Silver & Gold prices

[hoard]

I understand your point and perhaps should have read all the previous posts prior to responding. I believe we are in the same camp in terms of price inflation, it is not going to happen for some time. Where we differ is in the opinion of money supply inflation. I believe that the current administration will leverage the balance sheet and create incentives for banks to lend, and lend excessively in order to create jobs and stabilize the housing sector. This will expand money supply relative to aggregate output. I believe this will occur sooner than later. When this happens stores of value i.e. gold, silver, and raw land will increase in value relative to the USD.

 

I can only hope that my bets will pay off in the next five or so years. This has been a most excellent thread.

 

 

[CHABSENTIA]

I dont know if you are addressing me or the total posts. First of all I went into Detail and stressed that the actions of Greenspan and Bernanke were not a major cause but whose actions aggravated the situation. There was Psychology involved and there were also actions based on either being naive, misinformed and just plain stupid. I am not sure this percentage is equal to 95%.It is not because of any excess of spending over income which is a different story entirely.My younger brother is a graduate of V.M.I. in electrical engineering and after resigning his commission after six years went on to get his Masters degree and is not stupid but in conversations he cant tell the difference between the "Tarp" and the latest Stimulus as he talks about one as if it was the other.

 

I am not interested in Monetary Policy of the Fed etc and I dont believe that it is an indicator of Inflation etc. As far as History is concerned there is a lot to be said about Psychology .My father who passed away about three years ago had accumalated a large amount of assets and left our mother very secure.He only had one year of college but he paid for the College education of myself.my brother,mty son and the two sons of my brother.He had informed me that Real Estate values would never go down.This was just before regional prices in California went down when Boeing had large layoffs.

 

This economic situation is not the result of the Federal deficit as many seem to have been conditioned to accept.It makes no difference to me whether there is inflation or deflation.I can do nothing about deals made to ease the way for a merger of Citi and Travelers and the good luck of a Treasury secretary that received a Chairmanship. It does not affect me if people that make 30K a year dont have the capacity to understand that they cant afford a 300k home and worries more about financing the purchase of a Stereo System or a car etc then a House.I acted on many indicators and one with it that had historical evidence that any time the Fed increased the rate six consecutive times that there was some type of recession 90% of the time.It worked out for me.

 

I did hear today that the U.S.is in danger of losing its triple A rating but I knew we were heading in that direction. The tipping point was 1999 for the excesses of which we are seeing the result today.This economy is 70% driven by consumers.I hear people such as Donald Trump and others saying that the Banks arent lending and I hear others saying that this is the case.It makes no difference to me because I dont plan on needing any financing.If there is not excess printing of money it will happen.One of the other choices is to demonetize it.Many if most people are not aware of the under funding liabilty of S.S and Medicare.I see where it has been recommended by this Administation to send in extra money to pay down the deficit.I understand that the debt averages out to 70 K for every american citizen. If the average assets are 88K as you posted earlier then this is a joke.If people are unemployed and trying to pay down debt then an economy that has been 70% driven by consumers will take a long time to fully recover to a point two years ago. know that the average credit card debt a year ago was 11K. The tipping point was in 1999 and while not a credit bubble per se it was a credit bubble that aggravated it with a domino effect.I guess you could also call it a debt bubble but this is semantics.Ninety three percent of people are showing responsibilty in paying their mortgages. It is the other 7% that are the problem.If you have a credit rating of at least 720 and can put 10% down then you can probably get the financing unless there is only so much and you can be edged out by somebody that has 720 and 13% to put down.In soem areas of Florida there were regions that had some really low prices in January and just before. If I had lived in the area I would have taken advantage of at least one property.

 

I am not collecting Silver because I see a big increase.I like the issue.If it does go up then I will participate.I purchase many at least 25% below retail at the present so I dont see that much downside at this time.myhome has been paid for and I have no debts. My property taxes are low compared to other States and my State has no State income tax.Our Mother is self sufficient and financially independent etc.I see no problesm at this time.I can only gauge the actions of thosein Power and try to assess the results of their actions which change all the time and try to relate it to the present and act accordingly to preserve any assets

at least at the rate of inflation. I can do nothing about the fact that my home had decreased in value by about 25% and I have gained back about 5% of that but I have no plans to sell or refinance so it is immaterial.

[CHABSENTIA]

The Dow is ancient. I dont know whay they keep using it when there are broader versions that consist of 500 and even 2000 such as the S&P and Russell index etc.How an average of 30 Stocks is supposed to be representive is beyond me.

[CHABSENTIA]

There should have been conditions on the Tarp Loans and if there were then they werent enforced. They seem to be more worried about controlling salaries. The herd was all upset about the excused AIG bonuses but we unaware of the much larger bonuses with Merrill Lynch.

[World Colonial]

The prior post was not directed to anyone in particular.

 

I am editing this post because I did not read your last one in its entirety originally because it was too long and disjointed. I do not see that most of what you wrote in it really has anything to do with what I was talking about and there is so much stuffed in it, that I see little connection between the topics you covered.

 

But if you (or anyone else) have any specific questions you want me to answer or comment on, I will do so.

