romans holiday

I'm not sure that most people in the western world would agree with you that it is good news. The collapse of the global economy would bring enormous suffering to a lot of people, including GEI members' family and friends (unless you have enough gold salted away to look after them all!). I very much agree that the global economy is built on crumbling foundations and that we seem to be entering a phase of accelerated crisis. But who's to say that the shakeout won't take five or ten years, with plenty of twists and turns along the way. Its a mistake to underestimate human capacity to adapt and innovate in the face of crisis. All empires come to and end, including financial ones, but knowing that doesn't make it any easier to predict their demise with any degree of accuracy.

I would be worried if most people in the western world did agree with me.

It is good news because a fundamentally unsound and unjust debt-based economic system is in the process of collapse. Most people in the western world were becoming little better than serfs trapped in a lifetime of debt. Like yourself, I consider people capable of rising to the occasion.... stiff upper lip and all that. A bit of hardship will test the mettle of our character and old virtues will be rediscovered. A collapse of the financial system would undoubtedly bring some hardship and suffering, but I doubt it will bring the madmax fantasies of paranoids.

What's the good news?

That was the good news!

"The current debt-based, fiat-money global economy is in the process of collapse"

With all the nationalization going on, the talking heads are getting nervous .

"Hyper-inflation" and the "printing of money" was mentioned by the regular anchors today on CNBC.

hey guys, there is a possible take over LEH & WM by FED on this weekend, so , the $USD rally may be ending with a gold spike on sunday market open. (take your own risks for course)

This may lead to further dollar strength with panicked investors and hedge funds flying even faster to "quality" . Absurd isn't it!

For those with dry powder, it could be an excellent buying op.

The decline of the dollar may be left waiting in the wings for a few more months. Then the fun will really begin.

Who said that man was not an animal to be farmed?

An economic collapse would also be a regeneration of ourselves.

Extraordinary Measures Today, a Financial Funeral Tomorrow

by Kurt Kasun | PUBLISHED: September 09, 2008 AT 7:14 PM

http://www.greenfaucet.com/the-market/extr...-tomorrow/94888

Lehman and WaMu are on the edge. Will the Fed step up to the plate? Or let them fail?

Double post.

Well, this may be the first time that I have ever traded gold [aready heavily invested ]

The Indian festival Diwali arrives soon and gold always moves up in this period. I am thinking of a reverse fishing line.... buy a few ounces on this dip [perhaps around 700] then sell on the coming rise [i wonder if I will be able to bring myself to sell].

I have enough in gold at the moment but find it hard to resist at these prices.

In an overly-civilized world, maybe a bit of barbarism is a good thing.

Maybe we need to get away from the assumption that we should have growth.

 

Maybe it's more important to think about a system that would work well in a prolonged contraction, followed by stability.

 

The idea being that growth is not sustainable on a finite world.

I think you have hit on something significant here. Economic growth has become the rationale for social organisation. Perish the thought that we will have a recession!

I suspect it has something to do with the creation of debt money and keeping the general populace well disciplined, productive and devoid of leisure for thinking.

I'd argue that the rise to $1000+ wasn't really a bubble - a large part of the rise was an overdue correction, whether it overshot at the end or not is hard to say.

 

However I think what you say above is too restrictive as to what could be defined as a bubble. Bubbles don't have to involve the whole population to count. Property is obviously a market that a large part of the population are involved in. But you can have huge overpricing in a market based on speculative froth even if it is a fairly small proportion of the population who are interested in the first place.

Yes, I see your point. I believe the word "bubble" is being overused today. Where no one saw any bubbles a few years back, now they are suddenly everywhere! The new buzz word. In my opinion there has not been a lot of genuine bubbles in history. They are relatively few and far between and wreak economic havoc.

"Speculative froth" involves something far more common than a genuine bubble. For example, oil at $150 involved speculative froth but only the talking heads thought it was in a bubble.

Hmmm... once again we are getting down to the definition of words. Important nevertheless

The old high was formed at a time when physical demand from traditional gold purchasers was on the floor. The buyers were speculators. A bit like housing, where the BTLs displaced the FTBs and drove up prices too high.

 

Now the hot money has run to the exits, the price is back down, and the Indian's are buying again.

 

That's a bubble, in my book, now deflated.

 

How do you define a bubble?

It is ludicrous to say gold was in a bubble.

A bubble involves a manic phase where everyone is certain it is a sure bet. Anyone who could, and many did due to easy credit, bought houses without even bothering to ask what the real value of them were. People were "panicked" into buying and lost sight of fundamentals.

