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The Screaming Fundamentals For Owning Gold And Silver

The investment thesis for precious metals
Wednesday, June 29, 2011, 9:22 AM

This report lays out an investment thesis for gold and one for silver.  Various factors lead me to conclude that gold is one investment that you can park for the next ten or twenty years, confident that it will perform well. My timing and logic for both entering and finally exiting gold (and silver) as investments are laid out in the full report.

The punch line is this: Gold and silver are not (yet) in bubble territory, and large gains remain, especially if monetary, fiscal, and fundamental supply-and-demand trends remain in play.

Introduction

In 2001, as the painful end of the long stock bull market finally seeped into my consciousness, I began to grow quite concerned about my traditional stock and bond holdings. Other than a house with 27 years left on a 30 year mortgage, these holdings represented 100% of my investing portfolio. So I dug into the economic data to see what I could discover. What I found shocked me. It's all in the Crash Course in both video and book form, so I won't go into that data here.

By 2002, I had investigated enough about our monetary, economic, and political systems that I decided that holding gold and silver would be a very good idea, poured 50% of my liquid net worth into precious metals, and sat back and watched.

Since then, my appreciation for and understanding of the role of gold as a monetary asset and silver as an indispensable industrial metal have deepened considerably.

Investing in gold and silver is still a good idea. Here's why.

Why own gold and silver?

The reasons to hold gold and silver, and I mean physical gold and silver, are pretty straightforward. So let’s begin with the primary reasons to own gold.

  1. To protect against monetary recklessness
  2. As insulation against fiscal foolishness
  3. As insurance against the possibility of a major calamity in the banking/financial system
  4. For the embedded 'option value' that will pay out if and when gold is remonetized

By ‘monetary recklessness,’ I mean the creation of money out of thin air and the application of more liquidity than the productive economy actually needs. The central banks of the world have been doing this for decades, not just since the onset of the great financial crisis. In gold terms, the supply of above-ground gold is growing at roughly 3% per year, while money supply has been growing at nearly three times that yearly rate since 1980.

Now this is admittedly an unfair view, because the economy has been growing, too, but money and credit growth have handily outpaced even the upwardly distorted GDP measurements by a wide margin.  As the economy stagnates under this too-large debt load while the credit system continues to operate as if perpetual expansion were possible, look for all the resulting extra dollars to show up in prices of goods and services.    

Real interest rates are deeply negative (meaning that the rate of inflation is higher than Treasury bond yields). This is a forced, manipulated outcome courtesy of central banks that are buying bonds with thin-air money. Historically, periods of negative real interest rates are nearly always associated with outsized returns for commodities, especially precious metals. If and when real interest rates turn positive, I will reconsider my holdings in gold and silver, but not until then. That is as close to an absolute requirement as I have in this business.

Monetary policies across the developed world remain as accommodating as they’ve ever been. Even Greenspan's 1% blow-out special in 2003 was not as steeply negative in real terms as what Bernanke has recently engineered. But it is the highly aggressive and ‘alternative’ use of the Federal Reserve balance sheet to prop up insolvent banks and to sop up extra Treasury debt that really has me worried. There seems to be no way to end these ever-expanding programs, and they seem to have become a permanent feature of the economic and financial landscape.  In Europe, the equivalent would be the sovereign debt now found on the European Central Bank (ECB) balance sheet.  

Federal deficits are seemingly out of control and are now stuck in the -$1.5 trillion range. Massive deficit spending has always been inflationary, and inflation is usually gold/silver friendly. Although not always, mind you, as the correlation is not strong, especially during mild inflation (less than 5%). Note, for example, that gold fell from its high in 1980 all the way to its low in 1998, an 18 year period with plenty of mild inflation along the way. Sooner or later I expect extraordinary budget deficits to translate into extraordinary inflation.

Reason #3, insurance against a major calamity in the banking system, is an important part of my rationale for holding gold. I’m not referring to “paper gold” either, which includes the various tradable vehicles (like the "GLD" ETF) that you can buy like stocks through your broker. I’m talking about physical gold and silver because of their unusual ability to sit outside of the banking/monetary system and act as monetary assets.

Literally everything else financial, including your paper US money, is simultaneously somebody else’s liability, but gold and silver are not. They are simply, boringly, just assets. This is a highly desirable characteristic that is not easily replicated.

Should the banking system suffer a systemic breakdown, to which I ascribe a reasonably high probability of greater than 1-in-4 over the next 5 years, I expect banks to close for some period of time. Whether it's two weeks or six months is unimportant; no matter the length of time, I'd prefer to be holding gold than bank deposits.

During a banking holiday, your money will be frozen and left just sitting there, even as everything priced in money (especially imported items) rocket up in price. By the time your money is again available to you, you may find that a large portion of it has been looted by the effects of a collapsing currency. How do you avoid this? Easy; keep some ‘money’ out of the system to spend during an emergency. I always advocate three months of living expenses in cash, but you owe it to yourself to have gold and silver in your possession as well.

The final reason for holding gold, because it may be remonetized, is actually a very big draw for me. While the probability of this coming to pass may be low, the rewards would be very high.

Here are some numbers:  The total amount of 'official gold,' or that held by central banks around the world, is 30,684 tonnes, or 987 million troy ounces (MOz). In 2008 the total amount of money stock in the world was roughly $60 trillion.

If the world wanted 100% gold backing of all existing money, then the implied price for an ounce of gold is ($60T/987MOz) = $60,790 per troy ounce.

Clearly that's a silly number (or is it?), but even a 10% partial backing of money yields $6,000 per ounce. The point here is not to bandy about outlandish numbers, but merely to point out that unless a great deal of the world's money stock is destroyed somehow, or a lot more official gold is bought from the market and placed into official hands, backing even a fraction of the world's money supply by gold will result in a far higher number than today's ~$1,500/Oz.

The Difference Between Silver and Gold

Often people ask me if I hold goldandsilver as if it were one word. I do own both, but for almost entirely different reasons. Gold, to me, is a monetary substance. It has money-like qualities and it has been used as money by diverse cultures throughout history. I expect that to continue.

There is a chance, growing by the week, that gold will be remonetized on the international stage due to a failure of the current all-fiat regime. If or when the fiat regime fails, there will have to be some form of replacement, and the only one that we know works for sure is a gold standard. Therefore, a renewed gold standard has the best chance of being the ‘new’ system selected during the next bout of difficulties.

Silver is an industrial metal with a host of enviable and irreplaceable attributes. It is the most conductive metal known, and therefore it is widely used in the electronics industry. It is used to plate critical bearings in jet engines and as an antimicrobial additive to everything from wall paints to clothing fibers. In nearly all of these uses, plus a thousand others, it is used in such vanishingly small quantities that it is hardly worth recovering at the end of the product life cycle -- and often isn’t.

Because of this dispersion effect, above-ground silver is actually at something of a historical low point. When silver was used primarily for monetary and ornamentation purposes, the amount of above-ground, refined silver grew with every passing year. After industrial uses cropped up, that trend reversed, and today there are perhaps 1 billion ounces above ground, when in 1980 there were roughly 4 billion ounces.  

Because of this consumption dynamic,  it's entirely possible that over the next twenty years not one single net new ounce of above ground silver will be added to inventories, while in contrast, a few billion ounces of gold will be added.

I hold gold as a monetary metal. I own silver because of its residual monetary qualities, but more importantly because I believe it will continue to be in demand for industrial uses for a very long time, and it will become a scarce and rare item.

Scarcity

If we cast our minds forward ten years and think about a world with oil costing 2x to maybe 8x more than today, we have to ask how many of our currently-operating gold and silver mines, or the base metal mines from which gold and silver are by-products, will still be in operation, and how many will close because their energy costs will have exceeded their marginal economic benefits.

After just 100 years of modern, machine-powered mining, nearly all of the good ores are gone. By the time you are reading stories like this next one, you should be thinking, 'Why are they going to all that trouble unless that's the best option left?'

South African Miners Dig Deeper to Extend Gold Veins' Life Spans

Feb 17, 2011

JOHANNESBURG—With few new gold strikes around the world that can be turned into profitable mines, South Africa's gold miners are planning to dig deeper than ever before to get access to rich veins.

The plans raise questions about how to safely and profitably mine several miles below the surface. Success would mean overcoming problems such as possible rock falls, flooding and ventilation challenges and designing technology to overcome the threats.

Mark Cutifani, chief executive officer of AngloGold Ashanti Ltd., has a picture in his office of himself at one of the deepest points in Africa, roughly 4,000 meters, or 13,200 feet, down in the company's Mponeng mine south of Johannesburg. Mr. Cutifani sees no reason why Mponeng, already the deepest mining complex in the world, shouldn't in time operate an additional 3,000-plus feet deeper.

"The most critical challenges for all of us in South Africa are depths and depletion of reserves," Mr. Cutifani said in an interview.

The above article is just a different version of the story that led to the Deepwater Horizon incident.  By the time exceptional engineering challenges are being pondered to scrape a little deeper, it tells the alert observer everything they need to know about where we are in the depletion cycle.  We are closer to the end than the beginning.

We are at a point in history where we can easily look forward and make the case for declining per-capita production of numerous important elements just on the basis of constantly falling ore purities, and gold and silver fit into that category rather handily. Depletion of reserves is a very real dynamic. It is not one that future generations will have to worry about; it is one with which people alive today will have to come to terms.

The issue of Peak Oil only exacerbates the reserve depletion dynamic by adding steadily rising energy input costs to mix. Should oil get to the point of actual scarcity, where we have to ration by something other than price, then we must ask where operating marginal mines fits into the priority list. Not very high, would be my guess.

Supply and Demand - Gold

Not surprisingly, the high prices for gold and silver have stimulated quite a bit of exploration and new mine production. With over a decade of steadily rising prices, there has been ample time to bring on new production. Which leads to a real surprise: In the case of gold, relatively little incremental mine production has occurred.

The analytical firm Standard Chartered has calculated  a rather subdued 3.6% gold production growth over the next five years:

Most market commentary on gold centres on the direction of US dollar movements or inflation/deflation issues – we go beyond this to examine future mine supply, which we regard as an equally important driver. In our study of 375 global gold mines and projects, we note that after 10 years of a bull market, the gold mining industry has done little to bring on new supply. Our base-case scenario puts gold production growth at only 3.6% CAGR over the next five years.

