# Well this looks bad.



## 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.''


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## 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.


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## 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.


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## 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 ..


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## 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.


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## Canadian

Live Gold Price


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## 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.


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## NaeKid

endurance said:


> 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 ...


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## AgentFlounder

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


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## 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.


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## 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.


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## 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.


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## 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


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## 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.


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## 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.


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## AgentFlounder

So basically it is all a big conspiracy?


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## 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


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## AgentFlounder

Magus said:


> 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


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## 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.


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## Magus

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


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## Denny

I've always preached on trading commodities as a sound investment, *IF* you stay up with what is going on. Any commodity that deals with energy and precious metals is definately the way to go. Just about everything revolves around the price of gold, if you really think about it. Currency is a roller coaster and will cause gray hair, if you allow it.

I did, however uncharacteristically, during my first tour in Iraq (2004), buy some of that New Iraqi Dinar. It was a crap-shoot, of course. I bought it at 1851:1 and today it's roughly 1172:1. It's nothing to write home about, but it has definately had a steady increase and shows promise for more... a lot more. Even during this last stock market "psedo-crash" and dollar dip, the dinar was steady rising.


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## Canadian

I've always wondered how hyperinflation of the U.S. dollar would affect global currencies. I know that first world nations will also run their printing presses in tandem with the U.S. so that the relative devaluation of their currencies would keep pace.

What about third world nations? Most of them are probably paying attention to other things. They may not bother printing money to keep the relative value of their dollar in step with the U.S. dollar.

I always wondered if we'd wake up one day to the Mexican peso trading at par with first world currency simply based on all first world nations devaluing and a third world nation not bothering to "run the presses" 24/7?


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## AgentFlounder

There's no perfect investment, that's why advice is to diversify. Gold and silver investment carries risk too. Commodities aren't foolproof either -- consider the Oct commodities slump. I would think they are somewhat vulnerable to the kind of credit freeze situation we're seeing. Like any investment, they have ups and downs. Playing markets is pretty risky stuff.

Meanwhile this question of hyperinflation vs. deflation (or maybe both)... it doesn't appear to be entirely clear cut.

In monetary economics, a liquidity trap occurs when the nominal interest rate is close or equal to zero, and the monetary authority is unable to stimulate the economy with traditional monetary policy tools. In this kind of situation, people do not expect high returns on physical or financial investments, so they keep assets in short-term cash bank accounts or hoards rather than making long-term investments. This makes a recession even more severe, and can contribute to deflation. --Wikipedia​
So if this is the situation we're in, deflation may occur. Printing money is one way out of this... but print substantially too much and we have hyperinflation.


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## Canadian

Flounder - All investments are situational. There is always a "best" investment for a specific situation. To be safe you have to take appropriate action. If you're on a motorcycle - wear a helmet. If you're having sex - wear a condom. If you're in a boat wear a life jacket. If you're in an inflated economy - buy gold. 

If you try to cover all the bases you're wasting your assets. If you do put on the helmet, life jacket, and condom all at once you'll look hilarious when you do any of the activities listed above. Sure you're prepared for "anything" and your methods of protection are "diverse" but you'd also look silly because everybody knows all that stuff isn't going to happen at once. Even if one bad thing happened you'd be wasting 66% of your resources.

Traders want you to "diversify" so that you constantly have one asset or another that you are trading with them. Every time you make a trade "win or lose" they make money. If your investments are "diverse" something in your portfolio is always going up or down and needing to be traded. More trades = more commission. They don't make money if you make money. They make money every time you trade. Period. That's why they want you to diversify. That's why they don't want you to buy gold or real estate. 

Nobody is insisting that you buy and hold gold forever. We're just saying it's the safest option right now and for the near future. Besides it isn't a question of if the U.S. "will" print too much currency. They already have printed too much currency. That's why gold is floating at about $850+ daily. Take a look at the 12 month trend lines for gold. It's a solid upswing. 

The October "slump" didn't hit gold very hard. Gold dropped to just over $700 an ounce and that only hurt you if you bought at the top at over $900. If you go back a year or two you could have bought at $300 an ounce. Even at the "slump" price of $700 you've doubled your money. If you had bought ANYTHING else a year or two ago you are guaranteed to have lost money. At least 25% of it. Some people have lost all of it. Their "diversified" mutual funds did not help them one bit. Today gold is trading at $840. That's $140 over the "slump."

If you want to talk about risk you can "diversify" in any variety of stocks on an exchange that regularly dips by up to 300 points daily. Right now the stock market is the most volatile and dangerous places to put your money. 

I'll put all my eggs in one basket if all the other baskets have big holes in them. Besides, when was the last time you took the eggs out of the carton at the store and put a few in each shopping bag on the way home? Nobody does that. You put the whole carton in one bag and then put that bag aside in a safe place. 

Those of us who hold gold plan on selling it when the economy recovers and investing it in other things. Buy low. Sell High. Repeat. As the situation changes so does the investment strategy. Being diversified all the time does not allow you to buy low and sell high. The stock market crash proves that "diversification" provides no protection. 

