How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]
According to the Historical Gold Price Averages edited by the World Gold Council, Gold average in 1990 was $383.51 (NOT $410) and in 1999 it was $278.98. 1990 was exactly the year when Heap Leaching started to be introduced. Production dramatically increased from 1,540T in 1989 versus 2,259T in 1995. In 2000 it reached its top of 2830T. The POG accordingly went down, also helped by the massive sales of Central Banks. Since US economy was predominant in the period 1990-1999 and the USD was the one and only true reference currency, the POG should only be studied regarding this currency. In the Japanese deflationary environment of that period the Yen went up (which was normal during deflation), causing all other asset prices to go down in Japan (f.i. Real Estate and Gold). That's the reason why the GOP expressed in Yen went down more then expressed in USD. However, Japanese Debt in that same Period was accumulated domestically (for over 90%), resulting in the Yen gaining strength. I don't think that is the case for US Debt. If there were to be US deflation, for example preceded by collapse of Financial Institutions, the $ would collapse too because the Creditors (mainly) China would start a sell-off of their USD detained Debt. If one TRIES to be thoughtful, one should look at the whole picture and not confine himself to some sophistic reasoning.
The problem with star gazers is that after awhile they want to see stars everywhere. I'm afraid, Ellen, that you want to see Government everywhere so you took an overdose of studying "how can Government work cheap ?" As far as I can judge, and this has been scientifically proven, Governments aren't such good investors or managers. They tend to take a lot of actions or give a lot of stimulus (Eurozone Subsidies have a bad name as well) that have a perverse effect. You give an Italian Town a subsidy for Town-Reconstruction after the Earthquake and in a flash this Town organizes a free Billy Joel Rock Concert, throwing away millions. And that's a very mild example.
@Asbytec: " And there are big durable items we can sell, John Deere come to mind." I know bigger durable goods the US could sell, if only... I was on the brink of buying a condo in New Mexico. Then I heard about the trouble with property rights regarding Real Estate that the Foreclosures had caused and I decided to call off. The problem is, the US Banks (and rating agencies, and SEC, and Freddie, and Fanny, and Securitization Industry...) have put the US in such a bad light that people abroad fear to do business with them. Events like these:
Bank failures in Florida, Pennsylvania and Wisconsin make Nos. 147-149 in 2010, at a combined estimated cost to the FDIC's insurance fund of just under $200M. [View news story]
@7footMoose: You can't be more right. Apart from Deleveraging and the Housing Crisis, I forgot to mention the Fed's actions (QE driving interest rates south) as cause of this widespread Banking disease. You already mentioned those low interest rates being a curse for banking profitability. Maybe in the end that will be the sole positive result (but at what price ! ) of QE: a complete new Banking Landscape with Banks working more efficiently.
Ellen, I have no doubt QE2 decreased interest rates and made things easier for the US Government. The question is, will US Government govern more efficiently now ? I doubt it. They will use the extra money for whatever ugly plans they fancy. Lowering interest rates to such ridiculous low %'s will have nasty side-effects: as you mentioned, the Carry Trade will dry up domestic Credit Market and abroad there will be reallocation of USD's into speculative bubbles. I really see no gain. And then I even don't mention the savings on accounts: who will keep his money at a Bank at a 0.05% rate when he knows the bank can collapse every day every hour ?
@Ellen Brown: Forgive me to have to correct you: Your words: "The Weimar Republic owed its debts in currencies over which it had no control." Actually, the Weimar Republic owed its debts in Gold Marks. As result of the Peace Conference of Versailles, Germany had to pay 20 billion Gold Marks (= 7,000 Tons of massive Gold) to the countries it invaded:
Bank failures in Florida, Pennsylvania and Wisconsin make Nos. 147-149 in 2010, at a combined estimated cost to the FDIC's insurance fund of just under $200M. [View news story]
@7footMoose: "The record low interest rate environment is not good to bank profitability." Exactly my point. Deleveraging and Housing Market crisis will decimate the US and European Banking System. From an historical point of view, it's only normal: I always wondered when strolling through London why so many churches were empty (or reorganised as lofts) and noticed that they had been supplanted by Banks, Money being the New Religion. Time has come now to re-arrange these Banks as Lofts too. There would be less housing-shortage.
How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]
@Boston analyst: Are you addressing to me ? I'm the one to wish the POG to go down (my basket isn't full yet). On the other hand I realize I can't force it, so here I don't respond to your definition of "sad fool". Please, be specific. BTW, I wish people wouldn't start calling names when they disagree.
How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]
@Logical Thought: I'm not that good in guessing the weight of baskets, but I believe you on your word that you have done all the calculations.
Your words: "Again, I have no quibble with gold buyers who are certain that we're heading for true hyperinflation" Well, actually, I'm not certain of anything, the least that there will be (hyper)inflation. It all depends on how V and M in the Shiller Equation will develop. None of those 2 variables are foreseeable. On another SA-forum I wrote that the whole inflation-deflation issue couldn't care me less, because Gold thrives during inflation alike as during deflation (the Thirties were deflationary and the Gold price went up till Gold was banned).