(Source - Standard Chartered)

Of course, none of this is actually surprising to anyone who understands where we are in the depletion cycle, but it's probably quite a shock to many an economist. The quoted report goes on to calculate that existing projects just coming on-line need an average gold price of $1,400 to justify the capital costs, while greenfield, or brand-new, projects require a gold price of $2,000 an ounce.

This enormous increase in required gold prices to justify the investment is precisely the same dynamic that we are seeing with every other depleting resource: Energy costs run smack-dab into declining ore yields to produce an exponential increase in operating costs. And it's not as simple as the fuel that goes into the Caterpillar D-9s; it's the embodied energy in the steel and all the other energy-intensive mining components all along the entire supply chain.

Just as is the case with oil shales that always seem to need an oil price $10 higher than the current price to break even, the law of receding horizons (where rising input costs constantly place a resource just out of economic reach) will prevent many an interesting, but dilute, ore body from being developed. Given declining net energy, that's forever, as far as I am concerned.

The punch line of the Standard Chartered gold report is that they think $5,000 gold is a realistic target and go on to note the most important shift in gold accumulation of the past 30 years:

The limited new supply comes at a time when central banks have turned from being net sellers to significant net buyers of gold. The result, in our view, will be a gold market in deficit, even assuming flat growth in demand.

With the supply-demand balance so out of kilter, we see the gold price potentially going to US$5,000/oz.

(Source)

The emergence of central banks being net acquirers of gold is actually a pretty big deal. Over the past few decades, central banks have been actively reducing their gold holdings, preferring paper assets over the 'barbarous relic.' Famously, Canada and Switzerland vastly reduced their official gold holdings during this period, a decision that many citizens of those countries have openly and actively questioned.

The World Gold Council out of the UK is the primary firm that aggregates and reports on gold supply-and-demand statistics. Here's the most recent data on official (i.e., central bank) gold holdings:

(Source)

Note that the 2009 data is lowered by slightly more than 450 tonnes in this chart to remove the one-time announcement by China that it had secretly acquired 454 tonnes over the prior six years, so this data may differ from other representations you might see. I thought it best to remove that blip from the data. Also, the data for 2011 is for the first four months only, so we might expect 2011 to be a record-setter if the current pace continues.

Overall, world supply and demand are a bit out of alignment right now, with supply increasing by 2% last year and non-official demand increasing by 10%:

The summary of the fundamental analysis is that with mine production seriously lagging, the price increases for gold, and increased central bank and investment demand, we have set the stage for some hefty price increases irrespective of any fiscal or monetary shenanigans.

However, once we put those back into the mix, I forecast a quite volatile but upwardly sloping price for gold over the coming years. Possibly a very steep upward slope at points.

Supply and Demand - Silver

Silver demand is growing by double-digit percentages, being led primarily by industrial uses and investment demand. The Silver Institute does a fine job of tracking and reporting on these matters.

First, demand:

Total fabrication demand grew by 12.8 percent to a 10-year high of 878.8 Moz in 2010; this surge was led by the industrial demand category. Last year, silver’s use in industrial applications grew by 20.7 percent to 487.4 Moz, nearly recovering all the recession-induced losses in 2009, and is now seeing pronounced advances in 2011.

Jewelry posted a gain of 5.1 percent, the first substantial rise since 2003, primarily due to strong GDP gains in emerging markets and the industrialized world’s improving economic picture. Photography fell by 6.6 Moz, realizing its smallest loss in nine years, as medical centers deferred conversion to digital systems. Silverware demand fell to 50.3 Moz from 58.2 Moz in 2009, essentially due to lower demand in India.

(Source)

Now, supply:

Silver Production 2010

Silver mine production rose by 2.5 percent to 735.9 Moz in 2010 aided by new projects in Mexico and Argentina. Gains came from primary silver mines and as a by-product of lead/zinc mining activity, whereas silver volumes produced as a by-product of gold fell 4 percent last year.

Mexico eclipsed Peru as the world’s largest silver producing country in 2010, and Peru is followed by China, Australia and Chile. Global primary silver supply recorded a 5 percent increase to account for 30 percent of total mine production in 2010.

(Source)

Again, we are comparing double-digit demand increases against low single-digit supply increases.  After a decade of rather dramatic price increases for silver, the alert observer should be asking exactly why this is the case.

In table form, we can clearly see that the silver balance for the world requires both dishoarding from government stockpiles and the recycling of scrap silver. That is, shortfalls from mining have to be made up from above-ground stocks:

(Source)

There's only so long that such an imbalance can continue before the shortfalls require much higher prices to cool off demand.

One of the precise reasons that I originally invested quite heavily in silver is that I came to the conclusion that the price was far too low, artificially so, and that it would therefore be a great investment. So far, so good.

Given the above fundamentals, I project that prices for the precious metals will be many multiples higher - in today's dollar terms - by the end of the decade.

Part II of this report: How to Play The Greatest Gold & Silver Bull Market Of Our Lifetime delves into the specifics of how much of your net worth to invest and in what forms, what price targets gold and silver are likely to reach, and what indicators to look for that will indicate that it's time to sell out of your precious metal investments.

Click here to access Part II (free executive summary, enrollment required for full access).

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210 Comments

jones11's picture
jones11
Status: Member (Offline)
Joined: Jul 1 2011
Posts: 3
What else?

Jag, you are saying that gold/silver are the "asset-du-jour"? I do not think you realize just how underowned and unpopular they really are. How many people do you know that own or are even considering owning any physical precious metals? I agree, when they do become the "asset-du-jour" it will be time to sell. But we have not even scratched the surface yet, unlike the internet bubble or the real estate bubble when everyone wanted in at any price. I meet or know very few people who would even know the first thing about precious metals investing or holding. In the mainstream investment world precious metals are still a seriously contrarian investment. Although it is amazing at the press they get. And very much mostly negative, especially silver. Jag, it is not too late for you to get on board. Don't be upset you did not get in at $250 an ounce, very few did. Not even George Soros but look at the money he made off of gold.

But what I really wanted to ask was, what else is there. Where should I put  my life savings in order to keep it safe? Dollars? Bonds? Stocks? No confidence in any of it.

Ready's picture
Ready
Status: Platinum Member (Offline)
Joined: Dec 30 2008
Posts: 896
Jones...

Not to put words in JAG's mouth (that just wouldn't be sanitary) but I think JAG would rightly tell you that today, PM prices are set by the financial markets, not the physical one. So, while you may be carrying around a 1 oz coin in your pocket, it is getting a ride up and down in value along with ETFs (GLD) etc. Massive quanitites of paper are being traded, and that currently is the price discovery mechanism for gold, including physical spot prices.

So, if we are in bubbleland, and the paper market crashes, your dollar denominated value of the coin in your pocket crashes with it. At least going by today's rules. In that respect, if it is in a bubble that fully crashes before the proverbial TSHTF event (whatever that is) PMs will turn out to be a poor wealth storage device.

At least I think that is the gold contrarian point.

But, the key thing to remember about folks that take that stance is that typically they have a trader mentaility. In order to maximize wealth, you must accumulate FRNs or their equivalent, a trader might say. And there may be better, less risky, less bubble prone ways to do it. From a trader's perspective, the martket is being flodded with ads from goldline, the guys standing in front of pawn shops trying to get you to sell your gold chains, and ads for converting your IRA or 401k to gold. That is real, and honestly it is a little spooky if you really think about it.

So, the other side of the coin (see what is did there, punny, huh?) would be the long term "investor" who is not as concerned with profits as spendability. Not sure if that is a word, but hopefully you get my point. I need to know that I have an asset that would be accepted by Doc Peters for heart surgery, or Robbie for grain, regardless of what is happening in the financial markets, as long as I need to purchase goods and services. It will never go to zero. Can't say the same for the USD, but I hold them too.

So, JAG's points are actually valid (man it hurts to say that Yell) depending on your mindset. Where  JAG and I start to spar a bit is when he tries to say that gold hatred is not the opposite of gold bug, and yes, hatred is an emotion.

JAG's picture
JAG
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Joined: Oct 26 2008
Posts: 2489
Hatred is just marketing....

Ready wrote:

Where JAG and I start to spar a bit is when he tries to say that gold hatred is not the opposite of gold bug, and yes, hatred is an emotion.

Great job in explaining my position Ready, thank you. I would also emphasize to "Jones" that the GLD ETF is the second largest exchange-traded fund in the world. I agree that the physical market is too small to be much of a factor, but bubbles are typically a byproduct of the Wall Street derivative markets. Just as Wall Street speculation fueled the housing bubble of a few years ago, it is fueling the current bubbles in commodities, stocks, bonds, etc....

Regarding hatred....I certainly wouldn't waste my energy hating something as benign as a financial asset. What I focus my attention on is Wall Street marketing. Its sole purpose is to get you to trade your hard-earned money for an empty and undelivered dream. And the Wall Street marketing for gold is just overflowing with emotional triggers:

  • Buy gold because you fear the actions of the Fed.
  • Buy gold because you fear the hyperinflation that is just around the corner.
  • Buy gold because you fear a deflationary depression is upon us.
  • Buy gold because you fear global war or terrorist attacks.
  • Buy gold because you fear that the dollar will lose all its value.
  • Buy gold because you fear that the financial elite are planning a one world currency.
  • Buy gold because you hate the government and fear what the politicians will due next.
  • Buy gold because you hate Wall Street and don't want any part of it (ohh, that's just brilliant marketing)
  • Buy gold because you fear and hate missing out on easy-as-pie capital gains.
  • Buy gold because it will protect you and your wealth in the next economic crisis.

That last one just takes the cake. I figure that holding gold will protect you about as much in the next crisis as holding internet stocks did in the 2000-2002 crash and holding real estate did in the housing market crash in 2007. But here is the kicker, because most people hold physical gold not out of greed, but out of fear, they will never sell. So when the day comes when your gold coins are worth a $1000 less than what they once were, acknowledge the fact that you just contributed to the next round of Wall Street bonuses.

Though I haven't read part 2, I would think that Dr. M has done everyone a big favor by defining an objective gold exit plan. If I hadn't already sold my gold, I would certainly be willing to pay for that information. 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
Status: Martenson Brigade Member (Offline)
Joined: Jan 4 2009
Posts: 2484
Consider another angle...