The "diverse" strategy could be summed up as - buy everything and hope for the best. When you just buy a little bit of everything you're investing blindly. You're much better off to have some kind of strategy. Nobody goes to the track and bets on every horse. You can't make money that way and the traders know it. They just want to keep you trading. 

The way you talk about the market seems purely academic. Do you only have a small investment in the market? You don't sound too worried and most people with "diversified" conventional investments would be pretty depressed and or upset with the market by now. 

Even a guy like Warren Buffet will tell you to "invest in things you know or enjoy." He's not doing too good right now - but he's got an awesome track record and he does not buy into diversification either. 

That's my 2 cents on investment. All I can say is with my current strategy I've made money when everyone else I know has lost most of theirs. Every time gold goes up I smile. 

Peace!


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## AgentFlounder

You face considerable risk in your investments with such a short term viewpoint. The risk is that you have to figure out some time window that is favorable to sell before gold goes back down too far. But I'm sure you'll do fine. For me, playing markets is too much risk. Whether it is stock trading or gold investing or whatever else. The only waste of assets is when you sell your investment at a loss. EDIT: That's why I take a diversified, long term strategy in investing. Yeah, the market sucks now, but I think there's a pretty fair chance it will recover at some point.

Diversifying means spreading your assets across a variety of (EDIT: good) investments (gold could be included, why not??) so that your total wealth is resilient during various downswings. I'm not saying don't invest in gold, just know what the risks are and figure that into your overall investment strategy.


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## Canadian

Flounder - It's not really short term. The reason why is the war in Iraq. As long as the U.S. has a presence is Iraq it will be forced to "run the presses" to the tune of about 2 billion U.S. dollars per week. That's it. They have no other way to fund the war. 

They will also not "pull out" without warning. They'll set a target date. Plus there will be delays. We'll all be able to anticipate the "slowing of the presses." Besides that there are also constant "bailout" proposals. Anyone in gold will have at least a year's worth of warning based upon news about the war.

With the U.S. "printing" about 2 billion dollars a week just for the war (not including bailout packages or other over budget spending) hyperinflation is predictable and the levels can be easily monitored. As long as the war continues there is literally no risk in holding gold as the money supply is guaranteed to increase at an astronomical rate on a weekly basis.


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## endurance

Is gold on a bubble right now? Maybe, but if the government continues to make money at the current rate, what do you think your cash savings will be worth in a few years? 

The Iraq war is cheap compared to the bailout and stimulus packages that have been enacted and are in the works in the coming months. If you don't understand the tremendous risks that Credit Default Swaps (CDS) pose to the world financial markets right now, you don't understand the bomb that's sitting under your house right now. Currently, the US Federal Debt is around $10 trillion. Corporate, municipal, and private debt rests at about $45 trillion in the US alone. The US GDP is about $14.9 trillion. In other words, we're currently leveraged at about 360% of GDP. In 1929 we were leveraged at about 250%. Unfortunately, that's the good news. The bad news is that the federal government took on an unbelievably big risk in taking over AIG. The $85 billion is just the tip of the iceberg if big corporations that AIG insured the bonds of (like Lehman Brothers) start going out of business. That insurance or CDS market exposes the federal government to not billions, but trillions of dollars in risk. The global CDS market is estimated to be worth over $250 trillion dollars (more value than all currency in circulation in the entire world). 

To prevent that meltdown, the federal government will have to look at each bankruptcy now with the eye on how much will it cost to bail them out vs. how much will we have to pay the bond holders if they collapse. Also, if a company collapses that has a few billion in CDS's out there, how many banks will collapse when they have to pay to cover the CDS. The dirty little bit about CDS's is there are tens of thousands of CDS's where the holder doesn't even have the bond in the first place. It's like everyone buying insurance on your neighbor's house so you can all collect when it burns down. Of course, to make any money on that deal, you picked the neighbor who stores gasoline in their garage and smokes five packs of cigarettes a day.

Anyway, the net result is that the US government may now be on the hook for more money than it could raise in the next 100 years. The only way to get out of that isn't to take out loans, it's to make more money. 

Now there's an upside to inflation that few talk about. If you have a fixed mortgage, you pay that $1000/month (or whatever) plus property tax and insurance, right? If there was no inflation and your income stayed flat at $3,000/month, than you'd pay off the loan in 30 years. Well if inflation hits 20% per year and your income is adjusted annually for inflation, then next year you'd make $3,600/month. If that inflation rate continues for 10 years, sure a loaf of bread will be $37, but you'll be earning $22,207/month. That means that proportional to your income, your house payment will be 1/22 of your income vs. 1/3 like it is now. However, if you had any savings and they weren't making 20% interest, they'd be worth proportionately less. 

Gold, in theory, is a hedge against that inflation. Also, I see 20% as optimistic in the long run. South American countries have had 100% inflation per month to pay off their old debt. 

Personally, I think everyone should have some gold and silver in their savings. Treat it like money in the market. There will be exceptionally good times to buy, there will be exceptionally good times to sell, and there will be times to hold on and wait it out. It shouldn't come before the basics, like a way to heat your home if the power goes out or a cache of food to get you through a worst case scenario winter, but it should be on your list of things to acquire well before you start stockpiling ammo into the fourth figure.


