Bullion Investing: Concerning the Industry

Discussion in 'Bullion Investing' started by stainless, Sep 27, 2009.

  1. stainless

    stainless ANTONINIVS

    A lot of people invest in bullion try to get mostly silver and gold. The reason is, because if the dollar every becomes to the point were it is worthless, silver and gold will be sky high...however, I don't agree.

    Here is why, in a nutshell:
    If our dollar (US) is worthless then the industry that uses these metals would collapse. While the price for silver would be high, no one would be able to afford it, and thus it eventually would lose demand. The same goes for gold

    Now, some say that silver and gold, people could still use as a barter thing, but I don't think so. The silver bars, people may be skeptic of them (and there may even be a mass shoot out of fake bards at this time). And as far as coin go, well, try convincing the general public that you 1964 Washington is 90% silver.


    thoughts?


    stainless
     
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  3. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    Regarding the first comment, it reminds me of the old Yogi Berra saying, "That bar's so crowded that nobody goes there anymore." Prices are high when demand is high, and even if nobody at CoinTalk could afford even a single ounce, there are plenty of wealthy folks and institutional investors who could throw hundreds of billions of dollars at the metal as a store of value if needed.

    Regarding the second, I don't think anybody should be holding gold and silver to barter with. I think it's a bad mindset to spend time preparing for failure. It's dual functions are to be (1) another asset class to invest in, and (2) a way to get some of your wealth from this side to the other side of a hyperinflation.
     
  4. stainless

    stainless ANTONINIVS


    Agreed, there are people who could do it. But, It would not help the average "investor".

    Besides, if hyperinfaltion DID happen, what would be the point of these billionaires throwing money into something that no one can afford, and they will almost definatly lose mone on at the price they are buying at.


    stainless


    stainless
     
  5. WLhalves

    WLhalves Member

    Well Stainless until the dollar crashes these are only opinions, with that being said I will play. Silver and Gold are great investments. Take a look at what happened to gold at one of the worst economic times in our nations history. Specifically the stock market crash of 1929 http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx

    If you notice from the chart that it remained stable throughout the depression years. Beginning in 1929 and the depression was over in 1933 according to the history books. In fact from the link I provided you can see how it has done from the late 1800 to present day.

    This is a very small world in today's standards. I am more than confident that I will be able to trade my silver or gold for a more desirable currency, in less than a heartbeat. As for people accepting my 1964 quarter, you can bet there are plenty of educated people that sell goods or services that would be aware of the value of silver. Up until this last year, the Liberty Dollar was traded by many merchants all over the United States, just on it's silver content. http://www.libertydollar.org/

    The reason people have stopped trading the Liberty Dollar for goods and services is due to a supreme court trial. The court date is supposed to occur sometime in 2010. Whether they win or lose this coin was traded for goods and services, and it did show that merchants were willing to trade their goods and services for silver.
     
  6. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    I think what you are missing is that if there was hyperinflation, it might be true that US investors could not afford silver. But anybody who kept their money in any currency that did not experience the hyperinflation could afford it. The other thing to remember is that all of the silver is already owned by someone, and they will have no incentive to even want to trade their silver for failing paper currencies no matter how high the price goes. You think of silver as rising in price, but they will see the dollar as falling in value.
     
  7. stainless

    stainless ANTONINIVS


    You are correct, to a point. If we do experience a hyper inflation, the rest of the world will get hit as well (to an extent). Now, which currency should one pick up that is guaranteed not to suffer? It's a giant gamble.

    Also, if what you say that the ones with the currency that does not experience hyper inflation could afford is true (which it is), wouldn't it just make more sense to just hoard their currency? Problem is, I don't think one could possible know of that certain currency that wouldn't experience it.


    stainless
     
  8. fools_gold

    fools_gold Junior Member

    Well Peter Schiff has been talking about hoarding the Yen and remninbi. As he doesn't think they will suffer all that much.

    Also, when argentina/zimbabwe collapsed, I don't think any other countries were greatly affected right?

    I mean, someone from zimbabwe could probably make the same argument that you are right now.

    "Hey, if it costs us $1 million Z dollars to buy water, then NO ONE can afford it!"