A bubble does not form when some see something as a sure bet, but when most do. This is what causes prices to become over-inflated.

The general public know next to nothing about gold. When they do, maybe then you could talk of a bubble.

Anyone who did their homework on gold should not too concerned with the volatilty we have seen. Rather, it was to be expected. We will continue to have a deflationary period which will most probably be followed by an inflationary period after the election.

There are a lot of people out there, who, rightly or wrongly, feel "pumped and dumped". There is a vocal handful of uberbulls on here, but I just wonder what it will take to attract back the hot money needed to form a new bubble.

WM, you do a disservice to yourself. This comment is hardly worth a reply and is the sort of thing you hear from the talking heads on CNBC. Now if you asked what it would take to attract hot money needed to form new highs....

According to IG it is 752 at the close of Globex. Silver down over 5% in day. If this was any of the "hated" assets (property, cash, equities) their would be "black xxxday" threads. Why the difference? It just looks like denial to me. Luckily, people don't vent here when they reach the anger stage, they just politely move on. That's what it looks like from here, FWIW.

Whenever are you going to get it? The reason that some here just "politely move on" is that they do not take a dollar-centric view towards their investments. Comprendo?

In a global depression where do you park money such that these conditions are met?

Many think that in a global depression cash would be good. Due to fears of [global] recession, many investors seem to be going into cash now. The problem is that last time round, in the 30's, cash was backed by gold... by real solid stuff with a sound history of value. This time round, no such luck. It is best to go straight to the source and hold a portion of your worth in gold and silver.

If there is a depression all paper assets, including the dollar, would deflate.

Edit to add: Dollar deflation would have an inflationary effect in prices.

In particular I am coming to the following conclusion.The question I think to ask is what would make the market devalue the dollar, if all that has happened so far(B Stearns,indymac,credit ratings lowered for bond insurers ,F+F etc,etc) has not done so(although its still early days)

 

Leaving manipulation and black swans aside,which we obviously cannot anticipate and position for, I think that the only reasonable answer is that ,for the dollar to devalue the markets must judge that all other currencies or assets are relatively overvalued or lower risk.

In a global depression where do you park money such that these conditions are met?

 

I'm not sure, and these are just my thoughts.Any one with more brain power/economic savvy please tear to shreds/comment as appropriate.

1] The housing and banking crises are deflationary. Due to a credit boom, asset prices were over-inflated. They are now deflating due to a credit crisis.

2] Inflation comes from the "other end". It is primarily a problem with the currency. As many posters here have pointed out the money supply is increasing. An increasing amount of dollars circulating, competing for the same amount of goods/commodities, leads to higher prices. Another way of looking at this is that the dollar is deflating [in terms of purchasing power]. I imagine the dollar will further deflate when creditor countries downgrade the credit worthiness of the states [thinking F&F]

3] The dollar will most probably return to its long term trend of decline against other currencies [unless these also decline at the same rate which would then lead to a "race to the bottom" albeit at a snails pace]

4] The dollar will devalue against other assets such as currencies/gold etc when the market realises it is over-valued [i guess this is where inflation pyschology takes hold].

Edit to add: A time line needs to be kept in mind in order to see these phases play themselves out.

From Reminiscences:

Without faith in his own judgement no man can go very far in this game. That is about all I have learnt- to study general conditions, to take a position and stick to it. I can wait without a twinge of impatience. I can see a setback without being shaken, knowing that it is only temporary....... I have been short... and have seen a big rally coming... making a difference of one million dollars in my paper profits. And I have nevertheless stood pat and seen half my paper profit wiped out, without once considering the advisability..... of covering. I knew that if I did I might lose my position and with it the certainty of a big killing. It is the big swing that makes the big money for you.

The quandary I face at the moment is that I was not planning to buy any more gold; got a large proportion of my worth in gold already and was hoping to top up some cash reserves [sorry Steve ].

But at these prices, it is hard to resist the allure of the shiny stuff.

Edit: A dip to $700 [not saying it will] would force my hand.

What are the reasons given by Faber for the inflation-or link to what he said?

Not sure about the link. Quark previously posted this from Faber's latest article:

We shouldn’t dismiss entirely the possibility that all the bailouts fail to revive credit growth and that a deflationary secondary depression is now under way," writes Dr.Marc Faber in the latest edition of his highly respected Gloom, Boom & Doom Report.

"The sharp deceleration in credit growth, with rising default rates across the board, could suggest that debt liquidation is now occurring...[but] Ben [bernanke of the US Fed] and Hank [Paulson of the Treasury] may replace private debt with government debt in order to bail out the system.

