aliveandkicking

I consider liquidity to be infinite not because there exists an infintely large number of notes - but where there is more cash than there is worthwhile investments. This can occur in a variety of ways.

 

Regardless of how it comes about, how does that money stop becoming worthless, especially if you are getting to the point where it actually costs to hold anything including cash?

 

On the surface this looks to be very similar to a deflationary scenario - except there exists a surfeit of money as opposed to a shortage.

 

It is a situation where demand is more than met by supply in everything. This may be triggered by very low wage costs, very high profits leading to excess supply and depressed demand eventually.

Obviously there is not an infinite amount of cash

Please use use clearer and more correct english language to say what you mean.

Credit is created by levering a relatively small amount of cash.

I half agree with you. In the short term, investors are/ will be pressured to get out of cash... or even carry on leveraging up... but I think that economic fundamentals will at some point trump investor "psychology/ ideology". By only going into new asset bubbles, the money will not filter down to the real economy and consumers, which will continue to exhibit deflationary behaviour. I think it reasonable to believe that the debt/ credit deflation will overwhelm the finite resources of CBs to reflate. Basically, I think the greater population, if not investors, have woken up from their monetary slumber. Investors are, by and large, still under the spell of monetarism.

Robert Mugagbe has shown it can be done.

I know he was Oxford educated and amonst the elite but do you really think a determined government cannot do the same?

But at the moment they dont need to. Many of the doom and gloom stories about deflation have just not happened as predicted.

My point is let's consider a world where liquidity is infinite and that cpi remains low because of low labour costs.

 

Yields tend to zero and rates remain v. low.

 

But no hyperinflation potentially even in this sort of situation which is supposed to provide the conditions for such.

If liquidity is infinite then money has no value. So liquidity has to be less than infinite.

Edit; RH beat me to it.

But RH

Do you think it is possible for CBs to maintain excess liquidity? I'm thinking it is only a short-term fix as investors are fooled into spending/investing.

Dont be fooled into thinking that cash in a bank cannot be made worthless. It can be. And if the cash is not spent then that will be the outcome. Your theory that 'they wont do that is not based on reason. It is an irrational belief to think you will not be encouraged to spend by any means necessary to prevent deflation

But this spending will support asset prices generally and aspects of this crisis will no longer apply because asset holders with debt will no longer be under water and will feel happier spending and lenders will feel happier lending.

All in all the certain outcome that money will be spent means that interest rates will rise when inflation rises. Inflation will rise. Or the world will end and gold will go to the biggest thug.

and why would deleveraging be deflationary or even cause prices to fall? it is simply a transfer of money from the debtor to the creditor.

That is only true for full reserve banking which is pretty well not practised anywhere on earth in reality.

Our banks are fractional reserve banks which are allowed to lend money they borrow from others.

By defininition if no fractional reserve bank had any leverage then only cash the bank already owned could be lent to customers and it would be a full reserve bank.

A fractional reserve bank cannot create credit without creating savers deposits with that bank.

Credit is created by matching savers rates to borrowers rates for a profit.

Eg the bank with 1 dollar borrows 99 from a saver to lend 100 to a borrower to be levered 99:1 or whatever the leverage is.

Or it creates credit of 100 which is spent by a buyer of things sold by a customer of that bank who then has savings of 100 with the same bank.

If the 'saver' wants to be repaid the bank has to borrow from another source and might chose also to delever by not rolling over loans or by not issuing new ones as old ones expire.

As the bank delevers people who wish to borrow money are turned away or must pay higher interest rates which discourages borrowing for many.

If all the banks delever fully there will be something like 97% less money in the world. So prices will presumably fall 97% also or some huge amount.

well it's true that the USD supply has entered hyper-inflation, so of course there is no point in you saying that it hasn't.

 

prices haven't gone hyper yet though, so posters can still debate whether prices will go hyper or not.

 

rather than making personal attacks on posters who say that prices will go hyper; why don't you put forward your arguments as to why you think prices will not go hyper.

