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Chris Martenson Interviews Robert Mish: Front-Line Evidence That We are Nowhere Near a Gold Bubble

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Submitted by Chris Martenson

Robert Mish: Front-Line Evidence That We are Nowhere Near a Gold Bubble

Robert Mish has been a precious metals dealer for nearly 50 years and knows what a gold bubble mania looks like. We are nowhere near that stage, in his opinion.

Instead, he sees a US populace largely unappreciative of holding precious metal as a store of wealth, and engaged in a slow process of dis-hording their gold and silver to eager foreign buyers who are more than happy to take the bullion back to their shores.

In terms of where we are on the gold mania spectrum, he sees us at a "2" out of 10.

But he foresees a very rude awakening ahead as the populace eventually wakes up to the increasing damage our over-debted global economy is doing to the purchasing power of world currencies. Because when the general investor finally realizes the protection the precious metals offer against currency debasement, much of the retail supply will already be out of the system in very tight hands, and largely overseas.

Moreover, when supply gets tight, there will be more challenges to obtaining physical bullion during a buying mania than there were during the last one in 1980. There are many fewer local sources to exchange bullion these days as much of that business is now transacted by online vendors dependent mail delivery to ship product, which are more vulnerable to supply chain disruptions.

And be sure you're aware of how the form you hold your bullion in will affect the price you get during a buying frenzy, when refining capacity is overwhelmed. You may find you gold or silver sells at a hefty discount because it's not in a preferred format for trade.

On What A True Gold Mania Looks Like

The phone calls were ringing so much we could not answer them. We had to just put all our lines on hold so we could service the customers, and our own customers we wanted to service first.

 

We world come in to open at nine in the morning and there would already be a line out the door and down the block. Sometimes the line was mostly buyers, sometimes there were sellers. We would run out of metal. We would run out of anything. And we would have to divide the line into two lines. We would take the sellers in first, get some product, and sort it before the buyers were let in.

 

And people were not very discriminating then; they were panicking. By the time it peaked in January 1980, there were people out there who did not even understand free market economics or precious metal economics, they were just buying because it was fashionable or because it was going up forever. Those are more the makings of a bubble, today most people are coming in to sell.

On Today's Typical Seller

The typical seller today is really the opposite of who they were 30, 40, 50 years ago. People used to save either through a bank account to keeping some coins around, putting away silver dollars when they came back from Reno or Lake Tahoe. They would be buying some interesting furniture or jewelry and then they had income in excess of their expenses. Today, so many households are stressed having expenses greater than their income or servicing a lot of debt that they are starting to sell the things, the heirlooms that they so prized before. So we are seeing people sell their Rolex they do not want anymore or cannot afford to keep, their old jewelry, their parent’s jewelry and belongings that they inherited. The coins they collected when they were a kid, it is sad in a way because what we are seeing is the dis-hoarding of a culture.

On Today's Typical Buyer

Well in the United States, the typical buyer is perhaps someone who has taken the Crash Course and has studied what is happening to our nation and understands that they have to protect themselves from the coming inflation and social ramifications of that inflation and the debt burdened economy. Big money is buying but for every one buyer there has got to be five sellers here and I am sure that is similar among my colleagues around the country, maybe even more so. Because over here we are in a wealthier area and I still have more sellers than buyers.

A lot of it is going overseas. A lot of the coins that came to America over the decades, over the generations, either through the fact that we had the money to buy them or through immigration or through the spoils of war, it is all going back now to the home countries. Especially if it is a home country, where their economies are rising and the people are saving rather than spending.

 

Just last night we had two visitors from China, colleagues of mine in Shanghai, they flew here just to see me, and they flew back the next morning. They cannot get enough coins in China; they are buying everything back that came here when the people in China could not buy their own coins. Next weekend I have more visitors coming. Coin shows, which have been all over America, are now appearing all over the world. There are now major coin shows in gathering marts in Singapore, Tokyo, Beijing, Hong Kong. It used to be once a year, now it is three, four times a year. Big auctions that used to be held in the United States are now organizing in Hong Kong and other countries.

So we are seeing a movement back in the opposite direction and it is sad [for the US market]

On The Importance of Physical Form

Chris Martenson: So you mentioned refinery problems. What is a refinery problem?

Robert Mish: A refinery problem is where dealer buys the scrap gold and the scrap silver and his refiner cannot get it processed for several weeks or months. And that squeezes his cash flow so he has to pay less and less to the public.

Chris Martenson: So if I walk in with a bag of junk silver, it is 90% silver, it has always been trading well. But if we are in a real heyday, your refiner says "I am backed up 11 weeks. I can take that in 11 weeks". Meanwhile prices are gyrating. You are going to look at me and say what?

Robert Mish: I am going to say "Mr. Martenson, I wish you had come in here with pure tradable silver or something that is exchange ready."

The marketplace determines the choice for medium of exchange. If you have silver in any other form; if it is in odd form such as coins, broken spoons and knives, or whatever and I have to have it refined in order to get it back in a marketable form, it is going to suffer a discount. And that discount is going to be greater the longer it takes to turn that around.

Chris Martenson: So anything that has to cycle through a refinery has that refinery risk. What was the discount that got applied at its most maximum in the 1980’s?

Robert Mish: In the 1980s, when we were about eight weeks backlogged and not everyone even had a refiner relationship and had to rely on other dealers who did, it got to about a 30% discount for having the wrong form of silver versus the right form.

Click the play button below to listen to Chris' interview with Robert Mish (runtime 28m:19s):

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Sat, 03/10/2012 - 16:47 | 2243594 RockyRacoon
RockyRacoon's picture

Well, Mandy is a piece of work -- or maybe I'm just half right.

And while we're at it, that Brit, Simon, is a rabid gold-hater.  Spittle-city when he utters the word.

Sat, 03/10/2012 - 20:38 | 2243965 akak
akak's picture

Not only that, he bears a remarkable resemblance to Stewie from "Family Guy", both in appearance, accent and attitude, don't you think?

Sun, 03/11/2012 - 15:27 | 2245324 RockyRacoon
RockyRacoon's picture

Absolutely no idea.   Don't watch TV shows other than history/documentary/financial.

Sat, 03/10/2012 - 07:41 | 2242852 WillieNelsonListener
WillieNelsonListener's picture

Wonder if he missed the bubbles on Trish Reagan?

Fri, 03/09/2012 - 20:53 | 2241945 JustObserving
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Per US debtclock.org, US debt and unfunded liabilities are growing at $22.3 billion a day or $8.13 trillion a year.  All the gold mined is human history is 5.3 billion ounces (only about 1 billion ounces available as bullion now).  Today's cost of all the gold mined in human history is $9.08 trillion or approximately the growth in US debt and unfunded liabilities every year.  Every 77 days we can buy all the gold bullion in the world at today's price.

Silver is even more ridiculous - only about a billion ounces are available as bullion today and the growth in US debt and unfunded liabilities can buy 65% of available silver bullion every single day.

All this talk of bubbles in silver and gold is total misdirection. The bubble is our gargantuan debt growing at exponential rates.

http://www.usdebtclock.org/

http://www.usdebtclock.org/current-rates.html

Fri, 03/09/2012 - 21:10 | 2242033 Gunga
Gunga's picture

 I apologize for not having a link but I read that the newest Federal Reserve scheme is to give the Primary Dealers of US debt credits that they can use at US Treasury bond auctions. The Chinese and Japanese are purchasing lesser amounts of US debt so the Primary Dealers can't unload the bonds they buy. So essentially the Primary Dealers will be buying debt from the US Treasury with electronic credits they get from the Federal Reserve.

 The electronic credits are supposed to keep inflation at bay because they can only be used by Primary Dealers to purchase US Treasurys.

Sat, 03/10/2012 - 08:19 | 2242876 francis_sawyer
francis_sawyer's picture

All this talk of bubbles in silver and gold is total misdirection. The bubble is our gargantuan debt growing at exponential rates

The fiat paper bubble goes even a lot farther than you describe... With the Chinese (& other currencies), essentially pegged to the dollar, it's essentially a worldwide bubble proxy...

Sat, 03/10/2012 - 13:40 | 2243211 Non Passaran
Non Passaran's picture

That can't be right - ZH the other day said (I think one of bloggers here) that the US added 2000 bn of new debt in Feb

Fri, 03/09/2012 - 20:48 | 2241962 Flakmeister
Flakmeister's picture

Nothing like a friday night PM thread....

