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On Surviving The Monetary Meltdown
Via Detlev Schlichter of DetlevSchlichter.com,
Let us start by looking at the economy from 10,000 feet above: After 40 years of boozing on easy money and feasting on fantastical asset price inflations, the global monetary system is approaching catharsis, its arteries clogged and instant cardiac arrest a persistent threat. Most financial assets are expensive, and many appear to be little more than securitized promises with low probability of ever delivering payment in full. Around the globe, from Japan to the US, a policy of never-ending monetary stimulus consisting of zero interest rates and recurring rounds of ‘quantitative easing’ has been established aimed at numbing the market’s growing urge to liquidate. Via the printing press, the central banks, the lenders-of last resort, prop up banks and financial assets and simultaneously fatten the state, the borrower of last resort, which, despite excited editorials against the savage policy of ‘austerity,’ keeps going further into debt almost everywhere.
‘Muddling through’ is the name of the game today but in the end authorities will have two choices: stop printing money and allow the market to cleanse the system of its dislocations. This would involve defaults (including those of sovereigns) and some pretty nasty asset price corrections. Or, keep printing money and risk complete currency collapse. I think they should go for option one but I fear they will go for option two.
In this environment, how can people protect themselves and their property?
Disclaimer
Before I start sharing some of my own personal thoughts on this topic with you I should repeat my usual disclaimer: I provide economic analysis and opinion, food for thought. But I do not intend to give investment advice and certainly not any specific trade ideas. I provide a worldview, and an unconventional one at that. You alone remain responsible for your actions, and whatever you do, you do it at your own risk.
My three favourite assets
My three favourite assets are, in no particular order, gold, gold and gold. After that, there may be silver, and after a long gap of nothing there could be – if one really stretches the imagination – certain equities or commercial real estate.
Why gold?
We are, in my assessment, in the endgame of this, mankind’s latest and so far most ambitious, experiment with unconstrained fiat money. The present crisis is a paper money crisis. The gigantic imbalances that threaten to unravel the system momentarily are the direct consequences of years and decades of artificially cheap credit and easy money, and are simply unfathomable in a hard money system. Take away fiat money and central banks and our current problems would be inexplicable. (If you are still under the widespread but erroneous impression that the gold standard caused the Great Depression you may want to consider that the strictures of hard money were systematically disabled and the disciplinary power of a true gold standard increasingly weakened with the establishment of the Federal Reserve in 1913, and the introduction and spreading of lender-of-last resort central banking in the US financial system. In any case, we are now in the Greater Depression, and this one is entirely the responsibility of central banking and unlimited fiat money.)
Whenever paper money dies, eternal money – gold and silver – stage a comeback. We have already seen a major re-monetisation of gold over the past decade, as the metal again becomes the store of value of choice for many investors. This will continue in my view, and even accelerate.
Gold is money
A frequent allegation against gold is that its non-monetary applications are minor and do not justify the present price, and that gold doesn’t pay interest or dividends, quite the opposite, storing and insuring it incurs running expenses. Gold is an instrument with a negative cash yield.
None of these objections stand up to scrutiny. They are either wrong or irrelevant.
It is investment goods that are supposed to offer cash yields – interest income or dividends. But gold is not an investment good, it is a form of money. Gold is the oldest form of money still considered a monetary asset today, and the only truly global form of money (besides silver but silver is today still more of an industrial commodity than a financial one). Gold is – importantly – inelastic money. It cannot be created nor be destroyed by politicians and central bankers. It can, of course, be taxed and confiscated, and I come to that later.
The main alternative to gold is therefore not bonds, equities and commercial real estate but cash, i.e. state paper money. The person who ‘invests’ in gold is holding money. The cash in your wallet or under your mattress does not give you a cash return either. Neither does gold.
Sometimes I get asked, what if people suddenly stopped considering gold to be a monetary asset and a store of value? Would its price not drop steeply? – That is a fair point. But this applies to your paper money, too. In fact, it applies to paper money more so.
Every monetary asset – whether gold, paper tickets from the state, or electronic book-entries at your bank – receives its value (exchange value or purchasing power) from the trading public, and from nobody and nothing else, not from the state, nor from any non-monetary uses of the monetary asset, if it has any at all. If the public stops treating the item in question as money, or uses it less as money or only at a discount, it looses its monetary value. That is also always the case with state paper money. It is a sign of our hopelessly statist zeitgeist that many people believe that the state ‘assigns’ value to its paper money and somehow supports this value. This is not the case. The truth is that the paper tickets in your wallet have purchasing power (and thus have value beyond their paper content) for one reason and one reason only: the public accepts them as a medium of exchange, the public accepts them in exchange for goods and services. The public also determines what the exact purchasing power of those banknotes is at any moment in time and at any given place. The state does not even back its paper money with anything. If you take your paper tickets to the central bank, what do you get in return? – Change.
Paper monies come and go. In fact, throughout history every experiment with paper money has ended in failure, with over-issuance the predominant cause of death. Pound and dollar are the two oldest currencies around today but through most of their history they were linked to gold or silver, which restricted their issuance. Our system of hundreds of entirely unrestricted local fiat money monopolies dates back only to 1971, at least in its present form. In the 20th century alone, almost 30 hyperinflations of paper monies were recorded.
By contrast, gold has been money for 2,500 years at least. Should you be more concerned about the public not taking your gold any longer, or your paper money?
Gold is hard, apolitical, and global money, supported by an unparalleled history and tradition. That is the asset I want to own when our assorted finance PhDs in the central banks, the bureaucrats in the Treasuries and Ministries of Finance, and our sociopathic welfare politicians have manoeuvred the system to the edge of the abyss. Which is now.
Remember, paper money is always a political tool, gold is market money and apolitical. Paper monies come and go, gold is ‘eternal’ (as far as we can tell presently).
You have to be clear in your mind why you buy gold.
At every moment in time, all your possessions – all your wealth – can be split into three categories: consumption goods, investment goods, and money. For most of your possessions the category is pretty clear: The clothes you wear and the car you drive are consumption goods; your investment funds or your equity portfolios are investments; the banknotes in your drawer are money. For some things it is not so clear: An expensive painting might be an investment but if you hang it in your living room and enjoy looking at it, it is also a long-lasting consumption good. The house you live in could be both but in most cases it is more of a long-lasting consumption good than an investment: you use it up over time, albeit slowly, and you cannot easily liquidate it. You have to live somewhere.
The wealth you are not consuming in the here and now but want to maintain for the future can thus be held in the form of money or investment goods. Money gives you (usually) no return but has other advantages, namely that it allows you to maintain your purchasing power, at least if it is proper, hard money, and simultaneously retain complete flexibility. You are not committing yourself today to any investment good (or consumption good); you remain on the sidelines to wait how things turn out. But as you hold a monetary asset – a store of value and medium of exchange of (almost) universal acceptance – you can re-enter the markets quickly and easily. Somebody will always buy the gold from you in the future (which is far from certain in the case of most of your consumption and investment goods, and also in the case of that other form of money, state paper money).
