Price is an arbitrer of perceived relative value. How much is your time worth? If you look at how long you have to work to buy a loaf of bread or a gallon of gasoline, does it matter if your transactions occur in dollars, yen, or milligrams of gold? If we experience devastating deflation (90% decrease in prices,) your hourly wages (assuming your job survives) will decrease along with the price of everything else (including the price of gold and silver.) Were it not for debt being denominated in fiat currency terms, the price of goods wouldn't matter. What matters is the perceived relative value.
Buy low and sell high - the greatest financial advice ever. When you remove the price component and base investments on relative value, you should look for "things" that are undervalued and avoid "things" that are overvalued. Granted, easier said than done. What is currently undervalued - cash, gold/silver, land, goods, debt? Determining that is the trick in a zero sum game.
When you save for the future, where should you store your wealth? If we could trust that fiat currency will always hold value, stuffing paper dollars in the mattress is a sound practice. You won't get interest, but you won't incur the risk of default either. If devastating deflation occurs, dollars could be worth 10 or more times as much as it is now (except if you have debt denominated in dollars.)
The banks control the supply of fiat money. They don't control the demand. Theoretically, having a flexible fiat currency would allow macro inflation/deflation to be controlled. If it were that simple, it might be accomplishable. Unfortunately, the banks have a vested interest to protect. Can they be trusted to value society's needs higher than their own? How far will they go to protect their own interests? Will they risk hyperinflation rather than suffer deflation?
The bankers are using the relative calm to their advantage. What will happen with Japan's explicit inflationary goals? Will that be successful or will it surpass their wildest dreams? Will the euro survive? How will the dollar react? When you focus on price over value, these questions are ultimately important.
The best advice I've extracted from this site is to trust my own gut. My gut tells me not to trust fiat currency. I use it for day to day transactions, not for storing wealth.
How does QE cause rising asset prices if this newly printed money has not itself been used to buy stocks? It still lies dormant in the banks.
Not all of it is being hoarded by the banks. They are using what they're not hoarding to play in the stock and derivatives markets. The issue becomes not just the money, but what the policy means. With the pedal to the metal in this case of policy, it signals to fund managers who are seeking yield that bond yields will remain at all time lows, and so those managers, having to seek yield somewhere, have nowhere else to go but into equities and derivatives. The other problem is that the derivatives market is very nebulous in knowing how much leverage there actually is and the conditions of the contracts.
Treebeard is right, the entire system is now a game, but it's actually worse. We can play a game and someone will win and lose, but our lives in the end aren't effected. Hedges, derivatives, etc. are all legalized gambling, and gambling can have devastating effects on the losers. The overwhelming majority of our financial system is this gambling. Everything is a bet. Bet on the future price of this or that, bet that the global economy will collapse, bet the price of gold will go up or down, bet the crop yield of corn will be good this year, bet if you insure thousands of people only a few will get sick, and the list goes on and on. The hidden little secret in hedging to protect your wealth is that you are betting the future might go this way or that. I'm not saying its bad to hedge, but it's at least appropriate to acknowledge you are participating in the betting.
There is this part of ourselves that loves to bet, and most dream of getting something for nothing which in the end is a lie, but it was supposed to be a little part of us, not the primary part of us. You know, playing a little poker on Friday night after a week of good meaningful work.
Treebeard, I admire you courage to post what you posted on this thread! I also appreciate the other posts in regard to deflationary/inflationary scenarios. It's all good food for thought.
I'm drawing a line in the sand. Putting my foot down. I have decided to vacillate.
It is a matter of priorities. Maslows hierarchy of needs. Once I have secured my food supply and a warm snug bed and I don't feel threatened by my fellow man or climate change then I will be getting back into PM's. (Which raises the threat of violence again).
The Blackish Swan event that I see coming in from Left field is a de-facto world government. (Call it a conspiracy or call it a response).
The world government will be dominated by the Chinese. They have the moral fortittude to run a civilization. I am hoping that it will have strong elements of Confucianism. (Least worst option). But that is just wishful thinking.
My hero Asimov said that the size of an empire is predicated on it's speed of communications. We have the internet. If that goes down, kindly forget that I said we will have world government.
I dont think that the bilderberg group would appreciate the chinese taking over when theyve spend so much time trying to weasel their way in themselves.
but… sadly i would prefer the chinese to the bilderbergs. lesser of two evils. Is there any chance Ron Paul could form a one world government. George Carlin for vice president.
…if one had to develop a plan for wealth protection today, knowing deflation and/ or inflation have a non-zero probability of occurrence, and that it is essentially impossible to accurately quantify those probabilities at this time, would the following not be prudent?
