Questions about NewAmerica15.com...

[PeterMP]

$300/ounce, not $500.

And the answer to your question is simple. The currency that the world will shift to, temporarily, will be gold.

Of course is sounds practically impossible right now. And I'm not saying that this is guaranteed to happen. I'm just saying that this is what will happen if things get so bad that enough investors lose faith in the dollar. (I personally believe that this is one of the three most likely scenarios we face in our economic future, but that's another topic for another post, one I plan to finish writing soon.)

You can see the first signs of this playing out right now. Central banks, for the first time in decades, have become net buyers of gold. They're not doing so because they think that buying an asset when its price is at an all-time high is usually a good idea. But if the bottom of the dollar falls out, that will effectively push the reset button on the entire global economy. There will be complete chaos. Countries will still need to have some sort of unit of currency to use for the meager amount of trade they'll do with each other. And because the dollar will only collapse if it's the last paper currency to collapse, the default currency will revert to gold.

The short-term price swings in gold are largely irrelevant here. The $300 surge that happened in late summer/early fall is as meaningless as the recent $300 fall. It's nothing more than speculation and profit-taking, especially when it comes to European banks, which are telling the public that everything is fine and there's no need to panic while they panic behind the scenes and sell everything in a desperate effort to stay solvent and liquid. As long as the world remains locked in the "race to debase," gold will continue its long-term march upward.

It's odd, but I find this discussion to be somewhat similar to discussions I've had regarding Newt and the Republican nomination. All of the arguments against his success would be valid in any other race in the past 40 years. But in this race, once you've eliminated all other options, whoever remains, however improbable, will receive the votes. All of the arguments against gold would be perfectly valid at (almost) any other time in the past 40 years. But if all countries in the world are trying to devalue their currencies, whatever remains, however improbable, will increase in value.

Well, if everybody is working on debasign their currency, then essentially everything will go up in value.

You're essentially talking about large scale across the board inflation.

I seriously doubt that people will ever go back to physical transfers of gold to back trades. Any country that does economy will pretty much immediately stagnate (as nobody will want to do business with them). We hold as 2X as much gold as any other country in the world. The dollar than will be the resulting world currency (though it might be at a hugely altered value).

Do you really believe that you are seeing true gold prices right now? Do you think that market manipulation by gold producing countries like China and Russia plays no role?

[brandymac27]

Ok, so I don't really know crap about this kind of stuff, but is the price of gold expected to increase even more or is pretty much gonna go back down at some point?

[Predicto]

Ok, so I don't really know crap about this kind of stuff, but is the price of gold expected to increase even more or is pretty much gonna go back down at some point?

No one can predict the future on that (or anything else), but history tends to tell us that precious metal bubbles eventually burst.

[Bliz]

Ok, so I don't really know crap about this kind of stuff, but is the price of gold expected to increase even more or is pretty much gonna go back down at some point?

Hard to say. It's been going up a lot lately. If you bought in 2000, you have made an absolute killing. If you bought in 1980, you had lost money until 2010 (that's real dollars, not inflation adjusted). If you invested in 1995, it wasn't until 2005 that your portfolio had posted a gain.

My personal uninformed opinion is that the bottom will drop out sooner or later. This parabolic curve of increases is unsustainable. And if I had to predict the cause, it will be that one of these gold funds is a fraud, in that they don't have the physical assets to match all of the paper they have handed out declaring that people own so much gold. If word of that ever gets out, the crash will come fast and hard

[Corcaigh]

Hard to say.

Indeed, but if history is any guide, now looks like a good time to sell rather than buy.

[Predicto]

Hard to say. It's been going up a lot lately. If you bought in 2000, you have made an absolute killing. If you bought in 1980, you had lost money until 2010 (that's real dollars, not inflation adjusted). If you invested in 1995, it wasn't until 2005 that your portfolio had posted a gain.

My personal uninformed opinion is that the bottom will drop out sooner or later. This parabolic curve of increases is unsustainable. And if I had to predict the cause, it will be that one of these gold funds is a fraud, in that they don't have the physical assets to match all of the paper they have handed out declaring that people own so much gold. If word of that ever gets out, the crash will come fast and hard

It could take a while, however. Glenn Beck and Mark Levin and the rest of them have large audiences of timid old people, and not all of their listeners have been scared into converting their 401k's into gold - yet.

[PeterMP]

Two rules:

1. Nobody can predict the future, and if they can, they aren't going to tell you.

2. The market can stay irrational longer than you can stay solvent.

[Predicto]

Two rules:

1. Nobody can predict the future, and if they can, they aren't going to tell you.

2. The market can stay irrational longer than you can stay solvent.

Lord Keynes, is that you?

