Jobs, jobs, jobs, or wages, wages, wages. To spend more, people need to get more. When workers have bargaining power, they force concessions from employers and wages go up. Then the workers go out and spend more. If the workers don't have more, they can't spend unless they borrow, or if housing prices are increasing, they can extract equity from their houses. This is what powered the prosperity of 2003-2008. It isn't present now. There is no mechanism to get more money to the middle class types who do most of the spending; ergo, velocity slows down and the stimulus remains sequestered in the financial sector.
Bargaining power / supply = inflation. (If there is plenty of something, and the market is free, the price need not go up. hence the "divide by supply").
World money? Governments give up their relief valves (their ability to inflate their currency because their businesses aren't as adept as their competitors)? Fat chance. All the rest is possible as an outlier at best. The Fed can't withdraw life support until the patient is out of the ER.
My opinion -- Internationalization failed to save the developed economies because import/export is more a zero-sum game than a win-win. Every winner (Germany) creates a loser (Greece). The destruction of currency is the relief valve; Greece doesn't have one, so the pressure increases.
The Massive Elephant In The Economic Room [View article]
Aquarius: The advantage to being born in America was that you didn't have to work as hard as (for example) someone in China to get the same result. You had to work hard, but not as hard. That's why everyone wants to (or wanted to) come here.
That advantage appears to be unsustainable. As for the under-productive population, that is going to increase no matter what, because of mechanization. There isn't enough useful work for 7 billion people to do 40 hours a week. So you can let those who get left behind starve and/or riot, or you can give them minimal maintenance. The Romans called it bread and circuses. We call it welfare and TV.
On an individual level, you can work hard and smart, and get ahead. On a mass level, if everyone worked hard and smart, there wouldn't be much more of anything except excess consumer goods, but you'd have to work harder to beat the competition for everything. So for an individual, that is good advice, but as a social policy, it is a non-starter.
I'm afraid you're right though... the lesson is going to come from the school of hard knocks. I just hope to position myself to avoid the worst of it.
Deflation: What Can You Do About It? [View article]
I didn't go through life in debt either. I'm considered successful at what I do, and I don't owe anyone squat except a mortgage for about 20% the value of my house. But deflation will hurt your business when your customers decide they can't afford (as much of) whatever you sell, unless you're in the enviable position of being able to convince or force them to economize elsewhere. That would make you an exception even among business owners (except for large corps that got bailed out).
Deflation: What Can You Do About It? [View article]
You seem to be leaving out one of the causes of de leveraging; stagnant wages. On a personal level, until I get a series of raises, I'm not inclined to spend more. In fact I'm spending about the same amount I did in 2008, only getting about 20% less of everything. I need a 20% raise to feel comfortable staying at a medium-end resort like I did in 2008, instead of a budget hotel.
If it were just me, it would be easy to say "work more, change careers, do something to improve yourself." But it isn't just me, there are millions of us, and most will probably remain where they are. The bulk of them will need to get more money for the same amount of effort to fuel inflation. You could say that inflation is driven by labor's bargaining power, which is at a sustained low right now. That is bullish for deflation.
(I have a plan to improve things for me. Until it succeeds, I will reduce my spending to compensate for inflation).
There's yet another way to look at this. The world is full of very large gorillas who will try to sucker you out of, or steal as many of your bananas as they can. These can be governments, corporations, wealthy speculators, banks, you name it. They're both playing against each other, working together, and squeezing you, often at the same time. They also stumble occasionally and create consequences that might not be what they intended.
Your job is to protect your bananas, and if you're skillful and/or lucky, to gain on them a bit, and beat them out of some of their small change. Gold and GLD are two tools for doing this. So are stocks, bonds, cash, and any other investments.
I'm not discounting the 'honest' part of the markets, where you invest money in an attempt to help an honest business gain profits, and thereby share in those profits, but the manipulators and players seem to have the upper hand these days. I'm playing it as if they're firmly in charge.
I used a bunch of paper money to buy a car. It isn't worthless yet. But I agree with this principle: GLD is a paper asset nominally backed by bullion, and should track the price of said bullion unless the SHTF. It's like bolting your house to the foundation; it will protect it from a medium earthquake but not from a blowout.
Is the author's name Par Model, or am I misunderstanding my screen? Anyway, the author says:
So, what are investors to do? Diversification is always key
Investors need to diversify because no one is sure which emperor has clothes. There is no such thing as fungible and stable value; all forms are subject to large swings in value, up or down.
So why pick on gold just because it's the flavor of the moment? The stock market, bonds, real estate, cash... they have all had their ups and downs. Abstract value is a slippery thing, yet we are forced to bet our futures on it. Unless you think you can beat the house, diversification is the best strategy.
I use a core of diversity, with an overlay of speculation. I managed to sell most of that part of my gold that was on the speculation side halfway down the slope, so I only gave back part of what I gained earlier.
Cyprus Gold Sale Misinformation - Is Everyone Out To Get Gold? [View article]
People lie and finagle where gold is involved. Is anyone surprised? To me it looks like the central banks want to keep it as cheap as they can until they are done buying.
