Deflation Doesn't Exist

[mjkst27]

Flaming - I'll be more than happy to take your pre-65's off you at face value. I'll give you some of these green paper FRN's that are so easy to carry!

[Goldmember]

Ahhhh....... ain't she a beauty!

 

 

 

 

Order direct from here. No idea about taxes or shipping but I'm sure the mint could answer those questions. Then again anonamous purchases with cash lest Shrub or his replacement pull an FDR may be prudent. Bullion dealers should carry these though. I like the fact the gold Maple Leafs come in five sizes of smaller weights. A pocket with 1/5 ounce coins would be like a wad of hundred dollar bills, quite soon too!

 

Here in my neck of the woods thriving new small businesses that dominate are pawn shops and pay-day loan outfits, as alluded by Hypertiger, as well as a proliferation of bullion dealers in tiny little shops, noticeably more prevalent in Vangroovy.

[assteroid]

Cheifyweify, A deflationary collapse, similar to the Great Depression,

as you describe, especially in the healthcare sector, would be welcome

compared to what we're likely to see. The deflationary thirties were

part of a cycle. Key to pulling out of this cycle was a fairly

small pool of labour, plenty of natural resources, fewer govt. rules

and regulations. Crucial links of the economic chain were strengthened

(in part) by a growing middle class that grew out of a growing

labour movement.

 

Our maturing economy resembles a stumbling little old man who

has fallen, and can't get up! We didn't just get up after the 30's,

we were off and running, once we found our footing. But then

that was a genunine cycle. We are entering a status change,

not the winding down of a cycle, followed by a new cycle of

prosperity somewhere down the line.

 

Here and abroad, corporations and companies will be destroyed.

Rising out of the rubble will be businesses that will cater to those

who have wealth of one form or another. As Unabonkers

describes, the working poor will become a very small part of

any economic equation, and will create communities of rag pickers,

bartering barbers, weavers, etc... Not part of the traditional economy.

The traditional economy won't be able to sell to you. You're too damned

poor. That's the way it goes.

 

How, in a world of diminishing natural resources, where gasoline,

natural gas, electricity, water, will start to skyrocket, would the

price of products drop to meet the average man's ability to pay?

The utilities, through deregulation, political corruption, etc.. will

thrive in a "highest bidder" atmosphere. There will be a cascading

effect throughout the economy that will send many prices higher.

Granted, some will be lower. As Unabonkers describes, it will be

the "new business to business" made so much easier by the

internet, that do an end run around govt. regulation, and start

up costs, licence costs etc... that will serve us, and we will be

involved in. And that's not all bad, as you emphasize in your post.

In the end, all we have is each other.

 

I very much appreciate the sentiment of your post, Cheify, but I

can't help but see an inflationary depression, for the most part.

People who know much more about monetary policy, like Yobob,

could certainly prove me dead wrong.

 

The future will be a little bit Jetsons, a little bit Canterbury tales, a

little bit like the dirty thirties. But I think the model of European

feudalism would go a very long way to describe what it will be like. Modern "cathedral projects" will be govt. financed military operations.

I just don't think the power elite in this world are going to let it tank

quickly, if there's anything they can do to help it. They've all

integrated fear of the guillotine right into the fabric of their being.

Quick collapse= everyone suffers. Slow insidious rising tide of

failure= the power elite are okay, many even capitalize on it,

even if the rest of us have to tread water.

 

 

Warm up the scrabble board! Bringin' the third world home!

[Flaming Turds]

I would think there would be a considerable stigma attached to anything that looks like our current money. I understand the case you folks are making for the silver content but again its a confidence game. Valuation may become quite subjective. When that metal looks like a worthless quarter I think most people will request you trade them something else. Obviously none of us can say for sure and thats why I decided to make the argument. MH do you know of any good historical precedent where fiat was introduced and when it crashed people brought out their old 90% coins or 50% or whatever fraction may have been in use, causing the currency to revert back to value? Its an interesting conundrum.

