn't generate any income, the big money boys will shy away if the economy is anywhere near stable. Even if inflation is 15% they would rather be in investments that are paying 20.
As far as all the money going overseas etc, I used to think that was real bad. Now I'm not so sure, after all when we have traded for all thier goods and services for decades, in the end, they will be left with nothing more that our promises and paper.
I don't see why people make things so difficult. Buy Gold when it tells you it doesn't want to decline in value. Sell Gold when it refuses to rise. Same goes for any other investment, except your primary residence.
No heavy Econ 101 book required.
A piece of paper or a commodity like gold, silver, platinum, gasoline, sugar, clean water, food/grains?
Do you think you can own enough of the non-metals to make a difference? I mean, are we talkin' about storing 3 years worth of gasoline and sugar in the garage (and securing it from riot or theft)?
I'd need 4000 gallons of 87 octance...... assuming I still drive to the office
<< <i> A piece of paper or a commodity like gold, silver, platinum, gasoline, sugar, clean water, food/grains?
Do you think you can own enough of the non-metals to make a difference? I mean, are we talkin' about storing 3 years worth of gasoline and sugar in the garage (and securing it from riot or theft)?
I'd need 4000 gallons of 87 octance...... assuming I still drive to the office
Almost all of us are entirely dependent on the smooth operation of society and the economy.
Buying gold as protection against its demise is a losing game in all cases if it's the entirety of
one's plan.
It is worth a look. A long read and take time to understand it.
Link
(I have no epiphany netting)
But essentially it is: The Fed ...used...to be the engine of inflation.
You all ...know...the Fed multiplier, right? No? Well, it's that the Fed lends out one dollar for every dime they get in deposits. Called the "multiplier". And a great source of "feeling safe" when one realizes that our entire US monetary system is backed by a measly 10% in assets. But....to return to the tale.
Whereas the Fed used to create inflation by lending a buck for every dime they had.....
CHINA (Asia) now CHARGES a buck for every dime's worth of product they sell to us.
Wheee! Great system.
And, we dummies still buy stocks in companies that relocate to China or buy inventory for them.
Not even REALIZING that we undermine our own workers in doing so.
A fine conundrum. We go broker and broker......Asia gets richer and richer.....and we think we HAVE to save money so we buy Asian junk.
WHILE......back at the ranch.....Asia sends the money to OUR credit market to support our T-bills and keep our interest rates low so we buy .....MORE.
We is done now, Julia. Please serve while hot.
it's a hedge and it doesn't hurt to have something tangible like a small gold and silver hoard. I'm a firm believer of "hope for the best, plan for the worst"
do NOT agree with the fact that commodities and gold have any sort of correlation, and that gold will prevail in the long run, along with volitility along the way. In fact, I will go so far as to say that gold has no purpose anymore in modern monetary policy.
Unfortunately I do NOT agree with Dollardude and I am convinced gold is still inexorably linked to monetary policy. For the past 15 years the policy has been to short-sell gold to keep its price down and promote a risk free carry trade bonanza to all the key players. You can't promote a 20 year credit based society and let gold start to run up. As the central bank gold coffers empty out, the game will end. As far as gold having no purpose today, that is what Greenspan and Wallstreet would like you to think. They've succeeded beyond their wildest dreams. Our grandparents or great grandparents knew different. The rest of the world doesn't think like us. Several European countries are already out in front of us with their 30-40% payroll taxes to help cover their huge benefit packages for retirees. We are not far behind.
As far as all the money going overseas etc, I used to think that was real bad. Now I'm not so sure, after all when we have traded for all their goods and services for decades, in the end, they will be left with nothing more that our promises and paper.
Eventually Asia will wake up and stop accepting our paper for their tangible goods. They will be looking to turn their IOU's in. The game will not go on forever. And either we will have to inflate to pay off our debts (hyperinflation) or default on it. Either way, our dollar falls off the map and we'll have to look from within to buy tangible goods.....or pay with other tangible assets. Maybe last month was a harbinger of change. Instead of the usual $4-5 BILL per week, the Asians only swallowed $500 MILL or so of debt from us. To balance that off, we printed the balance of the money.
US monetary system is backed by a measly 10% in assets.
And that measly 10% is just paper. It is not backed by anything
tangible. The word "backed" is no longer applicable. Our 100% in valueless paper is backed by 10% in "selected" valueless paper.
Thanks for those other links. I hope to read them all shortly.
roadrunner
<< <i>Eventually Asia will wake up and stop accepting our paper for their tangible goods. >>
The reason Asia is buying US Treasuries is to keep the value of the dollar down so that the products they produce are cheap for us to buy.
US Treasuries are actually a very stupid investment for them, but they are choosing a poor investment to keep their citizens employed. The other reason foreign countries buy so much of the US's debt is because it is still the safest investment in the world. If the US goes down so does the rest of the world. If they start selling, then interest rates go up to attract more investment. So, I don't think we will have trouble finding people to buy our debt. We just might have to pay them more to do so.
