Need help arguing with co-workers...

[Yukon Cornelius]

There was a conversation in my office about investing, stocks etc. between a few of my co-workers.

"I have stock in Jet Blue" "I have a mutual fund" "I invest in bonds" - things like that.

Since they are aware of where I stand economically and politically (free market/Austrian and libertarian) they of course began to break my balls about owning gold and silver.

They couldn't understand why I would spend lets say $1000 on a bag of Franklin halves with a face value of 100$. ( I am simplifying). "That sounds like a losing proposition to me" they'd say or "If TSHTF someone else is not gonna care what the silver content is, its still 50cents".

As to my bullion:

"what good would a bunch of 1oz silver coins be if nobody wants to "buy them off you?"

I got the same nonsense with gold.

I tried to explain I am trying to protect some of my money from inflation but they continued to laugh and harp on the above sticking points.

Now my weakness is arguing and debating. I get all hopped up and my articulation suffers. I have always been like this. I know what I want to say but I never get all my points together without sounding like a tool.

How can I go back at these jack-asses with simple yet effective points for PMs?
I know alot of you guys would have shut them down immediately.

[Jordan]

Well, if the SHTF these are the kind of people that you're expecting to accept gold or silver as currency. Clearly, the people who aren't interested in trading gold or silver, they want dollars. Imagine that.


So maybe they're right, gold and silver don't actually make good barter material in a SHTF scenario.

[Mike4Freedom]

Fuck them. When it all crashes you are the one that will be able to eat. They will have worthless paper and worthless jet blue stocks. Do you think people are going to be taking a lot of flights when our dollar caves in? Those bonds will be worthless as well. With our economy taking a shit so will 99% of mutual funds unless its a fund out of this country or something like a Merkx hard currency fund.

Gold and Silver is Money and Dollars are just Fiat. No matter what happens gold and silver will always be worth something. The supply of them is low.

Anybody can own stock in Jet blue. Anybody can have dollars. They are essentially worthless. Dollars are just enforced by legal tender laws. It can also only be used to buy oil. Take that away and the legal tender laws and it will be worthless in a period of months, maybe even days,

[noxagol]

It depends on the level of shit hitting the fan. If it is simply a hyperinflation scenario, but there isn't chaos or complete breakdown, then gold and silver will have extreme value.

If it turns into something like Mad Max, then you are better off with more practical things like food, water, ammo, guns, clothes, alcohol, and cigarettes, maybe even drugs like pot. The things people need to live, need to protect themselves, and need to make themselves feel better.

Any level of shit above that and you will find gold and silver will be the best bet.

Also, your co-workers suffer from what most of America suffers from, short-sight-itis. They can't see but 5 minutes into the future and if they attempt to look beyond that, their predictions are wrong because the ideas they base those predictions off of are wrong.

I do not think the system will reach Mad Max levels. I think it will simply be more like Argentina. Hopefully it doesn't get to Zimbabwe style collapse.

[Lafayette]

I dont know Jordan, it worked pretty well in Zimbabwe where people would work all day long trying to get a few tenths of a gram to buy food for the day because no one would take the use less paper.

YouTube - Gold For Bread - Zimbabwe (http://www.youtube.com/watch?v=7ubJp6rmUYM)

[pacelli]

Don't argue with them. What's the point? As soon as an argument starts, the opportunity to reverse the other person's opinion degrades. When emotions kick in, reason, logic, and common sense are thrown out the window.

At best you can provide an intentionally weak argument in favor of their choices, apparently reversing your own position. Let them enjoy their freedom to make their decisions, and let them experience the consequences of their decisions.

[MelissaWV]

Precious metals are portable in that the physical metal can be taken to another country and still be worth something. FRNs have no such power. Stock in American companies is tied to FRNs, and of course those companies will prosper or flounder based on the state of the US economy. Investing here in a foreign company is slightly better, but the tying in to FRNs still makes it risky, and you'd have to find a way to cash out or get to that other country before your investment paid off. You are also gambling that the other country is not going to collapse.

PMs, on the other hand, are valued in other nations. Even if you never leave this country, the companies you want to deal with may have the means to spend the metal versus spending worthless paper/cloth. This gives you the upper hand.

If, like another poster said, it is a Mad Max level of SHTF, then paper and stocks will be just as worthless as gold is, so there's no point in arguing one as better than the other. Stockpiles of food, portable means of assuring potable water, shelter, and reliable transportation will be more important, together with guns and ammo and skills.

[tmosley]

You can tell them that there is a severe shortage of actual silver due to decades of price suppression by certain banks. There are a lot of uses for silver where the amounts needed are very small compared to the price of the product. As such, much of the demand is inelastic. You can tell them you are sitting on silver waiting for the shortage to hit the users, who will then bid up the price a hundred fold in search of actual supply rather than paper purporting to represent silver.

