What Would You Rather Have During Severe Deflation: Silver or Cash?

[tmosley]

I did notice a lot of that going on and would like to stay away from it.

I have been tempted to leave these forums myself. I'm glad there is at least one person here with some sense, even if you don't agree with me on everything.

 

[LibertyIn08]

Sorry, who are you, and why should I care what you think? I've never once seen you post before.

You wouldn't believe me if I posted how much I had made, considering I started buying gold in 2001 (a happy coincidence, mind you--I didn't know much about the markets back then), and it's hard to calculate, as I have been adding in a lot more newly earned money since then. Not to mention I also took a lot out to buy land and build buildings and a business (which I never got off the ground, government regulations are not friendly towards non-established types of fermented beverages like mead).

That said, I'll humor you. My net assets are currently worth, assuming a start value of 100 in 2001, something like 1200, including some 400 or so in further inputs from earnings. I've only had one really bad trade, when I tried to go short financials last April-May. Of course, my house also lost value, as I bought it near the peak of the RE boom, before I knew about Austrian economics. That was because I didn't realize that money was being printed like mad and finding its way into the markets.

Of course, this is just what some guy on the internet said. Maybe I'm a big fat liar. After all, I'm apparently intellectually dishonest (despite the fact that I don't intentionally misinterpret what other people say like SOME people).

People who provide investment advice should provide a track record, especially if they speak with a sense of infallibility.

Admitting past mistakes, however, is a new trend for you - hopefully it continues.

 

[tpreitzel]

I haven't read this thread, but the very title indicates someone looking for financial opportunities at the expense of the working man, i.e. someone grinding away at a job in the hope of preserving the wealth of his labor. Severe deflation is the consequence of severe inflation which primarily harms the working man who constitutionally should be preserving his wealth in gold and silver. Fiat money has given rise to all sorts of economic distortions including the rise of white-collar workers.

 

[DFF]

Deflation, inflation. Neither really matters. What does matter is supply and demand. Physical gold is in heavy demand. There is a limited supply and everybody and there mother knows it. Therefore, the price of gold should continue going up. And at some point, to a spectacular level, easily eclipsing 1980 on an inflation adjusted basis.

 

[Zippyjuan]

I have been tempted to leave these forums myself. I'm glad there is at least one person here with some sense, even if you don't agree with me on everything.

People post here becasue they are passionate about things. Sometimes in arguing their side, they can get worked up and upset because somebody else doesn't see things their way. I can present my own opinion which I try to support with facts but I cannot change their minds. Once it gets down to name calling, any rational discussion is finished and there is no point in going on. And there are certainly plenty of people here who do not agree with me on many issues- and that is fine. If we all agree all the time the discussions are boring and there is little point in reading them. You and I don't agree all the time but we have good discussions.

 

[jclay2]

People post here becasue they are passionate about things. Sometimes in arguing their side, they can get worked up and upset because somebody else doesn't see things their way. I can present my own opinion which I try to support with facts but I cannot change their minds. Once it gets down to name calling, any rational discussion is finished and there is no point in going on. And there are certainly plenty of people here who do not agree with me on many issues- and that is fine. If we all agree all the time the discussions are boring and there is little point in reading them. You and I don't agree all the time but we have good discussions.

While some of the name calling has been hilarious and enjoyable, it is not beneficial in the long run. Whenever bridges are burned, it hurts the interaction between forum members. Lets agree to disagree and if you want to beat a dead horse, do so with facts and logical argument rather than name calling.

 

[Wolverine302]

Silver, Bernanke has said he would drop dollars from the helicopters if he had to, to stop deflation.

 

[clb09]

Silver, Bernanke has said he would drop dollars from the helicopters if he had to, to stop deflation.

http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

Fiscal Policy

Each of the policy options I have discussed so far involves the Fed's acting on its own. In practice, the effectiveness of anti-deflation policy could be significantly enhanced by cooperation between the monetary and fiscal authorities. A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.

Of course, in lieu of tax cuts or increases in transfers the government could increase spending on current goods and services or even acquire existing real or financial assets. If the Treasury issued debt to purchase private assets and the Fed then purchased an equal amount of Treasury debt with newly created money, the whole operation would be the economic equivalent of direct open-market operations in private assets.

 

[theoakman]

You have also never seen an extended period of deflation.

But you have seen the price of gold do worse than the value of the dollar for an exended period of time. If you look at an inflation adjusted price of gold, any time when the inflation adjusted price of gold is declining, that means that it is losing purchasing power compared to the dollar. It happend for nearly 20 years from 1980 to roughly 2001. Even today, gold has half the purchasing power it had in 1980. And we have had good and bad economic times during that 20 year period.

http://inflationdata.com/inflation/inflation_rate/gold_inflation.asp

Rofl...

if you trace any asset in this history of the world from its inflation adjusted high, you can conclude that it doesn't keep pace with inflation.

Gold was at that price for a short period of time. You found a 2 year period where you shouldn't have bought gold. Perform your same analysis from the other 99% of recorded history and you'll reach a different conclusion.

All deflationary periods will be short lived because the central banks will prevent the losers (and by loser, I mean someone who lost money, not a personal insult) in a financial transaction from actually eating their losses. Even in 2008, deflation was short lived and it essentially ended the second the Fed started QE.

 

[RonPaul4America]

Most likely cash. By deflation, I'll assume you mean demand for goods dries up and people are fleeing to and hoarding dollars. It's likely gold would fare better than silver in that scenario as much of the demand for silver is driven by demand for new electronics. Don't forget the period from March 2008 to March 2009. Cash was king.