50% Precious metals held outside of banks
50 % cash
Expedited method for exchanging one of the above for the other based on relevant information
6 months living expenses in cash (on-site)
Immediate access to stored food, potable water, shelter, firearm and like-minded neighbors.
I realize this does not completely accomplish the admirable degree of self-sufficiency and resilience demonstrated by others, but I feel it's more than a step in the right direction.
I find it a little unfortunate that so many highly intelligent people with such a wealth of knowledge regarding our financial system still believe that the current banking crisis is the result of incompetence on the part of the IMF, the Federal Reserve ( another banking cartel) and the ECB.
The people at the highest levels of these organisations know exactly what they are doing. The game is to extract as much real wealth from the productive population and convert it to digital representations of that wealth so it can be manipulated and transferred to a relatively small group of privileged people.
Just follow the money trail !
Manipulation of digital money is clever and deliberately complex so the average person (who is too busy to study the increasing complexity of financial services offered to us) can be easily bamboozled and distracted.
Now that we are coming to the end of the current 40 year cycle of supposed "prosperity for all" the game is to corrupt the financial system to such an extent that SOMETHING HAS TO BE DONE to stabilise the system otherwise all hell will break loose. It is at this time that the culprits who engineered this crisis will step forward to save the world by offering STABILITY to the worlds financial system so this can NEVER HAPPEN AGAIN !
Their solution will involve even more centralisation of financial control and decision making which will further enhace their ability to manipulate the wealth of productive people.
If you think this is conspiracy theory stuff you have been asleep.
When enough people wake up to what is going on they will demand more transparency and accountability in the way our financial institutions operate and some may even develop their own local financial organisations to ensure the wealth from the productive sector of our population is shared amongst people who actually deserve it.
' The secret of OZ ' provides a basic introduction to the way our banks have been operating for hundreds of years.
It is a great pity that some of our politicians work mainly in the interests of banks rather than the general (productive) population
Robbie -Your 50/50 cash/gold plan covers the two cases for sure and the rest of what you describe puts you ahead of the vast majority of the rest of the country who are mired in debt living paycheck to paycheck hoping Fed Printing will somehow get them a job. Marc Faber likes 25 x 4 - 25% real estate, 25% stocks, 25% cash, and 25% gold. Of course he lives in Chiang Mai, Thailand, so perhaps his Real Estate isn't the same as your Real Estate.
But that said, I don't want to be too quick to state that outcomes here are either impossible to calculate (so we should just give up), or that they are even 50% inflation 50% deflation. Currently, we're not in deflation and the Fed's ability to print appears relatively free from interference. I'd rate inflation as more likely than deflation, at least here in the US. Its not a math or calculation thing, its just my gut feeling. My intuition, if you will. I think everyone should understand what the possibilites are, and apply their own intuition too.
But there are likely other outcomes we haven't talked about. And nuances are important too - for instance, Nicole actually believes in deflation-then-inflation, just the length of her "deflation" period is substantially longer than most others would agree with - likely including me. But I'd sure put her scenario up on the wall, and track how unfolding events made her scenario more or less likely as time passed.
Another wrinkle is - once you identify the key assumptions behind a scenario, you can apply it to more than one place where the facts on the ground are different. Spain, for example, cannot print if they choose to say within the eurozone. Therefore - bang - they automatically receive the Nicole Foss Scenario as long as they stay within the zone. Suddenly Nicole's Scenario doesn't look so inapplicable - especially if you live in Spain. And it becomes a lot more interesting to focus on the Fed's real ability to print.
Anyhow. In my own mind, I have this list of scenarios, and I mentally attach % chances to each scenario coming to pass. This % chance is rough, is based on informed intuition, and changes over time as new facts appear. And I'm always interested in other people's scenarios. That's why my request to Chris. He's a smart guy, thought a lot about this, and I'm sure he has scenarios I haven't even considered.
I deleted the meaningless, won't be allowed to happen part of your post, and highlighted/changed another. But for the most part, you're correct in your post! This board has fought this understanding tooth and nail over the years, but I have seen some waking, if slowly. While others, continue to believe…"Such smart people at the FED/BIS/IMF/etc…but they can't find their heads from their asses when it comes to monetary policy!"
Study history, especially the history of Bankers (Secret of Oz is a good start). They've played this game for centuries, do we really think they're not doing it AGAIN?
What should scare all of us the most, is the centralization of the banking powers of today! In the past, the Bankers colluded with other Bankers in the same country, or maybe continent. Now, it's world wide.
