INFLATIONISTS vs. DEFLATIONISTS -- a compendium in progress

[graveday]

What Ninakat said.   If you feel that way, why add to the waste?  I like gold.  On my wife, on my finger, and in my mouth.  Beyond that all I have is a Johnny Bench gold coin a Cincy aunt gave me.  I'm sure it will come in handy sometime.

[alan2102]

Careful cabacaba - the "you can't eat gold" assertion brings out some vicious
alligators around here that won't mind eating you alive!

No one would ever deny the obvious truism that YOU CAN'T EAT GOLD.
The thing that causes the problem is that that truism is never accompanied
by the necessary logical corollary: That you can't pay your bills with MREs.

How many mega-doomers are going to be stuck with basements full of
canned beef stew and bags of rice, having spent the rent money on same?
I don't know. Maybe as many as goldbugs who are stuck with pretty
Canadian maple leafs while all retail food distribution is shut down and
mass starvation sets in.

Ha.  That's my sick sense of humor.

None of us knows what is going to happen. Place your bets. Hedge 'em
as best you can.  Place the biggest bets on the biggest likelihoods, in
your estimation. When estimating, use your OWN head instead of
recycling someone else's ideas.   (Surely I didn't need to say that.)

[DoomandGloom]

Yup don't put all your eggs in one basket - for my money I like a cabin in the mountains with a few acres of land and a steam...

[graveday]

That would be stream, I suppose.  I would prefer a spring.  The stream comes from somewhere else and can be messed up there.   

[DoomandGloom]

That would be stream, I suppose.  I would prefer a spring.  The stream comes from somewhere else and can be messed up there.   

Ok so change it to a nice "steam" bath - teak of course

[rocketgirl]

Has anyone heard the idea of banks ability to change the currency they'll accept as payment on a mortgage?   My contract says payable in US dollars, another reason to hold US dollars and not put too much toward PM's.  Just wondering if anyone has info on that.  Thanks.

[graveday]

Well, right now you can trade your PMs for ever growing amounts of dollars.

[yellowrocker]

US currency has the statement "This note is legal tender for all debts, public and private". It's my understanding that all US creditors have to accept Federal currency notes as payment, no matter what the contract says.

[alan2102]

US currency has the statement "This note is legal tender for all debts, public and private".

.... and soon, it will be legal TINDER, useful for getting campfires going.   

[Tug Again]

My 2 cents in the inflation vs. deflation debate. First, a casual observation: We hear that deflation is a contraction of money and credit, while inflation is an expansion of money supply and credit...what the Big They has done is contract the money and credit supply to main street and expand the Money and credit supply to Wall Street...if everybody had a shot at a chunk of that 12 trillion that the feds gave Wall Street, a loaf of bread would already be 6 bucks. The 12 trillion has, of course allowed the Wall street Boyz to build another bubble...just my 2 cents.

My gut tells me that when it comes to inflation vs. deflation, we are gonna have some of both. The things that were overvalued--our houses, stocks, bonds etc. are gonna fall in price...so much of their value was hallucinatory...at the same time, anything REAL that has REAL utility--food, gas, good tools, commodities, an acre of good bottom land--is gonna increase in price in dollars and in other currencies. The commodities are getting more scarce and the value of paper assets (currencies) will fall...

You can't build a retirement/portfolio out of paper,promises (pension and Social Sec.) and your house any more. We're gonna have own some REAL money generating stuff...a store, a mill, a power generator of some type, a farm (that produces max yields with minimal petroleum inputs)...that we can leave to our children (who run it while they "buy" it from us in our retirement...again, just my 2 cents

Tug

[graveday]

We're gonna have own some REAL money generating stuff...a store, a mill, a power generator of some type, a farm (that produces max yields with minimal petroleum inputs)...that we can leave to our children (who run it while they "buy" it from us in our retirement...again, just my 2 cents

Tug

Assuming they will be interested.
I wish I could find where I read about a British farmer who was also an activist, political but I can't remember how, who got himself arrested.  During his several year internment, his farm went on running flawlessly, managed by his sons, the eldest of which was ten or twelve at the time the father was taken away.  Of course his wife was important too, but I was always impressed by how well he had trained his kids.  I would like to read more about him, but I can't find where I first heard about him to get his name.

[Tug Again]

True, the kids would have to be on board, though many businesses could be sold "outside the family"...just my thoughts on where we're heading and an alternative to the paper/promises/house portfolio that so many are counting on.

Tug

[AntiSocialite]

Has anyone heard the idea of banks ability to change the currency they'll accept as payment on a mortgage?   My contract says payable in US dollars, another reason to hold US dollars and not put too much toward PM's.  Just wondering if anyone has info on that.  Thanks.