Why gold now?
It seems that this is an opportune time to be on the sidelines, to be not engaged in the markets for equities, bonds and real estate, or to at least keep one’s exposure to these markets very low, since years and decades of unprecedented money growth have inflated and gravely corrupted the prices of standard investment goods. Sadly, these prices now rely increasingly on the kindness and efforts of manipulating bureaucrats to simply sit still and avoid a painful descent.
Central bankers state – openly and unashamedly – that they now consider it part of their mandate, if not the chief part of it, to keep asset prices at elevated levels and, if possible, even boost them further. Naturally, this will require ever more aggressive money printing and eternally super-low interest rates, and certainly argues against holding much paper money. Those who like to bet on the bureaucrats may claim that it makes sense to hold the very financial assets the prices of which central bankers are manipulating. As long as the central bankers are not ashamed of running the printing presses ever faster, they will simply get their way. Well, even under the rosiest of assumptions, this argument does not support investment in bonds. It could, in principle, be an argument for equities and real estate as ‘real assets’ of a sort but even in respect to these assets I consider it unsound, as I will explain later. Be that as it may, the beauty of gold is precisely that it allows you to remain on the sidelines and keep your powder dry. By holding gold you remove your wealth to a considerable degree from the rigged game of artificially inflated and openly manipulated financial markets. You commit internal capital flight from the fiat money system, and you simultaneously bet on the further debasement of paper money. The bet is this: The central bankers are trapped. The state, the banks, the pension funds, the insurance companies, the investment funds – they all would be in a right mess – or an even deeper mess than they already are – without cheap money from the central bank. Ergo, the policy of super-cheap money will have to continue until the bitter end.
There are a few more things to say about gold but before I do this let us talk about the worst asset.
Bonds – the worst asset class in my view
Bonds are ideal assets for you if you suffer from a financial death wish. Let me put it like this: After 40 years of almost relentless and of late accelerating money production we have too much debt. When you buy bonds you buy debt, and there is a lot of it to go around. And it is not even cheap. In most cases, it is ridiculously expensive, in particular when considering that most of it will never get repaid.
This is especially true of the sovereign bonds of major governments, which are probably among the worst ‘assets’ on the planet, yet are bizarrely still considered ‘safe haven’ assets, a ridiculous concept to begin with. What are the prospects in the long run for government bonds? Remember that most sovereign states are now credit-addicts, desperately relying on low rates and cheap credit to fund their incurable spending habits, and increasingly leaning on their central banks to provide the daily fixes. If the central banks stop printing money and thus stop funding the governments, they go broke. If the central banks keep funding the governments they will have to keep printing money, and this will certainly lead to higher inflation at some point, and that point may even be soon.
As an investor you will ultimately lose money through default or through inflation, and if it is a hyperinflation there will be default at the end of the hyperinflation. For the bond investor the choice is between death by hanging and death by drowning.
If that sounds overly dramatic then ask yourself in what scenario you win or even get your money back. Only if the present policies lead to a slow and steady return to self-sustaining growth that is inflation-free and allows the central banks to slowly and painlessly remove accommodation and deflate their overgrown balance sheets, and if the political class then grows up and gets sensible, departs from its free-spending ways, gets the fiscal house in order, and starts paring back the debt.
Yeah, and pigs might fly!
That this scenario is evidently the basis of much strategizing by professional money managers does not say much about its soundness or even remote probability. It is simply the scenario in which the financial industry comes out unscathed, with its size, reputation and income-stream intact. It is also the one scenario in which you need little money – neither paper money nor gold – but can stay fully invested in equities, bonds and real estate, as the rosy outlook of seamless crisis resolution and onwards growth forever will ultimately justify today’s lofty valuations. This is the scenario the financial industry favours and has an overwhelming desire to believe in – as do all politicians, central bankers and assorted Keynesians and other interventionists. Good luck to all of them! I fear this is wishful thinking rationalized with poor economics.
Every day that the markets are open the US government borrows an additional $4billion, roughly. For 5 years running the country’s budget deficits were considerably in excess of $1 trillion. Britain is among the world’s most highly indebted societies if you combine private and public debt, and despite all the blather in the press about ‘austerity’, the public sector keeps going more into debt. Japan has long been a bug in search of a windshield.
Bond investors may counter that it is all about the timing. Until death arrives, you collect coupons. – Well, hardly. With yields for the bonds of major bankrupt nations now in the 1 to 2 percent range, if that much, there is, in my view, little point in sitting on a gigantic powder keg and hoping the fuse is long enough. When this one blows, the fallout will be substantial.
Why are bonds not selling off?
As David Stockman has pointed out, much of the US Treasury market is not owned but rented. The big primary dealers and many hedge funds hold government bonds as trading positions funded with cheap money from the Fed. That is the true reason for the Fed’s new communications policy. Ben Bernanke now goes so far as to promise to keep rates and therefore the trading community’s funding costs near zero, not only for the near-term, but even beyond the tenure of his own chairmanship at the Fed. The goal is to make sure that these leveraged renters of Treasury debt stay engaged and help funding the state.
Then there are the big bureaucratic asset management entities that have historically always provided a reliable home for government bonds: insurance companies, pension funds, sovereign wealth funds, foreign central banks. Built-in risk-aversion and intellectual inertia are here working in support of over-valued bond markets. Here, the big investment decisions are made by committees of professional fund managers who are often in charge of obscenely large amounts of money. To beat the market and achieve superior returns is an objective located somewhere between the hugely improbable and the completely impossible. They are destined to fail, and in this position of nerve-shredding uncertainty they all cling to the same straws: 1) do what everybody else does; 2) stick to what has worked in the past; 3) stick to the industry’s assumed wisdom, such as ‘never fight the Fed’; ‘government bonds are safe assets because the government can always pay’, and so forth. The last point has no basis in theory and history, and looks increasingly like a heroic assumption today, but that is the fund manager’s line and he is sticking with it.
That government bonds are a safe investment can, of course, not be left a matter of simple opinion but has to be enshrined in the laws of the land, and the state’s rapidly expanding finance constabulary is already working on it. Via legislation and regulation, the state is busily building itself a captive investor base for its own debt.
The state regulates the banks and has long been telling them that if they want to lend their money securely they should give it to the state. Everywhere, state-imposed capital requirements for banks can best be met by buying government bonds. The advantages are obvious: Spanish banks heavily increased their exposure to ‘safe’ Spanish government bonds over the past year, from about 13 percent of their balance sheets to 31 percent. And what is safe for the banks is certainly safe for insurance companies, pension funds and other ‘socially important’ pools of saving. ‘Capital controls’ is such a nasty term. Much nicer to call it ‘regulation’, and the masses have now been sufficiently indoctrinated with the idea that the financial crisis was caused by lack of ‘regulation’ so that the state can now safely and calmly tighten the screws.
