Home Forums Hunting & Shooting Hunter's Campfire Greece to Default ??

no argument from me

I never count my house as an asset in total net worth even though it's paid for,

it still costs money to maintain it and keep it from freezing up

therefore imo it's a liability, not an asset

rental property that cash flows is an asset

fortunate that we have a MIL apartment above the garage so our house does indeed produce some income

but not enough to offset completely the expense of living here, fuel, elec., snow plowing, maintenance and property tax

so it's still a liability, just not as expensive as it would be without any rental income from it.

I agree that if the USD failed, that is the U.S. economy failed, it would cause the failure of many other economies. However, that's different than saying other major world currencies are pegged to the dollar. As I pointed out, the Euro is the other major world reserve currency with over a 25% share. When the Euro is down the dollar goes up on the FX market and when the dollar goes down the Euro goes up. That's one reason a number of other countries are using both the dollar and the Euro for their reserve currency needs.



It depends on your definition of failure. It's a failure in the sense that no nation has ever been able to sustain a currency backed by gold or silver; that's just a fact. The reasons include war (not only to attack but also defend), speculation (forced the British off the gold standard in 1931), gold and silver discoveries, and international trade. The same forces that forced every nation in history to abandon currency backed by gold or silver are still in effect today. You can read about all this here.



Now you are contradicting your expert Gary Korolev who states early in his lecture that while England was on the gold standard the many central-like banks were using fractional reserve banking to create money so the King could go to war. Okay, but to do away with fractional reserve banking means banks can't loan out depositor's money to make money, and if banks can't loan out money then they'll have to charge to store deposits. So where do people and businesses go to get loans that won't involve either leverage or fractional reserve banking? It can be done, but it makes it hard for individuals and businesses to borrow money and that slows economic growth.

You say that "politicians can't play their games of deficit spending, war..." So if a country is attacked as many were in WW2, they won't have the money to defend themselves. Of course, if such a country is defeated, then its gold backed money is worthless because the winner will take the gold reserves. Either a nation goes off the gold standard in time of war or it risks defeat in which case its money is worthless anyway. Because only the dead have seen the end of war, currency backed by gold or silver is unsustainable; it's a proven historical fact.



While the graphs are similar in shape, one is for a commodity and one is for the money supply. It's comparing apples and oranges and trying to draw a connection that doesn't exist.

The money supply growth up to 2008 represents the growth of the U.S. economy which is normal and expected to maintain price stability. The spike from 2008 on is the intentional manipulation of the money supply to avoid repeating the Great Depression. The good news is that the Fed can quickly shrink the money supply through higher interest rates and other techniques as the economy picks up steam. After all, it's just fiat money. As I said before, either the theory will be proven correct on not and that will have a lot to do with where the nation goes politically, if not in 2012, then by 2016.

I posted the graph on gold prices to show individuals the risk they take in purchasing gold at current prices. The graph shows that historically gold has been a poor investment, not even keeping up with 2% inflation for 30 year periods. The spike in gold prices represents fear over the current financial and debt crises. As I pointed out with TIPS, there are safer ways to protect your assets from any level of inflation short of an all out collapse of the U.S. economy, and if that happens you would be better off if you had invested your money in 25-year shelf-life food.

Bottom line, you're taking a lot of risk buying gold at current prices with little chance of substantial gain. Think about this; if the world economies started to unravel and the price of gold went to $5,000 an oz, would you sell your gold for fiat money when it looks like that money is going to fail? If not, then you gain nothing from the high price. If fiat money does fail, food will be in short supply for the reasons I gave and because food is an immediate necessity, it will be far more valuable than gold in the chaos of an economic collapse.

Only under a narrow set of conditions will buying gold at current prices prove to be a good investment, such as selling your gold when the fear generated price is even greater than it currently is. Are you really going to do that? However, under a broad set of conditions gold bought at current prices will be a bad investment, such as the economy recovers and investors sell off gold as they move back to stocks (the move may have already started).

Of course the gold merchants aren't going to tell you this because it's in their interest for more and more people to buy gold to jack up the price. That same conflict of interest is true for anyone who holds lots of gold. Many will lose their life saving in the collapse of the great gold bubble. I've offered ways to avoid the risk and still be prepaid for the worst, yet some find that offensive.

Mac � that�s the most compelling argument I�ve seen to avoid being swindled by gold hucksters. Not the most popular position to take round here.