[Koolblue13]

I like to think about end of days type things. I don't know why. Maybe it's my hate for consumerism and greed over taking care of our global community and planet and I want to see it all burn, so it can start over.

I can hunt with a bow (arrows are reusable), butcher an animal, grow veggies, start fire in the rain, build a safe place to live, make tools, etc. I'd live.

As far as the Gold goes. I saw a well known gloom and doom economist on the Daily Show once and he said "screw gold, buy spam. At least you can eat it".

[GibbsFactor]

I like to think about end of days type things. I don't know why. Maybe it's my hate for consumerism and greed over taking care of our global community and planet and I want to see it all burn, so it can start over.

I can hunt with a bow (arrows are reusable), butcher an animal, grow veggies, start fire in the rain, build a safe place to live, make tools, etc. I'd live.

As far as the Gold goes. I saw a well known gloom and doom economist on the Daily Show once and he said "screw gold, buy spam. At least you can eat it".

Our economic and political systems are rotting but haven't reached the core yet. Follow the rules and life isn't so bad. I often joke on here about the world falling to **** but I really want nothing to do with living in post apocalyptic times. Tooth aches hurt.

[Koolblue13]

Our economic and political systems are rotting but haven't reached the core yet. Follow the rules and life isn't so bad. I often joke on here about the world falling to **** but I really want nothing to do with living in post apocalyptic times. Tooth aches hurt.

Yes they do. I'm moving to an island that does have too much. Not third world by any means, but still an island. I may end up living in a rain forest and taking internships at a sustainable farming institute, learning about farming and holistic medicine, so I'll be a little more prepared. I know modern medicine and modern tech has a place, but I also believe in living simple and now I'm going to really test that out.

[GibbsFactor]

Yes they do. I'm moving to an island that does have too much. Not third world by any means, but still an island. I may end up living in a rain forest and taking internships at a sustainable farming institute, learning about farming and holistic medicine, so I'll be a little more prepared. I know modern medicine and modern tech has a place, but I also believe in living simple and now I'm going to really test that out.

Oh,absolutely. I have a farm lined up if it ever went to ****. I think that's the best thing people can do is find a place they'd be welcomed that is off the grid and able to sustain you for a while. Just in case.

[Koolblue13]

Oh,absolutely. I have a farm lined up if it ever went to ****. I think that's the best thing people can do is find a place they'd be welcomed that is off the grid and able to sustain you for a while. Just in case.

A friend and I were playing a game of "what ifs" and you could be Bear Grillis in this area and the shear amount of clueless, hungry scared people would just completely over run any one with half a brain in the area. You'd have to get to the mountains faster than the deer and hope the locals who have been living like this for years, don't think you're mouth is too pretty.

[Pick6]

If anyone wants to read a fun book about the US going to **** real fast after an EMP attack I highly recommend:

[Predicto]

If anyone wants to read a fun book about the US going to **** real fast after an EMP attack I highly recommend:

With an introduction by Newt Gingrich!

[Hubbs]

No one can predict the future on that (or anything else), but history tends to tell us that precious metal bubbles eventually burst.

History tells us that fiat currency bubbles always burst, too.

Well, if everybody is working on debasign their currency, then essentially everything will go up in value.

You're essentially talking about large scale across the board inflation.

I seriously doubt that people will ever go back to physical transfers of gold to back trades. Any country that does economy will pretty much immediately stagnate (as nobody will want to do business with them). We hold as 2X as much gold as any other country in the world. The dollar than will be the resulting world currency (though it might be at a hugely altered value).

Do you really believe that you are seeing true gold prices right now? Do you think that market manipulation by gold producing countries like China and Russia plays no role?

Yes, the task will be to figure out which assets will go up the most.

You speak as if there would be any nations that would be willing accept paper money that another country controls during a worldwide currency crisis. We're talking about a doomsday scenario here. Again, to make a point I made in another thread, this is the kind of thing that came up in the conversation Hank Paulson had with members of Congress when he locked them in a room and told them that if they didn't give him $700 billion, there wouldn't be a financial system to save tomorrow. Only in this case, we're talking about the disastrous inflation final outcome rather than the deflationary collapse outcome.

