Will Those Bold Enough to Buy Gold When the Fed Folds Wind Up in the Cold?

This is an article that is three months old, that references an article that is a year and a half old, all warning about the inevitable chain reaction that is occurring today as governments pay the price for rescuing banks by burdening tax payer funded governments with private bank problems. Stagflation baby! As predicted, and as is occurring, in damn near real time. Of added note, it also shows that some guys who have not run the numbers are putting more faith in gold than it empircally deserves. This is bound to start a fight, for I know gold is the "Trade du Jour" among the financial blogging crowd. Hey, don't shoot the messenger. I'm just relaying what the fundamental/historical crystal ball has shared with me.

This post was the beginning of the Sovereign Debt Crisis series in January, whose entire theme is practically internal deflation and currency debasement (where possible). Below, there are links to the entire crisis, heavy duty premium material (for those that care to have access to the heavy analysts material) and links to subscribe to my blog). Notice how the overseeing thing went right along as anticipated. On to the repost...

Deflation, Inflation or Stagflation - You Be the Judge!

In continuing the rant on the possibility of the US entering a stagflationary environment, as was hinted by Alcoa's quarterly  report (see "Is My Warning of the Risks of a Stagflationary Environment Coming to Fore?"), I have decided to graphically illustrate the historically most successful inflation hedges. Click graphic below to enlarge.

For those "gold bugs" who have never ran the numbers, gold offers less inflation protection than your house does. The same goes for WTI crude and probably most other categories of oil.

The number one inflation hedge appears to be apartment buildings, followed very closely by other classes of commercial real estate, with MSCI emerging markets coming in a close second. I can assure you that the supply/demand imbalance, credit environment, fundamental and macro situations will prevent apartments (oversupply and softening rents from condo conversion competition among other things, driving up cap rates) and most CRE from taking off anytime soon. The short to medium term direction for most of that stuff is down (see  CRE 2010 Overview for the 42 page white paper). 

So, if the traditional inflation hedges do not point to inflation, but input costs are going up while real assets are deflating, what do we have???

From "Economic contractions AND rising prices, dare Reggie utter the "I" word - Enter a global phenomenon", we get:

Stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time.[1] The portmanteau "stagflation" is generally attributed to British politician Iain Macleod, who coined the term in a speech toParliament in 1965.[2][3][4] The concept is notable partly because, in postwar macroeconomic theory, inflation and recession were regarded as mutually exclusive, and also because stagflation has generally proven to be difficult and costly to eradicate once it gets started.

Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable.[5][6][7] This type of stagflation presents a policy dilemma because most actions to assist with fighting inflation worsen economic stagnation and vice versa. Second, both stagnation and inflation can result from inappropriate macroeconomic policies. For example, central banks can cause inflation by permitting excessive growth of the money supply,[8] and the government can cause stagnation by excessive regulation of goods markets and labor markets;[9] together, these factors can cause stagflation. Both types of explanations are offered in analyses of the global stagflation of the 1970s: it began with a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to counteract the resulting recession, causing a runaway wage-price spiral.[10]

John Maynard Keynes wrote in The Economic Consequences of the Peace that governments printing money and using price controls were causing a combination of inflation and economic stagnation in Europe after World War I. Stagflation was also a very serious macroeconomic problem in the 1970s. In contrast to central bank responses to the oil price spike of the 1970s where similar policies were pursued on both sides of the Atlantic, the 21st century began with America going one way to fight recession and Europe going the other way to fight inflation.

 From the "The Butterfly is released!":

The decline in consumer spending has compelled many companies to reduce production. Toyota Motors Corporation reduced its auto sales forecast for 2009 to 2.1% from 5.6%. The company projected auto sales to be 10.4 million vehicles in 2009, but rising gasoline oil prices are likely to dent demand. Toyota expects sales to decrease 10% in North America, its biggest market.

