gold is getting CORRECTED!!

[Mn_Mark]

Re: gold is getting CORRECTED!!

The crux of the case for deflation is, as I understand it, that the credit supply is so huge that the Fed couldn't possibly print enough money to overcome its collapse.

I don't see what stops the Fed from doing so. Credit wouldn't collapse entirely overnight; it would be spread over a period of time - weeks, months, perhaps years. The Fed has already demonstrated the ability and will to monetize by the hundred-billion. People quickly become adjusted to new, bigger numbers, which lose their shock value quickly, enabling new and even bigger monetizations. When the alternative to the Fed monetizing is the Fed and Treasury standing by while a massive deflation ruins the Fed's banking friends and deprives the politicians of a chance at re-election, the Fed will monetize, and monetize as much as necessary. Solemn language will be used, restraint will be promised, dire necessity will be invoked...and then monetization by the trillion will proceed.

Yes, what we NEED is a cleansing deflationary depression that wipes out the excess credit and bad debt. But with the tool of a fiat currency at their disposal to use to delay or ameliorate the immediate damage to their friends and political connections, there is no realistic choice for the Fed but printing.

[jtabeb]

Re: gold is getting CORRECTED!!

But with the tool of a fiat currency at their disposal to use to delay or ameliorate the immediate damage to their friends and political connections, there is no realistic choice for the Fed but printing.

That's why they ARE FIGHTING TOOTH AND NAIL to prevent the FED books from being audited!

Yes, in a system where people did the right thing we'd have deflation. Who here thinks we live in that kind of system? C'mon now! Raise your hand!

[phirang]

Re: gold is getting CORRECTED!!

What about 100k+ new jobs in January? Will we still be kvetching about manipulation when gold tanks on that news?

Focus people - FOCUS: jobs and banks are what matter - the mechanics of the COMEX are irrelevant unless you REALLY know how the brokerage works for the specific product: details are KEY here, and there's no shortage of misleading amateur analysis.

[shiny!]

Re: gold is getting CORRECTED!!

Here's a little more amateur analysis:

I don't know for sure if we'll have deflation, inflation, stagflation, or conflagration. But owning some PMs is always a good thing. Overall the trend is up. When is a good time to buy or sell? NOBODY knows!

I doubt that governments, except perhaps China, will try to confiscate gold. It's too difficult to do and the amounts held by the general populace are too small to make a difference. Poor return for the risk and effort expended. However, I won't be at all surprised if they create a luxury tax on gold sales of say, 90%. I don't see them putting a luxury tax on silver because silver is largely an industrial commodity.

While the article posted above is betting on deflation and most iTulipers are betting on inflation, what they are describing short-term is absolutely true. Right now people are selling their gold and silver for all sorts of reasons. Some of them are using the money to pay their mortgage or bills. They think that it will tide them over until things get "back to normal". More sad are the ones who need the money to buy groceries, medicine and pay the landlord. A buddy of mine who is a coin dealer told me of several customers who had bought gold and silver against a SHTF scenario, who are having to sell it back to him because they lost their jobs. For them the S has already HTF.

From my conversations with people, most folks still think things will get "back to normal" in a few months or so. Some are starting to sense that things are worse than they are being told, but are too afraid to think about it. Most can't conceive of things like a currency crisis. Heck, I can't even wrap my head around what day-to-day living will be like if that scenario happens, and I've believed in an imminent collapse for all of my adult life!

The article's suggestion to invest in tangibles such as food, water and other necessities is a very good one. One should have enough of those things that they don't need to sell their PMs to buy groceries.

Rajiv's point about getting an RV or small mobile home is spot on! One can buy a used mobile home in a mobile home park for cheap. Decent ones can be found for under $10,000; fixer-uppers for far less. Space rent in a modest park is usually a few hundred a month plus utilities. So one can own their own home outright and pay less per month than they are currently paying to rent an apartment, and for WAY less than their mortgage costs.

While survivalists talk about buying land in the country off the grid, with a home and a well and a big garden, most working class people will never, ever be able to achieve that. Mobile homes and RV's are a great way to reduce living expenses and own a home outright. And unlike apartments and most neighborhoods, mobile home parks, especially the 55+ ones for seniors, have a real sense of "community" that has largely disappeared from our society. Neighbors look after each other and are ready to lend a hand. It's not a bad way to live, except maybe in hurricane country.

[jtabeb]

Re: gold is getting CORRECTED!!

What about 100k+ new jobs in January? Will we still be kvetching about manipulation when gold tanks on that news?

Sure, the propaganda train will be steaming ahead full steam, Umm, your point?

My point is that when the facade no longer works to hide the activities within, all ******* HELL BREAKS LOOSE.

[grapejelly]

Re: gold is getting CORRECTED!!

What will trigger the next downleg in the Depression?

My guess is a sovereign default much bigger than Dubai...say the UK...

Quantitative Easing now totals £200 billion which equates to about 15% of GDP which compares against U.S. Q.E. at approx 5% of GDP which illustrates that Britain is further on the path towards higher relative inflation than most major economies and therefore targeting a weaker exchange rate despite competitive devaluation.

...