Congress has shown a penchant, as of late, to pass bills that *retroactively* affect contract law. A great example of this was the repeal of the Glass-Steagall act in order to make the Citi/Travelers merger legal. Congress also (ostensibly) retains the power of coinage. For now, your mortgage will continue to be redeemable in U.S. dollars. Even if the units are called something different in the future, it is the ratio of your earning power (in dollars, yen, euros, shells, or glitter) that determines your ability to service the debt.

So, if U.S. dollars are, in the future exchanged 5-to-1 for a newly-released U.S. dollar, and your earning power drops by a similar ratio, your ability to service your mortgage will remain constant. If you SAVE current U.S. dollars as a backstop against periods of unemployment to PAY your U.S. dollar-denominated mortgage and the currency is exchanged in the future for a new one, you will retain the ability to service the mortgage in the same ratio as before.

In short, anyone with a mortgage and an ability to earn money to pay it should continue to do so in U.S. dollars.

The DEFLATION you need to worry about is your wages. The INFLATION you need to worry about is in food and energy.

Gold is used as hedge against inflation and currency collapse because:

1. Everyone understands it as a representation of wealth (whether they accept it or not is immaterial).
2. It is indestructible.
3. It is verifiable.
4. It is finite.
5. It is fungible.
6. It is easily traded.

Gold is simply a backstop against currency crises in a world of labor specialization. Unless everyone on the planet suddenly becomes a generalist overnight, then a medium of exchange will be in demand. Dollars currently serve that purpose. Gold serves as a backstop.

[ninakat]

STAGFLATION

Trader Dan Norcini:

Here in picture form is what the destruction of the middle class looks like - the collapsing Dollar has fomented another commodity bubble with prices on all "things tangible" soaring at the same time as wages remain stagnant or drop. This is the "STAGFLATION" of the late 1970's revisited with the exception of the flat wages. Purchasing power for millions of US citizens will now be eroded complements of the hucksters who manage the affairs of the nation's currency.

Click on picture for larger view (Acrobat PDF):

[ninakat]

Inflation segment near the end of this posting, but the author contends that gold is rising in large part due to price inflation. And I agree with his assessment of the Elliot Wave flaws, as evidenced in Robert Prechter's mistaken calls on gold for 6-7 years now. -- ninakat

A Golden Star is (about to be) Born
By Peter Degraaf

(...)



Featured is the weekly gold chart (see original article if image doesn't show above). The question ‘is gold overpriced’ is answered here with an emphatic “NO”.  At $1,070 gold is just 38% above its 200 week moving average, compared to 80% in March 2008 and 57% in July 2008.

The RSI is still below the level reached in March 2008 (blue oval), and the MACD is a long way below the level reached in March 2008 (black oval).

Historically gold produces a short-term bottom towards the end of October, and when this occurs as part of the 7 – 8 week gold cycle, it will likely be the last buying opportunity for a number of months.  Due to some incredibly bullish factors, this October bottom is expected to be shallow.

(...)

Hardly a day goes by that I don’t receive a letter from someone who is spooked by the negative picture painted for gold by some analyst who subscribes to Elliott Wave Analysis.

Pay no attention to the Elliott Wave crowd that warns you of collapsing gold prices!

Their most popular guru is Robert Prechter who has been down on gold for the past 6 or 7 years, and has been wrong all this time!

Here is the problem with applying Elliott Wave analysis to the gold price:

You begin by drawing 5 connected lines that follow a predictable course.  Lines number 1, 3 and 5 are slanted upwards, and #2 and #4 are of the downward slanting type.  Next you fit these lines onto a stock or commodity, in this case the gold price.  You make the pattern fit your expectations, and if you’re stubborn enough and are currently out of the market, you make the pattern look like we’re at the end of #1 or #3 or #5 and due for the start of #2 or #4.

Meanwhile you totally disregard the fundamentals which are always different!

If the fundamentals were always the same, then Elliott Wave analysis would work like a charm.  As it is, these people are like those who drive a car down the freeway while looking only in the rear view mirror without taking into consideration that there are other cars on the road.  The premise used by Elliott Wave mal-practitioners is FLAWED.

Elliott Wave analysis works best when viewed in retrospect!

(...)



Featured is the CPI trend chart courtesy Federal Reserve Bank of St. Louis.  Despite the rhetoric that price inflation is non-existent; this chart shows a steady rise that was interrupted only by the credit crisis plunge during late 2008.  Across the board price inflation is always caused by monetary inflation.  The two go ‘hand-in-hand’, albeit with a delay, as it takes money time to work through the system.

Price inflation is a major driver for a rising gold price.  Price inflation is causing ‘real interest’ rates to turn negative.  When you put money into a savings account you MUST DEDUCT the rate of inflation from your rate of interest.  According to economist John Williams who keeps track of price inflation on his website Shadowstats.com, the rate of price inflation at the moment is +2%.  By the time a saver pays taxes on the interest he or she received from the bank, the ‘net return’ is break-even at best or a negative return at worst.

This causes investors to look for something better. Gold fills that need.

(...)