"That such a bailout will diminish the purchasing power of the Dollar even more (it should be highly inflationary) is clear...

"Under this scenario, renewed US Dollar weakness and strength in commodities – in particular, in Gold – should reappear."w

Personally, I agree with Faber's view here. The market is in the midst of a deflation scare [prime cause being the credit crisis]. It is only a matter of time before investors realise the dollar is also devaluing... for all the inflationary reasons we know so well.

Edit to add: Over and above money supply issues, now that F&F are on the Treasury's books, it certainly makes the dollar a less attractive investment for the players abroad. Could F&F be the trojan horse?

IT WILL...

 

the US financial sector appears to be haemorraghing again with Lehman Bros now reportedly close to being acquired, while the latest industry figures reveal that 119 US banks are now insolvent. We believe a US rate rise is highly unlikely with the possibility of a further meltdown for the investment banks and a systemic risk to the entire US banking sector. In addition, Freddie Mac and Fannie Mae, after losing a total of $US14b over the last 9 months, are both being bailed out by the Treasury which might cost taxpayers up to $US200b.We now hear that the US auto industry is asking for a further $US50b in Govt assistance to stay competitive. Have I missed something or has the US suddenly become the ultimate welfare state where the Govt waves a wand and simply prints more money? This is bad news for the already surging budget deficit, bad news for money supply growth, very bad news for the US bond market and even worse for the US economy.

I think the US Govt will nationalize the car industry.... to balance out their portfolio.

I hope FFS that it makes up its mind soon so I can work out where best to put my investments. At the moment just about every investment is like a car on knackered shock absorbers, go over a bump and everyone ends up feeling travel sick

This period of a deflationary scare involves investors getting out of assets and into cash. Think of all that cash on the side lines being held by nervous investors.

Where do you think they are going to go when the inflationary scare [dollar deflation/devaluation] hits?

I'm sure that in long-term bull markets, there are lots of times when people are shaken out by prices falling just when people think they shouldn't fall any more right when they should be hanging on.

 

I'm also pretty sure that in a bear market (or when a bull market is over), there are lots of times when people keep hanging on all the way down and simply get wiped out because they refuse to let go.

 

Such a helpful guy. I thought Faber was fumbling on the CWR podcast the other week. He kept talking in the past tense... and seemed a bit clueless about the near future.

Edit: but on reading the following quote of his latest view, have to say he is getting it right by my book. He sees a deflationary period ahead followed by a period when inflationary pressures start to kick in.

I'm sure you're joking and winding me up. Nice one

 

- Another way the overall net inflation must express itself is as a fall in currency values relative to 'standards' [such as cost of living items, or PMs]

 

PM and tin hat time

Yes, I see a fall in currency value [good choice of words] on the horizon. Deflationary for the value of the dollar and inflationary for prices. Of course this will affect all prices [even assets] which may end up extremely volatile and range bound. I imagine it will be very hard for investors to find meaningful trends in asset prices as the deflation of these prices may be negated by a weakening currency [opposing inflationary force]. Gonna keep my eyes on value and ratios.

Edited.

$680 -- Are you really sure that you wouldn't run around like a headless chicken, quoting Prechter and Mish (and RB) all the time, screaming you're only going to hold Dollars from now on?

Well, if gold did happen to go to that price, I would not be confident that the dollar would not sink at a later date against gold.

Therefore would definitely not buy dollars with my gold.

I've already invested all the money I'd intended to on gold and silver, and it amounts to between 10 and 15% of my proverbial life savings.

 

I think it's fairly unlikely that I'll be putting any more (or perhaps much more) into it. Shame really as I'd've been better off all round spending my 10 to 15% now rather than over the last few months.

 

I guess this highlights that, when it comes to the alleged long-term bull in gold and silver, I lack conviction, and I'm still just a wishy-washy 'neither'...

OJ, what currency are you in? Are you confident with it? If not, why not think of gold and silver as alternative currencies.

Then you could split your "worth" between say four currencies; two natural and then two..... not so natural.

No. It is where monetization accelerates

 

I also wonder whether the history of Northern Rock might not reapeat itself...

That group is now doing everything it can (raising interest rates, offering smaller percentage loans, etc) to decrease the number of mortages it backs. This is because it wants to lower its obligations and claw back cash to increase is reserves. Everyone except those with really bad credit rating are moving on to other lenders. But moving on to another lender won't be such an easy option shou8ld F+F start acting like NR, since F+F are behind over half of all US mortgages. So could this mean that the bale out is actually going to depress rather than stimulate the US housing market over the next few years? ...hmmmmm

Deflationary then?