I mean there is a long trail of suspect economies dating back to September 2008 when Iceland first went pop, with a dozen or so contenders other than Dubai including Ireland, Venezuela, Argentina, Greece, Portugal, Spain, the whole eastern block and not forgetting Britain! Its only a matter of time before another country goes pop, which one could be next ? Well going by the credit default swap risk prices on sovereign debt, Venezuela tops the list, though closer to home I would definitely be wary of Greek stocks and bonds! the safest in terms of default risk are France and Germany which by and large missed out in the debt fuelled boom.

[phirang]

Re: gold is getting CORRECTED!!

If the UK defaults, expect the dollar to surge and gold to tank.

[jtabeb]

Re: gold is getting CORRECTED!!

If the UK defaults, expect the dollar to surge and gold to tank.

I'd expect the opposite, after all the US is just the UK writ large.

[LargoWinch]

Re: gold is getting CORRECTED!!

What will trigger the next downleg in the Depression?

My guess is a sovereign default much bigger than Dubai...say the UK...

Well...sir grapejelly.

According to the UK treasury itself the UK is in for hard times - sorry - decades of debt (pfff feel better now? ;) )

Pre-Budget report: UK ‘faces decades of debt’, warns Treasury

Britain faces decades of rising public sector debt, increasing taxes and, potentially, falling living standards unless it tackles the growing costs of its pensions and health bill, the Treasury will warn this week.

...

Full Article Here (that would make Mega proud)

[LargoWinch]

Re: gold is getting CORRECTED!!

If the UK defaults, expect the dollar to surge and gold to tank.

That is the best laugh I had today.

[Rajiv]

Re: gold is getting CORRECTED!!

Jamal,

Phirang may be right on this one.

The debt is mostly $ denominated. If UK fails, a whole set of stacked dominos falls leading to another credit crunch, and the $ resurgence as we saw previously.

The question is what will be paid to get at what will then become increasingly scarce $s -- other currencies? gold? oil? other commodities? other assets? The $s will be needed to honor debt obligations. If this leads to other defaults, that again implies an extremely dramatic shrinkage in global money supply. What the Fed has printed so far, may be gone in a puff of FIRE smoke.

[grapejelly]

Re: gold is getting CORRECTED!!

at some point the USD will surge again. I agree. A sovereign default might be the cause of this.

BUT I don't believe gold will plummet at this time. Although maybe it will for a short time. But I can see the USD rallying over 6 to 12 months as other currencies sag even worse, and gold and commodities rise.

That is precisely the condition of the late 1970s.

The USD rises and shorts have to cover, debt has to get paid back, assets have to be sold at a song to raise cash.

[jtabeb]

Re: gold is getting CORRECTED!!

Jamal,

Phirang may be right on this one.

The debt is mostly $ denominated. If UK fails, a whole set of stacked dominos falls leading to another credit crunch, and the $ resurgence as we saw previously.

The question is what will be paid to get at what will then become increasingly scarce $s -- other currencies? gold? oil? other commodities? other assets? The $s will be needed to honor debt obligations. If this leads to other defaults, that again implies an extremely dramatic shrinkage in global money supply. What the Fed has printed so far, may be gone in a puff of FIRE smoke.

Common sense says that you are correct. I just have a feeling that this is the time we've all discussed (the "this time it's different time"). Who knows? I've been wrong a time or two in the past (and been 18 months or so early a lot) so not really sure what to think at this point.

I think I'll just go back to fondling coins (it's what I do best).

I don't think the UK can be allowed to go down, otherwise he same stock market plunge we witnessed last September will show it's face again, and I'm REALLy not sure how many bouts of deflation this system can take. The last round almost brought it to he breaking point.

The powers that be can smack down the gold price hard, bu the liquidity draw down that that will require is enough to plunge the sock market again.

I just don't think the have the will power to kill the banks AND the stock market, not with mid term elections in 2010 and a presidential election (that looks to be hotly contested in 2012).

Honestly, it looks like there hands are tied politically (IF there is a second leg down, Republicans sweep).

I guess I'm just off in la-la land again. Oh Well. Worse things have happened to me in the past.


I'm going to go Waaaayyyy out on a limb and say that Bernanke's reappointment is was drove this smack down and that it can't last much longer with out taking the banks and stocks with it.

(Like I said, I'm open to the possibility that I'm wrong or early, but.... BUT....)

[GRG55]

Re: gold is getting CORRECTED!!

...I think I'll just go back to fondling coins (it's what I do best)...

And all this time I thought fondling one of these was what you did best...:p

[unlucky]

Re: gold is getting CORRECTED!!

Jamal,

Phirang may be right on this one.

The debt is mostly $ denominated. If UK fails, a whole set of stacked dominos falls leading to another credit crunch, and the $ resurgence as we saw previously.

The question is what will be paid to get at what will then become increasingly scarce $s -- other currencies? gold? oil? other commodities? other assets? The $s will be needed to honor debt obligations. If this leads to other defaults, that again implies an extremely dramatic shrinkage in global money supply. What the Fed has printed so far, may be gone in a puff of FIRE smoke.

I think for the short term the debate might no longer be about inflation versus deflation, but more about inflation versus "return to normal", i.e. a view that Bernanke's policies have worked, the economy is recovering, and he will be able to raise rates soon - in time to avoid inflation. It's not a view I buy into myself, but I think as an alternative to the inflationist view it is definitely in contention at this point. And if this view is wrong for the reasons I think it is wrong (economies remain dependent on unsustainable govt borrowing), it could take quite a while for that to become clear.