In my humble opinion we are heading for a Depression that will make the Great Depression seem like good economic times. All commodities are crashing, and gold is not. The opportunity I see for Gold with a great risk/reward scenario is to short gold in anticipation that it will catch up to the rest of the crashing commodites. In that particular scenario, Gold has a huge way to drop once the last gold holdouts realize that Gold is not the safe haven in a depression that everyone thinks it is.
How are we heading for the great depression II? The major cause was the US trying to export its overcapacity with import tariffs, which caused a worldwide trade war. This time is very different, with a worldwide monetary easing.
Great depression II might be debateable but in 1929 the US had a declining real estate market and a raging bull stock market when a credit bubble bursted. Then the government tried to fix everything and the rest is history. But THAT scenerio could NEVER happen in the US again, right?
Your analysis is overly simplistic. There were many causes of the prolonged rout in growth. But the main causes of the food shortages and bread lines that created the mystique of the GD were: 1. fed raised interest rates, tightened money supply to defend the dollar 2. smoot-hawley tariff act was instated to offset excess capacity which caused a trade war 3. to support commodity prices, farmers slaughtered millions of animals even though people were starving 4. Bank runs caused a huge banking collapse within the country, millions of people lost their savings (no FDIC) 5. drought conditions in the midwest caused farmers to lose everything There are many more reasons, but my point is that we are not even close to seeing the same conditions that set up the GD. The money supply is growing at a very rapid pace. Europe and Asia are also devaluing their currencies in tandum reducing any chances of a trade war, or currency collapse.
Are you unaware that during the Depression gold was confiscated at a state-determined price? If you really think things will get as bad as the 30s, then gold is pretty much the LAST thing you want to hold.
Stock up on sneakers, toilet paper, and tampons. Gummint won't confiscate those, and they'll never lose their value.
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.
And THAT'S why the $USD has lost 99% of its buying power since the creation of the Fed. At some point "positive inflation" (oxymoron at best) transforms from "big negative" to "totally destructive"... Politicos and Talking Heads argue the evils of deflation... when in fact, it's INFLATION which is the REAL killer.