Gotta get me some popcorn, these are usually pretty funny...

Especially when that Trav guy starts yanking the silver bugz chains....LOL 

Fri, 03/09/2012 - 20:50 | 2241970 ableman28
ableman28's picture

,,,

Fri, 03/09/2012 - 20:54 | 2241981 akak
akak's picture

Trav's laughable anti-silver bashing is nothing compared to the rampant, incessant, hysterical anti-gold trolling of certain malicious bastards who used to regularly soil this space a couple of years ago, notably MasterBater/JohnnyBravo, not to mention his later cohorts such as Methman, JayBayBaker, HairyWanger (the real one, not the imposter), Dangertime, and SpaldingSnails.

Fri, 03/09/2012 - 20:58 | 2242003 Flakmeister
Flakmeister's picture

Those guys were clowns....

Seriously, if Mosely could swat them away, they must have been lightweights...

Fri, 03/09/2012 - 21:42 | 2242103 Bay of Pigs
Bay of Pigs's picture

Don't forget William the Bastard and GoldenMiddleFinger. LOL.

Fri, 03/09/2012 - 21:50 | 2242122 akak
akak's picture

I must have missed GoldenMiddleFinger!

That noxious JohnnyBravo, though, must have LIVED just to troll ZH articles touching on gold --- he was always on them in no time, like a fly on shit.

Sat, 03/10/2012 - 01:59 | 2242635 Burnbright
Burnbright's picture

Dangertime I do not believe was a troll, he actually made some amazing calls that turned out to be correct. If I recall correctly he did call silver to 26 in the fall of 11 and it did in fact hit 26 much to my dismay and surprise. 

I honestly can't remember how many handles masterbates had, and the fact that he would talk to his other handles was weird.

Sat, 03/10/2012 - 16:50 | 2243604 RockyRacoon
RockyRacoon's picture

Ole Johnny was a headache and had no concept of markets.   As I recall he was a college student in Boulder?

He promised to leave upon a set of parameters being reached, they did, and he did.

Sat, 03/10/2012 - 20:43 | 2243972 akak
akak's picture

I was quite amazed that he actually abided by that bet and adhered to his self-imposed exile --- he did not show an ounce of decency or honesty aside from that one point.

Sat, 03/10/2012 - 00:04 | 2242436 Big Ben
Big Ben's picture

I wouldn't consider Dangertime to be a troll. He just felt that silver had gone up too fast last year. An unpopular opinion at the time, but it just so happened that he was right. Good call, Dangertime!

But Dangertime didn't seem to be against PM's for the long term.

Sat, 03/10/2012 - 01:31 | 2242602 Prometheus418
Prometheus418's picture

Neither is Trav- he just likes to fuck with TMosley

Sat, 03/10/2012 - 12:54 | 2243137 Flakmeister
Flakmeister's picture

Because any serious exchange reveals Tmosely to be an ideologically-fuelled cretin....

Fri, 03/09/2012 - 20:52 | 2241969 hairball48
hairball48's picture

I haven't had any trouble buying "junk silver" in the form of US minted coins. The last lot I bought was at the Kitco bullion ask price.

However, I can see where there might be a big discount trying to sell(back to dealers) silver spoons, jewelery, etc. that are not in "marketable/tradable" form.

And while I have gold bullion coins, I believe junk silver in the form of US minted coins will be very liquid once the shit hits the fan. It'll be "real money" again for old, poor folks like me.

I LOVE my junk silver :)

Fri, 03/09/2012 - 20:56 | 2241997 akak
akak's picture

I HATE that phrase "junk silver" --- NOTHING made out of silver is junk!

Fri, 03/09/2012 - 21:37 | 2242092 hairball48
hairball48's picture

I agree 100%, but that's how it's referred to by most people in the trade...at least around here.

Fri, 03/09/2012 - 21:40 | 2242098 akak
akak's picture

"Circulated silver" is both more accurate and less negatively biased.

Fri, 03/09/2012 - 22:06 | 2242163 dark pools of soros
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I only buy/sell .999 in bars or coins and my local dealer loves the few times i stop buy to sell - he can leave the piles of crap he sorts through and hand me cash in a quick deal

 

Sat, 03/10/2012 - 01:33 | 2242604 Prometheus418
Prometheus418's picture

I usually call it sterling- it's accurate and recognizable as a label.

Sat, 03/10/2012 - 07:50 | 2242859 Vlad Tepid
Vlad Tepid's picture

Sterling is .925..."junk" is .900.

Be careful you don't sell junk as sterling to the wrong dude or you may end up with a pistol in your face...

Fri, 03/09/2012 - 21:46 | 2242110 Amish Hacker
Amish Hacker's picture

At $34.00 silver, a junk silver quarter is worth $6.80.

During the 1980 runup in AG and AU prices, when gas prices were also high, I remember at least one gas station was advertising teaser prices, if you paid in pre-1964 coins. I think it was 25 cents per gallon.

Sat, 03/10/2012 - 11:30 | 2243034 disabledvet
disabledvet's picture

when the interest rates currently in effect INSIDE the Bank of Morgan spill out into the open market...THEN there will an open market for your silver and gold. For now..."fiat rates rule" and indeed...yield curves remain flattened to inverted for the forseeable future. For the record "the Bank of Morgan is a very small bank again." And that's the right size of a money center bank for me. As Europe and Japan teach us "Governments outgrow their financial system at their own risk." Not that i don't think the government did the right thing both by allowing Lehman to fail and then in effect "backstopping the entire edifice" back in 2008. Of course this is nothing new for all of you to hear from...i apologize for repeating myself going on years now. You may now return to your regularly scheduled programming...while i return to mine...

Sat, 03/10/2012 - 17:07 | 2243641 DosZap
DosZap's picture

akak

I HATE that phrase "junk silver" --- NOTHING made out of silver is junk!

Right on, just like Sell us/me your SCRAP GOLD..............HUH???

Scrap my arse, Gold is Gold,Silver is Silver and it never changes.

These slimy bstds use these terms to make common Joes, are getting a deal because its old/used/wrong form,anything to screw you.

We have a new Buyer here, this crook if you take him a diamond,ruby, etc,etc ring, neclklace KEEPS those for free if he buys your metal...............should be neutered.

Fri, 03/09/2012 - 22:31 | 2242225 mayhem_korner
mayhem_korner's picture

 

 

90% and 405 silver makes sense to include in your physical portfolio.  I believe it will act as currency in a fiat-currency-collapse event if needed.  I think it is especially useful because it provides a smaller denomination than 1 oz. .999ers.

By current market value, my physical PM holdings are about 65% Au, 28% .9999 Ag, 5% 90% Ag and 2% 40% Ag.

Fri, 03/09/2012 - 21:00 | 2242011 Newager23
Newager23's picture

Gold is so under-appreciated today. I've been trying to get my sisters to invest in gold and silver for several years. Finally, one of them agreed, but the amount was small. I was hoping for a lot more. I don't think they are much different than the average population. There is a lack of belief that gold is a good investment.

People are loading up on 401K and IRAs, with most of their investments going into stock and bond funds. Little do they know the risk they are taking. Nearly all of the Bloomberg guests espouse a belief in the strength of US economy. Trish Regan on the closing bell is literally ga-ga with confidence. It seems like everyone is hypnotized that the US economy is going to continue its march onward and upward.

Only here on ZH and on many other web sites, do people seem to have any sense of what is occuring. I wrote a book called The Demise of America in 2010. Why? Because it's over! The economy is not coming back. We are in a countdown to a crash of epic proportions. How many facts do you need? Let's list a few:

1. Debt in the US has been exploding since 1980. It's not just US Govt debt, Corporations and Households are also extremely over-extended.

2. Debt in Japan and Europe is just as big a problem as in the US.

3. The US Dollar is steadily losing its reserve status. The fallout from this will be nothing short of a default on US Govt debt and the implosion of the US economy.

4. Manufacturing jobs have been dropping since 1970. Today only 10% of the workforce is generating wealth. The rest are spinning their wheels.

5. Govt jobs now make up 17% of the workforce and 17% of the US income (paid by taxpayers). This is soaking up tax dollars and adding to the debt. But more importantly, it is depriving the private sector from thriving. Many of the govt jobs seem to make a habit of interfering with private sector companies.

6. High paying jobs are shrinking. Low paying jobs are increasing.

7. We are dependent of foreigners to maintain our standard of living (by purchasing our debt). Once foreigners lose their appetite for our treasury bonds we are toast.

