ziknik

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I'd max out the credit card in that case. My guess is, at $4 there wouldn't be any physical available. Just paper.

Do you know of a dealer that accepts credit card payments or do you balance transfer to your current account?

Has anyone here dealt with CoinInvestDirect.com, I am looking at there 1KG Heraeus silver bars currently at £300 which seems cheap considering you could probably turn around and sell them on ebay for going on 330-350 it seems, if anyone has brought from them did you experience any wait for the silver?

 

Does anyone have an opinion on the bars? or just any opinions on CoinInvestDirect?

A lot of people here have bought from them.

I placed my first order at the weekend. They’ve been dead good so far. I haven’t got my coins yet because I asked them to hold the delivery for a month.

Article on gold price in Telegraph today. I’ve not noticed it posted.

http://www.telegraph.co.uk/money/main.jhtm.../bcngold109.xml

So what about the short term outlook?

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After a six-year bull market, bullion may well be in for a consolidation phase within the $750 - to $1000 band. It should find a floor at around $750 (a price any lower would result in mine closures) but will struggle to hold onto any gains above $1000.

 

If our assumption is correct, gold equity shares that can show consistent cost savings and improved production targets should be able to show some meaningful earnings growth.

 

For once, we believe investors should find better performance from gold shares than exchange traded funds, as the mines come to terms with the spiralling cost factor that has hurt them so much in the past.

 

And over the longer term?

 

Over the longer term, we remain positive on gold, based on a mix of macro and supply-demand drivers. The forces that have propelled gold for the past 5 years are firmly in place, and policy prescriptions for the credit crisis seem powerfully and uniformly reflationary.

 

Gold has shown resilience during a period of seasonal slack, while weathering investor profit-taking without material damage.

 

We believe gold will be well positioned into the final quarter of the year, when fabrication tightens the market.

 

This does not map directly to gold prices, but prepares the ground for macro catalysts to enter. While these are impossible to forecast, with systemic financial stresses intensifying in the US and spreading to Europe and emerging markets, the probabilities favour gold.

Oils gone below $100!

An accelerating selloff.

Do they know what they are doing?

Central Banks usually look at their gold as a value and not a number of ounces. They try to maintain the value.When the price goes up they sell and when the price comes down they buy.

 

If only my timing was that good!

 

I called the top of the uk housing market about 4 years early! Still, like the PM bulls here, I stuck to my guns and it seems to be working out in the end........

FWIW, I’m expecting silver to fall further in price. I think we will see oil sub $100 and silver will come down with it. I’ve got some dry powder in my GM account waiting for the price to come down some more.

I’m not waiting to try and spot the bottom before I buy. I’m not lucky enough to get these things right so I’m buying a little more on every big price drop.

I don’t see price drops as a loss. Each Oz of silver is still an Oz of silver regardless of price.

I haven’t got any intention to sell my silver coins at the moment. I’m trying to build up a holding to keep for the rest of my life (and then I will gift it to my kids at least 7 years before I croak it ;) ). I haven’t got many coins at the moment because I don’t want to keep anymore than is covered by standard house insurance and I’d like to think that I’ve got at least 50 years left to buy

I’m going to swap my GM silver for gold at some point and then sell the gold when I buy a house regardless of price/profit/loss.

Here is what happened to silver/gold in the last reccession 2001/2003

 

Why the poor performance from silver?

etals.png]

Can you re-produce that chart up to today’s date please?

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But I can't prove anything either. I guess we shall see if this mysterious shortage continues after a period of stabilised or rising prices .

OK, but for clarity. I didn’t say there was a shortage of coins. I said logistical problems meeting demand

EDIT: ****, I did say short of coins in #160 above.

I phoned Chards this morning to get prices for silver coins. I was hoping weak hands will have dumped coins in the last few days.

 

I asked about shortages. I was told that Chards have heard rumours (from other people) about Perth Mint having shortages, but not experienced any problems with Perth Mint themselves.