I believe the gold prices we're seeing right now are the product of the first stage of a currency crisis, when officials in both the public and private sector tell everyone that everything's going to be fine, while behind the scenes they're panicking at the disco (5-year-old pop culture reference FTW!) and doing something that seems irrational to us mere peons who don't have access to the same information that they do: buying gold, because there's nothing left to buy for security. Currency? Not if you're losing faith. Bonds? Those are paid out in currency. Stocks? Who the hell knows which companies will survive a true crisis? Real estate? Those prices are driven by credit, which will largely shut down if things get bad enough. Real estate is the right buy when there's blood on the streets, not beforehand.

Ironically, days like today are the beginning of phase two, when some of the frantic buyers from the past three years are forced to sell because their contracts still demand currency, not gold, and they've finally run out of anything else to sell. They have no choice. Everything's going to ****, and they can either sell their gold or hitch a ride to the poor house. If the currency crisis is going to play out in full - like I said, I think that's only one of three likely scenarios - then the prices of most assets will have to go down before they go up, because onlythe beginnings of another emergency will relieve enough political pressure for the Fed, and probably even the ECB, to print even more. When the Fed becomes convinced that the only options are either another 2008 or more printing, I believe the choice will be to print. And when the Germans become convinced that the only options are either a worldwide depression caused by the breakup of the euro or finally allowing the ECB to print, I believe that the choice will, again, be to print. It will take a whole lot for the Germans to reach that point. Maybe an uncontrolled Greek default or exit from the euro. Maybe even more than that. So I certainly won't be in the business of predicting the timing of all of this. And perhaps one of other two scenarios will play out, or perhaps someone will invent cold fusion tomorrow and the world will be saved.

Anyway, as far as gold goes, in a currency crisis gold once again assumes its previous role as a store of value. Once enough people are using it for that, it will begin to also regain its role as a medium of exchange. Both of these roles will be temporary. But until you're on the other side of the crisis, gold will continue to increase in importance. If you think this is nothing more than a quaint little bubble fueled by Glenn Beck, then riddle me this: Why were central banks net sellers for so long when the price of gold was low, and they're net sellers when the price is at or near all-time highs? Are they just preposterously incompetent?

[War Paint]

As far as the Gold goes. I saw a well known gloom and doom economist on the Daily Show once and he said "screw gold, buy spam. At least you can eat it".

This is something that I've thought about in regards to gold. If things got so bad to where the currency crashed, I'd rather have a food storage than gold. If things did go Mad Max, I would think that a bucket of wheat is much more precious than a gold coin. I'm not trying to say that gold doesn't have value. It has pretty much been valued as a currency for thousands of years. I also think that the rise in gold is not a bubble. It will have some ups and downs, but I think it will continue to rise in the long run.

[The Evil Genius]

Get rich fast scheme.

1) Collect as much gold as you can.

2) Bomb Fort Knox with a tactical nuke.

3) Profit.

or...

[Hubbs]

This is something that I've thought about in regards to gold. If things got so bad to where the currency crashed, I'd rather have a food storage than gold. If things did go Mad Max, I would think that a bucket of wheat is much more precious than a gold coin. I'm not trying to say that gold doesn't have value. It has pretty much been valued as a currency for thousands of years. I also think that the rise in gold is not a bubble. It will have some ups and downs, but I think it will continue to rise in the long run.

Unfortunately, this is the part that's all about timing. If a true worldwide currency crisis does occur, there will be a period of disruption during which you'd much rather have medicine, food, and a gun than gold. It's the old "diamond or water" scenario, and you have to figure out when you'll go from someplace normal to the middle of the desert. It would be a very tough call. That's why I'd ultimately rather have Peter be right about everything.

[Hubbs]

Get rich fast scheme.

1) Collect as much gold as you can.

2) Bomb Fort Knox with a tactical nuke.

3) Profit.

Screw that. Go Die Hard 3 on the New York Fed.

"Fort Knox? Ha! It's for tourists!"

[Predicto]

If you think this is nothing more than a quaint little bubble fueled by Glenn Beck, then riddle me this: Why were central banks net sellers for so long when the price of gold was low, and they're net sellers when the price is at or near all-time highs? Are they just preposterously incompetent?

Actually, I admit that I don't know. I studied economics, but not to the extent necessary to analyze why central banks do everything that they do.

I tried to google it, but the only places that discussed the issue (or even seemed to think it was a big issue) were trying to sell me gold.

[PeterMP]

If you think this is nothing more than a quaint little bubble fueled by Glenn Beck, then riddle me this: Why were central banks net sellers for so long when the price of gold was low, and they're net sellers when the price is at or near all-time highs? Are they just preposterously incompetent?

It is always possible that there will be a complete and total economic melt down. I tend to think it won't come to that because if nothing else, it will become in people's interest to simply forgive the debts. China would be better off comletely forgiving the US debt than see the world go to a defacto gold standard.

