Hats off to Greece!

achilles28 · May 4, 2010

Quote from christianhgross:

Look we are not going to agree, but for you to think that an implosion and letting the chips fall where they may will result in only 18 months of pain is not understanding the problem at all.

I think we should just agree to disagree here because no amount of debating and discussion will budge either one of us from our viewpoints.

You don't get me. I said the market would bottom in ~18 months. I didn't say the pain would end there.

We're talking 70% losses in stock and real estate wealth. It would take 30 years for most people to make that back. Problem is, if the currency goes, it'll be much worse. America and Europe will be 2nd world countries, soon.

achilles28 · May 4, 2010

Quote from Ivanovich:

Not to mention the amount of margin calls that would definitely hold up the rise in gold (as profitable positions are liquidated to cover massive losses elsewhere).

True.

achilles28 · May 4, 2010

Quote from Misthos:

You have it backwards - what you described will be the catalyst for this to happen. Not the other way around.

Gold will not be used to destroy the Euro or the dollar. Gold will be used to resurrect them.

Unavoidable in my view.

So essentially, we're talking a global fiat collapse relative to gold. Creditors are made whole without default=crash.

The US only has around ~260 million ounces. Even if gold appreciated 10X , that's only 2.6 Trillion USD. That doesn't seem like enough. I've read inflation-adjusted gold value is $2,200 per oz. We'd have to go 5 times that to get within striking range. What do you think?

zdreg · May 4, 2010

Quote from achilles28:

You don't get me. I said the market would bottom in ~18 months. I didn't say the pain would end there.

We're talking 70% losses in stock and real estate wealth. It would take 30 years for most people to make that back. Problem is, if the currency goes, it'll be much worse. America and Europe will be 2nd world countries, soon.

I am glad you didn't say 3rd world countries. some mods would shunt thread to chit chat as the thought is unbearable.

Misthos · May 4, 2010

Quote from achilles28:

So essentially, we're talking a global fiat collapse relative to gold. Creditors are made whole without default=crash.

The US only has around ~260 million ounces. Even if gold appreciated 10X , that's only 2.6 Trillion USD. That doesn't seem like enough. I've read inflation-adjusted gold value is $2,200 per oz. We'd have to go 5 times that to get within striking range. What do you think?

Debt need not be paid off completely - it just needs to become manageable. Paid down, not paid off. No Sovereign needs to be debt free. Not all Sovereigns will benefit equally either from a gold re-monetization. But they will be better off. Especially when the western sovereign bond markets near collapse.

What's the current process on tackling debt? Printing money and buying the short end and rolling it over? Doesn't the total debt grow in that scenario? What if (when) interest rates go up? Is that realistic?

Look at Greece. Yes, they just got funding, and they will make cuts so that by 2014, the annual fiscal deficit is 3% of gdp - yet their total debt becomes 140+% of gdp by 2014. Does that make sense to you? And that's not even taking into consideration how much of a hit to gdp (and thus, tax revenues) will get from the government spending cuts. The Greek bailout was nothing permanent. It is the same policy we use here: extend and pretend.

As for your concern regarding the multiples gold would or could go... the inflation adjusted number of $2,200 is BOGUS. Do you recall, or have read about the Boskin Commission under Clinton? They recalculated inflation in order to save on future adjustments to social security. Today's inflation, as well as unemployment, as you may be aware, are not counted as they were in 1982. They have gone thru multiple changes. Changes that paint a better picture for government.

Thus, if you count inflation since the 1970s without the government "tweaks," I have read that the true gold inflation adjusted price matching the early 1980s high would be closer to $8,000. Shadowstats.com is a good source of real (pre Boskin Commission) inflation.

example: 260M oz * $20K per oz. = $5.2 T

In my view, the collapse is already under way. Gold - to me, seems the only viable remaining option. The central bankers of the world will likely be reluctant, but they understand the severity of the situation. The SDR system is being expanded just in case of collapse - or when it happens, I should say.

Think of it this way - a severe deflationary collapse can be easily countered with a remonetization of gold - as gold does not have a counterparty. You are creating money debt-free by using a universally sought-after precious and rare commodity. What are we doing now? Creating debt - money. Simple computer keystrokes at the Fed that rely on "faith."

I'm not professing to be a know-it all with this. I'm just observing our current situation and I just don't see the current remedies as sufficient. No, more like wholly inadequate, if not destructive.

Anyone here see some glaring issues with this scenario - fire away. I welcome it.

achilles28 · May 5, 2010

Quote from Misthos:

Debt need not be paid off completely - it just needs to become manageable. Paid down, not paid off. No Sovereign needs to be debt free. Not all Sovereigns will benefit equally either from a gold re-monetization. But they will be better off. Especially when the western sovereign bond markets near collapse.

What's the current process on tackling debt? Printing money and buying the short end and rolling it over? Doesn't the total debt grow in that scenario? What if (when) interest rates go up? Is that realistic?

Look at Greece. Yes, they just got funding, and they will make cuts so that by 2014, the annual fiscal deficit is 3% of gdp - yet their total debt becomes 140+% of gdp by 2014. Does that make sense to you? And that's not even taking into consideration how much of a hit to gdp (and thus, tax revenues) will get from the government spending cuts. The Greek bailout was nothing permanent. It is the same policy we use here: extend and pretend.