 

They’ve not got a lot of coins in stock. No Maples, no Eagles. Apparently, there is massive demand for silver coins at the moment and they are having trouble with the logistics associated with transport and shipping. They just can’t get the coins delivered in the quantity they need to meet demand. The have a big shipment stuck in Germany at the moment and another coming from Canada soon.

 

I presume Chards and others do not have contracts in place for the delivery chain to meet the recent demand and are now struggling.

But a dealer who avoids buying into a crash, makes more than a dealer who does not. Since July the falls have been precipitous. I can't believe many seasoned dealers were in any hurry to catch that knife.

 

How many developers are buying land at the moment? Well, they make money by dealing in property, but they also know when it is actually more profitable to shift what you have asap and then to just sit on your arse until market conditions improve.

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Yes, speculators can make huge profits by buying and selling at the right time. But quality professional coin dealers are not speculators.

Developers are not buying land at the moment because they can’t sell the land. That’s my point. Coin dealers can sell the coins (if they can get them) because there are people queuing up to buy.

I know I can’t prove nothing either way, but I would still be buying if all coin dealers put there price to 5x spot because I know I can sell at this price on ebay.

A dealer make his money from dealing in coins. Not by sitting around waiting for the prices to go up and down.

I’ve spoken to Chards a few times. They have people queuing for coins but they can’t get them in fast enough (logistical problems). A huge delivery arrived (at Chards) 2 weeks ago but they wouldn’t sell any to me because they’d had other people waiting weeks. I’d been waiting too; I’d just not thought to pay in advance .

I waited 6 weeks (or something like that) for coins from the Royal Mint. Why on Earth would Royal Mint delay deliveries if they weren’t short of coins?

One ounce 999 silver coins for less than £10 including 17.5% VAT.

 

http://coininvestdirect.com/main.php?a=11&id=238

Under £10 pounds! I’m buying!

OK, let me ask some dumb questions..

1) The volume is huge - could that not mean this is one single seller? e.g. hedge fund liquidating?

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The latest bank to fail was called ‘Silver State Bank’

Do you think it really had Silver and was forced to sell?

http://www.greenenergyinvestors.com/index....ost&p=57240

Dead link.

Try

http://www.telegraph.co.uk/money/main.jhtm.../bcnmort105.xml

On the whole I agree ziknik. I'm just not sure about the point in bold which is widely quoted.

It’s more difficult to write and understand the deflationary scenario because we have experienced deflation.

Most money is created as debt, it requires an interest payment to be made as (or when) it is repaid. To pay the interest, more money needs to be created in the future, usually as debt.

In a deflationary scenario, there is negative money supply creation. Assuming the deflation continues, there is not any net money creation and therefore, there is not enough money for somebody to repay their debt certainly not everyone). They default on the loan. The bank is forced to pay the debt on behalf of the borrower and this constrains the banks ability to hand out other loans. There is not enough money creation to meet the demand required to pay the loans + interest. This causes more defaults and spirals out of control

There are two provisos I would make...there is always enough money as long as that money continues to circulate quickly enough to run ahead of the growth of interest liabilities so that they don't become unmanageable i.e if you have a healthy economy people can earn their way out of their debts. It shows up as affordability I suppose. So the velocity of money is as important as the money supply itself in terms of meeting debt/interest obligations.

Yes, money velocity can slow deflation and stop in spiralling out of control. But money velocity is not enough long term. Sooner of later, money supply must turn positive again or the deflation keeps spiralling out of control.

It is not possible for people to work their way out of debt because the money doesn’t exist and nobody wants to borrow or is unable to borrow.

The economy is not healthy. The end point is when everyone has defaulted and there are no debts left

Secondly, the interest that gets paid to the bank ends up (assuming it has lent and run its business well) as profits. Those profits may well be used to grow lending and future profits even further. Alternatively those profits are paid out as tax to the government who may spend it or indeed to the shareholders who may spend it. So the interest doesn't necessarily just get stuck at the bank doing nothing...it circulates in the economy earning profits and repaying other debts.

Yes, the same money circulates around many many times. I’m just taking extreme points of view in my examples for simplicity.

