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Latest Comments54 Comments
Gold: The Next Reserve Currency Player
You may find this suprising, but some people will accept gold in exchange for currency, food, farmland, machinery, etc. You can exchange gold for lots of useful things. Maybe even an airplane to fly you out of the desert! So no need to worry about the Saudi's sitting on their piles of gold.
Nikhil- a comment from James Turk will help explain why many people worry that GLD exists only to soak up money that would otherwise support the physical gold market: "Thus, for example, when GLD adds a gold bar, there is no assurance that the gold bar really exists unless it is in the vault of the custodian, HSBC. But the prospectus discloses that HSBC uses subcustodians and even sub-subcustodians, and what's worse, "the Custodian is not liable for the acts or omissions of its subcustodians". In other words, if the subcustodian does not have the gold, GLD "Shareholders cannot be assured that the Trustee will be able to recover damages from subcustodians...for any losses relating to the safekeeping of gold by such subcustodian". This means that "Because neither the Trustee nor the Custodian oversees or monitors the activities of subcustodians who may hold the Trust's gold, failure by the subcustodians to exercise due care in the safekeeping of the Trust's gold could result in a loss to the Trust." To be blunt, these disclosures mean that there is no certainty that the gold supposedly owned by GLD really exists. After all, if there was complete certainty that the gold did exist, the objective of GLD would be to provide investors with the opportunity to own gold bullion by investing in shares of an ETF, rather than its stated objective to just track the price of gold."
Intelligent Government Action Is Key to a Market Turnaround
"The market will start to turn, and fear will start to abate" when equities reach what people believe are reasonable valuations in light of the economic downturn. This would happen swiftly if the government could butt out.
The government is only confusing the markets, rewarding bad actors and shifting resources to where they would flee in a free market. The market can find a bottom and begin the process of rebuilding on a more solid foundation, or the government can continue the decades-long process of misleading the markets with easy money and bailouts and try to rebuild on a foundation of sand.
Take a Stand Against Government Spending
An economy based entirely on debt: consumers dependent on debt to compensate for decline in real income; companies not viable without continuous issuance of new debt; local, state, and federal governments completely dependent on debt to provide even basic functions, and now sustaining more debt to bail out the debtors by giving them high quality debt in exchange for garbage debt to encourage them to continue lending even more! As if the problem will be solved by borrowing more money. Sigh.
At some point, there is too much debt. Then who is going to lend to us?
Please realize that you cannot keep piling debt on debt forever. Rip off the bandaid now, get assets (homes, equities, cars, etc.) down to affordable prices, and start over.
It will happen sooner or later. There is no getting around it by making more idiotic loans. Why prolong the agony?
But if you think bailouts with borrowed money are great for the economy, please put all your money in a Dow index, because you will get to enjoy trillions of dollars of stimulus and bailouts for the forseeable future. Bon appetite!
Another Call for the Gold Standard in the WSJ
We have competing currencies now: the fed makes dollars and the US Mint makes gold and silver. Demand for bullion is soaring as confidence in federal reserve notes wanes. When consumers are more confident, demand for bullion wanes. Pretty simple, if the Mint was actually interested in upholding its Constitutional obligations.
An interesting article about an IRS case dealing with real money versus the tissue paper we use now. An employer legally payed no withholding on $114 million payroll: www.wethepeoplefoundat...
Article I of the Constitution outlaws paper money and assures that only gold and silver are money. The U.S. Mint has reluctantly been following that law, rationing bullion as the demand for real money skyrockets. Try buying gold or silver anywhere on earth right now!
Supplying competing currencies would work if they could force the Mint to keep up with demand. Competing currencies is the only thing that can keep the kleptocracy under control, which is why the mint refuses to supply coins to all those demanding them.
I
There's Nothing to Fear But Fearmongers Themselves
"But, other than housing prices which were arguably too high anyway, the real economy seemed to be doing pretty well."
Aside from the fact that the average American was spending more than he saves, there are some other factors you could look at.
The average homeowner lost $85,000 in value this year, with 74% of homes losing value. Would that make a rational person think about putting their "credit card under the mattress", as you put it?