 

 

[World Colonial]

The posts I was referring are not just in this thread, but in many others. However, I do not recall a post of yours in them. So you probably have not seen them.

 

Though I do not agree with you completely, your post was well thought out and its not necessary that we agree anyway. Everyone is entitled to their opinion.

 

What I find consistent on this board though is that everyone or practically everyone believes in the imminence of higher inflation or much higher inflation, that the USD is going to tank (when in actuality, it ALREADY has) and that metals are going to soar. To my recollection, there is a grand total of ONE poster who MIGHT not share this opinion. This lopsided opinion is reflective of opinion generally and is additional confirmation to me that it is wrong.

 

On the subject of what the government will do, I do not believe that they will be successful in achieving what you describe. But whether they are or are not will also be a function of collective PSYCHOLOGY. If they try to move against the tide of sentiment which I believe has already turned on them, then the market, to personify it, will negate or overwhelm anything they attempt to do, no matter what it is and even though neither of us may know in advance exactly what it might be.

 

I agree that I never thought that they would be so completely reckless as they have been and doubtless, more reckless responses are in store if my outloook is remotely correct.

 

Specifically to real estate, the next activity I expect is mortgage "cramdowns.". This has been surfacing anyway and I expect it to be a condition of the next bank bailout because another one is coming. If they do this, then I expect mortgage credit to become even less available in the private market after it returns and at higher rates.

 

No doubt, the government, which accounts for the entire mortage market now, will continue to attempt to backfill but ultimately, the market is going to force it to choose between housing, heath care, social entitlements and military spending. You will know that this choice must be made when interest rates on Treasury debt start to rise significantly, even if the economy is weak and inflation is not a problem.

 

On your investment position, since I betting am directly against you, obviously I do not expect you to be correct. Its impossible to short land and I am not short the metals (I would consider that unwise) but I have positioned my assets to protect more agasint deflation than inflation and I am also waiting to short the stock market.

 

One of us is going to be wrong. If it is me, then I will probably be forced to buy metals at a higher price. I have the capacity to do so though not as much as I would like and obviously being late will introduce an added element of price risk.

 

If it is you, then you better be sure that you took into account what I included in this thread and have a contingency plan.

 

As for land, the only exception I have now to my general opinion is farmland, mineral rights or possibly land outside the United States in selective locations. But I'm still not bullish on it now.

 

I am completely bearish on all other real estate except for special situations that I have no ability to identify. For all the reasons I have mentioned in this post and others, I believe that real estate generally is going to fall a lot more.

[CHABSENTIA]

Agreed.Let me expalin the real estate part in more detailed terms. Interest rates are low and a person can now purchase a home with little or no money down. We will asssume that they are presented with the choice of a fixed mortgage and some sort of a variable mortgage. The variable mortgage requires cheaper payments up front and for whatever reason appeals to the buyer whether it is Psycholgical or it is all they can afford etc. Bernanke then raises rates 14 consecutive times. It is at least 1/4 and you throw in a few 1/2 and the net effect is another 4%. The first year is all interest and after a few years the principal hasnt been reduced by much. Lets say you took out a mortgage for 100K at 4% which is at least 7%.The mortgage didnt go up three or four percent. It is now reclculated at 100,000.00 at 7% as opposed to 3.5% or 4% at 100K and the payments are much bigger when the variable rate resets. Now instead of a mortgage at $1500 a month you now have one at $2300.00 a month or greater. Even if they were safe at $1500.00 they are probably not safe at $2300.00 a month or more. If you were marginal in the first place or you needed two incomes with your spouse to in the first place and one has reduced employment then you are even worse off or other variations especially if you were pushing the envelope at the beginning. Even if you can swing the increased mortgage then you see a decrease in value of your home as others walk away from them and thereare various foreclosures. So now you have greatly increased payments on a home that has decreased in value and you might even owe more than the home is worth. You certainly can't sell it and come out even. Then you had the people who used the equity in their home to finance a lifestyle they couldnt afford with regular wages. The have a 200K home and borrow 100K or 50% equity. The home goes down in value 30% and they now have a home valued at 140k and a loan on it at 100K.More decisons.

 

This economic demise is not the result of what many refer to as Deficit spending.This is a different animal and has much different consequences down the line mainly in a decline of the dollar and an erosion in many if not most forms of assets.This is the more silent thief.

 

It was more the actions of people who made bad decsions or stupid decisions and an environment that encouraged it and/or aggravated it. I go back to my earlier example of Bank of America. If it had not been allowed to expand across State lines and go into other forms of Invesments then the Problem woulf have been more confined. I havre also seen Wells Fargo in Texas and other States which had also been restricted to California and then there is Wachovia which had been restricted to North Carolina.

 

I can remember when Bank of American bought Barnett here in Florida. Just before the Jaquars Football team had come here and Barnett had a program where people could get a Loan to buy Seasons tickets. They just had to purcahse a few seasons in advance to make the Loan big enough

[World Colonial]

This thread is not about real estate, but since it is important to most people as their largest asset, I might as well comment on it in reply to your post.

