QE2: The Road to a Gold Standard (Incredibly important economics read re. impending Hyperinflation)

Kitco ^ | February 23, 2011

[UnwashedPeasant]

"The Perth Mint offer a truly excellent service."

It looks like The Perth Mint charges more than $8 over spot for the 1-oz silver coins. You can get American Silver Eagles for $2.70 to $2.90 over spot from several US sellers and then hide it in the woods, or whatever. What services do you get from The Perth Mint? And do they have better pricing than what I found?

[agere_contra]

Good to know you! I was agreeably suprised by your detachment from the reserve currency issue, and now I understand it.

The devaluation and its aftermath are going to be bad for most Americans - and horribly traumatic for anyone in cash. Also: the current US Govt will make the same deliberate mistakes as the Weimar Govt. They will print more money and keep upping the pay of public sector unions while everyone else starves. Depend on it.

This is why it’s vital that FReepers (on both sides of the Atlantic, but especially US FReepers) get into hard assets and defend those hard assets. Freepers must not allow their feathers to be plucked by this freakish new Stalin in the White House.

[dennisw]

lot o timely info here. thanks for posting!

[El Laton Caliente]

If this follows the 1978 to 1982 model, I'm not sure a mortgage is a bad thing. Yes we still have the Fed, .GOV and the Banks kicking the can down the road on the second round of repos which will force housing prices down. However, with hyperinflation, housing prices would go up just not as fast as other tangible goods.

Wages should inflate also as they did in the Karter stagflation, but, as last time, not as fast as cost of living. Still this devalues the mortgage so it could be paid back in inflated dollars.

[Jet Jaguar]

Goldbug Ping.

[agere_contra]

Oh, no, don't buy coins from them. Sorry for the confusion. The Perth Mint deal I'm thinking of is the depository.

You open an account and buy Gold in their vaults (you don't have to spend 250,000 AUD, you simply pay ~3% overheads if you are paying less. I don't know what the minimum buy is, I would guess about 10,000 USD). 2% is the standard above-spot for small Gold bullion buys I can get here in the UK: but of course the Perth Mint has to charge for the secure storage.

Perth Depository Gold is not physical hold-in-your-hand gold: it's physical hold-it-in-Perth gold (which is both its atraction and its flaw). Use it to hold the value of money you won't need until the Palin Presidency.

Or you can buy PMG on the Australian Stock Exchange. This acts somewhat like a Gold ETF (uh-oh), but by law is fully backed by gold. It is not a share issue, but is a little more complex. The site has FAQ to help you if this interests you.

[agere_contra]

Ah, but it is precisly this devaluation of mortgages which means that - quite suddenly after D-Month - no-one in their right mind will offer a mortgage on anything but a robust index-linked basis.

And given the insane lag on repossessions in the US housing market, lenders will find a way to stop lending altogether. The Mortgage-lending business will become a licence to lose money.

House-buying credit will dry up: house prices will drop like a stone. The Obama government will no doubt do something toxic to make sure that 'norities can buy houses at the expense of the middle class, but the main effect will be that Houses will only be traded for cash.

If you have the liquidity, you will be able to buy your dream house CHEAP sometime in the next two years. If you are currently paying a fixed mortgage you will get your current house for free. If you are paying an index linked mortage then you will lose big time - until Obama bails you out with other people's money.

Hope this is helpful.

P.S. One thing that is coming over in this thread are the deranged and toxic things that Bambo will doubtless do after D-month. Worth a thread in its own right, perhaps.

[agere_contra]

Wages should inflate also as they did in the Karter stagflation, but, as last time, not as fast as cost of living

Thanks for reminding me. This won't be stagflation. It will be a single sharp devaluation event, with a slower decline afterwards.

After D-month: private sector pay and public sector pay will sharply diverge as the Government flails about paying out ever larger amounts of money to bloated public sector unions - while the private sector grapples with increased oil prices and increased cost-of-doing-business.

Think FR hates public sector unions now? Wait twelve months. Government 'workers' will be eating at the Ritz while taxpayers (those who don't own gold) starve.

[El Laton Caliente]

We just bought a house on 43 acres of timber last April. Prices had dropped some. The fixed mortgage rates were good. I felt it was time.

[El Laton Caliente]

If the Fed & Government did a single large devaluation they would never sell another treasury bond. If they can't borrow how are they going to increase Federal employees’ wages? The only way I see is to roll the presses and that would take us down the Weimar Republic route and that would not be a slow decline.

[agere_contra]

Excellent point.

I think if it got to a point where your Govt really couldn’t print money any more - they would still do it.