I fear that to a large degree this is even welcome by the asset management industry. In an unstable and increasingly uncertain world, being told what to buy lifts a great responsibility of one’s shoulders. Although individually many money managers complain about stifling restrictions and regulations, it is usually the case that any outsized boom industry, when faced with the end of its boom, happily embraces state involvement to avoid getting trimmed back by market forces too harshly. Rather than seeing the return of the ‘bond vigilantes’ who instilled fear and loathing in debtors in the 1970s and 1980s but who roamed the financial landscape of a different age, one in which grown-ups were still allowed to smoke in public, we will most likely be treated to the sad spectacle of timid money mangers being herded into officially sanctioned asset classes by the cocksure financial market police.
All of the above may help explain why expensive assets may keep getting more expensive but these are, in the end, mitigating factors only that will, at the most, postpone the endgame but not change it.
One popular way to rationalize investments in bonds is that they are deflation hedges. Whenever the forces of liquidation and cleansing get the upper hand, bonds do well. This may be the case in the short term but any extended period of deflationary correction must be poison for sovereign bonds in particular: tax receipts will drop, non-discretionary state spending will balloon, and credit risk will rise. The bond market’s pendulum of doom will simply swing from the risk of higher inflation to the risk of default.
Gold versus other ‘real assets’ (equities and real estate)
It is often argued that equities and real estate are also good inflation hedges, and I know many people who prefer them to gold. I see the rationale but disagree with the conclusion. Gold may no longer be cheap because what I explain here has been a powerful force behind gold for a decade. But I would argue that equities and real estate are in general much more overvalued as the current financial infrastructure is designed to channel new money into financial assets and real estate but not into gold, and our financial infrastructure has been operating on these principles for decades. How many people do you know who not only own gold but bought it on loan from their bank? Now ask yourself the same question with respect to real estate. – Gold is the great ‘under-owned’ asset. Its share in global portfolios is miniscule. It plays hardly any role in institutional asset management.
It is true that during deflationary phases when the inflationary impetus from central banks slackens a bit and the urge of the markets to liquidate comes to the fore again, gold often sells off in sympathy with equities. But I believe that any risk of a more extended period of deflationary correction poses a much bigger problem for equities, and by extension real estate, than for gold.
Additionally, ask yourself how equities and real estate will fare in an inflationary crisis or a currency catastrophe. Which companies will make money, pay dividends or even survive? Which tenants, whether residential or commercial, will keep paying the rent? I am not saying that all these equities and all the real estate will become worthless – far from me to forecast a ‘Mad Max’-style end of civilisation. It is indeed to be expected that certain equities and select pieces of real estate will turn out to be decent instruments for carrying wealth through the valley of tears, and for coming out at the other end with one’s prosperity intact. But which ones? It strikes me that the variance of outcomes is much greater in these hugely heterogeneous, highly inflated and widely held sectors than anything that can come from holding the eternal money and homogenous commodity gold. If you consider any major economic crisis, whether inflationary or deflationary, gold beats equities and real estate in my book. (Equities and real estate are superior to bonds and paper money, however, and this is why I listed them above as potential holdings.)
Additionally, there is one aspect of real estate investing that is, in my opinion, frequently overlooked or underappreciated, and that is this one: Your property is like a marriage agreement with the local taxman, as my friend Tristan Geschex keeps reminding me. The War On Wealth is intensifying, as are the fiscal problems of most states. Both go hand in hand. Real estate is low-hanging fruit for the state, and taxation on it will most certainly increase. What market value and rent-income your property will manage to sustain through the vagaries of the crisis will most probably be subjected to confiscatory taxation from a bankrupt state. The ownership of gold could potentially also be restricted or heavily taxed. This is certainly a risk. But as I said, gold is still the under-owned asset, and there is still a chance that you can find arrangements for your gold holdings that lessen the tax implications. When the winds of change alter the political landscape in your country of residence and bring the War On Wealth to a cinema near you, you may still – if you are quick and lucky – pack your things, take your gold and move somewhere else (as long as they let you), maybe even obtain a different citizenship (as long as they let you), but owning property means having nailed your wealth to the ground and having signed up for whatever the local purveyors of snake-oil (politicians) manage to sell your fellow voters.
Paper money versus gold
Under what scenario would paper money beat gold, i.e. would the paper-money-price of gold drop sharply? – The answer is clear, in my view: If the central banks stopped the printing press and stopped depressing interest rates artificially and fully accepted the consequences for other asset classes and the economy. If the central banks decided to defend the value of their paper money and credibly assigned a greater importance to this objective than to the now dominant ones, which are sustaining a mirage of solvency of banks and states, funding the governments, propping up asset prices, and creating short-term growth spurts.
The big gold bull market of the 1970s ended harshly in 1980, when then Fed-chairman Paul Volcker stopped the printing press, let interest rates shoot up, and looked on as the economy slipped into recession. The paper dollar enjoyed a revival and the gold price tanked.
My view is that this is exceedingly unlikely to happen today. The global financial system is considerably more leveraged than it was 32 years ago, and presently much more dependent on never-ending cheap money from the central bank. In 1980, the total debt of the US government was less than $1 trillion, today the annual budget deficits are bigger than that. The fallout from an end to free money would be huge, and most politicians would deem the consequences inacceptable. Today, there are also no other strategies available that could cushion the impact. In the early 1980s, then-president Reagan countered hard money with an easy fiscal policy, and simply let the budget deficit balloon throughout his tenure. Today, the bond market would be quickly in trouble without support from the central bank, and the government would soon face its very own Greece-moment.
But even if this were indeed to happen, I think that gold would still do better than equities and real estate, and certainly bonds, which would suffer hugely from rapidly rising default risk. The deflationary correction is also a huge threat to the over-stretched banking system, which means you may not want to hold your paper money in form of bank deposits. Again, gold seems to be a decent self-defence asset, even in this scenario.
How to own gold
Personally, I believe one should hold gold in physical form (bars and coins), not through ETFs, derivatives or gold accounts. If one wants to have it held within the banking system (not ideal but there could be reasons for it), one should insist on having it in allocated form, that is, clearly allocated to one’s name and identified by serial numbers. Or, have the gold delivered and keep it in a safety deposit at a bank. Alternatively, there are now a number of specialised asset managers or gold dealers around that offer storage facilities as well.
I think the risk of gold confiscation is small in most countries at present but things may change. The risk of taxation on gold or restrictions on gold ownership is somewhat higher. The safest places to hold gold are probably Switzerland (still) and Singapore at present but if you live in the wrong place or have the wrong passport, having your gold there may not protect you from the long arm of your government when it begins to show interest in your gold. It is no surprise that people who really care about their wealth, which are often people who are very wealthy, now consider changing residency and even changing citizenship as an important component of their estate planning. The last time the US government confiscated private gold, in April 1933, it only grabbed what was held within the territory of the United States, and many people probably kept their gold by simply burying it in the backyard. Believe me, the next time private property will be confiscated, the process will not be handled so amateurishly.
In any case, these are just my opinions. As I said, food for thought….
In the meantime, the debasement of paper money continues.