 

I see no chance whatsoever that real estate prices in general will recover in the near future. The real estate bubble was a component (admitedly a large one) of the asset, debt and credit MANIA which was of unprecedented historical proportions. Let me be as obvious as possible. There has NEVER been a mania which was larger than this one. The end of the mania (at least since 1995) and economic conditions that have and will accompany it should keep real estate prices falling for years to come.

 

From a practical standpoint, higher unemployment and restricted credit availability will keep prices in check, and this is even true with higher inflation, quite a bit higher inflation in my opinion.

 

Real estate is still ridiculously overpriced in many instances versus the historical norm and even where it does not appear to be, demand is mostly depedendant upon access to unsustainably easy credit conditions.

 

The only reason real estate can be viewed as 'affordable" is because people look at the artificially low interest rates and the minimal downpayments required to buy a home. And based upon these terms, the monthly payment required to own one.

 

Aside from unsustainable prices, another result of these distortions has been to turn many "homeowners" (nominal only for many since 25% have NEGATIVE equity) into defacto DEBT SLAVES.

 

Contrary to conventional thinking (of course), a home is not an "investment" but a long lived consumer good. It wears out and is expensive to maintain and own. (Land does not wear out but is also currently absurdly overpriced for residential lots.)

 

The fact of the matter is that a substantial number of people cannot afford to consume the home they live in, and this is true even if they can afford the payments and are in no danger of foreclosure. The reason I state this is because it is an IMPEDIMENT to their accumulation of wealth absent artificial appreciation which has recently disappeared.

 

The health of real estate pricing is dependent upon the entry of first time home buyers and these people are flat broke and have been for years. The net worth and liquidity data I provided prove that the median household is practically broke, and the typical first time home buyer is in even worse shape since they have no home equity. And without the first time buyer, there is no move up market to push the prices of more expensive homes higher which constitute the vast majority of the housing market.

 

At the moment, the government is providing mortgage credit but eventually, they will be forced by the bond market to scale back because the government does not have the capacity to support all commitments concurrently indefinitely.

 

Other government policies are also counterproductive to the private mortgage market. The coming mortgage "cramdowns" are one because this populist demagoguery is going to reduce the willingness of creditors to provide mortgage financing in the future.

 

So are other laws which make it more difficult to foreclose or statutes which prevent the lender from going after deficiences.

 

It does not matter whether someone is or is not in favor of them. The mortgage business does not exist to provide people with funds to buy homes, but to provide a return to the creditor. If this business is not sufficiently profitable, then creditors will go elsewhere.

 

To the extent that mortgage credit is available in the future, I expect fewer borrowers to be eligible at all (those who voluntarily defaulted need not apply at all), higher interest rates and higher down payment requirements. Especially the latter to properly reflect the ACTUAL risk which exists with fewer government distortions.

 

And without these distortions, real estate will have to sell for less than it has because people will be both less willing and able to pay recent prices.

[SWNGC]

While it is true that I am currently of the opinion that in the near term there is a better chance for deflationary movement and general strengthening of the dollar (and my investments are structred to capitalize on this), my longer term opinion is still in favor of moderate/controlled cycles up/down, but with a controlled slope favoring long term (2 yr range) "reasonable" inflation to accomodate the extreme debt load of the masses and reduce/drag out/"dampen" the shock to the system and thus minimize any resulting "overshoot" that would otherwise be associated with sharp/uninhibited market movements and "buy time" for other economic developments, especially as related to the labor market, to transpire.

 

Much of the remaining discussion from my recent posts under this topic has been directed at challenging people to reconsider the common acts of accumulating gold/silver/etc as investments or hedges to stave inflation, and instead search for other mechanisms that may be better suited to achieve the desired objectives.... While my investment objectives are more geared toward long term accumulation and preservation of wealth/generational wealth, the tools and methodologies employed can often also be very useful to any other investor/speculator who wishes to manage/mitigate unneccessary risk and/or act with a more focused investment agenda... Knowing and using the right tool for the task is often half of the task...

 

Cheers to all

[World Colonial]

I agree with you that the government will attempt to create "moderate" inflation to lighten the debt load but I do not believe they will suceed. That outcome implies a reflation of the credit bubble which if "successful" would mean that the bubble would just get bigger than it was in late 2007.

 

Even under that "optimistic" scenario (and it is the best one that could happen from the conventional point of view), I would still expect a deflationary implosion later.

 

However, I do not expect a deflationary implosion later but sooner. And I do not expect it to be gradual either but another panic which is even worse than the one in late 2008.

 

The reason for this is that the government's distortions make a panic inevitable to me, as inevitable as most people believe higher inflation will be. These distortions are manifested in fiscal and monetary policy which directly waste a colossal amount of economic resources and indirectly by moral hazard which contributes to the mania psychology. What you describe would be a continuation of this.

 

The government has not allowed the economic distortions which have been created over the last century (mostly since the 1930's) to get corrected to date, but they will be "resolved" one way or another. I expect this "resolution" to be deflationary while most expect it to be inflationary.