The cost of most inputs has risen sharply in the last one year. Although prices have come down from record highs and are declining m-o-m, they continue to remain high on a y-o-y basis. Prices of iron and steel, which are essential components of manufacturing, increased 16.1% y-o-y in August 2008. Prices of other commodities also rose globally, leading to a sharp rise in input costs. Various indices in the UK are pointing toward a trend of declining sales. The non-store retail & repair index fell 3.2% m-o-m in July 2008. Falling sales are further pressurizing the margins of industrial companies.

  

Source: Government Website

The price of crude oil, one of the major inputs for manufacturing companies, increased at a rapid pace in 2007. Although the price has cooled down (falling 44% from its all-time high) as of September 11, 2008, it continues to remain high (37.4%) on a y-o-y basis. The increase in crude prices has pushed the cost of production higher.

The high cost of production can be passed by the manufacturer to the retailer only in certain cases. Various companies are evaluating the extent to which they can pass higher prices to end-customers. However, industrial companies would be affected in both cases-higher prices would weaken demand, while the increased cost of production would hurt margins. In such a scenario, maintaining a fine balance between the two is an extremely challenging task for industrial companies. Decline in sales due to increased cost (input and borrowing) is exerting pressure on industrial companies.

The article above is about a year old, but still drives home valid points. This material is a pre-cursor to the subscription material I will be releasing to subscribers illustrating the concentrations of sovereign risk around the globe. Remember, just because you transfer private risk to the government doesn't mean it disappears. There are pockets of risks in the usual suspects, but certain banks in certain areas have actually acted like sponges, concentrating risks in places where nobody really wants it. Now, back to the stagflation rant...

 

As you can see, UK inflation is trending down, but you can rest assured that many input costs will trend up, as in the diagram from the "butterfly". Spain, Ireland and Switzerland suffer from outright deflation, but will probably not be spared higher input costs as well.

 

Economic growth doesn't look very promising in any case. The EU is a dead-zone for the time being.

Very few in the EU can afford the result of higher input costs on the back of sagging GDP. The jobs just aren't there.

 

Does the CDS market see what I see?

So, what about the US and North America?

GDP is expected to increase, but relatively anemic compared to other so-called recoveries. Some expect a double dip recession, I believe the recovery is really just the masked effects of the government literally purchasing GDP points, paying $1 for every 30 cents worth of recovery.

As you can see, as in the EU, we cannot afford price spikes in anything. Higher input costs will simply lead to lower profitability, for price in-elasticity is here. People couldn't afford to pay more if they wanted to. Credit and income are way, way down. This means that companies will have to eat higher input costs since they can't pass them on. Translation: those sky high S&P earnings forecasts are fantasy, at best. Even if fantasy were to transform to reality, the stock market has already priced in la la land.

Inflation is expected to be tame. Stagflation is the threat.

I will walk through all of the world markets in the next week or so, and culminate the study with the banks that I feel are most at risk from the weakness in various sovereign states. The most "at risk" banks will be for subscribers, but there are quite a few that I will share publicly.

For the complete Pan-European Sovereign Debt Crisis series, see:

1.     The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.

2.     What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect

3.     The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.

4.     The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries

5.     The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!

6.     The Beginning of the Endgame is Coming???

7.     I Think It's Confirmed, Greece Will Be the First Domino to Fall 

8.     Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!

9.     Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?

10.   "Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire! 

11.   Germany Finally Comes Out and Says, "We're Not Touching Greece" - Well, Sort of...

12.   The Greece and the Greek Banks Get the Word "First" Etched on the Side of Their Domino

13.   As I Warned Earlier, Latvian Government Collapses Exacerbating Financial Crisis

14.   Once You Catch a Few EU Countries "Stretching the Truth", Why Should You Trust the Rest?

15.   Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

16.   Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe

17.   Moody's Follows Suit Behind Our Analysis and Downgrades 4 Greek Banks

The EU Has Rescued Greece From the Bond Vigilantes,,, April Fools!!!

Premium Subscription research for the following sovereign states and their respective domiciled banks at risk are available for immediate download.

