Do some reading about quantitative easing in Japan in 2001.
Hyperinflation
- Thread starter Bestmiler
- Start date
Quote from birdman:
ThriftyBob,
what course of action would you recommend to the average middle class person in order to protect themselves in these times or (if they are debt free and thrifty) to well position themselves
Peace
birdman
Not a rec for what others should do, since I have no business making recs, but I believe gold will hold its value. It has thus far if you can just hang in there and accumulate your position on panic selloffs. If you buy the panic spikes, you will get creamed unless there is a complete collapse of the dollar.
Did I not just say that?
"If you buy the panic spikes, you will get creamed unless there is a complete collapse of the dollar."
What exactly is the attraction of gold? $800/oz !!!
Oil is only $50/bbl and one can make a lot of products out of that oil...
What does a "hedge against the dollar" really mean? Who is actually going to take your gold to buy groceries, etc etc...
I have always viewed it as the greatest, longest running Ponzi scheme in existance....the ultimate "greater fool"
Would really like a reasonable explanation based on the practical aspects of owning gold and where you are going with it??
SteveD
Oil is only $50/bbl and one can make a lot of products out of that oil...
What does a "hedge against the dollar" really mean? Who is actually going to take your gold to buy groceries, etc etc...
I have always viewed it as the greatest, longest running Ponzi scheme in existance....the ultimate "greater fool"
Would really like a reasonable explanation based on the practical aspects of owning gold and where you are going with it??
SteveD
If you are betting on hyperinflation, you are betting on a devalued dollar. So a whole position would not only be the bond short, but a short dollar position of equal notional value.
But if word got out the fed was the only one buying treasuries (which it would, due to TICs reports and fed balance sheet reports), I'm sure the whole world would become net sellers and force the fed to print to buy. The exchange rate would drop quickly.
First of all the basics - gold has been (and likely will be) a better store of value than the "US Dollar".
The "US Dollar" in its current form has only been in existence since 1971, whereas gold has been money for many centuries.
Given the various bailouts (and therefore increasing US Govt debt), it appears increasingly likely that there will be only two possible solutions for the US to repay its government debt:
US Government default, which I see as unlikely, because it would result in the loss of a lot of political and economic power very quickly.
Significant inflation / hyperinflation, where the "US Dollar" loses significant value against a basket of commodities - both gold and food.
The next bit is a little more tricky - how does the end game work?
Here are some possible scenarios:
1. You own gold. You want to buy some groceries. You don't have any "US Dollars" because they are losing value quickly. You sell a gold bar / coin at a local coin shop in exchange for "US Dollars", and go and buy your groceries.
2. Once the US Dollar is replaced by another more stable currency (eg. an existing fiat currency or a new currency), you sell your gold in exchange for that new currency.
** added **
and also what Debaser82 said:
Apart from JPY, gold and USD have been two of the rare asset classes to do well in 2008.
Gold could be an investment choice for those who don't want JPY or USD.
The "US Dollar" in its current form has only been in existence since 1971, whereas gold has been money for many centuries.
Given the various bailouts (and therefore increasing US Govt debt), it appears increasingly likely that there will be only two possible solutions for the US to repay its government debt:
US Government default, which I see as unlikely, because it would result in the loss of a lot of political and economic power very quickly.
Significant inflation / hyperinflation, where the "US Dollar" loses significant value against a basket of commodities - both gold and food.
The next bit is a little more tricky - how does the end game work?
Here are some possible scenarios:
1. You own gold. You want to buy some groceries. You don't have any "US Dollars" because they are losing value quickly. You sell a gold bar / coin at a local coin shop in exchange for "US Dollars", and go and buy your groceries.
2. Once the US Dollar is replaced by another more stable currency (eg. an existing fiat currency or a new currency), you sell your gold in exchange for that new currency.
** added **
and also what Debaser82 said:
Apart from JPY, gold and USD have been two of the rare asset classes to do well in 2008.
Gold could be an investment choice for those who don't want JPY or USD.