 

As to why it wil not be gradual, it is because the government never anticipates anything correctly. They always react to the last crisis and are always surprised by the next one. This one will be no different.

[CHABSENTIA]

Your last few sentences say it all. Whether they attempt it or not and whether they attempt it and fail etc is the problem. They are going to have to do something to de monetize the debt att some poimt whether it be more excessive printing or allowing inflation to go real high befire attempting anything . The only other scenario would be to reduce spending and increase taxes which is not possible for them for many reasons

 

 

You are most likely correct in that whatever they do it will be at the very last minute and I am not sure that they will know when that point has been reached and then you have a large number of people re-electing them that cant find their a-- with both hands and a road map.

[World Colonial]

I believe that a deflationary collapse is the greater "risk" ( I put it in quotes because it is not a problem, but the actual solution to the government created distortions) precisely BECAUSE the government will not, and in actuality, cannot act in time to prevent it.

 

Listening to conventional opinion, the typical response is, the government will simply print as much fiat currency as necessary to create inflation and at will. That's the extent of the logic to the inflationary arguement or if there is anything more, I would like to know it because I have never heard it and nothing else comes to mind.

 

First, as I stated in a prior post here, there is not one shred of evidence from history that this has happened. No wealthy country with a primarily credit based economy has EVER done so except in times of duress such as war and even in time of war, this only happened when borrowing was not an option. Today, the US and other weathier countries do not remotely face those conditions and are unlikely to in the future before deflation happens.

 

Second, the government is not monolithic in the sense that it has the capacity and incentive to act like each of us do as individuals. In the private economy, people act individually according to their own interests but there is a "herding" impulse which makes trends like manias, depressions, panics and inflation possible. That's the psychological element which conventional thinkers ignore or fail to recognize though it is becoming more mainstream in the new field of behavioural economics.

 

Government policy is different. Because the government has to reach a consensus before it can do anything, the idea that it will pre-emptively act to stop deflation in its tracks and prevent a financial panic is absurd on its face. And this is true whether there is a panic or deflation in store or not. It is ALWAYS the last to act and only closes the proverbial barn door after the horses have bolted the stable.

 

Today, because of the stupendous leverage from fractional reserve lending built on top of a mole hill of actual "money", the financial system and the economy is at greater risk of a deflationary collapse than ever before. However, whether it happens or not and when is a PSYCHOLOGICAL phenomenon. Its possible that the resolution could be an inflationary explosion instead of a deflationary implosion but for all the reasons I have stated in this thread and many others, its far less likely than most people believe.

 

Third and related to this second consideration is that those who have the greatest influence and capacity to make it happen CANNOT do so unilaterally and at this time anyway, have absolutely no reason or motivation to do so.

 

Bernanke cannot do so as Chairman of the Fed, Geithner cannot do so as Treasury Secretary and Obama cannot do so as President of the United States.

 

But let's take "Helicopter Ben" Bernanke as a hypothetical example. Even if he wanted to print trillions in greenbacks, he would first have to get the concurrence and support of the FOMC and the district banks before he could implement that type of policy.

 

To even determine whether this makes any sense at all, you need to ask yourself, what possible benefit would it provide to HIM? Lightening the debt load of the man in the street is DEFINITELY NOT one of them. No one can give me one reason why he would give a rat's about that because there is none. He is far more interested in his "legacy" as Fed chairman and other considerations (such as lucrative employment after he leaves the Fed) than that.

 

But for the moment, let's overlook that minor detail and assume that Bernanke wanted to do it, that the rest of the Fed agreed with him and that no one else in the government stopped him. Guess what? It still would not happen the way conventional thinkers believe.

 

Remember the leverage I just mentioned? Well, if he attempted to inflate the debt away, creditors could collapse the economy by destroying far more nominal value than the Fed could print simply by lowering the market value of tradable debt and withholding new credit. And because the bond market is much bigger than the Fed, there is nothing that could be done to stop this outcome in time to prevent deflation. That is what happened between October, 2007 and March, 2009 and why the economy was on the verge of a financial metdown as even conventional thinkers in the economic and financial community admit. Nothing has changed to alter the risk that existed then and in fact, it is GREATER now because the distortions are larger and the financial position of banks, goverment and the public are WORSE than they were at the beginning of the crisis.

 

A far more reasonable outcome is to expect more of the same type of policies which will include more borrowing, more spending, SOME ACTUAL "printing", and more stupid legislation to bail those out who are either broke or made poor financial decisions. In other words, a continuation of the status quo until the market, to personify it, forces the government's hand through another financial crisis.

 

Depending upon the circumstances at that time, then the government might make a drastic change in policy which would make the inflationary outcome that most people believe is inevitable now a more likely outcome, but if so, it will only occur AFTER some level of deflation has already wrecked the balance sheets of most American households.

[CHABSENTIA]

I dont understand why you keep responding to me regardinf Inlfaltion as I hace said many times that it could be down the road and if it occurred would be the cause of a loss in purchasing power and an erosion of certain assets and that this economic collapse was no the result of a Deficit etc.