"It depends on your definition of failure. No nation has ever been able to sustain a currency backed by gold or silver; that's just a fact. The reasons include war (not only to attack but also defend), speculation (forced the British off the gold standard in 1931), gold and silver discoveries, and international trade. The same forces that forced every nation in history to abandon currency backed by gold or silver are still in effect today. You can read about all this here."

Yes it does depend on your definition of failure.

"Now you are contradicting your expert Gary Korolev who states early in his lecture that while England was on the gold standard the many central-like banks were using fractional reserve banking to create money so the King could go to war. Okay, but to do away with fractional reserve banking means banks can't loan out depositor's money to make money, and if banks can't loan out money then they'll have to charge to store deposits. So where do people and businesses go to get loans that won't involve either leverage or fractional reserve banking? It can be done, but it makes it hard for individuals and businesses to borrow money and that slows economic growth.

You say that "politicians can't play their games of deficit spending, war..." So if a country is attacked as many were in WW2, they won't have the money to defend themselves. Of course, if such a country is defeated, then its gold backed money is worthless because the winner will take the gold reserves. Either a nation goes off the gold standard in time of war or it risks defeat in which case its money is worthless anyway. Because only the dead have seen the end of war, currency backed by gold or silver is unsustainable; it's a proven historical fact."

No monetary system is without challenges. Just look at the mess we are in today with our current system. You have avoided recognizing a very important and significant point that I made again in my last post. That point being that EVERY FIAT CURRENCY IN THE HISTORY OF THE WORLD HAS FAILED. link: http://www.rapidtrends.com/examples...ughout-history-could-the-us-repeat-this/ Below is an exerpt from the article:

"The history of fiat money, to put it kindly, has been one of failure. In fact, EVERY fiat currency since the Romans first began the practice in the first century has ended in devaluation and eventual collapse, of not only the currency, but of the economy that housed the fiat currency as well."

Read that more than once and let it sink in. It is obvious that we (USA) are in for alot of unpleasant changes.

"While the graphs are similar in shape, one is for a commodity and one is for the money supply. It's comparing apples and oranges and trying to draw a connection that doesn't exist."

With all due respect, your reasoning for discounting the similarities between the two charts is totaly without merit. If I use your logic, you couldn't even compare charts of the prices of apples vs a chart of the price of oranges. Certainly you know better. The US Monetary Base chart that I provided is a text book example of a BUBBLE.

MacLorry -
I think we both know that we were never going to change the others mind. My motivation for joining in on this discussion was to present a different side of the arguement than the one you were promoting. I think there are many that will read our discussion and bennefit from our exchange. Having only one side of the story is seldom a good thing. We have discussed this topic to the point where I think it is of no value to continue. While we still disagree on many points, I thank you for the discussion. Best of luck with your investing strategies.

very well stated MacLorry indeed.

in fact I believe we'll see gold retreat hard from the 1764 area, probably lose at least 200 pts. per oz. and possibly 3-400 pts.


much of the news lately has been centered on Greece, a nation that holds a miniscule market share of world GDP.


it's amazing to me, how that's sent the tremors through the financial world. Especially as to the effect upon the Euro.


The US has a debt problem as well, 16 Trillion in debt, without counting many of the unfunded liabilities our gov't has incurred.

the folks that publish those numbers are part of the machine that gives us inflation numbers as well. Excluding food and fuel mind you.


imo inflation has been grossly understated, so it comes as not much of a stretch for me to believe that our debt numbers are understated as well.


hunting a buck whether in the wilds or in the financial jungle include some similar skills, read sign, (analysis) glassing (patience) the ability to move quickly when needed, and a steady hand to take the shot presented.


if I see the financial turmoil caused by a pissant little country like Greece on the world financial markets, it gives me pause to wonder "how will it effect markets as the debt problems of the US come more and more to light?"

my analysis leads me to believe......we ain't seen nuthin yet


California and Illinois are particularly problematic, they're effectively broke, and who will they turn to bail them out of their financial troubles, my guess is our Uncle Sam, who has financial troubles of his own.


I also like to follow the money, as much as it galls me I'm envious of what Red China is doing, making deals for natural resources with 3rd world countries while the USA goes on about policing the world on borrowed money.

China's central bank is buying gold, not on the peaks so much, but on the pullbacks it seems to indeed be acquiring more of the worthless yellow metal.

I have to ask myself why?