8. The Auto and Airline industries days are numbered because of high oil prices. How many years do they have left? My guess: 2-3 years.

9. What does the average family do when high energy prices increase the price of gasoline, food, and utilities? How many years do we have until this becomes a BIG problem? My guess: 2-3 years.

10. How close are we to our financial system freezing up and having a major liquidity problem. Thereby stopping any loans from occuring and small businesses dying like flies? My guess: 2-3 years.

I could list another 10 reasons, but that is enough to realize that gold and silver are smart investments today. It won't be long before many more Americans come to this conclusion. Today only about 1% of Americans have a significant investment in gold and silver. And only 3% of financial assets globally are invested in gold and silver.

Gold bubble? No way. Not yet. We still have a mania phase to go through.

I'm still not feeling a big move to gold yet. It's still quiet out there. But I can sense a degree of fear. It won't be long now.

www.goldsilverdata.com  (for stocks)

Fri, 03/09/2012 - 21:37 | 2242094 CompassionateFascist
CompassionateFascist's picture

2-3 years? We should be so lucky. Unfortunately, this debt train is going off the tracks well before it gets to the cliff: via IranWar.

Fri, 03/09/2012 - 21:54 | 2242126 TN Jed
TN Jed's picture

I can still remember my own apprehension when buying precious metals for the first time.  I don't blame the uninformed for not jumping in with both feet when getting advice from a friend.  I think for it to last they have to come to their own conclusion.  I was 38 when I had the economic epiphany.  Thirty-eight years of "knowing" what money was until suddenly I was wrong.  Not just wrong but apparently I didn't know half of it.  Even with all my new found wisdom I still had a gut reaction the first time I traded dollars for ounces.  Star Spangled Banner is a helluva song. 

 

Fri, 03/09/2012 - 23:15 | 2242337 Likstane
Likstane's picture

That feeling of real money in your hand is like no other.  I can think of only one other thing that makes my hand as happy. well, maybe two other things.

Sat, 03/10/2012 - 00:21 | 2242439 cowdiddly
cowdiddly's picture

Yes, You have to remember most people alive today never knew real money. You take a one ounce gold coin and hand it to someone. When they see the shine, feel the heft of Real money in their hand and the perfectness of a well cared for piece,and keep a close watch on their eyes. They will either get it right then and there or they won't. If they don't get it, immediatly get the coin back, take out a dollar bill, light a cigarette with it and leave.

     If they Do get it, and they start getting bug eyed or shakey or something, try to get the coin back even faster and follow the same steps with said dollar bill.

Sat, 03/10/2012 - 16:57 | 2243618 RockyRacoon
RockyRacoon's picture

I carry a silver Eagle in my pocket and some folks are stunned when they hold the coin.   It is more impressive than the Morgan due to the size.   There is little mistaking it for anything other than silver when held against the clad coins.

Sat, 03/10/2012 - 04:07 | 2242759 LowProfile
LowProfile's picture

 

well, maybe two other things.

Mine is my AR-15 and beef jerky.

Sat, 03/10/2012 - 00:25 | 2242478 Mary Wilbur
Mary Wilbur's picture

I sold my gold ETFs, and bought coins for the first time this past week. I thought about it for at least a year. I worried about storage, liquidity, convenience. What finally  pushed me was understanding that a gold ETF is just a piece of paper that can never be collected on. I also became convinced that the price of gold in dollars at least is going to continue to rise over the long term. I don't expect to make a killing. I do hope to protect at least some of my assets. 

Sat, 03/10/2012 - 18:54 | 2243807 Nottingham
Nottingham's picture

congrats.  You won't regret it.  Enjoy the better sleep.

Fri, 03/09/2012 - 21:04 | 2242020 WilliamShatner
WilliamShatner's picture

Just downloaded the Martenson podcast, will listen to it on my drive home.

Warp speed ahead for gold, next move up will punch thru 2000 like it's not even there.

Fri, 03/09/2012 - 21:48 | 2242116 kito
kito's picture

No it won't. It needs we for that and we won't see qe3 until at least 2023. Deflationary pressures have ramped up, so my guess is gold will be lucky to get to 1900 this year........

Fri, 03/09/2012 - 22:16 | 2242135 akak
akak's picture

*Sigh*

Another clueless deflationary flat-earther (and/or disinformation agent).

Oh yes, we've had just BOATLOADS of deflation, just as you Precterite/Douchinger idiots predicted, in the last four or five years --- which is apparently why almost every commodity, and the cost of living, is UP by double-digit figures since then, right?  Or are you so naive and/or stupid enough to buy the government's wildly massaged CPI statistics at face value?  Oh, wait, even those don't show a falling general price level!

Get back to us when Elvis rides in with your putative fiat currency deflation on the back on a unicorn, with Bigfoot, Mothman and an army of leprechauns in tow.  I would castigate you further for even daring to insult our intelligence in such a manner, but your likely actions to "protect" yourself from your supposedly ruinous (and historically unprecedented) fiat currency deflation will in the end prove to be your own worst punishment.

Fri, 03/09/2012 - 22:21 | 2242203 jimmyjames
jimmyjames's picture

*Sigh*

Another clueless deflationary flat-earther (and/or disinformation agent).

Oh yes, we've had just BOATLOADS of deflation, just as you idiots predicted, in the last four or five years ---

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

I think both of you are clueless-

One thinks QE is all that drives gold and the other thinks that a decrease in money supply is bearish for gold-

Fri, 03/09/2012 - 22:31 | 2242211 akak
akak's picture

And another thinks he knows or can assume (or even understands) the basis of my argument.

And just for the record, I most assuredly do NOT believe that the lack of any further (PUBLICLY DECLARED) QE will necessarily be negative for the price of gold, or that the QE we have seen so far has been the major influence on the rise in the price of gold over the past 3+ years --- otherwise, what explains gold's significant, six-year price rise PRIOR to the onset of the world financial crisis?

Fri, 03/09/2012 - 22:42 | 2242253 jimmyjames
jimmyjames's picture

And another thinks he knows or can assume (or even understands) the basis of my argument

**********

Ummmmm "the basis" would that be the usual trip to the mall-grocery store or the gas station-pricing out increases in the last 6 months?

12 trillion lost in the housing market alone and that's only so far and unemployment at record highs-SNAP-banks not lending except to the most credit worthy (other than the student loan slavery act that's happening) but the credit worthy aren't borrowing and somehow you recoil violently at the suggestion of deflation-go figure

 

Fri, 03/09/2012 - 23:07 | 2242268 akak
akak's picture

Thank you for demonstrating the usual and profound monetary ignorance of the typical deflationary flat-earther, and for destroying your own laughable arguments in opposition to financial and monetary history and reality.

Umm, there was not one penny of MONEY lost in the housing market --- the decline in the VALUATIONS of houses and real estate had NOTHING to do with the money supply!  It is such simplistic and fundamentally ignorant assumptions that make deflationists jump to conclusions that are directly contrary to both logic and reality.  You deflationists as well just LOVE to conflate credit and money as identical and equivalent, when even the most cursory of examinations of (non-Keynesian) monetary theory, as well as all of monetary history, will show you that this is patently incorrect --- which is why Mises himself called credit "near money", and did not include it in the money supply, no matter how the latter was defined.

Sorry if I come across rather brusquely, but it grows annoying and tiresome to have to debunk the same exact idiotic bullshit after the 1000th time.

Fri, 03/09/2012 - 23:09 | 2242318 kito
kito's picture

Poor akak, thinks money has to be shipped off to the moon to cause deflation.....ill check back with you in 6 months....I'm quite sure ill be right.....

Fri, 03/09/2012 - 23:14 | 2242329 akak
akak's picture

And I am entirely sure that you have already been proven demonstrably wrong.

But never let logic, nor reality, nor history get in the way of your deflationary delusions.  Just remember what I told you here today when your net worth is finally wiped out in the inflationary firestorm and/or currency collapse to come.  I WILL be both laughing last, and laughing best.

Fri, 03/09/2012 - 23:26 | 2242365 kito
kito's picture

funny how you are always right now based on what will happen down the road. gold hit its high right after ben stopped the presses. Reality set in......... I'm willing to bet that should qe be announced, gold would be at 2000 in a blink.....until then enjoy 1500 to 1800........