LATEST SOVEREIGN DEBT CRISIS SUBSCRIPTION CONTENT

• Spain public finances projections_033010 
  (Global Macro, Trades & Strategy)
• UK Public Finances March 2010
  (Global Macro, Trades & Strategy)
• Italy public finances projection
  (Global Macro, Trades & Strategy)
• Greece Public Finances Projections 
  (Global Macro, Trades & Strategy)
• Banks exposed to Central and Eastern Europe
  (Commercial & Investment Banks)
• Greek Banking Fundamental Tear Sheet
  (Commercial & Investment Banks)
• Italian Banking Macro-Fundamental Discussion Note
  (Commercial & Investment Banks)
• Spanish Banking Macro Discussion Note
  (Commercial & Investment Banks)
• China Macro Discussion 2-4-10
  (Global Macro, Trades & Strategy)

Comments

[speculator]

Thanks for the link! Glad you like our site. Our database will have 800+ companies in a few weeks (over 400 now) and we'll soon put up all the details on their properties.

Mike

miningalmanac.com

sovereignspeculator.com (blog)

[Gunther]

Reggie,
your argument is based on facts so I want to present facts that counter your argument.

The official CPI numbers are low and thus there is no inflation. If you believe Shadowstats' numbers inflation is fairly high.
In a discussion on your blog a while ago you stated that you use the official numbers even if they feel a bit low.
So, for the last ten years there has not been a lot of (official) inflation while real estate made a wild ride up and now down.
Moreover, an apartment building is a bet that at that spot are people willing to rent at a specific price. If the main employer in the area shuts down that is not very likely. That covers the risk on the income side; on the expense side is maintenance, energy and interest with interest usually being the biggest item. Interest rates have been falling since the early eighties and seem to bottom at around 3% for ten year government debt in the US and Germany. If rates go up faster then the landlord can increase rent, god luck!
If those risks get compensated by a higher return compared to gold, that is normal market forces at work.

Towards the current situation, sovereign debt crisis is different from inflation/deflation. Imagine a big risk blowing up, say Italy or JP Morgan's derivative book. Quite likely that would mean that currency will loose a lot of value. Iceland or Argentina might serve as a examples what that could that be like.
In such a case I rather own precious metals then real estate. The apartment building will only yield what little the locals there can pay for rent while the precious metals can be sold to the highest bidder worldwide.

Return of in investment is during risky times more important then return on investment.

[theprofromdover]

I'm sure Reggie's Inflation Hedge Index chart is correct on an "all-things-being-equal" basis, but of course all things are not currently equal.

I would certainly not be looking to buy into property of any kind just now, except on a complete fire-sale basis. If you have to buy something tangible, go buy some agricultural land (with water) -as well as precious metals.

There is no recovery; there is only lies, damn lies and statistical manipulation by our friends in the pinstripe suits, to keep us from understanding the dire reality we now find ourselves in.

The true picture is basically as bad as the second-worst doomsayer says it is.

Slavery.

[JuicyTheAnimal]

I could care less about some inflation.  I buy PMs because they look pretty.  Wait, that's my girlfriend, I buy PMs because I have dreams about forming a militia and leading the revolution to overthrow the ruling oligarchy with swift and brutal force and then declaring greenbacks to be TP.  Any psychologists out there?  What do these dreams mean?  Buy gold?

[verum quod lies]

One can take a certain periodicity of data and a specific period of time and get just about any result (e.g., real estate is good, gold is bad, oil is a bad hedge against whatever ...). In my way of thinking, showing specific results and making general investment conclusions is disingenuous at best, and false propaganda at worst.