JAG wrote:

Ready wrote:

Where JAG and I start to spar a bit is when he tries to say that gold hatred is not the opposite of gold bug, and yes, hatred is an emotion.

Great job in explaining my position Ready, thank you. I would also emphasize to "Jones" that the GLD ETF is the second largest exchange-traded fund in the world. I agree that the physical market is too small to be much of a factor, but bubbles are typically a byproduct of the Wall Street derivative markets. Just as Wall Street speculation fueled the housing bubble of a few years ago, it is fueling the current bubbles in commodities, stocks, bonds, etc....

Regarding hatred....I certainly wouldn't waste my energy hating something as benign as a financial asset. What I focus my attention on is Wall Street marketing. Its sole purpose is to get you to trade your hard-earned money for an empty and undelivered dream. And the Wall Street marketing for gold is just overflowing with emotional triggers:

  • Buy gold because you fear the actions of the Fed.
  • Buy gold because you fear the hyperinflation that is just around the corner.
  • Buy gold because you fear a deflationary depression is upon us.
  • Buy gold because you fear global war or terrorist attacks.
  • Buy gold because you fear that the dollar will lose all its value.
  • Buy gold because you fear that the financial elite are planning a one world currency.
  • Buy gold because you hate the government and fear what the politicians will due next.
  • Buy gold because you hate Wall Street and don't want any part of it (ohh, that's just brilliant marketing)
  • Buy gold because you fear and hate missing out on easy-as-pie capital gains.
  • Buy gold because it will protect you and your wealth in the next economic crisis.

That last one just takes the cake. I figure that holding gold will protect you about as much in the next crisis as holding internet stocks did in the 2000-2002 crash and holding real estate did in the housing market crash in 2007. But here is the kicker, because most people hold physical gold not out of greed, but out of fear, they will never sell. So when the day comes when your gold coins are worth a $1000 less than what they once were, acknowledge the fact that you just contributed to the next round of Wall Street bonuses.

Though I haven't read part 2, I would think that Dr. M has done everyone a big favor by defining an objective gold exit plan. If I hadn't already sold my gold, I would certainly be willing to pay for that information. 

Most Inimitable Captain Sheeple and Nemesis Ready - Cool

I have greatly enjoyed following this thread and the spiral discussions.  Jeff, I think you left what might be the skeleton key reason off you list.  Some might argue that it is a subset of the last reason on your list, but I think it stands alone.

Cat and I bought our gold and silver (and continue to do so) not because we are investing and think/hope/know it is going to go up in price.  The only reason we hold it is because it will store some measure of wealth when the dollar goes to zero.  Gold and silver will have a value - it might be a fraction of it once was, but unlike the dollar that went ZOOF, it will have some value.  We anticipate that it will take some time to come up with another form of currency or exchange medium, but I find it hard to imagine a credible scenario where gold AND silver are worthless as a form of barter to secure goods and services that we haven't accounted and prepped for. 

Our gold and silver are more of an insurance policy than any form of investment strategy.  And just like any insurance policy, nobody buys it and goes out hoping to get into a car accident to see how good their policy is.

sofistek's picture
sofistek
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 615
Why would anyone NOT look

Why would anyone NOT look for an investment of 20 years or more?  I don't see any inconsistency in Chris's message.  I do see misunderstanding in what you write.  But if not holding any PMs and keeping your all your wealth in cash and self-sufficiency items floats your boat, who am I to argue.

Mmm, I'm not sure you read my post. The Crash Course makes a convincing argument that things are going to hell in a handbasket. The next 20 years, Chris argues, will be nothing like the last 20, meaning that we're heading for a very different kind of society, either planned or unplanned. Investing, in the sense of the last 20 years, for a period of 10-20 years makes no sense at all, because you have no idea of what the world will look like at that point. If you don't actually hold the physical precious metals, will you be able to get at what you nominally own? Will you be able to sell what you own, given that normal markets aren't functioning any more? If you're still heavily dependent on others for your sustenance, will they happily accept physical gold in payment for what you need to survive, especially if it comes from those who aren't dependent on others (so they don't really need to buy much of what they don't produce themselves)? And, if you don't actually have small physical pieces of gold, how do you expect to get "change" if anyone does accept payment in gold? Will you be able to complete your preparations in a collapsing society, just because you have some gold buried in your garden?

All sorts of questions come to mind when the central theme of this blog is aired; that the next 20 years are going to be very different from the last 20. It would appear that you haven't grasped this central theme and it would appear that Chris is so into precious metals that he keeps diluting his main messages (though he has occasionally said the PM holders should consider liquidating some of their holding to finish up preparations for collapse - which kind of, again, goes against what he's saying here).

sofistek's picture
sofistek
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 615
Montana Native wrote:There

Montana Native wrote:
There are a couple anti-gold posts here from repeat offenders (you know who you are). Trying to shoot holes in Chris’ story is admirable and needed for a balanced debate, but in the end, current trends and past history make a very compelling case for gold and silver.

So you say. I didn't realise that criticism was considered an "offence". I'm not anti-gold, I just haven't seen a convincing case for it that examines all sides of the argument. There seem to be the gold zealots who never appear to examine the counter story, including Chris.

Montana Native wrote:
How one can just stick their nose up at money that has served humanity for millennia makes me scratch my head.

Well, this is the current meme but I'm not sure it's correct. I've seen others comment on gold that say history is completely the opposite. Oh yes, the wealthy have always had gold but the masses didn't and primarily used barter during times such as we're facing. Survival and satisfaction doesn't require such artifical wealth measures, it only requires self-sufficiency and community. I'd like to see a close examination of the conventional wisdom that gold has always served as a widespread means of exchange, because I'm not convinced that the conventional wisdom is accurate (most conventional wisdom isn't). Also, it seems to me that this frenzy for gold will just lead to another, but different, highly unequal society as most people end up with nothing whilst some of the more forward looking investors have wealth beyond their imagination (with gold at $65,000 an ounce, or more, at least nominally).

Montana Native wrote:
As a young man how am I supposed to save for my future?

What are you trying to save for? If you believe that the next 50 years will just be a continuation of the last 20, then you haven't paid much attention to the central theme of Chris's work. Why do you think that money (in some form) is what you need for the future? Sure, if you have property, you'll have to pay property taxes, at least, whilst society holds together enough to have local governments that have central services to pay for but otherwise you should be aiming to not rely on anyone but yourself, your family and your community.

Montana Native wrote:
In closing I will note that everyone who claims gold isn’t worth $1500 an ounce or $60,000 for that matter should question how much a dollar is really worth.

Gold has no intrinsic worth. It's worth only what people are prepared to accept it's worth. Something like oil, on the other hand, has real intrinsic value because of what can be done with it (more or less) directly. Gold is funny money, sort of.

Montana Native wrote:
I’ll be here in two years and we can see how this plays out.

Chris is talking about a long term investment. Two years isn't long term. I too expect gold to continue rising but I'm still not getting in that game. I have some savings only because I had the forsight to extract my pension funds at a time when I could do it without taking a penalty. I don't expect to retire in the conventional sense, so I don't need the money for that eventuality. It's useful to have those savings, though, because they give me some form of independence and a fairly liquid wealth base, with which to prepare. I've taken on a low paying job to ensure that I have some stream of income, should I not be able to get to my funds, though I don't see it as a long term thing as I continue my preparations. Gold still doesn't feature in those preparations, until I see a convincing case made.

Tony

sofistek's picture
sofistek
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 615
jones11 wrote: Where should

jones11 wrote:
Where should I put  my life savings in order to keep it safe?

Put them into making yourself as self-sufficient as possible. What else are you thinking of doing with your life savings as we start to enter a world where limits turn out to be real?

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Dogs_In_A_Pile wrote:Cat and

Dogs_In_A_Pile wrote:
Cat and I bought our gold and silver (and continue to do so) not because we are investing and think/hope/know it is going to go up in price.  The only reason we hold it is because it will store some measure of wealth when the dollar goes to zero.  Gold and silver will have a value - it might be a fraction of it once was, but unlike the dollar that went ZOOF, it will have some value.  We anticipate that it will take some time to come up with another form of currency or exchange medium, but I find it hard to imagine a credible scenario where gold AND silver are worthless as a form of barter to secure goods and services that we haven't accounted and prepped for.

That is, perhaps, the most sensible thing I've read from the gold advocates. It has a better chance of have some value (as agreed between participants in the exchange) than anything else you might hold. Except, of course, knowledge of how to look after yourself and others; that, surely, will always have the most worth of anything.

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C'mon JAG

C'mon JAG, man-up, inquiring minds want to know.

What's the alternative that you are not sharing, the one makes you so confident criticizing gold and Doctor M's analysis?

When I asked:

JAG.........what do you recommend to protect wealth after one is comfortable that he is materially prepared for a tumultuous future?

You danced around it.

When jones11 asked:

But what I really wanted to ask was, what else is there. Where should I put  my life savings in order to keep it safe? Dollars? Bonds? Stocks? No confidence in any of it.

You ignored him.

Looking at some of your past gold posts it seems that you've been a gold bear since at least Aug 15, 2009 ("Personally, my investment of choice is the USD. The market doesn't reward herd behavior, it punishes it." Gold at $948) and for most of the past 2 years a lot of your portfolio is w Sitka Pacific and the US$. They can't be what you suggest for a good night's sleep.

C'mon buddy, stop holding back, spill the beans, what's that alternative, give us something we can objectively track as Doctor M has done, let us in on it before some folks here (especially the old timers who have listened to this for so long) get to thinking that it's just cheap talk from a sour grapes troll.

There is something to be said for contrarian investing, but ask yourself this........how many people in the world w stored wealth own US dollars and how many own gold?

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mindlock?

sofistek wrote:

Why would anyone NOT look for an investment of 20 years or more?  I don't see any inconsistency in Chris's message.  I do see misunderstanding in what you write.  But if not holding any PMs and keeping your all your wealth in cash and self-sufficiency items floats your boat, who am I to argue.

