Inflation, deflation, gold and currencies

[vincecate]

In the long term, I don't see anywhere that's completely safe. Whether we have a deflationary spiral or hyperinflation, gold and silver are in bubbles as well. I've heard claims that gold can't possibly go down in value because of its rarity, but it did just that in the early 1980's.

If we have hyperinflation then the price of gold will never again be below the current pre-hyperinflation price levels. I am sure that in over 100 cases of hyperinflation there is not a single one where the price of gold in the hyperinflating currency ever went below the pre-hyperinflation price once hyperinflation had started. In fact, I would pay you $500 if you could find a single example of this and post it to this thread. For this I will use 80% inflation per year as the cut-off definition of hyperinflation. So your goal is to find an example where after 80+% inflation the price of gold in that currency was lower than before the high inflation started.

You may be thinking, "how do I know that Vince would really pay up after I do lots of research and find an example?". You can see by my user information that this forum is a place I like to hang out (lots of posts over the last 2 years). I would not want the shame of not paying in a place that I like to hang out, even an online place. Really.

[Higgenbotham]

I agree nothing is safe.

Thinking about oil back in 2008, when the bubbles burst then, oil went from $147 to $38 within just a few months. Oil got back to something like $114 last year and that's with demand supposedly increasing around the world. Not too many people thought anything like that could happen back in 2008.

Comparing to last year and looking at silver and the stock market, if you had told me in 2011 when silver was at $50 and the S&P was at 1350 that in 2012 silver would be at $32 while the S&P would be higher at 1400, I would not have thought it possible. Or that oil could be lower than it was last year and the stock market could be higher.

[Trevor]

Well, I'm not sure whether we'll have hyperinflation, as you assert, or a deflationary spiral. For all we know, we could have both or some countries will have the former and others the latter.

With the stock market, I don't see how this current surge can last. All bubbles pop, sooner or later, despite efforts to reinflate them. Feels like 2007 all over again.

[OLD1953]

Normally, countries create a new currency after a hyperinflation, and generally gold in those currencies is relatively cheap.

There are several different directions the US can take as regards the current situation and money/bonds.

1. Moderate inflation, bonds get paid off, this is the Fed's goal.

2. High inflation which drops off later, bonds are paid in much cheaper money - familiar story to those much over 40.

3. Deflation, bond payment is a struggle, bonds may not get paid or payments extended as the economy falters.

4. High inflation, new money. Bonds may be paid in worthless old money or redenominated in new money at a discount.

There are some other things that can happen, as I often see here people will speak of monetary inflation (as I do above) and shift gears to consumer price inflation, and they aren't the same thing at all, the definitions aren't even close to each other. Consumer prices can go up or down or sideways, and all of these will have effects on people and on elections and so forth, but not much effect on the monetary inflation. We could very easily have consumer shortages of some basic goods due to the financial failures, and that could cause prices shocks due to the financial failures and inability to lock in prices in futures markets, inability to get loans for planting, etc. These are financial problems that aren't directly related to monetary inflation, and could happen if money supplies were rising, falling, velocity of money was increasing or decreasing. And I'm sure everyone is tired to death of seeing me harp on that subject.

[vincecate]

I am collecting euphemisms for "printing money". I have 121! A bunch from Higgie, thanks!

http://howfiatdies.blogspot.com/2010/11 ... money.html

Anyway, I saw one I had not seen before, "CTRL+P".

Google seems to have over 50,000 pages with CTRL+P and Bernanke.

https://www.google.com/#q=bernanke+%22C ... 85ccd08d2c

Anyone seen other new euphemisms for printing money in the last year?

-- Vince

[aedens]

I am collecting euphemisms for "printing money". I have 121! A bunch from Higgie, thanks!

http://howfiatdies.blogspot.com/2010/11 ... money.html

Anyway, I saw one I had not seen before, "CTRL+P".

Google seems to have over 50,000 pages with CTRL+P and Bernanke.

https://www.google.com/#q=bernanke+%22C ... 85ccd08d2c

Anyone seen other new euphemisms for printing money in the last year?

-- Vince

http://www.fgmr.com/hyperinflation-loom ... oment.html

‘Havenstein Moment’

[Trevor]

There is something I have noticed, regardless of where anyone stands on the deflation-hyperinflation issue. Bernanke doesn't seem nearly as confident as he did when he first became the Federal Reserve Chairman. I've even heard him warning that projections of economic growth are liable to be overly optimistic, in addition to our skyrocketing debt. I've read numerous articles that proclaim him to be the savior of the global economy, but it seems like even he doesn't believe that of himself.

[vincecate]

Krugman references the article below on China. It seems savers there earn 1% while inflation is at 6%. This is even worse real loses than Americans are getting. The Chinese should rush to gold even faster than Americans. First come get the best prices.

http://brontecapital.blogspot.com/2012/ ... Capital%29

[vincecate]

A friend made a video of my gold operation. I buy gold, refine it, and make coins. It is just 3 minutes long.

http://www.youtube.com/watch?v=sRJnmBiLsOU

[Reality Check]

Krugman references the article below on China. It seems savers there earn 1% while inflation is at 6%. This is even worse real loses than Americans are getting. The Chinese should rush to gold even faster than Americans. First come get the best prices.

There is evidence that China's government attempted to do with copper during this crisis, what the U.S. government did with gold during the Great Depression.

India appears to be the country that selected the gold route.