why

i hate when people compare 1980's silver spike with whats going on today. they're two completely different situations

 

Log in or Sign up to hide this ad.

Yes, yes you can. You can call it simplistic, and it is. Using cheaper money to pay down fixed rate debt is mathematically an advantage to borrowers. Why do you think your famous "banksters" wish to fight inflation so severely?

Btw I didn't come up with the rule, its been a rule for thousands of years. Its called mathematics.

 

I was not comparing it at all if you are referring to me. I was simply relaying what happens in a falling market since many, (most) here have not experienced it. If the market goes up from here, then you will not have to experience it then. I was not making price predictions.

 

i'm hoping this kid is like 10, then it makes sense.

 

I've read statements by a few mining companies saying that it costs them $15.xx to produce an ounce of silver, others $18.xx to produce the same.

If those figures are true, why would anyone believe that they would mine silver at a loss? I don't think silver will drop below the cost to mine it.

 

Anyone who takes two seconds to actually do the math would tell you otherwise. Banksters absolutely have to have inflation and they know it. If you don't understand this then you really don't have a fundamental grasp of how this works.

Periods of high inflation cause two things to happen. Borrowers think they are doing well with it only IF wages rise to counter inflation AND the high inflation doesn't cause a decline in asset prices. It's no advantage to anyone if the house you borrow on can't be sold for what you paid for it when you first took out the loan.

There are millions of homeowners now being foreclosed on, millions more underwater on their mortgages, and even more stuck in short sale conditions. We have had vast, and I mean unprecedented amounts of inflation, but it's not being shown up in the real economy because interest rates are being kept at essentially negative amounts and the banks are then being paid interest to hold this money off the market. The math proves it. Your eyes should prove it but people have a habit of seeing what they want to see.

Inflation /= to the consumer price index. Many people make this mistake.

 

What you continue to miss is that inflation isn't just a measure of the growth in the supply of money. It is [properly] defined as an increase in the supply of money that exceeds the increase in demand for money. Over the last few years, the demand for money to reliquify the financial system has been enormous, so the inflation rate has been more modest than your economic view expects.

Please don't twist this like you usually do and suggest that I'm saying there is no inflation. I'm not. It's just not on the order of magnitude of the money supply increase, which proves the point.

 

Good point. I think the price of any commodity can temporarily fall below the cost of production, but the only way it will stay there for long is if either (1) there are enormous stockpiles to draw upon, or (2) people decide that less of the commodity is needed than in the past.

 

This is true LONG TERM and on the margins. However, short term mines cost money to shut down. Also, I believe the majority of silver is mined as a byproduct. As long as the copper or gold that they are mining is profitable, the silver will continue to be produced.

 

I hear this all the time and want to point out the fallacy, there is no money on the sidelines. All the money is somewhere, it only moves around. So the correct question is how likely is it to move into a pretty metal with little intrinsic value and no production capacity? In full on fear mode with negative real yeilds that pretty metal looks attractive, but in the current environment not so much.

One other point about money on the sidelines. Take a look at the re-balancing going on in the current account surpluses of Japan and China. When they run big surpluses they have to recycle those dollars into something, and it's been treasures, gold, and yen. Their surpluses are dropping sharply and will continue to do so for structural reasons. The decrease in demand from these two economies not recyling massive amounts of US dollars is THE driver. If you want to talk about money on the sidelines they are the whole game, everyone else is just a gnat. Look at the moves in gold, treasures, and yen!!! This is a major move people.

Now, no one can predict the future, but the re-balancing going on in China and Japan is huge. It could be picked up by the oil exporters as they face the same recycling issues, and if oil keeps going up they will have more and more dollars. But, the key point is the people who were driving demand for gold, treasuries, and yen, will not be driving that demand in the future. It could get picked up by others, but it might not. It's one thing to gamble that a trend will continue, it's another thing to gamble that a trend will change.

 

http://www.shadowstats.com/alternate_data/inflation-charts

With respect to the Fed's 2% inflation targeting:

http://kingworldnews.com/kingworldn...er_Spike_as_We_See_the_End_of_the_Dollar.html

http://gata.org/node/10966

 

I do realize this and I agree with your statement with a qualification. It doesn't change anything that I posted. Now for the qualification. Money demand as required by the real wealth creating economy and this would be one of three things: Manufacturing, Resource Extraction, Agriculture. Bankster demand for money has no bearing on Inflation.

We can debate this as much as you like, but it misses the point completely that the simple statement "Inflation is good for Borrowers" is simply incorrect without these other factors being taken into consideration.

As it stands now, The Inflation Rate is extremely high, period.

 

Oh darn... http://www.whitehouse.gov/the-press...order-national-defense-resources-preparedness

 

Hate to break it to you, but you'll be just as bad off. Gold and silver is just as fiat as paper. The value is in the belief it has value, nothing more. Stock up on canned goods if you want to be a doomsdayer.
Guy

 

pmbug,

While I have respect for J. Williams work at shadowstats, I'm not completely convinced that a 1980 [pre internet] measure of inflation is automatically better than the updated version. The economy is very different, as are the purchasing habits of consumers. Maybe the truth lies somewhere in between. Maybe nobody really knows the real inflation rate. But think about it. If the "real" inflation rate was 10%, then the total cost of living today would be about 2.5 times higher than a decade ago, and this clearly is not the case.

Another thought -- getting inflation information from shadowstats, GATA, and Kingworldnews is a little bit like asking the barber if you need a haircut. Their business model depends on belief in rising gold prices, inflation, market manipulation and economic collapse. That isn't proof that those things won't happen, but it's important to understand your information sources.

 

Can you explain why this is relevant to what I posted instead of just posting a link to a long document?

 

Sure, new exec order declaring the pres now has authority to confiscate any and all of that materiel which would create such economy. Read especially Sec 201, 308 and 801. It will only take you a second. Brave new world.

 

^Ahh. What Obama does is meaningless to me. I've already concluded the present administration has no interest in the Constitution. Ironic for a President who claims to be a constitutional lawyer. But no matter. There are no surprises here as I've said before we are in the death throes of another fiat currency and this is just another sign of it.

I have no interest in politics because it doesn't matter who is in Washington. They have already pushed the financial boulder over the cliff so it's too late for the pebbles to do anything about it. Any attempts to fix it will require them to ask for Americans to make a sacrifice. The last president who did this was Jimmy Carter and he has been demonized ever since. For bullion investors, it's on you to understand this and act appropriately.

 

Do you have any logical basis for why silver will be $5-7 again? You repeat it a lot, but I've never seen any substantiation for your reasoning. I have listed the fundamental reasons why I think silver is going higher ad naseum, and I'm not in the mood to type another novel at the moment, but in this case they are irrelevant since the cost of production is at least double your figures and is enough. Now if you do have reasons I am not aware of for your thinking I would be interested to know what they are so I can broaden my perspective.

 

It just depends whether you're a Keynesian or Austrian economist. Austrians define inflation as an increase in the money supply, plain and simple. Keynesians define it as price inflation. Your post is apparently Keynesian, but that doesn't mean Austrians are wrong. They are different and this needs to be clarified in such discussions.

Just because the calculated inflation rate (which mind you has not been accurate for decades) does not reflect the expansion of the money supply doesn't mean inflation hasn't happened to that degree.