Anyways, for me the issue isn't so bad as the false choices often presented (e.g., the it's either inflation or deflation choice, and hurry up and make a decision school of thought), and as some have pointed out we have actual histories and events to give us some guidance. For example, does the U.S. now remind you of the U.S. during the early 1930s? My answer to that is, in ways that are significant to the question at hand, yes, but mostly no. Yes, in that debt levels are unsustainable (but currrent levels are much higher overall), and no, in that productive capacity relative to the rest of the world is much smaller and shrinking, and the share of the economic pie taken up by non-productive portions of the economy is huge and growing (i.e., relative to the early 1930s), demographics are very different and worse, etc., etc. In addition, it is strange for me to read so many people (not on ZH per say) that keep stating silly things like "well unemployment is high so there can't be inflation ..." or "with debt deflation we can't have inflation" etc. Clearly those people aren't aware of history. Almost all, or all, hyperinflations occurred under high unemployment and debt deflation. In fact, see Bernholz's book entitled "Monetary Regimes and Inflation" or the Reinhart and Rogoff book, it is quit typical to have such things under not just hyperinflation (which Bernholtz defines to be 50% or greater inflation per month). Therefore, whenever someone presents me with the choice between, for example, 'hedging' my savings with commercial real estate (especially when I know real prices are generally dropping for that asset grouping) I wonder what the agenda is, not whether there is any truth in it, because it could be true but isn't generally true or even likley. Again, it's possible, but very, very unlikley, and the sweep of history tells me so.

[Burnbright]

Reggie I think your chart would make more sense if you also showed people where credit was going, don't you think?

For example, you get loans to buy houses and cars right? Couldn't that possibly be why they were run up more than other markets at the time. Do you really see people loaning money to people to buy gold?

Just think about it.

And if I recall correctly that chart represents some very skewed data. If you used the last two years what would it look like. That's what I thought.

[dumpster]

reggie not a clue .,. it is a wonder all the comedians in the room ... yep i know you and  sinclair go way back  lol he says 1650  firwst of year 2011.   called this some 8 years ago .  gave us the five pillers .

now in oil producing countries they want to get into gold .. they asked him for advice ..maybe your next after master bates  .

still got that.million i hear so far no takers ,, just a bunch of trying to make sense of something thewy have no clue about. so next best thing make up some charts

best to just watch.. see what happens .. most have foggy vision and no real time experience in gold ..

shake a leg lol

[Johnny Dangereaux]

www.runtogold.com

Good Info there.....

In 1792 the Gold/Silver ratio was fixed at 15:1....the same ratio it is found in the Earth's crust (approx.)....   Silver is an anti-microbial.....perfect to be passed around from one dirty hand to the next....that is why they make knives and forks out if it!....in Mexico they put a silver ball in their cisterns to kill germs etc ....

MB is right...Screw Gold....if you were an astute trader you could have done really well with silver! Buy Dips...don't sell rallies....

12-Month 19.4540 on 12/03/09 11.8228 on 04/17/09 +40.75% since 04/03/09

SILVER BITCHES!!  BWAHAHAHAHAAA !!

[dumpster]

another zit faced youngster .. do you have a couple dimes to rub together .. or is this your way of announcing a dry heave

[Johnny Dangereaux]

Mercury Dimes actually....hundreds of them!!

[Kreditanstalt]

I just suspect that this analysis is still focusing on getting a return on capital, rather than KEEPING one's capital.

Otherwise, why CRE & apartment bulidings?  Why not steel, oil & foodstuffs?

And what's this about real assets deflating?  This is a DEBT deflation and period of inflation in essentials - stuff with pricing power.  Anything dependent on leverage, needing borrowed money or requiring large layouts of cash to purchase will suffer price-wise.  Unencumbered funds - gold & certain currencies - will do best.

Perhaps too this writer is forgetting the likelihood of currency turmoil.  Good for gold.

[Jim in MN]

Well I am kind of waiting for Reggie to finish the post because he doesn't fully connect the dots between stagflation, other investment options, and gold.  Indeed, all he does do is note that real estate is normally a good hedge...but now is not.  OK, so...?  From the chart it looks as if gold is somewhere between buying into China and India as a simple (!) inflation hedge. 

Just because something isn't as good a hedge as some people think doesn't mean that it's not the best available hedge anyway. 

The other choices are fraught with risk, as in default risk.  Gold is the only asset that is no one else's liability and has no default risk. 

Once pigeons and ostriches and big lumbering albatrosses have had their wings burned x number of times rotating between stocks, bonds, emerging markets (ooooh darn nationalized again) and real estate, commodities and PMs will become the default, as much as cash anyway. 

It will indeed be a sulking, ungrateful affair.  But it will happen.

