Financial topics

[Carl Lieberman]

My guess is that the Fed started buying futures around 3:18 pm. One of the reasons that I am skeptical of Higgy's numeric market cycles is because I don't think that the markets are acting in anything like a normal way. The Fed is directly intervening. They are acting on a scale as never before. The same is true of the U.S. Treasury market. QE is the Fed directly buying our Treasuries as a buyer of last resort. When Europe collapses, their money will flow into U.S. Treasuries. This will obviate the need for further QE by the Fed for awhile. The dollar will strengthen very much. Eventually people will realize that the U.S. dollar is the last and biggest bubble on the planet. This will be the death of the dollar. Some would call it inflation or even hyperinflation. Rather it will be the collapse of the dollar as a store of value. So first I'm a deflationist, but in the end I am an inflationist. When this ends, the dollar will not be the reserve currency of the world. I would use this next nine months to buy gold and silver coins. I believe that gold will drop to around $1400 and Silver to $25. This should be seen as your last chance to hedge your bets. Keep half in dollars and half in gold and silver coins.

[aedens]

http://en.wikipedia.org/wiki/European_s ... ebt_crisis

What do the 99 say to the 1
Zones are unique, but we must observe MMT theory that a nation overly dependent on imports may face a supply shock if the exchange rate drops significantly. As an operational matter, central banks can and do trade on the FX markets to avoid sharp shocks to the exchange rate.
What we observe is the parity process. Painfull but under way.

[Higgenbotham]

One of the reasons that I am skeptical of Higgy's numeric market cycles is because I don't think that the markets are acting in anything like a normal way. The Fed is directly intervening. They are acting on a scale as never before. I believe that gold will drop to around $1400 and Silver to $25. This should be seen as your last chance to hedge your bets. Keep half in dollars and half in gold and silver coins.

Just to clarify, you have interpreted what I've said correctly. If my silver cycles are correct, silver topped in late April and the high will not be exceeded for decades. Gold can still go higher. If my stock market cycles are correct, the stock market topped in 2007 and the high will not be exceeded for decades and probably centuries. Also, my stock market cycles have already been proven partly incorrect because, according to my methods, the latest time frame for a secondary high was April 26, 2010 and the Fed was successful in exceeding that high with QE2 whereas I said it would not be possible.

[RDRUNR]

The dollar will strengthen very much. Eventually people will realize that the U.S. dollar is the last and biggest bubble on the planet. This will be the death of the dollar...When this ends, the dollar will not be the reserve currency of the world. I would use this next nine months to buy gold and silver coins. I believe that gold will drop to around $1400 and Silver to $25. This should be seen as your last chance to hedge your bets. Keep half in dollars and half in gold and silver coins.

That sounds great in theory, but in reality there is no other currency in the world that can replace the US Dollar as the reserve currency of the world. Trillions are exchanged/traded every day around the world in US dollars and even the Euro couldn't keep up with that. So what do you propose for a USD replacement (don't say siver/gold, it won't happen)

As for a 50% total investment in gold/silver, that is a lot riding on 1 trade (PM's), what about diversification in other currencies?

I see USD as a world currency myself for a good 20+ years to come still.

[aedens]

One of the reasons that I am skeptical of Higgy's numeric market cycles is because I don't think that the markets are acting in anything like a normal way. The Fed is directly intervening. They are acting on a scale as never before.

http://www.scribd.com/doc/66281284/Frbn ... -Media-Rfp

[richard5za]

Let me try to express what some writers are saying in a slightly different way: I am not seeing a way out for the North American and European financial system except by steady devaluation of the currencies involved, mainly dollar, euro and pound. These are called "beggar my neighbour policies" in this case upon the rest of the world, and they are not easy policies to implement because of the possibility of retaliation, even currency wars. They need to be quietly sneeked in.

What the Western governments don't need in this scenario is an out of control gold price that becomes the worlds strongest currency. It becomes a bench mark against which their economic actions are judged, and especially the strength of their currencies. It makes the devaluation plan hard to implement. Consider this:

"That day the U.S. announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."

Paul Volcker, Nikkei Weekly 2004

So as far as I can see the recent sell off in gold was not just a liquidation of some investors of selling profitable investments such as gold to provide liuqidity, but active Western central bank dumping of gold to maintain some control and dampen down of the price. If I'm right there will be growing restrictions on private ownership of gold: I understand France has or will impose such restrictions.

There are an increasing number of trader's reports that Asians are buying physical bullion as fast as they can get it, and even paying a premium to the spot price, on condition it is shipped back home. So whilst we argue the merits of gold investment the Asians don't seem to have any doubts. I suspect that they may have seen through the Western currency devaluation game.

So all the long term reasons for having gold in your portfolio remains valid in my view. But there may be a volatile road getting there.

If people like Vincecate are right and the monetary authorities lose control of inflation and we enter hyperinflation, then gold and other inflation hedges such as real estate become a financial life line for all of us.

[John]

> I see the market did that infamous 3:30 bounce. I'd really love to
> know how that works.

The reason for the bounce is that the collapse of Dexia bank is
causing European officials to talk about plans to recapitalize banks.
Investors are assuming this money will flow into the stock markets,
just as happened in America's bank recapitalization program in 2009.

John

[richard5za]

If people like Vincecate are right and the monetary authorities lose control of inflation and we enter hyperinflation

I need to add another caveat which I left out earlier (apologies, old age perhaps): If John is right and the authorities lose control of the situation and deflation results, then the quicker one gets out of gold the better. Its a genuine possibility. For instance currency wars can bring world trade to a halt which would probably have a serious deflationery result that the printing presses wouldn't combat e.g. the so called Keynesian 'liquidity trap'.

[Higgenbotham]

One of the reasons that I am skeptical of Higgy's numeric market cycles is because I don't think that the markets are acting in anything like a normal way. The Fed is directly intervening. They are acting on a scale as never before.

http://www.scribd.com/doc/66281284/Frbn ... -Media-Rfp

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[Carl Lieberman]

A couple of responses. Higgy, I have also read that the Fed is monitoring social media. Does this mean that I will soon be getting a knock on the door;--)

About deflation and the Japanese experience. There was a great post on zerohedge a couple of days ago about Japan's experience in the last couple of decades. In summary, Japan had a highly regulated and controlled economy. Prices were unbelievably high. There were enormous structural barriers to competition. Sushi was $50 etc. The deflation in Japan was prices returning to more normal levels. Our situation is not comparable. We have had more open trade and regulatory policies which have resulted in lower prices for comparable items. We will not have a similar decades long encounter with deflation.

On the reserve currency status of the U.S. dollar. I think that we have only another decade of reserve status left. Certainly there is currently no currency large enough to replace the dollar. But the policies of the Fed are disadvantaging almost every other country in the world relative to the U.S. Bernanke is acting in America's interest with his policies. He is acting as a catalyst unleashing a torrent of structural change in country after country. The "Arab Spring" being just one example. The world is an extraordinarily complex system. The unintended consequences of large scale interventions will themselves be large. We have unleashed a rapid destabilization of the status quo. After the last generational crisis, the dollar emerged as the reserve currency of the world. What I believe is different this time is that the dollar will lose its place as the reserve currency. Hence the need to protect oneself with precious metals. The window for easy anonymous acquisition of precious metals will begin to close.