If only you could agree to say hyper increases in money supply might lead to hyper inflation

Related to this style of debate we have:

1. Moderator goldfinger saying it is irrational to give any reasons why hyperinflation cannot be prevented.

2. Moderator RH saying that hyperinflationists are irrational nutters

Do people want a debate?

I simply cannot understand how an empire that is so far gone that it is reduced to buying its own debt and is using military force in order to try to frighten the rest of the world into continuing to buy its debt can last much longer.

 

I have a great respect for you via your posts but I am at a loss as to how we can perceive things so differently!

Perceiving or perception is an act of interpretation using the mind. If we can change our mind then we can change our perceptions. If we dont change our mind then we can only perceive what we saw before

The USA is the worlds largest economy. Other economies like Germany or Japan say are not full of consumers or people who want to take on more debt. These other economies want a strong USA economy so that firms like BMW or Sony remain strong. If BMW sells cars to the USA it gets dollars. If Germany wants to support the economy of Germany it can buy dollars

Meanwhile these same nations support the USA militarily and diplomatically as it gets easier and protected access to oil in the middle east.

Then there is the dollar as worlds reserve currency. The basis for the numbers in the banks is contracts between people who do not want to be double crossed. Most of the money in the world is dollars that are lent to other people. If i borrow 100 from you and lend 100 to Dr Bubb i am massively levered and exposed to losses if Dr Bubb does not repay me. So that loss if it happens creates a profit loss for me of the full 100 unless i have security i can sell. The banks are damaged and dont want to lend. Most of the money in the world is created by lending. The feds are mainly lending new money into existance that they expect to get repaid. The feds are private banks so you can imagine they want to be repaid or end up with no losses .

But you probably think banks are criminal organisations that invent the money out of thin air and no matter how long we were to sit down and talk about banking you could not possibly conceive they did not

So I imagine if Dr Bubb were to sit down with you and talk about banking you would also really struggle to understand how he could possibly not agree with you also.

Perception is a funny thing. None of us can really see anything. All we can do is attempt to sense what is there and allow it to come to us and then compare what we think we sense with what we imagine we have already seen while allowing what is there to come to us unchanged by what we imagine we saw earlier.

Human desires are what they are... why do they have to "make sense"?

If it makes sense to you to value silver more than the market i can supply you with market priced silver and place it in a nice box and you can pay me for my labour and holidays and so forth.

But if you want to sell it back to me i can only afford to pay you the market price minus my commission because i will have already paid for the holidays and need more of them to maintain my lifestyle.

If that makes sense to you then it does not have to make sense to me.

Just let me know when you want to proceed.

Yes Pix, how on earth Silver is 63x cheaper than Gold right now is insane IMO.

 

Silver is so important in everyday life, something will surely have to give.

Supply and demand figures for gold dont make sense and if people are accumulating silver for its monetary value that does not makes sense either. Silver is of course hugely valueable but it is produced mainly as a biproduct of copper production.

I have said all of this before and got the same stick from the same people still waiting for silver to have its day in the sun

Silver is just one of a myriad of commodities that humans want and get when they desire it and can afford it

Why silver? Why not pork or wood etc etc etc

So, your argument is that there were less metals known under the gold standard, and that is why gold today has less value? Are you certain that your thinking has a sound basis?

 

Also, could you please explain in what way 'we' value things differently than 38 years ago?

It seems the modus operandi of the moderators on this board that when a person does not agree with the moderators investment decisions it is assumed the person cannot think or does not think or cannot think soundly

Those who think that they are 'anti-gold bugs' and 'anti-nutters' are just nuts to assume that only war or chaos can lead to more adequate gold prices.

I imagine you know i was not saying that. But if it makes you feel better than you are welcome to believe i am nuts. I try to be helpful.

But if you are interested in why i think what i think then I refer you to Jim Rogers comment that the supply demand dynamics of gold are different to other commodities that he thinks are likely to give better returns but for sure the man must be holding gold also. Marc Faber made the comment about a year ago that his very wealthy clients dont hold more than about 5% of their net worth in gold. So the question then is what else is seen to be a good investment?

I think you are able to understand why platinum is more highly priced than gold. Platinum was i think up over 40 yesterday. I think you are yourself holding platinum?