Make that three points. Deposits are in a sense a loan to a bank and earn interest themselves which may also go out into the economy. The bank has to find the money to pay its depositors in much the same way that a borrower has to find the money to pay the bank. As you know the depositors' interest is largely paid by the bank from its lending. So the net liabilities may not be as big as we think...the effective liabilities between depositors and borrowers is far bigger than that between the borrower and the bank. And we know in both cases that the money comes out into the economy again anyway (unless something drastic happens).

 

ziknik is my thinking right? I'm not sure. Just doing it from scratch.

I’m a touch confused by what you mean (in the text I have bolded). I agree with the rest of it.

The problem for us is that we are the borrowers and Asia are the depositors. Then again, when it goes to rat **** it we may well find that we have got the better end of the deal.

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So

1 ) Loan -> inflation

2 ) Paying back principal -> deflation, ie. reversal of step (1) and net neutral

3 ) Interest payed -> no net effect on the money supply, just existing money changing hands

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It is over simplistic to look at only one loan transaction, you need to look at a series of the same transaction. In the series of the same transaction (over and over again) the money supply must grow or contract. It cannot stay the same.

These are 2 simplified extreme examples.

In an inflationary scenario, there has to be an increase in the money supply and it must keep growing. Otherwise we would not be able to repay our debts + interest. So the money supply keeps growing and you or somebody borrows more and more money to keep repaying debt + interest.

In the deflationary scenario, the money supply has not increased (or somebody defaults to cause the money supply to reduce). There is now not enough money for repayment of debt + interest, not for everyone. More people default because there simply isn’t the money to repay the loan (for everyone) and the situation keeps getting worse.

Both situations are balanced, slowed down a bit by default / new loans

4 ) Default -> failure to pay principal, i.e. not a reversal of step (1), which default is net inflationary

5) Bank pays principal itself with existing money-> makes up for step (4) which gets us back to no net inflation or deflation

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The fractional reserve banking system allows the banks to lend several times the money they have.

If a bank has £10, it may loan say £100 (10 times)

But if the entire £100 is defaulted on, the bank has to pay the money itself and it has lost the ability to lend £1000 (10 times)

I'm sorry ziknik, I don't understand that. Correction. I see what you mean...the government stepped in to provide funding when investors (banks, ordinary depositors, hedge funds etc) disappeared. But you argued earlier that repayment of loans is deflationary. Is it different here?

Did I ? I didn’t mean to . Where?

Can you point it out to me so I can clarify (back peddle )

The effect of the repayment of a bank's loan is in itself deflationary - but of course if they then go straight ahead and lend it out again, then it has no effect. It rather depends on whether the government's money is 'new' money or re-deployed (and where re-deployed from).

The effect of the repayment of a bank's loan is in itself deflationary if you consider it in isolation - but of course they then go straight ahead and lend it out again. and the bank received interest and now has an ability to lend more (10 times / 50 times the amount it received interest).

Over the course of a mortgage the interest may be 100% of the amount borrowed or more.

Given all the banks are having trouble increasing lending to support house prices, this extra requirement at this time would be difficult for them to support. In normal times, I would agree with you. The NR situation of reducing the book has the effect of reducing the lending capacity in the overall banking system.

I agree with you.

It’s a bit impossible to give an absolute definitive ‘inflationary’ or ‘deflationary’ in a real example because there are some many banks interacting with each other.

But remember, reducing the lending capacity in the overall banking system is not deflationary. It is less inflationary

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I would argue - but I've not had this confirmed anywhere - that the charging of interest itself may in fact be deflationary as it creates additional liabilities which need to be paid out of the existing money supply...i.e. the velocity of money has to rise. But this is contentious. Lending also brings forward consumption from the future and raises effective prices for goods and services - so in effect borrowing is short term inflationary and longer term deflationary in terms of demand.

Money supply has kept growing to cover the interest of past loans so there has been no deflationary affect.

The interest causes deflationary affects only when money supply does not grow fast enough. This has not happened. Money supply in the past has grown to cover interest and more.

The SLS provides liquidity not capital. So whilst it stops deflation as a result of a market shortage of liquidity, it does not solve the issue of default wiping out capital and the consequential effect on lending capacity.

