Freetruth

Despite Economic Headwinds, Gold Will Outperform

It will take two to three years to write down all the bad real estate loans on the books. The deflation that has occurred is the result of the pyramid scheme that is fractional reserve banking stalling. It must expand to keep from contracting and it reached its limits (people are tapped out). Thus the velocity of money has gone negative which has more than offset the creation of new reserves. When the accounting tricks have done their magic and new loans start flushing the system the herd will think happy days are here again. It will be time to hold on to your hat as the tsunami of expanding credit money leads to hyperinflation.

Historical study of empirical evidence void of proper theoretical context is worse than worthless as it leads people to make the same mistakes over and over. Perhaps one day in the far future Austrian Economics will get its due and we can stop the folly of central banking and central planning folly. Until that day comes holding on to some gold as insurance is a good idea.

Gold: War of Attrition

Deflation has had the upper hand as the number of bad loans has swamped the fractional reserve/credit money system. The Fed is pumping its heart out and the US Treasury is helping all it can. Increasing the amount of debt is what they do and they have met a wall of resistance from lenders and borrowers. The entire system requires ever more amounts of debt or it crashes. Basically everybody got tapped out and there were no more loans to make. Since the number of (existing) bad loans is finite and the amount of new credit money that can be created approaches infinity, there will come a time when deflationary factors are overwhelmed by the pumping. Mr. Bernanke and Mr. Paulson will get their wish, in spades.

I expect that by the end of 2009 most people will think that they were successful in "unclogging" or "defreezing" the system and away we go. But it will be too late by then to stop the pumping before we get massive inflation. The Son of Bubble Monster will be bigger and badder than the little hiccup that so many just panicked over.

Finally, gold is insurance, not an investment. If you don't have any you will likely be very sorry at some time over the next five years. If it is your only investment then you could also be disappointed in the near future.

Why I Got Gold Wrong

Ozzy43 nailed it. Mr. Baily is destined to miss a lot more in the future I would wager. Recognizing you're clueless is the first step to enlightenment, but grasping at branding? Gold is not real money, but fiat money is? Please tell me this article was a joke.

Gold Prices Finally Catch Fire

The government grand pooh-bahs have a meeting and promise to monetize all the bad debt: problem fixed! Wow, that was easy. Alright everything is okay now. Just like the everything-is-okay-gla... fuzzy feelings after Bear Sterns and again after the Fannie and Freddie bailouts. When WaMu wipes out the FDIC reserves and Morgan Stanley goes down in the next few weeks the panic will be even bigger because the clueless actually believe the government is the tooth-fairy and those trillions of dollars will just magically appear. The combination of flight to safety and the coming inflation from all these bailouts are fundamentals that can only lead to higher gold and silver prices over the next year.

Law of Supply & Demand Is Dead for Gold & Silver

check this one out: www.strike-the-root.co...

Law of Supply & Demand Is Dead for Gold & Silver

The purpose of a monopoly on the use of force (a state) is to provide a means for the elite to control/exploit the masses. This inherently violent social institution is used by rulers to compel the ruled to do what they don't want to do and prohibit them from doing what they do want to do. Collectivist fantasies of good men taking control of this evil apparatus to use it for good purposes (i.e. good government) are naive at best. Rationalizing the doctrine of might makes right with good intentions corrupts even the purist of do-gooders. The manipulation by vested interests are too powerful to overcome even if they might throw you a bone once in while. Democracy provides the curtain to hide the men pulling the levers and just compounds the problems. Participating in the democratic process is what gives your rulers legitimacy: don't do it and enjoy life instead.

Don't worry as mitigating social institutions (including local government ala Jefferson) in America will long survive the imploding United States Imperial Federal Government and prosper after its demise ala the USSR (it will go bankrupt). The incredible mounting debt is crushing the USIFG and it can't be stopped at this point. Don't fight it, just get the hell out of the way and enjoy the spectacle of it all.