But if industrialisation collapses will people value platinum?

It is for these reasons that we do tend to value things differently today. Man cannot live comfortably with gold in the safe, he has to buy things with it. Gold will likely peak when people buy things with their profits. But what about platinum? What about uranium if peak oil is a reality that will influence our lives in the near future?

My point about other metals such as platinum is related to the way such metals are used to create the modern life we are living which is more complex than the simpler times of yesteryear. Such days could however return if we get economic collapse back to simpler times. I am not wanting to really consider that kind of thing at my age with a newborn baby and so forth. Others can worry about it they want.

On the topic of margin i think you are mixing things up?

A broker can offer margin because you place a deposit with him that covers his exposure and punters tend to place bets that cancel to reduce his exposure. that kind of margin is different to the way a bank levers its profits by borrowing short and lending long so that with 4 dollars of own money say, it borrows 96 and lends 96 to profit on 96 of interest received that it sets, while paying 96 of interest out that it sets, so that it has margin on 96 dollars.

In times of unpredictability the broker can increase the margin requirements so customer exposures are reduced so that his own exposures are reduced. i would say the authorities will know when it suits them to make margin changes that will hurt the side they want to hurt. For example if they tighten bank lending regulations on amount of leverage then that will be deflationary and favour a fall in the gold price so a margin change after that event might force people running losses to take the losses via margin calls rather than trade out.

Who knows if they really want to hurt people to their advantage maybe we will see a 9 in the price of silver. Not a risk i am prepared to personally take as buyer now. On the other hand if we see 9 it might be safe to buy.

But one way or another i am sure you know about everything i have said. each of us looks at the same thing and connects the dots as we think is best for us.

you may do a whole lot better buying other commodities that will be making much more impressive moves. You should also be aware that the continual fascination with gold flies in the face of the realities of supply and demand.

From a traders viewpoint platinum has made some impressive moves at over 2000 to around 1000 and now 1300 and every chance it will be over 2000 before gold is.

In an economic recovery where there is less fear of collapse gold will fade in favour of stuff people require.

And in 2004 $850 was nowhere to be seen anytime soon

It seems if:

1. you are certain of economic collapse then trade wholely with gold

2. If you are optimistic of economic recovery then trade mainly with something that is required.

As an industrial metal largely, Platinum will be hit hard IMO. It is already well above its inflation adjusted highs and silver and gold are nowhere near theirs.

 

As far as catalytic converters are concerned silver will do the job just as well, should it be relied upon.

 

Industrialisation will collapse IMO, in fact it is collapsing/has been collapsing for a few years now.

 

Gold will always, in our lifetimes at least, be king of metals. It is simply 'like no other'. Think about history and trying to usurp a few thousand years of tradition for a second. Platinum is...well simply platinum. No double eagles/gothic crowns there. IMO Platinum has had it in the next commodity downturn. Just look at last time. Price was rewound 5 years in a couple of months (and presented a juicy buying opportunity for me).

 

I sincerely we do not return to war and chaos. But that is where we are leaning in the future. In fact it could be sooner than we all think. Iraq and Afghanistan (our boys home draped in flags and minutes silences). An unstable development in Iran. Fireworks in Pakistan. Nervous India. Loose canon Russia. And Israel looking down the barrel of it all. Ummm. Not a pretty picture. Throw in oil and declining (if true) stock piles and a dependency cultured West and the future looks far from rosy to me.

 

Talking of roses...that English Rose has no thorns? Surely an error of design?

 

Nice coin though. Does anyone have one yet to report back on?

 

Peace to all. No offence AK, I just think you are wrong on G and S.

Your response to me seems to have been generated by your strong beliefs about world economical collapse.

Such a collapse will amost certainly lead to war and chaos.

The world is not so different to when i was in my twenties back in the 1970's. At the time the world seemed a very scary place but my boss pointed out to me that it was no different to any other time he could remember.