Mmm, I'm not sure you read my post. The Crash Course makes a convincing argument that things are going to hell in a handbasket. The next 20 years, Chris argues, will be nothing like the last 20, meaning that we're heading for a very different kind of society, either planned or unplanned. Investing, in the sense of the last 20 years, for a period of 10-20 years makes no sense at all, because you have no idea of what the world will look like at that point. If you don't actually hold the physical precious metals, will you be able to get at what you nominally own? Will you be able to sell what you own, given that normal markets aren't functioning any more? If you're still heavily dependent on others for your sustenance, will they happily accept physical gold in payment for what you need to survive, especially if it comes from those who aren't dependent on others (so they don't really need to buy much of what they don't produce themselves)? And, if you don't actually have small physical pieces of gold, how do you expect to get "change" if anyone does accept payment in gold? Will you be able to complete your preparations in a collapsing society, just because you have some gold buried in your garden?

All sorts of questions come to mind when the central theme of this blog is aired; that the next 20 years are going to be very different from the last 20. It would appear that you haven't grasped this central theme and it would appear that Chris is so into precious metals that he keeps diluting his main messages (though he has occasionally said the PM holders should consider liquidating some of their holding to finish up preparations for collapse - which kind of, again, goes against what he's saying here).

I think I have some remote, vague, fuzzy, slight concept of the central theme of this blog but I guess I could be mistaken since you evidently have clearer insights into my thoughts than I do.  Every statement you made has been effectively countered by numerous discussions in the past that have gone on ad nauseum but you just don't seem to get it.  Do you think it's remotely possible that one could have all their self sufficiency ducks in a row but still have wealth that one wishes to invest in gold and silver as "currency insurance", as just one example?  Evidently, you seem to think accumulation of PMs is mutually exclusive from self sufficiency preparations.  Trust me, they can be concurrent and co-existing.

Now let's see, do I want to listen to Chris and do I want to follow the strategies which I've been following which have been very successful for me and my family or do I want to listen to sofistek?  Hmm ... no brainer there for me.

The proof of the pudding is in results though.  Personally, I have no major complaints in my life.  Professionally, I'm doing very well and am well respected and recognized in my field.  Financially, I'm financially independent and could retire now if I so chose (but I really like what I do and I'm very good at it and I can help others doing it).  Healthwise, I've surprised myself recently by surpassing certain records of physical performance that I keep including strength and reaction speed.  I need no medications.  I'm capable of defending myself with either armed (including firearms, edged weapons, and weapons of opportunity) and unarmed combat.  Familywise, I have a wonderful wife who's onboard with me 100% and two great kids who are going to be successful no matter what happens because of how they've been raised and the type of people they are.  Spiritually, I know who I am, I know what my purpose is, and I know where I'm going.  Preparationwise, if you dropped me off in the middle of the woods with a good knife, I'd survive.  I can fish, hunt, trap with snares and deadfalls, gather wild edible and medicinal plants, make clean water, make fire, make shelter, etc. in the primitive ways.  Luckily though, we've done well in our preps and should live comfortably regardless of what happens due to our personal skills and knowledge as well as the community relationships we've developed and are continuing to develop.  By the way, how're you doin'?   

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C'mon Denny...

C'mon Denny...

You have been around this long and you don't know the answer to that insincere question?

If you really think that our future is doomed to a TSHTF scenario (and I don't discount this probability), then there really is only one choice: invest in the means to produce life's necessities without the need of an economic and/or monetary system. Of course, this is much harder than just buying gold and sitting back and hoping for the best, as I'm sure you know. But it's really the only way to know that you will have something that people will always value and need. I mean, isn't that what wealth truly means?

If anyone has questions regarding this type of investment, please direct them to Ready. He is the personification of this approach in my book.

Oh yeah, and regarding your sour grapes comment, don't bother trying to bait me, just hit the "ignore user" button. And good luck with your plan to outsmart Wall Street.

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Still dancing

Seems like you're still dancing, Jeff.

Doctor M's report is about stored wealth after preps are considered.

The original question to you was about a better alternative than gold for stored wealth after TSHTF preps:

JAG.........what do you recommend to protect wealth after one is comfortable that he is materially prepared for a tumultuous future?

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A memorable event!

saxplayer00o1 wrote:

OK....Who is that quote from?

This could almost have been posted in the humor thread.....Hmmmm,  Anybody here been on a hot date lately that they aren't talking about?

Saxplayer has 998 posts, and in the year and a half I’ve been here this is the first one I remember where he actually “spoke”.  Usually he just does an extraordinary job of bringing us links to an incredible amount of useful information.  What does this mean?  Is it a portent of unimaginable changes about to commence?  Ominous!  Cool

Travlin

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JAG wrote: Ready

JAG wrote:

Ready wrote:

Where JAG and I start to spar a bit is when he tries to say that gold hatred is not the opposite of gold bug, and yes, hatred is an emotion.

Great job in explaining my position Ready, thank you. I would also emphasize to "Jones" that the GLD ETF is the second largest exchange-traded fund in the world. I agree that the physical market is too small to be much of a factor, but bubbles are typically a byproduct of the Wall Street derivative markets. Just as Wall Street speculation fueled the housing bubble of a few years ago, it is fueling the current bubbles in commodities, stocks, bonds, etc....

Regarding hatred....I certainly wouldn't waste my energy hating something as benign as a financial asset. What I focus my attention on is Wall Street marketing. Its sole purpose is to get you to trade your hard-earned money for an empty and undelivered dream. And the Wall Street marketing for gold is just overflowing with emotional triggers:

  • Buy gold because you fear the actions of the Fed.
  • Buy gold because you fear the hyperinflation that is just around the corner.
  • Buy gold because you fear a deflationary depression is upon us.
  • Buy gold because you fear global war or terrorist attacks.
  • Buy gold because you fear that the dollar will lose all its value.
  • Buy gold because you fear that the financial elite are planning a one world currency.
  • Buy gold because you hate the government and fear what the politicians will due next.
  • Buy gold because you hate Wall Street and don't want any part of it (ohh, that's just brilliant marketing)
  • Buy gold because you fear and hate missing out on easy-as-pie capital gains.
  • Buy gold because it will protect you and your wealth in the next economic crisis.

That last one just takes the cake. I figure that holding gold will protect you about as much in the next crisis as holding internet stocks did in the 2000-2002 crash and holding real estate did in the housing market crash in 2007. But here is the kicker, because most people hold physical gold not out of greed, but out of fear, they will never sell. So when the day comes when your gold coins are worth a $1000 less than what they once were, acknowledge the fact that you just contributed to the next round of Wall Street bonuses.

Though I haven't read part 2, I would think that Dr. M has done everyone a big favor by defining an objective gold exit plan. If I hadn't already sold my gold, I would certainly be willing to pay for that information. 

Jeff, I luv ya man. Hopefully you can wait for my response for a few days. it's a long weekend, and I have real work to do away from the interwebs.

Wish I could send you an electronic beer.

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After that.

OK, after that. Lets suppose we have made our selves self sufficient or have all we feel we need to do so. Would you just then let your money sit around in cash, stocks, bonds, real estae or gold. Pick one. Assuming you are prepared for the worst and have money left over, now lets prepare for a future where our "doomsday" preperations prove hopefully unneccesary and you want your savings to grow or at least not deteriorate so you may do something productive later on for your future family generations or whatever. I have heard all of the "GOLD IS BAD" arguments (and i do honestly hear where you are coming from) but no one is offering up anything else.

Reminds me of politicians. Everyone running around pointing out the problem but no solutions being proposed. I used to run a large company and I had a saying as the General Manager. "Pointing out the problem is the easy part. Now, if you can give me a solution, you will be proving your worth something." We all know the problems this society is facing. And there are many problems we can find with any investment but when you weigh the pro's and con's against the other financial tools out there I think they (gold/silver) have been coming out and still look to come out ahead for some time to come. But I am not married to the stuff and would love to have Jag or Sofistek point me in a direction that makes as much sense right now as physical PM's.

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Wall Street

If wall street is marketing gold then they are doing one stealth job of it. I know many financial professionals and none of them are marketing gold.

But Jag, you must live a very stress free and peaceful life. I envy you for that as you have:

1) No fear of the actions of the Fed.

2) No fear of inflation or deflation.

3) No fear of global war or terrorist attacks.

4) No fear of the dollar losing value, (which it has done consistently since the fed was created)

5) Complete trust of the financial and political elite (as they so obviously have the best of intentions and everyones best interest in mind.)

6) Complete trust in banks and wall street.

7) No concerns for making gains on your capital.

8) No fear of a new economic crisis (as if the last one ever ended)

You are a truly wealthy person with no need to insure against any of these supposed items as they are all just marketing tools used to get us to buy GOLD!! And .05% of the population has fallen for it and purchased some of it. Brilliant marketing.

The only marketing campaign from wall street is the bankers, and the elite trying to do everything they can including possible criminal manipulation of the markets to keep you in the stock market, the dollar, and OUT OF GOLD!!

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ao wrote: I think I have

ao wrote:

I think I have some remote, vague, fuzzy, slight concept of the central theme of this blog but I guess I could be mistaken since you evidently have clearer insights into my thoughts than I do.  Every statement you made has been effectively countered by numerous discussions in the past that have gone on ad nauseum but you just don't seem to get it.  Do you think it's remotely possible that one could have all their self sufficiency ducks in a row but still have wealth that one wishes to invest in gold and silver as "currency insurance", as just one example?  Evidently, you seem to think accumulation of PMs is mutually exclusive from self sufficiency preparations.  Trust me, they can be concurrent and co-existing.

Now let's see, do I want to listen to Chris and do I want to follow the strategies which I've been following which have been very successful for me and my family or do I want to listen to sofistek?  Hmm ... no brainer there for me.

The proof of the pudding is in results though.  Personally, I have no major complaints in my life.  Professionally, I'm doing very well and am well respected and recognized in my field.  Financially, I'm financially independent and could retire now if I so chose (but I really like what I do and I'm very good at it and I can help others doing it).  Healthwise, I've surprised myself recently by surpassing certain records of physical performance that I keep including strength and reaction speed.  I need no medications.  I'm capable of defending myself with either armed (including firearms, edged weapons, and weapons of opportunity) and unarmed combat.  Familywise, I have a wonderful wife who's onboard with me 100% and two great kids who are going to be successful no matter what happens because of how they've been raised and the type of people they are.  Spiritually, I know who I am, I know what my purpose is, and I know where I'm going.  Preparationwise, if you dropped me off in the middle of the woods with a good knife, I'd survive.  I can fish, hunt, trap with snares and deadfalls, gather wild edible and medicinal plants, make clean water, make fire, make shelter, etc. in the primitive ways.  Luckily though, we've done well in our preps and should live comfortably regardless of what happens due to our personal skills and knowledge as well as the community relationships we've developed and are continuing to develop.  By the way, how're you doin'?  

