Panic on Silver or Gold in 2013? Collapse of the U.S. Dollar?

Thanks "dear heart". In fact I have read these prospectuses, have had tests on the language in them, and have given the same tests. If you will look, you will find identical language in every fund prospectus. It is boilerplate legal protection that every lawyer requires them to say to protect them from lawsuits.

Anyone reading a prospectus and believing this is the REAL advice of the fund simply does not understand the financial world at all. Its one thing to read, but another to comprehend and understand the context in which something is written.

 

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What you are missing is the possibility of default, shich would be deflationary. Of course, they won't call it default. But eventually the debt will be restructured. For example, the Treasury could force the conversion of all bonds held by the Federal Reserve into non-interest bearing perpetual bonds. Nobody would notice or care any more than they cared when the Fed stuffed their balance sheet with worthless assets purchased from banks. Or they could declare that all short term debt is now 100 year debt without changing the coupon rate. Or the government could force all employees to use 5% of their paycheck to buy bonds on some unfavorable terms, or force conversion of 401k and IRA funds into Treasuries. Right now all of these options seem far fetched, but won't be in a real crisis.

It is possible that all of the debt will be monitized, but my guess is that a shadow default will be the preferred course of action once there are no more financing alternatives.

 

The US Constitution stands in the way of a number of these actions especially the ones that force individuals to purchase bonds. The entire point of having the Federal Reserve is that it can take actions which the US Treasury can't directly take with the population and the currency without getting Congress to directly address it in the budget.

When it eventually gets to a political choice of letting the banking system die and the people voting themselves into perpetual servitude the politics will head to the people. This is why they can't save Greece with the tricks and why, they won't be the last country to face this.

 

Fair enough about the coin collecting. I also enjoy it from the non-investing standpoint.

 

Do we have anyone here who leaved through the collapse of USSR?
If anything of the scale happens in US you would be surprised what might happen with some assets one call assets.


I for long stated that for US to start to solve the problem, it needs closing the border for import or impose very high import taxes, especially for those american corps who left the country. Just this one step will start bring production facilities home. Only after this step people might breath and may be will feel some positive effect from QEs or any other measure.

So far nothing special happens ... just people getting unemployed ... in some distant time they get hungry ... then they smash the government ... then it might be to late

 

Self-edited political post

 

In the event of a default gold will not be worth as much denominated in today's dollars, but the dollars themselves will not be worth anything because the promises behind them will have been broken. Gold will retain your wealth in a hyperinflation, or keep you from being flat broke in a default. The only way it loses out to currency is a deflation without default which is not possible since national debt is growing at an exponential rate that GDP cannot possibly keep up with. The only possible outcomes are default or hyperinflation, with any deflationary pressure being a temporary segway.

Sure they could cut the budget in half, or raise interest rates to Volcker-like levels, but either of those actions would cripple the economy by either cutting the government cheese which accounts not only for a large portion of jobs but enables people to keep spending money that is keeping a lot of companies afloat, and raising interest rates will blow up the balance sheets of any company that has outstanding debt. So these are not viable options in the world we live in today.

Whether the outcome is hyperinflation or default stocks and bonds will both leave you up a creek. In either case the money will be no good, corporations will not be in a position to do commerce until a new system emerges, bonds will become worthless in a default for the same reason that currency would or else fail to hold value in a hyperinflation, and when all the high frequency algorithms drop away leaving the $1.7 quadrillion derivatives bubble to its own devices there is not a financial vehicle in cyberspace that will be safe. This may take some time to play out, and certainly stocks will be of great benefit when the next round of QE kicks off, but that's not a safe haven by any means nor it is a good place to keep your money for the long haul even if it has been in the past.

 

On the contrary, dollars will be in great demand in a deflationary-default situation as people scramble to get liquid and get out of their investments in debt securities. And folks with debt will be scrambling for dollars to service and pay down their debt. It's just the way it goes.

 

Deflation yes, default no. In a default the promies of the USGov will be null and void, nobody will trust the bonds or the currency. A new currency will need to be issued to regain that trust.

 

Default is a form of deflation. Nobody blinked when the Fed bought worthless bank assets, and they wouldn't dump the dollar because of a restructuring of Treasury debt either. Instead, they would flee to dollars to get out of bonds. We'll have to wait and see who is right about this one.

