Gold And Silver Decline: The Blame Game Continues [View article]
Hi Michael,
I hope you're feeling better now. Thank you for your detailed response. I sincerely appreciate your graciousness in this discussion and look forward to your continued research.
I've been reading about The Great Depression a great deal recently. Much of what you say seems to be related to what happened then. However, much is different as well.
When the market began to unravel it had a cascading affect. The Dust Bowl only added to the problem. Banks started shutting down because of the contracting money supply (More money loaned on Wall Street than total printed U.S. currency). Bank runs pulled more money out of the system. Then people sat.
Interest rates rose, which drew some foreign investors. However, domestic investment dried up. Deflation resulted. People hoarded their gold and foreign governments started trading their dollars for gold. Roosevelt then pulled his gold recall stunt, followed by revaluing a year later.
Today we could see much of the same contraction. However, in the thirties the Treasury was shackled by the gold standard. They still manipulated, but were certainly unable to do anything akin to what we see today. Furthermore, because banks had to protect themselves through higher interest rates, easy money dried up. These reactions helped the economy recover more quickly than current policy would allow.
Furthermore, today we have amazingly irresponsible money printing (button pushing), expanding the currency supply at will. Low interest rates encourage domestic debt, exasperating the situation. It's a debt spiral, and quite possibly cannot result in any form of sustained deflation other than a short, sort of flash deflation, as defaults rise, stocks drop and people quit spending.
However, since M1 is so vast and easily manipulated, it's possible that the immense downward pressure on the dollar will cave under such circumstances. It must be kept in mind that our currency would have already dropped under current policy if it weren't for at least two factors: 1) It's close tie to oil and 2) it's status as the world's reserve currency. Currently, it's in nobodies' best interest for the dollar to fall. As other nations move out of dollars this downward pressure will only increase = inflation.
Hopefully my ponderings will aid in your research, at least to some degree.
Gold And Silver Decline: The Blame Game Continues [View article]
That might be true Michael. I can see what Avi's saying. But you seem to be refuting his statements. I'll pose a few thoughts that might help.
M3 was negative during 2010, which would be a deflationary indicator, correct? Every other year has seen positive M3 though. If the monetary base is increasing, even in spite of defaults, how can we have deflation?
Furthermore, higher interest rates increase the value of the dollar, make dollars harder to come by and, by implication, result in deflation. Low interest rates have the opposite effect, pushing down the value of the dollar - i.e. inflation.
Although the rate at which M3 increased in 2008-2009 decreased, the base still increased until late in 09, then resumed increasing in early 2011. M1 hasn't seen negative growth since 2007, M2 since... a long time.
Gold And Silver Decline: The Blame Game Continues [View article]
Thanks Michael,
I was able to find the article, but am not sure I understand the reasoning. Also, this might not be the article for the discussion, but those are a bit older. Are you saying that reduction in prices for goods and/or services defines deflation? If so, do you think this includes lower prices due to new technologies, more efficient production, cheaper materials, etc.? And, if so, does this preclude increased money supply? Finally, I'd hate to be the poor sap to suggest to my wife that we're experiencing deflation when she returns from picking up groceries.
Gold Will Finally Break $2,000 In 2012 [View article]
That's a bit inaccurate brenoboyle,
There was no bull market in gold in the 30s. Until 71 the dollar was tied to gold. What happened in 34 was a revalue, where gold was pegged to the dollar at 35/oz, rather than just over 20/oz. It was a means for Roosevelt to steal more wealth from honest Americans.
1980 was a reaction to several factors - the separation of dollars and gold in 71, overprinting and the relationship of oil to dollars among them.
As for oil in 2002, it was $16.65 in January... so the answer to your question is, "Yes."
One must consider the fact that the M2 was only 683 billion in 71, but it's 9,712 billion now. Interest rates were raised in the late 70s to combat a falling dollar, but this had little affect on gold. Today the dollar is being tossed in the trash via inflationary policy. Nations are turning to other means of preservation as they have started to resent its world reserve status. And gold's value against the dollar was held artificially low throughout the 90s, just as it is now.
