[Magus]

Tuesday, December 16, 2008
Investors Selling the US dollar before COLLAPSE
Investor Jim Rogers urged people to get out of the dollar and says he expects to be rid of all his U.S. currency assets by summer next year.

"If you have dollars, I urge you to get out,'' Rogers said in an interview from Singapore. He is chairman of New York-based Rogers Holdings, formerly known as Beeland Interests Inc. "That's not a currency to own.''

... Rogers, who predicted the start of the global commodities rally in 1999, criticized Federal Reserve Chairman Ben S. Bernanke for comments on the currency before a congressional committee on Nov. 8.

"He is a total fool,'' Rogers said. "He said Americans who buy only American goods are not affected if the value of the U.S. dollar goes down. I was terrified.''

Bernanke said the only effect of a weaker dollar on a typical American with their wealth in dollars, buying consumer goods in dollars, would be "their buying powers, it makes imported goods more expensive.''

Rogers said that's not right.

"If you only buy American products and the dollar goes down, the price of oil goes up, copper goes up, wheat goes up,'' he said. "That affects you. He doesn't understand the economy as far as I can see.''

 

[TechAdmin]

I've been a little worried about this for awhile now. With these trillions in bailouts it makes me wonder what inflation is going to be like over the next couple of years.

 

[Canadian]

Hyperinflation is on the way. It is only a matter of time before it hits. The only way to get it under control will be to use taxation to offset the massive amount of money being printed by the federal government. The taxes will be very heavy as the few people who are working will have to cover the tax burden of people who have lost their jobs.

The only commodity to hold any value over the past six months has been gold. It topped at about 1000 per oz and has never fallen below 700 oz. Today it is at $869 oz. Compare it to lead, zinc, copper, etc. Most are down 60 -70% from six months ago.

Many financial groups agree that with hyperinflation we may see gold go to $3000 oz. At the very least gold is a great protection against inflation. Not gold futures but actual physical gold.

 

[NaeKid]

So - you are suggesting that I start gold-panning to have the gold in my back-pocket? Or, are you suggesting that purchasing as much gold jewlery would be the better choice? Or, finally, purchase raw gold bricks and hide them under my bed?

I wouldn't go for the "futures" stuff - that's part of the reason why everything has gone haywire in the last couple of months ..

 

[Canadian]

Do not buy coins or rings or necklaces. Also avoid diamonds and other stones. The reason why is all of these things need to be evaluated in order to determine value. You have to check the cut of a diamond. The purity of a ring. The value of the coin stamping. Also depending where you are bullion may be sales tax exempt. Also when you buy a necklace you're paying the cost of making all those little links at the jewelers.

An ounce of gold is an once of gold no matter what shape it is in. Bullion is also higher in purity then other stamped or formed gold. Gold is soft and won't hold a shape unless you mix other metals in.

Also don't buy large bricks of gold or silver. You can get 1 kg bricks of silver and it isn't that wildly expensive. The problem with bricks is you can drill a hole in them and hollow them out and fill the void with lead. Then cover the drill hole with silver. You'd never know unless you cut it in half since it weighs the same. 1 oz slips are so narrow you could never do it.

Many Canadian banks will sell you 1 oz slips. Just don't use CIBC as they put odd limits on the amount you can buy. I get mine from Royal Bank.

A fire proof safe is the best thing for your gold. By the way if you can pan for it and find some that's great. There's plenty of mining in Alberta.

I check the price of gold daily here.

It fluctuates between 750 - 850 oz these days. Try to buy at about 750 US.

 

[Canadian]

Live Gold Price

 

[endurance]

I've been gradually acquiring a little gold for the last couple months, but now it's really starting to climb again. I'm debating whether to get more gold or get what I really want; full PV. I'm looking at an 8x180w off grid system that's $8k. Sure seems like that would be of more use to me after the hyperinflation started than a pile of gold. I just worry that if I don't get it now, I won't be able to afford it later. Plus, even without hyperinflation or a crash, I'll be off the grid, with fixed electrical costs for the next 20-odd years.

is what got me a little nervous recently.