 

 

Actually it is very simple. We are in a period of over capacity and low demand which is deflationary. Coupled with an actual rate of 17.5% unemployment then it is even more deflationary . Depending on which Economist that you adhere to then any noticeable recoverty would be at the end of 2011 or another 12 years. At what point it could turn inflationary would then be in those time frames/

 

Based on the above an economist such as Roubini who has been pretty much on the button is not a gold bug,

 

I like ther Morgans and am not a silver bug,however, the historic ratio of gold to silver is 60 to one which means that Gold at 1200 would mean silver at 20 so there is a liitle more room for silver and more if and when gold starts to go up but the downside is more for Gold in my opinion at thos time.

[World Colonial]

In this case I was replying to your post but not directing it specifically to you. But generally I was not. I suppose it is necesary to state when I am and when I am not?

 

In one other post, I was specifically directing my comments to you but not in the others. There were other posts I wrote in this thread that were written after you replied, but it just so happened that I used the "reply" button right after you wrote your comments. That is it.

[Nick Jr.]

Here is the thing that you have to take into consideration, supply & demand silver has come of age as a major component in various things. One of them just recently is solar panels, they have discoverd that using silver in solar panels has made them very efficient & cost effective. This is only one of many of silver uses more to come. Just watch siver prices sore even though they went down below $17 per oz today they will even go lower but then again they will take off. I will keep telling if you buy now be patient over $100 oz will not surprise me .

[gbsten]

I agree that we may be on the verge of a long-term silver increase due to expanded uses. In addition to the solar/electrical uses, it appears we may have several expansions in the biomedical field that may drive long-term demand.

[CHABSENTIA]

Actually I think that I made a mistake in the historic ratio of Gold to Silver as I was in a hurry so lets give a few examples.

 

Right now we are in a deflationary environment because of low demand and excess capacity coupled with high unemployment. The historic ratio of gold to silver is about 20. Gold at 1200.00 and Silver at 20.00 is a ratio of 60.

 

Let us take Roubini who has been right on the money in predictions who states that there will be no improvement in the economy until the end of 2011 or two years from now. So we have to assume that it will be deflationary for at least that long.

 

Let us say that an individual has 200 ounces of Morgan Dollars which has a retail of $16,000.00 dollarsTwo hundred ounces of silver at $20.00 is $4000.00 which means the value out side of the silver is $12,000 or 3 to one. Obviously you cant purchase an 1881 S morgan in MS65 that is pretty common for $20.00

 

Let us further asume that except for a few spikes due to spot crises around the world that Gold remains at $1200.00 an ounce for at least the next teo years or more. If Siver rises to the 20 to one ratio then Silver would be at $60.00 an ounce and your 200 ounces of Morgans would be worth $12,000.00 in silver content alone. Even if the ratio of retail coin value to silver value was only 2 to one then this would be $24,000 and the total value would be $36,000 as opposed to the previous $16,000 or more than twice the previuos value . If it was the same previuos value of 3 to one then your 200 ounces of Morgan dollars would be worth $48,000.00

 

Now let us assume that Gold drops back to $900.00 an ounce and the 20 to one historic ratio is maintained then the value of silver is $45.00 and ounce and your 200 ounces of Morgans are worth $45.00 an ounce at a 2 to one ratio is worth

$27,000.00. If Gold drops back to $900.00 and the 60 to one ratio is still maintained then the value of the solver content of the 200 ounces of Morgans is $15.00 times 200 ounces or $3,000.00 and at the previous 3 to one difference then you have $9000.00 plus $3000.00 or 12,000.which is less than the original $16,000 but could be closer because the intrinsic vlaue of the Morgans would probably have increased in two years.

 

So if you were really concerned about purchasing precious metals as a hedge against inflation then Silver would be the obviuos choice because if the deflationary environment last too much longer then there is a good possibilty that Gold could decline and even if it were to go up to say $1400.00 the chance for a profit is not there unless you could buy 100 ounces which at $1200. an ounce is $120,000.00

 

 

So unless you believe that Inflation is really going to increase a lot in the next two years which does not seem possible a this time then Silver coins has the least odds of a drop and this is not including Psycholgical factors involved in its purchase. The 60 to one present ratio might be maintained today because there are over riding Pychological concerns that outweigh all others because the majority of the people believe that Gold is priced too high and will decline. I personally think the 60 to one ratio is overdone because a continous even a historic ratio of 20 to one and silver at $20.00 an ounce values Gold at $400.00 an ounce which does not seem possible in this and future climates.

 

So the odds favor silver in most scenarios.

[CHABSENTIA]

As explained in my previous post I dont see Silver at $100.00 an ounce. At the 60 to one present ratio then this would mean Gold would have to be $6000.00 an ounce. At a historic 20 to one ratio then this would mean gold was $2000.00 an ounce which would be more reasonable but not possible in a deflationary environment.