The dollar is not glued to value. It's glued to politics. And those ploys are unraveling. It might take a while, but the writing is on the wall.
Interesting research Avi. Thanks for the info. Because of gold's unique place in the markets, as well as homes, I would expect it to defy chart patterns, except in a general sense. If your record is tracking well with gold, it'll be interesting to see how it pans out over the next couple of years. Other than that, I can't say much simply because I agree with your conclusions, even if I arrived at the same ones on a different path. Gold around 2k in 2012 seems reasonable, with an average perhaps up around 1800. Even with current Federal Reserve actions, 2k or just above seems like a very strong psychological resistance barrier. But, being an election year, markets need to look good for the current administration. Of course, if Iran blows up, Europe does something right for the euro or the POTUS sneezes, all bets are off.
Back To The Gold Standard - And The Great Depression (Video) [View article]
Bird-man actually has shared that he holds precious metals. But he's no bug and is in disagreement with many who act as if gold was THE ONLY place worthy of our confidence. In this, though our perspectives are certainly different, I do sympathize with him. There is a point where people will sell. We all have our price. There are only two reasons not to sell if the price is right - fear and greed. How many of us know people who held gold at $800? In 1980?
The Fed Just Telegraphed: Buy Silver And Gold Now [View article]
Interestingly, US demand for platinum decreased in 2011. And, contrary to popular belief, gold is less prevalent in the ground than platinum. Furthermore, palladium can be used to replace platinum in some applications. There are other factors to consider, but with gold's allure as a store of value, coupled with it's appeal when fear hits the markets, the idea that platinum is going to shoot past gold may prove erroneous. Calling whether or not silver will outperform gold in six months would be a fools errand though. Six months is too short a time period. Eventually, however, fundamental dynamics would seem to dictate that silver has farther to go than gold. But gold is soooo purdy, we'll see. Logic does not dictate sentiment.
Silver Manipulation: CFT Drops Probe [View article]
Sandstorm Gold: From Silver Streaming To Streams Of Gold [View article]
Gold And Silver Decline: The Blame Game Continues [View article]
I hope you're feeling better now. Thank you for your detailed response. I sincerely appreciate your graciousness in this discussion and look forward to your continued research.
I've been reading about The Great Depression a great deal recently. Much of what you say seems to be related to what happened then. However, much is different as well.
When the market began to unravel it had a cascading affect. The Dust Bowl only added to the problem. Banks started shutting down because of the contracting money supply (More money loaned on Wall Street than total printed U.S. currency). Bank runs pulled more money out of the system. Then people sat.
Interest rates rose, which drew some foreign investors. However, domestic investment dried up. Deflation resulted. People hoarded their gold and foreign governments started trading their dollars for gold. Roosevelt then pulled his gold recall stunt, followed by revaluing a year later.
Today we could see much of the same contraction. However, in the thirties the Treasury was shackled by the gold standard. They still manipulated, but were certainly unable to do anything akin to what we see today. Furthermore, because banks had to protect themselves through higher interest rates, easy money dried up. These reactions helped the economy recover more quickly than current policy would allow.
Furthermore, today we have amazingly irresponsible money printing (button pushing), expanding the currency supply at will. Low interest rates encourage domestic debt, exasperating the situation. It's a debt spiral, and quite possibly cannot result in any form of sustained deflation other than a short, sort of flash deflation, as defaults rise, stocks drop and people quit spending.
However, since M1 is so vast and easily manipulated, it's possible that the immense downward pressure on the dollar will cave under such circumstances. It must be kept in mind that our currency would have already dropped under current policy if it weren't for at least two factors: 1) It's close tie to oil and 2) it's status as the world's reserve currency. Currently, it's in nobodies' best interest for the dollar to fall. As other nations move out of dollars this downward pressure will only increase = inflation.
Hopefully my ponderings will aid in your research, at least to some degree.
Thanks again Michael.
GI
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Gold And Silver Decline: The Blame Game Continues [View article]
M3 was negative during 2010, which would be a deflationary indicator, correct? Every other year has seen positive M3 though. If the monetary base is increasing, even in spite of defaults, how can we have deflation?
