the usa's debt dwarfs china's debt ..., page-72

Hobo

Unemployment say +15%
Housing prices -50%
ASX down say -50%
CRB down say -50 to 60%


I think the proof for the hyper inflationary scenario for gold is scant, 79 wasn't hyper inflationary it was risk based, I also wonder how relevant that 79 episode is in this modern context, the world was a pretty different place back then, it certainly shows whats possible but a guide for the future? ....and even the folk who do claim its an accurate reflection of the likely scenario to unfold close their eyes and ears when you show them the volatility experienced in 79-80. If we are really in 79-80 it would be nothing for it to fall to below 700 on the way to 5000


Dont forget that crude went to $66 a barrel in the same period, is anyone seriously expecting $400 oil? and copper was 2.2 a LB and from memory it touched 1.70 last year, based on that copper should be $10 bucks

The trouble is with these scenarios is the world is buckling under current prices, there isnt anymore debt to expand, how are folks going to pay for $400 oil? Folks talk about the price of gold in 1979 but take no account that the debt in that period, both private and government was 20% of what it is today. Is it a case of folks reading all the things they want to see to confirm their scenario and ignoring the facts that contradict their beliefs?

When I suggest wealth preservation I dont doubt physical gold will do really well .....and if you time your buys right so will gold equities, although for equities I dont think that time is now. Gold 5000, 10000, who knows, have any of you got US assets? why is the gold price important to track in USD? is anyone American here?What value is it to tracks something on another countries fiat currency? On the one hand you are against fiat and love gold, on the other you measure golds success by units of fiat that you despise? In 1973 AUD was 1.48 USD, talk about USD destruction in that period yet we forget that AUD has been falling much faster in value, what if gold rises to 2000 and AUD rises back to 1.48?

http://www.data360.org/graph_group.aspx?Graph_Group_Id=817

Judging by that chart its the AUD thats losing value not the USD....it looks like a 40 year bear market for the AUD?

Cpmpare that say to the swiss franc which would have taken 4.2 to buy 1 usd in 1971, last week it was near 1.07:1

Just think how pleased you will feel if you hold gold and there is another stock market crash that say takes the asx down to say 2000. Wealth rpeservation is a comparitive to other asset class argument, if everything is haling in value and your gold relative to those asset classes increases in value then you going to be pretty happy.

What I am suggesting is that you may not see your reward measure in fiat terms, all the money that could be printed has been printed and lent into the economy, walk down the street, any street and there is millions of that printed money locked up in debt used to buy those assets.

When folks talk about money printing in the last 12 months I point out they have been at it for 40-50 years. I bought a house in Burwood in 1985 for 66k last year it sold at auction for 1.5M. Yet folks want to talk about the coming hyperinflation? with folks in debt at a scale never seen before in civilizations history? In 1979 our debt to gdp ratio in Australia was 43%, today its 176% (private debt), yet despite these massive rises in asset prices and massive levels of debt out of no where hyperinflation is going to take hold?

a)Gold isnt a hyperinflation story anyway and 79 want hyperinflation it was a global materials crisis caused by geo political factors
b)there has been hyper asset inflation already
c)the debt we are all in is way more than any other era

Put simply the world cant afford hyper inflation and even if it could there has never been a global hyper inflationary event to compare it too. The GBP never hyper inflated when they were an empire, the depression started in 1920 for Great Britain and they spend the next 34 years in deflation............Weimer Germany hyper inflated in the early 1920 as did Russia but they were two fiat currencies when all other major currencies were gold standard, the hyper inflated because their debt were in gold and they used paper to buy gold to pay their debt, eventually no one wanted to sell them gold for paper.

While some will be surprised to know that some sovereign debts are still in gold most are denominated in USD, the reality is that most bonds are short term reset, so a country inflating away its debt will be chased hard by bond vigilantes demand better returns on their investment......its basically a nil sum game, inflate and the cost of your debt goes up. The idea that any country can inflate away its obligations is simplistically naive , while it sounds good in theory in practice if a country did do that no one would buy its bonds.


How did that kind of asset inflation occur? Printed money being used for credit expansion, the hyperinflation has largely already happened. I have another example of a friend who bought a house on the northern beaches of Sydney for 83k in 1986 and sold it recently for 3.2m (now thats inflation)