Your words: "gold at current prices is far from a sure thing." It is my experience that nothing nowadays is a sure thing: Stocks, Bonds, everything "sure" goes up and down like a horse's tail. And sometimes there's even bankrupcy or, worse, a threatening Sovereign default. But I agree: Gold is much too expensive (as is silver), that's why I wait for a dip to buy a few ounces more. It's been a pleasure to have this conversation.
How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]
@Logical Thought: Your words: "The point is that neither you nor I nor anyone else knows what gold is "worth", because the amount of stuff you can buy with it has fluctuated wildly over the years, and CONTINUES to fluctuate wildly."
Hasn't about everything fluctuated wildly over the (last) years, starting with commodities (oil at $160, then at $35, now at $85), Stocks and food (grains, sugar) ?? The $ being resp. at 1/160 of a barrel oil, 1/35 of a barrel oil, 1/85 of a barrel oil. What a highly volatile currency !! If that's an argument of maintaining that no one knows what Gold is worth, I find it rather silly-sounding.
Then, I'd prefer the argument that in times of starvation, one can't eat Gold and so the price might plummet. However, in Zimbabwe there was starvation and yet Gold thrived. Or try the "Lord of the Rings"-argument: gold is bad for your health, it destroys your own free will, it attracks you to Goromodor and the Orks. As soon as goldbugs start repeating **My Precious...** (not to their wives), they should sell.
European Sovereign Debt Spells Messy 2011: Some Option Choices [View article]
Spanish Debt is at 60% of GDP. Its Fiscal Deficit amounts to 12%. That looks serviceable, but is it ? If one takes the Spanish Regions' Debt into account, the overall Debt rises to some 140%. French Banks hold the largest Spanish Debt (some $300bn), followed by the German and the US. Sarkozy will need to be inventive. How about the overall US Debt (Gov., States, Counties, Cities...) ? There might be some 2011 hot summer nights.
European Banks and the Irish Bailout [View article]
@Flash: That must've been a way long time ago that you got vacation over in Spain. Right now, Spain is more or less out of fashion. Europeans spend their leasure time in Turkey, Morocco or Tunesia. Spain priced itself out of the casino. Even Greece is cheaper, at least when not on strike.
It's Time for the Irish People to Rise [View article]
I don't think you are right in your mind when you propose an extra social bloodbath to an already heavily mutilated Ireland. Your heart must be made of granite and your brain of spaghetti.
How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]
1990 was exactly the year when Heap Leaching started to be introduced. Production dramatically increased from 1,540T in 1989 versus 2,259T in 1995. In 2000 it reached its top of 2830T.
The POG accordingly went down, also helped by the massive sales of Central Banks.
Since US economy was predominant in the period 1990-1999 and the USD was the one and only true reference currency, the POG should only be studied regarding this currency.
In the Japanese deflationary environment of that period the Yen went up (which was normal during deflation), causing all other asset prices to go down in Japan (f.i. Real Estate and Gold). That's the reason why the GOP expressed in Yen went down more then expressed in USD.
However, Japanese Debt in that same Period was accumulated domestically (for over 90%), resulting in the Yen gaining strength.
I don't think that is the case for US Debt. If there were to be US deflation, for example preceded by collapse of Financial Institutions, the $ would collapse too because the Creditors (mainly) China would start a sell-off of their USD detained Debt.
If one TRIES to be thoughtful, one should look at the whole picture and not confine himself to some sophistic reasoning.
What’s Really Behind QE2? [View article]
I'm afraid, Ellen, that you want to see Government everywhere so you took an overdose of studying "how can Government work cheap ?"
As far as I can judge, and this has been scientifically proven, Governments aren't such good investors or managers. They tend to take a lot of actions or give a lot of stimulus (Eurozone Subsidies have a bad name as well) that have a perverse effect.
You give an Italian Town a subsidy for Town-Reconstruction after the Earthquake and in a flash this Town organizes a free Billy Joel Rock Concert, throwing away millions.
And that's a very mild example.
What’s Really Behind QE2? [View article]
" And there are big durable items we can sell, John Deere come to mind."
I know bigger durable goods the US could sell, if only...
I was on the brink of buying a condo in New Mexico. Then I heard about the trouble with property rights regarding Real Estate that the Foreclosures had caused and I decided to call off.
The problem is, the US Banks (and rating agencies, and SEC, and Freddie, and Fanny, and Securitization Industry...) have put the US in such a bad light that people abroad fear to do business with them.
Events like these:
online.wsj.com/article...
won't ease the mistrust.
But I agree, John Deere, Caterpillar and hundreds of others should do fine.
Bank failures in Florida, Pennsylvania and Wisconsin make Nos. 147-149 in 2010, at a combined estimated cost to the FDIC's insurance fund of just under $200M. [View news story]
You can't be more right.
Apart from Deleveraging and the Housing Crisis, I forgot to mention the Fed's actions (QE driving interest rates south) as cause of this widespread Banking disease.
You already mentioned those low interest rates being a curse for banking profitability.