Furthermore, higher interest rates increase the value of the dollar, make dollars harder to come by and, by implication, result in deflation. Low interest rates have the opposite effect, pushing down the value of the dollar - i.e. inflation.
Although the rate at which M3 increased in 2008-2009 decreased, the base still increased until late in 09, then resumed increasing in early 2011. M1 hasn't seen negative growth since 2007, M2 since... a long time.
I don't get it. :)
http://bit.ly/yrwkGS
Gold And Silver Decline: The Blame Game Continues [View article]
I was able to find the article, but am not sure I understand the reasoning. Also, this might not be the article for the discussion, but those are a bit older.
Are you saying that reduction in prices for goods and/or services defines deflation? If so, do you think this includes lower prices due to new technologies, more efficient production, cheaper materials, etc.? And, if so, does this preclude increased money supply?
Finally, I'd hate to be the poor sap to suggest to my wife that we're experiencing deflation when she returns from picking up groceries.
Gold And Silver Decline: The Blame Game Continues [View article]
I don't know if my head's not on right this morning, or what. But this sentence didn't make sense to me. Could you clarify?
"The inflation/deflation cycle has yet to turn in favor of inflation, suggesting its continuance and giving support to precious metals bulls."
Gold Is Overvalued Relative To Platinum Group Metals [View article]
Most astute observations. Well said. I have nothing to add except, thanks.
Gold Will Finally Break $2,000 In 2012 [View article]
There was no bull market in gold in the 30s. Until 71 the dollar was tied to gold. What happened in 34 was a revalue, where gold was pegged to the dollar at 35/oz, rather than just over 20/oz. It was a means for Roosevelt to steal more wealth from honest Americans.
1980 was a reaction to several factors - the separation of dollars and gold in 71, overprinting and the relationship of oil to dollars among them.
As for oil in 2002, it was $16.65 in January... so the answer to your question is, "Yes."
One must consider the fact that the M2 was only 683 billion in 71, but it's 9,712 billion now. Interest rates were raised in the late 70s to combat a falling dollar, but this had little affect on gold. Today the dollar is being tossed in the trash via inflationary policy. Nations are turning to other means of preservation as they have started to resent its world reserve status. And gold's value against the dollar was held artificially low throughout the 90s, just as it is now.
The dollar is not glued to value. It's glued to politics. And those ploys are unraveling. It might take a while, but the writing is on the wall.
Gold: $2,000 Here We Come [View article]
Because of gold's unique place in the markets, as well as homes, I would expect it to defy chart patterns, except in a general sense. If your record is tracking well with gold, it'll be interesting to see how it pans out over the next couple of years.
Other than that, I can't say much simply because I agree with your conclusions, even if I arrived at the same ones on a different path. Gold around 2k in 2012 seems reasonable, with an average perhaps up around 1800. Even with current Federal Reserve actions, 2k or just above seems like a very strong psychological resistance barrier.
But, being an election year, markets need to look good for the current administration. Of course, if Iran blows up, Europe does something right for the euro or the POTUS sneezes, all bets are off.
The Truth About Gold [View article]
See GI's previous post. :)
Back To The Gold Standard - And The Great Depression (Video) [View article]
There is a point where people will sell. We all have our price. There are only two reasons not to sell if the price is right - fear and greed. How many of us know people who held gold at $800? In 1980?
Now That You’ve Taken Delivery, Where Will You Stash Your Precious Metals? [View instapost]
I read of someone painting a bar of gold black and using it as a door stop too.
The Fed Just Telegraphed: Buy Silver And Gold Now [View article]
And, contrary to popular belief, gold is less prevalent in the ground than platinum. Furthermore, palladium can be used to replace platinum in some applications. There are other factors to consider, but with gold's allure as a store of value, coupled with it's appeal when fear hits the markets, the idea that platinum is going to shoot past gold may prove erroneous.
Calling whether or not silver will outperform gold in six months would be a fools errand though. Six months is too short a time period. Eventually, however, fundamental dynamics would seem to dictate that silver has farther to go than gold. But gold is soooo purdy, we'll see. Logic does not dictate sentiment.