 

MJK if a major stigma toward US currency of all types develops, then what good is accepting those coins if you cant then trade them for something else? (I certainly wouldnt be trading them to you for paper sir, youd be earning them one way or another. Nice try tho.) They would then be worthless to you if you could not find any willing takers when you went to trade them. You would be required to DISCOUNT them to other pure forms and that discount could be substantial. My point is that if I was in the position to choose, I certainly would want to trade something that I felt was the most liquid. If I get laughed at everytime I pull out some quarters and have to go into a long song and dance about why someone should accept these particular quarters from me, its not going to take me long to stop accepting them from others. I dont have a lot of faith in main st USA getting up to speed on this very quickly. I dont own any junk coins. (Except whats in my pocket and my piggy bank :grin: ) I own coins that look like the one above

[Guest AssMaster]

Think of the pre-1965 coins as having protection on both sides of the inflation/deflation argument. If inflation rules and silver goes to $50/oz, they are worth the bullion amount. If deflation rules, they are at least worth a quarter.

 

Kind of like the precious metal version of TIPS. :grin:

[Charmin]

Dan Ascani

 

PPI -0.4%.

 

So far, the US Producer Price Index follows a nearly identical pattern to that of the post-1929 era.

 

In 1930, PPI was only negative by -1.1% YOY. Then it steadily got worse. By my calculations we're in about 1931. During the past couple of years, US PPI has been steadily detiorating, spending a lot of time below the zero line -- between -1.1% and -2.8% YOY in 2001, 2002.

 

This is what the Greenspan Fed is worried about: The present rate of deflation is not yet severe, but its trend has us on the precipice of a potential deflationary spiral.

 

As I've said many times before: The risk/reward equation is dictating personal (consumer/investor) strategies consistent with deflation. Since we have all the leading indicators of deflation in place (collapsing stock prices, collapsing pricing power, stalling or falling asset prices (high end real estate, and now mid-priced real estate), liquidity crunch, etc. --just like the 7 past deflationary cycles), how could one make the assumption, or impliment a strategy, that says the PPI and other symptoms of deflation WON'T worsen? You'd be eliminating the part that counts after all the signs were there: The strategy.

 

For 2001 we fastened our seatbelts. For 2002, we kept them on. For 2003, better check those air bags.

[Takachi]

Pretty good discussion on Bill Maudlin's weekly letter for which the site is below. Also a snippet that shows Japan's deflation in spite of monster monetary expansion. Its not the amount of money its the velocity. I think it shows good insight in how you can have monetary (not price) inflation and deflation.

 

http://www.investorsinsight.com/

 

Where's the Deflation?

 

Every week, I get letters from readers telling me that there is no deflation. Some suggest I should go back to Economics 101. They insist the money supply is growing and therefore, by definition, we have inflation. Well, as they say, not exactly.

 

This insightful quote is from Gary North's Remnant Review: "Let's begin with a definition of deflation. There are two. There is monetary deflation. This is a reduction in the money supply. Problem: there is no agreement about what constitutes the money supply. Price deflation is a reduction in the official price level. Problem: there is no official price level. So, from the beginning, we are guessing. So are the economists. So are the statisticians who collect data in terms of the economists' theories." (I have been reading North for 20 years. I sometimes, even often, disagree, but I always read. He makes me think. For subscription information write [email protected].)

 

The Bank of Japan is doing what it can to create inflation. The monetary base in Japan is up a stunning 21% vs. a year ago. This is on top of large growth from prior years. By the reasoning of my weekly critics, there is and should be inflation in Japan. But yet there is clearly deflation in Japan. One reason is the following:

 

Today, Dennis Gartman tells us that "The Japan Daily Digest recently reported that in November in Japan the total of outstanding bank loans fell 4.7% year-on-year.... the 59th straight month of decline. As far as we know, this is unprecedented in any industrialized nation in modern times. For the "city banks," [large banks] their lending was down 7.4% y-o-y... and more astounding still is that this is the 75th straight monthly decline.