    I don't look at my silver buying as an investment per se, I look at it as a way to convert my US dollars into another type of valuable material that has substance backing it. And that is the actual silver/gold.

    If nothing happens, I can always sell it and get my US Dollars back. It's almost a good insurance policy.
     
  9. scottishmoney

    scottishmoney Buh bye

    Your answer is more likely to be found in countries where hyperinflation wipes out the currency with frequency - say Brazil, they go through currencies faster than some people change their underwear. People in places like Brazil tend to put any excess money into anything of value, be it real estate, automobiles, gold, even electronics. That is to say - wise people really don't keep money in banks.

    I have seen this in Ukraine, where you have people not really trusting of banks, banks are less regulated and more prone to failure than even in the USA - and no insurance. The hryvnia currency has lost literally 50% of it's value in the last 18 months. Keeping your funds in dollars is even preferable to keeping it in hryven. I never bothered to have more than 500 hryven because it kept losing value so much.

    Actually I would steer clear of putting money in any foreign funds, especially Chinese RMB - that is a currency which has been artificially undervalued for a long time - giving the impression it should rise in value - which frankly the US Treasury would love - but the Chinese government could pull the plug on the RMB and let it slide down to make their exports cheaper and more attractive than domestic products in the USA.
     
  10. Argento

    Argento Perplexed

    Here's the key failing in all of the discussion to this point. By the time the dollar is actually worthless, a competing currency will already be in place, guaranteed. Most likely this new currency will have been in place for a while by the time the Dollar is literally worth nothing. Hell, the financial powers that be had a plan in place as the economy damn near imploded entirely last Fall. As things backed away from the precipice, talk of that new currency died down but make no mistake, plans for an alternate currency is ready and waiting in the wings should the US economy go so completely off the rails that the Dollar is obliterated. We all caught a little glimpse of it last Fall.

    With a new reserve currency in place, there will be a means to assign value to commodities and hard assets like PM, Oil, Coal, ad nauseum... Your non-Dollar assets will retain their value, it will have a different name (my 1995 W ASE will then be worth $2000 Freedom bucks), but their value relative to purchasing power should remain approximately the same. Your Dollar holdings, if you were foolish to hold on as they circled the drain, will be kaput.

    So, to bring the conversation back full circle, I disagree with your assertion that silver/gold/etc. will lose value as a result of a loss of demand, due to hyperinflation resulting from total loss of the value of the Dollar -- under the simple premise that the Dollar crashing to zero is only likely in the event an alternative is in place and functioning.

    Edit: Also, as an aside, the talk of other nation's currencies crashing and burning is irrelevant to this discussion because those currencies are not the globally accepted reserve. That simple fact adds a HUGE wrinkle to the discussion that has only been touched on so far.
     
  11. scottishmoney

    scottishmoney Buh bye

    In case you have missed it, China, Russia etc. have seriously discussed dumping dollars as reserve currencies. Chinese officials whisper of this frequently - and have encouraged their citizens to hold gold. The Chinese can call in their Treasuries and then you would see the dollar plummet like those "other nation's currencies".

    It is not just an economic measure, but a political one. The USA has a bloody nose in world opinion and quite frankly a lot of countries want to loosen those binds like dollar reserves.

    Wait until the list of bank failures does in the FDIC and the Treasury has to step in with 500 Billion more dollars to shore up deposits in failing banks. We'll see what happens but the last thing the Chinese want to be left with is a bunch of worthless American paper.
     
  12. Argento

    Argento Perplexed

    scottish, I think you missed the point. To speculate about what would happen to the dollar in the event it crashed to zero by comparing it to other nation's when their currencies crashed is entirely irrelevant because none of those were global reserve currencies. No global reserve currency has ever crashed (because prior to the dollar, gold was the reserve) so nobody knows what would happen if the Dollar crashed.

    What you say with regards to China and Russia is true but we are also a long way from that scenario ever occurring. Even further away is the entire global economy dumping the dollar. Even in the highly unlikely event that these situations do occur, there will be another currency in the works (Russia and China agree on this), which brings me back to my original point.
     
  13. BNB Analytics

    BNB Analytics New Member

    Anything that is HARD and is valuable like a metal is a good thing to own as a fail-safe net in case the dollar dumps.