Because most people including yourself do not want war and chaos then most people tend to work towards economical solutions that enable a reasonable peace to be maintained. China and America are for example long term allies where America support china in ww2 with lend lease in the same way it supported the UK with lend lease. The main pacific so called allied powers of the day were the ABCD powers versus the so called Axis powers. When Russia changed sides it too got lend lease assistance. Russians are surprisingly artistic and romantic if chaotic and have reasons to distrust the west as does iran but Russia today is embracing western methodology because they want what the west has got or at least less of the unpleasant parts of the chaotic parts they presently live with. For example they need to introduce rule of law rather than what they have at the moment which is something different related to respect of power - no matter how ugly it is.

Hyperinflationism seems to be aligned with anarchism which is the belief all powers other than the individual is tyranny

I am inclined to believe your attitude towards me was to be tyranical in the hope that you and the others could achieve your objectives for world distruction so that your belief system can be satisfied that only the individual is important

Most people are operating in a group world type environment of cooperation or working towards that as on objective

did you short silver back in mid-june when the price was around $13?

No. Still waiting for that 9 to buy

try palladium.

I expect the price of palladium is related to it being mined with platinum rather like silver is usually produced from refining copper ore

I invite you to imagine the dessimation in Platinum if it were not needed for Catalytic converters because we use Hydrogen fuel cells or batteries?

Probably if hydrogen fuel cells are in cars they will use generators as brakes and create more hydrogen and oxygen or something? And the platinum will be the inert metal for the electrolysis?

But wait there is more info:

A fuel cell works by catalysis, separating the component electrons and protons of the reactant fuel, and forcing the electrons to travel through a circuit, hence converting them to electrical power. The catalyst typically comprises a platinum group metal or alloy

Yes. And I heard plenty about it around November 08. And I'm sure we'll all hear about it again soon.

 

I maybe missed a few of your posts AK, thus misunderstanding you. I was merely replying to your post re gold and silver. Perhaps you need to take a breath of north of Helsinki air?

As far as i know platinum was at almost 1500 usd per onze today. I would guess platinum keeps its price today because it is a way of preserving wealth and it is an industrial metal

The first point i made earlier is to ask why should silver have some particular mystique that is more special than other industrial metals? Presumably the availability of silver is such that it can be priced around 100 times lower than platinum?

Gold is not the king of the metals in our current industrial era.

The second point i made was that gold will be king if industrialisation collapses and we return to widespread war and chaos

Yes, it's available here in Finland.

 

Nice video.

But confuscious he say also

The wise man sees this process with different eyes to the man who can only see the contents of his own mind.

When mattel toys sells plastic ducks around the world that are not manufactured by American labour it saves money and is able to produce greater profits for its owners.

The countries who enable this process get a share of the profits and learn also how to make plastic ducks.

Why would china stop making plastic ducks for America?

Confuscious he say: Some see revolution. Some see changes. And some cannot see that nothing has changed.

There is no need for that language here.

 

If you have to resort to that type of language to defend yourself, then you have already 'lost'.

Well congratulation for repeating it

If jake wants to be ignorant and think i am stupid then so be it

You know next to nothing! Silver and Gold have hundreds if not thousands of years of history behind them as a store of value. Houses have but a few decades.

Some coins get minted and are worth today many multiple thousands of pounds more depending on their rarity alone. Please do some research before you start spouting rubbish. Uses of silver are many and most of it is used up in industry, the price of recycling it (at todays price) uneconomical. When we all realise that silver is far more precious than as we esteem it to be now, the price will adjust accordingly. For gold, most of mined gold is still around above ground and for that honor is accustomed its worth and value. Gold is like no other. Nor likely to be.

Like it or lump it the pair will not for a long time, lose their 'glitter', in fact, just the opposite. Still you go ahead and ignore it, if you dare. Put your faith in bricks or plastics its all the same to me.

 

'Only in a total collapse of economies will gold be the king again..' - Have you been sleepwalking through the last few years? Alive and kicking? You might be 'dead and buried' rather.

