Posted on 03/03/2006 7:59:26 AM PST by Killborn
Edited on 03/03/2006 8:11:35 AM PST by Admin Moderator. [history]
Hi Guys,
I hope everyone loaded up on gold (now up 50%)and silver (up 85%) and is happy, because the flip side is very gloomy. The dollar continues to lose value and the resulting decline in American wealth looks like it will cause class warfare. Whether it is only economic warfare making everyone poor or whether it develops into physical violence is still not clear.
Greater than 93% drop in the greenback -
Since the US government decided to use central planning to control interest rates instead of the free market and the gold peg, the dollar has lost more than 93% of its value. For centuries the dollar value of gold hardly moved. Then politicians created the FED early last century.
Do you remember $35 an ounce? I do, and now it's $570. When Alan Greenspan went before congress last year, he was asked how was the US Government going to be able to finance its obligations regarding Social Security (i.e. pay retirement checks).
Greenspan's answer was that it was no problem, they would just issue Government checks. When the senator looked confused, Greenspan added, 'the problem is whether these checks would buy anything of value'.
The economically challenged senators still didn't get it. What good is a monthly check for $10,000 if a loaf of bread costs $10,000.
At his State of the Union speech, Bush lamented he couldn't get Social Security reform through congress. The Democrats, led by Hillary Clinton cheered.
I hope that tape is replayed when retirees riot over their worthless SS checks. But, at least this gives us someone to blame.
Americans aren't saving for their retirement, instead they are going ever deeper into debt, confident the Government will give them a nice retirement check.
Both Republicans and Democrats are spending like drunken sailors. No worries mate, we'll just borrow some more.
Now that Americans aren't saving enough to finance this debt, we have to borrow from foreigners at the rate of $2 billion a day.
The amount of wealth we will have to transfer to these foreigners to repay this $8 trillion debt will bankrupt a whole generation. Unless, of course, we just issue worthless Government checks and inflate away the value of the dollar.
But who are our central planners going to blame. There must be someone. How about Wal-Mart. Maryland central planners are going to force health care costs for employees, their spouses, children, parents, relatives, pets, etc. onto Wal-Mart. Maybe we can have a windfall profits tax to pay for our debt.
The central planners in Russia and China never let windfall profits happen. Maybe we just won't let foreigners spend the dollars they so foolishly accepted. We can call it National Security and not let them buy Unocal and not let them operate our ports. When they stop accepting our dollars, we can be happy with all our paper money, happy and poor.
I still think the best protection from our central planners are hard assets like gold, silver, oil sands, gas, etc. Then you don't have to worry when they let the printing presses roll.
Tom
Yeah. If you dig gold out of the ground you can trade it for paper money. But if you print paper money and try to trade it for gold they put you in jail.
Bottom line, both are "hard" to get (only for different reasons), and thus worth some value because people want them. Since the *only* reason either are valuable is because people want them and can trade them for other things, then they are the same.
Go for it. Speculating is much classier than casinos, any day.
I'm not any kind of expert, but if what palmer says in #97 is true then we're already into a speculative market. If gold can be dug from the ground for less than current market prices, then guaranteed it will come back down someday unless energy prices cause production costs to rise. As far as I know gold doesn't have any kind of cartel controlling it the way that deBeers controls the diamond market, so it will eventually bounce around somewhere a bit above production costs.
I don't know that I agree that gold will continue up very much. Perhaps it will, given all the advertising it's getting, and people are getting out of the real estate market and perhaps will want a place to put their new cash. But I've just seen this speculative gold run-up before, and heard people swear how important it is for years and it just hasn't panned out that way since the early 80's. I'm just not buyin it.
Investing in commodities is FAR riskier than investing in stocks.
What would have happened if you invested in natural gas three months around the end of last year? The NASDAQ plunge wasn't nearly as sudden.
Interesting. Thank you.
That too. I'd rather get cash the old fashion way.
Ultimately I will trade my gold (or silver) for something, but in the meantime it I'm saving, and to some extent diversifying. Paper isn't as savable as PM's, although I do have some cash hidden as well (I believe in diversification in savings).
So did I. That was actually a bit of a no-brainer.
Furthermore, I forsaw the programmer-glut of the early 2000's. I figured a zillion people would proclaim themselves 'computer programmers' for the Y2K profiteering, then when it was finished, there'd be too many people chasing too few jobs.
Zat's what happened.
About gold? I think gold will slowly increase as the dollar continues to become a somewhat less influential currency. But I don't forsee gold going out-of-control, pricewise, because it simply does not produce wealth. It only stores it. It's like holding on to money. No interest, no profits.
It certainly could go up higher... in fact, it could go up LOTS higher. The problem is knowing when to get off the ride. Those who agree with the original post NEVER get off because gold is the ONLY asset they can hold when the world is falling apart (not that it would be the smart thing to do even in that case).
When will the ride be over? I have no idea. It may be today, or it may double in price in six months. But when it hits the wall it will fall apart faster than any of us would be able to yell "SELL!!!". That's how these things work.
Free advice (worth every penny) to anyone who wants to take it. Any time you see someone talk about "bubbles" and they restrict their comments to the current real estate and/or stock markets while ignoring commodity prices... run, do not walk, to the exits. They don't know what they're talking about. The price of gold today has very little to do with any intrinsic value... it's all speculation. There's nothing that says you'll be the last sucker on that pyramid... you might still make a killing. But don't count on it.
Well, being able to see the Dot bomb already puts you and him over a significant number of Americans. :)
So what do you think about his message?
Dollars are speculative until you trade them for something. I don't save too much in dollars although I have some cash in my stock account right now. I save in gold and silver and speculate in mining shares. I had to sell to get my portfolio down from 50% to 33% mining shares. Those are speculative. Gold and silver themselves are for savers especially if you save them for decades.
One thing is for sure, with the surge in gold prices in the last 4 years, the $50 dollar Kellogg's have gone up well, regardless of condition.
That's how. Thank you.
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