Fri, 03/09/2012 - 23:34 | 2242378 akak
akak's picture

Even by the laughably blinkered standards of the usual deflationists, your arguments are so shallow and flimsy that I behold them in awe of such disingenuosity and/or ignorance.

Pray tell, if Bernanke's QE's are the only, or even just the major, influence on the price of gold, just what drove gold up over 200% in the six years BEFORE the current world financial crisis began?

Sat, 03/10/2012 - 08:53 | 2242893 kito
kito's picture

Gold wasn't up against a world wide acute deleveraging tsunami that is upon us....it was smooth sailing for gold till now......

Sat, 03/10/2012 - 16:34 | 2243563 MrSteve
MrSteve's picture

there are only two forms of money: Cash and all others!

Federal Reserve Notes were good cash when they kept the CPI and corresponding GNP Deflator in check. Now, those concepts are a fraud and tornado of wealth destruction.

The value of gold is pretty much constant though everything flucuates in value with everything else: wool suits, an acre of corn or wheat farm land, a lawyer's hour - just kidding there- or an ounce of gold.

inflation, deflation it just doesn't matter: the US dollar will be worthless by the time these storms rage through your world. Inflation may be hitting you now but then it will be deflation. Note Well: Spain experienced inflation while on the gold standard when all the New World gold came pouring into Spanish ports. Gold is a better money for cash than paper currency and history has proven that.

Don't be caught up in labels when currency devaluation is the bottom line. Your top line should be storing and growing wealth in real value of enduring utility, including gold and inhabitable real estate and agricultural and energy production. Wood heat anyone?

Fri, 03/09/2012 - 23:13 | 2242330 jimmyjames
jimmyjames's picture

Sorry if I come across rather brusquely, but it grows annoying and tiresome to have to debunk the same exact idiotic bullshit after the 1000th time.

**********

"trying" to debunk is right-

try understanding what "inflation" is and then try to remember-"deflation is the opposite-

 

Inflation, always and everywhere, is primarily caused by an increase in the supply of money and credit. In fact, inflation is the increase in the supply of money and credit.

http://mises.org/daily/2914

Fri, 03/09/2012 - 23:20 | 2242345 akak
akak's picture

I take issue with your definition ---- inflation is the increase in the supply of MONEY, NOT credit! 

Credit to an extent can APPROXIMATE money (and only in the relative short term), but is NOT equivalent to money.  Otherwise, we would not even HAVE a term for "credit" --- we would just call it all "money" uniformly.

Even a little historical examination will demonstrate this: did our economy experience a 1300% inflation between 1990 and 2008?  Did it experience an inflation even close to that degree?  No, it did not --- yet that was the measure of the growth in credit between those years.  Nor has it experienced any real deflation in the last four years, but just the opposite, as the world's central banks keep creating fiat currency units with abandon, with the worst effects of this ongoing near-hyperinflation still to be felt.

Sat, 03/10/2012 - 00:03 | 2242437 jimmyjames
jimmyjames's picture

the worst effects of this ongoing near-hyperinflation still to be felt.

***********

lol--i'm done

Sat, 03/10/2012 - 00:24 | 2242477 akak
akak's picture

As Ayn Rand so eloquently stated, you can choose to ignore reality, but you cannot ignore the consequences of ignoring reality.

Fri, 03/09/2012 - 22:55 | 2242285 CompassionateFascist
CompassionateFascist's picture

biflation: heavy producer goods plummet, day-to-day consumables rise steadily. ZOGsters got it planned that way: it's how you squeeze out the middle class.

Sat, 03/10/2012 - 11:17 | 2243023 jimmyjames
jimmyjames's picture

otherwise, what explains gold's significant, six-year price rise PRIOR to the onset of the world financial crisis?

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

Try "credit risk" and leaving gold out of the picture for a minute-

What caused long bonds to spike back in 01 at the same time gold broke out of a 20 year bear market?

Answer that and you will be on your way to understanding...well maybe-

Fri, 03/09/2012 - 22:37 | 2242236 mayhem_korner
mayhem_korner's picture

the other thinks that a decrease in money supply is bearish for gold-

 

 

Excellent point.  Even many gold "bugs" remain fooled by the idea that gold has a "price."  The price will ebb and flow with however many fiat currency units are chasing it.  But that isn't relevant.  When you convert fiat to gold, you preserve purchasing power.  Inflation and deflation in fiat-denominated "prices" becomes irrelevant.

That said, I hold the view that some of the purchasing power in PMs has been supressed by manipulation, so there may be some "real" gain in purchasing power to come.  But I hold it purely to preserve purchasing power, not on the hopes of some return.

Fri, 03/09/2012 - 22:55 | 2242286 jimmyjames
jimmyjames's picture

But I hold it purely to preserve purchasing power, not on the hopes of some return.

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

Yes-very simple-in deflation money will be king ie: buying power as assets fall out from under its value-

Currency will be the winner as it always has been in deflations past-

The "quality" of the currency you hold is all important-

You will want to hold the king currency which is and always has been gold-because "everything" has been and will continue to deflate against it-

 

Fri, 03/09/2012 - 23:24 | 2242299 akak
akak's picture

But you make the mistake of not defining in which terms your supposed deflation is going to take place.

In terms of gold, yes, you could say that we are experiencing and will experience "deflation" --- if not for the fact that gold today is not money as most people define or use it.  In terms of the fiat trash that masquerades as money and that the government forces us to use, we will most certainly NOT be experiencing any sort of deflation, but rather inflation (which should be called by its REAL name, "currency debasement").

Fri, 03/09/2012 - 23:46 | 2242401 jimmyjames
jimmyjames's picture

But you make the mistake of not defining in which terms your supposed deflation is going to take place.

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

It just ain't that complicated-so- why do you try to make it that way--who knows

Fri, 03/09/2012 - 23:53 | 2242412 akak
akak's picture

OK, so you are therefore suggesting that we could define inflation and deflation in terms of gold OR in terms of fiat currency with equal meanings, and with equal outcomes?  Are you stating that prices are going to fall both in terms of gold  AND in terms of dollars?

I am attempting to insert some clarity into a discussion in which both you and Kito have been carelessly and casually throwing terms around so sloppily as to strip almost all meaning from them.

Sat, 03/10/2012 - 00:30 | 2242489 Likstane
Likstane's picture

good

Fri, 03/09/2012 - 23:21 | 2242350 Likstane
Likstane's picture

JJ -Quality of the currency?  Show me a currency that has any quality.

Fri, 03/09/2012 - 23:42 | 2242395 jimmyjames
jimmyjames's picture

Show me a currency that has any quality.

***********

Try Gold-

 

Sat, 03/10/2012 - 00:29 | 2242475 Likstane
Likstane's picture

I said currency-not money. You are the one arguing for quality of currency.

edit-ok I will read your entire post next time-damn-I have to quit responding before I read. My bad

 

Sat, 03/10/2012 - 00:41 | 2242506 jimmyjames
jimmyjames's picture

no problem--

but there's no argument that gold is currency-

http://bit.ly/xdModk

Sat, 03/10/2012 - 01:27 | 2242562 akak
akak's picture

Actually, there is an argument, as gold is clearly NOT a currency anywhere in the world today.  Gold is today NOT used in daily financial transactions as a medium of exchange by anyone, so it is manifestly NOT a currency --- although one can argue (and I would as well) that it is still money by most if not quite all definitions of the word.

(As an aside, though, I would like to know, just exactly when and where WAS gold last used as a circulating currency?)

Really, are you just a kneejerk contrarian who loves to make statements opposite to the facts just for the hell of it?

Sat, 03/10/2012 - 11:00 | 2243003 jimmyjames
jimmyjames's picture

Actually, there is an argument, as gold is clearly NOT a currency anywhere in the world today.  Gold is today NOT used in daily financial transactions as a medium of exchange by anyone, so it is manifestly NOT a currency ---

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

You really are clueless and loud--

Anything that trades like money-acts like money or is saved like money--is money--so obviously it is a currency--

It does not have to be a medium of exchange to be a currency-that's like saying gold isn't money because you cant use it at the mall-

Some of you inflationistas should really do some homework before you make such fools of yourselves-

Sat, 03/10/2012 - 20:53 | 2243977 akak
akak's picture

.

Anything that trades like money-acts like money or is saved like money--is money--so obviously it is a currency--

 

It does not have to be a medium of exchange to be a currency-that's like saying gold isn't money because you cant use it at the mall-

I would like for you to provide even one example of a currency that is NOT a medium of exchange!

