GOLD

[romans holiday]

I have yet to listen to the broadcast. But I think the argument is that hyperinflation would shatter economies, leading to economic contraction and higher unemployment; this results in deflation in real terms, regardless of nominal prices.

 

I should add, real deflation in asset prices, consumer prices may be another matter.

 

Although, we've already had a period of price deflation, so whatever happens to prices, the record will show that deflation was followed by inflation (at some point). The asset deflation is continuing. So really the only question is how long will the deflation continue? 1 year? 20 years? And what will consumer prices be doing? And how do we profit from asset deflation and the movement in consumer prices? And will asset deflation make core currencies more valuable or will it eventually undermine confidence in the core currencies, perhaps due to QE?

Here's my scenario fwiw:

 

The deflation will last a good few years, with Japan having already shown the way ahead for developed economies. Consumer prices will stay flat as demand destruction puts downward pressure on prices even as various currencies depreciate [against others] putting upward pressure on prices . Under political pressure, China will "re-peg" it's currency to a basket of currencies, but this will not substantially appreciate the Yuan against the dollar. This re-pegging will have the effect of keeping the Yuan low as a depreciated Euro, and other depreciating currencies [Aussie?] will be a major component of this basket. The dollar will continue to strengthen, with the US economy crucified on a strong dollar. Deflationary and political pressures will force the US to protect their economy which will lead to a further downleg in world trade.... and with it further deflation. In the face of a deflationary quagmire, international leaders will look for stability at all costs, and re-boot the world currency system in a new Bretton Woods. This will involve the stabilization of currencies to gold, and fixing those currencies at the appropriate levels in order to restore balanced trade. Even with this "bedrock" put in place, the world economy could still slowly contract for some period... the main thing is it will be put on a more stable footing, which would provide the basis for a new period of growth in the future. Stability, not growth, will be the new buzzword.

 

Gold bullion will be a beneficiary of the process as it first continues to strengthen in the market as an alternative reserve currency/ hedge against uncertainty. When the economy really hits the skids, with capital increasingly flying into gold [besides treasuries] the price will be capped... at anywhere between $2000/$3000 [there would be no alternative here as the economy would become starved of capital]. This capping of the gold price will involve, conversely, the "fixing" of currencies to gold. This will also involve the demise of market fundamentalism, which allowed currencies to float freely in the market. It will also finally enable the devaluation of the dollar, and the appreciation of the Yuan.

[jamesspeed]

Australia's May Trade Surplus Widens on Overseas Shipments of Coal, Gold

 

Australia’s trade surplus widened in May as exports of coal and gold climbed on demand from Asia, outpacing a gain in imports.

 

Exports gained 6 percent to A$24.7 billion, today’s report showed. Coal exports rose 10 percent and non-monetary gold jumped 66 percent.

 

http://www.bloomberg.com/news/2010-07-06/a...-coal-gold.html

 

and

 

Missing from the Swiss central bank: CHF6.3bn

 

"A look through the FX reserve data shows that much of the fall can be accounted for by an increase in gold holdings. The SNB’s gold holdings at market value went from 39.1bn to 45bn showing an increase of 5.9bn (gold measured in CHF terms was actually down by 4.8% during June). Thus instead of providing an indication of the SNB’s intervention stance, what we have is interesting insight into the SNB’s portfolio allocation which interestingly is showing a bias toward holding gold. It will be interesting if over the coming months the SNB also reveals the makeup of their FX reserves and whether they are showing a bias away from both USD and EUR and more toward GBP and other currencies (commodity linked) as a means of better diversifying their reserves"

 

http://ftalphaville.ft.com/blog/2010/07/06...-bank-chf6-3bn/

 

 

Seems there is a lot of demand supporting prices ?

 

[InternationalRockSuperstar]

This will also involve the demise of market fundamentalism, which allowed currencies to float freely in the market.

 

fiat (government imposed) currencies have nothing to do with free markets!