Not as well as you apparently are. However, your comments do appear to be entrenched in the current economy and society, despite what you claim about preparations. There is a lot of emotion in this one but I've still to read anything about gold investment that explains why it would be a good investment over other things, in a collapsing society. However, I can see that in a slow collapse, gold hoarders might live a more glorified, but less satisfying, life than the increasing masses of have-nots. What I can't see, nor can anyone else, is how long it would take before they start to be engulfed by collapse and perhaps wish they'd used their wealth more wisely.

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jones11 wrote:OK, after

jones11 wrote:
OK, after that. Lets suppose we have made our selves self sufficient or have all we feel we need to do so. Would you just then let your money sit around in cash, stocks, bonds, real estae or gold. Pick one. Assuming you are prepared for the worst and have money left over, now lets prepare for a future where our "doomsday" preperations prove hopefully unneccesary and you want your savings to grow or at least not deteriorate so you may do something productive later on for your future family generations or whatever. I have heard all of the "GOLD IS BAD" arguments (and i do honestly hear where you are coming from) but no one is offering up anything else.

Reminds me of politicians. Everyone running around pointing out the problem but no solutions being proposed. I used to run a large company and I had a saying as the General Manager. "Pointing out the problem is the easy part. Now, if you can give me a solution, you will be proving your worth something." We all know the problems this society is facing. And there are many problems we can find with any investment but when you weigh the pro's and con's against the other financial tools out there I think they (gold/silver) have been coming out and still look to come out ahead for some time to come. But I am not married to the stuff and would love to have Jag or Sofistek point me in a direction that makes as much sense right now as physical PM's.

I'm not saying gold is bad, Jones11.

You're right to want answers but neither I, nor Chris, have them; we only have opinions. Some of mine are based on Chris's Crash Course. It's very certain that doomsday (as you call it) preparations will be a good investment. As Chris has pointed out, the future will be very different. The are resource constraints which scream with certainty that the future will be very different. But I see no meaningful moves towards gradual change to a no-growth sustainable society. Therefore, society WILL collapse. Really, there is very little doubt of that, apart from the proviso that if enough of your particular community become aware enough, in time to ease the path down, you might get lucky that some vague resemblences to some aspects of current society might remain. The only real question is whether you personally will be caught up in the collapse (i.e. will its speed engulf you before you're dead of natural causes?). You might, of course want to think a bit further ahead than that, perhaps to the lives of your children and grandchildren. Collapse is inevitable and there are a lot of indications that it is already happening. So being able to rely only on yourself, your family and your local community is certainly an aim you should be striving for.

So where do gold and PMs fit into this picture? I've still not seen a good commentary on that. I've heard Chris talk about preserving wealth until you are in a position to invest in useful skills, tools and, maybe, land. So I've never seen it is a long term investment because I don't see a need to preserve that sort of artificial wealth indefinitely. I'm also not convinced that, once fiat money is gone, suddenly life will go on as normal with gold and silver being the means of exchange. Not that they won't be important to some people in some areas of society, and they may even eventually become more common means of exchange.

Of course, if one is so rich that one can't think of any more preps to invest in, then by all means buy gold and PMs (indeed, it seems to be rapidly becoming a buy that only for the rich). It's just that I fail to see what it has got to do with the future that's looming up. The only decent comment I've read on this is that at least gold and PMs will have some value when fiat money will have none. So perhaps those with gold will eventually be able to improve on their preps when others can't. I might also say that if you simply can't face the prospect of learning the skills needed (and it is a daunting prospect to many, including myself) then buying gold MIGHT allow you to buy most of what you need, if you're lucky.

But don't go looking for a conventional retirement by hoarding gold.

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Sofistek

Quote:
However, I can see that in a slow collapse, gold hoarders might live a more glorified, but less satisfying, life than the increasing masses of have-nots. What I can't see, nor can anyone else, is how long it would take before they start to be engulfed by collapse and perhaps wish they'd used their wealth more wisely.

Less satisfying than the have-nots?  What could be more satisfying than being a have-not? SmileWell...Ghandi seemed to get off on it.

Are you suggesting that somehow life is less fulfilling if you own gold?  How does that compute?  It has been stressed frequently here that people, certainly including myself, own PMs because we don't see any good alternatives for preserving purchasing power.  If you think that hoarding cash is a swell idea, I would remind you that it is the stated goal of the Bernank to make sure your cash deteriorates in value 2-3% a year.  That means just to stay even, you have to put your money somewhere that matches that deterioration with an equal gain.  If, like me, you expect greater inflation coming down the road (according to John Williams and my personal experience, it's already here), where do you put that cash?

I'm not interested in hearing about all the wonderful preparations you can make with that cash, I'm already there.  I don't care how well you're prepared in terms of sustainable land, things and skills, there is still a financial aspect to our lives that has to be acknowledged.

How many of us are living completely self-contained lives where we have no need of a medium of exchange beyond barter?  Not even the Amish are that secure.

Once you acknowledge that some store of financial value is necessary, then you have to figure out how to ensure that value doesn't deteriorate.  I have concluded that the traditional financial assets, including cash, are at least as risky as PMs.  From that perspective, I'm just trying to see that my family and I don't become wards of the state, as it is increasingly clear that the 'state' can't afford us.

Doug

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Thanks for this great blog.

Hello,

I been following Chris for some time now including others.....

I suggest Chris Martenson, GATA.org, GoldSilver.com (Mike Malony), run2gold.com (Trace Mayer), Marc Faber, David Morgan, Bob Chapman  and others (also some people at globalresearch.ca) have a great common publication/website that merges their work in addition to their own publicaitons/sites/podcasts......

Great work and thanks...

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JAG wrote: It wasn't my

JAG wrote:

It wasn't my contention that money supply was correlated with the price of gold, it was Dr. M's (and many others) observation. I agree with you and Dr. M on the interest rate correlation.

My contention is it is correlated, and the time frame (80's through 90's) you are considering is an anamoly, because US was exporting dollars all over the world. The dollars never stayed domestically to stoke inflation.

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JAG wrote: That last one

JAG wrote:

That last one just takes the cake. I figure that holding gold will protect you about as much in the next crisis as holding internet stocks did in the 2000-2002 crash and holding real estate did in the housing market crash in 2007.

Nothing can be more false than this statement. Gold is no one's liability, unlike stocks where the company is the liability and housing where bank is liable. That is the beauty of gold. It doesn't pay dividends, but at the same time -- holding it means there is no counter party risk.

JAG wrote:

But here is the kicker, because most people hold physical gold not out of greed, but out of fear, they will never sell. So when the day comes when your gold coins are worth a $1000 less than what they once were, acknowledge the fact that you just contributed to the next round of Wall Street bonuses.

No way am I going to accept this statement. You don't sell your insurance, just because there is a lesser likelihood of your house catching fire. Same rule applies here as well. Gold is an insurance against currency debasement. There is no time in history where currency debasement has led to prosperity.

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Maybe This Will Explain It Better

Hyper-Inflation
Dr. Martenson has previously written or said that he wasn't sure which one - hyper-inflation or deflation - was likely to occur. However, he was leaning more towards hyper-inflation. That was probably a year ago. Now he leans further in the hyper-inflationary camp for all the various reasons he's listed.

Also in this camp, National Inflation Association, FoFoA, Gonzalo Lira, Fernando "FerFAL" Aguirre, Jesse of Jesse's Café Américain, etc.

Deflation
On the other end, a few sites like The Automatic Earth and the principals, "Ilargi" and Nicole "Stoneleigh" Foss, believe in deflation. Their thesis is that credit bubbles are bound to collapse. Money may be printed to offset deflation and increase the money supply - but effective deflation continues. People spend less, jobs become scarcer, they don't feel confident about the economy, banks have reduced their lending, home prices continue to drop. This becomes a downward spiral. Foss believes that after the period of deflation (years), then there may be hyper-inflation.

Where They Agree
Both Martenson and Foss has said that, first you should take care of the basics. Access to food, water, emergency supplies, be out of debt, have a few months' cash on hand, tools, skills, security, community, and other things of resiliency (solar water heater, panels, etc. Foss argues for storing more cash - physical cash, bank accounts, short-term Treasuries, etc. If you have even more after that, then you can consider putting money into securely stored physical gold and silver, preferably gold.

For Most People
I think for most people, getting all the basics will be more than enough to occupy one's attention and meager resources. Beyond that point, having several months of cash and getting gold and silver is pretty much something for those with more financial means. This debate on gold and silver is more academic for me. But if I had the resources, I would hedge my bets.

Poet

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water hoarders

sofistek wrote:

There is a lot of emotion in this one but I've still to read anything about gold investment that explains why it would be a good investment over other things, in a collapsing society. However, I can see that in a slow collapse, gold hoarders might live a more glorified, but less satisfying, life than the increasing masses of have-nots. What I can't see, nor can anyone else, is how long it would take before they start to be engulfed by collapse and perhaps wish they'd used their wealth more wisely.

Mindlock ... with a twist of sour grapes?  If you don't get it by now with reading Chris's article or watching the video posted #1 by sundarb, you never will.

Let me say it one final time ... investment in gold does not preclude investment in other "things".  Once again, for emphasis ...

INVESTMENT IN GOLD DOES NOT PRECLUDE INVESTMENT IN OTHER "THINGS"

And what's your evidence that gold "hoarders" (an emotional term if I've ever heard one) will live a less satisfying life.  Maybe water hoarders will live a less satisfying life.  Nothing worse than someone hoarding water when almost 1 billion people on this planet don't have clean, safe fresh water supplies.  I've always been shocked how people in places such as New Zealand can keep all their abundant fresh water to themselves rather than shipping some of it to the Sudan.

Have you ever consider that some of those gold "hoarders" might give away some of their bounty to charities like charity:water to help others have access to fresh water.  You might want to emulate them.  Here you go.  Kvetch talk is cheap.  Put your money where your mouth is.

http://www.charitywater.org/whywater/

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I appreciate the...

I appreciate the intellectual honesty and civil attitude of most posters on CM.com.   In find it very helpful as I attempt to clarify my understanding of the predicaments we all face, and determine what I can do to possibly mitigate their impact on my life and the lives of my loved ones.