Further, you should tell them that all of their investments are subject to counterparty risk. Stock shares, bonds, and currencies can be issued in an infinite amount, until they litter the streets like confetti. Once people see this is happening, they will demand things that can not be endlessly reproduced, or that can be multiplied in value merely by adding a few zeros on the end of the bill.

Show them the Gold for Bread in Zimbabwe video. Let them know that the policies that lead Zimbabwe down that road are the very same as the ones being pursued by the Fed and the Treasury.

[Zeeder]

When the "SHTF" their bonds and stocks are going to be worthless. Silver and gold are for the recovery too. What will they have in the recovery? Nothing.
I thought it was standard investment practice to have 10% in gold and silver? They don't?


There are people who think guns are worthless. They've never owned a gun. They've never hunted. They've never had a home invasion. When the SHTF, suddenly I bet they will be in the market for a gun. The same thing will happen when there is 200% inflation or the bond market breaks. Suddenly Gold and silver appear to make sense even to your economically retarded friends.

[silverhandorder]

OP ferFal is a guy writing about Argentine collapse. They use gold there so just bring that up as an example.

[legion]

There are people who think guns are worthless. They've never owned a gun. They've never hunted. They've never had a home invasion. When the SHTF, suddenly I bet they will be in the market for a gun. The same thing will happen when there is 200% inflation or the bond market breaks. Suddenly Gold and silver appear to make sense even to your economically retarded friends.

I own a cheap shotgun and no gold.

I can't think of any situation where if the shotgun didn't save me having more guns would help.

Guns, for the average person, are worthless in modern society. The market reflects this too, because guns are cheaper in inflation adjusted dollars than they have ever been. In todays dollars a government model Colt revolver cost around 3000$. Also, the price of materials used and craftsmanship of modern guns is much lower than in the past.

[Zeeder]

I own a cheap shotgun and no gold.

I can't think of any situation where if the shotgun didn't save me having more guns would help.

Guns, for the average person, are worthless in modern society. The market reflects this too, because guns are cheaper in inflation adjusted dollars than they have ever been. In todays dollars a government model Colt revolver cost around 3000$. Also, the price of materials used and craftsmanship of modern guns is much lower than in the past.

I can't tell if you understood my point or not.

My point was. That shotgun you have is worth far more than gold/money when the SHTF, or you have a home invasion. When a currency crisis happens, suddenly what the posters friends thought was stupid(investing in silver) becomes not so stupid afterall.

Guns are worthless in modern society, until something really bad happens. Same goes for growing your own food. The Average person says that I don't need to store food, because there is a grocery store.
The OP is dealing with average people.

[tmosley]

I own a cheap shotgun and no gold.

I can't think of any situation where if the shotgun didn't save me having more guns would help.

Guns, for the average person, are worthless in modern society. The market reflects this too, because guns are cheaper in inflation adjusted dollars than they have ever been. In todays dollars a government model Colt revolver cost around 3000$. Also, the price of materials used and craftsmanship of modern guns is much lower than in the past.

It's hard to take a shotgun around town (pistols are preferable), and shotguns aren't very good for hunting. You should at least cover the basics. Even a .22 pistol and a .22 rifle would leave you much more prepared (plus they are cheap and use the same super cheap ammo). A larger rifle will allow you to hunt big game. It will also help you to discourage large groups of men with rifles from trying to get into your house. If they have rifles, and you only have a shotgun, they can just shoot you through the window. If you have a rifle, they have to stay much further back, and it is difficult for them to tell if you are still there from such a distance.

[legion]

It's hard to take a shotgun around town (pistols are preferable), and shotguns aren't very good for hunting. You should at least cover the basics. Even a .22 pistol and a .22 rifle would leave you much more prepared (plus they are cheap and use the same super cheap ammo). A larger rifle will allow you to hunt big game. It will also help you to discourage large groups of men with rifles from trying to get into your house. If they have rifles, and you only have a shotgun, they can just shoot you through the window. If you have a rifle, they have to stay much further back, and it is difficult for them to tell if you are still there from such a distance.

If there's a large group of men with rifles trying to get into my house, me having a bigger gun is just delaying the inevitable. Which is my point.

If you guys are right about SHTF I'm going to be eating pigeons, squirrels, cats and dogs. Walking around after SHTF with anything but a shotgun would make you look like you are wanting to get into some trouble. Who says shotguns aren't good for hunting?

Even if SHTF, the way most of you are preparing for it is silly.

[dannno]

You can tell them that there is a severe shortage of actual silver due to decades of price suppression by certain banks. There are a lot of uses for silver where the amounts needed are very small compared to the price of the product. As such, much of the demand is inelastic. You can tell them you are sitting on silver waiting for the shortage to hit the users, who will then bid up the price a hundred fold in search of actual supply rather than paper purporting to represent silver.

