The Apocalyptic Depression of the 21st century

[the1]

The US currency will be replaced with another currency -- probably a worldwide currency -- and then the cycle will repeat. In the short run, Gold is the place to be but in the long run another fiat currency will emerge to replace Gold once again and then that fiat currency will be destroyed like its predecessors. And so the evolution of economics will continue. Economics is merely an extention of mankind and as mankind evolves so will the currencies that travel with him.

Quote from Emini Maestro:

Gold (bullion, not stock) will outlive the US currency, and continue outperforming the US currency, until I cash my gold out... but never again into a depreciating asset like US currency.

 

[PlusMinus]

Quote from TheGoonior:

Gold is only valuable while there is still an infrastructure in place where it can be used as a proxy for other items. In an "Apocalyptic" Depression, lead is far more precious than gold (in 9mm form).

Gold has value and is fungeable in any modern economy, or any backwards economy for that matter. It is a store of money to a future point in time. Whether that value is greater or lesser is not guaranteed. But you can trade USD for gold, and then trade gold for AUD or EUD when/if USD becomes worthless, if you believe that is a possibility.

To say that there is either normalcy or an apocalypse is silly. There are plenty of levels in between.

 

[PlusMinus]

Quote from the1:

If you study the evolution of modern economics and currencies you will quickly realize it is assured Gold will not become a currency, short of something unexpected like a coast to coast meltdown of all the nuclear reactors in the US.

Become a primary currency or any official currency? No, it won't likely. But it is on the path to becoming a massive insurance policy against a dwindling dollar. That is simply undeniable.

 

[Emini Maestro]

Quote from TheGoonior:

Gold is only valuable while there is still an infrastructure in place where it can be used as a proxy for other items. In an "Apocalyptic" Depression, lead is far more precious than gold (in 9mm form).

I prefer the 45 and 762 forms, which were both stocked prior to buying even one ounce of gold. To those bent in the positive toward being prepared: http://www.youtube.com/watch?v=MT-8k7uyoDE

 

[DrPepper]

Quote from Emini Maestro:

I prefer the 45 and 762 forms, which were both stocked prior to buying even one ounce of gold. To those bent in the positive toward being prepared: http://www.youtube.com/watch?v=MT-8k7uyoDE

Entertaining video that I agree with, although with some slight differences:

1. You cannot go wrong with a Glock, but it does not have a safety. A lot of police officers carry the Springfield XD, which has several safety features. The .40 caliber has more stopping power (and a lot more kick) than the 9mm. Semi-automatics occasionally jam, so a .357 magnum revolver is another dependable option. However, 2 former police officers told me that for true home protection, they recommend a short-barrelled shot gun. A good choice is the 12 gauge Remington pump 870 Express with an 18.5" barrel. Mossberg has a similar gun that may be a little less expensive.

2. In addition to water, you might want to consider getting a water purifier.

3. I have never actually tried spam, but I have a feeling I would not like it. Purchasing a good supply of non-hybrid seeds and learning to grow vegetables could come in handy. There is a great book called Square Foot Gardening, that teaches you how to grow a lot of vegetables in a small space. I am ordering seeds and planting my first square foot garden this spring.

4. I totally agree with buying silver. Everyone is talking about gold, but silver may be a much better value right now, since it is trading at about 64 ounces of silver to 1 ounce of gold. When the average American living paycheck to paycheck finally realizes what is happening to the value of the US dollar and that there may be a currency collapse, they are not going to be able to buy even one gold American Eagle for several thousand dollars. Silver American Eagles and junk silver may be what people want because they can afford it and they can use it to buy groceries, etc.

 

[Onlygold]

Quote from Onlygold:
Assume gold was $300 in 2003. Which of the two statements is more correct :
1) The (obvious) time to buy gold was 10 years back, not now.
2) Now is the (obvious) time to buy gold, not 10 years back.

Note: some inaccuracy above - assume just 10 years ago price was $300/oz.

Since there is no answer, I'll try myself. We exclude traders who win trading anything as they don't need to buy gold. Just restrict the argument to investors who can't trade, but wish to invest for the long term.

Answer : 2) is more correct. It is easier to buy gold now than 10 years back.

Only the smartest money would buy gold 10 years back when gold was at $300/400. It was "obvious" to everyone then that it was silly to buy gold as, after falling from $800/oz, it stayed at $400/oz for 20 years - zero returns, cost to hold etc. The common man cannot see beyond the recent and the "obvious". Further, stock was where money could easily be made in the 90's. This pattern of repeating recent habits is why people still go for the current stock rally when there is zero reason to do so. So only the smartest could have invested in gold in 2002/2003 when gold was just breaking out. "breaking out" was never "obvious" and against "recent experience".

It is easier to buy gold now then 10 years back. By now, anyone who contemplated going into gold should have read how the Fed and western banks have suppressed the gold price. After the financial crises of 2008, the Fed and the western banks are as weak as they could be. They don't have the means to suppressed the gold price anymore as there are other central banks which would be on the other side of the trade - the buy side. So the game now is highly simplified - a simple battle between gold and fiat currencies. This battle now has only two variables, the total quantity of gold versus the total global fiat money supply. Nothing could be simpler (I cannot find ways to reduce things to one simple variable, e.g todays temperature).
There is never a downside risk.
Just as no one imagines gold going back the the pre-1971 level of $35/oz, even the not-the-smartest may see that gold would never go back to $1040/oz, the price the Royal Bank of India paid for 200 tons. Why is the $1040/oz now the equivalent to the old floor price of $35/oz. The reason is the physics of hydraulics and fluid. Fiat money is created out of air and, being fluid, obeys the law of hydraulics (Man created out of clay obeys the laws of gravity). The relevant principle is :
Air that is leaked never returns.
Once the global fiat monies have been created (not just the US dollar), you cannot rein them back in the long run. Contraction of money supply in the short term is possible but never in the long run.
So the further rise of gold is assured.
Is gold $1040/oz the current floor price for gold ? The answer is a clear No.
Every price of gold in the future may be taken as the new floor price of gold.
Contradictory but true. There are again reasons :
Gold will stop rising when this currencies war ends together with a strong, healthy global economy.

