fran

Hang on to Your Gold

don't inflation or higher taxes have a negative affect on the average wage earner/tax payer? in the end, whether i have fewer dollars to make purchases due to tax increase or the same quantity of dollars[no tax increase] but the dollar's purchase value be less, somehow i think me lose either way. inflation be hidden tax. which keeps me most even?


On Dec 07 08:35 AM Alan Brochstein wrote:

> SW Richmond, I am glad to see that you are publishing your ideas.
> There is no reason, in my opinion, for you to qualify yourself as
> "not being a professional" in a negative way! Yes, I am the same
> guy you called a coward and a sell-out regarding my belief that the
> government needs to provide capital to the auto industry to avoid
> liquidation and to ensure an orderly transition to down-sizing.
>
>
> I don't agree with your conclusion about gold. I know that the debate
> is raging, but even if gold is the "right" way to play these events,
> you perpetuate the flawed logic without supporting your argument.
>
>
> Gold bulls use classical liberal economic theories to conclude that
> government printing presses produce inflation. I believe that in
> this environment, the replacement of private capital, which has been
> destroyed, with public capital (the debt that we are taking on as
> a society) doesn't necessarily lead to inflation. It can lead to
> higher taxation, higher real interest rates and lower long-term growth
> instead. The world has changed since these theories were born - there
> isn't a country with a currency linked to gold any longer. Additionally,
> I don't believe that the theory addresses when all the developed
> world is in the same boat, as we are now. I have written previously
> and continue to believe that gold is a "sucker's bet".
>
> One other comment.... I don't believe that your argument regarding
> $60 trillion makes a lot of sense. A lot of the leverage created
> was used by different entities who placed money on opposite sides
> of a bet (some were long commodities, others were short commodities).
> A lot of the higher leverage traders have voluntarily or involuntarily
> reduced their leverage dramatically already. You can see this in
> the declines of short-interest in stocks, and I would bet that open
> interest has plunged on commodities (though I am not sure). With
> that said, I remain very worried. I told a banker friend yesterday
> that banks with "only" 8-1 leverage still have about twice as much
> as they should in this environment. So, I don't disagree with your
> premise regarding the need for new capital, but I do take issue with
> the logic you employ (30-1 to 10-1).
>
> So, I think we are both very pessimistic about the severity and duration
> of this economic crisis, but we are in stark disagreement about how
> to invest during it. Please keep sharing your thoughts!
>