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I'm simply making the point that Bitcoin isn't nearly mature enough, nor widely enough recognized and accepted, to be a viable alternative.
If you're comfortable with it, though, I wish you luck.
I prefer Pokerstars Playmoney chips to bitcoin. Had 3 million but lost it all. Was a little sad but I'm over it.
That's a centralized currency, Bitcoin is entirely decentralized and P2P. It cannot be inflated or shut down by a government.
I prefer monopoly money
I prefer shiny pieces of metal that other people can steal from me and dig up more of out of the ground. Oh wait, that's gold.
A truly retarded post. NOTHING is 100% secure. Your assumptions are naive, as your comments in regards to something that only exists BEFORE an EMP strike. You had to be drinking...otherwise your posts are beyond ridiculous... Just saying.
Whoa there, somebody's got a stick up his ass. Calm down, pardner.
8 jars of acid, and you can tell carats, it is easy.
Oh yeah, sure, 8 jars of acid. That should be convenient at every checkout point.
Easily trumped by EMP!
Nope! Bitcoin can be stored offline, without electricity, and the blockchain exists on computers all over the world. So you'd have to EMP the entire planet. Nice try, though! I can steal your gold easily with a military.
You can not make gold. You can mine it, refine it, size and stamp it. If some non-existent person(s) named Satoshi Nakamoto can make a "Bitcoin" then anyone one can make electronic currency, which means each country, each state, each county, City, and/or crime syndicate can make their own crypto-currency. So, why would bitcoin retain its value? If bitcoin can do it, any crypto-curency made from the same SHA-256 hash algorithm to make their own. Maybe I'll start my own edickcoin over turkey day.
Besides look up "spoofing the chain" to see if you still think bitcoin is unbreakable.
If Bitcoin is "breakable", then go ahead. Try to do it. You'd stand to make millions of dollars if you could figure it out (the current market cap for Bitcoin is around 150 million bucks).
And it's true, anyone can make their own cryptocurrency. The reason people continue to use Bitcoin, however, is the fact it has the longest blockchain, and the largest network of users, which means the total network processing power is the most-powerful in the world. And that's the reason nobody can hack it: you'd need greater than 50% of the total network's processing power, and not even the most powerful supercomputers in the world combined could pull it off.
"The reason people continue to use Bitcoin,..."
People use jugs of Tide for money. If you can use a dead squirle for money use it. Just find some on the side of the road. But, claiming a crytpcurrency developed by some person(s) named "Satoshi Nakamoto" who refused to identify himself, herself, themselves is safe because it based on some some common alogrithm is baloney.
"...total network processing power is the most-powerful in the world. And that's the reason nobody can hack it:..."
Really, explain why it is not possible for the NSA and its 10,000 computer experts and all of its computing power can not crack it?
Spoof the chain?
Unless you provide some evidence the NSA can defeat the combined processing power of 50% of the Bitcoin network, you don't have a point. And no, they can't do it - the network can outpace every other supercomputer in the world combined.
It doesn't matter that Satoshi Nakamoto isn't a public figure - the Bitcoin code is entirely open source. Anybody can look and see how it works.
Jugs of Tide, dead squirrels, and gold are all potential moneys, yes. But Bitcoin has several major advantages over all of them, which I've outlined in other posts here.
You cannot "spoof the chain". Sorry.
Just for further discussion -
"To steal your bitcoins by breaking crypto (as opposed to getting your private key), somebody would have to:
1. Break RIPEMD160. Because your bitcoin address is a RIPEMD160 hash... AND
2. Break SHA256. Because your bitcoin address is a RIPEMD160 hash of the SHA256 hash... AND
3. Break the ECDSA elliptic curve encryption signature algorithm, to figure out the private key that corresponds to the public key that they got from breaking (1) and (2).
That's assuming that you don't re-use bitcoin receiving addresses (your public key is revealed the first time you spend coins that were sent to that address). If you do re-use the same receiving address, then they just need (3).
I don't spend any time worrying about whether or not the NSA (or anybody else) can break ECDSA."
reference https://bitcointalk.org/index.php?topic=6503.0
On March 29, 2011, two researchers published a IACR paper[4] demonstrating that it is possible to retrieve a TLS private key of a server using OpenSSL that authenticates with Elliptic Curves DSA over a binary field via a timing attack.[5] The vulnerability was fixed in OpenSSL 1.0.0e.[6]
reference http://en.wikipedia.org/wiki/Elliptic_Curve_DSA#cite_note-5
Note the part that states "...demonstrates that is possible to retrieve the TLS private key of a server using OpenSSL that authenticates with Elliptic Curves DSA..."
I don't claim to be an expert. Seriously, tell me what you think? I may become interested again but the NSA only has to break the weakest link.
The brightest minds in cryptography have agreed that Bitcoin comports to the highest standard of security. Also, the protocol is changable - so if it's discovered that someone can hack it, it's easy to change over to a better encryption method. But that's incredibly unlikely.
If you're bright enough to be able to hack this level of encryption, you'd be far better-off spending your time and intelligence figuring out how to break into peoples' houses and get their valuables that way, or break into Bank of America (or any other bank's) online accounts - that's just as easy, if not easier to hack than Bitcoin.
The point still stands: Bitcoin's major advantage is the fact it's not a physical commodity, and therefore governments cannot steal it with force. For that reason Bitcoin, or another cryptographic currency like it, will ultimately end government control of money and banking. It's inevitable. Bitcoin is to money what Email is to the postal service.
"If you're bright enough to be able to hack this level of encryption, you'd be far better-off spending your time and intelligence figuring out how to break into peoples' houses and get their valuables that way..."
ISTM that if Bitcoin were to become a serious threat to fiat paper currencies, the government's brightest minds *would be* focused on attacking it, not wasting their time breaking into the Bank of America. After all, the whole purpose would be to protect the livelyhood of said bank and many others.
And they still wouldn't be able to shut it down, because there's no way they could ever achieve 50% of the Bitcoin network's total hash processing power. We've been over this several times.
Sure, they might find it difficult to break Bitcoin's security.
But they might simply shut down the Internet -- or some relevant part of it. Recall that we're talking about life/death of the state's fiat currency...the state will stop at nothing to save it.
"it is impossible for any government to shut down the Bitcoin network because it's entirely decentralized P2P software"
ROTFL. Government can simply describe users of Bitcoin as "terrorists" and shut down the Internet. P2P uses the Internet for its connectivity.
SpykerSpeed
Question, What happens to your thesis, and plans for BITCOIN, when the gov cuts off the Internet?.
You ready for that scenario?.BitCoin, shmitcoin.
If the government "cuts off the internet", gold would make a good currency. That was actually the first sentence I typed on here, if you'd been paying attention to my posts. But the government can't cut off the Internet without also cutting off all electricity, and that would cause many young men to lose their jobs. Young men with guns. So the government can't do that - it's not an option to them.
You can keep buying gold, I'm not stopping you. Hell, I think gold is a wise investment, and I own a lot of it. My only point was that Bitcoin is a superior MONEY. Governments can't steal it from you, or control it, or tax it. We should all get behind that.
damn inernet................