Edit: I'm picking up a pattern in these threads. If the Fed prints money to pay off the debt, we'll have hyperinflation. If the debt is restructured/defaulted, we'll have hyperinflation. If we continue doing what we've always done. We'll have hyperinflation. If gold prices rise, it's a sign of a falling dollar. If gold prices drop, it's a sign of manipulation to hide the falling dollar. It's okay to like gold, but to be unable to accept any scenario that might lead to lower gold prices is a dangerous investment viewpoint.

 

EVERYTHING in a capitalist society can go down. Cloud is right, it scares me also how some believe there is literally no circumstance in which PM could go down. By "going down", remember, we are talking about it not going up by 3% of so a year, since that is the purchasing value you lose every year holding a non-dividend/interest bearing asset. So, if PM stayed steady for a decade, you just lost 30.48% of your money. It can happen, and people should always remember staying steady is losing money for a commodity, let alone going down in nominal value.

 

First, who here has said that gold can't go down? I challenge you to to find a post here from the regular forumers who have said this. Second, if they are so foolish, why would this scare you? If you are referring to the greater public, I will point out the vast majority of people these days don't own gold.

I find that these constant false arguments, endless platitudes on what others are doing and hence you are superior because you know better, and personal anecdotes given as proof far more distracting than people who are positive on gold. IMO, such tactics are used when people can't make a logical case for where they stand. If you think Gold or Silver are going down then state your reasons. But pontificating on a red herring argument of being "scared" for the poor people who think otherwise, isn't an argument.

(Though I don't mind if you and Cloud continue your "bromance". I find it amusing.)

 

I agree they are in the same neck of the woods. The difference is that in a default you are telling the rest of the world that you aren't willing to pay your bills. Thus nobody wants to buy your debt, thus you can no longer finance your debt without money printing unless you junk the currency and start anew. The end result is either hyperinflation or the trash can, neither of which are good for cash even though deflation itself is good for cash.

I'm not saying hyperinflation is a given, that's dependent on monetary policy. Although the pattern of monetary debasement has been quite consistent over the years. I'm also not saying that gold and silver will gain in value. They could very well lose value, but one thing they can't do is go to zero. Currency, stocks, and bonds all have this possibility even if it is a miniscule one. Say gold goes to $100/oz one day, and the next day your dollars are worth zero, you'll be glad you bought at $2000/oz just to have attained some while it was possible to do so. My goal has never been to maximize my profits, but rather to maximize my ounces.

 

currency markets are cyclical, to much is focused on the euro and yen, which comprise approximately 70% of the dollar index, the real currencies that should be watched when trading/investing in silver are the Canadian dollar, Indian rupee, Chine yuan, australian dollar. THe euro is out of favor now, strange, as the last year the best thing to happen to the US was the SP downgrade, as the dollar rallied against other majors, and bonds went straight up. SIlveer and Gold are most likely near there year bottom on Thurday, as theose people who wold at 26.70 and 1528 did not want to. Another thing bullish metlas and bearish dollar right now, is Missouri is in the proccess of trying to pass a law, in which bullion account couldn be used as collateral acounts similar to stocks and and margin account, I dont know all the specs, but multiple states are making it a currency, Mexico will most likely to be the first major country to put it backin coinage, once the general pop gets wind of that, it should be a moonshot up..............fyi only ..........qsilver007

 

And a dangerous way of thinking, as well as irresponsible.

 

We saw the resulot of the Fed hammering the big banks to sell gold and drive the price down from the near $1800 level it had reached. Then the bottom was just below $1600 and the rise began, with nearly 100 gained in two days. I am thinking the 1800 level is sustainable next year. The dollar will lose some value, but the influence over the rest of the world won;t be so effective. Today, nearly 5 billion people can legally own gold where they live. Half of those can actually buy it over the internet. Small investors can mark the value, although the big traders will have the greatest impact still. But small investors are more in for the long haul. So I am calling for 1800 gold with 32 Silver.

 

I actually agree with both you and Cloud in this regard. To assume gold has to go up is foolish. However, if the worst were to happen and metals become one of the only reliable stores value it's not the sort of thing you'll be able to play catch up on. By that time the ship will have sailed. For those who are trying to turn a profit, maybe best to stay in the stock market. Gold is for wealth preservation and safe haven. Although I do still believe silver will be the best long term play with gold also being a good play. Short term, who knows.

 

Good answer. Silver and Gold will outpace the dollar. But what won't?