Further, you should tell them that all of their investments are subject to counterparty risk. Stock shares, bonds, and currencies can be issued in an infinite amount, until they litter the streets like confetti. Once people see this is happening, they will demand things that can not be endlessly reproduced, or that can be multiplied in value merely by adding a few zeros on the end of the bill.

Show them the Gold for Bread in Zimbabwe video. Let them know that the policies that lead Zimbabwe down that road are the very same as the ones being pursued by the Fed and the Treasury.

+1

[low preference guy]

The answer to your coworkers is really simple.

They say you can't cash it, right? Well, just show them that you can! There are plenty of sellers and buyers online that deal through the mail. So you just mail the goal and get the money. It's that simple!

You buy gold in 2000 and it costs you $250 per ounce. You sell a few ounces in 2010 and you charge $1100. It's that simple.

Gold supply is extremely scarce. It grows only 2 or 3% a year. It's limited by nature.
Dollar supply is limited by the amount of zeros a computer can store.

Which is more likely to increase in supply, gold or dollars? Dollars. All it takes is a key stroke. Once you increase the supply, it's a matter of time before its value goes down.

Can you drastically increase the supply of gold, by say, 20%? Sure, after you bring to earth all the gold you found in outer space.

[Chester Copperpot]

There was a conversation in my office about investing, stocks etc. between a few of my co-workers.

"I have stock in Jet Blue" "I have a mutual fund" "I invest in bonds" - things like that.

Since they are aware of where I stand economically and politically (free market/Austrian and libertarian) they of course began to break my balls about owning gold and silver.

They couldn't understand why I would spend lets say $1000 on a bag of Franklin halves with a face value of 100$. ( I am simplifying). "That sounds like a losing proposition to me" they'd say or "If TSHTF someone else is not gonna care what the silver content is, its still 50cents".

As to my bullion:

"what good would a bunch of 1oz silver coins be if nobody wants to "buy them off you?"

I got the same nonsense with gold.

I tried to explain I am trying to protect some of my money from inflation but they continued to laugh and harp on the above sticking points.

Now my weakness is arguing and debating. I get all hopped up and my articulation suffers. I have always been like this. I know what I want to say but I never get all my points together without sounding like a tool.

How can I go back at these jack-asses with simple yet effective points for PMs?
I know alot of you guys would have shut them down immediately.

If SHTF youre franklin halves will buy 2 gallons of gasoline. even if the price of gasoline goes to $50 a gallon...

Let them try and spend their stock certificates.. (Oh that's right, they don't even own their stock.. all their stock is owned by the Depository Trust Corporation which is owned by the same guys who own the NY Federal Reserve.. youre friends only have an interest in the shares..) tsk tsk,...


THey probably want to remain ignorant and dont care.. not much you can do dude..

[SamFisher]

"what good would a bunch of 1oz silver coins be if nobody wants to "buy them off you?"



I hate to tell you, your friends are probably right. I fail to see the difference between gold, cotton, silver, sugar or oil. If you traded gold in 2009 you wouldn't have made more money than cotton....or any other commodity provided you know how to trade. It all depends on your research and timing not the commodity. This gold and silver fetish is based on no fact. People can make money and lose money on gold and silver just as they can on any other commodity depending on the market.

YouTube - Jim Rogers on Gold Silver and Sugar (http://www.youtube.com/watch?v=y1uimNf9pEc)


GOLD:

http://futures.tradingcharts.com/charts/hist/DG/cont/DG2009.png
(http://futures.tradingcharts.com/hist_DG.html)


COTTON:
http://futures.tradingcharts.com/charts/hist/CT/cont/CT2009.png
(http://futures.tradingcharts.com/hist_CT.html)

[tmosley]

If there's a large group of men with rifles trying to get into my house, me having a bigger gun is just delaying the inevitable. Which is my point.

If you guys are right about SHTF I'm going to be eating pigeons, squirrels, cats and dogs. Walking around after SHTF with anything but a shotgun would make you look like you are wanting to get into some trouble. Who says shotguns aren't good for hunting?

Even if SHTF, the way most of you are preparing for it is silly.

An ounce of deterrent is worth a pound of ammunition.

People in Afghanistan walk around with rifles all the time, and no-one (except the US military) thinks they are trying to start shit. Rifles are just really good for self defense. A shotgun isn't going to do much good against someone trying to mow you down with a car, but a rifle will knock out their engine block.

If you can't think of a situation where a rifle or a handgun would be useful, then you're pretty dumb. More likely, you are intentionally dense. You picked a position and you are going to stick with it no matter how obvious it becomes that you are wrong, until you are so wrong that you are dead. Enjoy that thought.

[tmosley]

I hate to tell you, your friends are probably right. I fail to see the difference between gold, cotton, silver, sugar or oil. If you traded gold in 2009 you wouldn't have made more money than cotton....or any other commodity provided you know how to trade. It all depends on your research and timing not the commodity. This gold and silver fetish is based on no fact. People can make money and lose money on gold and silver just as they can on any other commodity depending on the market.

