Re: Inflation/Deflation trade
mInvestor
4/25/2012 8:35:51 PM
@Scott,
Nice reference. Looks like Jim Sinclair is good at charts. One of them is quite interesting. Unemployment rate and Nazi votes. Hmmm, scary...
Hold the gold
impactnow
4/25/2012 12:12:01 PM
Lenore thanks for bringing the point home. For those on the recovery band wagon they are not viewing the complete picture. We are far from recovery and I am not selling my gold. The world macro factors are still perilous and that will continue to drive the value of gold. I am all in.
@AskAsa
That's exactly right. People have a hard time grasping the scale of things because the numbers are so large. But when you talk about world indebtedness it is trillions of dollars, in excess of the GDP of many countries.
One of my trading gurus over time has been Jim Sinclair. For a few years I was trading gold for my own account, he was my go-to expert. His analysis has been spot on. He says there are only two solutions to the world debt crisis 1) Let stuff collapse, fall into depression or 2) print, print, print. Not surprisingly he believes world governments will take option 2.
"Austerity" will not work as a solution because it is too late. It's like locking up your stable after the horses have gotten out.
Take a look at this reference which kind of puts things in perspective:
http://www.jsmineset.com/2012/04/24/jims-mailbox-915/
Re: Inflation/Deflation trade
AskAsa
4/25/2012 9:34:12 AM
It seems pretty simple. As long as the fed believes liquidity is the answer and keeps pumping more money into the financial system then we can only see further weakening of the dollar and further strengthening of gold.
Taken to an extreme...if the whole financial system falls apart. dollars will be good for, well, campfires. But gold will still have intrinsic value.
@Heinrich
Not really understanding your point. Gold is a currency. The difference between gold and U.S. Dollars is that its supply cannot be manipulated easily because gold consumption, production, and supply numbers are rather steady. Dollars, however, can be printed with the press of a computer button. Gold has been rising faster and faster, in fact, because the computer buttons have been pressed faster and faster.
I would also point out that this is not just about dollars, as gold has been rising against every currency on earth.
As far as who holds gold, it constitutes less than 3% of the monetary assets in the financial markets so it is not yet over-owned.
You've thought about these issues a whole lot more than most people, Scott. And because of that, you've got some ideas that don't always follow the mainstream thinking people are getting from lots of other sources.
For decades, people have heard "backed by the full faith and credit of the US Government" and imagined that it means more than it does.
I think you're exactly right about the debt, but political debates about the deficit - Is a deficit good for the economy? have been around a long time. Many people don't fully understand that the US deficit is now 9% of GDP. Economic arguments in favor of growing the deficit - just aren't relevant anymroe.
Think of it this way - when the Gold bubble peaks ($3,000?) most IU readers will be selling their last bits or already on the sidelines. If someone who's ever been to IU is still buying at that point, well - you can lead a horse to water...but you can't make them drink.
PC
@PredictableChaos
Thanks. I understand that you understand.
I guess I'm just more concerned that I get a lot of puzzled feedback on why gold would be related to currency values. I wonder why that it isn't common sense to people. If you have a lump of coal and a paper currency sitting on your desk next to each other and suddenly the paper currency is devalued by 50%, that means the lump of coal will be worth twice as much in that currency (because you suddenly need twice as much money to buy it in the new currency). It's the magic of hard assets and it makes sense to me. Maybe other people don't see it that way.
I continue to believe that hard assets including gold need to be a big part of investment portfolios because of the extreme risk in global currency devaluations.
@Scott
Some of us read a lot of the content on IU. We understand your well-supported explanation of how printing more and more money means that prices for gold will continue their upward trend in the most-likely scenarios.
Sure. But it's not like you have to preach to me.
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