As for your concern regarding the multiples gold would or could go... the inflation adjusted number of $2,200 is BOGUS. Do you recall, or have read about the Boskin Commission under Clinton? They recalculated inflation in order to save on future adjustments to social security. Today's inflation, as well as unemployment, as you may be aware, are not counted as they were in 1982. They have gone thru multiple changes. Changes that paint a better picture for government.

Thus, if you count inflation since the 1970s without the government "tweaks," I have read that the true gold inflation adjusted price matching the early 1980s high would be closer to $8,000. Shadowstats.com is a good source of real (pre Boskin Commission) inflation.

example: 260M oz * $20K per oz. = $5.2 T

In my view, the collapse is already under way. Gold - to me, seems the only viable remaining option. The central bankers of the world will likely be reluctant, but they understand the severity of the situation. The SDR system is being expanded just in case of collapse - or when it happens, I should say.

Think of it this way - a severe deflationary collapse can be easily countered with a remonetization of gold - as gold does not have a counterparty. You are creating money debt-free by using a universally sought-after precious and rare commodity. What are we doing now? Creating debt - money. Simple computer keystrokes at the Fed that rely on "faith."

I'm not professing to be a know-it all with this. I'm just observing our current situation and I just don't see the current remedies as sufficient. No, more like wholly inadequate, if not destructive.

Anyone here see some glaring issues with this scenario - fire away. I welcome it.

Thanks for the reply.

I'm extremely bearish on the fiat debt bubble, so you're preaching to the choir on that one.

Assuming the numbers are good (I wasn't aware post-1980 CPI was used to calculate 2,200 inflation-adjusted oz price), yea, >10K gold is possible.

But what we're discussing is no different than a shopaholic pawing their assets to continue a consumption binge.

A gold liquidation - assuming prices explode - only buys the world time to get their financial house in order. In other words, the only long-term solution here is frugality = massive spending cuts + balanced budget + surpluses.

Otherwise, in another 3-4 years, we'll arrive at the same crossroads we're now at, with no gold, offering half of Alaska to the Chinese for collateral on our debt.

Don't get me wrong, I think the idea has merit and the best temporary solution I've seen. But there are some hurdles. The first assumes Central Bankers will part with their gold hoards to save the World. The Great Depression was a perfect example where they refused, and indirectly starved 25% of the Country to death. There was no "whoops" involved, there. Second, politicians favor crisis and calamity over smooth sailing. The former provides an ideal window to consolidate power and expand bureaucracies. This is now the dominant paradigm in Washington, "Let no good crisis go to waste". Third, a gold liquidation just maintains well-functioning sovereign debt markets and mitigates the looming downturn into a Depression, instead of a Great Depression. Fiscal austerity is the only long-term solution here, and that means big haircuts for everyone. In terms of GDP, living standards, entitlement programs etc. Will politicians and voters show enough character and make the big cuts so desperately needed? In the short window provided? Obamacare, Carbon-taxes, tax hikes, and an entrenched subculture of cradle-to-grave Socialism, doesn't bode well, at all.

Last, it's my personal opinion that under no circumstance should any Country surrender territory to pay off debt. I think that's what the Central Bankers want. Also, the FED and all US commercial banks should disclose the exact amounts of US and foreign sovereign debt they hold, as that's essentially the property of US taxpayer (purchased through debasement).

DrPepper · May 5, 2010

Misthos · May 5, 2010

Quote from achilles28:

Thanks for the reply.

I'm extremely bearish on the fiat debt bubble, so you're preaching to the choir on that one.

Assuming the numbers are good (I wasn't aware post-1980 CPI was used to calculate 2,200 inflation-adjusted oz price), yea, >10K gold is possible.

But what we're discussing is no different than a shopaholic pawing their assets to continue a consumption binge.

A gold liquidation - assuming prices explode - only buys the world time to get their financial house in order. In other words, the only long-term solution here is frugality = massive spending cuts + balanced budget + surpluses.

Otherwise, in another 3-4 years, we'll arrive at the same crossroads we're now at, with no gold, offering half of Alaska to the Chinese for collateral on our debt.

Don't get me wrong, I think the idea has merit and the best temporary solution I've seen. But there are some hurdles. The first assumes Central Bankers will part with their gold hoards to save the World. The Great Depression was a perfect example where they refused, and indirectly starved 25% of the Country to death. There was no "whoops" involved, there. Second, politicians favor crisis and calamity over smooth sailing. The former provides an ideal window to consolidate power and expand bureaucracies. This is now the dominant paradigm in Washington, "Let no good crisis go to waste". Third, a gold liquidation just maintains well-functioning sovereign debt markets and mitigates the looming downturn into a Depression, instead of a Great Depression. Fiscal austerity is the only long-term solution here, and that means big haircuts for everyone. In terms of GDP, living standards, entitlement programs etc. Will politicians and voters show enough character and make the big cuts so desperately needed? In the short window provided? Obamacare, Carbon-taxes, tax hikes, and an entrenched subculture of cradle-to-grave Socialism, doesn't bode well, at all.

Last, it's my personal opinion that under no circumstance should any Country surrender territory to pay off debt. I think that's what the Central Bankers want. Also, the FED and all US commercial banks should disclose the exact amounts of US and foreign sovereign debt they hold, as that's essentially the property of US taxpayer (purchased through debasement).

No time for a detailed follow up right now. But as I said.... gold and/or SDRs will be the endgame:

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