Sorry, my mistake --- I initially assumed that I was conversing with somebody who had a modicum of intelligence and monetary knowledge; clearly, I was incorrect.

Carry on, alien pig creature.

Sat, 03/10/2012 - 11:33 | 2243037 disabledvet
disabledvet's picture

there are only two actual "markets" (as in where liquidity exists) for gold: inside a bank (security, cash) and at the end of a barrel of a gun. (the secure/insecure Hegelian Dialectic)

Fri, 03/09/2012 - 23:20 | 2242347 Xploregon
Xploregon's picture

@ akak; ...wish I said that.

Fri, 03/09/2012 - 23:23 | 2242354 akak
akak's picture

Well, somebody had to say it!  I guess I just got there first. 

Thanks though.

Fri, 03/09/2012 - 23:14 | 2242331 kito
kito's picture

Edit: should read 2013, not 2023....new phone...switched from blackberry to touchscreen.....can't get used to it......

Fri, 03/09/2012 - 21:36 | 2242088 WillieNelsonListener
WillieNelsonListener's picture

How many oz of Ag is in a cruise missle?

Fri, 03/09/2012 - 22:41 | 2242252 Red Heeler
Red Heeler's picture

Approximately a monster box's worth.

Cha-ching!

Fri, 03/09/2012 - 22:44 | 2242258 UP Forester
Fri, 03/09/2012 - 21:54 | 2242124 geewhiz190
geewhiz190's picture

i can tell you from current experience, the mania in 1980  that is described in this piece   is very simliar to the current mania the retail public has for bonds.  in 1980 you couldn't give away a double AA solid quality muni at 13% tax free, now the public is falling all over itself to buy 25 year munis at less than 3% . corporate paper is even worse.  the demand for nearly junk debt paying 4-4.5% is unreal.  but no one would dream of buying an ounce of gold because it doesn't "pay anything"-so what's the point of owning it?"  pretty wild stuff.

Fri, 03/09/2012 - 22:15 | 2242182 dark pools of soros
dark pools of soros's picture

as long as people put money into valued assets they are storing wealth - pick something you know and stock up and you will be able to barter if needed....  scotch, cigars, drugs.. hell even lighter fluid and beef jerky

 

Sat, 03/10/2012 - 11:36 | 2243041 disabledvet
disabledvet's picture

lighter fluid is big in the world of markets. "Olean, NY" comes to mind...

Fri, 03/09/2012 - 22:42 | 2242254 Asher88
Asher88's picture

Establish a relationship with your local coin/bullion dealer ASAP! Then, buy as much silver as you can. Wait two to three-ish years, and sell back to said local coin dealer. Live happily ever after! So simple, even Koko the monkey could do it....

Sat, 03/10/2012 - 01:19 | 2242580 akak
akak's picture

Establish a relationship with your local coin/bullion dealer ASAP!

What if I am already married, or otherwise in a committed relationship?

Damn, this gold and silver stuff is more complicated than I thought!

Fri, 03/09/2012 - 22:44 | 2242260 Sandoz
Sandoz's picture

And believe me, there's nobody more impartial and unbiased than your good ole local PM dealer.

Fri, 03/09/2012 - 22:50 | 2242272 Asher88
Asher88's picture

You must live in Podunk USA where your local dealer is in the strip mall next to dollar general? If so, that's where you want to SELL your metal, not buy it.

Fri, 03/09/2012 - 22:53 | 2242282 Asher88
Asher88's picture

My local dealer is ironically lcated in the basement of the JPM Chase building downtown, in a major metropolitan area.

Fri, 03/09/2012 - 23:02 | 2242301 americanspirit
americanspirit's picture

If the feds can make having possession of the flowers of a plant worth years of jail time just imagine what they can do with possession of silver and gold. Without the restoration of states rights and the destruction of the federal bureaucracy PMs are only a contingent safe haven. In order to realize their benefits owners will have to be willing to become criminals and be willing to suffer the consequences. Anyone who thinks that the feds, who are really nothing more than the enforcers for the international bankers, are going to let people like you and me waltz into our local PM dealer and cash in our coins in order to survive are not thinking. The only way that PMs will ensure your survival is if you hold them out of reach of the gangster Feds, and for most of us, good luck with that. Keeping your head down and buying PMs to ensure your survival isn't the answer - revolution and regime change is the only possible route to survival of America the Beautiful. Otherwise, welcome to slavery.

Fri, 03/09/2012 - 23:20 | 2242349 Asher88
Asher88's picture

You're only a "criminal" or should I say "evil speculator"??? ...if you get caught!

Sat, 03/10/2012 - 08:34 | 2242885 francis_sawyer
francis_sawyer's picture

Have they made it illegal to own food yet?

Sat, 03/10/2012 - 11:25 | 2243029 Boxed Merlot
Boxed Merlot's picture

Not yet, but you better make sure you have a primary physician lined up.  Otherwise they'll know you don't have the prerequisite mandated health insurance.   

Sat, 03/10/2012 - 19:18 | 2243838 Vlad Tepid
Vlad Tepid's picture

Raw milk?  Lemonade stand w/o a business license?  I would say food has been made illegal if the wrong people are deemed to be selling it (ie Amish and children).  Foot, meet slippery slope.  Luckily, I lost all my food in a canoeing accident while traveling abroad....

Fri, 03/09/2012 - 23:38 | 2242388 ipud
ipud's picture

Who? Who does not want to have the gold?

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

Sat, 03/10/2012 - 01:33 | 2242607 nah
nah's picture

borrowing other people fiat cash will have one last boom

.

this could be it

Sat, 03/10/2012 - 02:00 | 2242627 Sandoz
Sandoz's picture

It always amazes me how easily people forget that the 70's-80's bubble was the result of someone trying to corner the market. 

Sat, 03/10/2012 - 04:13 | 2242762 LowProfile
LowProfile's picture

Guess you missed that run on the dollar that Volker squashed.

Dolt.

Sat, 03/10/2012 - 11:20 | 2243024 Boxed Merlot
Boxed Merlot's picture

It always amazes me how easily people forget that the 70's-80's bubble was the result of someone outside of the club trying to corner the market.

 

Fixed it for you. 

Sat, 03/10/2012 - 03:59 | 2242751 hungarianboy
hungarianboy's picture

screw Gold. It's going down to $1300 at least...

 

http://www.safehaven.com/article/24645/gold-facing-brisk-headwinds

 

Sat, 03/10/2012 - 04:13 | 2242764 LowProfile
LowProfile's picture

Yes.

And that will be the last opportunity to get on board anywhere near these prices.

Sat, 03/10/2012 - 04:00 | 2242753 Wave-Tech
Wave-Tech's picture

How good was February Gold?  ZERO-to-SEXY good...

http://www.elliottwavetechnology.com/2012/03/how-sexy-was-gold-last-month.html

Sat, 03/10/2012 - 04:50 | 2242780 suckerfishzilla
suckerfishzilla's picture

1947 and 1948 Mexican 5 peso coins are 90% Silver and weigh in at 30 grams.   Whereas common date US Peace dollars are 90% Silver and weigh in at 26.73 grams.  I have always been able to find the 5 peso pieces in BU condition for a lower cost than their American common date counterparts in BU.  In fact when I go to coin shows in my area I seek out the Mexican 5 peso pieces first.  They are the best deal for 90% Silver coins.  Junk pieces with obsolete designs I prefer as well.  Everybody's seen a Washington quarter.  To some newcomers it is not spectacular to see a Silver Washington quarter but show them a Standing Liberty quarter and they just might start to feel the fever.   If you don't have your own venue of sale then shop your junk around to different dealers.  Some of these clowns will try and get away with giving you 10 cents on the dollar.  There are decent dealers out there though.  That's why you have to look around.  There's always ebay.  Anyway I'm not selling.  I'm accumulatin'

Sat, 03/10/2012 - 06:54 | 2242819 tim73
tim73's picture

Is this the "buy now or be priced out forevaaah!"-speech from goldbugs? Maybe you will be disappointed and this is not the end of the world. Then the gold goes maybe below even 500...again.

Goldbugs are like those crazies believing in some idiot declaring May 15th of 2010 will be the end of the world...except it was not. The judgement day is then endlessly postponed for one reason or another. I have been hearing the same bullshit since 1997 about gold.

 

Sat, 03/10/2012 - 19:21 | 2243841 Vlad Tepid
Vlad Tepid's picture

I'm really sorry you got burned by Harold Camping.  But cheer up!  Now it looks like you've got Benny and his Magical $500 gold!  See?  Things are looking up already.

