Speculation & Gold

[Steve Netwriter]

If you need guns to protect your gold then it's worthless.
Gold is only valuable when things are running smoothly.
Which defeats the purpose of holding gold?

An idle question which just occurred to me:
Is the price of gold manipulated?
Can the 'evil empire' control the price?
If so, isn't it risky to hold gold?

" Gold is only valuable when things are running smoothly." - I don't think that tallies with history. In fact I think the opposite is true.

" Which defeats the purpose of holding gold?" - which obviously justifies it at certain times.

" Is the price of gold manipulated?" - it sure is. If you accept/agree with that, then you must ask yourself why.

" Can the 'evil empire' control the price?" - they have done. It was fixed at $35/oz for a while, before they released it, and then it shot up towards its market value. I'm not sure they are "evil". The 2nd article I just posted suggests they are just misguided. Even someone with high ideals can make a mess of things.

" If so, isn't it risky to hold gold?" - IMO there is risk in everything. The question I ask in reply is "Isn't it risky having your wealth 'stored' in a fiat currency as a liability of a bank".

After all, when you put your hard-earned money in a bank, it's not in a box somewhere is it. They lend it to someone else. Your asset, their liability, all dependant upon the counter-party risk associated with the person who ended up with it, and their ability to repay it.
If that's someone with a 100% mortgage, will they be capable of repaying it ?

IMO the requirement of any safe haven is the exclusion of counter-party risk. That excludes many things, including a house with a mortgage, because you suffer the risk of losing your job, or going into negative equity.

Possible safe havens:
1. Food
2. 100% owned property
3. Gold/silver (not ETFs etc)
4. Other physical assets (antiques, jewellery etc )

[tricky]

Good response, Steve.
Thanks.

[67910241]

Dodgy Regression Warning

This one got me thinking (my red curve):




That and the two recent articles I've read make me wonder whether we are getting rather close......

Steve!

I normally like your graphs, but this one I found extremely problematic.

What makes you confident your underlying trend line, as approximated by the regression curve, is linear (and must hit the bottom in 2015) and not negative Exponential (will keep diminishing but never ever hit Y = 0)?

If I had to use my intuition, I'd find the latter far easier to swallow.

Please justify your choice!

[Badger]

Tricky the flip flopper

Amazing how most have forgotten or have not been taught the value of gold/silver

What a joke though Tricky...heres your scribble dribble

http://www.propertytalk.com/forum/showthread.php?t=16792&highlight=gold&page=3

Thats from last month! Scroll along a couple of pages and check out your contribution dribble...

Tricky's exact words about the same subject!

"Badger just likes doing the 'Doom Dance'.
There's no intelligence inside the suit."

With the same kind of information presented in the same way!

How strange...

[Steve Netwriter]

I normally like your graphs

- that's the good news

Can I claim the 5th ?

Actually it's not my graph. I just added the red bit, because the original article IMO didn't make it clear enough that the actual line hit the x-axis sooner than the trend line. I wanted to make the point that with swings above and below, it could well hit it earlier.

It looks like you need to take it up with "The chart below, provided to me by Barry Bannister, clearly illustrates the countdown to hyperinflation.".

I must admit I haven't put that much thought into it.
If you are happy to download a 100MB video, this makes a similar point:

The Crash -- Coming Financial Collapse of America (100MB)

http://video.google.ca/videoplay?docid=3702181847213988991&q=crash+america&ei=CuqLSMT4LJDQ-wHm2MWQCA

Download this:

http://vp.video.google.com/videodownload?version=0&secureurl=QwAAANhwRHTXwlZOOwRU6fXSco8bXgxJIsG9yxnJN470xfMlWKB-lvg0OA2GipSGwpbWg9dISxvPSL7LXjGgLbtLz47iEsk9QhHc4e49CraAjbYA&sigh=6_v5dBB7zBDtxUO1UgI-XkyKj6Q

I don't claim it's that good, but it makes an important point.

Now, I don't claim more than 5 seconds thought put into this, but I'd have made exactly the opposite argument.
If you replace the US economy with a household with income and expenses and interest on debt to pay, initially the debt rises linearly, but when the lenders start getting worried, don't the debt repayments rise, hastening your inevitable failure to repay the debt ?

I'll try and look into this more.

[tricky]

Amazing how most have forgotten or have not been taught the value of gold/silver

What a joke though Tricky...heres your scribble dribble

http://www.propertytalk.com/forum/showthread.php?t=16792&highlight=gold&page=3

Thats from last month! Scroll along a couple of pages and check out your contribution dribble...

Tricky's exact words about the same subject!

"Badger just likes doing the 'Doom Dance'.
There's no intelligence inside the suit."

With the same kind of information presented in the same way!

How strange...

Ah, you still love me.

[Steve Netwriter]

JIM: I wonder if you might contrast where we are today compared with the 30s. In the 30s we had probably a lot more GDP compared to debt, and today we’ve got a lot more debt compared to GDP, I would say that argues for different outcomes.
BARRY: If you look at debt, excluding what’s called ‘financial debt’, which may be double counted – double counting of debt which in the financial sector means if you issue a mortgage it is a debt of a consumer, but if the debt is turned around and bundled as an asset backed security by Fannie Mae, then it becomes debt twice – so if you exclude that twice counted debt, debt-to-GDP is about where it was in 1928-29. The deflationary calamity of 29-32 caused the debt in nominal terms to stay flat, but the GDP to just sink, to fall away, and there was a deficiency of GDP. We don’t have a deficiency of US GDP now, we probably have a deficiency of world GDP because of all the underutilized people in the world. So there will be a push to grow the world at a high nominal rate. So, as far as debt is concerned, it would become difficult to compete with those people for capital and resources; so it may be we’re seeing the bottom of interest rates, but arguments that we’re going to have a calamity are probably premature. [29:08]