 

"...According to The Japan Daily Digest (and this is a truly preposterous figure, but nonetheless it is true) "So little money is being lent that the banks now have almost as much money on deposit--Yen 476.4 trillion--as they do on loan." To put it metaphorically, the transmission is slipping, and the car cannot move forward." (The Gartman Letter, $2500 or so per year, [email protected]. Must reading for serious traders.)

[Hypertiger]

"To put it metaphorically, the transmission is slipping, and the car cannot move forward"

 

I know that after 1000's of years of brainwashing/propaganda, the nature of Fractional reserve banking is hard to comprehend... It takes years of study...

 

Before the Internet existed "research" Was used book stores... and libraries...

 

Go read how the 1,2,3 program works above

 

Then read the following thoughts

 

The "Transmission" is when a child is old enough to understand that a dollar (Paper with ink on it), given by his parents, is money and is good... goo goo ga ga...

 

That is the only "Transmission" that "the powers that be" care about...

 

The powers that be have known what I know before I knew it and they will know it after I am long gone.

 

The powers that be have constructed the "reality" that we are part of and will never let it affect them with its consequences and have nothing but contempt for the victims of their construct.

 

The powers that be will coat the planet with blood to avoid discovery?

 

The ?world leaders? of all the countries and all the people in those countries including Kings and Queens are beneath the ?powers that be?

 

But the owners of the Earth are above the ?powers that be?

 

I don?t talk about the owners much because they are so far removed from the constructed ?reality? that it is really pointless to spend much time investigating ?them?.

 

They use the 1,2,3 program to control ?us? and Phase/Stage 3 is POWER CONSOLIDATION. This is when ?the powers that be? play their most active role

 

It is when ?we? are in our weakest condition and will accept further ?programming? very easily.

 

The powers that be are composed of two factions that oppose each other the gradual and the violent. But work towards the same goal, a one world order?

 

The owners of the Earth make sure we don?t exterminate ourselves (Human race).

 

I could go into great detail and expand on the whole thing but this is enough. I have to keep a low profile....

 

Why do I tell you these things? You are closer to understanding than 99.999999998%? of the population of the planet Earth.

 

Boolean logic helps?

 

Knowledge is power. Trade safe.

 

Will this kill the thread? Or just file this away and continue on? Just babbling? <_<

[Guest yobob1]

Machinehead thanks for catching the screw up on the math...must be that damn Chinese calculator. Either that or one of my two remaining brain cells has committed fratricide.

 

The quantities of silver in junk coins are so small and the complexity of design is such that the costs to counterfeit them could never be recovered. Bars however because of their very simple markings and quantities involved provide ample opportunity and motive for counterfeiting. Recognition and trust of the medium are key elements in trade. If you ever wanted to trade one of your bars for my junk coins I would insist on an assay.

 

My main motive with silver is a gain. By traditional measures (i.e a "normal" ratio of between 15:1 and 20:1 to gold) it is more undervalued than gold with the current ratio being about 70:1. So I look to maximize the leverage by keeping the premium as low as possible. When the ratio closes I will most likely look to roll most of the silver into gold, something I have prearranged with the dealers.

 

MH do you know of any good historical precedent where fiat was introduced and when it crashed people brought out their old 90% coins or 50% or whatever fraction may have been in use, causing the currency to revert back to value? Its an interesting conundrum.

 

Virtually every time a fiat has been introduced to supplant the coin of the realm, the money in circulation returned to it's prior "honest" form upon the collapse fo the fiat. In the case of something like our quarter even a blind man can tell the difference. All you have to do is drop a sample of a 90% quarter on the table and a sample of a sandwich coin, the tonal qualities are easily distinguished.

 

In 1716 Law convinced the French government to let him open a bank, the Bank Generale, that could issue paper money, or bank notes. The paper notes would be supported by the bank's assets of gold and silver and would circulate as a medium of exchange. Paper money was a new concept for the French; money to them was silver and gold......

....Stock prices began falling in January 1720 as some investors sold shares to turn capital gains into gold coin..........The company was trying to get people to accept the paper notes rather than gold................It would be 80 years before France would again introduce paper money into its economy.

