Inflation, deflation, gold and currencies

[jdcpapa]

"Gold fever" is the leading indicator of doom.

[richard5za]

"Gold fever" is the leading indicator of doom.

First time I ever heard that.

[RDRUNR]

"Gold fever" is the leading indicator of doom.

So true, be it the gold rush of the Klondike or the 20's or 80's or today. For "doom" I would say it's to those who develop the "fever" (gold rush fever), something like 95% of those who went to the Klondike gold rush came back greatly poorer they when they left.

Gold is now down $150oz since yesterday. I predicted last week it would fall, none of the gold bugs listened, by the end of the year, $1500oz was my guess. CNBC was also warning gold bugs to get out of the "gold bubble" when it was $1900oz. Yesterday CNBC said people were trying to sell gold but there were very few buyers (as I said would happen 3 weeks ago). No one will buy it when it's falling $50 to $100oz a day!

Fear and Greed. It was the greed that brought gold up to $1900oz, now it's the fear of losing it all that will have it go to $500ish oz.

[jdcpapa]

Fear and Greed. It was the greed that brought gold up to $1900oz, now it's the fear of losing it all that will have it go to $500ish oz.

You know, I was reading all of the passionate views about gold and I posted my response intuitively . While cocking my response, I was reflecting on my plan to buy gold when it went below $450. Albeit not more than 5% of my liquidity. Well,it got down to the 200's and it just so happens that I was distracted at that time. So I found myself thinking (Richard's post); I could really be "milking" this and that took me to "gold fever".

It could be that "fear" brought the gold up to 1900 oz and the "greed" of losing it all will bring it down. You just need to catch the "wave" and ride it in successfully. I missed it. But no regrets because "cash is king". IMHO

Buena noche a todo

[vincecate]

I missed it. But no regrets because "cash is king". IMHO

Not if there is hyperinflation.

[richard5za]

It could be that "fear" brought the gold up to 1900 oz and the "greed" of losing it all will bring it down.

The point to understand first is that gold has had a steadily growing price trend for roughly a decade now, obviously with ups and downs along the way. Why gold has had this decade long trend is too compicated to cover here; and there are a number of different views on the subject. Since 5 July 2011 there has been a short period of substantial volatility. There is no way of knowing, logically and with reason, whether the trend line of the last 10 years has reversed, or not. The recent volatility appears to be safe haven related with investors fearing a collapse in equities, and putting money into gold. In due course we will know whether the gold price trend line still points up, or has reversed.

But no regrets because "cash is king".

Cash is king in a deflationery environment; in an inflationery environment you can become poor quite quickly. The Germans lost their savings twice in 25 years, 1923 and 1948. There is a view that "austerity and deflation" versus "inflation and devaluation" is purely a policy decision of the monetary authorities in situations where the government of the day is empowered to make those decisions. That is the so called fiat currency. The US dollar is a fiat currency because the USA government can decide to switch on the printing presses (and at high speed) if they want to. Cash is the deflaionery "hedge"; the value of your savings is protected. For inflation find other hedges.

[jdcpapa]

It could be that "fear" brought the gold up to 1900 oz and the "greed" of losing it all will bring it down.

The point to understand first is that gold has had a steadily growing price trend for roughly a decade now, obviously with ups and downs along the way. Why gold has had this decade long trend is too compicated to cover here; and there are a number of different views on the subject. Since 5 July 2011 there has been a short period of substantial volatility. There is no way of knowing, logically and with reason, whether the trend line of the last 10 years has reversed, or not. The recent volatility appears to be safe haven related with investors fearing a collapse in equities, and putting money into gold. In due course we will know whether the gold price trend line still points up, or has reversed.

But no regrets because "cash is king".

Cash is king in a deflationery environment; in an inflationery environment you can become poor quite quickly. The Germans lost their savings twice in 25 years, 1923 and 1948. There is a view that "austerity and deflation" versus "inflation and devaluation" is purely a policy decision of the monetary authorities in situations where the government of the day is empowered to make those decisions. That is the so called fiat currency. The US dollar is a fiat currency because the USA government can decide to switch on the printing presses (and at high speed) if they want to. Cash is the deflaionery "hedge"; the value of your savings is protected. For inflation find other hedges.

I missed it. But no regrets because "cash is king". IMHO

Not if there is hyperinflation.

Your points are well taken and respected. I have not studied "Weimer" to any meaningful degree. I know that they did not have a "world reserve currency". The "world reserve currency" factor seems to be missing when these subjects are debated.

[vincecate]

Your points are well taken and respected. I have not studied "Weimer" to any meaningful degree. I know that they did not have a "world reserve currency". The "world reserve currency" factor seems to be missing when these subjects are debated.

I think people should study hyperinflation. I have written up some stuff at:

http://pair.offshore.ai/38yearcycle/#hyperinflation

I think having a fiat currency be the world reserve currency makes for a bigger crash when the currency hyperinflates, but does not prevent hyperinflation.

-- Vince

[jdcpapa]

The point to understand first is that gold has had a steadily growing price trend for roughly a decade now, obviously with ups and downs along the way. Why gold has had this decade long trend is too compicated to cover here; and there are a number of different views on the subject. Since 5 July 2011 there has been a short period of substantial volatility. There is no way of knowing, logically and with reason, whether the trend line of the last 10 years has reversed, or not. The recent volatility appears to be safe haven related with investors fearing a collapse in equities, and putting money into gold. In due course we will know whether the gold price trend line still points up, or has reversed.

Cash is king in a deflationery environment; in an inflationery environment you can become poor quite quickly. The Germans lost their savings twice in 25 years, 1923 and 1948. There is a view that "austerity and deflation" versus "inflation and devaluation" is purely a policy decision of the monetary authorities in situations where the government of the day is empowered to make those decisions. That is the so called fiat currency. The US dollar is a fiat currency because the USA government can decide to switch on the printing presses (and at high speed) if they want to. Cash is the deflaionery "hedge"; the value of your savings is protected. For inflation find other hedges.

I realize that gold prices have experienced upward pressure. The whys may very well be reconciled to fear and greed at the very least from a historical perspective. I have been "feeling" the gold ascension for more than 10 years. I believe the collapse of the US is the primary driver. The reality may be catching up to the fear now. Further, gold is a foundation of civilization. The only question is the utility and value in the future.

On the inflationary vs deflationary issue, I intend to pick apart Weimer et al. But a few parting words are appropriate: As I mentioned previously,I cannot ignore the world reserve issue. In my preliminary view, Weimer is not relevant in that respect. Please advise when in history that a fiat currency that is a world reserve has experiened hyperinflation so that I can supplement my analysis.

Respectfully,

[jdcpapa]

I think having a fiat currency be the world reserve currency makes for a bigger crash when the currency hyperinflates, but does not prevent hyperinflation.

-- Vince

I am going to study your stuff. Thank you for the invitation. If I understand you correctly, what you are saying is that the world will experience a bigger crash when the currency hyperinflates by virtue of the fact that they are awash in the US currency.