YouTube - Jim Rogers on Gold Silver and Sugar (http://www.youtube.com/watch?v=y1uimNf9pEc)


GOLD:

http://futures.tradingcharts.com/charts/hist/DG/cont/DG2009.png
(http://futures.tradingcharts.com/hist_DG.html)


COTTON:
http://futures.tradingcharts.com/charts/hist/CT/cont/CT2009.png
(http://futures.tradingcharts.com/hist_CT.html)

Cotton doesn't store well, and it isn't portable. Yes, other commodities might have kept up with gold, but so what? You going to store a thousand barrels of oil in your basement, or are you going to keep 80 1 oz gold coins in your safe?

Further, the price of cotton is real, as it is all delivered at the end of the contract period. The gold is rarely delivered, and probably isn't real. Once it is discovered by the market that the gold isn't there, the paper trading vehicles will fail, and the price for physical will soar.

If you fail to see the allure of gold or silver, you haven't done your research. Sloppy investing is going to leave you and a lot of other people penniless over the coming years. "Counterparty risk" is the most important term that few people truly understand.

[peacepotpaul]

they are not completely wrong, what good is having a bunch of coins if nobody with food, guns, oil or electricity wants it from you?

you should at least have some food, ammunition, fuel stocked up before getting precious metals, you have no guarantee your metals will be worth something to the right people, but at least if you have food, you can eat it.

[jclay2]

These people are clueless and will continue to be so. It will be hard to convince them. However, I might go under a slightly different argument. I would simply ask them if they would be willing to make this bet:

"If you are so sure in yourself about not prepping for some serious shtf scenario, would you be willing to say that it is more likely than not that in the next 70 years there will be no situation arising in the us/world where prepping would be extremely usefull?"

If they are still ignorant, then ask the same question again in the context of all the events just in our past life time. Think WW2, slaughter of millions by governments in peace time, hyperinflations, etc. Many of these events happened in the developed world, and to state that nothing could ever happen in the US is just absurd. If they still disagree, let them be. At this point there is nothing you can do to help them.

[Che]

yea, but SHTF scenario is not gonna happn tmrw..

[emazur]

They couldn't understand why I would spend lets say $1000 on a bag of Franklin halves with a face value of 100$. ( I am simplifying). "That sounds like a losing proposition to me" they'd say or "If TSHTF someone else is not gonna care what the silver content is, its still 50cents".

As to my bullion:

"what good would a bunch of 1oz silver coins be if nobody wants to "buy them off you?"



First of all, I've heard over and over again from investment advisors of all stripes that everyone's investment portfolio should consist a minimum of 5 to 10 percent of precious metals.

Secondly, if they think face value is so important, ask them: "If you had some 25 cent silver quarters (or $1 silver eagles or whatever - adjust as necessary), would you sell them to me for 50 cents a piece? Go acquire 1000 of them and sell 'em to me for $500. You'll double your investment! Much better than the returns on your Jet Blue stock right? Don't worry about 'taking advantage' of me - the only way I'll learn is if I keep getting suckered til I can't take it anymore"

Or on the flip side, bring in a $1 silver coin and ask who wants to swap their dollar bill for it? Only an idiot wouldn't take advantage - maybe get them into a bidding war, and if the best you get is $5 say something like "you know, I just don't feel comfortable taking advantage of you like that" and withdraw your offer.

Thridly, it's not a matter of "who's going to buy them off you" if the SHTF. The question is who's going to be more eager to trade food for low-value coins vs. who wants to trade food for precious metal coins.

[SamFisher]

Cotton doesn't store well, and it isn't portable. Yes, other commodities might have kept up with gold, but so what? You going to store a thousand barrels of oil in your basement, or are you going to keep 80 1 oz gold coins in your safe?

LOL! that's why God invented the stock market so people don't have to wait for the grain delivery next year. It makes no sense for any individual small investor to own actual physical commodity. That world is never coming back and if it does the 1st thing that will happen the gov will confiscate or your neighbor will shoot you for it.


Further, the price of cotton is real, as it is all delivered at the end of the contract period. The gold is rarely delivered, and probably isn't real. Once it is discovered by the market that the gold isn't there, the paper trading vehicles will fail, and the price for physical will soar.

That's a big IF. All the time you wait for that to happen you are losing out on real opportunities.

[Athan]

There was a conversation in my office about investing, stocks etc. between a few of my co-workers.

"I have stock in Jet Blue" "I have a mutual fund" "I invest in bonds" - things like that.

Since they are aware of where I stand economically and politically (free market/Austrian and libertarian) they of course began to break my balls about owning gold and silver.