I assume you have heard of platinum

From:

Gold is for eternity but most of us have simpler ambitions and where necessary chip board and plastic will probably be part of my final journey

If you really want to understand the value of gold buy your wife some plastic jewlery for christmas. I'm sure she will be able to explain why gold is better than plastic in a way that you will understand. Anyone who ever bought their fiancée a plastic enganement ring will also know all about gold's value.

 

On the topic of silver's many and varied uses, has anyone tried x-static clothing yet? I hear it's quite good.

At some point the investors will see there is no value in holding gold and they will sell to buy something useful which could be plastic or whatever is useful to them. Meanwhile other investors are investing in plastic already

My point was that the world is different and we do value things differently today than when there was a gold standard.

Gold has to be useful to have value. A certain amount goes to jewelry, in dentistry gold is still the most valueable material for a crown in terms of biting ability and durability. Gold is fantastic for electrical contacts and as wires in tiny integrated circuits. Etc. Etc. For sure it is valueable. But it still has to compete with other valueable materials and there seem far more of them today than in former times.

Uh, I suppose there is a high density of coin shops where I live then. I can think of three within a 15 minutes drive from my house in Italy and a few in London too.

 

 

 

Well it's up to him, of course. If he is willing to make the deal, he will wait. If he isn't even after I offer to pay twice as much, probably either he is not so desperate or he is a scammer.

 

If he wants to sell the coin for $50, then he doesn't know its real value. If he doesn't know its real value, he won't be concerned with me going inside a shop and have it checked. If what you are saying is that I should not trust the coin shop owner, I thought it's pretty obvious that I'd sell the coin straight away, go out and pay the guy his $100. I can't see any serious risk in this approach.

 

As for your comment, I find it pretty funny for a very personal reason: pretty much everyone close to me points out how hard it is to gain my trust

Which is both a compliment and a criticism, no?

My point was that you appeared dismissive of people who did not trust the seller saying no brains were needed

I felt it was fairly natural when it comes to money that people would not trust another - rather they want to verify things.

alk are you reading the posts correctly GF is clearly not on your 'similar wavelength'.Quote GF "i spent 3 weeks in the us and only SAW things that were manafactured in CHINA."

What town/city in finland do you live??

He said in the shops

I have lived in places other than finland - finland being exceptional in my recent experience

Finland has a significant amount of uranium in some of the water when bore holes are used

I have a gold crown in my mouth which i counted as in my body

If you dont know about US manufacturing i will leave that one for you to find out about. Go to a small airport for example and report the makers names. Go to a farm and note who makes the complex vehicles and machines. Who makes the computers? Who makes the very large buisiness computers? Few countries do make them. The us is a major manufacturer of stuff

You misunderstood my comment about the gold coin copy

Typically forgers place a heavy metal inside the gold so on the outside it is just pure gold. Which is why gold bars have drill holes in them where they have been tested to see if the inside is the stated purity. For large bars unless you have the traceable paperwork for the bar things get complicated as more holes need to be drilled or it needs melting down to be tested.

Yeah, but $50. If it was me, I'd consider that a good risk/ reward transaction with what looks and feels like a Maple in my hand.

I suppose it is true that such a coin would be collectable also.

The video goes to show that the average local knows nothing about gold. All it would take, for someone who knew just a little, would be to look at it, feel the weight of it, and ping it to know it was the real McCoy. I wonder if he would really have accepted $50 though. I think he was relying on the fact that most are ignorant of gold and instinctively wary of strangers trying to sell something.

You could only assume it was real even if you were an expert. And an expert dealer can always pass it onto another person.

A determined person with knowledge could produce a less valueable coin that would be next to impossible to seperate from the real thing without analysis or damage to the coin, which is why you need the paperwork when you sell the coins

I would ask him to come with me to the nearest coin shop, ask him to wait outside and have it checked. If he does not want to go through that, you tell him you'll give him $100 instead of $50 if the coin turns out to be genuine. Seems like a no brainer to me

So you think somebody would give you 1100 dollars of gold while they wait outside and you go inside a shop?

Or if somebody was near a coin shop trying to sell coins for much less than the apparent value they would not be working in cahoots with the coin shop owner for sure so it would require no brains to know that was the case?

You seem to think people will trust you and you seem to trust others