Along with this, the Western Worlds Media is owned by the Banking Elite. As are the Food Producing Organizations, Energy Producing Organizations, plus Western Governments (and Militaries) and their Education Systems are owned by said Elite! Everything the people see, eat, sleep, hear, etc…is controlled by these few people, and has been for decades. Hence, the reason people are still asleep.
Anyway, I'll get off my high horse. I'd love to see more people wake up, and stop questioning what's so damn clear to me (and others).
As a high ranking officer (Multi Star General) said to me once: "There's no such thing as Coincidence any longer in this town. And if you hear the word Coincidence in the media or in our circles, then you'll know it was a contrived event."
The alternative financial news and commentators have been "predicting" the imminent collapse of the dollar (e.g. Max Keiser's claim that the dollar would collapse this month; well there's still 15 days), the collapse of the Euro and Yen (e.g. numerous posts on ZH), a run on European banks (again just read through ZH. Note: there wasn't even a run on the Cyprus banks after they opened), a crash in the stock market (e.g.,this site; okay there is still a little time left on that calculation and btw, I still respect Chris a great deal) ..... ad nauseam.
Here's the punch line: Not one, at least that I read/heard, "predicted" a blood bath in gold. Hmmm...that gives me something to think about
As a postscript sinceI know that the pat answer from many is "manipulation." Well, maybe so but I am really dubious of that claim. Jim Puplava, whom I generally respect because he does not (imo) engage in rhetorical overkill, has a different take (not going to go into it here). His analysis, although giving a nod to the typical manipulation that goes on in all markets, warned of the gold crush about to come (Maalox moment, as he calls it). His take is to hang on because the fundamentals haven't changed. I agree with his assessment but had I not been following him, I might have been absolutely (emotionally) crushed today along with gold if all I paid attention to was the alternative doom and gloom media.
Hey, maybe we are just sheeple following a different flock.
Logan,
I have been (and probably many others) reluctant to embrace the conspiracy theories with both hands firstly because it's so hard to beleive that a plan of the requisite complexity could be pulled of (herding cats?) and that so many world and national leaders could be so craven as to participate. Also, as someone noted above "Never attribute to conspiracy what can be explained by incompetance" or something along that line. Additionally, is it possible that what we are seeing is more like a syndrome: 'a series of unrelated events or a combination of phenomena seen in association'?
These are possibilities but I am forced to admit that the likelihood of a conspiracy is growing more evident by the day.
Thanks for the contrarian view. It appears to be quite prescient.
James Kuntsler has recently come around to concluding that there is conspiracy going on in PM markets;
http://kunstler.com/blog/2013/04/smack-down-time.html
What a humdinger last week was in a money world that is chugging toward maximum velocity and turbulence. Readers know (and may be sick of hearing) that I'm allergic to conspiracy theories, but my allergy is not absolute or total and there are excellent reasons to believe that the smack down of gold and silver was an orchestrated event. By whom? So far, in the opaque realm of paper gold sales, we don't know, except that it was a 500-ton dump that set off the larger skid, and it is even quite possible, as one anonymous wag put it on James Sinclair's website, that the buyer and seller were virtually the same entity – meaning that the probable naked short transaction only amounted to a mere bookkeeping jot when all was said and done.
Anyway, the 500-ton all-at-once dump could only be calculated to drive the price down. Any rational strategic sale of so much gold would be parceled out in smaller amounts over time so as not to drastically impair the sales revenue, as this sale did. And, by the way, who even has the roughly $25 billion holdings in paper gold besides a major government, a major central bank, or one of the Fed's Too Big To Fail handmaidens (Goldman Sachs, JP Morgan, Morgan Stanley)? Or who could afford to eat the $billion-plus loss on the smacked-down sales value? In other words, the usual suspects.
Question for ExaminedLife... you said;
The alternative financial news and commentators have been "predicting" the imminent collapse of the dollar (e.g. Max Keiser's claim that the dollar would collapse this month; well there's still 15 days), the collapse of the Euro and Yen (e.g. numerous posts on ZH), a run on European banks (again just read through ZH. Note: there wasn't even a run on the Cyprus banks after they opened), a crash in the stock market (e.g.,this site; okay there is still a little time left on that calculation and btw, I still respect Chris a great deal) ..... ad nauseam.
How could there be a bank run post reopen with the strict capital controls (low daily withdrawal limits) in place? If you have been reading ZH, you know that the bank runs took place before the closure even occured... the smart money was already out.
Also Logan,Some questions:
Is there no limit on their power?