Barry B. Bannister, CFA
Managing Director, Equity Research, Legg Mason Wood Walker Inc.
Topic: Commodity Cycles

http://www.financialsense.com/transcriptions/2005/Bannister.html

[Steve Netwriter]

There are several more fundamental differences between the early 1980s, which led to the Reagan boom and today's economic conditions. When in 1980, Mr. Reagan became President of the US, the debt to GDP ratio stood at around 130% and was not meaningfully higher than in the 1950s. In fact, from the figure below, courtesy of Barry Bannister of Legg Mason in Baltimore, we can see that until the 1980s, one dollar of additional debt boosted GDP by about $ 0.70. But now, with debt at close to 330% of GDP, one dollar in additional debt only leads to an increase in GDP of about $ 0.25!

We can, therefore, say that today, because of excessive debts in the system, debt growth and fiscal deficits are far less effective at stimulating the economy than they were at the time of President Reagan. In fact, I would argue that for monetary policies the "Mother of all Monetary Tests" is unfolding right now, as it may be that monetary stimulus is no longer going to boost the economy, but inflation alone, which would lead in a benign scenario to stagflation and in a worst case scenario to a inflationary depression a la 1980s in Latin America. (I admit that a deflationary recession/depression remains a possibility, although not a very likely one given the Fed's monetary policies, Mr. Greenspan's track record at tackling every economic discomfort with an additional injection of liquidity, and Mr. Bernanke's recent statements about the Fed's ability to print money.)

Another difference between the early 1980s and today's conditions relates to the US dollar. In the early 1980s the US dollar had become significantly undervalued following its steep decline against hard currencies after President Nixon had closed the gold window in August 1971 (see figure below). Today, however, the situation is fundamentally different. Whereas one could argue that the US dollar is about where it should be against the Euro, the dollar is certainly grossly over-valued against the Asian currencies. A sustained dollar rally such as occurred in the period 1980 to 1985 is, therefore, given also the large external deficits of the US, almost out of the question (see figure below). More to the point, whereas in the early 1980s a dollar rally unfolded at the same time the US had growing trade and fiscal deficits, today even larger trade and fiscal deficits are more likely to lead to additional dollar weakness - not strength. I may add that I feel that the dollar has about the same downside risk against the Asian currencies as it had in 1971 against the European currencies, against which it then declined by 70% in the course of the 1970s and led to its early 1980 under-valuation.

A President Bush Economic Boom????
by Marc Faber
July 08, 2004

http://www.safehaven.com/article-1732.htm

----------------

Isn't it amazing to read something like that from 4 years ago considering the current state ?!

[Steve Netwriter]

I think someone asked where all the money is coming from to buy gold.
Just look at this:



from:

Microsoft PowerPoint - 07-590_MFWebcast07_revised.ppt [Read-Only]

Gloom, Doom or Boom?
Analysis of the Global Economic Expansion
Dr. Marc Faber
Editor and Publisher of “The Gloom, Boom & Doom” Report
and author of the best-selling book “Tomorrow’s Gold”

http://www.usfunds.com/docs/pdf/GloomDoomBoom.pdf

A lot of money has been created. It is now looking for somewhere to go !
Oil anyone ?

[Jumpin]

679... Yes, the trend line strictly should only tend to zero rather than intersect, but the variation on the actual line is so large it hardly matters. So is zero hour when the actual line crosses zero or when the trend line crosses zero?
Who knows? As Steve says it is imminent anyhow. I suspect if anything bad happens it will happen before the line crosses zero.

The implication of crossing zero is that the US will stop printing currency because there will be no advantage in doing so.
Can you comment on that statement Steve?

[Steve Netwriter]

From the same presentation:

[Steve Netwriter]

679... Yes, the trend line strictly should only tend to zero rather than intersect, but the variation on the actual line is so large it hardly matters. So is zero hour when the actual line crosses zero or when the trend line crosses zero?
Who knows? As Steve says it is imminent anyhow. I suspect if anything bad happens it will happen before the line crosses zero.

The implication of crossing zero is that the US will stop printing currency because there will be no advantage in doing so.
Can you comment on that statement Steve?

I don't claim to be an expert. I'm in learn mode on this at the moment.
Unless I'm missing something, if you have to spend all your taxes on debt interest, then there is nothing left to pay for anything, then.......

That video pretty much explains the apparent lunacy.

[heanme]

feel real real old...But ain't...But property time and again has been the winner and do not need graphs and spikes ..Its a gut feeling ...and its not yet...

[Badger]

I don't claim to be an expert. I'm in learn mode on this at the moment.
Unless I'm missing something, if you have to spend all your taxes on debt interest, then there is nothing left to pay for anything, then.......

That video pretty much explains the apparent lunacy.

Yep thats the crux of it the debt or credit as bankers say it has to be paid back + interest at some point in the future

The debt loaned out as credit is loaned out on premise that future growth will service the debt under the current system...

The current financial system and the economic morass of the growth model are interlinked if you understand the overall system

[Perry]

I was talking about "and I had an orchard of fruit, a stable of animals producing
and that same stable providing shelter".

Do you think someone with no food will let you just keep your farm/orchard ?

Ahhh, so that's what it's for. Golden bullets. I had wondered.

You can have your gold, your silver, and your petrol,
but, without food, you have nothing – nothing at all.
(Apologies to Monty)