They couldn't understand why I would spend lets say $1000 on a bag of Franklin halves with a face value of 100$. ( I am simplifying). "That sounds like a losing proposition to me" they'd say or "If TSHTF someone else is not gonna care what the silver content is, its still 50cents".

As to my bullion:

"what good would a bunch of 1oz silver coins be if nobody wants to "buy them off you?"

I got the same nonsense with gold.

I tried to explain I am trying to protect some of my money from inflation but they continued to laugh and harp on the above sticking points.

Now my weakness is arguing and debating. I get all hopped up and my articulation suffers. I have always been like this. I know what I want to say but I never get all my points together without sounding like a tool.

How can I go back at these jack-asses with simple yet effective points for PMs?
I know alot of you guys would have shut them down immediately.

Step 1: Justify your actions by your observations.
Well you need to start explaining your understanding of how the fiat currency is being abused. You should start by saying you don't trust the incompetent money managers because their current strategy of "quantitative easing" has the risk of economic suicide attached to the warning label. The reason you don't want to invest as they do is because you are seeing how the fools are running the show.

Step 2: Explain why their shit can go to shit; and why your shit is the shit.
The US stocks aren't a wise bet without real research into them and an actual strategy that takes possible bad scenarios into the plan. Their is a lot of uncertainty in the market and the time to buy their junk was back in the fall of 08 when everything went to hell on Wall street and prices for such stock plummeted. You would have had gains now and can cut your losses if it starts getting bad again. Remember, buy when there is blood on the street, and sell when your co-workers are buying.

Currently commodities of some form are a wiser gamble. Suppliers are more important than services in this time no matter what happens. Jet Blue is nothing without relatively cheap jet fuel and the entity can take a real hit if inflationary prices start hurting the normal flow of business. Every real economist agrees inflation is coming thanks to loose monetary policy. A lot of what you are doing with PM is also a cautionary commodity play. Silver has industrial uses as well. It isn't a bad buy. Its just a slow cautious buy in response to foolish market manipulation and management. You should think of it as investing in both a currency market and commodity market at the same time. In the end, they have more to lose with the current Fed than you do in the immediate future.

Do consider stocks with dividend yields though. They aren't completely wrong. They just aren't looking at the behavior going on behind the scenes.

[SamFisher]

Currently commodities of some form are a wiser gamble.

i think stocks are about to stage a comeback, hcare IT, biotech etc. My guess is that speculative investments which is why commodities were so volatile in recent years will get a kick in the butt by the end of this year via new regulations so a lot of cash will start flowing in the real economy in traditional stocks mostly high tech green energy, nanotech biotech etc. but that's just a guess, I am no expert, feel free to call me stupid or naive.

[Mini-Me]

If there's a large group of men with rifles trying to get into my house, me having a bigger gun is just delaying the inevitable. Which is my point.
Well, it depends on how much bigger. If you're all by yourself, a rocket launcher might help. ;) Seriously though, I think the above scenario misses the point: If home invasions and roaming gangs ever become a serious and well-known concern, people will be much more likely to come together with their neighbors to form a neighborhood watch...even people who ordinarily keep to themselves. If that's the case, it's no longer just you against a large group of men; it's you and all of your neighbors, and you have a much better chance of successfully defending your home (or your neighbor's).



If you guys are right about SHTF I'm going to be eating pigeons, squirrels, cats and dogs. Walking around after SHTF with anything but a shotgun would make you look like you are wanting to get into some trouble. Who says shotguns aren't good for hunting?

Even if SHTF, the way most of you are preparing for it is silly.

It probably has a lot to do with your setting. For instance, living in a city makes for very different circumstances from living in the country. As far as rifles go, I imagine they're likely to be much more effective at community defense (in cooperation with neighbors and such) than shotguns, at least outside of cities.

I'm actually not even a gun owner, but in the general sense:
I'd rather be silly and overly dramatic under the best of circumstances than totally screwed under the worst.

[Ninja Homer]

There was a conversation in my office about investing, stocks etc. between a few of my co-workers.

"I have stock in Jet Blue" "I have a mutual fund" "I invest in bonds" - things like that.

Since they are aware of where I stand economically and politically (free market/Austrian and libertarian) they of course began to break my balls about owning gold and silver.

They couldn't understand why I would spend lets say $1000 on a bag of Franklin halves with a face value of 100$. ( I am simplifying). "That sounds like a losing proposition to me" they'd say or "If TSHTF someone else is not gonna care what the silver content is, its still 50cents".

As to my bullion:

"what good would a bunch of 1oz silver coins be if nobody wants to "buy them off you?"

I got the same nonsense with gold.

I tried to explain I am trying to protect some of my money from inflation but they continued to laugh and harp on the above sticking points.

Now my weakness is arguing and debating. I get all hopped up and my articulation suffers. I have always been like this. I know what I want to say but I never get all my points together without sounding like a tool.

How can I go back at these jack-asses with simple yet effective points for PMs?
I know alot of you guys would have shut them down immediately.