How does this play out?
And how should one prepare or respond to the threat, that is, differently than what we're already doing?
I know that you posted extensively on this site regarding this topic; could you direct us to your previous contributions that are most germane at this point?
Thanks in advance.
I am editing here to add that I just watched Rick Santelli's take on the gold slam and he definitely insinuates a Central Bank "conspiracy." Downside is that he also suggests that the Central Banks will make sure that gold stays suppressed for a long time. Whether they can keep that kind of control (compared to early 80's, the periord Santelli referred to in his thesis) is the big question to me.
Anexaminedlife said no one predicted a big drop in gold. I can't afford the time to find citations for you, but I'm familiar with several who said one scenario that was realistic was for a big drop in gold before a HUGE rocket upward. The same kind of thing happened in '08 (though this looks bigger) and then prices doubled. "They" picked various support levels which have so far been prescient: $1520, and various points in the $1300's (1385, 1320, 1300). I've been secretly hoping and saving for such a drop and today I'm poised to make some purchases (basically drawing down cash to accelerate my regular, small monthly purchases). However, the prices seem to be still moving downward (though not as fast as Friday and earlier today) so I'm in no rush. I'm cheering from the sidelines: fall, baby, fall!! As JimH wrote above, Chris and PP (and others, imho) have given us the gift of certainty: certainty about the broad strokes of what lies ahead of us. So, this is a golden buying opportunity/sale. As long as prices keep falling, I'll try to be patient before making a purchase. Of course, when the future unfolds basically like we expect it to and gold hits $7,000 or $10,000 or some other unbelievable number I won't care much whether I bought it at $1,000, $1,385, or $1725.
How could there be a bank run post reopen with the strict capital controls (low daily withdrawal limits) in place? If you have been reading ZH, you know that the bank runs took place before the closure even occured… the smart money was already out. (Jim H.)
While I think the observation is only tangential to my comment, the insider money did leave prior to the bank closures. The point I was making is that in the week or so the Cyprus banks were closed, there were a lot of predictions, not only on the alternative media sites, that the common folks would make a run on their accounts (although there were withdrawal limits once the banks reopened; not sure if those are still in place) but even more to my point, there were many predicting that the banks in Spain, Portugal, maybe Italy and Ireland would experience runs in fear that they were next. Didn't happen.
My point is that the only prediction I rarely read/heard in the alternative media is that there would be a "run" on gold; everything else has seen the prediction of defeat, except gold. (Yes, it is paper gold, but physical is affected, even if the premiums are allegedly quite high today.)
Anexaminedlife said no one predicted a big drop in gold. I can't afford the time to find citations for you, but I'm familiar with several who said one scenario that was realistic was for a big drop in gold before a HUGE rocket upward. The same kind of thing happened in '08 (though this looks bigger) and then prices doubled. "They" picked various support levels which have so far been prescient: $1520, and various points in the $1300's (1385, 1320, 1300). (THC0655)
I didn't read or hear many, if any, commentators in the alternative media alleging that scenario, although I am seeing it today. (e.g. http://www.zerohedge.com/news/2013-04-15/what-happened-last-time-we-saw-gold-drop) I would not consider, for example, Puplava or his guests, who did suggest this could happen, alternative media guys. Anyway, I can only hope this is good analysis, but I, for one, am not so confident. I do know that 2008 saw a big decline in the gold price and I am glad I had the fortitude to buy then; now, I am not so sure.
In any event, my only point is that while there has been months and months of alternative media commentary claiming that the sky is falling on the dollar, the euro, the yen, the stock market, and oh yeah...the bond market - there has been no gnashing of teeth that the gold market was the market upon which the sky would fall.
Until the currency is energy it will always be subject to manipulation.
thats the beauty of energy, it does a certain amount of work, and you cant change it and you cant make it out of nothing (until we master dark energy).
Everything else that exists they now have the ability to bend you over because they have all the wealth and there are only scraps left, and every new iteration is designed to leave less and less scraps.
i can see it plummet further, and then be bought up at rock bottom prices. Of course everyone else loses if they bail.
For those who might be looking for hard data, here's a report from a well-known coin dealer on the Main Line (wealthy Philadelphia suburb):
No lines (yet) but business has been brisk all day.
All business has been people buying, none are selling.
Has kept premiums the same as ever (eg. $85 for gold eagles, $3 for silver eagles).
Sold out of 3,500 silver eagles just this morning. Wednesday's delivery is also nearly sold out.
They still have gold eagles and junk silver in stock, but have sold a lot of GAE's.