[MC2]

Provide evidence of CBs "creating" money at a rate of 10-15 % per year. Not happening; in fact, money is being displaced (and not replaced) through credit and financial asset destruction.
That's what you get with deflation.

[kmann]

Given a choice between recession and inflation, Ben B will choose recession, as would any economist who lived through the late '70s and early '80s. And he will have to choose soon. CW is that if you let inflation get out of hand, you've got years of fighting with it on your hands, whereas a recession can be beaten in a couple of quarters typically.

[MC2]

kmann, Ben is on record regarding his approach to fighting deflation, anyway. But, the problem is, there may not be anything he can do.
Don't know if people here are watching futures and the Asian markets, but, from all signs, tomorrow could be incredibly ugly.

As in the "C" word.

Perhaps Ben will do an emergency cut first thing tomorrow. Don't know if even that can stop what appears to be coming.

[seldom_seen]

$this->bbcode_second_pass_quote('MC2', 'G')old will settle somewhere around 5 - 600 within a few months or so.

[threadbear]

$this->bbcode_second_pass_quote('kmann', 'G')iven a choice between recession and inflation, Ben B will choose recession, as would any economist who lived through the late '70s and early '80s. And he will have to choose soon. CW is that if you let inflation get out of hand, you've got years of fighting with it on your hands, whereas a recession can be beaten in a couple of quarters typically.

[cube]

$this->bbcode_second_pass_quote('threadbear', '.')..
You think Bernanke wouldn't choose the '70's and early '80's over the '30's?

[MC2]

$this->bbcode_second_pass_quote('seldom_seen', '')$this->bbcode_second_pass_quote('MC2', 'G')old will settle somewhere around 5 - 600 within a few months or so.

[qwanta]

$this->bbcode_second_pass_quote('MC2', 'P')rovide evidence of CBs "creating" money at a rate of 10-15 % per year. Not happening; in fact, money is being displaced (and not replaced) through credit and financial asset destruction.
That's what you get with deflation.

[LoneSnark]

Yes, a long run bull market. If you bought gold in 1980 and sold today your return was about 0%. Adjusted for inflation, you lost 3% a year. Compare that to investing in the stockmarket which would should have earned you 10% a year.

[qwanta]

$this->bbcode_second_pass_quote('', 'I')t also amazes me how every time a guest on financial television suggests gold as a sound alternative investment, the host invariably points to the 1980 price of $850 to discredit the recommendation. Such was the case again this week when CNBC’s Mark Haines, who three years ago told me on the air “who cares about the price of gold,” pointed out that if an investor bought gold at $850 dollars per ounce in 1980 that he finally broke even. He compared “speculating” in gold to “investing” in General Electric, claiming that buying and holding the former for ten years assures investors a good return, but that buying and holding gold for a similar time period was much riskier and would likely produce losses. I don't know if Haines has noticed but GE shares are still trading at the same price they were eight years ago while the price of gold has tripled!

I agree with Mark Haines on one point. Watching gold go from $35 per ounce in 1970 to $850 in 1980, then buying at the absolute peak price and holding on though the entire bear market was pretty foolish. However, how many people actually did that? Certainly those who understood the problems the Fed created in the 1960s likely got in much earlier; say when prices were still well below $150 per ounce, and though they probably did not cash out at the peak, they likely sold above $450 sometime in the early 1980’s. As a result, they protected their wealth during the inflation ravaged 1970s and were well positioned to acquire other financial assets at depressed prices.

Now, as then, gold’s warning is crystal clear and obvious to anyone who honestly evaluates it. Those who heed it will be rewarded while those on Wall Street who rationalize it away will likely share the canary's fate.

[qwanta]

$this->bbcode_second_pass_quote('LoneSnark', 'Y')es, a long run bull market. If you bought gold in 1980 and sold today your return was about 0%. Adjusted for inflation, you lost 3% a year. Compare that to investing in the stockmarket which would should have earned you 10% a year.

[Iaato]

Really nice graphs, Qwanta, thanks. I bookmarked this page--it's going to come in handy.

[threadbear]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('threadbear', '.')..
You think Bernanke wouldn't choose the '70's and early '80's over the '30's?

[LoneSnark]

$this->bbcode_second_pass_quote('', 'S')o what's your forecast for gold in 2 years time say, so we can have it on record?

[qwanta]

$this->bbcode_second_pass_quote('Iaato', 'R')eally nice graphs, Qwanta, thanks. I bookmarked this page--it's going to come in handy.

[cube]

cube's prediction:
Gold, wheat, and oil will continue to rise for at least the next 5 years. Every year, the price will rise higher then the previous.
If I am wrong....anybody feel free to dig this thread up in the future.

[Teclo]

In a systematic collapse of the financial system gold will remain valuable while many fiat currencies will collapse. This is because currencies will collapse when the parent economy behind them is in turmoil.
If you believe this will happen because of peak oil buying gold today at any price makes sense.
If this doesn't happen and there's a 1930's style deflationary depression that somehow (how?) retains strong fiat currencies then yes gold would suffer but the deflation argument is too theoretical, it assumes fiat currency will remain strong in a depression, it believes gold is a commodity

My question is when on paper a country is bankrupt why should it's currency be worth anything. That's what's going to rock the system, if the system isn't rocked that badly then deflationist could be right...

[LoneSnark]

Money is worth something as long as the people keep using it. So far as I can see only inflation can debase a fiat currency because the dollars act as a commodity themselves just like gold. As long as that commodity is rare then it has value in everyone's eyes. So, unless someone steals the printing presses and floods the world with dollars they will have value, just as if someone discovered a huge gold deposit and flooded the world with gold.

[halcyon]

I like to question gold bugs, not because I see them inherently being wrong, but because I want to challenge some of the mechanisms for coming to the gold-bug conclusions.

So, with that done and away with, I'd like to hear gold-bugs opinions on:

1) If money (in US) gets destroyed faster than is printed and we run into deflation, then what becomes of gold? Remember, this can happen. FED can print, but it is not given that the markets will take it. Combine that with loss of liquidity -> loss of solvency -> loss of "money" in circulation and you get deflation.

2) There are plenty of other assets that haven't rise as fast as gold has and are poised to do moderately well to well in a situation of high volatility, risk aversion and unknown mix of inflation/deflation/stagflation. Considering the run gold has had, what guarantees that big players will not take profits home and diversify to these assets?

I'm _not_ saying gold will not rise, I'm _not_ saying it's not a wise asset class to have (among others) in your portfolio.

I'm just trying to question the logic and pinpoint potential gold pitfalls.

Any takers?

[MC2]

Gold bugs ARE inherently wrong, at least in a deflationary contraction, which we are in.

U.S. markets futures are down big as Asia and Europe are tanking this morning, and gold is dropping right alongside.

A lot of "short bus riders" in this thread...

If you're still long gold, better hope you can get out soon. It's headed for 550 or so...