    I agree though, I don't think the dollar will dump anytime soon.

    We're just not going to let that happen as a nation.

    I still think Silver is a great investment however, it's all public perception. If we perceive silver to be on the same level as gold, then price will respond accordingly. However, after all these years of silver being around, why hasn't it?
     
  14. fools_gold

    fools_gold Junior Member

    Even if the USD gets replaced with a new currency, I guess the question is, how much value does the new currency have over the USD?

    It would be logical that it would HAVE to be worth more, otherwise there's no point. So hypothetically, let's call the new currency NWO currency. :D

    Let's say for every $1 NWO, you would need $100 USD.

    I would HOPE that the NWO dollar would be backed by gold or some standard that is close to the value of gold. Therefore hoping that your wealth has been preserved in the event you want to convert your PM's to NWO currency.

    For those left holding the bag on the USD, they will see a tremendous loss in wealth for the conversion process.
     
  15. Argento

    Argento Perplexed

    Of the alternate currencies I've seen mentioned, Russia favors one that is PM backed and China favors a mixed backing (pm and commodities). Presumably, if such a thing were to occur, there would be an exchange rate that started at a given level and wound down til the dollar was no more.

    All speculation of course.
     
  16. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    Under those circumstances, the people who already own the silver probably won't sell it at any price in any currency. The price will basically be infinity. That's why it is important to buy it now.
     
  17. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    I've heard this claim, but can you source it or did you just spread the undocumented rumor?
     
  18. Info Sponge

    Info Sponge Junior Member

    The question is whether silver and gold will be valuable if the economy goes into hyperinflation, which would damage the routine economic activity that gives precious metals their industrial value. In other words, what is the value (or the price) of bullion in a collapsed economy?

    I'm going to be one of those annoying people who doesn't answer the question but instead says it's the wrong question.

    If the national currency is losing half its value every 30 days, what happens to all those "net 30" invoices? Will a food wholesaler extend credit to a supermarket in those conditions? Will a low-margin business like a supermarket be able to pay cash up front? Will there even be food coming out of the farms if the farmers can't get credit?

    Precious metals are a hedge against inflation up to the triple digits. Go beyond that into hyperinflation and your food reserves will mean more than your precious metal stack. What is your silver worth if the supermarket shelves are bare and nobody wants to trade you their food for something shiny?
     
  19. desertgem

    desertgem Senior Errer Collecktor

    But who do you think will be making the rules under which the "new dollar" will evolve? Those with the most USD rather than precious metal will. How many power mongers have extensive holdings in precious metals rather than USD? How easy for Congress and the President to say, we are protecting the USD and the US, and those unpatriotic precious metal holders of gold and silver will have to surrender them at a set "old USD" reimbursement. It has been done in the US before with gold and could readily be done again rather than replace the USD. All species payment could be ended and each US citizen receive a SS/Citizenship/Health/Financial combo card.

    Did all of you who have ordered gold or silver from the mint give them your real address? Here they come!

    The quote should be reworded:

    For those left holding the bag of precious metals, they will see a tremendous loss in wealth for the conversion process.

    Neither scenarios will occur. Own gold and silver if it pleases you, but to depend on it elevating you to prosperity or even survival over the average John Doe in case of impending financial failure ignores all of the reality of political power.

    IMO.
    Jim
     
  20. Argento

    Argento Perplexed

    If you google it, you will find articles dating back to last Fall when Wall Street went off its hinges.

    In fresh news, this article out of the UK is partially responsible for the turmoil this evening in overseas PM markets. Discussions about the diminishing role of the dollar: http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html

    Interestingly enough, they (China) keep coming back to this mixed backing -- aka, "Basket" currency. I guess it makes sense. It's not in China's best interest to back a standard that keeps the US on top, probably even more-so than we are today. We don't hold significant foreign currency reserves so a mixed backing currency would see us scrambling but if things went back to gold, the US would reign supreme, once again. If China made a big push for gold, it would be the equivalent of shooting themselves in the foot.
     
  21. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    That particular claim has already been refuted as incorrect. I read a lot of articles where the author will claim that the Chinese plan to do this or that; but there is never any statement from China or actions by China that are documented to support it. So it remains a rumor in my opinion.
     
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