Ditch Gold & Silver as an investment

[freedomordeath]

I don't understand. Peter explains that gold would hold up in a deflationary period because it would retain its real value over its nominal value which is more important. Fine. Then this means there is no point to buying gold as an inflation hedge. If the money supply doubles and prices double (not a realistic correlation factor)...Peter seems to be saying there would be no point in having your gold...because even if you sold it at twice the price, the price of everything else went up twice as much. Sure I have twice the dollars...but everything is twice as expensive. This is the justification for Peter in reverse defending gold against deflation.

thats why gold sucks as an investment but is the most supperior form of currency known to man if you live in a city where everyone only deals in gold and silver and refuses fiat currency.

 

[Dr.3D]

I don't understand. Peter explains that gold would hold up in a deflationary period because it would retain its real value over its nominal value which is more important. Fine. Then this means there is no point to buying gold as an inflation hedge. If the money supply doubles and prices double (not a realistic correlation factor)...Peter seems to be saying there would be no point in having your gold...because even if you sold it at twice the price, the price of everything else went up twice as much. Sure I have twice the dollars...but everything is twice as expensive. This is the justification for Peter in reverse defending gold against deflation.

Well, if you had held dollars instead of gold, you would have half as many dollars as you would had you held gold and sold it for twice as many dollars.
In other words, $1000 dollars in gold = $2000 dollars when everything was twice as expensive. If you had held $1000 in currency it would = $1000 when everything was twice as expensive. That means you would have lost half the value of your savings. Wouldn't it be better to have saved in gold?

 

[rpwi]

you missed the point of what I'm trying to say, central banking is simply one type of currency scheme in existance backed by a swat team, another interesting one is bitcoin, everyone bangs on about it not being backed by anything, yet it carries on and trading at $6 as we speak.

Bitcoin is a sham and will collapse. It only has value now because of speculative/ponzi demand.

Gold DOES HOLD ITS VALUE, what planet are you on. You can take a 1oz coin and travel in a time machine and probably buy similar stuff like a tailoured suit in the Byzantine era, the classical greece area the roman era and even today a tailor probably won't say no if you shove it in his face.

Gold's role in antiquity is actually an interesting one. Many have suggested that it was not gold's commodity demand that raised it to prominence but rather its ability to satisfy tax debts. Tell some people on a tropic island that you want to sell them gold for coconuts and they'll probably laugh at you. Tell them they have to pay a tax in gold or go to jail and they will be scampering to sell you whatever they can for gold. Taxation's role in determining extrinsic demand is IMO what the most determinants of whether a currency catches on or not.

Gold is a supperior currency system hands down because it can't be printed and unless they invent a maching that can make gold, it will hold its value relative to other hard assets and services like tailouring.

If gold is to hold its value as is...one as to ask why gold is priced the way it is now. Sure the supply of gold won't change significantly...but that is far different from the price of gold. The price for a fixed supply of anything can vary tremendously.... If a good portion of that price is due to genuine fabrication demand...then gold is not likely to fall in price. But if a good portion of demand is because governments are demanding it or because there is speculative demand (I'll buy something just to resell it as the same or high price), then that is an issue. In fact for gold to circulate as a currency, the speculative demand has to be higher than fabrication demand, otherwhise the gold would be consumed and the 'money supply' would vanish. I mean if the price of gold is $1500 per ounce and industrial demand for gold is $1700...then why would there be a gold standard? Gold has to be priced more than industrial/fabrication demand for it be a currency which means it HAS to be overpriced.

So again my question... LETS USE IT FOR CRYING OUT LOUD. In Utah its legal, lets start the ball rolling, everyone playing around with moutain hours, bitcoins why not gold and silver. Poeple can start paying their employees in gold and silver.

You can use gold and silver...and euro's, pesos, bus coins, ithica hours, etc... The IRS just rules that you have to count the transaction as barter and pay the fair market value for the gold/currency.

If we did not tax payments in dollars the same as the fair market-value of gold, then people would acquire and trade gold to avoid taxes. This would give gold an artificial privileged status as a tax-avoidance vehicle.

