[technovelist]

The other difference, of course, is the enormous total amount of money at stake today, even counted in ounces of gold, as well as the immense leverage available with suicide loans. That’s why the bust will be much bigger and worse than the 1880’s, as moronic as that was.

[technovelist]

Sure, I’ll elaborate on my predictions.

Basically, I think we are approaching the climax of a very long wave of increasing government interference in the economy. This is the first time in history that there is no sound money in circulation anywhere. It has been only 33 years since the last link to gold was severed by Nixon (whether he had a choice is a different discussion), and in that time we have seen tremendous changes in the world economy, none of them favorable to long-term economic sustainability.

As the Austrian school of economics teaches, there is no such thing as a “soft landing” from a great inflation. There are only two outcomes of such an inflation:

1. The government stops printing money. In this case, all the overleveraged debtors go under, and you get something like the Great Depression. However, it would be much worse now because the average person is in much worse economic shape than the average person in the 1930’s. Similarly with the government itself, which is a gigantic debtor, again in much worse shape than the 1930’s.

2. The government doesn’t stop printing money, but tries to print enough to “keep up with demand”. This results in the total destruction of the currency. This is much worse in the short run than the first possibility, as it destroys the division of labor. With no money, no one can pay anyone else to work. However, in the long run, the survivors will probably be better off than with the first possibility, as the government will also collapse, freeing them from that overwhelming burden.

Which of these will happen? I expect that the government will do anything in its power to avoid the deflationary depression, and in so doing will trigger the hyperinflation. But I could be wrong, which is why I won’t overleverage myself with debt that would be wiped out in a hyperinflation.

I’ll be happy to answer any questions you may have.

[technovelist]

Yes, of course deflation is good for savers and bad for borrowers. But what is the biggest borrower in the world? Hint: its initials are “USA”. And it just so happens to have a magic “money” printing machine to make sure that there is no deflation, courtesy of the Federal Reserve. Thus, deflation cannot happen until and unless the Federal Reserve loses the ability to inflate, which in turn can happen only when no one will take their funny “money” any more, i.e., after a hyperinflation that wipes out the “dollar”.

[technovelist]

No, you are not the most bearish on this board. I don’t expect the stock market, or the economy for that matter, to survive in a recognizable form after the upcoming catastrophe.

[technovelist]

Actually, the Fed’s goal is inflation. That’s why it was created in the first place, so that the government could spend more than it takes in taxes. However, if people realized that, they wouldn’t be able to get away with it anymore. Thus, they are always trying to bamboozle the public into believing they are “fighting inflation”, when in fact ending inflation is easy: just stop printing money.

[technovelist]

Wait. Prices will have to come down a great deal, for exactly the reasons you have stated: almost no one can actually afford the current prices. When something cannot continue, it won’t continue.

You’ll know when it is time to buy, because no one will be discussing how much money they have made in real estate. Instead, they will be discussing who has the best bankruptcy lawyer.

[technovelist]

I don’t think this is correct. Gold is money, and when the main reserve currency (currently the dollar) is in trouble, then gold will go up.

By the way, there is no such thing as a pure inflation hedge. To see this, just consider: We have had continuous monetary inflation for approximately the last 50 years. Thus, a true inflation hedge would have gone up continuously during that time, proportionately to the inflation rate. What investment has done that?

[technovelist]

Agreed, except for one point. It’s not “if the dollar begins to tank”, it’s “when the dollar resumes its previous tanking”. If I recall correctly, we’re not too far off the all-time low of the dollar index, and once it goes through that low, look out below!

[technovelist]

Sorry, I don’t buy it (no pun intended). In my opinion, the risk in waiting for gold to go down to the mid 500’s is bigger than the risk in acquiring at least a partial position now, and then buying more on the dip if it occurs. The move above the 200 dma can also be corrected by the moving average coming up, not only by the price going down.

But of course it’s your money, so you have to make the decision. Just remember that these advisors can be wrong too, and they won’t help you if you get “priced out”.

[technovelist]

How do you figure that gold is overpriced? To match the 1980 peak (after inflation, of course), it would have to be over $2000. And the overall economic situation now is MUCH worse than it was then!

Remember, gold is the only money that is always acceptable, no matter what disasters are unfolding. That’s why central banks have held onto so much of it, even while telling us it is a “barbarous relic”.

[technovelist]

It’s easy enough to answer his question as to “where people get the money to afford that homes they buy”: from “lenders” who don’t care that they can’t ever repay the loans, because they sell them immediately to bigger fools.

[technovelist]

Here is a web page with a general explanation of Swiss annuities, as well as links to a couple of annuity brokers (at the bottom). I’ve personally used JML.

[technovelist]

All good points. I’d just like to add that there is no net gain for the population when housing prices go up; the nominal increase in wealth of homeowners is exactly balanced by the increasing difficulty of non-homeowners to buy. This is nothing specific to housing, of course: with any boom in asset prices, the increasing cost to those who don’t have the assets balances the increasing nominal wealth of those who do.

Needless to say, this doesn’t mean there aren’t any economic effects of asset price changes; there are. But they aren’t the “gravy train” that many people seem to think; in fact, in the current situation the (former) house price increases have been very detrimental to the economy as a whole.

[technovelist]

I’m not powayseller (obviously), but in my opinion for most people the most cost-effective way to get a Swiss franc position is probably to purchase a Swiss franc annuity. These annuities are quite liquid and pay a reasonable interest rate (for Swiss francs investments, anyway). They can also have favorable tax treatment when you start taking the money out if you actually “annuitize” your accumulated account at retirement.

Buying Swiss franc banknotes (i.e., “cash”) is possible, but you will probably find there is a pretty wide spread between the bank’s buying price and their selling price, which makes this a less desirable approach.

[technovelist]

Since I don’t believe the government can do anything about the coming economic disaster, I’m voting solely based on one thing: war vs. peace. An anti-war candidate will get my vote; no pro-war candidate will.

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