 

[NaeKid]

I've been gradually acquiring a little gold for the last couple months, but now it's really starting to climb again. I'm debating whether to get more gold or get what I really want; full PV. I'm looking at an 8x180w off grid system that's $8k. Sure seems like that would be of more use to me after the hyperinflation started than a pile of gold. I just worry that if I don't get it now, I won't be able to afford it later. Plus, even without hyperinflation or a crash, I'll be off the grid, with fixed electrical costs for the next 20-odd years.

This is what got me a little nervous recently.

I believe that I posted that same information a while ago. I will take that information with a grain-of-salt - some of it seems to be far-fetched. Some of it seems quite plausable. I am not going to do the "wait-n-see" what happens next - I will continue my plans in such a way to be grid-free the way that my father and grandparents were ...

 

[AgentFlounder]

Magus, where did that article come from? Are there any other financial advisors that are confirming Jim Rogers' predictions?

 

[skip]

I don't make enough to worry about investing in gold and the like. I did put money into a 401k, but due to the current economy, am in the process of retrieving that money. After the Guberment takes their share, the rest will be used To pay off my mortgage and bills, and the rest will be used to buy what we need to grow more of our own food. That is more important than gold.

 

[AgentFlounder]

I went out doing a little looking... cnnfn has an article that actually talks more about the threat of deflation rather than the other way around. Interesting. Altho it at the same time dispells that possibility based on looking at two unstable commodities -- oil was one -- aside from these two things (I forgot the other), inflation is in a positive trend and has been and will almost certainly continue to be.

I don't really understand all the causes of hyperinflation ... hard to pick all that up in reading a few articles. I gather that it is more complex than simply printing more money (or increasing currency in circulation -- note the difference). I think this would be a good thread to post up more articles/research on the topic.

 

[Canadian]

Hyperinflation is pretty simple to understand. Let's say you have a shot of scotch. You decide to have scotch and water. You've just diluted the scotch. The more water you add the more diluted it becomes. If you add one liter of water you'll have to drink it all to have the same effect as drinking the original shot. That's why in third world nations people need to take a duffel bag of cash to buy a loaf of bread. The currency is too diluted.

The money you have and all the assets you own are like the glass of whiskey. The problem is that you have no choice in when or how often it gets watered down. The government plays bartender and comes along and dumps water in your glass whenever they want. This dilutes the value of everything you have ever earned in life.

When you opt out of the fiat currency system by buying gold you can at the very least maintain the value of what you have earned. The USA does not print the extra money. They just add a few zeros to the end of a number on a computer at the treasury department. It's that easy and that is the problem. They can "print" as much money as they want but the nation only has a finite amount of "productivity." They are just diluting the value of each unit of measurement for that productivity. That's the only cause of inflation. If you look at the years before the civilized world dumped the "gold standard" there was no inflation.

Most financial publications (that are not mainstream) do indeed see deflation on the rise. Mainstream financial papers have only just recently admitted that we're in a recession (that started almost a year ago).

Deflation in basic terms mean people dropping the prices of goods to get more sales. The TV set goes from $900 to $700 to entice people to buy. People buy them but the TV company makes less money so they lay people off. People have less income. They drop the prices more. More people lose jobs. Less profit. Less jobs. You get the idea. It only ends when the least competitive companies go broke. The last man standing starts to make money again and everyone starts to rebuild.

Deflation and inflation on their own are bad. When the government tries to fight deflation with inflation it is like putting out a fire with gasoline. Deflation has already started - check out the price of TV's, cars, everything is dropping. However the money "printing" is still going on. Hyperinflation is coming. The combination of both will be brutal.

