Thoughts on Apocalyptic Prophesy 32 comments
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Here's an email I sent a reader the other day who had messaged me asking me about the growing appeal of various well-known prophets of the financial apocalypse:
As you say, people are desperate for someone to help them make sense of what's going on, and, as the poem goes, "the best lack all conviction, while the worst are full of passionate intensity".
Generally speaking, I do buy into some long waves in the market, but they are very difficult to untangle from so much of what is going on out there. For example, there is a long-wave credit cycle, and that just peaked and has now gone into decline, with its last peak having been during the Great Depression. My guess is we will see a similar credit unwinding over the next 3-6 years, with lots of false starts along the way.
With respect to some of the more apocalyptic views out there, certainly anything is possible. That said, organizing my life around a return to barter and barbarism represents a financial variant of Pascal’s wager that I'm not currently willing to take -- in part because I can be financially and personally prudent without going all the way to hoarding gold, buying agricultural property, or stocking up on weaponry and canned goods.
More broadly, I think what people are realizing, at core, is that most of what seems "normal" is a useful fiction. That's not a conspiracy theory, but a simple statement that it's not black swans that are the issue -- it's our collective willingness or unwillingness to live as if the complex and tightly-coupled economic system in which we live is actually stable and resilient. It isn't. It can seem that way, but there is no "normal".
Finally, I hear what you're saying wrt gold. In some very real sense, however, gold is just another ponzi scheme. It is only worth something because other people think it's worth something. After all, gold is near useless as an exchange medium; there is little supply; and it has minimal practical value. Does that mean you shouldn't own gold? No, I do. But it also means that when the wheels come off it, as will eventually happen, then finding a gold bottom is very tough, because there is no underlying economic rationale for any particular value.
Semi-random musings.
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And what about the US$ and all fiat currencies? Let's face facts. Unless we're going to a barter system where food, water, and shelter are the only things of value, precious metals like gold, silver, platinum, etc. are the most legitimate form of money we have today. They are in short suppy, can't be printed, and they are expensive to mine. Demand is high, supplies are limited, and it's been the most valued form of money throughout history. Give me a better idea to replace paper 'worthless' money and we'll have something to discuss. Until that day comes, buy it as a hedge or face the consequences
"Finally, I hear what you're saying wrt gold. In some very real sense, however, gold is just another ponzi scheme. It is only worth something because other people think it's worth something. After all, gold is near useless as an exchange medium; there is little supply; and it has minimal practical value. Does that mean you shouldn't own gold? No, I do. But it also means that when the wheels come off it, as will eventually happen, then finding a gold bottom is very tough, because there is no underlying economic rationale for any particular value."
After reading the above it becomes apparant to me that the author has very little understanding of what MONEY is. I suggest the author should ask himself these questions;
Did it ever occur to you that the current fiat monetary system we are in could fail?
That the the paper dollars in your wallet are merely symbols of someones debt. That it takes more and more debt to sustain this system and could it eventually sprial out of control?
That in the future will a new monetary system need to be created and could gold be part of the equation?
Here is a very informative video that will open your mind to what is today's reality....
video.google.com/video...
If you think you are being personally prudent by not stocking up on weaponry and canned goods...all I can say is good luck -- you're gonna need it. This isn't gonna end well, and people had better get ready.
On Feb 27 09:47 AM doubleguns wrote:
> Look on any dollar bill and it is called a "Note" not money. A note
> is debt. We trade (barter) federal reserve debt for eggs, milk etc..
> every day. Who ever gets all the fed notes will own all the fed debt.
> I don't want debt I want money.
>
> Gold is money.
I think this is a rare unworthy comment from the worthiest of authors.
What store of value/medium of exchange is not a so-called Ponzi scheme? Should we buy something no-one knows about and therefore of no value and die waiting in the hope that others somehow get to know about it and Ponzify it? Where is the "economic rationale" in that? Obviously anything of value only has a value because the owner believes he/she is not the only one to think so.
It boils down to faith. As long as people have faith in gold as a better long-term store of value relative to any other Ponzified, even interest-bearing store of value, then they will be able to withstand the illusory "wheels coming off" their wagon if and when that might happen.