If govs stopped printing money based on nothing and instead based it on something real, oh say like gold, this would hardly be negative for gold.
The only negative for gold is if you have too short an investment horizon or lifespan, as the ridiculous scam may drag on for years before meltdown.
The real question that Detlev, Faber, Schiff, etc. refuse to answer ...
What about the Philosopher's Stone?
But in all seriousness, keep your gold for under the table transactions as the Tax Man is going to be looking for his increasingly deep cut in all legal on-the-books financial transactions going into the future.
I once read a story about a guy who was a GI in 1946 in post WWII Japan. You can hardly think of anything more post-apocalyptic than post-WWII Japan.
In any event, this guy got a three-day pass and wanted to go out and have a good time; get some girls and such. So, he had this 18k gold pocket watch his grandfather had given him, and he decided to hock it at a pawn shop. The pawn broker looked it over and told the GI he did not want it. The GI insisted, “But it's a gold watch. It must be worth something.” The pawn broker said, "Yes, it is a very fine gold watch, but everyone wants to sell gold. No one wants to buy gold."
His Sargent set him straight, and sent him back out in town with 2 packs of cigs, and couple of chocolate bars, and two cans of spam. He spent three days in debauchery and had a wonderful time.
The point is, when it all really falls to pieces, gold is worthless. You cannot eat it, or use it to defend yourself, or do anything else with it. Anyone who has it, and has nothing else, will be trying to unload it for things they can use to survive.
Horde all the gold you want, but if you really think the end is near, better to by lots of ammunition, booze, wine, beer, canned meats, toilet paper, soap, shampoo, MRE's, plant seed, and the like. You could buy a life time’s supply of soap, shampoo, toilet paper, and booze. These items will keep almost indefinitely, and you will need to buy it eventually, anyway. If you need some, you do not need to go to the store, just go down to the basement and get what you need. If only “mild” inflation hits, you will still make out nicely as you will have bought when prices were low.
But don’t let people know you have this stash. If they know you have it, they will rush right past your little stack of gold and go right for the stuff they can use.
That guys was a retard. He could have bought the pawn shop and the rest of the block for that.
It's not that no-one wanted the gold, it's that they didn't have anything to trade for it. You can't buy a loaf of bread or a prostitute for the weekend with an ounce of gold. But you can buy the store that sells the bread, or the whorehouse for such.
The only time that gold is worth less than food is in the IMMEDIATE AFTERMATH. Perhaps your story was about the week after the war ended, in which case, fine. There was no food anywhere, but there was some gold circulating, chasing very little consumable goods. This is what your food stores are for. Three weeks later, you can bring out your gold and buy the world.
The only thing that stopped Mr. Potter from buying up Bedford Falls was George Bailey. Potter knew the score. So do the villains in charge of the system. You are right, Mosley. They are patient and they know how to create, and benefit from, a crisis.
In 1945, GI's were given free smokes and chocolate (on a rationed basis). So, he got his good time for nearly nothing, and kept his gold. Does not sound like a retard to me. In fact, army regulations forbade soldiers from selling or bartering their smoke and chocolate rations on the "economy." There was not such restriction on selling or bartering gold.
The pawn broker is in the same fix as everyone else in town. He has to possess things people want to trade to survive. It's not so easy plan for the future when your stomach is empty, millions are dead, and all the buildings around you are blown to bits or burned to the ground. Try going two weeks with a pocket full of gold but nothing to eat. Also, do some research and look at what happened to money, gold and silver in Europe after the fall of the Roman Empire. No one wanted it. The economy went straight to barter. This condition lasted a couple hundred years.
But go ahead and horde your gold. You will trade it all away as fast as you can for a loaf of bread, if anyone has enough reserve of bread to want to trade it away.
The scenario is for post-apocolyptic scenarios. Extremely unlikely, but I just want to point out gold is not always the prefered holding in all scenarios.
I'm an optimist,and think things will work out in the end. Not saying we are not in for some interim hardships, but, like everything else, there are limits to the utility of gold. Gold can also get killed in deflationary environments.
I think it was a very good post and something to ponder. Thank you for your contribution.
so where did all the gold go? did the rich throw it into the streets where it was ignored by the peasants?
And what happened in 1947 to the people that had snatched up generations worth of gold holdings with cigarettes and chocolate bars? That should be a good story. I'm sure there were a few of those.
Yep, perspective is everything.
The shelves in my basement hold more canned meats, chocolate, booze, tobacco, and ammunition than many stores keep on hand. Soon they will hold more general food items and fuel than many stores keep on hand. I simply can't imagine the price (or value) of these items going down in the forseeable future.
Do you believe every story you read?
ISTM this only applies in extreme scenarios you describe: eg, Japan after WWII. But there are only a few people who claim that the world will become like that if/when some major fiat paper currencies collapse. Check the Asian paper money collapses late 1990s for how it likely plays out.
..Remember, paper money is always a political tool, gold is market money and apolitical....
though as big a 'gold bug' as anyone currently on-planet, I prefer not to bite at that dangled worm...
which serves as a great example of how common sense wisdom in investment and asset protection can curdle into a puddle of self-congratulatory sewage and a looping feedback mechanism of myopic madness that eliminates all the benefits of holding gold by destroying the survival instinct.
Everything is 'political' except my favourite pony...."mr. market"...You won't survive five days in our coming post-apocalypse times with that blind spot chumly. Mr Market, meet Mr RoughTrade.
Option 2 has always been the only option. Option 1 has never even been tried in a fiat collapse. Agree that gold is good because for it to work as a wealth asset it has to be reset much higher. It will be the flow that determines it's future purchasing power. All these calculations of 'so much gold per so much currency' are meaningless until one knows how much gold will seek that currency. Agree it will be wild!!!
Whenever paper money dies, eternal money – gold and silver – stage a comeback.
Wrong...we always get another paper money system because we as a people demand easy money....that is and always will be the truth. Gold will be held outside the monetary as a savings vehicle...and the best one ever!
The "comeback of gold" applies during the turbulent transition from one failed paper State currency to a new one - which obviously hasn't failed at the time of its introduction. At the time of transition, nobody knows what conversion rate will be applied by govt except that it is always one which deliberately steals wealth from its citizens.
Global fiat collapse will herald a new cashless society, the endgame of the Luciferians' technocratic New World Order. This new currency will be backed by a basket of commodities, chief among them gold and other tangible stores of wealth. What, you think the shadow-banking fiat black hole upon which the world is indebted was an accident? Get with the program ZH.