 

The demand is not there for Solar Panels. How many people can afford to solar panel their entire House at $50K.The problem is how the rebate for how this is constructed,, If you are in the 20% tax bracket then the 50K is worth 10 K in deductions. Unless you owe 10K in taxes then the 10K in deductions do you no good and even if you owe 10K then you still have an excess of 40K on the cost of the solar panels. Then you have to take the remaining 40 k and divide it by the difference in cost of your previous consumption costs to see how many years it takes to break even which is probably about 12 years

[World Colonial]

The explanation you are using is hardly new and is a common one used by silver bulls to explain their position. The other common ones are the inflation argument and in the 1980's at least, the supply deficit.

 

Silver is primarily an industrial metal but will eventually be vulnerable to substitution or technological obsolecense if it becomes uneconomical to use for industrial purposes and at $100 an ounce, it would for at least some purposes. The film industry used to be the largest or one of the largest users of silver. How much is it used for digital photography now? I do not know but someone can tell me if they do. It is certainly a lot less than before.

 

But neither the reason you give nor the other two I provided used by silver bulls will be responsible for much higher silver prices. If silver explodes in price, it will not be because of industrial demand but because of "investor" or speculative demand.

 

Inflation occurred every year between 1980 and 2001 and silver prices fell 93% from $50 to $3.50. There was also a supply deficit between mining production and user demand for either most or all of this period and it did not make any difference either as the price still crashed.

 

I cannot speak to the industrial uses of silver but they have changed over time with some new ones and others that disappeared.

 

Ultimately, these explanations are rationalizations that do not work in making a price forecast or if they do, then someone should be able to provide some actual evidence because I have never seen it.

 

But in any event, since I expect an economic depression to occur first, I do not expect industrial demand for silver to explode in the near future anyway, I expect it to crash.

 

On the investment and speculative merits, I have already stated that those who can afford to buy silver and KEEP IT should do so but they should not expect to become rich off of it like a lot of them apparently do. Most people do not have the financial capacity to keep any substantial position under adverse circumstances and since they cannot, they better hope they are right.

 

Silver might go up anyway now instead of later despite the arguments I have provided to explain why this is not likely. And that is why I say everyone should own it (or gold).

[chinook]

interesting note for those who still believe in the market rebound..

 

After the initial collapse in 1929 of the market, there was a rebound ( rarely mentioned) that saw the market regain 46% of its lost value by April of 1930..after that there was an additional 80% drop by November of 1930..

 

The debt is a done deal...we can never pay it off and it will be only a few years until the interest alone exceeds GDP..the Fed cannot artificially keep interest rates at 0% forever..when this house of cards collapse and hyperinflation hits the dollar will pop its bubble..

 

I agree with WC about 1 major point...precious metals will likely continue to soar but then things would be relative...what good is $100 an ounce silver if a can of soup costs $25?

 

Nothing of what you wrote is true. If you are interested I will provide with facts and then of my opinion.

[chinook]

I did hear today that the U.S.is in danger of losing its triple A rating but I knew we were heading in that direction. The tipping point was 1999 for the excesses of which we are seeing the result today.This economy is 70% driven by consumers.I hear people such as Donald Trump and others saying that the Banks arent lending and I hear others saying that this is the case

 

Highly unlikely. The USA "allows" the global trade engine to continue. They could make it all stop on a dime if desired. No other country can do that.

 

Banks are not lending because most people are not worthy. Look around you, would you lend?

 

Trump has gone bankrupt 3x now, why he even gets facetime on TV is beyond me.

[MorganMan]

interesting note for those who still believe in the market rebound..

 

After the initial collapse in 1929 of the market, there was a rebound ( rarely mentioned) that saw the market regain 46% of its lost value by April of 1930..after that there was an additional 80% drop by November of 1930..

The debt is a done deal...we can never pay it off and it will be only a few years until the interest alone exceeds GDP..the Fed cannot artificially keep interest rates at 0% forever..when this house of cards collapse and hyperinflation hits the dollar will pop its bubble..

 

I agree with WC about 1 major point...precious metals will likely continue to soar but then things would be relative...what good is $100 an ounce silver if a can of soup costs $25?

 

Nothing of what you wrote is true. If you are interested I will provide with facts and then of my opinion.

 

I think you need to check the charts. He is dead on about the rebound before the big drop. It went from 381 down to 198, then rebounded back to 294, before dropping to a low of 41. The only thing he got wrong was it was a couple of years after 1930 before it hit the low.

 

1920-1940 Stock Chart

 

The question I have is: Are we sitting at early 1930 right now....teetering on another big drop?

 

MM

[World Colonial]

The question I have is: Are we sitting at early 1930 right now....teetering on another big drop?

 

MM

 

Yes, we are. The Dow has retraced asimilar percentage at this time since the March 9 low as it did in April 1930, 60% now versus about 54% then. (I do not have the price data with me but I believe this incorporates intra-day moves. The data you provided makes it slightly less than 50%.).

 

Seasonal factors are positive for the next few weeks but I am looking for a resumption of the decline to start in the near future.

 

History never repeats itself exactly, but the risk of a resumption of the October 2007 to March 2009 decline is at least as great if not greater than it was in April 1930.