Banks have written down $500 billion in mortgage losses, on their way to probably $2 trillion dollars. Could this cause a clampdown on credit? Seeing as how total credit is 340% of our GDP, could this have a negative effect on the economy?
In addition, how many people formerly employed selling homes, funding, building, remodeling, furnishing, and so on, are now out of a job?
Yes, the powers that be are absolutely taking advantage of the situation.
But people have myriad reasons to cut back on expenditures and start saving money! Don't expect the hoi polloi to renew their appetite for more junk to fill up their rented storage units anytime soon.
Precious Metals Will Depose Cash from Its Temporary Throne
And the Fed and it's European counterpart are openly trying to weaken their respective currencies. It's a struggle right now, but they will succeed mightily at some point!
Gold is the enemy of inflation, and the gold market recognizes this. That is why central banks and their allies continue to fight the gold price, as all central banks must.
Do yourself a favor and buy some artificially cheap gold. Get out of dollars while the gettin's good!
White-Hot Mad over AIG
Or are you seriously looking forward to low unemployment, few bankruptcies, and no economic turmoil in the next few years? All thanks to the organized looting of our treasury.
The Winners Will Be Those Who Look to Gold and Commodities
Two things:
1. The government can't keep borrowing at this pace without raising interest rates. Total Fed lending now over $2 trillion. Bailout plans approaching $2.5 trillion, and certain to increase as Congress feels the need to "do something". The tax base is being destroyed by the minute, destroying the ability to service debt.
2. What is a bank that doesn't lend money? It's not going to sit in a virtual vault gathering dust. Now that the government has shown that some banks will not be allowed to fail, will they become responsible stewards of taxpayer largesse?
The Winners Will Be Those Who Look to Gold and Commodities
Fantastic! Now that I know that debt and currency supply don't determine currency value, I am wondering: where is my million dollar stimulus check? Why not send a million dollars to everyone on earth? Then just cut the government budget to strengthen the dollar. That should get the economy going! Things are looking up!
Also, if our government cuts service to US citizens in order to pay foreign debtholders, will anyone be upset?
'The Shallowest Generation': A Rebuttal
That has been our official economic policy since the Keynsians took over. If you read Greenspan and Bernanke, they have written extensively on the need for inflation to punish savers and encourage lending. If the savings rate goes too high, they wrote of the need to increase inflation to punish savers. Negative savings rate? Mission accomplished, according to our economic masters!
Why save money if it will be devalued by inflation? Our government and the Fed reward speculation and punish the savers, thus most people's main savings is their home.
The Winners Will Be Those Who Look to Gold and Commodities
"The price of a commodity will always revert to its value." Doesn't everything? What will the value of a dollar be after 5 years? You can't expect demand for US debt to continue unabated, especially as we need to fund medicare, social security, and our bloated military.
Commodities have real, tangible value and are limited in supply. The value of dollars are based on faith in the government and are in infinite supply.
Where Have All the Peak Oil Believers Gone?
Why Oil and Gold Are Headed Much Higher
Billions and billions are poured into these wars every day. So far, not helping America one bit.
What helped from WW2 was a lot of GI's coming home ready to make families, buy cars, dinette sets, lawn mowers, go to the movies, etc. The money spent for destructive purposes (beyond wages) really didn't do much for the economy. Like the pallets of money flown to Iraq. How will that help America?
Impending Inflation? The Global 'New Deal' All but Guarantees It
Beyond that, the Fed and Treasury working together should be able to get inflation back on track. They destroyed 90% of the dollar's value so far, what makes the last 10% so special?
Inflation: One Worry to Cross Off the List
"More disturbing still, Stephanie goes on, is that the households with the cash (and assets) "are not the ones with the debt." Rather, alas, the top 1% of householders hold 30% of the assets and 7% of the debt, while the bottom 50% hold a mere 6% of assets but a burdensome 24% of the debt."
A huge proportion of Americans are net debtors.
Total assets vs. debt not so useful. How much of those assets are tied up in housing? Can't be accessed without borrowing against or selling the house, making that portion of assets highly inaccesable.