But if hauled up by Congress or Rand Paul: they would sell something tangible - a supercarrier, the gold in Fort Knox, missile secrets or YellowStone Park - and pay for their union buddies that way. They are with the Unions to the death. Kaplaa!!

[weef]

Great advice, especially this one:

If you buy physical Gold/Silver, tell only one person where it is, don’t store it all in one place and don’t put any in a Bank.

[weef]

What you don't want is a lot of cash or stocks that will drop like a rock. Banks, luxury item producers, entertainment companies are examples.

Great point.

Regarding your land comment, I own some land (just 3 ac) in semi-suburbia that will never serve as a bug out location so I'm actually contemplating selling that now to buy more silver/gold. When things get tough I don't see that land offering me any benefits.

[Stentor]

...gold in Fort Knox...

Might want to pick something else to sell unless you can rehab Bernie real fast.

[PA Engineer]

If you buy physical Gold/Silver, tell only one person where it is, don’t store it all in one place and don’t put any in a Bank.

I don't know if you have read Ferfal's Blog, however he made some interesting security points from experience with the financial collapse in Argentina.

One problem was home invasion. People would go to homes under numerous different "normal" pretexts to gain access. Once inside they would take the family hostage and begin to torture the wife or children to find out where the family stash was. Many times it would end up in the death of the family. Other times if they had a diversionary safe to give up the ordeal would end quickly with bandits fleeing. Some times even that would not be sufficient.

Ferfal made some interesting points. Home invaders did not have label of bad guy on them. They looked like just average people going to the residence for normal reasons. Assume as times get worse Americans will begin to witness this type of crime more often. Begin to develop you OpSec skills and use them at all times.

An example would be the average American who has a garage. Before they are fully secure in their cars they open up the door allowing easy entry for the bad guy. Instead, buckle into your car, lock the doors and then with an eye on the mirrors and hand on the ignition, open the door. This will give you many more options for evasion and escape and costs nothing.

These are just some things to consider as you take possession of precious metals or any commodities of value. With our entitlement class I know things are going to get very bad here.

[MSF BU]

Well in the case of hyperinflation perhaps taking out a big mortgage might be a good move? It will be interesting to watch the feds try to keep up COLA’s for pensioners if this happens. Of course, if this happens, the West is screwed as is the East. Oh, and the Chinese holding all of our debt will also be big losers.

[Jack Black]

I’m going to guess you were not a science major? Gold is an element, which means it is composed of only gold atoms
Atoms can only be made or unmade in an atomic reaction. Atom bombs smash apart uranium atoms. All the gold in our solar system was made in an ancient high poweredexplosion of a ancient sun, a supernova. I would not worry about anyone turning sand to gold. B

[TruthConquers]

“Let’s see. A website that sells gold and silver is saying here are the reasons why you should quickly buy gold and silver.
There is much truth in the article, but understand that it has a biased view.”

Well, the writer of the article is NOT the owner of this web site. Kitco does sell gold and silver, but it always has a section to linked articles about gold, silver and the markets like COMEX. The writer of this article has his own web site, and he sells a newsletter. He does not sell gold or silver.

FYI

[bert]

Check my posts of 5 months and even a year ago.......

Gold Standard.....I told you so.

America will likely be forced by some little players going on the gold standard first.

[bert]

-——how do we stop being wiped out at that time? Investing in physical gold and silver only? ———

There is no certainty. There is no magic solution

My thoughts.....

It also depends on you circumstances. If you have wealth, invest in inflation hedges. The writer seems to think gold is a good bet and silver better. another is energy related companies. You can’t buy and stockpile oil but you can buy Exxon or a basket of energy companies in a mutual fund. You can buy food related companies. ADM is one. Realestate might be ok, especially real estate or property away from the mega cities. A gold mutual fund is purchaceing share of companies with gold in the ground. (my favorite)

If you do not possess and need to guard wealth, the situation is different. A good choice would be to buy food. You can go to Sam’s or other such and buy quantities for hundreds or perhaps a few thousand dollars. The same process can be taken buy shopping and learning who has the best price on peas and peaches and flour and corn meal and dry beans and rice. Don’t consider it as consuming, but investing.

Savings in the bank will deteriorate as the $ further devalues against all the various food items. Lots of folks here including at least one talk about lead and brass. To that I say horse hocky. While it might be prudent to a point, beyond that point it is basically worthless. Better to discretely store food and tell no one. If you are not in a big city the need for ammo diminishes with the distance away. Being out of gas, the strapping freaks aren’t going to hike 50 miles to get you. If you live in a big city....that requires serious consideration. Stay? Move?

Lastly, this storm will pass. A long term bet on America is pretty safe. The problem is stashing assets or stuff to weather the certain storm.