Dr. Martenson discusses three types of wealth in his book: primary, secondary and tertiary.   My primary objective is to convert as much tertiary wealth as feasable into primary wealth: homestead, water, food, garden, chickens, etc., and developing the skills needed to sustain those things.  I also believe it is important to invest in the means to defend and protect my family and our support structure.  After that, with what tertiary wealth remains, my objective is to hedge against a collapsing financial system by converting 60% of it into a store of value...an alternative medium of exchange.  That would be gold and silver.  I am not aware of any better (or equal) alternative exchange medium.

Of course, the financial system may not collapse. WTIM, I keep some of it in cash (4+ months worth of expenses), then spread the rest between short-term Treasurys, plus agriculture and energy stocks (largely ETFs).

(Side bar:  I haven't bought ag or energy stocks yet as I'm not convinced we've seen a bottom in the markets.  I got 80% out of the stock market in August of 2007, started buying storage foods in spring of 2008, started buying PMs in spring of 2009.  I started a raised bed garden last year, and am also learning about container gardening.  Currently, I am completing our back-up water system (rain water cistern), and planning the chicken coup for this Fall.  I am fortunate to have the space to do these things, and good friends who are teaching me how to do them.)

If I were younger (I'm a 63 year old small business owner hoping to retire in two years), I'd be finding a way to get into a business that focuses locally on the types of needs people will have in a post-growth economy: recycling, small scale manufacturing, farming and/or local food distribution, solar heat and power, private replacements for goverment services (police, fire, garbage collection, etc.), and change management.  Owning a business of this type would be a form of primary wealth as it would serve to sustain you.  Short of owning it, I'd look for a position of responsibility in one, then make myself irreplaceable.

Wishing everyone all the best.  Keep the ideas flowing.

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Links

Tony,

There have been no alternatives laid out as to other options for saving. Why save? Saving is a wise thing to do. Here are a couple of commodity money links that may or may not pique your interest. Things may just sputter along for a lot longer than many well informed folks think possible so a little insurance is a great way to fly. My timber is insurance too.

http://mises.org/daily/2942

http://en.wikipedia.org/wiki/Coinage_Act_of_1792

The current meme is that the US can and will pay massive debts without debasing the currency. The current bubble is the US treasury market. If we default, watch those dollars repatriate en masse. Whether 2 years or 20 just keep your eye on the price of gold in Federal Reserve notes. My guess is that the exponential function will come into play at some point. When janitors are taking out NINJA loans to buy half a million in gold I'll be selling.

I asked Ben Stein if he thought silver was a good investment last night when I saw him out. He thinks precious metals are a bad investment and  that guys like Jim Rogers are "commodities speculators" . Apparently he missed the part of the crash course where the price of the orange in the boat is dictated by the amount of money in the boat. He did add he wished he could print money and he gave me a monotone "bye bye now" as he walked away. At least you are in good company. Off to cover the blueberries from the waxwings.

TJ

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Tommygun
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Gold bull market

Marc Faber outlook for Gold

Marc Faber : "...First of all it is true that gold has gone up from $252 in 1999 to now $1550 an ounce. However, at the same time over this 11-year period, the quantity of money in the world and the quantity of credit in the world has exploded. So that I could make a case that actually maybe gold is cheaper today than it was in 1999 adjusted for the increase in the quantity of money and credit.Secondly, today we have many more people that have become affluent, just think of the well-to-do people in India, then Indian middle class, the middle class in China, the well-to-do people in China, it has exploded over the last 11 years. And all these people I guarantee you, they are all essentially flooded with US dollars and so for them to take a little bit of their money and park it into gold is a no-brainer in the long run. I go to many conferences every year.They usually ask the audience even at resource conferences, how many of you have more than 5% of their portfolio assets in gold? I have been at a conference in Singapore two days ago, among 500 people involved in real estate, not one had more than 5% of his assets in gold. I guess most of them did not have any gold at all, and so if someone tells me it is a bubble, I can tell you in year 1999-2000, the whole world was gambling in NASDAQ stocks, in telecom stocks and the media companies everywhere in the world. Now most people that I know have actually already sold their gold. " - in ET Now 24 June 2011
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JAG
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sundarb wrote: JAG

sundarb wrote:

JAG wrote:

That last one just takes the cake. I figure that holding gold will protect you about as much in the next crisis as holding internet stocks did in the 2000-2002 crash and holding real estate did in the housing market crash in 2007.

Nothing can be more false than this statement. Gold is no one's liability, unlike stocks where the company is the liability and housing where bank is liable. That is the beauty of gold. It doesn't pay dividends, but at the same time -- holding it means there is no counter party risk.

Sorry, but paper gold is someone else's liability, and it is the paper market that determines the economic value of physical gold (today, h/t Ready). So just because one holds only physical gold doesn't necessarily mean that they are immune to the counter party risk within the financial markets. 

------------------------------------------------------------------------------------------------------------------------------------------------

Captain Sheeple is Done! When I look back over this enjoyable discussion, I must admit that I underestimated just how entrenched the pro-gold argument has become in the belief structure and identity of this community. I offered my critique in the spirit of Dr. M's opening statement to the Crash Course, where he said:

Chris Martenson wrote:

"I think it is very important to distinguish between facts, opinions, and beliefs..."

I get no pleasure in playing the "black sheep" of the community when it comes to this issue, but if I hold a different perspective than the collective, I owe it to this community to express it. After all, isn't that what we all truly value about this community, the fact that it holds a different perspective than the majority?

You guys have a great 4th of July.

P.S. And Denny, just sell some gold and buy some more pasture land for your dairy cows. The value of organic milk is going exponential!Wink

All the best....Jeff

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"End Game" and the debt supercycle

As per John Mauldin, we are coming up on the “End Game” as the result of a debt supercycle. A reevalution of the currency is one way to default. There have been major monetary changes over time, such as, Demonetization of Silver in 1873, the formation of the Federal Reserve in 1913, gold confiscation in 1933, devaluation of the dollar in 1934 and the closing of the gold window in 1971. I suspect we are about to have the next one. Dr. Martenson mentioned re-monetizing gold. That would be a big and welcomed change! I agree that gold confiscation is highly unlikely, but couldn’t the government apply a special 90% capital gains tax on the sale of gold? This would would effectively confiscating gold, or at least deminish the benefits of holding gold? How about potential capital controls? In one of Carmen Reinhart’s papers, she mentions capital controls are implemented before a currency crisis to prevent flights to safety. Since all currencies are being debased, gold is the ultimate destination for safety.

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The gold vs anti-gold debate

The gold vs anti-gold debate makes for great reading.  As Chris often has said, "Trust yourself."  

1)  For the last ten years gold has gone up an average of 18% as measured in dollars.  See http://www.goldmoney.com/gold-research/gold-rises-in-2010-to-end-a-stell...

2)  For years gold has been going up in all currencies.

3)   Because of the continually irresponsible (and destructive) policies of the Federal Reserve, and the free spending ways of the Federal Government, it is highly unlikely that the debasing of the U. S. dollar will stop anytime soon.  Therefore, I must conclude at some point -- which could be sooner or it could be later -- there will be a dollar crash or default of some sort, similar to (but not exactly like) what occurred in 1933-34 and 1971.

4)  So no matter how the endgame developes, and whether folks like it or not, gold is not an investment, GOLD IS MONEY!  That settles the issue for me. 

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JAG wrote: Sorry, but paper

JAG wrote:

Sorry, but paper gold is someone else's liability, and it is the paper market that determines the economic value of physical gold (today, h/t Ready). So just because one holds only physical gold doesn't necessarily mean that they are immune to the counter party risk within the financial markets. 

Jeff, one important distinction I would like to make is that there are paper markets such as ETF's GLD, SLV which supposedly track the price of gold/silver and then there are two critical paper markets which is the futures market and the lending market. The GLD, SLV ETF's are meant to be trading vehicles for PM's without physically owning them. Now there is a camp that argues that paper vast exceeds the actual physical and therefore naked shorting leads to suppressed PM prices. I am not saying there is no truth to this argument, but I don't think this paints the full picture.

I believe the futures market and the metals lending market have a more drastic effect on the physical metal spot prices, than these paper trading vehicles. Decreased participation in the futures market or in other words - people unwilling to part with their metal causes backwardation and thus increased spot prices to get the marginal seller to sell the metal. Lending market also has an important effect on the spot price because metals can be borrowed short to lend long (just the same way banks take our demand deposits and make long-term loans using them), which causes price distortions as well. 

There are ways to track the activity in futures/lending market using bases (see www.bullionbasis.com ) and thereby we can make a reasonable prediction on future track of PM's. I think silver is in a more persistent backwardation than gold at the moment.

JAG wrote:

------------------------------------------------------------------------------------------------------------------------------------------------

Captain Sheeple is Done! When I look back over this enjoyable discussion, I must admit that I underestimated just how entrenched the pro-gold argument has become in the belief structure and identity of this community. I offered my critique in the spirit of Dr. M's opening statement to the Crash Course, where he said:

I get no pleasure in playing the "black sheep" of the community when it comes to this issue, but if I hold a different perspective than the collective, I owe it to this community to express it. After all, isn't that what we all truly value about this community, the fact that it holds a different perspective than the majority?

Precisely and the very reason I am a member of this community. I don't know if I can speak for others, but my pro-gold argument is mostly based on facts (as explained in my other posts) and also in my belief that the politicians won't man up and make the necessary spending cuts, curtail growth (which as we learn time and again through Chris that it is not necessarily a good thing). 

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Ready
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JAG

JAG wrote:

Sorry, but paper gold is someone else's liability.

I am in complete agreement with this statement

JAG wrote:

------------------------------------------------------------------------------------------------------------------------------------------------

Captain Sheeple is Done!

I get no pleasure in playing the "black sheep" of the community when it comes to this issue, but if I hold a different perspective than the collective, I owe it to this community to express it. After all, isn't that what we all truly value about this community, the fact that it holds a different perspective than the majority?

Public thank you to JAG for being intellectually honest. I couldn't wish for a better sounding board and checker of my beliefs vs. facts circuit.

JAG wrote:

You guys have a great 4th of July.

U2.