 

[AgentFlounder]

Will Monetizing the Federal Deficit Cause Inflation? - Seeking Alpha

I have no idea who the writer is, or whether he or the website is worth a poop, but ... *shrug*... more information to slog through.

Michael

 

[AgentFlounder]

Deflation has the added symptom that when prices start falling, people stop buying, waiting for the price to go lower, which feeds the cycle. Interesting article here:

Will this deep recession lead to deflation? - Dec. 18, 2008

In my few dozen minutes of reading hyperinflation is a combination of a few things... sure printing money is at the heart of it, but most articles cite huge debt, and "printing" money to pay off that debt. Is that what is happening? Or with the low (0) rates for govt borrowing, are they going that route? In other words, why did the fed add $600+ Billion

To add to the complexity, hyperinflation isn't guaranteed when the govt prints/creates money quickly -- apparently some theorists tie it to the unemployment rate falling below a threshold (NAIRU). Confidence in currency basis plays in too apparently. And the article I posted above talks about the threat of deflation -- and the possibility that monetizing the fed debt for a couple years may not stave off deflation (so he says, but again, others believe that deflation isn't a threat just yet).

If all this were simple and/or thoroughly understood, seems to me everyone would agree.

 

[Canadian]

People just try to make the economy seem confusing so ordinary people are forced to rely on "experts" to explain it.

Hyperinflation is pretty much all about printing money. Why they print it does not really figure into it. Debt, Stimulus, Military Spending - it's all the same. The bottom line is that they are "printing" money non stop. That is the cause of hyperinflation. America does not have to worry about taking on new debts. No nation will loan them money. The only "new" debt to pay is simply interest on pre-existing debts.

"Confidence" depends on how little people know about how much money is being printed. "Confidence" can only last as long as the vast amounts printed are kept secret. Once the secret is out "confidence" drops.

Since "confidence" determines value we're just talking about a delay from when the money is printed to when the amount printed is discovered. Then it's "Oh crap look how diluted this currency is. Sell it before someone else notices. Once one nation sells off the others will see the sell off. Their confidence drops. They sell. Value drops. The spiral down continues. America fears a currency sell off by China who is the world's largest holder of American securities. The minute they sell it'll trigger a world wide sell off that will cripple the value of the U.S. dollar.

Hyperinflation is always guaranteed. The fact that it may not have an immediate effect does not change the fact that it has taken place. The fact that it is undetected does not mean that the effect is "not guaranteed."

A good example would be the AIDS virus. You can get infected with AIDS and go on living for many years and not know you are effected. The fact that it is undetected and has not make you sick yet does not mean that you will not die. You will die 100% from AIDS guaranteed. It's just a question of detecting the illness and when it will kill you.

Hyperinflation is like AIDS for the American economy. It will take a long time to detect it. It will take even longer for the government and main stream economists to admit that it is taking place. Just like AIDS hyperinflation has a 100% chance of slowly killing the American economy.

Just like AIDS America will not want anyone to know they are infected and will do everything to hide it. Nobody will want to "swap securities" with an infected economy. If they do they will be infected by the same virus.

There are a lot of people like lawyers, politicians, and economists who make a living off of making simple things complicated.

Here's something simple: Gold peaks at $1,000 an ounce. Today it's selling at $836 an ounce. That's only 17% off the peak price when other commodities and stocks are trading 65% - 75% off peak.

The politicians and economists may not agree but if you look at gold - the economy itself is telling you something. Buy gold. I'll take the price of gold over what some economist says. Reading people is hard but reading the stock market is easy. They put the numbers up on the internet where everyone can see them.

The American government and media can’t agree or tell the truth about the value of the dollar. If they did everyone would buy gold and cease to use the dollar and the government would collapse. Too many people rely on the old broken system to make their money. It’s like the old WMD, terrorism, mission accomplished, the economy is strong – string of lies. “Don’t worry about inflation” is just the latest lie.

 

[AgentFlounder]

So basically it is all a big conspiracy?