If gold is such a good investment? Why are the central banks around the world selling their gold reserves?
But we have seen nothing yet. We will scream for the heads of so many people that it will either become a sort of a violent "French revolution" or the realization that too many people had their hands in the till that we will end up giving amnesty to everyone.
The United States is on its way to becoming a poorer country relative to the 20th century and will continue on the path to "Britianization" of our economy.
By 2030, the major stock exchanges will no longer be in New York. They will be in China or India. We will still have a major stock exchange similar to the London Exchange which had to reinvent itself after the decimation of the British economy by the 1st century of the 20th century. By 1907, the New York Exchange took over from the London Excahnge as the #1 worlds exchange.
We will still be a military power but China will control Formosa by 2030 through "peaceful means." I suspect that China will forgive a considerable amount of US debt in exchange for a peaceful takeover of the Island. It will be negotiated for at least 10 years.
We will then slip to the worlds #2 economy similar to what the Soviet Union was between 1943-1975 but with a first rate military power until 2035 at which time China will have achieved military parity. We can only hope for a benevolent society and leadership in China by then.
What happens after that is total speculation. But the US will look more and more like the Byzantine (old Eastern Roman Empire) with many years of contraction and decline with very few years of modest growth and revitalzation in between.
Our children will not be able to afford to buy our more expensive coins and it remains to be seen who will buy our more expensive coins 20 years from now. if no one steps up to the plate as seen with British coins since the early 20 century, then our coin prices will stagnate and possibly even decline for 50 or more years starting in 2025.
However, neither country will challenge the United States for the foreseeable future in terms of economic supremacy.
Demographics, political stability, history, resources, and many other factors greatly favor us. We face many challenges, but they are small compared to the difficulties faced by China and India.
Keep in mind that both China and India you have about 300 million middle class to very prosperous citizens, and about 1 billion extremely poor. To some degree these poor are a source of cheap labor and future economic growth, but they are also a source of potential huge social unrest. Both China and India have potentially explosive demographic challenges. In the US, although we have a modest challenge associated with aging, our demographic situation is extremely favorable for economic growth -- over the next 30 years, we will see population gradually increase from about 300 to 400 million, with a manageable increase in the average age. China, in contrast, due to its one child policy, will see growth in its working age population grind to a halt, and the decline, and the number of retirees mushrooms.
We in the US will definitely not be able to live above our means forever. We are, however, a huge, wealthy, politically stable, economically (relatively) free country, and adjustment will be relatively easy -- and it will occur gradually over a 20 year period.
Discussion of these issues is healthy, and will ultimately lead to a better result. Fundamentally, however, by far the most likely scenario is continued prosperity. The United States (and the former colonies) have had 300 years of remarkable economic growth and prosperity, with a few major disruptions (civil war, depression). There is nothing whatsoever to suggest that we face diminished economic prospects going forward.
I am in total agreement with every point Oreville made in both of his posts.
The problem I have with Mr. Willey’s essay, as well as most of these types of essays, is that these writers continue to make judgments on where the World will go, based on our controlling the situation.
Where it is true that the U.S. and its Bankers have controlled the World economy for over a century, it is now true, that we are no longer in control of many areas and will continue to lose more control as the years progress.
If I were trying to predict the price of many commodities for the next few years I would be more interested in what the Chinese, Indians, and other coming economic powers might be doing in the future rather than Americans.
The simple fact is that America has fallen into the same traps that have occurred to many great civilizations.
Over the last 40 years there has been a general decline in personal, and economic, moral behavior, and a move to socialism. Where our grand parents cry was a chicken in every pot, the new American cry is a Government check in every mailbox.
Its very simple. As long as gold is priced in US Dollars internationally, as the dollar falls, gold will go up. The same applies to Oil and other commodities.
Gold is an interesting commodity today. The FALL of the asian markets 10 years ago left gold prices plummeting. Asian consumers stopped buying it, thus the price went down. I may sound like I dont know what I am talking about, but I read an article in 1997 that stated 78% of ALL GOLD consumption/purchases were asian consumers, for mainly jewelry!!! (I still have a hard time believing it, but who else was/is buying a lot of gold?). The banks were trying to DUMP all there gold. Remember reading about the Swiss banks, and the British banks trying to unload their gold reserves? I want to BELIEVE gold should NOT rise much at all.... Plenty of gold still being mined, and banks still trying to sell their gold, and consumers (asian primarily) still not coming into play as strong buyers again.
This is a COIN forum though. Cant really compare the gold coin rarities to the price of gold. No comparison with price increases. I guess if gold really shot up, the gold coins would be worth more, but their prices are far greater than the price of gold, except for poor specimens.
Currently, NO inflation because of little to no pricing pressure (asia's fault), LOW interest rates, and yet gold has gone up in value past 3 years??? The pressure of the dollar is the reason.