romans holiday

Well, I only have one foot in the deflation camp. Eventually we might see some capital flight out of the dollar and into stronger currencies [what I've termed hyper-deflation, where the currency also devalues] but before then chances are that the dollar will strengthen due to deflationary dynamics. I like to take a more "syncretic" approach, which recognizes the valid points of each. http://dictionary.reference.com/browse/syncretic

I have come to similiar conclusions. Prices might just stagnate as upward pressure on prices, which you would expect from a devaluing currency, might well be counteracted by downward pressures such as a contracting economy and unemployment when money becomes valued more[demand destruction]. The worst affected would be government with less revenue and those in debt. Stagflation stagnation.

Silver bugs getting a mention on Bob Hoye's latest. http://howestreet.com/audiovideo/index.php...ediaplayer/1391

Isn't there a vicious circle here? Demand destruction leads to supply destruction [over-supply/ over-capacity]. The economy is then locked in an ongoing contraction as there will be less of both demand and supply. GDP would shrink and people would live much simpler and frugal lives. Keynesian policies can at best only slow the contraction and stave off a complete collapse. I do not think the government has the power to reverse this process... you might as well tell the tide not to go out. Sure, there is the idea of omnipotence, yet those that think governments are all powerful and can create inflation on a whim are indulging in the mis-allocation of intellectual resources, that is, of mal-reasoning.

Ok, so many are now agreeing that financial assets are set to keep deflating. But bracket your aversion to fiat for a moment and think of the logic of this. What do you think will be the effect of people seeing their wealth destroyed will be? They will most get very defensive and stop spending. We have seen this behaviour already. Less spending leads to demand destruction which is a downwards pressure on prices in consumables. Why would prices rise if the velocity of money doesn't? Currencies are relative. You might as well say they are all rising together as sinking together as consumers come to value money more [save it and not spend it], and unless we see large rises in prices that is what they will be doing. Some currencies I imagine will rise more than others; gold could quadruple in value against assets while the dollar could conceivably double in value against those assets. The same may also be true of goods.

53 days left for the dollar? More likely that the dollar will spike massively upwards on a market crash.

Interesting from Bill Murphy who has tended to come across as an anti-dollar moralist in the past. Given Bill's prognosis here, it makes sense to hold your nose and buy the dollar. Hmmm... maybe this and next months income... would be nice to see it hit all time lows first.

My money is on the 30s. Depression mark 2. Joe6pack won't be buying so many six packs and holding on to the little money he has.

I doubt very much whether we will see hyper-inflation, rather I magine we will see currency devaluations where they will still remain very much valuable for the mass of consumers where money, believe it or not, could be in short supply. No 100% certainties... theory lives or dies if it is verified or not by future events. Give it six months or so and we should know which way things go. If we see hyper-deflation instead, the market and all those inflation hedges, will tank.

Read my post again and then in the context of the previous one. You will see I am not negative on gold. It is the go to currency to preserve capital in an era of wealth destruction. More than a mere "investment".

What about an asset which preserves wealth/ capital? You couldn't really call it productive, could you? But then perhaps an asset that preserves wealth is not really a [productive] investment... of the sort people seem only too keen to start buying again. In this sense, I do not see gold as an investment. Investment works well in periods of growth, but no so well in periods of contraction/ wealth destruction. It really depends on whether you believe in recovery and reflation or not.

I agree.... if by short term you mean two days.

I suspect many investors will be fooled by a "Kansas city shuffle" in the market. From: http://www.youtube.com/watch?v=Dlc9pPeS2Q0

Yes, you should have a large position in gold and silver.... but you should also have a large position in cash. A third of each sounds about right... then wait for the market to come to you in order to go from one to the other. Silver to gold, pre-crash... and cash to silver post-crash.

imo the stock market is rising because of a weak dollar leaving the more discerning of traders mystified. I wonder though if continued weakness in the real economy will overwhelm the stock market at some point. If stocks and commodities then sell off, the dollar will rise. I doubt very much the dollar demise will happen overnight, or go smoothly in one direction.... but do think it will decline severely in the end. Also, a new dollar carry trade, where investors are borrowing cheap and buying overseas [shorting the dollar, going long on other currencies], is having an impact on the dollar. imo this is a very risky trade. Of course, this has been promoted by the monetary authorities through QE and inflation expectations as they want a lower dollar. But there is a danger here, as the adage says "be careful what you wish for". If the dollar went too low, and if the treasury market was in turn threatened... the Fed could likely engineer/ encourage a reversal in the market in order to salvage treasuries and the dollar. The dollar would then spike savagely. A black swan real possibility.

Socialist tendencies?

http://www.radio.goldseek.com/players/turkplayersep15.php James Turk's latest.

I guess some country has to consume the stuff all the others are producing. Could be Japan's turn to spend its wealth.

With Hoye... and Bubb, I still think whiplash in the markets is likely soon. Hence my desire to swap silver for gold at 50. Just want to see one more spending spree push up the market first.

I have become quite attached to silver... so will hang onto a little at GM all the way. I also have my collection of coins and bars at home. Will hang onto them.... I love giving a silver coin to nephews/nieces when I visit. I remember my grandfather giving my a five dollar note when I was a wee lad... which blew me away as was quite a bit of money a few decades back. My parents promptly "borrowed" it to fill up the car with gas. A silver coin is more likely to go unspent.

Well, things are getting interesting now with the ratio into the 50s. Lets hope there is one more big spending spree in the markets on the back of Bernanke's call that the recession is over. I am jumping to gold at 50...odd.

I think the new government are going to support a strong Yen and the Japanese consumer. More bad news for exporters. Just about hitting the 89 handle now.

In regards to the ratio, a lot depends on whether you see another round of deleveraging on the horizon. If you see deleveraging then you will be getting very itchy fingers to get out at around 50. . Nicejim's pragmatic approach looks like a good option to me. I wouldn't be too concerned if you swapped to gold then the ratio turned again and went a bit lower.... you will never get the exact bottom. Anyway, it is not like you have swapped for cash.

I plan to make next year my last one in Seoul [am hoping the economy here will hold up that long]. My exit plan is a 100 gram bar of gold in case the currency collapses. As for keeping a third of your savings in cash... I do not think this takes much courage. It is a hedge against a large position in metal and allows for you to buy at the cheapest prices on a possible liquidating dip.

Recently saw Jim Rogers on CNBC [a case study in behavioural economics] and he could not stop talking about currency crises. If we see these they will certainly take us on a roller coaster ride. I hope to keep around a third of my liquid assets in cash in order to take advantage of the big one. The other two thirds will be in silver and gold of course.