1. I think I've made my opinions on the ability of humans to predict the future and therefore to move in a "good" manner in terms of the economic future. The fact they are part of a centeral bank doesn't really change that. (There's actually a history of countries buying oil to build reserves when oil prices are actually pretty high.)

2. I've NEVER said that it was ONLY a Glenn Beck fueled bubble. America has real economic problems and a hedge against that isn't unreasonable and much of Europe is even in worse shape. We seriously need to consume less or be a lot more productive.

3. However, some of the developing economies (e.g. China, India, South Korea) have a very SMALL gold portfolio as compared to other more mature economies (e.g. the US and most European countries). It isn't surprising as they'd attempt to increase their gold holdings. China and India also started building oil reserves in 2004 despite relative high oil prices that than went even higher. Them doing so isn't a sign that they have some apocolyptic view of the future. It is just the fact that it is reasonably conservative thing to do if you have the money to do it, and they feel like they've obtained enough money to do it. To a certain extent it is a self fullfilling event. Countries can't easily buy and accumulate things like gold and oil secretely, and they have to buy pretty large amounts for it to do any good (China buying a couple of ounces of gold or a barrell or 2 or oil doesn't make much sense) and that knowledge in of to itself drives the price higher, much less the fact that they ARE actually increasing world wide demand though they aren't really consuming or using it.

That countries that are starting to have excess money are looking to spend it isn't surprising and isn't really a bad thing if they do it in a legitimate manner (i.e. they don't "spend" in a manner to intentionally manipulate markets in an attempt to make even more money).

4. I think the Saudis and some other countries are also looking at their investments differently because they are seeing the prospect of their way of life pretty rapidly going away. They once had incentive to buy US dollars to help control the relative levels of our currency and theirs, but if you aren't going to be selling as much oil to the US in the future that goes away.

5. I also find it some what oddly coincidental that the price of gold is going up in the way it as at the same time that a country that isn't known for playing by free market rules is becoming the major producer of gold and that country is pretty secretive about its gold reserves.

I wouldn't it all be suprised to learn that China and Russia were cordinating their actions with respect to growing their gold reserves in order to increase gold prices, and therefore to increase the value of their resources (that it makes the US and the dollar look weak is just an added bonus (short term)).

Do you think China (and to a lesser extent Russia) is actually paying market price for their gold (is China increasing their reserves by actually buying the gold, or are they just taking gold that they are producing and placing it in their vaults)?

And if not, what does that mean to "real" gold prices?

[Koolblue13]

I can imagine a currency crash, but I'd put my fair share of spam on a continued currency crash on the side of a major food and water crisis, sprinkled with a touch of pandemic.

As far as a zombie problem, with all the overweight people sitting around being force fed by their tvs asking their government to take care of them is close enough. World goes to ****, there's your zombies.

[TD_washingtonredskins]

I'd like to hear what NewAmerica1 through 14 have to say first before I listen to NewAmerica15.

The franchise jumped the shark at NA3.

[Hubbs]

It is always possible that there will be a complete and total economic melt down. I tend to think it won't come to that because if nothing else, it will become in people's interest to simply forgive the debts. China would be better off comletely forgiving the US debt than see the world go to a defacto gold standard.

The problem isn't the debt owned by China. It's the debt owned by banks. They can't forgive it, because doing so would instantly make them insolvent, which in turn would mean that more entities would require debt forgiveness, and round and round we go.

(Also, pension funds won't be able to fulfill their obligations if they forgive government debt, and they own a ton of it. Mutual funds would go under. Hedge funds as well. And so on.)

1. I think I've made my opinions on the ability of humans to predict the future and therefore to move in a "good" manner in terms of the economic future. The fact they are part of a centeral bank doesn't really change that. (There's actually a history of countries buying oil to build reserves when oil prices are actually pretty high.)

Three thoughts. One, you're getting pretty broad in your definition of inability to predict the future. I can easily predict, for example, that the rate at which the federal government is going into debt in terms of percentage of GDP is going to end. It might be voluntary and it might not, but it won't go on forever, that much is certain. Then, if I add some sort of "if-then" statement to make other conditional predictions based off of that. If the rate goes down significantly, and the rest of our current economic conditions remain the same as they are now, GDP growth will fall even further. Additionally, you're taking studies that demonstrate that on a market-wide basis, over the long term, inactive, diversified investing does better than fee-based active fund managers. This is rather different than data showing that specific predictions are impossible. I believe that at one point during the tech bubble, tech companies were, as a whole, apparently promoting business plans to investors that projected collective total annual revenues that were several times global GDP. Obviously this is beyond impossible. Now, predicting which companies would fail spectacularly based on that information alone is impossible, but predicting that there would be spectacular failures would be obvious.

