ebaycj
Diamond Member
- Mar 9, 2002
- 5,418
- 0
- 0
Obviously my example was simplified. But there are many different investment classes that are fairly liquid and hold their values well against the dollar.
Oil.
Coal.
Natural Gas.
Precious metals.
Base/manufacturing metals.
Strong foreign currencies (GBP / Euro / Yen (to some degree) ).
foreign currency delimited bonds.
etc...
Obviously you would want to have a mix of investments that overall would hold most of its value (even if one component underperformed your expectations).
Oil - if economy is weak and people can't afford it, price will drop
Coal - same as oil
NG - same
Precious metals - if you think about it this is the most worthless of commodities out there. Who really gives a shit about gold and platinum?
Mfgr metals - same as oil
Foreign currencies - global is economy is lead by the US, there is nothing that the UK, europe, and japan actually creates that has better value/wealth than what the US creates.
Shit's all relative. Dollar will only devalue/hyperinflate deeply if the economy in itself is a complete sham (i.e. based on tulips) and/or productivity completely plummets (i.e. people become lazy and stop working).
The only feasible way to devalue currency like that is for Obama to literally print money without creating a liability (treasury bonds) and distribute it to whomever.
GTaudiophile
Lifer
- Oct 24, 2000
- 29,767
- 33
- 81
Originally posted by: Skoorb
You picked a very lucky time, assuming you bought your Euros around the time of the trip
I brought back only around 60 EUR
Hahahahhaha.
What kind of insane logic is that? You invest in stocks at the beginning of a 20 year bear market based on historical performance? Face it, there's a time to be in gold, and now is one of them. It was the right choice eight years ago at $250 and it's the right choice today at $850. Gold is going to keep going up relative to stocks until the Dow is worth 1oz again, which it has achieved several times over the last century.
That's total garbage, gold has been a global money for centuries. Guaranteed scarcity is exactly where you want to be in a situation where fiat units are being over-manufactured. The more they do it, the closer those units become to achieving the commonness and value of the material which with they're made. It has nothing to do with how many dollars you have, it has to do with who wants to hold them and assets denominated in them in the midst of hyperinflation. Until the Fed raises rates to 20% and stops buying government debt with money it created at no labor or material cost, your prediction is as silly as eight years ago.
Currencies are merely placeholders for products when the confidence to hold them is there. That's what money is, a common means of exchange. When they're all debased, manufactured products and commodities rise against them. You know, things that can't be created at no labor or material value. That you don't even realize this yet is stunningly bullish for gold, because people like you are the norm, and you haven't woken up yet.
And since I can predict the future of stupidity, I will now address the "but you can't go into a store and buy things with gold." Very true, however that's besides the point. You can still protect yourself by converting dollars and dollar holdings into gold, and then sell chunks when you need to buy things. Beats holding wealth that depreciates when you're not using it.
You and typical traders have this one all wrong. The USA is not the global engine of production, all it produces is more and more inflation. We set a record trade deficit every month, we borrow money from foreigners to consume their products, and they stash our dollars in reserves or use them to replace factories we shut down. They're not going to keep throwing good money after bad, they're going to let their currencies appreciate to the dollar and consume their own products. You're suggesting they keep pegging and commit global economic suicide. They would have to loan us trillions and trillions more savings at negative interest rates with full knowledge that we will use it to snatch up products they can't afford as a result of that loan. Total scam, there's no way this continues forever.
Today, gold has nominal value. What's it used for today? Some jewerly (useless good), and maybe some electrical parts (in minute amounts). He is correct in saying that most of the "value" in gold is in investor bubble. We might as well be trading rare sea shells.
What's gold trading at now? like $800/oz? Let's say we devalue by 10x, do you really think people will even think to purchase gold for $8k? $4k? $2k? At that armageddon scenario, people will not give a shit about gold, they will only care about FOOD, SHELTER, and energy. The only reason gold has value right now is because investors are willing to pay $800/oz for it, not because there is that value.
Exactly, it won't last forever. When the equilibrium and balance shifts, and they are no longer buying US investments, what else are they going to do with US dollars? They can only "use" it to buy US goods. And at that point they will have to purchase US goods or just use the currency as toilet paper. Either way we either 1) are going to benefit economically from their spending of US dollars, or 2) benefit from de-dilution of dollars from them flushing it down the toilet.
That is what trade is. China sends us goods, US sends them either goods back to trade, or an "IOU" which effective is a promise by China to buy US goods. If their culture is to be such cheap ass people and to hoard currency at mattress rates, hey all the better for Americans, we are effectively getting Chinese shit for free.
