Important Read! Bob Chapman - International Forecaster article

Buy FS coins...that's the answer! :thumb:

 

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Wow. I feel like I am in Bizarro world after the last few days. Thanks guys for putting the thread back on track!

Now as far as inflation and deflation, I have read that these can co-exist at the same time. Perhaps we can discuss this and how it relates to current monetary policy and as it relates to silver/gold bullion holdings. And how they could co-exist or how they do typically co-exist?

Also, concering the overvaluations of equities that you mentioned (I agree): I went to a Campaign For Liberty event in the Twin Cities in February of this year. I was curious about how inflation would have an impact on equities (it would appear to me that equities would go up). Since the monetary policies currently favor inflation and monetizing debt, is this a correct thesis? Also, how would deflation affect equity prices as well? How would this play in the picture concerning gold/silver bullion?

Since I didn't get my question about equities thoroughly answered at the Campaign For Liberty event, I thought I would bring it here since it is topical in this thread.

My thoughts are there would need to be some sort of market crash overall. Then we would see natural resources, bullion, some other hard assets (probably not real estate) etc. rise while stock prices would remain down depending on the company. And then I could see produced goods dropping in price and maybe wages in some instances too. I could be wrong here but that is why I am asking.

The other thing is how quickly can inflation hit? My point is will there be a window of opportunity to get into equities if known inflation is coming. How will we know when to get in to catch the "reflation" wave on equities? Before they start raising rates? Right after they start raising rates?

And then finally, if we know this is our future, really how much should we keep in bullion and physical PM's? 25%? 50%?

Maybe some of you veterans of the 70's and 80's recession can explain what happened and how now is different or similar to then.

Thanks in advance! :smile

 

One thing that isn't commonly realized is that inflation and deflation is the same disease manifesting itself in two different ways -- the problem is lack of purchasing power. With deflation, there isn't enough money in the hands of people and the value of the assets they own is declining. With inflation, the money in the hands of people just doesn't have enough purchasing power and the value of the assets they own isn't keeping up with the loss of purchasing power of the currency. It is very possible that we will see inflation in the price of necessities at the same time we see deflation in the value of assets. Deflation = lower asset prices.

I wouldn't predict a market crash. Market crashes are very low probability events. But it might be very very difficult to make any money in bonds and stocks for years to come -- or maybe not. How can anyone know for certain?

Inflation has already hit hard with the monetary expansion from the various bailouts. It hasn't hit the prices on the shelves of stores yet because they have been working down old inventory. Since the CPI no longer measures a fixed basket of goods and services, it might not hit the public conscience for another year or perhaps two. Remenber history -- the government ran a "guns and butter" economic policy from the mid-60s onward, but inflation wasn't a problem until the early 70s, and double-digit inflation didn't hit the evening news until the mid-70s.

When inflation hits, don't jump into equities to quickly. I know the theory is that the ownership of things, and stocks, will protect your purchasing power, but it didn't work that way in the 70s and probably won't again. Be patient and the opportunity will come. Real estate did much better in the 70s, but there wasn't as much debt around back then so it might not repeat.

Contrary to everything you hear, holding a large percentage of investment dollars in cash isn't a bad strategy if there is inflation. Sure they are losing purchasing power, but interest rates should be rising by then if we have inflation, and cash is king if we have deflation. Your cash won't lose purchasing power as quickly as markets can crash, so the cash may actually increase in relative purchasing power even if it declines in absolute purchasing power.

Everyone has to decide for themselves how much to hold in bullion. You must reconcile yourself to the fact that there is almost no way to beat the inflation monster. Even if you hold gold, it may become subject to a windfall profits tax or outlawed altogether since societies under duress tend to change the laws to punish the intelligent and the lucky.

Good luck to us all.