I haven't made millions investing but the gold as money doesn't seem logical as pointed out by numerous comments below - see orly. The gold boat seems to be nearing the end of its trip, meaning its' value has exploded in dollars in recent years indicating it was a wise investment for those who got in in say.. around 08'. It very likely will explode again in value but that will most likely indicate a complete un-raveling of the whole shit storm and in a hyper-competitive, survival of the fittest scenario it's useless. Perhaps when the dust settles a generation or two later it will be re-appear as "stored value." What's a greenback or confederate dollar go for these days, comic books, Babe Ruth cards, same could be said for holding a lot of things, art, ancient documents, etc etc. Peccus - cattle; pecunia - money, salus- salt, "soldier worth his salt." Rome was collapsing for 200-400 years. Soldiers were paid with salt, salt = tangible, useful. Gold can be turned into FRN's now, which can be used to acquire tangible items that are useful, cows, hogs, chickens, land, generators, bunkers, weapons if you are of that mind or beach condos, boats, hookers, booze, smokes, cruises, pedialyte. If a horde of mongols approaches your town to stack skulls do you want a bunch of gold bars or a fast horse, a canteen, some jerky, and some quat. If a gang of say urbanites- Miamians, or blacks are heading up i-95 or 75, you want some premium gas, a good/working car, some jerky, few gallons of water, some coffee grounds or some fuckin gold coins. Gold is good to play with in a stable market environment as an investment tool. The author of this article is proposing gold to have value in a choatic economic meltdown it seems. That is irrational and non-sensical. His approach is also from that of someone with money i.e. rich. Only a rich person would see things through that lens. I certainly can't afford to order fucking gold coins. (bullets are affordable) Likely the article wasn't intended toward my demographic, probably boomers.
red arrow....for not having a good grasp on history
Sir Rome collapsed over more than a 200 year period, it can be argued it was imploding from before the 235 AD - 476 AD dates usually accepted by most classical historians. Roman soldiers were paid with salt. Mongols did stack skulls into giant mounds. What did I miss sir? We can talk history if you'd like sir.
Yoshinator missed my point entirely. Gold = No utility in a modern meltdown. Not interested in gold coins. "the thing about trying to jump on a moving train you either get hurt or you miss it " - Sire Evelyn Zie Rozzchild
A siege was layed on Rome...by the Visigoths, meaning they were starving them out. The Roman Senate ended the siege by paying them 5000 pounds of gold and 30,000 pounds of silver. So yes, gold does have value in a meltdown scenerio. Perhaps if they had enough gold and silver...they could've prevented the sack of their city. At least that's what historians suggest.
1920's Weimar Republic....gold enabled those smart enough to have it, to push through very difficult times.
People escaping totalitarian regimes (should I list them for you)....carried gold in flight/passage to start somewhere anew.
Yes....we can talk history if you like, but first, find a time in the last couple thousand years where the value of gold has been zero
"A siege was layed on Rome...by the Visigoths, meaning they were starving them out. The Roman Senate ended the siege by paying them 5000 pounds of gold and 30,000 pounds of silver. So yes, gold does have value in a meltdown scenerio. Perhaps if they had enough gold and silver...they could've prevented the sack of their city. At least that's what historians suggest."
In this case gold (& silver) actually have a negative value i.e. attracting a horde of barbarians to your city to starve, loot, rape, and murder you. And how much good did that gold do them? You negated your own arguement - " Perhaps if they had enough gold and silver...they could've prevented the sack of their city." Right.... and I'm sure if the Aztecs had given Cortez enough gold he wouldn't have sacked Tenochitlian. Are you going to look at your gold coins and say "wow they have value, they are so precious" while peoples head's are getting sawed off next to you or when you are emaciated and dehydrated? The answer is no and has always been no as this scenario has played out through time.
"1920's Weimar Republic....gold enabled those smart enough to have it, to push through very difficult times."
Can't help but to think of a Jew in Weimer Germany with a store of gold. Yes, he survived those difficult times with his gold, Tell me how much good did that gold do him in the 1930's and early 40's? Did the jewish man's gold still hold value? Sure ask the Swiss, but in hindsight to the jewish man, a smarter investment would have been emigration. I doubt he gave much thought to the value of his gold coins walking toward a crematoria.
Tell me how much good did that gold do him in the 1930's and early 40's? Did the jewish man's gold still hold value?
If he was intelligent enough to read the lay of the land, HE got out.And his family did well.
Willful Ignorance.
I'm clearly wasting my time pointing you in the direction of getting educated about history.
You'll always be a low wage slave....until you shuck your normalcy bias.
If you want to buy precious metals...embrace the persona that promotes self education
You dont think I could get a bluewater sailboat for 30 gold coins? In a meltdown?
In a meltdown is when gold will have it most useful value.
I'm not sure if you can get a sailboat with gold in a meltdown. Probably depends a lot on the severity or level of meltdown. But if you purchased gold 4 years ago you certainly made a wise investment and you could buy one right now. What good is a sailboat without the ability to navigate or operate it. In a meltdown skills, intelligence, and luck have more value than gold.
That's why you stack a little bit at a time. They do have 1/4 and 1/8 ounce coins you know.
Dismissing the argument because you don't have money, is rather silly, isnt it?
No.
He said he recommends we own gold in bars and coins. I have mine in scrap 14k jewelery that I get at a 4%discount from spot. I always wondered how things would work out when it came time to sell when shit really hits the fan. Right now I can just go to the refiner and he'll pay spot minus his 3.5% but what if I wanted to buy a few acres of land or a commercial building with it during the collapse. Do you think someone would take 3 kilos in scrap 14k for their property or do you think they would insist on bars or coins.
How do you prove it is 14k
The monetary system will not "freeze-up" overnight. Central bank electronic money can create a billion, ten billion or a trillion with the push of keyboard button.
What will happen, what always happens every so often, is a crisis, a panic and/or a sell-off. If the world is overleveraged to the hilt and about to implode, all gold can do for you is implode less than a stock or bond. Sorry, that doesn't work for me. What won't implode or sell off? Physical cash. Physical cash is scarcer than gold and infinitely more liquid than gold (I only know five coin shops in my metro area of one million people who buy gold at a fair spot price). On the other hand, physical cash is accepted by all one million people where I live (assuming a national or global collapse).
Cash is what you use to buy gold after a panic and sell-off, when its dollar price has taken a big shit on itself and people are panicking and selling everything. That is when you buy gold. You do NOT buy gold now. You should have bought gold back in the $400-$700 range. Then that gold you buy on a sell-off is your hedge against the inflation that may or may not come after the central banks panic and overstimulate.
As for storing your gold. Who in the hell is going to store their physical gold in a foreign country thousands of miles away except a multi-millionaire? A brinks account is private, or if you are middle class joe -- like 99% who read and comment here, then storing 100-200 ounces of gold in a secure spot in your own home is no real challenge -- provided you safeguard it well and keep your yap shut.
I won't buy a single ounce of gold until people are willing to dump it in a panic, then I will buy it at a price that doesn't represent the trillions of stimulus that has been injected into the system.
That sounds really dumb. You may never own any gold.
When gold is 8000 will you really care whether you bought it at 1700 or 1300?
I'm at a loss here... You say unlimited fiat money can be printed with the push of a button... and you want to hold said money because it won't implode?
You do realize electronic money is exactly equivalent by definition with the physical cash you have stuffed in your mattress? Right? Do you seriously think that they can't print more physical cash? Very retarded.