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Ready
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Sundarb, I don't have a lot

Sundarb,

I don't have a lot of time or bandwidth, but did you just say that the le4nding market and the futures market are not someone else's liability? Maybe I have a lack of understanding that you can help me with here, becuase I would have said that they clearly were.

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sundarb
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Ready wrote: Sundarb, I

Ready wrote:

Sundarb,

I don't have a lot of time or bandwidth, but did you just say that the le4nding market and the futures market are not someone else's liability? Maybe I have a lack of understanding that you can help me with here, becuase I would have said that they clearly were.

No, I did not mean that. What I meant is that if you own the physical, the asset itself is no one's liability at the same time. Isn't that a true statement? 

This is not true with stocks or even cash, because they can both flat out go to zero. Sure gold's economic value measured in fiat dollars is continuously going to vary at any given time frame. and the economic value, again measured in dollars is liable to the activities of futures and the lending market. But what are we most worried about here? Short term trading in and out of the market or looking at the big picture and making an investment? If you're worried about short term trading in and out, you can get burnt if you look at just the spot market trend. That's where the basis will help. If you're concerned about the big picture and making an investment, then buying the dips and relaxing is the best way. Because of the inherent instability in the debt based monetary system, gold will do well.

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Denny Johnson
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Pastureland

Hey Jeff,

Pastureland.....now there's something we can agree on.Smile

You have a great weekend as well.

Best wishes

Denny

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sofistek
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Doug wrote:Are you

Doug wrote:
Are you suggesting that somehow life is less fulfilling if you own gold?

No, not at the moment. If you are one of the select few who own gold during the collapse, it may be less and less satisfying having to expend more and more resources to protect what you have and having fewer and fewer friends who are able to stay in your circle. As others possibly start to fend for themselves, their lives could be much more satisfying than those who continue to try to buy their existence with gold.

Doug wrote:
It has been stressed frequently here that people, certainly including myself, own PMs because we don't see any good alternatives for preserving purchasing power.

Yup, sounds reasonable if you're in the part of society that hasn't been overtaken by collapse. After that, I'm not sure how long it will take for gold to be a common enough means of exchange for the investment to have seemed worthwhile. However, in the short term, it's probably a reasonable hedge against your particular bank going bankrupt and unable to pay you your savings. If your government decides that gold should not be held by individuals, then it may not be a good investment even in the short term. Investments are always a gamble.

Doug wrote:
If, like me, you expect greater inflation coming down the road (according to John Williams and my personal experience, it's already here), where do you put that cash?

Buy tools. Buy land. Go on courses.

Doug wrote:
I'm not interested in hearing about all the wonderful preparations you can make with that cash, I'm already there.  I don't care how well you're prepared in terms of sustainable land, things and skills, there is still a financial aspect to our lives that has to be acknowledged.

Whilst there is some form of government that can impose taxes on you, I agree. I hope they take gold as payment. But, if you're all set, then it doesn't really matter where you put your excess cash. After all, it's excess, isn't it? Give it to a charity.

Doug wrote:
How many of us are living completely self-contained lives where we have no need of a medium of exchange beyond barter?  Not even the Amish are that secure.

I thought hoarding gold was a long term thing. Sure, barter is not yet a medium of exchange, but you also are not going to be using your gold as such tomorrow. As society breaks apart, I would think barter would become much more prevalent than gold as money, at least for a while.

Doug wrote:
Once you acknowledge that some store of financial value is necessary

Well, I suppose that's it, I don't, at least long term. Long term, the only things that matter are the skills and knowledge that your community has managed to acquire.

Doug wrote:
I'm just trying to see that my family and I don't become wards of the state, as it is increasingly clear that the 'state' can't afford us.

Then make sure you're not dependent on the state.

Tony

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sofistek
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ao wrote:Let me say it one

ao wrote:
Let me say it one final time ... investment in gold does not preclude investment in other "things".

I didn't say it did, at least for those with excess wealth. If one has more than enough wealth to make the short term preparations that are needed (indeed, I seem to remember Chris talking about the urgent need to finish of preparations, and even sell gold, if that is needed to do so), then buy gold if you want. But this article was an out and out sell for gold and silver. That's why I ask what are the alternatives? Is this just a strategy for those who have completed their preparations or for those who have more than enough savings and income to do so? If it is, then, as far as I can see, it doesn't matter whether the advice is sound or not.

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sofistek
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Outcast19 wrote:After that,

Outcast19 wrote:
After that, with what tertiary wealth remains, my objective is to hedge against a collapsing financial system by converting 60% of it into a store of value...an alternative medium of exchange.  That would be gold and silver.  I am not aware of any better (or equal) alternative exchange medium.

That's fair enough, outcast. I can't find much fault with that.

Outcast19 wrote:
I'm a 63 year old small business owner hoping to retire in two years

What do you mean by "retire"?

Montana Native wrote:
Saving is a wise thing to do.

Why? Paying off debt and making preparations is a wise thing to do. Perhaps saving enough for property taxes is a wise thing to do but I'm not sure why saving beyond that is wise.

Montana Native wrote:
Things may just sputter along for a lot longer than many well informed folks think possible so a little insurance is a great way to fly.

Yes, they may. How does that affect how you approach the future? Things may also not sputter along, for much longer, for you personally, or for other members of your family, or for anyone. My insurance would be to acquire the skills needed to rely on others, particularly the state, as little as possible.

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I have read all but the last

I have read all but the last two pages of comments as I am short of time since at 3 pm today I'll be flying in a small float plane into the wilderness of the central coast of BC to check out the grizzlies and test my self survival skills. But I really like the debate in these comments sections.

The main comment I have is that people tend to describe economic collapses, and especially the final one to come in the next year or so, as being "wealth destruction" events. I take issue with that characterization, because there is no plausible way for such a huge amount of the world's wealth to simply vaporize over such a short time, save for say a nuclear bomb being dropped or an asteroid hitting the planet somewhere. The amounts of physical productive capital of the world do not change at all over a 2 hour-duration stock market crash or currency devaluation event. Rather, what happens is that the ownership of that wealth shifts, as apparent wealth, or paper promises for wealth, gets destroyed.

What we have is the mother of all ponzi schemes, where holders of paper wealth believe that they are entitled to have access to a certain amount of real world physical things of value. This ponzi scheme is being propped up by the Fed and the 100 trillion dollar plus (quadrillions?) derivatives market. Based on how I put the pieces together, the Fed is able to buy up new Treasury debt and artificially suppress interest rates, while still printing money, while at the same time keeping inflation relatively in check (to tame the masses and keep everyone believing in some magical economic recovery that will never happen), by hiding all that crap in the derivatives, using JP Morgan (apparenlty just an arm of the Fed), and other Wall Street firms. The problem is, this Keynesian activity violates the laws of nature and the crap must be hidden from everyone in the derivatives ponzi scheme, ie. artifical paper entitlements to real assets that could never be honoured in the real world. The crap can't just be papered away. And  the longer this goes on, the longer the artificially low commodity prices will spur overconsumption, which means the final ponzi collapse will be even worse than it otherwise would be. Rob Kirby explains the Fed's ponzi scheme well in his Elephant in the Room article,

http://www.financialsensearchive.com/fsu/editorials/kirby/2009/0804.html

He also just wrote another great article on the topic:

http://news.goldseek.com/GoldSeek/1309532700.php

I also like Eric Sprott's recent analysis of the silver take downs,

http://www.industrymailout.com/Industry/Home/5274/22439/images/0611%20Ca...

The take home message I am getting at is that economic collapses do not destroy wealth; they redistribute ownership of it. The destruction of actual wealth has occurred over the last few decades due to misallocation of capital and consumption patterns; the final crash is merely the "wake up call" where the market realizes what has happened. So the key to maintaining your prosperity is to correctly predict where that wealth ownership redistribution will go (hyperinflation or deflation? In a world of increasingly scarce resources where real prices have been suppressed low for decades by Fed monetary intervention, I have a hard time believing all those new trillions of dollars being printed are going to deflate, and when that money printing must go up exponentially so if and when interest rates rise, and they must at some point, when the derivatives scheme crashes and the dollar is to continue to be the central unit of the monetary system). I just don't see long term deflation being possible in this scenario.

True, gold is not a valuable productive asset since it doesn't do anything. Rather, productive farmland, fisheries, factories, and mineral and energy resources are productive assets. Those are the things people will be scrambling to gain ownership of when the phony paper ponzi scheme crashes, because those are the things the paper wealth is supposedly representing ownership of (but cannot possibly fulfill those obligations; that's why they are printing money and suppressing interest rates!)

I think a well rounded portfolio in all those things could not go wrong in the medium to long term; after all, what else of true productive value is there in the world to have ownership of? And gold and silver will be another hard physical asset which people will automatially flock to when they lose confidence in paper ponzi schemes, so whether gold will form the basis of a new monetary system or not (I hope not, IMHO) is irrelevant for me right now, the point is that it is well positioned to be on the receiving end of a major wave of investment sentiment.

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Gold a Barbarous Relic

Chris, I always enjoy reading your stuff because it is interesting, analytical and well reasoned.  However, I think that your own analysis proves why gold will never revert back to the basis of a monetary system. 

Firstly, you admit that the size of the world economy is vast in comparison to the available gold to back the return to the gold standard and couldn't possibly sustain the world economy.

"In 2008 the total amount of money stock in the world was roughly $60 trillion.

If the world wanted 100% gold backing of all existing money, then the implied price for an ounce of gold is ($60T/987MOz) = $60,790 per troy ounce.

Clearly that's a silly number (or is it?), but even a 10% partial backing of money yields $6,000 per ounce."

But let us assume for arguments sake a country, for example, Poland, decided to revert back to the gold standard.  Of course, gold bugs everywhere would be delighted and pile into the Polish Zltoy with abandon.  Moreover, given the state of the Euro and the American Dollar, even non gold-bugs would pile into the Polish Zltoy.  The Zltoy would skyrocket in value vis a vis every other international currency in the world.   The problem is that such appreciation would kill the competitiveness of the Polish Economy.  Secondly, the Polish Economy would be held hostage to the vagaries of the price of gold.  If the price of gold appreciated to $6,000 per oz as you and other suggest might happen it would make it impossible for the Polish Economy to compete, on the other hand if Poland decided to peg its currency to the price of gold at say its current value of $1,500 per oz, and the price of gold collapsed to $400 per oz then the flip side is that inflation would suddenly become a huge problem.  Morover, the value of the price of gold has more to do with the percieved inflationary risks of the US Economy than the fundamentals of the Polish Economy.  Try managing the Polish economy based on these bizzare influences.  It would be chaotic.