Yes your right.. WE ARE MEAN'T TO HAVE A DEFLATIONARY DEPRESSION as credit contracts, but where is the deflation. The reason why you don't see it is because these bastards are inflating in sync to keep it flat lining. Its not uniform thats why different asset classes behave differently in price.

Yeah...it's complicated. MB is rocketing upwards and M1 really crashed (although the higher aggregates are steaming on). The following is a graph of historic private debt to GDP ratios...you can see the dilemma we are in. The cure the Fed proposes is more debt or the public taking on some of the private debt...and this will only make the situation worse:

We still could have some serious deleveraging to do...which might not bode well for gold

 

[deadfish]

Bitcoin is a sham and will collapse. It only has value now because of speculative/ponzi demand.
(

You lost me here... why is it a sham? Seems pretty ingenious concept - Currency based on the future work of powerful processors. The whole world would become a giant goldmine. Whoever can build the most processing power, wins the "free" money. But, since running a GPU factory is a tough business, the incentive for innovation would be enormous. It does not take much imagination to picture a new technological golden age akin to the industrial revolution and internet revolution.

 

[rpwi]

Well, if you had held dollars instead of gold, you would have half as many dollars as you would had you held gold and sold it for twice as many dollars.
In other words, $1000 dollars in gold = $2000 dollars when everything was twice as expensive. If you had held $1000 in currency it would = $1000 when everything was twice as expensive. That means you would have lost half the value of your savings. Wouldn't it be better to have saved in gold?

But wouldn't the opposite be true? During deflation, wouldn't it be much better to hold dollars over gold? If gold were a mere inflation indexed hedge...wouldn't be more practical to hold commodities on consumables instead?

 

[tribute_13]

Would it be safe to buy lets say a tube of silver rounds in anticipation for selling right after the election? I could see silver bumping up as a result of the initial post election panic when Obama wins re-election. Probably wouldn't be anything substantial but could we possibly see a temporary rise in the days after the election? With silver hovering around $28~$32 an ounce right now, would it be safe to invest now?

 

[Dr.3D]

But wouldn't the opposite be true? During deflation, wouldn't it be much better to hold dollars over gold? If gold were a mere inflation indexed hedge...wouldn't be more practical to hold commodities on consumables instead?

Probably so. It's all about what you believe is going to happen. Is the government printing more dollars every day going to cause deflation?

 

[rpwi]

You lost me here... why is it a sham? Seems pretty ingenious concept - Currency based on the future work of powerful processors. The whole world would become a giant goldmine. Whoever can build the most processing power, wins the "free" money. But, since running a GPU factory is a tough business, the incentive for innovation would be enormous. It does not take much imagination to picture a new technological golden age akin to the industrial revolution and internet revolution.

Processor work...digging holes in the yad...building mud pies...all the same thing. Scarcity does not give something value. If there are only 10 mud cupcakes in the world instead of 20...that doesn't mean they are that much more or less valuable. The value that bitcoin now is not logically assigned to any real value...so it's market value now is equal to the credit used to acquire it from the outside world plus speculative value. In other words its a big debt scheme. People have traded 'real wealth' for bitcoins...only because they expect to get real wealth back in the future. This is a debt from bitcoin to those who acquired bitcoins. Because the production of bitcoins is not tied to the production of real wealth but of computer algorithms this can't be possible.

 

[LibForestPaul]

The biggest problem with a dollar deflation (inflationary depression) scenario is a simultaneous tightening and eventual collapse of the debt system. Deflation means falling prices everywhere except one: past debts, and interest on the same...

Slavery?
That would be one sick scenario...

 

[rpwi]

Probably so. It's all about what you believe is going to happen. Is the government printing more dollars every day going to cause deflation?

The thing that has us in trouble now is debt to gdp ratio...but the government can't really fix this by expanding the money supply because this just creates more debt (Fed only introduces MB into the economy if they get somebody's debt in turn). The private banks only create money if they also get debt in turn...so it is a big mess. How can you pay off debt with more debt? If guys like Steve Keen are right, we will have to correct this and it will result in mass debt write-offs or bankruptcy which will in turn wipe out the higher aggregates and will in turn cause deflation.