Something doesn't have to be consumed or played with to have value, look at dollars for christ's sake. Money is important, it is the difference between barter inefficiency and efficiency, and there is no doomsday scenario where we are reduced to trading apples for oranges for leather for cotton to get salt, and so forth. Everyone has to have a common desire, a placeholder for any product, or we're relegated to barter.
You're still not getting it, GOLD would be an extension of caring about other products because it would be going up with them or against them. Because as people continue holding dollars in hyperinflation rather than gold, they see themselves being able to afford less and less and go over to the products themselves, especially gold. As a storage of dollar wealth, it's easily divisible, it isn't flammable, it doesn't take up massive amounts of space, it doesn't rust, it doesn't die, it doesn't spoil, it doesn't require upkeep. People who say that people will use chickens and oil and legos as means of trade before gold and silver are economic ignoramuses. Your seashell example is exactly that, seashells come in thousands of various shapes and sizes and grades, nobody would have a clue how to value them in everyday trade. A rare metal is far more simple and robust.
Yes, but inherently gold has no truer value. It's impossible to store wealth anyway in times of chaos and anarchy. At that point power is the only "valuable" thing. Go take gold to some aboriginies, see if they give you anything for it.
Now we are getting somewhere! haha.
Seriously though, if we are talking 10x devalution, that is considered doomsday scenario, and the most "valuable" things will not be some shiney metal, it's going to be GUNS+BULLETS and massive cans of SPAM and drinking water.
sandorski
No Lifer
- Oct 10, 1999
- 70,677
- 6,250
- 126
Gold as a safe-haven is a facade. It's a throw back to the Gold Standard and as Time passes the "safe-haven" becomes less effective. Peoples views of it are changing and how people view Gold is really it's only true Value. It really should be viewed the same as any other Commodity these days, as using it as security is becoming increasngly risky.
Nothing inherently has value, value is a subjective assessment dependent on the human situation surrounding it. A suitcase full of federal reserve notes has no value to a man starving and alone on a mountain. A box of Cocoa Krispies would have more value to him. In times of hyperinflation in a modern economy, gold demand increases relative to the currency being debased. It's not hard to figure out why. I don't believe like you that we're headed for global anarchy, I think things will only get bad here as we are cut off from pegs and forced into a much lower standard of living relative to productive creditor nations whom we've been swindling for decades. The only way out is an increase in productive capacity over many years. The less the government steps in, the sooner that adjustment will happen.
And I guarantee you I'd get further with a gold coin than the equivalent of firewood with aboriginies. They may not do anything beyond barter, but at least they'd value the gold for its material rarity and adornment.
First
Lifer
- Jun 3, 2002
- 10,518
- 271
- 136
Because Americans as well as foreign investors wouldn't have confidence that the U.S. could mitigate financial crises without a central bank, the perception would be that the U.S. has no control over it's financial system. Those italicized words are hugely important in human economic history, they have always been the guiding hand behind it. An active central bank has proven to be successful the last 100 years. Without an active central bank, one that just "lets the market sort things out", we get things like the Great Depression. No one would be there to mitigate sell-offs by lowering interest rates, no one would be there to control inflation, no one would be there to act as a monetary stimulus period, and no would be there to stop people from pulling their money from banks which keep the entire system afloat (i.e. the "run" on banks I talked about). What evidence is there that investors wouldn't start selling off irrationally in this sort of atmosphere? Exactly, none, we've seen it a million times before.
No actually, I've explained it in that post, read carefully. And have now explained it in more detail.
Please delineate precisely where Greenspan made the asinine assertion you made that we shouldn't have a Federal Reserve? I didn't think so.
You're confused, they have nowhere near the ability to "control" wealth to the point where they can do what they want. They act as a mitigating force in times of crisis, they cannot simply alter the direction of markets on a whim for a predetermined course. If they could, we wouldn't have lost $2T in the last couple months.
I'm going to be nice when I say this; you have no idea what the founding fathers wanted and I doubt you've read anything they wrote in the Federalist Papers.
TheSlamma
Diamond Member
- Sep 6, 2005
- 7,625
- 5
- 81
I know how to fix the problem. Get every government in the world to agree to this and make all debt's public and private void. All outstanding loans would be considered paid. Then everyone starts from scratch.
It's so hair brained and wild it could work better than the crap that keeps getting passed.
It's so hair brained and wild it could work better than the crap that keeps getting passed.
No, you're partially wrong. Gold has industrial uses while silver is a byproduct of mining. Gold is used mainly as a storage of wealth and thus a great protection against inflation. While it is true that historically gold has poor ROI, it is a good investment in these uncertain times. A lot of the big investors are predicting hyperinflation in the US and are moving their wealth into soft commodities, oil, gold, Japanese Yen, and Swiss Francs.
