Silver Below $14

[Cue the music...] I may be right, you may be crazy... But it just may be a lunatic I'm looking for...

 

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I almost never hear of anything inflation threat. If you watch CNBC a lot and read, experts are more worried about deflation. If we slip into deflation, we may be there a long time. Japan has been trying to find a way to break that cycle for 25 years. U.S./worldwide deflation would take out PMs prices, along with other commodities

 

The "Twelve Days of Christmas" gift price index is up only 0.6% year on year, at a bit over $34K. "Lords a-leapin" is the biggest dollar increase, while the partridge in a pear tree has the highest percentage bump.

 

This "inflation / deflation" talk is smoke and mirrors.

Sure, oil is at $40 a barrel, but the government is growing by leaps and bounds - and increasing taxes and fees along the way.

A can of paint that was $20 last year is still $20 this year in California. But now there's a "Paint Recovery Fee" of $0.75 per gallon purchased and it's taxed at the time of sale.

Meals in restaurants have seen the biggest hit due to the wage and benefits inflation. Our local restaurants have raised prices around 15% - 20% in the last 2 years.

The way I see it, almost everyone now hates precious metals and have sold out or gone away. That means it's time to get on the bandwagon.

Next year people are going to start realizing they need to pay more attention to things other than the price of oil.

 

Brett,
If you're going to go all "deny the data", there's no sense discussing anything with you. It's a conveniently perfect answer to everything anyone can ever say. It also makes you look pretty foolish. I'm a "regular" at the counter at my favorite grub hall, and prices here are actually down a wee bit from last year. Menu prices? No, but more frequent and more valuable low price promos. By the way, nothing that EVER happens in California EVER counts as "normal". Californians have nothing on Lewis Carroll.

I used to be in the camera business, pre-digital, and Nikon and Canon never lowered MSRP's, but they did massive rebate checks direct to the consumer. In inflation figures, only MSRP is counted, so in a rebate laden scenario, inflation is actually overstated.

 

I'm not denying any data - I'm merely looking at it in the context of data that you may or may not take as valid - or even realize. Being stuck interacting so much with the DC pundits 24/7 may have clouded your vision.

I was also told I was foolish when I bought real estate in 2000, and again in 2010. Contrary to popular belief - I did - and did well. I bought the fear knowing that long term things will come around.

I am buying the fear again, and have a plan to hold long enough to ride it out.

The jobs are recovering - there is what I call "stealth inflation" hitting us, people are paying off debt - and soon they will look to put money to work - and into savings. Part of that will be metals. As demand increases - so will cost. It isn't going to turn on a dime - and it's not going to go insane without some major world events.

Taxes and fees are inflation. They increase the cost of the same goods and services. We've seen recovery fees, increases in sales, property and income tax percentages. We know have healthcare taxes and minimum wage laws increasing prices - these are all real. Maybe your traditional algorithm doesn't take them into account - but they are all real.

Kurt, I think you come here purely as a vent - since you obviously hate bullion and metals in general. I picture you walking around poking things with a stick to see how they react.

 

You're right about one thing - people are paying off debt. And THAT is deflationary, by definition, just as an increase in borrowing creates new money and is inflationary, again by definition. If the Fed is NOT doing QE-something while the public retires debt, we will inevitably have a deflationary spiral, and that's Japan the last 25 years. Debt and "morality" have gotten all tangled up with each other, and no one realizes that retiring debt creates the NEED for QE.

Like in much of economics, the proper path for the individual is precisely OPPOSITE of the proper path for the collective economy.

 

As for the rest of your post, it's pure manure. Taxes and fees are inherently DEflationary, in that they take income flows from private transactions. It's government SPENDING that is stimulative. The taxing part is anti-stimulative to an economy. Hence, what stimulates an economy? Deficit spending. What drives an economy into the ground? Governments running a surplus through reduced spending without reducing taxes. Every dollar any government spends is some private entity's income, and every dollar they tax is income taken away. This is the essence of fiscal policy, a lost art, because some politicians have gotten morality thrown into the mix where it doesn't belong.

 

Yes I agree, money is created when a loan is granted and money is destroyed when that loan is payed down.

 

Even many so-called professional economists miss this central truth. Austrian School economists ignore it on purpose. Debt is money and money is debt. Simple, if somewhat counter-intuitive. If anything in economics sounds counter-intuitive, it's probably correct. If it makes sense to "the man on the street", it's invariably wrong.

 

According to you Kurt, there'd be no commerce if it weren't for the government taking an ever-growing percentage of a transaction between two people.

That prophecy is self-defeating in that eventually everything goes to the government and we become slaves. Well, we're on the way - and soon enough people will realize there are more people taking than giving - and it will crumble.

The government is the least efficient and most expensive solution to any problem - as proven time and time again.

As far as manure is concerned - my feet are clean. So go check your own...

 

Kurt, with all that said I am still buying silver in smaller amounts as at it drops... in hopes it will ascend in a few years.... as I am the man on street that's insane and invariably wrong.......

 

Well, self-awareness IS the beginning of enlightenment...

 

Yes, the private sector is ALWAYS superior , as private police forces and armies usually demonstrate . And as for knowing how much societal collective "charity" (aka transfer payments) or public education funding for poorer areas is appropriate, nobody knows better than the guy who has been fortunate enough to never have had to really face those prospects; "everybody" knows that, don't they? After all, the wealthy ARE that way because they are morally superior, which we all know, right?

 

Invariably wrong for "the man on the street" or invariably wrong [not in the best interests of] for the collective?

 

What you're describing is sounding less like a healthy economy and more like a Ponzi scheme. Your views seem to only be slanted toward central banking and pretty much neglect GDP. The problem with the debt economy is in the end it always leads to hyperinflation because of it's nature.

I will admit I am a layman when it comes to economics, but I do know central banks are pretty bad for an economy. The morality line is a bit misleading, I really don't think a corporation can have morality. That's why banks kept increasing their leverage ratios and then we had a collapse. Obviously too much debt is a bad thing, otherwise you're just describing a Ponzi scheme.

Inflation is not simply the government spending money. There are so many other forces that cause inflation it's false to simply correlate it to debt. That is why we don't have inflation even when the Fed is pumping money into the system. You can't inflate your prices if no one is buying your product.

I would actually say what is stunting the economy is the ever-growing income disparity. It skews the effects of natural market forces because the majority of the consumer base is getting poorer and poorer. In a way, you could say what is happening is a "targeted" inflation, where the base of the taxpayers are hit the hardest.

Production stimulates an economy just as well as spending, but when wages are stagnating, inflation is not tenable. When there is no product to make, because all our jobs have been moved overseas, we have no GDP, just a bunch of bankers rationalizing all their debt and making nothing except more money for themselves to show for it. Money that is created out of nothing, i.e. debt.

 

The macroeconomy, the collective. What works for the individual is what is best at that level. Generalizing from the micro to the macro is the central error, and a prime tenet of Austrian School "thought", as if thought were involved.

 

All this is spot on. It applies to numismatics, too. Where are prices booming? Very high end stuff. Where are they "poopy"? Average collector stuff. Simple. We have a bifurcated economy in coins and otherwise. The price vs. condition slopes are higher than ever in history.

 

So what is best for the individual is not what is in his own best interest (micro level?) but what is in the best interest of the collective?