JetBlue 5 years
http://img191.imageshack.us/img191/3898/jetblue.jpg

gold ~6 years
http://img14.imageshack.us/img14/4169/goldsv.jpg

silver ~6 years
http://img191.imageshack.us/img191/2817/silverh.jpg

Any questions?

[jclay2]

Any questions?

Too bad prices for silver and gold are going up. I would really like to get more ounces for my frn's.

[Jordan]

LOL! that's why God invented the stock market so people don't have to wait for the grain delivery next year. It makes no sense for any individual small investor to own actual physical commodity. That world is never coming back and if it does the 1st thing that will happen the gov will confiscate or your neighbor will shoot you for it.

That's a big IF. All the time you wait for that to happen you are losing out on real opportunities.

+1

[SamFisher]

gold ~6 years
http://img14.imageshack.us/img14/4169/goldsv.jpg



LOL! Or, instead of Jet Blue, you could have picked oil, or an oil services company like Haliburton :D

http://img163.imageshack.us/img163/8529/halg.jpg (http://finance.yahoo.com/q/bc?s=^OSX&t=my)

It's all about the trade and the market, sorry.

[Ninja Homer]

LOL! Or, instead of Jet Blue, you could have picked oil, or an oil services company like Haliburton :D

Read the OP and maybe it'll make sense to you.

[low preference guy]

SamFisher needs to be read some Peter Schiff.

The key is that in the medium term, gold and silver will gain demand lost by depreciating paper money.

Remember that the structural problems of the economy were not corrected, but only papered over with bailouts and inflation. So a crash will come within a few years, and will take a hit on the dollar. That's when demand will shift from fiat money to hard money.

[SamFisher]

SamFisher needs to be read some Peter Schiff.

The key is that in the medium term, gold and silver will gain demand lost by depreciating paper money.

Remember that the structural problems of the economy were not corrected, but only papered over with bailouts and inflation. So a crash will come within a few years, and will take a hit on the dollar. That's when demand will shift from fiat money to hard money.

I bookmarked this thread and I'll be gloating about the crashing gold price 2 years from now.

[low preference guy]

I bookmarked this thread and I'll be gloating about the crashing gold price 2 years from now.

Haha. I expect it to be the doubling of the price of gold, but I'll wait the 2 years...

[SamFisher]

Haha. I expect it to be the doubling of the price of gold, but I'll wait the 2 years...

Gold is about commodities and commodities are always led by energy. In an economy is managed right you have abundant cheap energy. I make a bet that's the direction we are going to and if that's the case commodities like gold will stagnate or even crash while the real economy like the tech sector will flourish. Again , bookmark it, c ya in 24 months.

[low preference guy]

Gold is about commodities and commodities are always led by energy. In an economy is managed right you have abundant cheap energy. I make a bet that's the direction we are going to and if that's the case commodities like gold will stagnate or even crash while the real economy like the tech sector will flourish. Again , bookmark it, c ya in 24 months.

Where I gamble is that I bet there will be a demand for hard money. If that's true, not every commodity will get the new demand, most likely only gold and silver. But I concede it's a bet, there is no proof that will happen within a few years.

I believe though in the long term, all fiat money systems end.

On energy, I also think it will do well. But I don't think that will happen in stocks in general.

[SamFisher]

Where I gamble is that I bet there will be a demand for hard money.

and what does gold have to do with "hard money" today?! if someone just explained to me how that works... I doubt we go back to a fixed exchange rate or a system with only 1 commodity such as gold or silver backing it world wide if that's what you mean by "hard money".

If you think fiat money is manipulated you don't know how the owners of gold mines and strategic commodities such as grain played with hard currencies throughout history. A fixed exchange rate can be manipulated just as much as a floating exchange except instead of a lot of different resources now you depend on 1 so it's easier to monopolize.

I think the future of money is closer to where the NOK is for instance ie. in commodities, or products that a country can export and in the case of a reserve currency like the dollar or SDRs, the global trade that's done in that currency because that's what's going to determine the demand for it ie. its value.

http://en.wikipedia.org/wiki/Norwegian_krone#Exchange_rates

[low preference guy]

and what does gold have to do with "hard money" today [i'm taking about the future]?! if someone just explained to me how that works...


Ok, this is not an entire argument. Other people can do it better, but this is my try.

The dollar has lost more than 95% of its value since the Fed was created. That can be expected because the government can print money at will.

The dollar is the reserve currency. This is a blessing, because you can just print money and acquire purchasing power by devaluing dollars from people all over the world, not only from your country. But it's also a curse, because if there is a run on the dollar, there are more people who can dump it, so it could create a supply shock which crashes the value. Any event can trigger a run: a terrorist attack, a financial crisis, inability to pay the debt, etc. Considering that the government spends $1.6 for every $1 it collects, we are in serious trouble. And the entitlement mentality won't allow us to make cuts. We are even adding a health care entitlement!