Maybe in the end that will be the sole positive result (but at what price ! ) of QE: a complete new Banking Landscape with Banks working more efficiently.
What’s Really Behind QE2? [View article]
The question is, will US Government govern more efficiently now ? I doubt it. They will use the extra money for whatever ugly plans they fancy.
Lowering interest rates to such ridiculous low %'s will have nasty side-effects: as you mentioned, the Carry Trade will dry up domestic Credit Market and abroad there will be reallocation of USD's into speculative bubbles.
I really see no gain.
And then I even don't mention the savings on accounts: who will keep his money at a Bank at a 0.05% rate when he knows the bank can collapse every day every hour ?
What’s Really Behind QE2? [View article]
Forgive me to have to correct you:
Your words:
"The Weimar Republic owed its debts in currencies over which it had no control."
Actually, the Weimar Republic owed its debts in Gold Marks. As result of the Peace Conference of Versailles, Germany had to pay 20 billion Gold Marks
(= 7,000 Tons of massive Gold) to the countries it invaded:
en.wikipedia.org/wiki/...
Not that having to repair in Gold made repayments easier for the Germans, but I like to put things straight.
Oooooh, and by the way, I got this excellent entry from John Mauldin this morning concerning the deflation/inflation debate:
www.frontlinethoughts....
I can only advise reading John's articles. His book will be out soon.
What’s Really Behind QE2? [View article]
Bank failures in Florida, Pennsylvania and Wisconsin make Nos. 147-149 in 2010, at a combined estimated cost to the FDIC's insurance fund of just under $200M. [View news story]
"The record low interest rate environment is not good to bank profitability."
Exactly my point.
Deleveraging and Housing Market crisis will decimate the US and European Banking System.
From an historical point of view, it's only normal: I always wondered when strolling through London why so many churches were empty (or reorganised as lofts) and noticed that they had been supplanted by Banks, Money being the New Religion.
Time has come now to re-arrange these Banks as Lofts too. There would be less housing-shortage.
How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]
Are you addressing to me ?
I'm the one to wish the POG to go down (my basket isn't full yet).
On the other hand I realize I can't force it, so here I don't respond to your definition of "sad fool".
Please, be specific.
BTW, I wish people wouldn't start calling names when they disagree.
How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]
I'm not that good in guessing the weight of baskets, but I believe you on your word that you have done all the calculations.
Your words:
"Again, I have no quibble with gold buyers who are certain that we're heading for true hyperinflation"
Well, actually, I'm not certain of anything, the least that there will be (hyper)inflation.
It all depends on how V and M in the Shiller Equation will develop. None of those 2 variables are foreseeable.
On another SA-forum I wrote that the whole inflation-deflation issue couldn't care me less, because Gold thrives during inflation alike as during deflation (the Thirties were deflationary and the Gold price went up till Gold was banned).
Your words:
"gold at current prices is far from a sure thing."
It is my experience that nothing nowadays is a sure thing: Stocks, Bonds, everything "sure" goes up and down like a horse's tail. And sometimes there's even bankrupcy or, worse, a threatening Sovereign default.
But I agree: Gold is much too expensive (as is silver), that's why I wait for a dip to buy a few ounces more.
It's been a pleasure to have this conversation.
How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]
Your words:
"The point is that neither you nor I nor anyone else knows what gold is "worth", because the amount of stuff you can buy with it has fluctuated wildly over the years, and CONTINUES to fluctuate wildly."
Hasn't about everything fluctuated wildly over the (last) years, starting with commodities (oil at $160, then at $35, now at $85), Stocks and food (grains, sugar) ?? The $ being resp. at 1/160 of a barrel oil, 1/35 of a barrel oil, 1/85 of a barrel oil. What a highly volatile currency !!
If that's an argument of maintaining that no one knows what Gold is worth, I find it rather silly-sounding.
Then, I'd prefer the argument that in times of starvation, one can't eat Gold and so the price might plummet. However, in Zimbabwe there was starvation and yet Gold thrived.
Or try the "Lord of the Rings"-argument: gold is bad for your health, it destroys your own free will, it attracks you to Goromodor and the Orks. As soon as goldbugs start repeating **My Precious...** (not to their wives), they should sell.
European Sovereign Debt Spells Messy 2011: Some Option Choices [View article]
Its Fiscal Deficit amounts to 12%.
That looks serviceable, but is it ?
If one takes the Spanish Regions' Debt into account, the overall Debt rises to some 140%.
French Banks hold the largest Spanish Debt (some $300bn), followed by the German and the US.
Sarkozy will need to be inventive.
How about the overall US Debt (Gov., States, Counties, Cities...) ?
There might be some 2011 hot summer nights.
European Banks and the Irish Bailout [View article]
Right now, Spain is more or less out of fashion. Europeans spend their leasure time in Turkey, Morocco or Tunesia.
Spain priced itself out of the casino. Even Greece is cheaper, at least when not on strike.
It's Time for the Irish People to Rise [View article]
How Gold Performs During Periods of Deflation, Disinflation, Runaway Stagflation and Hyperinflation [View article]