[CHABSENTIA]

The fact that the U.S. is losing its triple A rating means nothing.Trump may be worh less than before,however, he is not in the poorhouse and it doesnt mean that he doent know anything about the situation.Take a look at Roubini who has been right on ther money.The Banks are a joke. They were very irresponsible after 1999 .Now theyb have gone to the opposite extreme.My only point about Trumo was that he ageed that the Banks werent lending. If you wanted to buy a piece of Real Estate and had a creidit rating of 740 or better and 10 % to put down then you might stand a chance unless somebody came along with the same credit rating and 12% to put down then they would get the available loan. I see no problem here. When I bought a home in 1979 I had to put 20% down and my monthly debt payments including my mortgage could not be more than 25% of my Income. I think its a great ratio,

 

Another point was that anybody who thinks the deficit is responsible for this mess is clueless. The other point was that an average Unemployment ration of over 17% and only 25% of the stimulus being spent since February amd 95% of that 25% being spent on Medicaid, Food Stamos and Tax incentives is not job cretion but Wealth redistribution just like the recent Obama program that pays the mortgages of unemployed people.

 

These actions and the total number of people unemployed which is above 16 miilion is not going to support an economy that has been 70% consumer driven especially when the average credit card debt is 11K.We are in a deflationary economy with over capacity, low demand and high unemployment and 1999 was the tipping point.

 

You need to quote my whole paragraphs instead of selective sentences and trying to rationalize the above attempts at wealth redistribution and trying to force Banks to lend Money at excesive rates which got us into this mess. Lets go back to 20% down etc.

 

 

[Oldtrader3]

Keep in mind that there are some modern uses of silver being discovered now that are not able to be substituted (bacteriacidal uses, medical uses) by the use of other precious metals.

[MorganMan]

The fact that the U.S. is losing its triple A rating means nothing.Trump may be worh less than before,however, he is not in the poorhouse and it doesnt mean that he doent know anything about the situation.Take a look at Roubini who has been right on ther money.The Banks are a joke. They were very irresponsible after 1999 .Now theyb have gone to the opposite extreme.My only point about Trumo was that he ageed that the Banks werent lending. If you wanted to buy a piece of Real Estate and had a creidit rating of 740 or better and 10 % to put down then you might stand a chance unless somebody came along with the same credit rating and 12% to put down then they would get the available loan. I see no problem here. When I bought a home in 1979 I had to put 20% down and my monthly debt payments including my mortgage could not be more than 25% of my Income. I think its a great ratio,

 

Another point was that anybody who thinks the deficit is responsible for this mess is clueless. The other point was that an average Unemployment ration of over 17% and only 25% of the stimulus being spent since February amd 95% of that 25% being spent on Medicaid, Food Stamos and Tax incentives is not job cretion but Wealth redistribution just like the recent Obama program that pays the mortgages of unemployed people.

 

These actions and the total number of people unemployed which is above 16 miilion is not going to support an economy that has been 70% consumer driven especially when the average credit card debt is 11K.We are in a deflationary economy with over capacity, low demand and high unemployment and 1999 was the tipping point.

 

You need to quote my whole paragraphs instead of selective sentences and trying to rationalize the above attempts at wealth redistribution and trying to force Banks to lend Money at excesive rates which got us into this mess. Lets go back to 20% down etc.

 

 

They were pressured to loan money to low income folks by the administration at that time. I knew several bankers that made loans that they knew would never be paid, but were scared to death of lawsuits by the fed for discrimination.

 

Why do you think Freddie Mac was created in the first place. Wealth redistribution incognito.

 

I can remember real estate agents talking about how if they wanted a sure sale, they could just take a minority couple with a salary of 30,000 to the bank to buy a 300,000 home. The banks were scared to turn the loan down.

 

And no, you will never hear them state this publicly. It is part of all this "politically correct" BS

 

MM

[WinstonWare]

The question I have is: Are we sitting at early 1930 right now....teetering on another big drop?

 

MM

 

Yes, we are. The Dow has retraced asimilar percentage at this time since the March 9 low as it did in April 1930, 60% now versus about 54% then. (I do not have the price data with me but I believe this incorporates intra-day moves. The data you provided makes it slightly less than 50%.).

 

Seasonal factors are positive for the next few weeks but I am looking for a resumption of the decline to start in the near future.

 

History never repeats itself exactly, but the risk of a resumption of the October 2007 to March 2009 decline is at least as great if not greater than it was in April 1930.

 

I was just read this which seems relevant to this conversation...

 

"Fed Chairman Ben Bernanke, named Time's Person of the Year on Wednesday, has repeated frequently that one of the problems of the Great Depression was that the Fed raised rates too quickly when the economy first showed signs of life, causing a second, much more painful downturn that extended the Depression for years."

 

CNN Money Article

[World Colonial]

Yes, I saw that headline today and it is a complete farce. Bernanke is a complete fool who operates in an ivory tower concoction of his own making which has little to no resemblance to the real world.

 

I do not know whether the Fed's monetary policy made things worse or not in the 1930's, probably it did which is what I would expect since I consider those supposed omnipotent wizards behind the curtain to be completely clueless.