If the dollar collapses, all currencies will lose value, because they are backed by dollars. Paper money in general will lose appeal. That will make every commodity skyrocket in price, including gold. People will look for alternatives for money, something that is not paper currency, and traditionally those monies are gold and silver. In other words, today's demand for fiat money will become tomorrow's demand for gold and silver.

P.S. I don't think gold will be fixed to anything. While politicians are discussing the new monetary system, people will just start using gold and silver, so it will be a de-facto market based gold standard. We will have a pure free-market monetary system, absolutely separated from the Government.

[bchavez]

Make a point to say that the US Dollar was ONCE backed by Gold...

If the US Dollar was once backed by Gold, fundamentally, what does that say about Gold being used as money?

Now, that the Dollar has been taken off the Gold standard, ask them to think about what the dollar means now.

It's true, nobody can eat Gold, but you can't eat paper Dollars either. Point to Germany and what happens to their currency when it was inflated away.

If they have any smarts, they'd see the connection (or disconnection here).

[lx43]

Gold/Silver has been around for thousand of years. Paper currency has been around for only a few hundred years, people are therefore more inclined to see gold/silver as safe havens during times of financial distress. Show them a chart of the valuation increase of gold since 1913 against the decline of value in dollars.

PS I don't like buying airlines b/c all the money they make goes into buying new jets and maintaining the old ones they have (low ROIC).

[SamFisher]

Ok, this is not an entire argument. Other people can do it better, but this is my try.

The dollar has lost more than 95% of its value since the Fed was created. That can be expected because the government can print money at will.

The dollar is the reserve currency. This is a blessing, because you can just print money and acquire purchasing power by devaluing dollars from people all over the world, not only from your country. But it's also a curse, because if there is a run on the dollar, there are more people who can dump it, so it could create a supply shock which crashes the value. Any event can trigger a run: a terrorist attack, a financial crisis, inability to pay the debt, etc. Considering that the government spends $1.6 for every $1 it collects, we are in serious trouble. And the entitlement mentality won't allow us to make cuts. We are even adding a health care entitlement!

If the dollar collapses, all currencies will lose value, because they are backed by dollars. Paper money in general will lose appeal. That will make every commodity skyrocket in price, including gold. People will look for alternatives for money, something that is not paper currency, and traditionally those monies are gold and silver. In other words, today's demand for fiat money will become tomorrow's demand for gold and silver.

P.S. I don't think gold will be fixed to anything. While politicians are discussing the new monetary system, people will just start using gold and silver, so it will be a de-facto market based gold standard. We will have a pure free-market monetary system, absolutely separated from the Government.

Well, first of all what you describe as the devaluation of money has nothing to do with gold or the fiat currency. It has to do with fractional reserve banking or debt financing which existed along with the gold standard for centuries. (since 1694)

YouTube - The Origins of the National Debt and Central Banking (http://www.youtube.com/watch?v=4jLmKbwKcMc)

Fractional reserve banking is capitalism. Without it capitalism doesn't exist. The whole industrial revolution was financed by fractional reserve banking because that's the only known way for capitalism to pool the resources of many individuals in a large scale project that involves whole societies.

The other issue is debt which is a US national problem and it has to do with trade roles that developed the last 30 years. In fact the US problem is not government debt, that's "only" 80% of GDP or about $12 trillion, Japan's is 200% GDP. The real problem in the US economy is private debt which is 300% GDP or about $50 trillion. We will not get out of that even if we shut down gov tomorrow. In fact we will make it worse because in 30 years we managed to kill manufacturing and people have no incomes outside the service sector, ie. finance insurance and real estate. You can't create wealth by flipping apartments and speculating on OTC derivatives.

In my opinion what needs to happen the next 4-5 years is a massive Manhattan project of re-industrializing America like in WW2 and put the whole thing on uncle Sam's credit card while we can and then ppl will be able to make some real wages to pay off both the private and the public debt.

[low preference guy]

what you describe as the devaluation of money has nothing to do with gold or the fiat currency

i disagree with what you said. it's true that fractional reserve banking has to do with the devaluation of money, but what i said also has to do with it. it's just a matter of supply in demand.

supply of gold can only increase by 2 or 3% a year (that's what nature provides).
the supply of money is limited by the number of zeros a computer can store.

therefore, it's possible to devalue much faster when there is fiat money.

if devaluations have nothing to do with fiat money or gold, why did hyperinflation in paper currencies occur, where the value dropped to zero, but there has never been hyperinflation in gold? when was the last time the value of gold dropped to zero?

i absolutely disagree that fractional reserve banking was necessary for the industrial revolution. this is a topic for another thread, but i'll just state that fractional reserve banking is what produces the boom and bust cycle. without it, we would have had much more growth.