Can Your Gold ETF Holdings Be 'Cyprused?' Yes [View article]
Slight correction - permaculture is a method of growing large amounts of food in a small area using ecologically sustainable methods. It is more likely to be practiced by foodies and ecology-minded types than survivalists.
Can Your Gold ETF Holdings Be 'Cyprused?' Yes [View article]
When analyzing the intentionality of banks, investment groups, and even governments, all you have is guesses and opinions. If you know their moves in advance, you can play against them, like George Soros did when the English government tried to protect the pound.
Can Your Gold ETF Holdings Be 'Cyprused?' Yes [View article]
You could also buy a signed Lloyd Loar mandolin for about 200k, walk it through TSA, and sell it when you get to wherever you're going. They'd never notice.
I'll bet they'd challenge that face value. They might even deal with it in the confiscation order.
Why Inflation Never Came [View article]
Bargaining power / supply = inflation. (If there is plenty of something, and the market is free, the price need not go up. hence the "divide by supply").
Gold Going To $500? [View article]
- a new monetary system based on IMF SDR
World money? Governments give up their relief valves (their ability to inflate their currency because their businesses aren't as adept as their competitors)? Fat chance. All the rest is possible as an outlier at best. The Fed can't withdraw life support until the patient is out of the ER.
My opinion -- Internationalization failed to save the developed economies because import/export is more a zero-sum game than a win-win. Every winner (Germany) creates a loser (Greece). The destruction of currency is the relief valve; Greece doesn't have one, so the pressure increases.
Gold Going To $500? [View article]
- The fundamentals are cr*p but the fed is doing a good job. (I think you're right about the fed, but they have cr*p to work with).
- The stock market is up, but the employment participation rate is terrible.
- There are trillions of new dollars, but they are sequestered in the balance sheets of banks, and therefore virtual.
I'm hedging my bets on either side of this one.
The Massive Elephant In The Economic Room [View article]
That advantage appears to be unsustainable. As for the under-productive population, that is going to increase no matter what, because of mechanization. There isn't enough useful work for 7 billion people to do 40 hours a week. So you can let those who get left behind starve and/or riot, or you can give them minimal maintenance. The Romans called it bread and circuses. We call it welfare and TV.
On an individual level, you can work hard and smart, and get ahead. On a mass level, if everyone worked hard and smart, there wouldn't be much more of anything except excess consumer goods, but you'd have to work harder to beat the competition for everything. So for an individual, that is good advice, but as a social policy, it is a non-starter.
I'm afraid you're right though... the lesson is going to come from the school of hard knocks. I just hope to position myself to avoid the worst of it.
Deflation: What Can You Do About It? [View article]
Deflation: What Can You Do About It? [View article]
If it were just me, it would be easy to say "work more, change careers, do something to improve yourself." But it isn't just me, there are millions of us, and most will probably remain where they are. The bulk of them will need to get more money for the same amount of effort to fuel inflation. You could say that inflation is driven by labor's bargaining power, which is at a sustained low right now. That is bullish for deflation.
(I have a plan to improve things for me. Until it succeeds, I will reduce my spending to compensate for inflation).
The Gold Emperor Has No Clothes [View article]
"Recession is God's way of telling us that what we're doing is not sustainable. Bubbles are the Devil's way of telling us that it is."
All this conversation about value, gold, and central banks made me want to say it, that's all.
The Gold Emperor Has No Clothes [View article]
Your job is to protect your bananas, and if you're skillful and/or lucky, to gain on them a bit, and beat them out of some of their small change. Gold and GLD are two tools for doing this. So are stocks, bonds, cash, and any other investments.
I'm not discounting the 'honest' part of the markets, where you invest money in an attempt to help an honest business gain profits, and thereby share in those profits, but the manipulators and players seem to have the upper hand these days. I'm playing it as if they're firmly in charge.
The Gold Emperor Has No Clothes [View article]
The Gold Emperor Has No Clothes [View article]
If I might add:
... and commensurate with the intensity of their disbelief in other forms of money.
The Gold Emperor Has No Clothes [View article]
So, what are investors to do? Diversification is always key
Investors need to diversify because no one is sure which emperor has clothes. There is no such thing as fungible and stable value; all forms are subject to large swings in value, up or down.
So why pick on gold just because it's the flavor of the moment? The stock market, bonds, real estate, cash... they have all had their ups and downs. Abstract value is a slippery thing, yet we are forced to bet our futures on it. Unless you think you can beat the house, diversification is the best strategy.
I use a core of diversity, with an overlay of speculation. I managed to sell most of that part of my gold that was on the speculation side halfway down the slope, so I only gave back part of what I gained earlier.
Cyprus Gold Sale Misinformation - Is Everyone Out To Get Gold? [View article]
Can Your Gold ETF Holdings Be 'Cyprused?' Yes [View article]
Can Your Gold ETF Holdings Be 'Cyprused?' Yes [View article]
Can Your Gold ETF Holdings Be 'Cyprused?' Yes [View article]
I'll bet they'd challenge that face value. They might even deal with it in the confiscation order.