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- May 20, 2006
From what I am hearing there are two trains of thought here on investing in PMs. None of which involve any real, statistically significant analysis or valuation but I guess it's all you guys have to offer up.
So the first is that as the dollar looses value and we go into hyperinflation(which is not a given and no one here has a probability % of that happening) gold will increase in terms of a weaker dollar? Is that correct?
What some of you may not realize is that in this scenario, EVERYTHING increases in price. Bread, milk, Mcdonalds, everything. You are not making a profit in this scenario. The $81,000 you are expecting to get for your gold will not buy you what $81,000 will buy you today. It will buy you exactly the same amount of stuff as $1600 will today, if the price increase is due to inflation and all else is held constant. And good luck finding anyone to purchase your gold if the situation deteriorates to that extent.
The second scenario seems to be that PMs or gold are "real money" and that when the system deteriorates people will start circulating bullion as dollars are circulated today and that demand for money is what causes the price to increase.
First off, tell me how gold is anymore of a "real" currency than paper or any other commodity? We could just as easily be talking about diamonds or plastic for that matter. It has value because people perceive it to have value. You can't get anymore out of a gold coin than you can out of a dollar bill except for the fact that people have assigned it a value and believe and mutually agree that it is worth a defined amount. Sounds very similar to fiat albeit not govt. backed.
The following is a list of reasons why it is impossible to have PMs as circulated currency:
-There is not enough gold or silver in the world to account for the amount of currency in the global system.
-The yearly growth of the worldwide economy could not exceed the amount of new PMs taken from the ground yearly.
-No wage increases, no profit increases for companies. You have what you have unless you can get your hands on some of the below ground PMs.
-If gold ever becomes a currency the price will be set, no more trading markets and spot pricing, and it certainly won't be set anywhere near $5000 an ounce or even $1000. You gonna take a pebble of gold to the store to buy a loaf of bread?
-Of course setting the price of gold requires that there still be paper currency circulating to set the price in. How are you gonna set prices of all goods and services globally or even nationally in terms of gold with no currency or a hyper inflated currency as a reference point?
-You think all the other countries are going to go along with this set pricing? You think they will contribute their gold reserves to the new money supply at a rate set by the US?
-The country with the largest gold reserve immediately becomes the most powerful. Can you imagine the international turmoil, there would be wars.
-Google "coin clipping". PMs as currency doesn't work.
-The format of gold as a currency would have to be standardized. There will not just be random bars and various types of coins circulating. You may be forced to hand in your gold at a rate of the govt's choosing or face not being able to redeem your various forms of gold at all. It happened not so long ago. You know physical gold was illegal to own up until the 1970s?
-How long before the circulated coins purity starts to decrease? 90%, 80%, 70%......hyper-inflation!
-For all you conspiracy nuts, this is that NWO, one-world currency you all are afraid of. How nice is it that they are broadcasting non-stop about the benefits of owning gold so mom and pop will be well prepared for the impending NWO takeover.
NT usually knows a trap when it sees it.
I can go on and on but i think you get the picture. I have given up on any reasonable discussion of valuation or trading strategy. You ask any professional investor and they will tell you that you need an entry price, a stop loss price, an exit price(profit) and a reason for each before you commit any money to a trade. You all don't seem to be doing any of that. Hopefully you may all learn something here. I know it is nice to see your assets appreciate and I know it is tempting to buy into gold even at these levels when you hear some of these totally baseless predictions but I am telling you all that you need to devise an exit strategy. You guys don't realize how much risk you are taking. Find another way to make money or preserve your capital. Maybe I can't talk you out of buying gold but at least maybe you will consider some other asset classes or other ways to prepare your self in the event of economic collapse. I wouldn't even waste my time writing all this if i wasn't seriously concerned about the amount of people falling for this trap. I don't have money long or short in gold so what you guys do won't affect me. Understand i'm just trying to look out for those without investment experience and/or well rounded knowledge of financial markets.
Please tell me why i'm wrong.
So the first is that as the dollar looses value and we go into hyperinflation(which is not a given and no one here has a probability % of that happening) gold will increase in terms of a weaker dollar? Is that correct?
What some of you may not realize is that in this scenario, EVERYTHING increases in price. Bread, milk, Mcdonalds, everything. You are not making a profit in this scenario. The $81,000 you are expecting to get for your gold will not buy you what $81,000 will buy you today. It will buy you exactly the same amount of stuff as $1600 will today, if the price increase is due to inflation and all else is held constant. And good luck finding anyone to purchase your gold if the situation deteriorates to that extent.
The second scenario seems to be that PMs or gold are "real money" and that when the system deteriorates people will start circulating bullion as dollars are circulated today and that demand for money is what causes the price to increase.
First off, tell me how gold is anymore of a "real" currency than paper or any other commodity? We could just as easily be talking about diamonds or plastic for that matter. It has value because people perceive it to have value. You can't get anymore out of a gold coin than you can out of a dollar bill except for the fact that people have assigned it a value and believe and mutually agree that it is worth a defined amount. Sounds very similar to fiat albeit not govt. backed.
The following is a list of reasons why it is impossible to have PMs as circulated currency:
-There is not enough gold or silver in the world to account for the amount of currency in the global system.
-The yearly growth of the worldwide economy could not exceed the amount of new PMs taken from the ground yearly.
-No wage increases, no profit increases for companies. You have what you have unless you can get your hands on some of the below ground PMs.
-If gold ever becomes a currency the price will be set, no more trading markets and spot pricing, and it certainly won't be set anywhere near $5000 an ounce or even $1000. You gonna take a pebble of gold to the store to buy a loaf of bread?
-Of course setting the price of gold requires that there still be paper currency circulating to set the price in. How are you gonna set prices of all goods and services globally or even nationally in terms of gold with no currency or a hyper inflated currency as a reference point?
-You think all the other countries are going to go along with this set pricing? You think they will contribute their gold reserves to the new money supply at a rate set by the US?
-The country with the largest gold reserve immediately becomes the most powerful. Can you imagine the international turmoil, there would be wars.
-Google "coin clipping". PMs as currency doesn't work.
-The format of gold as a currency would have to be standardized. There will not just be random bars and various types of coins circulating. You may be forced to hand in your gold at a rate of the govt's choosing or face not being able to redeem your various forms of gold at all. It happened not so long ago. You know physical gold was illegal to own up until the 1970s?
-How long before the circulated coins purity starts to decrease? 90%, 80%, 70%......hyper-inflation!
-For all you conspiracy nuts, this is that NWO, one-world currency you all are afraid of. How nice is it that they are broadcasting non-stop about the benefits of owning gold so mom and pop will be well prepared for the impending NWO takeover.
I can go on and on but i think you get the picture. I have given up on any reasonable discussion of valuation or trading strategy. You ask any professional investor and they will tell you that you need an entry price, a stop loss price, an exit price(profit) and a reason for each before you commit any money to a trade. You all don't seem to be doing any of that. Hopefully you may all learn something here. I know it is nice to see your assets appreciate and I know it is tempting to buy into gold even at these levels when you hear some of these totally baseless predictions but I am telling you all that you need to devise an exit strategy. You guys don't realize how much risk you are taking. Find another way to make money or preserve your capital. Maybe I can't talk you out of buying gold but at least maybe you will consider some other asset classes or other ways to prepare your self in the event of economic collapse. I wouldn't even waste my time writing all this if i wasn't seriously concerned about the amount of people falling for this trap. I don't have money long or short in gold so what you guys do won't affect me. Understand i'm just trying to look out for those without investment experience and/or well rounded knowledge of financial markets.
Please tell me why i'm wrong.