[Kreditanstalt]

Well said, Jim!  And, remember, the gold market may be VERY big in the blogosphere but it is miniscule in size elsewhere...

[QQQBall]

Huge divergences in regions of the world? Emerging market demand increases while mature economies contract & stagnate.

All or most Zero hedgers agree gold is the call? hmm, that's worrisome for da 'bugs.

Ireland is going to be interesting to watch. They may be on the leading edge as they pay $85/bbl for crude and their economy deflates.

Thanks Reggie... why do I never feel obligated to call anyone named "Reggie" by Mr. ....

[caconhma]

Reviewing Reggie paper,  I noticed that Greece is in a very good economic condition. Its Real GDP growth is the highest in Eurozone. Their unemployment and inflation rates are lowest. WOW.

Reading Reggie analysis, one would be puzzled about the entire Greece affair.

In any case, analyzing bogus and fake data, as if they were real, is nothing more than a senseless waste of time.

As for gold, the time of fiat reserve currencies is coming to the end. Looking at the present geopolitical landscape, when almost all world governments are involved in faking their economic statistics, a new reserve currency structure based on real things of value (like commodities, PM, agriculture, etc.,) is inevitable. I really do not see how apartment buildings will be part of a new store of values.

[jimmyjames]

For the goldbugs--

This site is still in the completion stage-but-is kept up to date (live) and has some cool search features--

http://miningalmanac.com/

[tony bonn]

'For those "gold bugs" who have never ran [sic] the numbers, gold offers less inflation protection than your house does.'

what a crock. for those gold bashers who have never ran [sic] the analysis, the price of gold is massively manipulated to the down side. gold is money without counter party liability.

and for those usg bugs who have never ran [sic] the numbers, bls has chronically understated inflation since the 1980s...

[Master Bates]

When are you goldtards gonna get off of that shit?

"Gold is manipulated downward."

That's why it goes UP?  Because people are holding it down?  You people are on dope...

[Burnbright]

Wait werent you just saying that people that buy gold lose money... I don't get bates, durrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr

[toathis]

INFLATION IS THE HEALTH OF THE STATE. Not Deflation.

[jimmyjames]

by toathis
on Sun, 04/04/2010 - 17:14
#285975

INFLATION IS THE HEALTH OF THE STATE. Not Deflation.

***********************************

Inflation is government theft of savers-thru-devauation--

It drives most prices higher--high prices are not a good thing--

Deflation is the destruction of overpriced collateral-based on credit expansion-not productivity--

Deflation is anti-political--which is why they fight it--

Deflation leads prices lower--low prices are a good thing--

[Instant Karma]

The thing about gold is that you can store it discreetly, sell it or transfer ownership without tax, and, basically, unlike real estate or bank or brokerage accounts, its a store of wealth that's off the radar.

[swamp]

Very much off the radar, it passes through metal detectors undetected.

[SofaPapa]

Having posted that, you do of course know this is an oversight that will soon be corrected?

[DoChenRollingBearing]

So happy to read that!

That seems to have been my experience as well.  Twice I have taken gold out of the USA in my carry-on.  Neither time did any of our TSA pals blink when all that Au went through the machine.

That of course is subject to change.  "Better Technology"

[Mr Lennon Hendrix]

Not this time Reggie.

[AUD]

"Stagflation is an economic situation in which inflation and economic stagnation occur simultaneously" Who said? some British politician in 1965?

"The concept is notable partly because, in postwar macroeconomic theory, inflation and recession were regarded as mutually exclusive" Who said this, Keynes?

Inflation, deflation, stagflation, recession etc are but facets of the same monetary disorder. Trying to separate them leads to erroneous conclusions. Probably what the money managers are looking for.

[Master Bates]

I iz a zerohedge goldbug, bitchez!

How dare u put fax and numbers and grafs up aboot gold?  I kant reed that shit!  Gold bitchez til the day I die!

I don't care if eye loose munny.  I kan hold gold in my hands, bitchez!

Yeah boyee!

[Mr Lennon Hendrix]

I hope you understand, at the rate you are going, you will no longer be able to post on ZH without getting made fun of like Timmah Geiththththner did in elementary school........wait a minute.....oh shit....MB is Timmah Fuckin' Geiththththner!