Law of Supply & Demand Is Dead for Gold & Silver

Marxbites,

You are one of the few who "get it". If I might suggest another good site it is at: strike-the-root.com

Law of Supply & Demand Is Dead for Gold & Silver

Gold won't spike because of AIG or any other big financial company going down. That is deflationary and one of the causes for the price of gold going down recently while the dollar goes up. That is the supply of fiat money has been decreasing as bad loans are written off and new credit has been restricted. Its not the event, but the reaction to the event that is important to note. Gold will retain its value (but increase in dollar price) when the dollar tanks because of the reaction by the central bank is to create more credit/fiat money.

The Fed thus far has not been successful in re-inflating the collapsing bubbles, though not for lack of effort. I have faith that the Fed will eventually be successful in doing what it is they are trying to do (inflate the money supply with credit-money through bailouts). More bailouts are coming and not just financial firms, but auto makers, airlines, and other politically connected industrial companies. The lender of last resort is lending their little hearts out, so just give them time. Also I’d guess that another tax/energy/whatever “rebate” check will be sent out in the mail early next year, but this time much larger than the last. Helicopter Ben has only just begun to fight! It will take about 9 to 18 months before we see the fruits of his efforts and the genie of hyper-inflation will be hard to put back in the bottle.

Hobbes was a statist idiot. Try reading Rothbard and Mises for a better philosophy and more clear understanding of the Natural Order.

The economy won’t completely collapse, look at Zimbabwe, it keeps hanging on and our economy is much, much larger. The adjustment will be painful for many of course, especially those holding paper assets and lacking marketable skills. Food and water will not be a problem to get for those with real assets and/or marketable skills. Families, friends and neighbors will have a chance to again supplant the corporate-state institutions that are crumbling as we speak with local networks and age-old social institutions. This is a good thing and the start of a better free-market money system. Gold and silver has always emerged as the most popular commodity-money and will again. Then you will see what "real money" is.

Law of Supply & Demand Is Dead for Gold & Silver

dlaw - "And for the people who talk about fractional-reserve banking, you're basically saying the same thing as people who didn't believe airplanes could really fly.

Just because you don't understand the math, doesn't mean it doesn't work."

If you don't believe in National Socialist Banking then you're denying scientific progress? Don't understand the math? What a typical pompous socialist comment. If you don't understand the theory then the math is irrelevant. All the accounting tricks in the world can't change the fact that fractional reserve banking is legalized fraud and thus "moral hazard" is inherent in the system. Manipulation of financial markets is the what they do and why they were created in the first place!

Artificial booms created by credit money expansion will lead to real crashes when the malinvestments are exposed: every time. The most intelligent math whiz central planners in the world can't get around the basic calculation problem and all of the idiot formulas in the world can't overcome it in the long run. This goes for central banking as well.

I must admit that the concept of a socialist entrepreneur is creative; a loony contradiction of terms, but creative. Socialists used the USSR, Poland, et al as empirical evidence of the viability of centrally planned (socialist) economies for years; sure they worked right up until they crashed and burned. Pointing out the viability of the Federal Reserve as evidence that central banking “can fly” will turn out the same way. Try reading some Austrian Economics and get back to me when you understand.

Next Stop: $2,000 Gold

mkreisel said "If Dollar goes to zero, your gold will be worthless too. That would be the end of the civilization and you would need to resort to cannibalism to survive."

Why? If worthless paper is revealed to be what it truly is then real money also becomes worthless? What about the Euro and other currencies? End of civilization? Wow, that is an indoctrinated world view that totally discounts society as an entity elavating bureaucratic controllers to the status of saviours. When the "full faith and credit of the U.S. government" goes to zero value this great society will be released from the biggest chains ever put on productive people. Thus we will not only survive, but thrive. The whole bunch of political junkies aren't worth saving, its time to take our lumps for being duped and move on. Let free-markets rule, not fools.