I've no doubt, the numbers from DC will be painted to make our economy indeed seem to be recovering, and perhaps it really is, I'd love to see it. But forgive me if I'm skeptical about how our gov't reports numbers in lieu of how they report our true debt and inflation.


the eye of the world has been focused upon Greece as of late and their poor fiscal accounting.

what happens if that same critical eye is pointed towards the US?

granted we may not be as unhealthy as Greece, but I do believe our national balance sheet is a long ways from the pink of good health.


How do you envision the impact that will have on financial markets, including gold?

imo and I agree that it's mostly psychological, gold represents a flight to safety when folks are uncertain about the state of the world.


I agree with your premise that "it's a narrow set of circumstances that would allow gold to rise from current prices"

but in my view, the rut we've dug with overspending upon overspending is indeed deep and may just take us down that narrow path.


really enjoy your take on things and particularly financial matters.

I've some familiarity with TIPS, but don't currently have a position in them, but am going to be looking hard at diversifying some of our funds towards them. Really appreciate the tip on TIPS. (grin)

You mention Illinois and California as two states in deep kimchi. Both are mired in welfare payments. One to an illegal alien population, the other to a morally corrupt, uneducated, and lazy indigenous population.

I checked your link and they count changing from fiat to gold backed currency as a failure of fiat currency even though the country survived. By that SAME standard, changing from a gold backed currency to a fiat currency is a failure of gold backed currency. Being there are no gold backed currencies anymore, it's valid to say that EVERY GOLD BACKED CURRENCY IN THE HISTORY OF THE WORLD HAS FAILED.



One is a real physical commodity who's price is established by the market and the other is the number of fiat dollars which have no physical existence and who's quantity is set by the Fed. If you think the two graphs are the same, then yes we are at an impasse.

MacLorry
The comparison is of the charts themselves - - - - not a comparison of USD and gold. We are talking about what any chart would look like right before the bubble breaks.

I disagree that the growth of the money supply foretells a crash, but I have seen enough commodity bubbles to recognize the substantial downside risk of investing in gold at current prices given the history of gold prices. By far investors are the largest holders of gold in the market and when their greed overtakes their fear the sell-off of gold will be rapid. You may have to wait 10 to 30 years to get your money back.

As an individual I can't control the money supply only protect myself from the consequences in the ways I have stated. However, I sure can avoid buying gold at current prices.

Most likely you just simplified what I said for expediency, but what I said is this:

If the world economies started to unravel and the price of gold went to $5,000 an oz, would you sell your gold for fiat money when it looks like that money is going to fail? If not, then you gain nothing from the high price.

Which I restated as this:

Only under a narrow set of conditions will buying gold at current prices prove to be a good investment, such as selling your gold when the fear generated price is even greater than it currently is. Are you really going to do that?



Thanks, but you are in the minority at least on this thread. There are lots of people making money hawking gold, but there's no financial incentive for those who point out the risks. Likely some posting here have already been swindled and are basically shooting the messenger rather than coming to terms with the message.

Now don't be getting all logical with the gold crowd...

Show me a paper backed successful economy. LMAO The only paper worth keeping is TP. All the rest I have no use for. Precious metals will always have value. Sure it will go up and down but will never become useless like paper.

I would like to interject a little bit about gold back currencies and the possibility of going back to same. I think the figures that a few have thrown about are a little low if we were to convert back.

Depending on what number you use for outstanding US Dollars, the price per oz based on what gold we are told we have in reserve would put the price per oz somewhere between $50,000 and $80,000 per oz. Keep in mind that our gold reserves haven't been subject to a public audit. Just bear with me for the sake of argument that we have the gold we are being told.

Now let's take China. For them to back the Yuan with their gold reserves and factoring in the amount of Yuan outstanding then China would have to value it over $100,000 per oz.

Rot Roh. Now we have the most basic of problems in countries reconverting back to a gold standard. At what price do you peg gold for the conversion? There is already an arbitrage situation between two of the superpowers. Try to factor in the gold reserves of the Eurozone countries and the outstanding Euros....

This becomes a major barrier to the process. I will go out on a limb and say Bob will win his bet with Mike. Three years is not near enough time to work out this kink alone.

China? Taiwan? South Korea? India? Umm...I guess any current successful economy you want to pull out of the hat would fit that criteria because all countries are paper backed.

Most likely if the U.S. were to convert back they would first confiscate private gold holdings as they did with the Gold Reserve Act of 1934. Even so, at $50,000 per oz you may find your life is worth less than the gold in your teeth while walking some dark street.