Sat, 03/10/2012 - 07:57 | 2242866 prole
prole's picture

How right you are tim, I'm glad somebody else gets it!

I've been hearing these precious-metals-fondling morons singing the same sad song since 1933:

They think gold is going to go up! lol

Sat, 03/10/2012 - 08:18 | 2242873 achmachat
achmachat's picture

:-)

Sat, 03/10/2012 - 08:40 | 2242888 Treeplanter
Treeplanter's picture

I'm one of the very few I know who buys metal or even miners.  They think they aready missed the boat.  

Sat, 03/10/2012 - 09:56 | 2242934 cat2
cat2's picture

I'm not a trader, so I don't want a bubble to appear, I just want it to represent a constant store of value.

Sat, 03/10/2012 - 10:22 | 2242960 FinsterMonster
FinsterMonster's picture

Would like some comments on this train of thoughts about gold being in a bubble and that it will crash.

What I take to heart from this interview is quite the opposite of what it seems alot of you guys do: It's quite bearish on the safety of the gold and its price rise.

First of all, listen to Robert, he talks about the 70-ies and 1980 bubble:
1. people stood in line and bought everything that wasn't nailed down if it had silver and or gold in it.
2. People were going through a high inflation period and wanted to save their excess in something that could hold its purchasing power.
3. People were actually saving!
4. The media was full of jokes of gold and gold got alot of mind-share in peoples lives.
5. There were coindealers in every city, occasionally more than one.

And they conclude that gold is not in a bubble today because:
1. People are selling their gold and silver
2. A ratio of about 1 buyer to 5 sellers
3. Some kind of paranoia or distrust towards governments/CB's and their money printing

But listen to the other things they talk about:
1. Robert has asian visitors who come from abroad just to buy up his stock
2. The ones buying and actually have some income left and end of month are asians who live in usa. People who are used to save in gold, pm's, traditionally.
3. The gold is going somewhere and as you say, why refine a coin when you can sell it as such. So somewhere people are buying every coin, scrap that the western world has.

My take:
USA and the developed nations in the west are in a gold bubble. The Asians are and therefor Gold is. And it will crash, probably much sooner as you might think. Just take a look at Chinas progress.

Why?
1. Eastern citizens are living with high inflation, they try to save their purchasing power.
2. Asians are actually used to saving, not consuming their wealth
3. Asians have traditionally saved in PM's.
4. Gold has a HUGE media/mind-share compared to its market-share of the total market of equities, fixed income etc. So everyone and their neighbor is talking about gold. (in the western world).
5. There are now gold buyers everywhere. (in the western world). We are the source of PM's for the Asian bubble.

6. We live in a globalized world. Very much so than in the 79/80 period. Which means that bubbles also are shared globally. For example the credit bubble right now ravaging the western world. Who could have guessed that some houses in florida and their falling in price would bring down countries?

7. We got some serious debtproblems in the western world. It's quite deflationary and "riches" are vanishing/deleveraging all around us. Some might point to the fact that house valuations arent "real money" but it was quite real to the homeowner and his/her mindset when going out shopping. It certainly is real to the people who are now underwater. Credit is money, as all money is debt, and money is the medium for which your government accepts payments of taxes and or debt owned. Your government could declare gold to be the medium, but it could also just declare used toilet paper to be money.

7. I somehow get the impression that capitalism has not grasped the eastern world by the balls as much as it has us. So they are in terms of a civilisation of consumers where we were in the 70-ies.

What I'm going to do about it:
1. I will not try to save my purchasing power by extreme speculation on gold. For me Gold = tulips.

2. What I do know is the purchasing power of my money right this minute. So I actually wont care about the future, I'll buy what I need now to survive in the future.

3. If I ever get more money than what I actually need now I save it in my countrys fiat.

Why? Well its well established, people think its real money and the things I might want to buy for my survival with loads of money is not being imported (for example real estate, farm etc.) so my money will be all good for awhile while people get crushed when the deleveraging

accelerates.

Comments?

Oh and btw, how about some constructive comments/arguments instead of the usual trash?

Sat, 03/10/2012 - 10:55 | 2242998 Winston Churchill
Winston Churchill's picture

The only pronblem with your online CNBC thesis. is;

The Asians you so casually dismiss account for nearly 50% of world population.

Your soporific defence of the "gold Bubble"theory and by implication The Federalist Ponzi

Bank will  leave you cold and hungry  and dead long before the holders of PMs.

Sat, 03/10/2012 - 12:22 | 2243105 FinsterMonster
FinsterMonster's picture

Thank you for your reply Winston!

Example:
Gold around $1700 per oz.

China, GDP per capita, PPP: $7536, 4,43 oz per person.
India, PPP: $3586, 2,1 oz per person.

USA, $48147, 28,32 oz per person.
EU, $31548, 18,56 oz per person.

And we are the ones selling our gold to survive.

Sat, 03/10/2012 - 12:47 | 2243130 WillieNelsonListener
WillieNelsonListener's picture

@FinsterMonster

Do you really think the 1+Billiion chinese per capita is an appropriate measure?

Similar to the US, do you think its the top income earners that have the opportunity to buy Au / Ag?

Do you happen to have the info on income distribution for both countries?  Frequency of income by brackets?  Wouldn't that be a more useful tool for your analysis?

Sat, 03/10/2012 - 11:53 | 2243058 WillieNelsonListener
WillieNelsonListener's picture

@FinsterMonster:  Well thought out post, thank you.  A few questions if I may?

What I'm going to do about it:
1. I will not try to save my purchasing power by extreme speculation on gold. For me Gold = tulips.

Tulips mania lasted how long?  How long has Gold been used throughout history as a monetary instrument - dollar peg, before that directly?

2. What I do know is the purchasing power of my money right this minute. So I actually wont care about the future, I'll buy what I need now to survive in the future.

What has the increase in the money supply done for your purchasing power over the last 12-24 months for your survival needs?  Do you notice the increase in food, energy?  What's the direct correlation between the money supply and the price of gold, pick a time frame.  During the same time frame, what the correlation between the money supply and the price of survival needs (food and energy)?  How long in the future are you planning to survive, thus have you bought now?  How do you store it?

3. If I ever get more money than what I actually need now I save it in my countrys fiat.

Question above - when you save it, what will it purchase 12 - 24 months from now (food and energy) - do you anticipate the cost of food decreasing? 

Why? Well its well established, people think its real money and the things I might want to buy for my survival with loads of money is not being imported (for example real estate, farm etc.) so my money will be all good for awhile while people get crushed when the deleveraging accelerates.

You real estate - how does this help you survive?  You mention farm - do you farm / grow / produce your own food and energy?  Can you describe further your thoughts on how "people get crushed when the deleveraging accelarates? 

Comments?

What timeline do you base your analysis? 

As all ZHer's know... On a long enough timeline....

Thank you for a lively post and look forward to your reply.

http://www.youtube.com/watch?v=p610TdtyjYs&feature=fvst

 

Sat, 03/10/2012 - 13:39 | 2243209 FinsterMonster
FinsterMonster's picture

Thank you for your post and questions WillieNelson,

1. Actually gold as money is a whole different matter than gold as a speculation as a commodity. So sure, it has been used as a medium of exchange through hundreds/thousands of years but the use of gold as money will never work, just take the Roman Empire as an example.

Inflation and devaluations were commonplace, even though it was made of Gold, silver and other metals. See

http://www.youtube.com/watch?v=AkK06A32tTU&feature=related

for an excellent presentation about it.

I am talking about the commodity Gold in a bubble. That gold could ever be money, money which would never loose value, that for me is an impossibility. The medium of exchange is what your government declares it to be, nothing more. If it happens to be backed by gold sure, why not. But you would have to trust your government to not print more receipts than the gold it has. So if it was a note out of thin air or if it said it was backed by gold it would still have to be founded in your trust for your government. So gold in my mind is just a commodity. Money is a construct, an idea, a medium for exchange/barter.

2. The increase in money supply is actually not the question, it's the velocity of that printed money that I'm focusing on. Right now the money is not being lent, it's not being used. Deposits at the FED and ECB both tells the same thing. The money is not being used in a significant way. Companies do the same thing, they hoard cash.