No, costs of raw materials will go up but the price of their products can't really go up as much, for market reasons.
In your first paragraph, you mention confidence 'that the US could mitigate a financial crisis.' A 'run' on banks only occurs in a true market when the bank has shown signs of being insolvent (ie.. It leveraged too much or made bad investments.).
You say, "Without a central bank, we get things like the Great Depression." Well, WITH the central bank, we GOT the Great Depression. So my argument is the central bank is no better at mitigating a financial crisis than a decentralized monetary system. (Remember.. 1913.. Federal Reserve.. 1929.. Great Depression..) But even further, who cares if a financial crisis is successfully mitigated? That is merely a tiny part of a strong economy.
The best indicator of a strong economy is a STRONG middle class. Right now, in the US, we have the vast majority of the middle class in a realm that is orders of magnitude less than the upper class.
[/quote]
Another error in reasoning: "Please delineate precisely where Greenspan made the asinine assertion you made that we shouldn't have a Federal Reserve? I didn't think so. "
This is called affirming the consequent. You describe my argument as 'asinine', which is your opinion, in your own premise. Second, I never said that Greenspan made the assertion in the first place. I argue the opposite - but I can see how you assumed Greenspan must be the 'educated' person I was talking about because you are so indoctrinated into the idea that a Federal Reserve is necessary. I would argue that Greenspan would do everything he could to argue for a Federal Reserve. Rather, the 'intelligent' side I was referring to originally was the Senate Banking Committee (who, despite being corrupt and maybe inept would seldom seem unintelligent.)
[/quote]
The Federal Reserve of the United States decided to allow Lehman Brothers to fail. At the same time, it organized a buyout of Merril Lynch. At the same time, it has 'injected' over $2Trillion into the 'economy' (megabanks). It lowered the interested rate to 0% right now to force people to move their money around in the name of the economy.
I'd say again the Federal Reserve damnwell does have the ability to control wealth. If you save too much, the Federal Reserve can inflate the currency - diluting your wealth. How is this not 'controlling wealth?'
Instead of attacking me, with my lowly degree in Political Science, and just finished a biography on Alexander Hamilton (who is not my favorite Founding Father, btw - but he did write most of the Federalist Papers), how about you attack my argument?
When they get through gutting the dollar, hold on for Stagnat Inflation for years to come. Unlike the Japanese, we don't have a savings level to hold value in the dollar. And every dollar they print after the Interest Rate hits zero, will need to be inflated into a real dollar at some point.
sinbce there is no gold to base it on, and no savings to bounce it off of, the last place is on the backls of the workers. Working for a dollar in the morning, and recieving .90 cents at payday.
Good Job!
sinbce there is no gold to base it on, and no savings to bounce it off of, the last place is on the backls of the workers. Working for a dollar in the morning, and recieving .90 cents at payday.
Good Job!
First
Lifer
- Jun 3, 2002
- 10,518
- 271
- 136
For one, the Fed did nothing during the Great Depression, it let the money supply contract by 1/3rd and that is widely considered one of the major reasons we sunk into a depression. The Fed actions had nothing to do with it, they didn't actually act much, they sat back based on the long-debunked principle that the market will magically work itself out. There are no examples of successful economies without some sort of central bank in the last 100 years that are still around today.
The gap between rich and poor has been widening over the last 30 years, but that has nothing to do with centralized banking. Besides, the middle class is far better off than it was without a central bank in the 19th century.
Yes, Greenspan and his ilk are far more intelligent than people who don't believe the Federal Reserve should exist. It's because empirical evidence and world-wide success says central banks are the superior alternative (nowhere near perfect, but that's never been argued).
Your simplistic interpretation is flawed. Again, if the Fed could control wealth we'd be out of the recession by now. It's a layman statement, makes no sense. The Fed injects liquidity, provides confidence and guidance to markets, and controls some benchmark interest rates. To say it controls wealth is to imply some sort of conspiracy where they can do what they want for self-serving reasons. They can't. Congress ultimately controls their fate, and Congressman are elected by American citizens, who are in the end controlled by the majority of Americans. Americans control wealth and will for the foreseeable future.
Your argument is flawed because it assumes the Founding Fathers knew WTH a central bank would do in a modern economy. They didn't, they purposefully left our Constitution open to interpretation and amendment for just that reason; because they can't see the future. Jefferson wanted Americans to live agrarians lifestyles for eternity and resented industrialization. They weren't all of the same mind and shouldn't be treated monolithically, and they certainly weren't universally right.
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