Who honestly knows? We can debate all day, but time is going to decide.
www.safehaven.com/arti...
"I learned about the life-saving properties of gold a few months later in a different context. When the Red Army placed Budapest under a siege those who had gold ate; those who didn't went hungry.............Dur... the next hyperinflation, following World War II, dentists refused to take paper money for professional services rendered. My mother paid for dental work needed by my sister in gold. "
Are we to believe that human nature has really changed all that much in 3,000 years of history?
Gold was, is, and will be sought after as wealth.
Gold as a ponzi scheme.
What really is a ponzi scheme?
A Ponzi Scheme is when a schemer convinces investors to invest in his scheme, then lures more investors to invest and pays the old investors off with new investor money and so on and so on.
Eventually there are no more new investors and the scheme collapses leaving new investors out of their money.
Gold is far from a ponzi scheme since-
There is a physical metal to be exchanged for paper money (provided the buyer takes posession of the gold.)
There is always a demand for gold even if the price goes down (gold is used in electronics, jewelry, gold is used for a treatment of Rheumatism, etc.)
What makes gold's price rise? Inflation and fear.
What makes gold's price fall? Rising interest rates and confidence in fiat currencies.
It was double digit interest rates in the 1980's that lured investors away from gold and back into paper investments. Will we see double digit inflation again any time soon?
Confidence in the US Dollar as the world's reserve currency had ahand in depressing gold's price. Will the US Dollar maintain the confidence of investors here and abroad?
Gold, an insurance policy to one's investment portfolio. You hope you never need it but you are glad that it is there when you do.
On gold/silver - the physical metal evokes something in people. I'm no "only gold is money" type of person but all of our lives we have looked at jewelry and gold and silver coins as "riches" and "treasure", and I believe it's left a psychological impression on us that will cause it to maintain value.
On apocalypse - it's remarkably cheap to prepare for apocalypse without thinking it will actually happen. Usually just costs a few thousand dollars. And I reference its likelihood in one way - everyone seems to think that it's sane to put a smoke alarm in your house even though your odds of dying in a fire are less than one in 5,000. Yet nobody thinks it's sane to think that our government or currency could collapse in a given year, even though your odds are only one in a couple of hundred, in that most governments only last that long.
Basically, my take is that if something hasn't happened in the last couple of generations, people assume that it won't happen at all, regardless of the actual odds.
I go to various good economics blogs and learn stuff, and then every once in a while I click through something and end up here - the CNBC of financial blogs.
If it's not some permabull lying to me, it's some nose-breather raising entropy without conveying even a single bit of information.
"In some very real sense, however, gold is just another ponzi scheme. It is only worth something because other people think it's worth something."
This is a common criticism, but it's flawed. It implies that gold could lose value if popular opinion and customs changed and people thought differently about it. But gold's value does not rest ultimately on popular opinion or custom. It is based on the faith of a FEW who will trade goods and services for it. There needn't be many such persons. Just one pawn-broker or coin shop or regular weekend flea market trader per town will suffice to provide the backing that gold needs. This trade-ability makes persons in the general populace willing to take gold in trade as well.
"After all, gold is near useless as an exchange medium ...."
A pawn shop or flea market will either trade your gold for anything you need directly, or trade for a readily accepted medium of exchange or 'trade good," such as batteries, booze, cigarettes, chocolate, silver dollars, etc. Even if these institutions are lacking, gold has held up well recently as a medium of barter--even in the form or links from a chain or chips from a coin--in places like Argentina and Zimbabwe.
I suggest holding about 5-10% of your portfolio in Gold at all times as it is the money of last resort and can be a good hedge for times like these when most people are unsure where to invest.
"And what rough beast, its hour come round at last,
Slouches toward Bethlehem to be born."
Gold is not money. I can barter it for something, or exchange it for money as a durable good. I cannot put an american eagle coin in a soda machine and get $900 worth of soda.
On Feb 27 09:47 AM doubleguns wrote:
> Look on any dollar bill and it is called a "Note" not money. A note
> is debt. We trade (barter) federal reserve debt for eggs, milk etc..
> every day. Who ever gets all the fed notes will own all the fed debt.
> I don't want debt I want money.
>
> Gold is money.