If your doom and gloom scenario does come true you won't be selling your food supply either making it less "valuable" than Gold. An Investment is something you expect to sell or profit from. I would never sell my food supply in that scenario (and no one would buy it in any other event) but I would gladly trade Gold and Yes I'll be happy to sell Gold at 5K an ounce!
As far as Gold not keeping up with inflation any one can manipulate a chart in hindsight to prove a point. Now show us a chart for Gold for the last seven years and tell us again that it hasn't kept up with inflation. BTW how did Gold end today?
I got a good laugh when I opened the current issue of The Vanguard today and had a look at your selective cut n paste post on TIPS.

He lost the last one.

I suspect when confidence is lost in the current monetary regime that we WILL have some type of reserve backed by metals. It may not be the FRN$, and will likely be something on the order of an SDR with gold a large part of the basket, and with the option of allowing trades to be settled in gold. I predict that in order to re instill confidence in the system as a whole, and to have a common reserve store of value, metals will play a large role. The bonfire of the currencies will likely destroy ALL paper currencies to one degree or another, as they are all derivatives of the FRN$.

BTW, if there is an individual country re valuation, I suspect it will be based upon the on the M2, MZM or M3 of the individual countries. Most bonds will be made worthless in the run up to the re introduction of a metals standard. The ridiculous numbers involved show how out of control the creation of paper currencies and credit has become, especially in light of the declining earnings of most individuals. The same currencies that give such seemingly ridiculous figures per ounce of gold are also used for day to day life. When the velocity of these currency units increases, even a little, the prices for commodities will water the eyes.

Also, your Chinese numbers may be a little off because China has moved to the number one producer of gold in the world, and they allow no exports. Their mine supply each year is estimated close to 300 tonnes, and their central bank hasn't reported their holdings for the last two years. This doesn't include the amounts that they are purchasing with their FRN$'s for gold on the cash market. Their gold stocks are likely to be much higher than the 1030 Tonnes that they reported a few years ago.

Of course, I could be wrong, and paper and electronic money, and all their derivative products could continue to infinity, but history is against this happening. I think that I'll stick to my metals, especially as bullion alone has outperformed both stocks and bonds over the last 11 years, especially if one uses constant 2000 FRN$'s.

The bet you had with Bob could have easily gone either way over such a short time period. It wasn't a blow out by any stretch.

Also, gold isn't the only asset a country possesses. It is a common medium, but bonds can easily be asset backed. As far as what I am using for my gold reserves and/or money supply, it was outlined in my post "for argument sakes." No one has complete knowledge of who owns what.

The accuracy of my numbers is not the sticking point. It is the arbitrage that is the elephant in the room for reconverting back to the gold standard.

A $200-220 (depending upon what metric for the gold price that you use) difference in a 9 month period on a $1500 bet. Maybe not a blowout, but pretty substantial.

My point about the whole thing is that the entire system will be in collapse when they are essentially forced to pull a "Rentenmark" out of their a$$. They-meaning the world's banking system-might be able to issue "asset" backed bonds, but they'd better be able to do so with something that has the ability to be actually possessed or converted into real goods, or confidence won't be restored. No confidence, no con.

After this debacle, there may be no confidence in anything not physical. It wouldn't surprise me in the least. After the wholesale abrogation of bond holder's rights by both the US government and the ECB and EC over the last 4 years, why would anyone believe that any paper issued by anyone would be honored? It certainly isn't being done today. As examples I give you the GM bankruptcy, and the recent unprecedented ECB removal of all CAC's in the Greek bonds that they hold, as opposed to the Greek bonds held by everyone else who still retains them.

It all depends on how much food a person has and what the current disaster is. If I have enough food for 10 years and the disaster is only economic and not likely to last that long, sure I'll use extra food to buy whatever I need. If you show up starving I might sell you a pound of food for a pound of gold. No skin off my nose if you don't like the price.



Yet many people buy emergency supplies by the truckload thinking an investmate in their survival is profitable. And yes, I believe you would sell your gold for fiat money just before it became worthless. Someone has to play that part.



I posted the chart from 1975 to 2011. Anyone can look it up if they think I manipulated it and if you do you'll see that prior to 2005 gold prices did not keep up with inflation going back 30 years, it's just a fact. The current price of gold represents fear of debt and inflation, but if the economy rebounds strong there'll once again be a lot more money in stocks and greed will cause investors to sell off gold. Big investors can sell fast enough to keep from taking a blood bath, but small investors with physical gold we be left holding the bag.



I posted the last 5 years results on VIPSX, not TIPS. I get a laugh out of those who don't see the downside risk in current gold prices and want to tell others about investing.