Even though the velocity of money is very low it will eventually come out of hiding. Although I'm betting that it will not push up the
prices of the things I will want to buy with my savings later on because of the insane deleveraging going on behind the scenes. Someone mentioned $12T lost in value in housing till this day, let's say only 50% of it was in mortages, well FED has printed about $2,5T? Still got some more printing to go before those losses are taken care of and the banks can start lending, growing as they used to before 2006. Consider the CDS markets, the Sovereign bond markets and the losses in "value" will be absolutely astonishing. I'm betting the CB's will not be able to print that fast. So deleveraging will be the name of the game.

The cost increase of food and energy is why I buy the stuff I need now and not later. You can actually be suprised of how long you can store food when you get the hang of it.

The direct correlation of the money supply and the rise in commodity prices... Well there might be the possiblity that there actually does not exist a direct correlation between the price of a commodity and the recent printing of money. If the velocity of money is almost zero, then there could be other answers to why the commodities rise. For example, as a thought, everything is nowadays securitized into tradeable paper/securities through a click of a mouse, speculation, might be one. Another might be actual supply and

demand. I happen to think we are close to peak-everything resource wise. Conventional oil peaked around 2005, demand just keeps on growing. And if there is something that has been growing in regards to gold it's fear, something that Gold has always by some magic been the safe haven for.

About the timeframe for survival.

There is a saying you might consider: If you and your friend come across an angry bear while walking through the woods you dont have to run faster than the bear. Just faster than your friend.

3. My thoughts about saving my excess (albeit limited) wealth in fiat and after a period switching to real assets like real estate are pretty straight forward. The turmoil wont last for ever and ever, it will end. When it ends, I would like the possibility of being able to choose, for example buy real estate, rent it out and get some income (barter house and room for essentials). A farm and actually even considering growing my own food would be a stretch (considering my skillset), but buying a farm and then let other people grow their food and take a small percentage of the top would not be too far out.

Timeline, well, the last shirt you wear has no pockets...

I try to look at it in steps instead of timeline. The first signs will be seen in the economy. Therefor I keep a keen eye on the economy and what's going on there. I used to think about timelines, but then in came the politicians and all logic went out the window.

Now I focus on steps and my own life and the need of my family. All else is just background noise. My survival is my responsibility, not anyone elses.

Something people usually ignore is the fact that if society comes to the point that you have to use your gold to survive, well then you will not have the ability to buy everything online with direct fedex delivery the next day. The stores you want to buy stuff from will mostly be empty, the waterfilter you might want will all be gone etc etc. I will gladly pay a "premium" today to get what I want, when I want it and also in the quantity I want it.

Sat, 03/10/2012 - 14:41 | 2243341 WillieNelsonListener
WillieNelsonListener's picture

Thanks - interesting, while I would still like to hear your thoughts on the other questions.

Also,

how do you factor into your position to favor fiat versus gold (or not entering the gold bubble) the 1.5T budget deficit the Federal Government is running annually, the decrease in the foriegn investment in Bonds, and the resulting necessity for the Fed to monetize the debt either directly or through Primary Dealers?  You recognize the money supply increase, and I see your point on the velocity, while at some point you also see the money entering the economy, hence increase in velocity

why do you think the Chinese and other countries are net importers of Gold?  who's at the end of the buy transaction (who are the buyers)? chinese citizens or government, and why?

Could you address the question regarding the per capita comparisons for the US and China, would enjoy your thoughts on that one

Also, any thoughts as to the theory of price manipulation in the PM markets, do you think it exists?  if so, why, if not, how can you explain the massive paper sell off of 2.29?  Do you think this much physicial actually went anywhere?

Would it be fair to say your strategy to fight inflation in food and energy is to buy today and store for tomorrow, as opposed to obtain a return on your capital greater than the price increases in good and services?  Any other ways you see to protect your wealth from the inflation (real inflation - i would categorize the things they don't count in the CPI, but real folks in the day to day world see) - Food, Energy

BTW, like the bear and shirt analogies ...

Sat, 03/10/2012 - 15:51 | 2243477 FinsterMonster
FinsterMonster's picture

Getting late here but I'll try to write down some of my thoughts about your questions Willie, thanks for the follow up btw!

US debt is horrendeous, absolutely terrifying. Especially if you read the report from Tullett Prebon titled, Armageddon USA: http://www.tullettprebon.com/Documents/strategyinsights/TPSI_Armaggaddon...

There you also get a couple of ways of dealing with the debtburden of USA going forward. It's well written and up to date.

So actually after reading that paper I have a somewhat more positive view of the future of USA. Not a rosy one, but less apocalyptic. I especially loved the part where they discuss the USA's blueeyed view and application of the comparative advantage theory.

I think China and other countries in the EM/Asia are net importers of Gold because they want to have it as part of their reserve. It's portfolio management enlarged. This doesnt mean citizens should speculate in it, but if CB's want to, who am I to argue against it. I'm more concerned with my survival than the CB's are I think.

The comparison of GDP per capita (PPP) was my reflection of a situation that high GDP or even a modest level of GDP per capita (PPP) not only is a measurement of economics but also a crude measurement of how living in that country might be, a higher income gives you possibilities where as low income makes you vulnerable to even moderate priceincreases in food and energy. It's the difference that I tried to point out, the differences are extreme between China, India, USA and EU. So even though we got 1 billion people in china and another one in india, their level of PPP is so low that life for a large part of them would be to find food to put on the table.

About the massive paper sell off 2.29, it's in my view proof of the sickness in todays all out securitization of everything. There will ofcourse be more of these flash crashes and or manipulations in the future. I'm absolutely sure that if the market was physical we would never have those rapid moves. Put greed, fast paced markets and fear in a bucket of bubbleeconomics and you get chaos.

About gain on capital. Yes if you think about it this way: Every week I get tons of advertisement from the local stores about this and that. 1 week I get to buy spam for 60 a kg, ordinary it costs 80 a kg. I get a return on my capital of 33% and lock in the profit the second I buy it. Thats arbitrage in my world. :) So get a good sized pantry and start working that arbitrage!

Nowadays is more of return OF capital than return ON capital it seems. Why else would people buy treasuries in some countries for less than 0%, as in pay to lend out money.

Please let me know if I was unclear on anything, getting tired over here, time for bed.

Best regards.

Sun, 03/11/2012 - 04:53 | 2244461 Tom Green Swedish
Tom Green Swedish's picture

The ECB's balance sheet has increased the same amount as the USA's.

Number two inflation has only increased 25 percent since 2000 while the price of gold has increased over 280 percent.  It is a well known fact America controls the global food supply, and only lacks in two key areas; Oil and the abundance of cheap labor. Do you really think gold is something that is anywhere near importance?

In my honest opinion water is a much better investment than gold,  in fact if you are smart you would ditch the gold and get into water now. Im sorry but the USA and UK have dumped 12000 tonnes of the worthless crap since World War 2 and quite frankly the rest of the World is nowhere near the USA in terms of quality of life (besides the degenerate lazy trash who refuse to work and think since they are American everything should be handed to them and DingleBarry 2013 gives into.)

Sun, 03/11/2012 - 14:54 | 2245249 akak
akak's picture

You are as idiotic and just plain stupid as you are mendacious and disingenuous.

The simple fact that you try to bolster your "argument" (such as it is) by using the government's laughably low, utterly bullshit CPI statistics and dare try to claim that "inflation" is up only 25% since 2000 is reason enough to dismiss your pathetic attempt to poortalk gold.  Anybody with even half a brain knows that the REAL level of price increases in the last 12 years is well over 60% (at least).  You also fail to mention the exponential rise in governmental debt since 2000, or the unprecedented monetary expansion by major world cental banks during the same period.  All these points prove to me that you are nothing but a dishonest peddlers of lies and propaganda, and not interested in the truth in any way.

Sat, 03/10/2012 - 10:46 | 2242987 uno
uno's picture

Biderman was exceptional on Yesterday's video blog

http://trimtabs.com/blog/

 

Sat, 03/10/2012 - 13:03 | 2243149 toadold
toadold's picture

Well the gold "bubble" has been going on for about 10 years. Funny how it coincides with inflation.  The employment situation is a lot worse now than it was in 1979,1980 also. The term used back then was "stagflation". I'm seeing the same thing only worse. This time around we've got a down grade of the US credit rating on top of / because of everything else.  People also need to think a bit why it was made legal for individuals to own gold again in the US. It was not because of the nobleness in the hearts of politicians. Also consider why people have businesses that are buying coins, and pms. I suspect they know how to make money doing it. 