Quote from somewhere on here: "One should buy when the We Buy Gold stores go up and sell when the We Sell Gold sign replaces it."
Everything is fine as consumer confidence is all that matters and since confidence is high clearly things are improving...
Average US credit card debt per borrower up in 3Q"Americans cranked up their use of credit cards in the third quarter, racking up more debt than a year ago, while also being less diligent about making payments on time, an analysis of consumer-credit data shows.
The average credit card debt per borrower in the U.S. grew 4.9 percent in the July-to-September period from a year earlier to $4,996, credit reporting agency TransUnion said Monday.
At the same time, the rate of credit card payments at least 90 days overdue hit 0.75 percent, up from 0.71 percent in the third quarter of last year, the firm said."
http://news.yahoo.com/average-us-credit-card-debt-per-borrower-3q-050216...
It may be CCs are being used to cover overhead. The cost of living is going up. Local taxes are going up as well. The lack of money moving through the hands of banks and businesses has choked off the credt line a business requires in order to operate. It is by design.
From Article: "If Congress fails to reauthorize federal unemployment insurance benefits before the end of year, more than 2 million workers will be cut off UI during the holiday season, while federal benefits will no longer be available for recently laid-off workers."
http://goldrushcam.com/sierrasuntimes/index.php/news/mariposa-daily-news-2012/140-november/6892-california-unemployment-up-date-end-of-the-year-set-to-bring-end-to-federal-extensions-of-unemployment-benefits
400,000 Calif about to lose Unemployment ins ext on 12/31/2012.
So sorry - link breaks. but please confirm which should be easy with a google search.
I wouldn't completely write off the value of the actual paper currency. I talked to my 86 year old father the other day about the Depression of the 30s. I said to him that real estate must have been really cheap. He said that yes it was cheap and you could buy a nice house for $100 cash, but the problem was, NO ONE HAD $100 CASH.
Or a couple of gold coins
A famous and true story - a doorman in Weimar Gernmany brought a hotel from his boss for one gold coin. Needless to say the boss was apprently in allot of trouble.
I dpn't think many of us will be that lucky. However heading to wear it is going to be the wost is where you will find the nest bargains; if you dont mind the danger that goes along with that.
Since Higgins house and servers were wiped out by Sandy, his very valuable website showing beta and gamma realtime charts is no longer available.
I wrote to him to ask for help on chart setup, it looks tricky, but he very likely has other priorites on his mind.
At this link is a scatter chart of recent readings,
Seattle spiking to 300 CPM last week!
Anything about 100 CPM is cause for concern. At 100 CPM you have a significant increase in cancer if you stay in the 100 CPM zone for 1 year.
nukeprofessional.blogspot.com/2012/11/seattle-spiking-to-300-cpm-last-week.html
Nikkei up 3.7% on more QE! What a crazy world.
effen insane!
100 Preparation Items for Emergency Preparedness
In the near future we may see some serious problems. If you are spending your time on basic items, without a pot to piss in, like the thousands of people after Sandy that had no preparations, then you will be in much worse shape.
http://nukeprofessional.blogspot.com/2012/11/100-preparation-items-for-e...
.
First of all, I disagree with this article. Gold is useless. It does not provide anything. It only serves in times of stability. When crisis comes, everyone is trying to sell it. But it does not have any value. Clean water has. Or good resistant shelter. Or canned food. Etc.
Investing in real estate. The question is why the big players prefer not to do it. Why would one of the richest people in the world do that? There are better ways how to earn money. And if you realize how many housing bubbles are out here, it is probably more risky than gold. Think of Canada, where a slowdown is coming. What will you do with your investments when there is no one to buy. Therefore the only anti-crisis savings are those which help you survive: drugs, food, clean water, shelter, combustibles.
So all those people who have bought gold to protect their wealth in the run up to a collapse of their nation's paper currency, all decide to sell their gold (thereby pushing down the value) when the paper currency actually does collapse. Makes NOT a lot of sense.
Sell your gold when the sheeple discover it and run the price up as they always do.
Sell their gold for what? That is the big question.
If you have only enough money to afford basic necesities then by all means invest in that. If you have a lot of additional wealth now that you would like to see recoverd in a new world order then consider PMs among other things.
Laura: For those lucky enough to have more than the essentials, precious metals are another way to preserve and store wealth. It's just another currency that is underowned.
I thought it was IPADS and IPHONES- No.................
A meltdown to avoid the risks of a fed induced confiscation of gold wealth, is the best answer to the comming fiscal cliff issues. It garrentiees that as you are gazing over the cliff, you get shoved from behind and fall gracefully to the bottom of your dream.
Another good story I heard. A lot of Saucalito, CA waterfront property was bought up really cheap during the 30's for CASH money.
Many investors have been conned into "keeping your money safe" in a 'segregated account' a la MF Global.
the Gold standard leads us to 1929 conundrum. So its not the solution to present problem.
The monetary race based on cheap money and FIRE assset super vamp and now CB about turn involving unlimited money creation leads us to the impossible equation of trying to create growth to erase 700 Trillion of private banksta derivative debts and bets, that have been collaterised on 70 Trillion ton of world assets, thru crony political collusion.
It ain't doable, and a debt default is the only way out.
But the Oligarchs and their leveraged gravy trains don't want that as they lose ALL their marbles in commodity and risk asset play meltdowns. Financial armageddon for them, hard times for the sheeple who will have to take their governments back, and once the shit has been cleaned out, revamp the real economy via Keynesian means; aka government spending and infrastructure projects; not war.
No other way out; lets not kid ourselves; the Oligarchy will go belly up as its a sterile power construct that is in total denial as it hurtles to the wall the head up its ass; and we along with it. Their model of supply side hubris is worse than FDR's demand side statist leverage, provided the debt spiral and government's regulatory control stays transparent, accountable and punishable in case of corruption. Which means that the CITIZEN has to stop being a sheeple and become a responsible person in the political field. We the people have all the instruments of power but we don't use them 'cos we are apathetic and lazy; oft-times fellow travellers to the corrupt process of either government or corporate strong arm tactics. We cannot build a world solely on maximising profit as its short term thinking. If we ALWAYS marked our investments to market we would never have gone to the Moon and Columbus woud never have discovered AMerica. Som qualitative leaps have to be societal decisions and not pure market decisions; which if left to their own are more and more short term knee jerks.
We need a new financial architecture, with balanced spending, transparent financial institutions, due diligence and government run central banks that impose constraints on fractional reserve money creation. We cannot say zero debt, aka 100% reserve is the ONLY meme, as capitalism is based on the expectation that innovation gives us better economic return and better quality of life tomorrow for capital investment at RISK today. Which means we have to use debt leverage, but not necessarily based on usury of geometric interest rates that makes the private bank cartel OWNER of money line and us its debt slaves.
