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When a Currency is Devalued


WarrenJ

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At some time in the past the sainted FDR revalued gold from $20.67 to $35/ounce. A huge percentage of American's savings were wiped out with the stroke of a pen. Shortly, FDR made it illegal to own gold. Citizen's gold currency was simply confiscated and replaced with paper. Thus were the seeds planted for the paper fiat currency used in the U.S.A. today.

In 1971 president Nixon decoupled the dollar from gold. Since then our dollars have only something called "intrinsic value." Hmnn . . .

History shows us a fiat currency generally has a life expectancy of about 40 years; we are in year 38.

To see what happens when a government has control of a paper fiat currency, just look here:

http://www.timesonline.co.uk/tol/news/worl...icle6940482.ece

Heads up!

Regards,

Warren

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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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bought another 10 pounds of silver yesterday afternoon...when the price dropped.

Looking for another 50 or 60 pounds... if I can find it at the right price.

Keep in mind that silver, the poor mans gold, is more volatile in price than is gold. It must be watched very carefully. Most analysts expect a near-term/short-lived rally in the dollar. If that is the case, precious metals should decline in price for a bit. That should present a buying opportunity. I'll be taking advantage of that as I expect the metals to rise far above their current price.

Remember also that gold is "money;" silver is only a commodity that takes on the appearance of money in uncertain times. Once stability returns, silver returns to its commodity status. You might not want to own it then. Assuming "then" ever happens.

It's also worth considering owning mining stocks in order to leverage any precious metal price increases. If gold or silver were to double in price, good mining stocks might triple or even quadruple in response. I'm fond of SLW, SVM, HL, GG, AUY, IAG and some others.

Regards,

Warren

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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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bought another 10 pounds of silver yesterday afternoon...when the price dropped.

Looking for another 50 or 60 pounds... if I can find it at the right price.

Keep in mind that silver, the poor mans gold, is more volatile in price than is gold. It must be watched very carefully. Most analysts expect a near-term/short-lived rally in the dollar. If that is the case, precious metals should decline in price for a bit. That should present a buying opportunity. I'll be taking advantage of that as I expect the metals to rise far above their current price.

Remember also that gold is "money;" silver is only a commodity that takes on the appearance of money in uncertain times. Once stability returns, silver returns to its commodity status. You might not want to own it then. Assuming "then" ever happens.

It's also worth considering owning mining stocks in order to leverage any precious metal price increases. If gold or silver were to double in price, good mining stocks might triple or even quadruple in response. I'm fond of SLW, SVM, HL, GG, AUY, IAG and some others.

Regards,

Warren

Thanks.

I have been considering some mining stocks as well.

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Remember also that gold is "money;" silver is only a commodity that takes on the appearance of money in uncertain times. Once stability returns, silver returns to its commodity status. You might not want to own it then. Assuming "then" ever happens.

Careful with that POV... Gold as a hedge against economic collapse is a great tool. But gold is not money and gold has no real intrinsic value. It is not used in any great deal in manufacturing (of anything other then jewelry). And long term Gold has been a "so-so" investment at best. Over the long term there are lots of better investments then gold and other precious metals.

What does Buffett say about gold?

"It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Buffett was also quoted as saying about stocks, gold, and inflation:

"stocks are probably still the best of all the poor alternatives in an era of inflation—at least they are if you buy in at appropriate prices."

Understand that certain "key" spokespeople that we see on certain news channels every night, who are preaching immanent economic collapse are sponsored (in some cases almost exclusively now) by private and public gold "re-sellers"

Do your homework, talk to your broker, understand the pros and cons. And if the economic situation turns, be ready to get out quick. Also understand if the economy continues to stabilize this investment will look like a total dog. And if you think that runaway inflation is on the horizon there are LOTS of better investments. Given the price of Real Estate right now (in most places) that would be much higher on my list then Gold.

Many people (including my broker) are worried that Gold may have peaked. And if December's economic numbers build on Novembers positive news, Gold could collapse, like it did in late 81. People who bough gold at $700 an ounce in 1980/1981 had to wait almost 26 year just to break even.

Long story short, Gold has a place in a properly diversified portfolio, but if you are putting all of your eggs in the "gold" basket you will probably regret this decision.

Edited by OynxSTS

caddy.jpg

Easin' down the highway in a new Cadillac,

I had a fine fox in front, I had three more in the back

ZZTOP, I'm Bad I'm Nationwide

Greg

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Long story short, Gold has a place in a properly diversified portfolio, but if you are putting all of your eggs in the "gold" basket you will probably regret this decision.

I have many eggs and many baskets.

Would you care to make a wager?

I'll wager you $500 gold will be over $2,000/ounce by the end of 2010. If I lose the wager, I'll contribute half my losings to a charity of Bruce's choice and the other half to you. You'll do the same if I win?

Either way, Bruce's charity wins.

Regards,

Warren

Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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Long story short, Gold has a place in a properly diversified portfolio, but if you are putting all of your eggs in the "gold" basket you will probably regret this decision.

I have many eggs and many baskets.

Would you care to make a wager?

I'll wager you $500 gold will be over $2,000/ounce by the end of 2010. If I lose the wager, I'll contribute half my losings to a charity of Bruce's choice and the other half to you. You'll do the same if I win?

Either way, Bruce's charity wins.

Regards,

Warren

I don't gamble, I invest, (ya, I'm a lot of fun in Vegas ;) ) and as I posted on other threads I curently hold gold minning shares (which have been HAMMERED in the past few days), so even if I did gamble I definately would not bet against myself... My plan right now, is to wait for December's earning statements to get published in early January, (they are going to be HUGE) and then get the heck out.