 

John Law

 

Back then you porbably could have found any number of different coins in circulation, perhaps even Roman coins. As long as people recognized them for their content they would have beeen accepted.

 

Monetarists have a tough time explaining Japan's deflation in spite of enourmous increases in the money supply and fiscal stimulus that has pushed Japan's debt to 140% of GDP. I'm still waiting. I would also like them to explain where is the (price) inflation that should be present given the enormous increase in our own money supply since 1996. I don't buy the lag argument, it's been too long already. For price inflation to occur there needs to be a shortge of goods relative to the money supply. That is certainly not the case currently. The CRB (minus PM and oil) is being driven by speculative money flows not goods shortages. I expect that over the next few months 10 year yields will confirm what I am saying. Like I've said before, it really is not a matter of concern from a personal standpoint, either outcome should be beneficial to my holdings given the circumstances.

 

Kudos to Takachi, Charmin, AssMaster and Machinehead for substantive adds.

[Hypertiger]

"fiat" has corrupted and collapsed every economic system that embraces it.

[Flaming Turds]

Very good arguments and you support your strategy well.

 

My metals are for emergency reserve purposes so Im not planning on a local dealer trade. Perhaps I'll pick up a bag just to have a balanced supply though. For maximum gain I have chosen to trade the shares. My bars are to cover the possibilty of closed banks and markets. In that scenario I think the coins will be discounted due to the prevailing psychology of the times.

[Hypertiger]

Money is power and with enough "power base" then fractionally reserve, or create "leverage" it into quite a bit of power. All the gold in the world is the basis for all the paper DUH and the fractional reserve is gone...

 

We have been FIAT for 31 years all ready "Hyperinflationary" Guess what? You might as well buy your Gold and Silver now, maybe even copper... People could start losing their minds... But the arguement is over if I won a lottery tomorrow I'd use half to speculate with and half in silver or Gold. the end. My current holdings are small but because of my 50-50 Get out of debt plan I will soon have a lot of leverage... I am impervious to suffering but I'm not glutton for punishment sheesh...

 

You build a "pile of bars" so that the center is hidden that is impressive enough that nobody questions the nature of the copper or lead core the then you buy an appartment building and live off the rent or build a power station and live off the rent or start a bank and live off the rent... Invest the rent in further conquest... the first investment is in replacement of the center of the pile. I don't think they will pull it off...

[mjkst27]

Yobob - would it even be practical to counterfeit a silver bar? About the only material candidate is Lead, as it is heavier than silver. Platinum, palladium and gold are also heavier than silver, but make poor counterfeit silver candidates for obvious reasons. Plutonium? Uranium? Well, probably not. Of course I am assuming that the sheep accepting the fake bar is smart enough to weigh it and check against what a silver bar should weigh.

[Hypertiger]

The best is putting the pile of plated material on display ringed with guards or giving guided tours for profit. You need a big pile for bluff power but they've been doing it for 100's of years.

[DogBoy]

500 Bearmen. Gold will be about $500 per ounce by Fall 03.

 

5000 Dow, 550 SP, and 500 Gold. everything will be a multiple of around 500.

 

$500 Stool subscription ?

 

If we get there like I think we're gonna I'm sure stoolies would be able to afford it easily.

 

In fact why peg the price of the Stool subscripton to ONE OUNCE OF GOLD.

 

And if you like you can mail a Maple Leaf to Doc.

 

"Noland last week had something to say on this."

 

Is this the guy who was calling to $200 Gold or was it Prechter ?

 

"Gold is the ultimate inflationary signal"

 

Not really. Gold is the ultimate test of CONfidence in DA SYSTEM. GThis is proven by the fact that Gold zoomed 10 times during the 30's which was the most deflationary time in our hisory.

 

Which proves my point that 99% of people even on this site don't understand the TRUE nature of Gold. Inflation/Deflation arguments are meaningless. Any economic extremes support Gold.