 

[Magus]

I'd rather be sitting on a month's worth of groceries and not need them than sit there in a stupid tinfoil hat and be hungry.LOL

 

[AgentFlounder]

I'd rather be sitting on a month's worth of groceries and not need them than sit there in a stupid tinfoil hat and be hungry.LOL

Hehe, no doubt.

So I spent a few hours reading my butt off and learning what I could about hyperinflation. There's more to learn but thought I'd share what I've picked up so far.

Prior periods of hyperinflation that I've read about so far don't have an element of conspiracy about 'em -- it reads more like simple bungling on the part of government which to me is far far easier to believe and more credible. There is also a sort of element of riding the wave of confidence in the currency.

From what I've read so far, it's simply that the governments were wildly overspending vs their income, had way too much debt, were unable to seek loans from other countries, and couldn't/wouldn't tax hike, so instead they monetized their debt. (meaning they paid their debt by printing more money)

The effects of hyperinflation were brought on by a combination of high monetary velocity (basically how many transactions a given unit of currency went through in a period of time), large amount of currency in circulation, and stable or declining GDP. The effects were that prices rose very, very quickly (at least hundreds if not thousands or tends of thousands of percent per year), confidence in the currency eroded (that is, confidence by nations and citizens that the currency would hold its value), people started buying stuff like crazy to offset the crashing value of the currency, debt was wiped out, and in the case of post war Germany (WWI) entire companies sprang up to speculate on increased inflation either buying other companies or producing goods wildly, and finally --- a shortage of money.

Shortage of money during hyperinflation sounds counter intuitive but it happens because prices far outstrip the influx of new notes being printed. So the effective buying power of currency in circulation plummets.

Ultimately the effect is a massive redistribution of wealth. The poor, apparently, are less effected. The middle class are devastated, and the rich get richer. Whee.

In most of the cases I read about, it can be abruptly halted by the government. It seems preventable too... by balancing the budget, cutting spending, backing bills with gold to enforce discipline, and other stuff.

I have plenty more research to do--- I happily retain my healthy skepticism about some of the stuff I've read (as should all of us about everything we read).

I think it's helpful to learn a bit more about economics at this point... I'll be talking to my financial planner after I learn a bit more and see if we can come up with some mitigating strategies. Note that I am reluctant to take advice on strategies from a place that sells gold

Anyway thought folks here might find this of interest.

Here are some sources I was reading last night:

Episodes of Hyperinflation <- seems like an impartial although rather terse study of various episodes of hyperinflation

The Dynamics of Inflation and Hyperinflation <- explanation of monetary theory (the quantity theory of money)

Hyperinflation Special Report <- this one I am a little skeptical about... seems rational but a little bit too much rhetoric at the outset... I think it would be wise to find other information about hyperinflation history to correlate with this

 

[Canadian]

It's not really a big conspiracy. It's just the people in power depend on the current system for their gains. If they can keep it limping along they get to stay in power and keep making money. Your financial advisor has an interest in selling you anything they can make a commission on. If you tell them you're going to buy gold and keep it in a safe at your house it's pretty much guaranteed they'll try to talk you out of it.

If you're not interested in gold I highly encourage you to take a second look at it. If you really don't want gold I highly suggest uranium mining and exploration stocks. Also energy companies that own or are constructing reactors in America and Europe.

In the coming decades as oil runs out nations will turn to nuclear to satisfy the need for electricity. Uranium is the new oil. Right now uranium stocks are widely undervalued on the exchanges. Nobody knows where the bottom is but now might be a very good time to buy.

I also recommend potash mining. Canada is one of the world's top suppliers. We ship most of it to China for fertilizer. World demand for food can only increase. Those are my top suggestions. I do advise you to stay far away from traditional stocks and bonds.

That's my 2 cents for what it's worth.

 

[Magus]

I suggest food,water,arms,and ammo.I've been wrong before but this is a bit more tangible than Y2k. :/