But I'm curious, what is Bruce's charity?

caddy.jpg

Easin' down the highway in a new Cadillac,

I had a fine fox in front, I had three more in the back

ZZTOP, I'm Bad I'm Nationwide

Greg

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  • 3 months later...

Wow in hindsight I should have taken this bet... 1/4 of the year down... economy stabilized. Car sales up. Unemployment no longer getting worse. Gold flat at $1120.

I hope you all got out... Update in 3 months.

caddy.jpg

Easin' down the highway in a new Cadillac,

I had a fine fox in front, I had three more in the back

ZZTOP, I'm Bad I'm Nationwide

Greg

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Wow in hindsight I should have taken this bet... 1/4 of the year down... economy stabilized. Car sales up. Unemployment no longer getting worse. Gold flat at $1120.

I hope you all got out... Update in 3 months.

The U.S. economy is about as stable as Wile E. Coyote in mid air.

wile-e-coyote2.jpg

Car sales up? Okay, but are profits up by an equivalent percentage?

A friend told me today that his Chevy dealer phoned two weeks ago and offered him nearly the purchase price of his two year old Suburban if he traded it in on a new one. When I expressed disbelief he told me a friend of his received the same offer from a different dealer. Didn't want to call him a liar, but...

Unemployment IS getting worse, just not as fast as in the past. We not only need to stop losing jobs, we need to create nearly 200,000 per month. And I don't mean tax consuming government jobs, I mean wealth producing private sector jobs.

A person might wait until gold drops to the popularly accepted resistance level of $1,050, but I am not that person. I'll chance not trying to buy gold at the absolute bottom and instead buy it now. And don't forget silver; if you can stand the volatility the rewards will be great. I've been buying both on dips since late 2007.

It is mathematically impossible for the U.S. government to pay off the debts it is incurring even if it taxed its citizens at 100%. We are fast approaching a monetary nightmare the likes of which have never before been seen.

Regards,

Warren

P.S. How many knew Wile E. Coyote's middle name is Ethelbert?

P.P.S. [EDIT] I thought I posted this on The 19th Hole. Sorry.

Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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Wow in hindsight I should have taken this bet... 1/4 of the year down... economy stabilized. Car sales up. Unemployment no longer getting worse. Gold flat at $1120.

I hope you all got out... Update in 3 months.

The U.S. economy is about as stable as Wile E. Coyote in mid air.

wile-e-coyote2.jpg

Car sales up? Okay, but are profits up by an equivalent percentage?

A friend told me today that his Chevy dealer phoned two weeks ago and offered him nearly the purchase price of his two year old Suburban if he traded it in on a new one. When I expressed disbelief he told me a friend of his received the same offer from a different dealer. Didn't want to call him a liar, but...

Unemployment IS getting worse, just not as fast as in the past. We not only need to stop losing jobs, we need to create nearly 200,000 per month. And I don't mean tax consuming government jobs, I mean wealth producing private sector jobs.

A person might wait until gold drops to the popularly accepted resistance level of $1,050, but I am not that person. I'll chance not trying to buy gold at the absolute bottom and instead buy it now. And don't forget silver; if you can stand the volatility the rewards will be great. I've been buying both on dips since late 2007.

It is mathematically impossible for the U.S. government to pay off the debts it is incurring even if it taxed its citizens at 100%. We are fast approaching a monetary nightmare the likes of which have never before been seen.

Regards,

Warren

P.S. How many knew Wile E. Coyote's middle name is Ethelbert?

P.P.S. [EDIT] I thought I posted this on The 19th Hole. Sorry.

Wow I guess I was wrong. I read that the US Economy created 162,000 jobs last month... and that GM sales were up over 40% on the core brands...

Last time I checked running in air is still better then falling like a stone... right now we are hovering.

See ya in 3 months...

Edited by OynxSTS

caddy.jpg

Easin' down the highway in a new Cadillac,

I had a fine fox in front, I had three more in the back

ZZTOP, I'm Bad I'm Nationwide

Greg

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  • 9 months later...

Would you care to make a wager?

I'll wager you $500 gold will be over $2,000/ounce by the end of 2010. If I lose the wager, I'll contribute half my losings to a charity of Bruce's choice and the other half to you. You'll do the same if I win?

Either way, Bruce's charity wins.

Regards,

Warren

Hate to break this to you, but you missed by over $600 an oz.

Edited by OynxSTS

caddy.jpg

Easin' down the highway in a new Cadillac,

I had a fine fox in front, I had three more in the back

ZZTOP, I'm Bad I'm Nationwide

Greg

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Share on other sites

Would you care to make a wager?

I'll wager you $500 gold will be over $2,000/ounce by the end of 2010. If I lose the wager, I'll contribute half my losings to a charity of Bruce's choice and the other half to you. You'll do the same if I win?

Either way, Bruce's charity wins.

Regards,

Warren

Hate to break this to you, but you missed by over $600 an oz.

Actually a bit less than $600 ($2000 - $1421.60* = $587.40), but I concede your point. I was "premature" (again!).

Alas, I've been able to console myself by chuckling delightedly all the way to the bank.

The fiscal state of affairs in the U.S. and Western Europe, unfortunately, only portends a further U.S. Dollar rise in gold prices. You're fortunate your Loonies are on firmer ground.

* Closing price 12/31/10

Posted Image

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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