A cure would be debt-free money...both from the Fed and from banks. In this matter...although MB would grow...it could grow to replace defaulted bank deposits so we could have our cake and eat it too.

 

[Steven Douglas]

A cure would be debt-free money...both from the Fed and from banks. In this matter...although MB would grow...it could grow to replace defaulted bank deposits so we could have our cake and eat it too.

For a time. Debt money and debt free money, when it comes out of thin air, are both exponential propositions, both untenable in the long term. The more debt free money is created, the more downward pressure is placed on the value of the currency. Even if we bought into the illusion of "maintaining" the value of the currency with a constant, moderate influx of new thin-air currency (debt money or debt free), it absolutely REQUIRES an economy that also "maintains growth" (given that is where value is siphoned to maintain the illusion of "currency value stability"). If the economy stops growing, which SHOULD be a perfectly healthy phenomenon, as it merely maintains itself, any new money introduced would be strictly inflationary, with an attendant spiral. Any artificial influx of new currency into an otherwise stable economy (no growth, no decline) acts as a stimulus that forces growth that is neither necessary nor sustainable. It's growth, but not of the economy, but whatever cysts and parasitic elements exist to siphon off that growth - value that should have accumulated and recirculated privately.

Debt money is unsustainable because while there is a mechanism for destroying debt currency, it is always less than the mechanism for creating the new debt currency required to inflate it so that prior debts can be serviced. So it's just an ever-widening circle of debt that can never be paid down in the aggregate, and cannot deflate without catastrophic consequences. A debt-free money regime isn't much better, as it doesn't even have a mechanism for destroying currency in an economy that no longer needs to grow, but can maintain itself if the currency isn't fucked with. The idea that taxes are going to be levied for the sole purpose of destroying excess currency (to stabilize value in the other direction in an economy that no longer requires growth) would never enter a politician's mind, let alone pass if it did. At the point where the productive economy stops growing and simply maintain, government must also stop growing -- and perish that thought.

Hence, Kenneth Boulding's famous saying, "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist".

 

[rpwi]

A debt-free money regime isn't much better, as it doesn't even have a mechanism for destroying currency in an economy that no longer needs to grow, but can maintain itself if the currency isn't fucked with.

Not sure I understand why a debt-free currency has to be destroyed at times?

The idea that taxes are going to be levied for the sole purpose of destroying excess currency (to stabilize value in the other direction in an economy that no longer requires growth) would never enter a politician's mind, let alone pass if it did.

MMT holds that taxes destroy currency...but to me this makes no sense. If google recieves 1 billion in dollar and doesn't spend it for a week...does that mean the currency was destroyed for that time? If the treasury collects the same amount (not counting TT&L) and does the same...did that destroy currency? It's a popular concept...I just haven't wrapped my head around it.

 

[freedomordeath]

But wouldn't the opposite be true? During deflation, wouldn't it be much better to hold dollars over gold? If gold were a mere inflation indexed hedge...wouldn't be more practical to hold commodities on consumables instead?

The only reason why it will be better to have dollars is as Robert Pretcher said is because poeple will have to sell gold to pay off debt denominated in dollars, gold will be an asset and like any asset has to be sold off to pay the man. BUT WHY DO WE HAVE TO SELL GOLD, BECAUSE WE ARE FORCED TO BY GOVERNMENT BECAUSE OF LEGAL TENDER LAWS. Central banking leads to skimming off the top by fat poeple that DO NOT WANT TO WORK.. GET IT. If you want to be a living battery in the Matrix, by all means keep the fiat, what we are trying to do is start communities in Utah that deals only in gold and silver, get a working model together so others can follow.

 

[Seraphim]

Not sure I understand why a debt-free currency has to be destroyed at times?
MMT holds that taxes destroy currency...but to me this makes no sense. If google recieves 1 billion in dollar and doesn't spend it for a week...does that mean the currency was destroyed for that time? If the treasury collects the same amount (not counting TT&L) and does the same...did that destroy currency? It's a popular concept...I just haven't wrapped my head around it.