 

the demise of fiat currencies is clearly a failure of statism.

[G0ldfinger]

During the collapse, price fixing will only exacerbate the problems.

[romans holiday]

During the collapse, price fixing will only exacerbate the problems.

Stabilizing currencies is hardly price-fixing. If government can fight a rear-guard action and avoid a complete rout, they should do it. A complete laissez faire approach is no solution at all. It would be an abdication of government and cause untold bankruptcy and misery ... and this is just not going to happen. The way I see it, the rehabilitation of gold to government will be the means of avoiding the kind of chaos that some seem to wish for.

 

 

[G0ldfinger]

My point of view is that during times of economic trouble the last thing one should do is hindering trade. That applies to currency trade as well. Market-inconsistent prices simply lead to lack or oversupply.

[romans holiday]

My point of view is that during times of economic trouble the last thing one should do is hindering trade. That applies to currency trade as well. Market-inconsistent prices simply lead to lack or oversupply.

Efficient international trade arises from stable/ fixed currencies. Trading/ free-floating currencies is a relatively recent experiment which is not turning out too well. I'd argue that stable currencies are what provides the very conditions for [stable] trade.

 

Was it Thomas Jefferson who said the merchant has no country? The merchant might also find that with "countries" out of the way he has no market. Countries, with all their rules and regulations, provide the very conditions for markets to exist. Otherwise, you'd just have barter or pillage. I wonder if by "free markets" you're really referring to barter.

[aliveandkicking]

Stabilizing currencies is hardly price-fixing. If government can fight a rear-guard action and avoid a complete rout, they should do it. A complete laissez faire approach is no solution at all. It would be an abdication of government and cause untold bankruptcy and misery ... and this is just not going to happen. The way I see it, the rehabilitation of gold to government will be the means of avoiding the kind of chaos that some seem to wish for.

 

The only way a gold standard will be reintroduced is if total failure occurs and people arise to power who think a gold standard can avert world war 2.

 

And i do mean world war 2.

 

 

[G0ldfinger]

Plungy-plungy.

[romans holiday]

The only way a gold standard will be reintroduced is if total failure occurs and people arise to power who think a gold standard can avert world war 2.

 

And i do mean world war 2.

Yes, it would take quite some deterioration in conditions from here before government contemplated going back on gold. In this sense, I think they will be forced back on.

 

 

9]

http://www.greenenergyinvestors.com/index....st&p=147745

[G0ldfinger]

Efficient international trade arises from stable/ fixed currencies.

A fixed currency is not the same as a stable currency. See Sterling 1992 as a recent example.

 

I wonder if by "free markets" you're really referring to barter.

Trade is always barter. Only, for some reason, when one of the bartered goods is currency, people tend to not call it barter.

[romans holiday]

Trade is always barter. Only, for some reason, when one of the bartered goods is currency, people tend to not call it barter.

Here-in lies some of our differences. I'd distinguish bartering from a market economy. Barter [common meaning of the word] is very inefficient because the barterers are not sure what something is worth. And then they will only barter for something they need at that moment. Without a currency, no efficient market has arisen which enables them to sell there product for currency [giving them a potential purchase in the future]. The market also enables "price discovery" so participants can be relatively certain what something is worth and hence will sell. Without this you have no "velocity" in trade. Obviously, this sort of organisation requires law and political power. Without it the wealth of nations would have been impossible.

 

This is also the problem with today's currencies. Along with assets, investors/ CBs are now not so sure how to value their reserves/ savings [due primarily to the deflation in anglosphere asset values]. This will lead to hoarding in the case of some currencies, and capital flight in the case of others, then the reverse. Massive instability all round, and destructive of the real economy, not to mention people's livelihoods.

[aliveandkicking]

Plungy-plungy.

 

 

[G0ldfinger]

Here-in lies some of our differences. I'd distinguish bartering from a market economy.