My view is that as a store of value and a medium of exchange, gold was great while it lasted.  It served its purpose, but it does not have a place in the modern international economy.  As you yourself have pointed out there is not enough of it to serve the world economy's needs. For another  it's not flexible enough to manage the dynamics of the modern economy.  Whatever your criticisms of Bernanke and the Feds monetary policy.  So far it has kept the world out of the second great depression.   If the world had been tied to the gold standard as it had been after the First World War it would have guaranteed that the world would now be grinding through a depression even greater than the  1930s.

Moreover, it is my belief that what is holding back the United States from a full recovery is the intransigence of the Republican Right.  There are solutions to the mess we find ourselves in.  You don't have to be Milton Friedman or John Maynard Keynes to figure that out.  Simply raise taxes and cut spending.  The problem in the United States is not economic but political.   Ask yourself what would happen if somehow, mysteriously and magically, Congress behaved like adults and sat down and worked out a credible plan to reduce the debt and tackle entitlements and spending.  Within a year or two the crisis would be over and the United States would have regained the crediblity that everyone - even the Chinese want the United States to have.

The problem is not the debt, its not the Chinese, or Iran, or Al Quada or anybody else.  The problem are those bozos in congress who will do anything to seize power.  Even kill America to get re-elected.

As for your thesis regarding the eventual collapse of the world economy because we are squandering our resources, I fully subscribe to that.  In my opinion you are dead right.

One final thought, you may be right that in the end that the world returns to the gold standard, but this would presuppose a total collapse of the international economy.  However, I don't think owning gold would be much help.  Chaos would reign supreme and it's quite possible we all would have reverted back to barter anyway.  I don't think there is anything one could plan to survive a situation like that.  It seems to me skills, in such an economy would be worth more than anything that gold could buy.

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Dirk Campbell
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store of value

'The only truly long term store of value is productive capacity.' -rhare

I copied that and posted it on my desktop.

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Eye
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With respect to ao's post

Excellent post ao.  I would add that geothermal energy diversifies your energy self sufficiency,  is largely protected ( unlike solar and wind ) and can not be easily stolen because it is underground or inside your house.  Also, keeping a sizable portion of your assets in cash allows you to pay the surprizing increase in real eastate taxes and other levies municipalities will charge those who have adequately prepared.  It's all in the balance.

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Sofistek

Quote:
But, if you're all set, then it doesn't really matter where you put your excess cash. After all, it's excess, isn't it? Give it to a charity.

This is a central failing of your reasoning.  My PMs are not "excess", they are finanacial assets that give my family and me a measure of security.  I've reached an age where I need to seriously be thinking about how I'm going to survive when my physical and possibly mental abilities wane.  All the tools and land in the world aren't going to help me if I can't use them.  Having financial assets allows me to hire or work out some kind of exchange with those who still can do the work.  Your dismissal of the value of financial assets in general and PMs specifically is frivolous and lends no credibility to your argument.

I might add more generally that people here are not addressing the reality that when governments become more predatory in acquiring our wealth, as they are reasonably sure to do, the existing and thriving black markets in this land will grow, perhaps exponentially.  Surprised  Remember, practices like barter are technically black markets.  They are taxable events, though rarely taxed because of the difficulties in doing so.  As gov't practices become more confiscatory, people will find alternatives and substances of traditional value will come to be useful in those markets.

Doug

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Ready
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Well JAG,

I came back from the long weekend ready to start this conversation back up, only to find that you are gone, and we are now debating whether or not savings (of any kind) is a good thing (seriously???? ) and religious dogma's place at CM. On a  PM Special report from CM no less.

*sigh*

See ya around buddy, I'm out.

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Nice try ;)

@Captain Sheeple (JAG)

Nice try, but as most of the people as you said our whole live (the last generation) have been in paper market. And is clear from your post that you still live in this paper market. And yes the speculations you mentioned will continue to work in this paper fiat market. And this is the biggest weakness of your argument.

As I said when you change your perspective i.e. starting to measure your well being by the real material world not by the paper-pipe dreams then you wll find that all your arguments vaporise and become thin air as all the fiat becomes sooner and later.

And yes USA $ is just the next in line... it can happen here, it happened almost everywhere in those last 30-40 years that you prize as perpetual motion machine... do I have to name it .. South America, Asia, Eastern Europe, USSR....all of them experienced hyper or high inflation periods... many currencies disappered.

I'm not saying dollar will disappear just I'm sure it will devalue enought to kill the bulk of the profits of speculators who didn't exited in time..

Again the main mistake most people have is using the wrong measuring rod.

PS> the reason of the long term downtrend in gld was not some miracle of new fiat-paper, but the invention of the microprocessor and technological advances that allowed cheap oil and the followed increase in world wide productivity. This is now tipping off combined with continuous griding steadily increase of the cost of the energy.

The only way this can continue now is something on the scale of "personal cold fusion reactors" if that is ever possible ;) We may be able to find some sort of cheap energy along those lines, but it will be long after current looming crisis is history, something like 30+ years in the future.

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tictac1
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WOW!

I wonder why Christianity is so offensive to people here?  I mean, one line in a lengthy post, and everyone jumps him?!?

Some people here need to wake up to the fact that ALL discussions are both political AND religious, especially discussions involving economics and wealth.

This is because one's axioms, that which is taken for granted in the subtext of every argument, are rooted in one's religion, whether that be Christianity, Islam, Statism, or one of the other smaller players.  I'm actually surprised this isn't obvious to such an astute group. 

We do not interpret data or form opinions in a void.

On the gold issue, I'm of the opinion that 10,000 years of history won't turn on a dime, i.e. gold will not somehow be worthless this time around.  Of course, how do we know the current price is not the product of manipulation to some end we do not currently know about? 

Personally, I'm not worried about being able to sell it later, even with all the imaginable tariffs, taxes, etc.  The government's ability to enforce laws is limited to its ability to use violence, and I think if the "situation" gets bad enough I'm selling gold to make ends meet, the government will have it's hands full just trying to exist.  There already exists a vast blackmarket, in many goods, the government is unable to even slow down.  Most of a government's ability to rule comes from fear, and when people realize just how impotent their governments are, that fear starts to dissolve.

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raptor
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@tictac1 You are right,

@tictac1

You are right, black market opens up at the moment the gov. become too invasive.... so they will get nothing if they try to tax too much.

You can take my word for it.. I lived in a socialist regime ..Just to clarify nobody was allowed to have a company and bussiness everything was nationalized.. Yet almost everybody was doing favors/work for anybody else on the black market w/o giving a dime back to the corrupt government. And socialist regimes were more totallitarian than the current Western democracies at least for now..

The same thing happens everywhere it is human nature... and when the government try to inflate blatantly people will just switch to whatever, doesnt have to be gold and silver !! But most probably will be.

Did the prohobition stopped selling alchohol, no it made it more profitable to whoever took the risk to smuggle it...

Ready's picture
Ready
Status: Platinum Member (Offline)
Joined: Dec 30 2008
Posts: 896
Ready wrote: I came back

Ready wrote:

I came back from the long weekend ready to start this conversation back up, only to find that you are gone, and we are now debating whether or not savings (of any kind) is a good thing (seriously???? ) and religious dogma's place at CM. On a  PM Special report from CM no less.

Apparently, this thread got cleansed just a bit, in case 'yall thought I was smokin' the cleaning rags again. I'd edit the previous post, but I guess it's been too long.

tictac1's picture
tictac1
Status: Silver Member (Offline)
Joined: Sep 25 2009
Posts: 166
Gold Market

On grey/black market value of gold, it's been said that the illegality of trade would lower the price.  While this makes some sense, I cannot think of any other item that gets CHEAPER on the black market.

Value is not what the spot price says, however, it is exactly how much the person you are trying to sell to will pay for it.

On eBay, gold fluctuates, but recently has been quite reasonable-

http://goldkrugerrandferret.com/gold-krugerrand-price/

In the recent past, ebay was very pricey for Krugs, even though the supply was high.

Has anyone attempted to use silver ounce coins to pay for goods/services?  I'm of the opinion that much would depend on the clerk.  When I was a cashier, I would have paid for the customer's goods out of pocket, and kept the silver, but I'm not sure anyone would recognize real silver today.

So if silver right now is at $35/oz, but you can only trade it for $20 worth of goods, that tells you the "street price", so to speak.  Or maybe you can get $40 worth of goods?  Anyone tried this recently?

sofistek's picture
sofistek
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 615
Doug

Doug wrote:
This is a central failing of your reasoning.

Not really. You said, "I'm not interested in hearing about all the wonderful preparations you can make with that cash, I'm already there." and I said (including new emphasis), "If you're all set". If you didn't mean you're all prepared then my "if" becomes irrelevant and we revert back to the argument between buying PMs and preparing. If you are, indeed, all set, then my reasoning is sound. If there is no more that you can do to prepare then any savings you have are excess to requirements, though, of course, you may still have taxes to pay and I've covered that. You make the point about being able to buy in what you need, if you and your family become incapable either of looking after yourselves or of bartering for what you need. But the PMs, if they are accepted in exchange for goods and services, will run out at some stage, either in your lifetime or your family's lifetimes, unless your family can start providing something that other people need - in which case you could always barter than sell.

Doug wrote:
Your dismissal of the value of financial assets in general and PMs specifically is frivolous and lends no credibility to your argument.

Only if your PMs will allow you to do what you say they will. Neither you nor Chris knows that (not that Chris mentioned your proposed use of your PMs, as far as I know). I don't dismiss financial assets; they can be very useful in preparing for a very different future by becoming as self sufficient as possible.

Doug wrote:
Remember, practices like barter are technically black markets.

Sorry, I don't see that, either in the current society or after collapse. Barter is direct exchange of goods and services, instead of through some intermediate mechanism, like money or gold. I don't think I've heard of barter being taxable currently, though I wouldn't put it past governments or dictators to try to do so, in some way.

Doug wrote:
As gov't practices become more confiscatory, people will find alternatives and substances of traditional value will come to be useful in those markets.

Providing governments don't confiscate those substances. Skills will always have value and governments will find it very difficult to confiscate those.

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