Gold/silver paper smackdown coming?

Anybody buying precious metals with the intent to sell them for paper dollars missed the point entirely. Gold and silver are the money that can't be devalued by inflation. Sure we need dealers in every market, but that aspect is not unique to this one.

 

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If you ever plan on spending your PM you will need to convert the PM to whatever is accepted as money during that time period. This could be shells or YEN we don't know. Whether we agree with it or not USD are considered money to 99.9%(estimate) of Americans. With the sheer size of the GLOBAL economy and the use of electronic banking I don't see PM being exchanged physically as a form of money.

 

Except, you know, pricing information...

 

Most stackers will be satisfied, over the next ten years, to merely PRESERVE the purchasing power of their present liquid assets. They are not traders.

Just for fun, assume that today, you can get a decent quick lunch at Wendy's for $5.75 -- or about 25 cents in silver. In 2023, due to hyperinflation and the [petro]dollar's replacement as the primary "oil" currency, that same meal costs you $20. Silver has climbed to $95 per ounce, so that your Wendy's excursion costs you about 21 cents in silver.

You have made a smallish profit on your silver in terms of purchasing power, but you have survived for ten years.

However, people who did not diversify and "protect" their bank accounts and insurance policies and stocks/bonds, etc. -- they have been screwed, big time, and most are now permanently impoverished, never to recover, and their children, with nothing to inherit, are doomed to a lifetime in the underclass full of frustration, discontent, rage, and malice toward others.

The stacker's time frame is a MINIMUM of 10 years.

Worse, some new flavor of fiat money may already have been put into place, to fool the people again. You can read about this inevitable and easily-explainable process in dozens of countries over the past 200 years. We are not immune.

 

My question sir would be who has all of their money in FRNs? I have some in my house, some in farmland, some in PM, some in collectible coins, (consider that "wasted" money though), some in stocks, some in bonds, and some in money market. If your scenario played out, I only see bonds and money market affected really, as everything else should long term adjust with inflation. Some say stocks wouldn't, but I think they would eventually since its ownership of physical things, (at least my stocks are), and their debt would become cheaper.

So, as protection against inflation I agree PM is fine and prudent, my only point is MANY things are also prudent for that scenario.

Look back in history, the owners of the land, bulidings, and other "things" were not nearly as affected by currency fluctuations as others.

To me, the key is to become an OWNER and not a RENTER. If you are always in debt and scraping by you are at severe risk to almost anything. Only by climbing up the resource ladder by not having debt, buying and paying off a house, saving up to buy a car versus financing, improving your pay, etc can you REALLY get ahead of the game. You have to be an owner of assets. Yes, PM can play a part of that, but I would be nervous about buying PM while you are in debt for car payments, credit card, student loans, etc. Stop being a borrower and start OWNING things, that is my "shortcut" to prosperity.

Edit: Btw, by "things" I mean long term assets. I am not saying to go out and buy a LED tv, a PS3, and think you are doing the "financially right thing".

 

By the way, for those of you who want to foam and froth at the mouth and spew at the monitor screen and scream LIES, LIES with a stentorian voice, go to the website:

www.milesfranklin.com (precious metals dealer, investment adviser, secure warehouse operator, and other functions)

and sign up for "Ranting Andy Hoffman's" free daily email. He WILL make you crazy. I read every word, every day.

 

This is true if you plan on transacting in dollars. However, linearly growing GDP (which is now nominally negative in Q4 2012, and has been actually negative when adjusted for inflation since 2008) cannot possibly sustain exponentially growing debt so dollars are on their way out. That's what I meant by my previous statement. In the meantime metals will protect you from the ongoing currency devaluation. Also, there is no reason why people can't transact in metals. It will be a matter of preference between dealing parties. Typically people who own metals are willing to trade for them. Although if you wanted to barter with me we'd be doing some melting first It doesn't matter what the global economy does except when you are dealing with a financial institution or government. Just look at what they are doing in Greece with their Tem coupons. There are over 4,000 gold dealers in Attica alone.

 

I said substantive. If you believe the price is accurate feel free, but I know that it is not.

sub·stan·tive
/ˈsʌbstəntɪv/ Show Spelled [suhb-stuhn-tiv] Show IPA
noun Grammar.
belonging to the real nature or essential part of a thing; essential.
real or actual.

 

Kyle Bass pointed out on TV the other day that the Zimbabwe stock market was the best performer last decade, but your entire portfolio would only buy you about 3 eggs. The only thing out of all these investments you've outlined that would actually preserve buying power through a hyperinflation or a default is metals and maybe housing, but housing is not portable and you may end up having to stand your ground to protect it. Although housing is dependent on the Fed printing $40 billion per month just like bonds.

Also, buying a house today essentially amounts to taking out a loan for many years worth of income. "Owning" a house is not the same thing as taking out a mortgage. I agree with your line of thinking, which is why I hold metals. I actually own them. I do have a mortgage and will hopefully one day own my house, but it is debt, not ownership until it is paid off.

