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Update: The Great Pretenders stopped pretending, as Monty Pelerin says. Monty also says that Bill Bonner says it best.
Here's the quote from Bonner that confirms for me some of what I said earlier today:
...[T]he central bank of Zimbabwe was printing up trillion-dollar notes and handing them out all over town. Trouble was, you couldn’t even buy a cup of coffee with them. In fact, you couldn’t buy a cup of coffee anyway…the whole economy was in such disarray nobody could get any coffee. Or anything else. (Emphasis added)
Or, coffee will get you through times of no money better than money will get you through times of no coffee.
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Yesterday, the US Fed reduced its rate for euros and dollars. This makes 90-day rates cheaper to the European banks -- some of which are teetering on the brink of collapse. The European Central Bank apparently feared bank runs and subsequent crisis. Other central banks joined with the Fed and ECB to support the move. Only dollars are currently being created out of thin air to prop up the euro and the Eurozone, but the Banks of Japan, England, Canada, and the Swiss National Bank form the Fed's posse.
More dollars going to Europe will add to inflation. It was reflected in the price of equities and commodities yesterday. Today looks like there is some profit-taking, but the dollar is still down against every other currency from its position earlier in the week.
All this psycho-financial manipulation even resulted in a successful bond auction for Spain. In fact, that may have been a motivating factor for the move, at least in terms of timing. The last thing the Eurozone needs at this point is another country that looks like it needs bailing out -- especially one with an economy the size of Spain's. It could not be done, and it would lead to a very abrupt and ugly end for the euro.
A few days ago, reader Jim was asking if it would be wiser to hold cash or invest in metals. I do not want to offer investment advice. My purpose is simply to point out some of the realities of our current situation and encourage people to think about them so we are not caught by surprise or pushed into a panic when bizarre events take place. I trust in God alone -- who mercifully grants unto His children the wisdom to keep blades sharp and powder dry.
With that caveat, I would say that I have expected gold to correct downward because it looks to me as if most of the rise about $1200 was speculative rather than purely reflective of actual inflation. Given the action of the central banks, a significant gold correction is unlikely for quite a while -- if ever.
Silver looks to me to have tracked much closer to the actual rate of inflation except for a spike back in the summer. Buyers should be aware that the silver is more of a commodity than gold and has been much more volatile in the past. A fifty percent drop from the current price would not be unheard of, even given the likelihood of significant inflation for the dollar.
I am kind of partial to a saying I used to hear among the freaks back in the '70s: "Dope will get you through times of no money better than money will get you through times of no dope."
Or to put it another way, it is better to have the stuff you need than to have the money to buy the stuff you need and not be able to find the stuff you need. Gold and silver are certainly forms of money historically. Gold especially is a reliable store of value. Nevertheless, I would rather have a cup of coffee and a plate of beans when I am hungry than a gold coin and no food in sight.
Consider what is of utmost importance: your spiritual well-being, friends and family, your physical health and well-being.
Water, food, shelter, and ammunition will get you through times of no gold better than gold will get you through times of no water, food, shelter, or ammunition. YMMV.
Yesterday, I took all my "money" from one of my retirement accounts, the one I can control, out of stock funds and parked it in a money market fund. I may have actually sold "high" although it is a 4% loss on my investment over the last 4 years. Stocks may shoot up a bit more. But in the 1 to 3 year horizon? I don't know what more can keep them up.
ReplyDeleteI'm pondering whether to cash out this account,take the penalties, pay the taxes and buy gold and silver. Looking to sit on it for 20 years. This would be my retirement-safety account. I'm positive that if the government keeps on in its present form without collapse then they will inflate away the value of any virtual money I may accumulate in my other retirement account.
Also looking into buying wheat, beans, oats, and rice and throwing them into one of our chest freezers. It is a relatively inexpensive bit of food insurance. As for protein, we can gnaw on the sheep flock.
That makes sense to me.
ReplyDeleteI think there are ways to invest in gold and silver with your IRA. I would talk to whomever you are brokering through, even your local bank. It won't be physical gold but mining stocks and stuff which would likely see significant growth.
The rally yesterday was so unreal. I can remember when market rallies kind of made sense. The Fed dropped interest rates so investors moved out of short-term cash into equities. The Fed tightened the money supply and investors moved gains out of equities and into cash instruments. Not any more. We are playing around with interest rates at near zero and so they drop swap rates, and the market zooms. That's not a Bull Rally, but, as my dad would say, a Bulls**t Rally.