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## Tim

Endurance, 
You laid it all out very well. The situation is not good and you did not even mention the coming crisis in Social Security and Medicare funding which adds up to trillions of dollars over the next decade. I would definately look at gold as a back up currency if the dollar falls in value greatly. Keep in mind that FDR did confiscate gold coins, bullion, and certificates during the Great Depression, it could happen again.


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## The_Blob

Social Security will be the way of the Dodo long before I would be ready to collect it. A main reason I have opted OUT of it & use my own 'retirement plan'. when I tell people this they look at me like I am mentally deficient, as if the govt. could manage my money (or even has a right to) better than I can. But then again, most of this economic mess has happened because people have 'kept up with the Joneses' & followed them over a cliff.

ok, preaching over... >_< ^_^


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## Tim

You opted out? Did you opt out of the taxes? 
Too many folks have been counting on SS for a large part of their retirement. They expect ed the government to fix the problem looming at our doorstep, but both parties have ducked the whole issue. Medicare will be probably be combined with the coming national health system, which will probably lower standards of care and cost trillions more.


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## endurance

I don't think I'm that far from the norm in trying to keep one foot in each of two very different worlds. On the one hand, I have laid plans that expect the worst in which I've stored over a year of food and other essential tools of survival. On the other hand, I've planned for a retirement through my employer's 401k. At no point in either scenario did I see social security playing any kind of meaningful role. 

There's little doubt in my mind that some incredibly difficult times are coming. Whether we get our acts together and take on the challenges ahead with peak energy or we put that off for another decade will be interesting. We could create a more sustainable lifestyle and a future for humans on the planet, but I have my doubts. I think we're more likely to take the quick and easy way out of this and put off what we can, which will only delay and worsen the inevitable.

So, back to the topic of gold and silver, I think both have their place. One problem I have with silver is the 50% premium you pay for coins in most cases. No coin goes for spot prices when buying, but many gold coins can be had for $50 over spot if you look around. Silver on the otherhand trades for about $5-10 over spot. Given the current spot prices of around $10 for silver and $850 for gold, it's hard for me to swallow the idea of paying $15 for a silver one ounce coin. Even if prices go up by 50%, I only break even when I sell to a coin store (although e-bay sometimes lets you recover the premium). With gold, if the price goes up by 50%, I can sell that coin I paid $900 for a sum of $1,275.

Now, take that hyperinflation scenario with 1200% inflation for a couple years and assume the value of gold stays stable relative to the value in purchasing power. If today a piece of gold will buy you a Honda 2000EU generator, it will buy you a Honda 2000EU generator two years from now, even if the price has shot up to $129,600 with two years at 1200% inflation ($900x12= $10800x12= $129600). Ok, so let's say some day you go down to the bank, cash in two ounces of gold for $259,200 and wire it directly to your mortgage holder. You just bought your house for $1800 in gold. How's that for bargain shopping!?! I don't know if it would ever happen, but to me, it's worth keeping enough around to have as a hedge and keep you off the streets if everything went completely wonky.


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## AgentFlounder

Deflation being another possible scenario in the shorter term (and the one Bernanke is most trying to avoid), gold would help there too, although you'd need a lot more on hand to pay off the house


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## Canadian

Endurance - Look into bullion instead of coins. Coins have a numistic value and are more commonly traded. Bullion is not and has no numistic value. In Canada there is no sales tax on bullion. Because bullion is not stamped or minted it also has a lower starting price. It is also obtained easily from our banks without any premium. 

If you buy bullion instead you may be able to get much better value. You can have currency inflation at the exact same time as a deflation in the value of goods like real estate. In that case you're way farther ahead with gold. 

Also the gold advantage is that it will not remain in step with the price of goods. The price of goods will drop relative to the price of gold. You're assuming that the overall demand for generators will be the same in a hyperinflated economy as in a good economy. 

The demand for all goods will drop meaning values will drop. People will also be selling a flood of used generators to pay their rent while they are unemployed. This drives the prices of all generators down. Why would you buy a new one when you can get a used one for almost nothing? The level of desparation and competition for capital will drive the value of everything down. This is where the buying power of gold comes in. 

It's the old saying "buy low sell high." If the relative values of all goods were always the same no matter what the economy was doing it would be impossible to buy low and sell high. It would be buy medium sell medium which = no profit.


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## AgentFlounder

Canadian said:


> The demand for all goods will drop meaning values will drop. People will also be selling a flood of used generators to pay their rent while they are unemployed. This drives the prices of all generators down. Why would you buy a new one when you can get a used one for almost nothing? The level of desparation[sic] and competition for capital will drive the value of everything down. This is where the buying power of gold comes in.


What you describe here is deflation, actually.


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## Canadian

Flounder - Yes it is deflation. What I'm trying to explain is that the relative value of gold is different when you compare it to deflated goods and inflated currency. That all three do not move in lock step with each other. That each relative value has to be taken into account individually. Endurance was putting them all together in one group.


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## AgentFlounder

Ah, gotcha, that makes sense, thanks.


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