 

But regardless of whether it did or not, the idea that the Fed can prevent the next depression is a lie. They could not have prevented it then and they cannot now either. The market is much bigger than the Fed and will make its own path regardless of what the Fed does or does not do.

 

Per the examples I gave before, the government (whether the Fed or otherwise), is always behind the curve and fighting the last war. Recently, this last war was the fear of inflation when the far greater risk now is deflation. I believe that even the Fed fears this more now despite their lies. Their supposed goal of "price stability" and "moderate" inflation is simply institutionalized THEFT. Purportedly, their annual inflation target is 2% which means they want to STEAL 2% of your wealth and mine every year. That alone is enough of a reason to get rid of the Fed.

 

If my expectations come to pass and there is a deflationary depression, then the Fed will either act like they did last fall and fail to stem the tide this next time or, they will appear to be successful at the bottom which is what is my interpretation of things last year.

 

If my expectations do not come to pass at this time, then that most likely means that the Fed policy will be a "success" and we'll have an opportunity to witness Bubble 3.0, the sequal to Bubble 1.0 (stock market) and Bubble 2.0 (housing), all of which are subsets of the greatest bubble, credit and debt. Where the focus of Bubble 3.0 could be, I do not know. I see no candidates that are BIGGER than either stocks or housing which I consiser a prerequisite requirement for a follow-up due to the need to "stimulate" the economy and keep the debt baloon from imploding.

 

But regardless of whether what I expect happens now or later, ultimately, the standard of living of the typical American will decline and the longer this claptrap continues, the worse it will be. There is no need to have any ambivalence about that outcome. All bad debts and decisions must be paid because there is no free lunch in life.

[CHABSENTIA]

Actually the C.R.A started earlier under the Carter administration. I am not sure but I think it was killed under R.R. The tipping point was in 1999. Was it a coincidence that Travelers couldnt merge with Citibank because of the restricitons of Glass Steagall and Glass Steagall was repealed and Clinton did not veto it? Was it a coincidence that two weeks after Clinton signed it into Law that his Treasury Secretary,Robert Rubin, resigned to become Chairman of Citibank where he stayed until 2008 when he resigned to become a top adviser for the Obama campaign. Is it also a coincidence that Larry Summers who is a top economic adviser for Obama was a top adviser for Clinton and a coincidence that the Obama Treasury Secretary. Geithner, is a protege of Summers?All Treasury Secretaries have been from Wall Street origins for some time with the exception of Snow whio was head of CSX transportation. Geithner was the head of the Federal Reserve during this Financial meltdown. He was head of the Federal reserve in New York which is the most important of the 12 districts because of it location to the Financial district in New York.The Under secretary of the Treasury a t the end of 2008 who was to be responsible for the Tarp until the new Treasury secretary took office is a former exec of Goldman Sachs

 

And then we have the revival of the C.R.A under Clinton that was not opposed to it by the Majority Republcan party under Phil Gramm and who repealed Glass Steagall and s was signed into Law by Clinton and did force Banks to low income people and Institutions that couldnt get a conventional mortgage, And Freddie Mac etc who then guaranteed about 80% of those mortgages

 

People just dont get it. I saw an interview of Berkely college students a few months agp where they were asked Political questions. Two girls who were asked about their favorite President answered "Ben Franklin".None knew their Congressional representive. Most knew about Brad Pitt and Angelina.

 

I also read an artice yesterday about a kid who ran up a 21K cell phone bill on Verizon because he downloaded 200 Songs. Neither the Father who was responsible for the bill or the son was aware of the download charges etc.

 

Then there was another one of those 911 cals. A woman called to complain about her cheese burger. The 911 operator told her that this was not a criminal complaint and 911 was only for them to which the woman responded " But you are here to protect us". This is you new culture along with the people whop think and have been condtioned that the Deficit is responsible.

[CHABSENTIA]

I was one of the first to criticixe Greenspan. Even after Greenspan left office the Stock Market moved on his quotes and he was still idolized. I criticized Bernanke when he raised the disocunt rate about 14 times and people are still worshipping him and calling him an expert on the Great depression. Perhaps there is soem unwritten law where you cant criticize the head of the Fed until after he has been out of office for a year.

 

There is still more on the Housing Bubble. Obama just starteda program where unemployed people will be bailed out on their mortgages. More redistribution of wealth. Fifty percent of the people who were foreclosed and bailed have already defaulted again. I understand that there is something called "Option ARMS" that were supposed to reset this year. The only good thing is that they reset under low interest rates. If they are raised then............,,,,,

 

I am reminded of a Professor in College in Politcal scince who uses a hypothetical comparison to illustrate Socialism and the transfer of wealth. Grades would be given so everbody will pass and the passing grade will be 70%. A person making 100% will gice 10% to the person making 60% and the person making 90% etc would give 20% to the person making 50% etc. The first problem is that those that are marginal will not work harder and there will be people who are making top grades who will study less because they are assured of passing etc. Who is going to support a system of wealth re-distribution whe the wealthy flee the country snd/or the currency and hide their assets as well as not working harder etc. I dont know of too many instances where somebody making 30K o 50 k a year has provided too many jobs.