Nevermind. Misread what you wrote.

 

[anaconda]

My girlfriend is buying rental properties in MS, GA, and TN for nothing down and that all have net positive cash flows. The returns on investment are very very large. I mention it from time to time on the forums because it appears that quite a number of people are looking for investment opportunities. Very few seem interested, however. A nice fellow I used to work with is now in real estate and he walked my g/f through the process. He earns a small commission out of the deal. He would be happy to explain it to anyone who is interested.

 

[Steven Douglas]

Not sure I understand why a debt-free currency has to be destroyed at times?

The effect of money that is "lent into existence" is inflationary at first, then deflationary as the debt is paid down. Currency that is simply "spent into circulation" (as Kucinich envisions) is strictly inflationary. The value of all existing currency is permanently diluted, as that currency remains permanently in circulation.

MMT holds that taxes destroy currency, but to me this makes no sense. If google recieves 1 billion in dollar and doesn't spend it for a week...does that mean the currency was destroyed for that time? If the treasury collects the same amount (not counting TT&L) and does the same...did that destroy currency? It's a popular concept...I just haven't wrapped my head around it.

The only taxes that destroy the currency (value) are the hidden taxes brought about by money creation. Other taxes destroy private wealth directly, but not the currency itself. It just distorts the natural dynamics of an otherwise free economy. Resources that would have otherwise been allocated to other uses are redirected in favor of reallocated demand preferences of the public sector.

 

[PaulConventionWV]

I think its time that poeple ditch this idea of Gold and Silver as an investment. The truth is is they are metals that store value, so if you have a shoe box with $1000 and have $1000 worth of gold, the gold over 50years will hold its value.

Yes it is true that you can make money on the ups and downs if you know what you are doing, but it can also be dangerous if you bought in the peak of 1979 for example when gold went sideways for decades.

So whats the point of this post, it is simply to start using it as currency. Why wait for the crash to happen, why not have a working system up and running so poeple can be shown its a better system. Why not get the Armish for example on gold and silver, they live a voluteered based opt-in socialist system that uses very little money, but where they do transact with outside world convince them to use gold and silver instead.

Some states have past laws legalizing gold and silver as legal tender, are there any communties set up or markets set up where gold and silver is only currency allowed. Imagine a tourist coming to the market, they don't have gold and silver, guess what, there are friendly exchange booths ready to take their fiat dollars and exchange it for gold and silver. Then the tourists can go buy what they want. In these states, once markets are set up then private banks can allow digital gold for those not wanting to carry it around. The problem with digital gold is the government restricts it, but in states where it is legal, there should be no reason why banks can't be set up. Also businesses can pay their staff in gold and silver and deposit it in there account through digital gold. If we simply DO IT, INSTEAD OF WAITING then we take power away from the globalists.

Are you aware of a thing called legal tender laws?

 

[PaulConventionWV]

Nope, your gold would still buy as much stuff as it used too.
You may get less dollars back if the price falls, but that means the dollar will be worth more, and buy more.
Gold is a preservation of wealth, that is all, don't expect to make money by holding it.

The problem is that nobody will take gold as currency right now.

 

[PaulConventionWV]

If dollar inflation is good for gold, then why isn't dollar deflation bad for gold?

It's not a question of "good" or "bad". When the dollar goes down in value, gold appears to go up, but it's actually just maintaining its value. It only appears to go up because there is more dollars relative to gold, making gold worth more dollars. It does the same thing when there is deflation. It holds its value.

Gold isn't going to make you money. That is, it won't increase your net worth. It is more of a safe store of value for when the SHTF because, until then, it is not acceptable as US currency.

 

[PaulConventionWV]

There is no safe storage of wealth with a Big Government on the hunt.

Good point. The 'safe storage of wealth' refers more to the immunity that gold has to the ravages of the market when it comes to speculation and faith-based money. The only thing that really affects its value anymore is supply and demand. What affects its value in dollars is a different question entirely.