why is gold and silver going down right now?

But you made a statement with no bounds. This would mean than that you must have an idea then what is a good amount to pay down the debt and when is a good amount to increase the debt. Otherwise, it's a pretty pointless rule since it means you never know when it can be applied or used or what the results might be.

We have a social catastrophe now and it's not getting better.

 

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Antal Fekete brings it up constantly, but nobody reads him. I think he might be the only person who has deeply studied how the gold system used to work, and why it is neither deflationary nor inflationary. The short answer is the way he ties it in to Adam Smith's real bills doctrine and then gives numerous examples of how this enabled a relatively small gold base to support an enormous level of world trade prior to World War I.

 

I was merely responding to a post with an incorrect statement in it. And you are correct that I have my own ideas about the situation.

The present situation is almost infinitely more comfortable than what will be experienced if the currency collapses.

 

The problems inherent in your description are because the gold standard methodolgy in use was price fixing the value of gold without respect to the ratio of dollars to gold. If the ratio is intact then the price will be automatically determined by the amount of gold, and then there is no longer any concern over inflation or deflation. Deflation can only happen if gold is swapped out for dollars, in which case those dollars must then be destroyed to maintain the ratio. Otherwise new dollars will be created as new gold is mined, and whatever inflation there is would still maintain the fixed ratio and thus buying power would be unchanged. It is only when the ratio changes, most often due to money printing without increase in gold supply, or else fractional reserve gold lending, leasing, or swapping between central banks that people with fixed payments get punished. As long as the gold actually exists and as long as the rules (ratio being key) are actually enforced, and people are free to return their dollars for gold if they want to then it is self regulating and would prevent deflation with predictable inflation based on the increase in gold supply.

 

What is the basis for this thinking? The currency collapsed in Iceland, and they are all doing quite well there now. It's one of the few economies in Europe, for that matter the world, that is experience real growth not dependent upon money printing.

 

This is true, but the global economy does not hinge upon the currency in Iceland either. The world reserve currency status makes it much more dicey. If the US defaults on its debt the chain reaction of counter party risk would be devastating. Unfortunately it is mathematically impossible for GDP to grow exponentially as the debt currently is.

 

Well, there were a lot more factors than gold that lead to the growth.

- Industrial Revolution
- Virtually free land
- Rapid population growth
- Legal system that protected private property and contract rights
- Vast tracts of fertile farmland

You can think of many others if you try. So lets not imply that gold was the sole reason for the prosperity. Also, in 1792 the nation adopted the silver standard, not a gold standard.

 

You missed the point. The original statement was that there is no way to pay down the debt without hyperinflation. As I showed, this is clearly untrue. I never commented on the practicality of probability that it would happen.

 

Plus, while the Krona was devalued, it is still in use and has not collapsed. Iceland had a banking crisis, not a real currency crisis in the sense of Weimar Germany or Zimbabwe.

 

Well I need to go back and get a refund from my dealer then Fatima. I am guessing by your statement that you are saying my coronet head half eagle is a fake then, not minted by the US since "there was no gold until Charlotte".

 

Sorry sir but the demand for money does not, unless by coincidence, correspond to the demand for money in an economy. Since this is plainly evident, tying money to gold, silver, oil, cotton, or pork bellies artificially ties the creation of money. As such, there will be periods of too much or too little money, creating inflation or deflation. In the modern society its most likely the demand for money would grow faster than gold mining, so that environment would be deflationary and very harmful to the economy. It would be anything but stable.

 

I do believe the original question was about the precious metals and their "current" downward move. It seems the last few pages are just resurrecting for the "googlizillion time" the debate on a pm standard and how it would save mankind, eliminate tooth decay, and make every one better than the average wealth

 

So, back to the original question. The reason silver fell, stocks went up, crude oil continues to climb slowly, and your favorite U.S. coin series is doing whatever it is doing: Madness in the speculation department. No particular reason sometimes, except people start panicking and prices move one way or the other without a definite reason. Every time PMs move up or down a buck or two, this same conversation reignites over and over. Look at the bigger picture; you'll avoid ulcers that way!

 

Well considering every single market you listed has their own details and news going on, and equities is really 10,000 different stories and sets of data, why do we always assume there HAS to be a correlation? We may be right and there will be long term correlations between markets, but short term not necessarily. All I know right now is my PM is sitting there pretty stagnant and has been for a couple of years now, and I am doing pretty well with stocks I bought in 2009 and later that some on this board labeled me borderline retarded for buying. Diversification.

 

In the beginning it was a silver standard, technically, bimetallic practically. You can look that up anywhere and everywhere. The paragraph you quote states a simple proportion, without regard to a base. However, the *dollar* was measured in silver, making that a base. And no one was saying it was "fiat", stop making strawmen in your discussions.

Also, I already gave my source at the bottom of the post. Ref = http://www.measuringworth.com

 

If I were buying PM's based on past performance I probably wouldn't have that much. I bought after a 50% drop in 2008, and I've been doing the same since it came down into the 30's last year. I prefer to buy when performance has been bad, because that's my buying opportunity. For me, it's about future potential of a finite resource, silver, the first metal slated to become unavailable by current abundance and usage figures, which also happens to be the most useful industrial commodity besides oil, and is the most useful technological resource.

Why is it going down? Because the physical market plays second fiddle to paper contracts. The price is reflective of speculation whether it goes up or down. It is at best 1-2% reflective of the physical market's supply and demand, where a year's worth of mining supply is traded on a daily basis in paper contracts, otherwise it would not be the first metal headed for unavailability. Don't worry about the gyrations, just get your position ready for when the paper charade can no longer contain the free market.

 

Any good investor will tell you that, and it is sound advice. I also believe in moderation in all aspects of life. Stick to those two rules, and you will do alright.

 

This is basically incorrect, as the metal itself is not traded, nor is an actual contract for the metal. What is traded is the paper right to cash profit/loss on the future appreciation/depreciation of the spot price of the metal. The "paper" contracts could multiply by a factor of 10X and not affect the metal directly, as the exchanges have to balance the longs and shorts ( buyers and sellers). There is a psychological aspect naturally, because if the "normal" speculators of the PM sees a widespread selling of the contracts, so the buyers are offering less and less due to risk, then of course the price of the actual metal will decrease, and visa versa, but no one will run out of metal, because almost no one is taking delivery. The paper trade is most of the Free market in metals, like it or not, and it will continue to grow. You have to learn to take advantage of it or be controlled by it. If the paper trade drags PM down to pitiful levels, that is what your metal is worth if you need to sell. No more. IMO.

 

I would agree with you if there were no such thing as naked shorting. If you don't believe that is going on, ask the CEO of SilverCorp.
http://newsandinsight.thomsonreuter...ercorp_widens_lawsuit_to_add_five_defendants/

As such, a lot of what you are describing is moot since whatever it is labeled as, or whatever it actually is, it still impacts the price as though physical metal were bought or sold. While the rules state that longs have to balance the shorts, the rules are not actually enforced. This is unfortunately widespread and rampant throughout the industry.

 

Interestingly, I started buying silver around $7 partly because it was up from $5. And gold around $400 partly because it was up from $250. And oil stocks when oil was around $30 partly because it was up from $20. It's nice to be able to buy an asset when it is cheap, but sometimes it works well if you buy it after it has started to rise. Go figure.

In answer to the OP, I don't know why PMs are down. They are very volitile and the speculators use significant margin. If you look back over the past dozen years, there have been several pretty scary drops, but what evidence there is suggests that the bull market is still intact.