Agree with that.

Re Northern Rock - the capital injection is 'inflationary' to the extent that it is expected to replace capital that is expected to be wiped out.

It is inflationary the maximum extent because all the banks that lent money to NRK got their money back in one day rather than receiving it over years.

However, the plan is to shrink the book to about one third I think over the next few years which is very deflationary.

It could be deflationary if people paid back their loans within a few years but they are not going to do so. They are going to move their loans to another bank so it will make no/little difference.

I was talking about his reference to the existing money reservoirs. I don't think he addressed the point that the CB injections are not inflationary in themselves. He merely pointed out that there are counter-balancing inflationary pressures to the deflationary deleveraging of banks.

If you take the SLS as an example: It is designed to stop the deflation. The BofE have put a lot of time in to the design of the scheme to ensure it is not inflationary. If it runs as per design, it will probably be a bit inflationary. It’s a difficult balance and it cannot be 100% right.

The chances are that the SLS loans will run for several years and halt the deflation that is needed and cause some (a little) inflation.

But, on top of the SLS, we have Northern Rock. NRK was a 100% bail out. The money will be unrecoverable and is very inflationary.

If another bank on the SLS goes bust we have more of the same. Especially if it is 100% bailed out like NRK.

Remember, there’s already enough money in existence to create a devastating inflation scenario (if not hyperinflation). We need some deflation

Ah I see...

 

Edit:

 

OK I see in principle the theory here. But I doubt any goverment or central bank would allow receivers to act in this way due to the spread of systematic risk.

 

They didnt wrap up Northern Rock this way after all.

It may well come down to the lesser of 2 evils.

The Government can’t keep printing money to cover losses or it will become worthless (hyperinflation)

Yes. But not exactly, exactly.

 

Because the bank's capital is wiped out by having to pay off the customers' loan for him in the event of default, it means the bank's capacity to lend is constrained by the appropriate regulatory capital requirement (c.10x average for on balance sheet lending). They either have to raise additional capital (which is effectively a transfer from elsewhere) or they have to either call in their loans or not grow the book so quickly as they rebuild their capital ratios out of profits.

Yes. I was keeping it simple for myself above.

The Circa 10 times applies to the USA where the reserve requirement is 10%. In the UK, the reserve requirement is 2% (?) so the banks can lend 50 times the high powered money

Any and all lending creates new money (its being borrowed from the future)

Any and all forms of loan termination (paying it back or defaulting on it) destroys that money (returns it to the future)

 

So these things (loans, paybacks, defaults) are affecting Money Supply.

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Repaying a loan is deflationary in terms of prices because money is being used to repay loans rather than chasing goods.

In terms of money supply, repayment is inflationary because the money is paid back with interest. This allows the bank to lend even more.

And if through weight of default they collapse or obtain capital from a central bank?

Collapse is very deflationary. The bank does not have time/years to play with the books and make up losses from future profits. The receivers will continue to collect debt repayments, but are very likely to call in every loan (where allowed by the T&Cs) causing more defaults. This allows the receivers to wrap up the bank quicker without having to wait years for debts to be repaid.

When a Central Bank provides a loan to a bank, the Bank does not lose much of its ability to lend. It is a much less deflationary.

Edit to add. Providing the CB provides a loan to cover 100% of the losses

Bank lending is inflationary.

 

Debt payment is deflationary.

 

Default = no change (i assume)

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Default is more deflationary because the bank must re-pay the loan on their balance sheet out of their profits/capital

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The proof will be in the pudding of course, but remember that my main point in this thread was that the central bank money that was being referred to as massively inflationary is far less so than pictured, since it is merely rebuilding banks' ravaged balance sheets as they are forced to deleverage. No-one has addressed that point, you've just found different ways to argue that there are still inflationary pressures - I happily acknowledge those other inflationary pressures, such as the money reservoirs abroad. I just want to assert that the inflationary role of the CB money propping up banks is being vastly overstated.

G0ldfinger addressed that point above and you said, “That's a decent statement of the inflationary argument…….”

http://www.greenenergyinvestors.com/index....ost&p=56916