 

So those PM miners I own from all over the world will just be junk? My farmland will be worthless, because the corn coming off it is not "portable" and China will stop buying US soybeans?

Just confused.

 

Here's J. P. Morgan data as of a few weeks ago:

In the fall of 2012, JPMorgan added a whopping 24,000 new short contracts and increased its total silver short position to 38,000 contracts at the end of November. This is the equivalent of 190 million oz. and is equal to 25% of world annual mine production and 35% of the entire COMEX short​

-Ted Butler, ButlerResearch.com​

 

They are the market maker. Was there more interest in purchasing contracts? What did volumes do?

This is the kind of gasoline thrown into the fire of a public who doesn't understand the inner workings of the market that lead to incorrect conclusions.

You do know that they will be needing to BUY these back before expiration, right? Every month JPM is the largest BUYER of these contracts before they expire.

Bottom line, without JPM selling shorts, this market will freeze up. IDK if the AMOUNT they sell is correct or not, but neither does anyone sitting here reading this unless they work on this issue at COMEX. Short of that, I simply view it as throwing out data that out of context is meaningless.

Just my opinion.

Btw, I wonder how much Ted Butler charges at butlerresearch.com. He seems to have made a living for a very long time reporting the exact same information. He was saying the same stuff over a decade ago when silver was $5. If its a "conspiracy" its the worst one ever devised.

Edit: I apologize Doug. I think I was a little too harsh. Any data is welcomed to be posted. I think I just jumped to argue against the conclusion I felt others would draw from this data. I did not mean to make it seem I did not appreciate your post sir.

 

Please note I said in a hyperinflation or default. In the first scenario the price of goods and services rises so fast that there cannot be any semblance of price discovery. In the second scenario the currency would cease to be desired for use because the promises of the government backing the currency have been broken. Since the USD is the world reserve currency it's hard to say what other chain of events may follow.

The PM miners would do fine if they could adjust their business model to use a different currency, and if they could still buy the oil they need, and if the financial system does not go down with the USD, and if their delivery system can also make the same adjustments and continue to function unhindered. Many question marks here, and most of them apply to farmland as well. Although I would rather have farmland personally, it still may require protection. The issue with metals in hand would be what someone is willing to give you for them. Yes metals also require protection, but since they are portable they are much easier to protect than farmland.

 

I always take what the silverbugs say with a grain of salt. On the other hand I take what the mainstream folks say with two grains of salt. It seems like silver never goes to da moon as much as the silverbugs say, nor does it tank as much as the mainstream folks say either. For example this year I think it may stay the same or go up to around $50, since some are saying $100 and others are saying it will crash. $50 is right in the middle. I base this prediction on my immense knowledge and the fact that between $100 and zero is $50. Please don't follow me, since I really don't know actually what's going to happen. I have been buying lately, but that's just because I found some deals.

 

I think silver can go to the moon because of the excess liquidity sloshing through the global financial system that will be looking greedily for the next bubble. Each year, the central banks are printing trillions of dollars to support unsustainable debts. So long as they continue printing money, they are dousing the markets with rocket fuel, and a few things are bound to really take off as a result. On the other hand, nothing is guaranteed, and the markets are influenced by psychology, so silver may just move up in accordance with inflation.

If nations wrote down their debts and deflated the money supply, I'd agree with the bears of the mainstream. I do think by taking the middle ground you are on the right track, tho. I just think a moonshot is much more likely than us seeing $15 per ounce any time soon.

 

I read the Automatic Earth and she thinks that there is so much deleveraging still to come that in the end it will produce deflation. I am not entirely convinced, but I can see how it might happen, given the fact that there was around 1.4 Quadrillion in derivatives out there,and every crazy bet has a counterparty. Someone's making money, but then again someone is losing it too. I think we are going to see saw back and forth between inflation and deflation for a while, meanwhile all of us little people are experiencing the inflation of all the things we really need.

 

Keep in mind that $1.4 quadrillion is MANY TIMES the annual GDP of the entire world. I agree, it is virtually impossible to figure out who holds the counterparty risk, and who is already technically bankrupt.

 

If every bet has a counterparty bet, what difference does it make if it is 1.4 quadrillion worth or 1.4 million worth , or 140 dollars worth? They will cancel out. Yes, some will lose and some will gain, but most have resources to pay off. And usually no one entity is dumb enough to only bet one way, but has hedged over time and how their situation has changed. Everyone didn't go all in all at one time.

 

True. I feel like it's a big bookie joint, placing odds on everything and the house always wins. That's why I keep buying silver.

 

The problem is that some of the counterparties can no longer perform, and no one knows which ones.

If only 5% default, that's still MORE than the entire world's annual GDP. Some of those broken entities may be the ones holding your corporate pension, or other liabilities linked indirectly to YOU.