That would be the time to sell all gold and go for the next best investments.

 

[logikos]

Quote from DrPepper:

Entertaining video that I agree with, although with some slight differences:

1. You cannot go wrong with a Glock, but it does not have a safety. A lot of police officers carry the Springfield XD, which has several safety features. The .40 caliber has more stopping power (and a lot more kick) than the 9mm. Semi-automatics occasionally jam, so a .357 magnum revolver is another dependable option. However, 2 former police officers told me that for true home protection, they recommend a short-barrelled shot gun. A good choice is the 12 gauge Remington pump 870 Express with an 18.5" barrel. Mossberg has a similar gun that may be a little less expensive.

If one goes with a semi-auto, definitely spring for top grade commercial ammo, not target loads. Too many jams with the latter, and odds are it will jam when you need it the most.

.357 magnum revolvers are always a favorite to shoot and have tremendous stopping power, but are too inaccurate past 10 feet.

Short barreled shotguns are great, but only good for defense. A normal shotgun is a must have to hunt small game.

An often overlooked caliber is a .22. A long barreled .22 handgun are extremely accurate, low noise with practically no kick. Great for varmints, hunting, and yes, even self defense.

 

[the1]

That I would agree with.

Quote from PlusMinus:

Become a primary currency or any official currency? No, it won't likely. But it is on the path to becoming a massive insurance policy against a dwindling dollar. That is simply undeniable.

 

[Onlygold]

The Collapse of the Dollar
The dollar has been weakening for the past decade with the dollar index falling 35% from 2001. For a superpower, the main reason is usually overspending. The US runaway federal budget deficits could only be supported through money expansion and all money printing dilutes the value of a currency. In all likelihood, the large US budget deficits will be the norm in the coming years and the fundamental for the long term dollar is downwards.

For the current year, the dollar index fell about 15% from 88 to 75. This is accompanied by the Fed rate falling to zero after the financial crisis of 2008. After the Nasdaq collapse, the Fed rate was reduced from 6% down to a low of 1% in order to prevent an economic and a widespread stock market collapse. When the Fed rate was raised from the low of 1% in 2004 back to 5% in 2006, the stock market responded with a crash. It is either save the stock market or the dollar, but not both.

With the the dollar heading down in the long term and a zero Fed rate that has become fixed onto the US economy, only funds that have no way to go would remain in US bonds. A (nominal) zero interest rate cannot go down any further. As bonds prices move inversely to yields, the US Treasury market is as high as it could be and forms a bubble top and a "knowable" market top. It is illogical and insane that any free (speculative) markets have definite and "knowable" tops or bottoms. The usual scenario should be everyone would immediately sell a "known-in-advanced" market top (Antal Fekete commented that this bond market is simply "rigged" as bonds traders are literally allowed to make huge profits with no risk!). The problem is of course the enormous size of the US Treasuries funds which no other asset market could accommodate. But most central banks would still attempt to divert any additional dollar accumulations to "better" havens, one of which clearly is gold. Neither the Fed nor the Obama administration could stop this current collapse of the dollar.

An exchanged rate is determined ultimately by the bids and offers of the spot markets and not interest yields, risk nor other factors. So what about direct "quantitative bidding" to save the dollar? The dollar is unique as it is the key reserve currency. The Fed is only responsible for creating it, then manipulating it according to the Fed's policy. As for looking after the dollar when it is heading in a wrong direction, the responsibility falls on the rest of the world. The US is in sovereign default since 1971 and it is "bankrupt" in the sense it does not have any foreign reserves (cash-in-hand) to defend or buy up a falling dollar even if it wanted to. The Fort Knox gold reserve is not for spending for whatever reason. A possible reason why the Fort Knox gold is untouchable may be a secret prophecy handed down by the Red Indians and had nothing to do with gold having any intrinsic value:
When the Fort Knox gold goes, so does the United States of America.
The Red Indians could not protect their gold and so their lifestyle and culture disappeared.

But what's so bad about a falling dollar? The real value of the foreign debt of the US got reduced and may be repaid in the future with lesser real value. A lower dollar also spurs export by lowering the international price of US goods and would be good for manufacturing and which means more jobs. The catch is there would be no foreign country with the money to buy US goods when their export industries are being destroyed by losing the biggest export market in the world - the US consumers.

So no one wants the dollar and yet the dollar cannot disappear without a trace saving itself any more trouble. What will happen is the collapse of the dollar would be what takes away any "green shoots" and hope that countries could get out of recessions. It would mean the final unraveling of full global depression.

What goes down may not come up. The collapse of the dollar need not destroy the dollar, but the world economy.

 

[Ivanovich]

Moved to chit chat. I tried to find the "Move to Kitco.com" option in the admin control panel, but alas, it hasn't been implemented.