You don't get me. I said the market would bottom in ~18 months. I didn't say the pain would end there. We're talking 70% losses in stock and real estate wealth. It would take 30 years for most people to make that back. Problem is, if the currency goes, it'll be much worse. America and Europe will be 2nd world countries, soon.
So essentially, we're talking a global fiat collapse relative to gold. Creditors are made whole without default=crash. The US only has around ~260 million ounces. Even if gold appreciated 10X , that's only 2.6 Trillion USD. That doesn't seem like enough. I've read inflation-adjusted gold value is $2,200 per oz. We'd have to go 5 times that to get within striking range. What do you think?
I am glad you didn't say 3rd world countries. some mods would shunt thread to chit chat as the thought is unbearable.
Debt need not be paid off completely - it just needs to become manageable. Paid down, not paid off. No Sovereign needs to be debt free. Not all Sovereigns will benefit equally either from a gold re-monetization. But they will be better off. Especially when the western sovereign bond markets near collapse. What's the current process on tackling debt? Printing money and buying the short end and rolling it over? Doesn't the total debt grow in that scenario? What if (when) interest rates go up? Is that realistic? Look at Greece. Yes, they just got funding, and they will make cuts so that by 2014, the annual fiscal deficit is 3% of gdp - yet their total debt becomes 140+% of gdp by 2014. Does that make sense to you? And that's not even taking into consideration how much of a hit to gdp (and thus, tax revenues) will get from the government spending cuts. The Greek bailout was nothing permanent. It is the same policy we use here: extend and pretend. As for your concern regarding the multiples gold would or could go... the inflation adjusted number of $2,200 is BOGUS. Do you recall, or have read about the Boskin Commission under Clinton? They recalculated inflation in order to save on future adjustments to social security. Today's inflation, as well as unemployment, as you may be aware, are not counted as they were in 1982. They have gone thru multiple changes. Changes that paint a better picture for government. Thus, if you count inflation since the 1970s without the government "tweaks," I have read that the true gold inflation adjusted price matching the early 1980s high would be closer to $8,000. Shadowstats.com is a good source of real (pre Boskin Commission) inflation. example: 260M oz * $20K per oz. = $5.2 T In my view, the collapse is already under way. Gold - to me, seems the only viable remaining option. The central bankers of the world will likely be reluctant, but they understand the severity of the situation. The SDR system is being expanded just in case of collapse - or when it happens, I should say. Think of it this way - a severe deflationary collapse can be easily countered with a remonetization of gold - as gold does not have a counterparty. You are creating money debt-free by using a universally sought-after precious and rare commodity. What are we doing now? Creating debt - money. Simple computer keystrokes at the Fed that rely on "faith." I'm not professing to be a know-it all with this. I'm just observing our current situation and I just don't see the current remedies as sufficient. No, more like wholly inadequate, if not destructive. Anyone here see some glaring issues with this scenario - fire away. I welcome it.
Thanks for the reply. I'm extremely bearish on the fiat debt bubble, so you're preaching to the choir on that one. Assuming the numbers are good (I wasn't aware post-1980 CPI was used to calculate 2,200 inflation-adjusted oz price), yea, >10K gold is possible. But what we're discussing is no different than a shopaholic pawing their assets to continue a consumption binge. A gold liquidation - assuming prices explode - only buys the world time to get their financial house in order. In other words, the only long-term solution here is frugality = massive spending cuts + balanced budget + surpluses. Otherwise, in another 3-4 years, we'll arrive at the same crossroads we're now at, with no gold, offering half of Alaska to the Chinese for collateral on our debt. Don't get me wrong, I think the idea has merit and the best temporary solution I've seen. But there are some hurdles. The first assumes Central Bankers will part with their gold hoards to save the World. The Great Depression was a perfect example where they refused, and indirectly starved 25% of the Country to death. There was no "whoops" involved, there. Second, politicians favor crisis and calamity over smooth sailing. The former provides an ideal window to consolidate power and expand bureaucracies. This is now the dominant paradigm in Washington, "Let no good crisis go to waste". Third, a gold liquidation just maintains well-functioning sovereign debt markets and mitigates the looming downturn into a Depression, instead of a Great Depression. Fiscal austerity is the only long-term solution here, and that means big haircuts for everyone. In terms of GDP, living standards, entitlement programs etc. Will politicians and voters show enough character and make the big cuts so desperately needed? In the short window provided? Obamacare, Carbon-taxes, tax hikes, and an entrenched subculture of cradle-to-grave Socialism, doesn't bode well, at all. Last, it's my personal opinion that under no circumstance should any Country surrender territory to pay off debt. I think that's what the Central Bankers want. Also, the FED and all US commercial banks should disclose the exact amounts of US and foreign sovereign debt they hold, as that's essentially the property of US taxpayer (purchased through debasement).
<object width="480" height="385"><param name="movie" value="http://www.youtube.com/v/zMJGRlaDV4c&hl=en_US&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/zMJGRlaDV4c&hl=en_US&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="480" height="385"></embed></object> After years of following the insane policy of increasing deficit spending, it seems surreal that we are finally discussing the actual collapse of the system. Greece is indeed lucky to be the first in line for a sovereign bailout because there will not be enough money to bail out everyone as the dominos fall. The Greeks are protesting the need for austeriy measures as will the people of every country that is fortunate enough to get a temporary bailout. I imagine that the crisis will also get to the point in the US where our elected leaders actually realize that in order to pay off our debts, we have to decrease spending and increase taxes. Everyone will start pointing fingers at China for keeping their currency so low for so long and Wall Street for bankrupting our country for their own financial gain. We are entering a very perilous stage in history. I hope that our elected leaders manage to steer the ship safely. Meanwhile, I remain short the euro and long gold/silver.
No time for a detailed follow up right now. But as I said.... gold and/or SDRs will be the endgame: <object id="cnbcplayer" height="380" width="400" classid="clsid27CDB6E-AE6D-11cf-96B8-444553540000" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=9,0,0,0" > <param name="type" value="application/x-shockwave-flash"/> <param name="allowfullscreen" value="true"/> <param name="allowscriptaccess" value="always"/> <param name="quality" value="best"/> <param name="scale" value="noscale" />