Inflation, deflation, gold and currencies

[freddyv]

silver2008 -

Do you think the fed could/would engage in "quantitative easing" (creating money) to such an extent that the dollars held by the good and hardworking men and women of this country no longer have any value? It would be a way for the fed to steal the wealth of the nation an use it to pay the debt the country owes to other nations.

I hope they wouldn't, but it seems from thier action that they would if they could.

I am interested in you opinion of if its something they can do. I am dumbfounded that the Fed is unrestrained by constitution or law, but that seems to be the case.

If I'm not mistaken we have already devalued our dollar by living off debt for so many years. This is not really the Fed's fault, it is the fault of our society and as this sites suggests, Generational Dynamics.

My opinion is that yes, they will keep printing money and devaluing the dollar until it either works or they have completely and totally ruined the trust of the world in the U.S.A. I hope it works; I don't think it will.

I suppose the theory is that they must keep the world economy flowing no matter what because if they don't we will have another Great Depression, or worse. I watch Fast Money every day and the smartest person on the show is Karen Finerman (with all due respect to Macke) who made the point that everytime the government takes some sort of action they are telling us where the problem is. So far the problems have all turned out to be bigger than anyone, or at least Wall Street, expected. Just look at the way AIG is sucking up more and more money as time goes on.

As John has pointed out here many times, they keep doing more and more and more and things are getting worse and worse and worse. You don't start throwing around trillions of dollars unless you see financial armaggedon on the horizon.

--Fred

[John]

From a web site reader:

> Everywhere I look, the opinion is to buy gold - radio adds want me
> to buy; large, wise investors are fleeing to gold for safety so I
> should follow if I have half a brain; most newsletters say you
> must have gold, my son says to buy gold, my wife's friends say
> their husbands are buying gold. Gold is a store of value in a
> depression and protects you in inflation when the economy heats up
> - you cannot lose with gold so the carefully constructed argument
> goes.

> However, world demand for gold in production is down as the
> economy collapses, gold jewlery sales are down (in fact peole are
> cashing in old jewelry), miners must be increasing the supply at
> these high prices. Most all other commodities except gold have
> collapsed in price.

> My thought is that gold is a bubble that will burst before a rise
> later because of inflation. Very large investors with gold are
> desperately trying to sell anywhere they can. Do you have any
> opinion if the gold bubble will burst?

The gold bubble will definitely burst. When that will happen can't
be predicted. This entire thread discusses the matter.

Sincerely,

John

[MarshAviator]

Europe’s banks face a $2 trillion dollar shortage

from: http://www.telegraph.co.uk/finance/fina ... rtage.html

This would be a staggering amount of dollars, one you factor in petro trading in dollars, it gets really large.

The idea of a gold hedge is one thing, but unless we adopt a gold standard again (unlikely until at least 2012) dollars are king.
You just can't file off some gold to trade unless we become a pure barter economy.

[browner55]

The gold bubble will definitely burst. When that will happen can't
be predicted. This entire thread discusses the matter.

Sincerely,

John

I find the gold bubble to be one of the most fascinating bubbles. If it does really "pop," it will be the principle of maximum ruin in its most ravaging form. I know many sophisticated investors that would be ruined if this bubble popped. The Fed seems to be "monetizing" the debt by buying treasuries, which seems to be the same as printing money. After the Fed made their announcement to do so yesterday, gold spike about $50 instantly and the value of the dollar with respect to other currencies tanked. Goldbugs had a sweet revenge of sorts. It seems logical that if the Fed continues monetizing the debt and "printing money" that this would continue. However, it is unclear to me as to how this money actually flows into the system and trickles into my pocket.

[malleni]

...
Hi malleni,
So your argument is just because Dr. G. Gono, the chairman of the Reserve Bank of Zimbabwe praised the US Federal Reserve therefore my inflation argument is wrong? Please rethink your reasoning as you are missing something.
With best regards,
Theeconomy..

Hi Theeconomy,

Sorry for this late answer.

I think that you misunderstand me.
Actually, I think that your post was absolutely - correct!
My posting was (or was planed to be) - just a sarcastically SUPPORT to your (correct in my opinion) posting.

Today is just not only funny to talk about "deflation" - but even more nonsensical.
Not just because all mainstream media talking each day about it (and it is really boring to hear again the same shallow story) - but it is obvious from each day that something like "Great Depression Deflation of 1929 type" - will NOT happen.
Something other - will.
AND it will be WORSE than this quasi "NEW Great Depression Deflation of 1929 type".
But to imagine it - man should think little bit more "after the day D".