For me barter simply is the market. Nowadays, there is a lot of barter which includes currencies/money. I agree that it is more efficient to have a particularly marketable commodity (value/dense/rare, durable, divisible), i.e. money, for barter/trade. It will evolve automatically, since it is efficient. Government better don't mess around with that process of free determination of efficient methods and allocations.

[G0ldfinger]

That doesn't look like popcorn.

[Schaublin]

 

Are you self-medicating?

[aliveandkicking]

That doesn't look like popcorn.

 

I seem to be in two minds about all of this stuff

 

 

[dietcolaaddict]

Looks to me like the seasonal dip may be starting, and thats a good thing for 'buy and hold' types

 

I remain keen to buy big in late summer - a strategy that has worked well in recent years. Averaging-in over late Aug-Sept-early Oct

[Gatesy]

Seems they redesigned their site.

http://www.financialsense.com/

You can find the broadcasts under the 'NEWSHOUR' tab, then go to archive. You will see Big Picture, or in Depth... there you go.

EDIT I see the big picture has not appeared yet for this weekend.

 

The site isn't the only thing they've redesigned in recent months; the podcasts are a mess.

[Gatesy]

Tribute to George Blake, a.k.a. "Zapata George"

6 July 2010: We were saddened to learn that "Zapata George" passed away over the weekend. A frequent guest on Financial Sense Newshour, George's signature "No Bull" style was extremely popular with our listeners and fans. His voice and his friendship will be greatly missed. —FSO Staff

 

How sad, no message seems to have been posted on Zapata's site . Did always strike me as a strange little fella but well meaning. I wonder what his subscribers do now, not that I am one.

[InternationalRockSuperstar]

Countries, with all their rules and regulations, provide the very conditions for markets to exist.

 

nonsense.

 

the markets exist first.

 

then the statists come along to try to take a cut of each transaction, by force.

 

Otherwise, you'd just have barter or pillage. I wonder if by "free markets" you're really referring to barter.

 

FFS stop repeatedly posting this false dichotomy of 'gov't imposed currencies' or 'barter'

 

no gov't involvement is required to produce a liquid, widely accepted currency.

 

e-gold had 5 million accounts and growing, before the statists made their excuses and shut it down.

 

the purpose of gov't is for those in gov't to pillage those who are not.

[G0ldfinger]

How sad, no message seems to have been posted on Zapata's site . Did always strike me as a strange little fella but well meaning. I wonder what his subscribers do now, not that I am one.

Yeah, sad to hear this.

[Crashman begins]

What do you make of this Goldfinger ?

 

http://www.zawya.com/Story.cfm/sidZW201007...20Save%20Wealth

 

2ndUPDATE: Saudi King: Halt To Oil Exploration To Save Wealth

 

Sunday, Jul 04, 2010

 

 

RIYADH (Zawya Dow Jones)--Saudi Arabia's King Abdullah has ordered a halt to oil exploration operations to save the hydrocarbon wealth in the world's top crude exporting nation for future generations, the official Saudi Press Agency, or SPA, reported late Saturday.

 

"I was heading a cabinet meeting and told them to pray to God the Almighty to give it a long life," King Abdullah told Saudi scholars studying in Washington, according to SPA.

 

"I told them that I have ordered a halt to all oil explorations so part of this wealth is left for our sons and successors God willing," he said.

 

A senior oil ministry official, who declined to be named, told Zawya Dow Jones the king's order wasn't an outright ban but rather meant future exploration activities should be carried out wisely.

[romans holiday]

the markets exist first.

Disagee. With Hobbes on this one. In a state of nature "the life of man is solitary, poor, nasty, brutish and short". The homo economicus of modern economics is an ideological [though useful] construction, yet if taken too seriously becomes a complete distortion and caricature of ourselves.

[nicejim]

...

"I told them that I have ordered a halt to all oil explorations so part of this wealth is left for our sons and successors God willing," he said.

...

I wonder if he's thinking of this:

 

"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel."

-- Rashid bin Saeed Al Maktoum

 

Are you thinking of ANOTHER?