[Master Bates]

And like Timmay, I'll be proven to be right in time, while all the people that make fun of me pick lettuce or something for a living...

LOL at ZHers making fun of me.

[DoChenRollingBearing]

I think you're reading Geithner wrong, MB. He is just another crooked cog in the machine.

If you ARE right about Timmay and gold, please feel free to wave at me picking that lettuce!

Don't hold your breath waiting for that to happen though.  More likely Geithner will be in jail than lil ol moi pickin' lettuce.

[Hulk]

We didn't buy Au on margin MB, so while its quite possible for us to take a short term bath,its highly unlikely we will become destitute enough to require that we pick lettuce for a living....

Also, I think it safe to say that many of us have positioned ourselves so that we can hold our positions for years to come, even into the next generation

Welcome back. Nice black duck...

[bonddude]

Stutterer eh, stutterer eh ?

[Master Bates]

And like Timmay, I'll be proven to be right in time, while all the people that make fun of me pick lettuce or something for a living...

LOL at ZHers making fun of me.

[toathis]

eerrr. You make me angry!

[Master Bates]

You make me angry, bitchez!!

How dare u knok gold, when I bought all I culd at 1200 an ounce?!?!

Dats wy its going to 6000, cause I missed the first 500% run up.

[Spitzer]

If 10 years of gains will not shut you up then what will ?

Will another 10 years of gains shut you up ?

[swamp]

+100

[Mr Lennon Hendrix]

Who said Beetlejuice? 

Well fine...hey there MB.  Hey, the Federal Reserve wants to know, "Would you like to buy a monkey?"

http://www.youtube.com/watch?v=WbCc2jeEQdY

[pitz]

If you take a look at Weimar Germany, during the periods of strong inflation there, the share of income that went to rent or housing declined from reasonably high values (20-30% of household income), to almost nothing, as inflation took off.  As you point out, Real Estate does well when inflation is the byproduct of economic growth, but in the USA, circa 2010, pricing has disconnected from economic growth.

[jimmyjames]

by pitz
on Sun, 04/04/2010 - 15:00
#285898

but in the USA, circa 2010, pricing has disconnected from economic growth.

*******************************

I think almost everything--especially sanity--is in disconnect--

http://js-kit.com/blob/G_nUzjVPifw_OHA7apz_VS.png

[junkyard dog]

All types of investments have their day. What is good today is worthless tomorrow.

I have $100K in CD's. They are paying 1%. That is $1,000 per year. At the end of the year I owe $ 250 income tax on the $1,000 even though I do not take possession of the cash.

I have $ 50,000 in gold and silver. For the year 2009 I have a $ 6,000 profit. I do not owe income tax on the profit because I have not taken delivery of the profit.

At the end of this month $ 50,000 in CD's mature. I will take that sum and buy more gold and silver. I will not leave it in the bank and get screwed any longer.

As long as gold and silver advance $ 200 and $ 6 an ounce respectfully this year I will be ahead.

One day gold and silver will lose its place as a best investment vehicle and I will sell it. Until then, which will not be before 9/2013, I will hold it not as a hedge against inflation but as a means to not getting bent over by the bankers and brokers and shafted until I bleed out my eyes.

Your wasting your time Reggie.

[Master Bates]

Yeah, quit trying to tell people the truth Reggie!

I made 12% in a year, so now I'm going to make 12% every year until the day I die!  Gold will never go down, EVER!!!

AHAHAHA!!!  When gold is at 2000 an ounce this April, I'll be laughing at you!

Oh wait, it's April already... ummm... errr....

Nevermind that!  It'll be 6000 by June!  Yeah bitchez!  Gold!

[Hephasteus]

You give me a tank and 50,000 gallons of gas and about 2000 shells and let me destroy every single "We buy gold" business in the US and every single state and the federal government will be entirely shut down in a month and half.

As it stands it's giong to require another 200000 lost jobs this month to get enough people to feed the beast. All paths lead to ass fucking while the fed and IMF scream I love you I love you I love you I hope you are not too mad about this in your ear.