Those days I found on the Bloomberg an really unexpected supporter for the "Generational Dynamic theory" - in Johns interpretation.
Namely, Federal Reserve Bank of Dallas President Richard Fisher:

http://www.bloomberg.com/apps/news?pid= ... refer=news


Please find this very "clever" point where he "explained":
"...
There’s no reason why China would reduce its purchases of U.S. Treasuries, which have “obviously been a plus for the U.S.” by containing interest rates, Fisher said. “I don’t detect any desire among the Chinese government that they will not help us,” he said.
...
"

So he admitted openly that China is actually some kind of "prisoner" because it is trapped in USD trapp and can not "find the reason" why they should NOT continue to finance a bankrupt State of US!!!???

Really...?
Why not try with simple logic?
What every "prisoner" wish as - first ...!!!???

To escape, of course... OUT of prison!

There is no doubt that Beijing seeks tirelessly now to get rid as soon as possible of this mountain of assets "toxic" that became the U.S. Treasury Bonds and U.S. currency!
There are PLENTY of sources for it (even on this funny site).


In difference what Herr Fisher from FED and also "theorists" form GD on this site - insist, namely:
"...Someone, somehow will bail out us..."
and...
"...USD remain strong, even if STATE of USA collapsed..."

The REAL LIFE is not at all as those "theorists - predicted".


Simple survival logic say that in crises situation everybody try to rescue himself.
That is valid for China too.
As support to this more than logical "explanation" i am giving also a diagram from NYTthose days, which explains how "Chinese helping us..."

[ainsleyclare]

What I see happening is that some things are getting less expensive (ie, furniture, vacation travel, fancy electronics, anything else we can do without) while other things are getting more expensive (ie, food, utilities, anything else we really have to have).

Note that I don't say I "foresee" this happening. It is happening right now!

This is simply another manifestation of the principle of maximum ruin.

[malleni]

As "tribute" to all "explanations" of the GD "theorist" (about "strong dollar" between others... ) - on this site I can give this one:

http://www.bloomberg.com/apps/news?pid= ... refer=home

Of course it is not FIRST time that FED making this failed policy:
http://www.ustreas.gov/offices/internat ... f/history/

As said already - today - this is present situation:
"...
All told, the Fed's balance sheet reported $308.8 billion in central bank liquidity swaps April 1.
..."

Implications:
1) There would be no need to secure these new agreements if the fed hadn’t already used most of its existing $308.8 billion in central bank liquidity swaps.
2) This implies that unwinding the Federal Reserves existing swaps would leave the US with close to 300 billion in foreign denominated debt.
3) This development also implies that much of the dollar’s recent rally has been artificially created by the Federal Reserve’s 300 billion currency swap intervention...
(Just in opposite from "theorist" of Day D, and "strong dollar lover")

It is obvious that - the dollar bubble is reaching its final stages.



Thank you for today.

Kind regards
malleni

[eugenis]

I don't understand why after US Government printed a lot of money to bailout, the Gold price dropped? If a lot of money is printed, money value will drop and gold price will raise, isn't it?

[John]

I don't understand why after US Government printed a lot of money to bailout, the Gold price dropped? If a lot of money is printed, money value will drop and gold price will raise, isn't it?

We're in a deflationary spiral, so the price of everything is falling. There's
no reason why gold should be an exception.

John

[malleni]

I don't understand why after US Government printed a lot of money to bailout, the Gold price dropped? If a lot of money is printed, money value will drop and gold price will raise, isn't it?

We're in a deflationary spiral, so the price of everything is falling. There's
no reason why gold should be an exception.

John

Wou...
Strong comment!

And probably US Treasuries are the - "right investment"?


Dear eugenis,
Even if John do not agree with it, I think that price of gold is just very strong manipulated as everything and especially gold, on todays so-called "free market".
The main manipulators are in US but even in EU and represented in central banks.
Additionally, never forget - US is Empire - falling one, but still Empire.

Try this:
(funny "explanation" of IMF after G20 meeting:)
http://www.imf.org/external/np/exr/faq/goldfaqs.htm

(ECB selling huge amount of physical gold:)
http://seekingalpha.com/article/129128- ... ld-default

(a little bit about "paper gold":)
http://www.goldensextant.com/commentary ... chor195022
http://news.silverseek.com/GoldIsMoney/1239035223.php

Kind regards