And we need an honest market mechanisms to ensure private sector to feed the economic pipeline as governments can give direction like going to the moon, creating Internet seed money, rebuilding infrastructure, reorienting research to renewable horizon, but are useless at making consumer durable or consumable products; aka 80% of the real economy.
solution to present problem is jubelee , writing off debts across the board.
Gold has nothing to do with it except that creditors would like to force borrowers to repay debts in hard currency rather than fiat one (to avoid inflating out the debts)
the OLigarchs will never accept jubilee as they lose their equity. And, its a legal maze unless the governments issue a collective dictat. That or they pull the plug on the banks and let them go belly up!
No choice is in chartered waters; we are somewhere in outer space.
What we need here is less freedom and a little bit more socialism. No really! It's never been tried before! Well, just the corrupted versions.... It will be different this time! (and if not, we'll still be in charge and have lots of slaves.)
lol, viva bushmania.
Have some more "free" derivatives.
Oh brother here comes the gold and silver pump again. Technicals must have bottomed and the gold trolls come slinkying out of the darkness to fleese the stupids one more time.
Listen, we told these stupids around here who drank a gallon of the gold/silver koolaid to sell silver at 49.15 and gold at 1900. On cue they got wiped out, They then took what they had left after selling the bottom and went into AAPL at 698 and have been raped.
Don't you pumpers ever get tired?
Why don't you pump land or something?
Or maybe unfracked natgas in lithuania
The only shit you're gonna need is:
cash
Big fuckinbg 50 cals on each turret
1 acre to raise wenches and chickens
beer
more beer (preferably cottage brewery kind cause i"m fussy about my beer)
rum
coke (mix not powder)
more wenches
Handguns can be handy in tight quarters.
Tied Up Politicians as zombie distractors tied to trees up the driveway which gives you 3 minute escape time.
Oh and rubber boots for the goats when the wenches get eaten.
Zombies don't eat gold and silver so tell me where they fit in this scenario
Fucking zuppies....
.......
Yes, but they eat the cheese, and drink the kool-aid, after selling your stolen metals, and geting a belly ache.
hows about some christmas tree bud to goes with that beer?
One of the best written articles that I have read in recent times. It is very thoughtful and articulate. This is a must read piece.
one of the best articles explaining gold and current economic situation in simple terms
Thank You
When investing we have to differentiate between secular plays (i.e. more than 10 years) like those shown in the post, from intermediate and even long-term investments (several months to 1-2 years). Thus, on a secular basis I agree that bonds are not the place to be and gold will shine.
However, most investors don't have the fortitude to invest along the secular trend. Furthermore, one may be wrong when assessing the secular trend. This is why paying attention to long term (1-2 year) technicals makes sense.
On this somewhat shorter time frame (1-2 years), gold is also bullish. However, if gold and silver violate their 11/02/2012 secondary reaction lows a primary bear market would be signaled in gold and silver. So right now we have strength in gold, but if such lows are violated, we could see weakness in the months ahead. This is the chart to monitor:
http://www.dowtheoryinvestment.com/2012/11/dow-theory-update-for-nov-12-...
As to bonds, currently they are in a primary bull market. Technically, right now, bonds are not forecasting Armageddon. However, there are also some troubling signs in the horizon:
http://www.dowtheoryinvestment.com/2012/10/dow-theory-spells-trouble-for...
Mel Gibson needed gasoline but Superman protected precious metals.
Unfortunately, when push comest to shove it's rarely about who has the real money. It's about who has the power to do whatever they want. Money flows to power, not the other way around.
There is a real disconnect somewhere, because where I live there are no signs of any problems a head: People are working and those that are not are living very comfortably off their retirement investments, they are packing restaurants, shopping, taking vacations, etc. I understand there is a difference between Fiat and real money, but as I read the stories on ZH and then look at what is actually going on in my community the two are polar opposites. I'm just not seeing the lack of confidence in the dollar, banks or Wall Street for that matter in the general public.
That "disconnect" is part of the reason that Obummer was elected again. As long as the world accepts the fact that we will add another trillion dollars of debt every year and does not take away our reserve currency status then we can continue to live high on the hog at the expense of the world and future generations. We can continue to flood the consumer markets with money that would be absent, if we had to pay our way, and there were no extended unemployment benefits, ZIRP, SNAP, EBT, student loans, etc.
It is a grand illusion which continues even as we produce less and have high rates of joblessness. When the illusion dissipates for whatever reason our reality will be the reality of Spain and Greece.
If you are wrapped in this illusion, unwilling to sense the danger, your vulnerability is so extreme as to be potentially fatal, not just financially ruinous.
option 1 is what anyone who calls themselves a "conservative" should be demanding - otherwise you're a sell-out.
Currency debasement + Sovereign default on US T bonds ( by hyperinflation rather that default) will of course send gold to 5,000 $.BUT the bankruptcy of a currency is always running paralllel to the debasement od democracy. At the end of the economic implosion, you will see that your gold coins, bars etc..will be outlawed as means of payement.Because the Governnment , morphed into a kleptocracy , will made it illegal to hold it or to exchange it, for the very simple reason that the ultimate word belongs to the state and not to the citizen.And the state badly needs your gold , in order to save its skin, the skin of its law-enforcers army, its army of snitchers and eventually, in a remote future, regain the faith in its currency.
Look at what happened with cash , banknotes, they are slowly and surely outcasted as " tainted ", used by " trafficants " " shaddy people ", and only plastic money is legitimate and clean...
So unless you are prepared to live on the run, with beans, bullets, bullion , I think the state will screw all the gold bugs
From what I can perceive from the opinions of communities like this one, the visibile democratically elected goverment works for the invisible unelected shadow rulers. Those rulers also handle widespread public opinion and that opinion chooses what gets used as money. If the manipulation of fiat money is the rulers sustainable ponzi scheme to transfer some of everybodies wealth thier way I can't see how it's in thier interest to allow a crack up boom inflation to take place and risk widespread public opinion replacing fiat money with hard money (gold, silver, bitcoin). If I was a ruler I would pull in the reins on printing and blame the fallout on the profligacy of the pols. Kind of like the drug dealer blaming the drug user for his crimes and the crime victims taking it out on the drug user. The drug dealer survives to continue his scheme with new drug users and thier victims wealth. The victims get indirectly milked and the cycle repeats. Sure the fallout this time is going to be a lot bigger than when Volker reined in the printing, but whats a ruler to do? He's got to protect his sheep farm, even if it means culling a lot of sick sheep and thier pols. Rulers did not become rulers by being stupid, they understand what the best libertarian thinkers understand and probably a lot more besides. So my bet is that they will pull in the printing at some point and let maths take care of the rest with blame falling on the pols. Hopefully there won't also be a nasty war somewheres. With the numbers of libertarians growing maybe a new type of underground economy using gold and bitcoins in place of goverment cash will provide free minded people with some relief from thier slavery. The rise of the value of the bitcoin is encouraging. Gold is good but I don't think it's entirely risk free. Golds value is dependent on the critical thinking ability of the masses of sheeple and thats an oxymoron. There is a pretty good chance that fiat money is not played out as the money du jour just yet.