[DoChenRollingBearing]

Welcome back MB.  I thought that all the rest of us pro-golders had run you off.  One reason I always liked to read your posts was they were often thoughtful and you sometimes sourced.  Maybe not this time though....

You might want to read more History, especially before WW I.  I respect History more and more as I get older.  Same ol' sh!t, over and over.

History cemented me into the goldbug camp.

[dumpster]

MB got a job yet .

let me give you a lesson.. how to chew gum and walk,, and keep a job.

in the early 1970's bought gold . watched the market . listened to no little no nothings then,

my own thing  chewing gum walking making decisions   sold gold jan 1980 850,, knew the interest rates would drive capital to bonds.. bought the bonds 14.5%

early eighties started own business,, grew it for 15 year.. sold to fidelity in spring 2000,  bought gold 300 silver 4.25  so far so good ,, chewing gum walking keeping job as consultant

have i done well in gold you betcha ,, business ditto .. bonds yep.. even got some of that 5000 nasdq,, watching making decisions

not letting some out of work person yammer about something he has no deep understanding about.

My opinion your way out of your league crossing the stream on the back of alligator thinking your on a log.

some of the wisdom of the markets sinclair, russell, dines and many other put you to silence ,but you will not listen .

now your proffer advice about gold .. unemployed , as gold makes its move higher . silver ditto

advice get a job first create a 200,000 grand in capital ,

try to hold on to it  .. start a business then come back and give your advice ,, you have been dead wrong . and digging a hole deeper that time will show you as a no nothing ,

speak softly . be aware that you may be trying to teach lessons that are way over your head .. from folks who know the difference from their ass and a hole in the ground

[Mr Lennon Hendrix]

I think it was 20%-30% last year, depending on how and when the FIAT was deployed.

Hey, check out the 10,000 year chart.  I like that one best.

[murray]

It's useful to define terms here:

In the past, when the U.S. government still had control over its finances, expansions in the monetary base and government balance sheet led to dollar flows into approved assets- real estate, technology stocks, and, the creator of most of these new dollars, financials (reggie, why not include this sector in your study? I bet it outperforms).

While pushing these new dollars ("inflation") into approved sectors and financial instruments, driving up the nominal value of, especially, real estate and the stock market, the controllers of the system also wished to keep commodity prices down (so they could buy more at lower prices and continue to create trillions of dollars without causing revolt), so much of the inflation was also used to create paper that shorted commodities on the paper exchanges.  Therefore, rather than resulting in rising commodity prices as would seem logical, the new dollars were conversely used to push down the exchange price of commodities.

However, with the govmint quickly losing control over its finances, what we are likely to see, quite possibly in the near future, is not historical controlled inflation but a Misesian crack-up boom, in which the stability of dollar value disappears, meaning that the dollar price of real assets (money aka gold and silver, energy, food, water) will no longer be subject to dollar control, as worldwide demand will ensure true price discovery.  Past performance analysis during historical controlled inflation cannot predict the results of dollar collapse.

[Mark Beck]

Gold is a bridge between currencies when you can no long accurately establish price in one of them, for example, during times of hyper-inflation. I do not look at gold as a way to fight inflation on equal terms with other assets like a house, or any other "productive" asset. Its place is to support acceptance beyond fiat currency. So it has its place in a balanced multinational estate portfolio.

Mark Beck

[b_thunder]

I am not so sure that appartment buildings or any RE for that matter will perform nearly as well as in the past episodes of inflation or stagflation:

Reason #1:  There's a lot more dwellings exist now than what's needed.  Vacancy rates will be too high for a while.  HS and college grads will not move out (especially if they get medical infurance for 3 more years)

Reason #2: In the 1970s inflation/recession, the unemployment was lower, and workers had a lot more bargaining power than today.  The wages largely kept up with price increases, which drove prices higher yet.  This time around, if inflation does happen, it will be not because of rising wages, but becasue of money printing.

I don't think there is a fool-proof hedge. Perhaps food producers?  Everyone is bound to lose some wealth.