i can also show you a video about central banking



Money, Banking and the Federal Reserve (http://video.google.com/videoplay?docid=-466210540567002553#)

[SamFisher]

"what you describe as the devaluation of money has nothing to do with gold or the fiat currency"

i disagree with what you said. it's true that fractional reserve banking has to do with the devaluation of money, but what i said also has to do with it. it's just a matter of supply in demand.

supply of gold can only increase by 2 or 3% a year (that's what nature provides).
the supply of money is limited by the number of zeros a computer can store.

therefore, it's possible to devalue much faster when there is fiat money.

if devaluations have nothing to do with fiat money or gold, why did hyperinflation in paper currencies occur, where the value dropped to zero, but there has never been hyperinflation in gold? when was the last time the value of gold dropped to zero?

i absolutely disagree that fractional reserve banking was necessary for the industrial revolution. this is a topic for another thread, but i'll just state that fractional reserve banking is what produces the boom and bust cycle. without it, we would have had much more growth in the long term.

i can also show you a video about central banking




In well regulated capital markets the value of fiat money is also subject to supply and demand: the $ for instance depends on the demand for dollar denominated commerce at any given moment. About the boom bust cycle: may I remind you that we haven't had not 1 bank failure between 1935 and 1987! Today's problem is political: the financial industry captured the whole political system, democrats and republicans are bought by Wall street and that's why the FED is doling out money to the bankers at 0% and allows them to create inflation with $600 trillion outstanding derivatives contracts. that amounts to a license to print money. that could be fixed with a stroke of a pen by following GAO recommendations from 1994 ignored by both republicans and democrats for 15 years:

http://archive.gao.gov/t2pbat3/151647.pdf

[low preference guy]

Today's problem is political

The problem will always be political, until there is a pure market based gold standard which doesn't allow politicians to print money. And I am quite sure it will happen in this generation.


that could be fixed with a stroke of a pen by following GAO recommendations from 1994 ignored by both republicans and democrats for 15 years:


sorry to say, but expecting solutions where politicians do the right thing is naive.

lastly... i'm gonna go now, but you won't regret watching the video i embedded.

[hugolp]

Well, first of all what you describe as the devaluation of money has nothing to do with gold or the fiat currency. It has to do with fractional reserve banking or debt financing which existed along with the gold standard for centuries. (since 1694)

YouTube - The Origins of the National Debt and Central Banking (http://www.youtube.com/watch?v=4jLmKbwKcMc)

Fractional reserve banking is capitalism. Without it capitalism doesn't exist. The whole industrial revolution was financed by fractional reserve banking because that's the only known way for capitalism to pool the resources of many individuals in a large scale project that involves whole societies.

The other issue is debt which is a US national problem and it has to do with trade roles that developed the last 30 years. In fact the US problem is not government debt, that's "only" 80% of GDP or about $12 trillion, Japan's is 200% GDP. The real problem in the US economy is private debt which is 300% GDP or about $50 trillion. We will not get out of that even if we shut down gov tomorrow. In fact we will make it worse because in 30 years we managed to kill manufacturing and people have no incomes outside the service sector, ie. finance insurance and real estate. You can't create wealth by flipping apartments and speculating on OTC derivatives.

In my opinion what needs to happen the next 4-5 years is a massive Manhattan project of re-industrializing America like in WW2 and put the whole thing on uncle Sam's credit card while we can and then ppl will be able to make some real wages to pay off both the private and the public debt.

This is complete bullshit.

Specially several parts:

1) I am against fractional reserve, but what you said about it is false: fractional Reserve for itself can not inflate forever. In fact, after a short period of inflation fractional reserve banking gets to a "equilibrium" and can not inflate more. The only way for fractional reserve banks to inflate more is if there is a central bank suplying new money, and in modern societies this is done through monetizing goverment debt (basically giving newly printed money to the goverment).

2) You say that fractional reserve banking is capitalism. Utter bullshit. In fact, the main attackers of fractional reserve banking have been the austrian school of economics (through not all of them). Also, the process that you describe as industrialization through resource grabbing of the individuals is more like a sort of central planning, and not the volutnary asociations that capitalism promotes. It is not random that fractional reserve banking has been attacked by the austrian school and it has been defended by more interventionistic or socialistic economic theories like keynsianism. And this resource grabbing can not happen alone with fractional reserve because of what I said in point 1). You need the goverment "printing" money (either by himself or by a central bank) for this to happen.

[Yukon Cornelius]

Good stuff guys. Thanks.

I have more than enough here to make coherent and concise points the next time they scoff at the collapsing dollar.

[pacelli]

Good stuff guys. Thanks.

I have more than enough here to make coherent and concise points the next time they scoff at the collapsing dollar.

Also keep in mind that when introduced in 1980, the zimbabwean dollar was actually worth more than the US dollar. It cost $1.47 US for each zimbabwean dollar.