Inflation, deflation, gold and currencies

[Trevor]

Course, those are in bubbles too. I don't think there's anywhere really safe that you can invest or store your money in. Relatively safe places can be short-term treasury bills (1 year or less) or small banks, which is where I've stored what little money I actually have.

[vincecate]

Course, those are in bubbles too. I don't think there's anywhere really safe that you can invest or store your money in. Relatively safe places can be short-term treasury bills (1 year or less) or small banks, which is where I've stored what little money I actually have.

Bernanke has spent trillions pushing up the prices on bonds. The interest rates are below the inflation rate. Don't you think bonds are in a bubble?

If people stop buying bonds then the government ends up printing lots of new money and the currency becomes worth less and less. Or another way to look at it is that bonds slow the average velocity of money so when people get paid off when the bond comes due the average velocity of money can go up and prices go up. So the dollar can be a bubble too.

Gold has been money for 5,000 years. It has never really stopped being money. Central banks bought over 400 tons this last year. Some countries have started selling oil for gold.

When they are printing trillions of pieces of paper with pictures of dead presidents on them, how do you expect your pieces of paper to hold their value?

[gerald]

Well then, what you need to do is hold hard debt free income producing assets in a stable area. But of course there are risks and aggravations, but you do reduce currency loss risk.

[richard5za]

Well then, what you need to do is hold hard debt free income producing assets in a stable area. But of course there are risks and aggravations, but you do reduce currency loss risk.

Do you mean real estate? Income is the rents. First class commercial, manufacturing or residential protects against inflation in the long run. If we head into serious, or hyper, inflation then having bank debt on the property makes good sense because you pay it back at a reduced value. But you need to be careful because if economioc times are hard for a while rental income may soften.

[gerald]

Yes, I mean " real estate" that provides a goods or service, but NO DEBT, for debt can be indexed to inflation, and if times are bad you may not be able to service the debt. In the late 1960's I traveled to an area of Austria, and stayed in a small hotel.This hotel had pictures on the wall showing the history of the hotel and the family which owned it since the late 1600's, I assume it had no debt. A short distance away was the town cemetery. It contained numerous monuments and pictures of those buried there, such as " The glorious fighters and defenders of the "Third Reich" At times it may be wise to have no debt.

[Trevor]

Speaking of currency, most people are predicting that Greece will exit the Euro within a couple years. That prediction I believe will become true.

[gerald]

In terms of real estate, I am making the assumption that one can KEEP ones real estate. I have an acquaintance who escaped from China during the Maoist revolution by crawling under barbed wire while avoiding being shot. The only thing of value that he could carry were gems, they are light and high in value. Gold and silver are not adequate for they are too heavy and bulky. Your location and assets during epic events is very important in relation to your choice of actions.

[Trevor]

That's where the old joke about hiding your money under a mattress came from. Gems would also be easier to hide because I'm sure fleeing people provide ample opportunity for criminals.

[vincecate]

In terms of real estate, I am making the assumption that one can KEEP ones real estate. I have an acquaintance who escaped from China during the Maoist revolution by crawling under barbed wire while avoiding being shot. The only thing of value that he could carry were gems, they are light and high in value. Gold and silver are not adequate for they are too heavy and bulky.

Imagine I can carry 20 lbs of gold in my backpack and gold is $1600/oz.
With 16 oz per lb we get:

20*16*1600 = $512,000

Silver I agree, but you can carry a lot of value in gold. If you have it in 1/10th oz coins (the size I make at gold.ai) you can turn them in for about $160 each at many "cash for gold" places all over the world. The gems would be much harder to convert to cash.

The machines making gems keep getting better, so the real value of gems will probably be dropping (nominal may keep going up as they print so much money). So for holding value long term I bet gold wins big over gems.

[Trevor]

In the long term, I don't see anywhere that's completely safe. Whether we have a deflationary spiral or hyperinflation, gold and silver are in bubbles as well. I've heard claims that gold can't possibly go down in value because of its rarity, but it did just that in the early 1980's.