Two, you're really stretching if you're trying to suggest that because central banks don't know for sure where the price of gold will be going, their actions therefore do not require any sort of explanation beyond, "Hey, they're just investing like everyone else." Saying that would, to me, indicate that you've taken your personal economic philosophy to the same level of absurdity as the Chicago economist I mentioned in that other thread who boldly claimed that he has no idea what causes recessions, but he's quite certain that the last recession began way before the date the NBER picked, and he's also quite certain that the recession wasn't caused by the housing bubble. Alarm bells should go off in your head when your economic philosophy leads you to say something like that. If central banks are just investing like everyone else, just trying to make some money, selling gold at multi-decade lows and buying at or near all-time highs is maybe the dumbest combination of investment strategies of all time.

Three... I'll actually get to that later, since you make the same point multiple times.

2. I've NEVER said that it was ONLY a Glenn Beck fueled bubble. America has real economic problems and a hedge against that isn't unreasonable and much of Europe is even in worse shape. We seriously need to consume less or be a lot more productive.

3. However, some of the developing economies (e.g. China, India, South Korea) have a very SMALL gold portfolio as compared to other more mature economies (e.g. the US and most European countries). It isn't surprising as they'd attempt to increase their gold holdings. China and India also started building oil reserves in 2004 despite relative high oil prices that than went even higher. Them doing so isn't a sign that they have some apocolyptic view of the future. It is just the fact that it is reasonably conservative thing to do if you have the money to do it, and they feel like they've obtained enough money to do it. To a certain extent it is a self fullfilling event. Countries can't easily buy and accumulate things like gold and oil secretely, and they have to buy pretty large amounts for it to do any good (China buying a couple of ounces of gold or a barrell or 2 or oil doesn't make much sense) and that knowledge in of to itself drives the price higher, much less the fact that they ARE actually increasing world wide demand though they aren't really consuming or using it.

That countries that are starting to have excess money are looking to spend it isn't surprising and isn't really a bad thing if they do it in a legitimate manner (i.e. they don't "spend" in a manner to intentionally manipulate markets in an attempt to make even more money).

Okay, now to the third point from above. Expanding your strategic oil reserve when prices are high makes all the sense in the world if you think about it politically. You need oil for your economy to function. When the price is really low, there isn't much political desire to expand reserves, even though it's obviously the better time to do it. But when the price of oil spikes, everyone freaks out and screams at the government, "We need oil! Do something!"

The only time you really need gold for your economy to function is when people start to lose faith in the things you've created to replace gold.

By the way, what in the world is this "starting to have excess money" nonsense? China has been sitting on the largest pile of foreign reserves for a long time now. Central banks, by definition, always have excess money. Sovereign wealth funds, again by definition, are made up entirely of excess money. Yet the shift towards gold has only happened in the past couple of years, during which time the price of gold has been going parabolic. Anyone who has studied parabolic moves in the market would tell you that it's a big, fat warning sign at least 95% of the time. Again, are you offering up the theory that the entire world has lost its mind?

4. I think the Saudis and some other countries are also looking at their investments differently because they are seeing the prospect of their way of life pretty rapidly going away. They once had incentive to buy US dollars to help control the relative levels of our currency and theirs, but if you aren't going to be selling as much oil to the US in the future that goes away.

What is it that makes you think we're going to "pretty rapidly" be getting off of Middle Eastern oil any time soon?

5. I also find it some what oddly coincidental that the price of gold is going up in the way it as at the same time that a country that isn't known for playing by free market rules is becoming the major producer of gold and that country is pretty secretive about its gold reserves.

I wouldn't it all be suprised to learn that China and Russia were cordinating their actions with respect to growing their gold reserves in order to increase gold prices, and therefore to increase the value of their resources (that it makes the US and the dollar look weak is just an added bonus (short term)).

Do you think China (and to a lesser extent Russia) is actually paying market price for their gold (is China increasing their reserves by actually buying the gold, or are they just taking gold that they are producing and placing it in their vaults)?

And if not, what does that mean to "real" gold prices?

I feel like I have to be misunderstanding this part. You're saying that you think Russia and China are intentionally over-bidding for gold, while simultaneously arguing in the beginning of your post that China would rather voluntarily give up over $1 trillion in U.S. debt than move towards a new gold standard? I mean... huh?