Those uncirculated one ounce silver Walking Liberty bullion coins are looking  like a pretty good hedge to me. The premium isn't bad either. It is tough to balance things out, food, ammo, firearms, whiskey, a reasonable amount of cash, and some pm.  

Sat, 03/10/2012 - 14:44 | 2243334 FinsterMonster
FinsterMonster's picture

Hi toadold,

interesting post. Would you mind evolving on your thoughts about why it was made legal for individuals to own gold again? I would like to hear your thoughts about it.

Also agree, the balance is quite tough. I'm hoping people do prioritize as you write with one additional item as number one: potable water.

And something the Vikings used to consume for food and drink because it was easy to store for a long time: Beer  

Beer is a wonderful survival item with a buzz ...

Sat, 03/10/2012 - 16:41 | 2243583 Lord Koos
Lord Koos's picture

Surviving on beer, yeah that'll keep you on your toes in times of change.

Sat, 03/10/2012 - 16:40 | 2243578 Lord Koos
Lord Koos's picture

This guy Mish has some good points but his talking points are as a bullion salesman, which he is... I'm not planning to trade my small stash of 90% US coins for pure rounds.

Sun, 03/11/2012 - 05:01 | 2244464 Howard_Beale
Howard_Beale's picture

And why would you? I think Mish is full of it as far as purity being a big issue. There was not a big market for junk silver in 1980. He needs to get over the fact that the electronic calculator is owned by everyone now. We can do the math. In 1980, the Pulsar watch was only 5 years old, calculators were replacing the sliderule,  and there were no personal computers.

Keep your 90%'s. Silver rounds are not what is important. Sterliing is just fine--as are older silver coins.

I respect Chris Martenson. But frankly, this whole interview is a load of shit. My 100 ounce bars may not get me any immediate food since they are a large denomination--but I have that covered (see next post). The big bars might even buy houses and other large items--I really don't care. There is always a Canadian border to go to and break down the bars, AKA doorstops, if necessary.  

Sun, 03/11/2012 - 04:51 | 2243809 Howard_Beale
Howard_Beale's picture

Sprout seeds.

This is a currency that has quality. It is the highest form of food. You can produce and eat them as long as you have water, you can trade them for other goods, and they need no special storage. Best of all, if you had to, you could actually live on them.

I don't even have to store them like I do silver and gold. I don't fear the seed stealer.....yet.

Sun, 03/11/2012 - 05:41 | 2244462 Tom Green Swedish
Tom Green Swedish's picture

Commencement address technology school: Don't beleive the hype.

 

What cost $1 in 1971 would cost $2.57 in 1984. (Gold buying OK)

What cost $1 in 1984 would cost $2.07 in 2010.

 

What cost $300 in 1984 would cost $1700 in 2010. (550 Percent Increase for an inflation hedge in for 107 percent inflation in 27 years)

 

You'd have to be smoking a major crack pipe to think gold is not in a bubble. The garbage has increased 280 percent in 10 years while inflation has only increased 25 percent.  The price of gold in 1971 dollars has increase 700 percent and is nearing the price in 1971 dollars that it did when it took a major crash in the 80's.  The USA has unloaded 12000 tonnes of this crap while Europe and the rest of the world is buying it up.  They can have the crap. When it tanks back to 200 dollars a gram, or 47 which the IMF says its worth I'll buy it back.  In the meantime I will go back to my job like the rest of America helping the rest of the world survive, while they hold their yellow rocks and pray. 

 

The phone calls were ringing so much we could not answer them. We had to just put all our lines on hold so we could service the customers, and our own customers we wanted to service first.

 

We world come in to open at nine in the morning and there would already be a line out the door and down the block. Sometimes the line was mostly buyers, sometimes there were sellers. We would run out of metal. We would run out of anything. And we would have to divide the line into two lines. We would take the sellers in first, get some product, and sort it before the buyers were let in.

 

And people were not very discriminating then; they were panicking. By the time it peaked in January 1980, there were people out there who did not even understand free market economics or precious metal economics, they were just buying because it was fashionable or because it was going up forever. Those are more the makings of a bubble, today most people are coming in to sell.

 

Comment on Martensen's gold hype

Most people realize that at today prices it is a good idea to sell.  The reason why gold increased in the 80's was because inflation was very bad, and because it was completely manipulated via the silver market, which the Hunt Brothers engineered.  As far as I am concerned we are one newspaper article from a jewelry company, maybe one in China?. And finally inflation from 1971 to 1984 inflation was infact 260 percent.  That is why people were buying.

 

 

The typical seller today is really the opposite of who they were 30, 40, 50 years ago. People used to save either through a bank account to keeping some coins around, putting away silver dollars when they came back from Reno or Lake Tahoe. They would be buying some interesting furniture or jewelry and then they had income in excess of their expenses. Today, so many households are stressed having expenses greater than their income or servicing a lot of debt that they are starting to sell the things, the heirlooms that they so prized before. So we are seeing people sell their Rolex they do not want anymore or cannot afford to keep, their old jewelry, their parent’s jewelry and belongings that they inherited. The coins they collected when they were a kid, it is sad in a way because what we are seeing is the dis-hoarding of a culture.

 

Comment on Martensen's gold hype

Really never found a good use for the gold and silver bars I have stored for the last 20 years.  Sometimes I take them out to look at them.  They have no impact on my life other than sentimentel value.

 

 The quality of the content on this site is better than others but the gold mania is almost as tired as Greece.

 

 The USA is only deficient in two areas. Oil and Cheap Labor.  We faced a similar problem 200 years ago when they broght indentured servants to pick cotton and tobacco.  After the cotton gin was invented those jobs disapeared.  As for oil, there is technology that exists RIGHT NOW that can eliminate the need for it in its main use ; automobiles.

 

And keep this in mind the whole collapse was based on the real estate market and the Iraq War.  Look what happened after Vietnam in this country, and look at home prices now in the USA versus China (cheap cheap cheap).  Guess whos going to crash hardcore?

Sun, 03/11/2012 - 13:27 | 2245076 FinsterMonster
FinsterMonster's picture

Tom G Swe, thanks for an interesting couple of posts. I know I could spend hours and hours trying to google, search, read and still end up somewhere I would rather not be if I wanted to know more about water and investing in it.

Would you mind pointing to a couple of useful places and/or sites where I can get credible and usefull information about investing in water? What sources of information do you use?

I'd be very gratefull if you could help me out.

Best regard, FM

Sun, 03/11/2012 - 14:03 | 2245135 Tom Green Swedish
Tom Green Swedish's picture

Most Southwest states Water Bonds are Triple A and a very good and safe investment, ie Texas / Oklahoma / California etc.  Google Ogallala Aquifier.

 

While everbody is drilling for oil and buying gold you can be a winner.  Personally myself I would rather eat and have clothing than drive or look at some gold.

 

Ever see the movie Idiocracy? It was passed off as a joke, but could very well be a reality.

 

Thanks for reading.

 

 

Mon, 03/12/2012 - 05:41 | 2246658 FinsterMonster
FinsterMonster's picture

Found some alarming information about Ogallala Aquifier:

From 2006 article:

"Since the current drought began in 2000, groundwater levels in parts of the state have dropped by more than 30 feet, reported Mark Burbach of the University of Nebraska’s School of Natural Resources."

"In southwest Nebraska and Box Butte County, groundwater levels have dropped more than 50 feet since large scale groundwater irrigation began."

"Water policy in Nebraska is now based in theory on the premise that water usage should be sustainable. Unfortunately, no one really knows what it will take to sustain groundwater levels."

- http://journalstar.com/news/opinion/another-sign-of-long-term-water-worr...

30 feet in 6 years!!!! Just think about it for a second.

With more dry spells coming... The breadbasket of USA built on The Dust Bowl. Enabled by the aquifier. I'll have to take a more extensive look at this.

Thanks for responding Tom!

Sun, 03/11/2012 - 13:45 | 2245127 Tom Green Swedish
Tom Green Swedish's picture

CHris Martensen Quote:

 

Those are more the makings of a bubble, today most people are coming in to sell.

 

 

The economics and supply / demand doesn't make any sense.  Most people are selling, which means there is no demand for it. Where is all the stuff people are selling going?  Didn't this guy take Economics in college? Supply / Demand the most basic thing in economics and to some extent finance and markets and he doesn't understand it and its the industry he is in/  If more people are selling that means the price goes down.

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