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On September 18 2008 14:14 Ecael wrote:
Practicalities, a financial system collapse won't leave you any use with your gold. The US's finances collapsing won't be just a regional thing where such rare metals will retain value due to the rest of the world having a necessity for them.
well, the econ in viet nam collapses all the time. viet money is literally paper. u think germany was insane when they measure money with a weight scale? in viet nam, they use a meter stick. (too lazy to put it on a scale). yet gold still proved its worth there. viet nam is not alone in this practice. lots of ppl in China used to buy gold when inflation was insane in 194X.
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are you actually advocating the use of gold as a currency? if not, i don't really see why you're discussing ths.
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On September 18 2008 14:36 mahnini wrote:
are you actually advocating the use of gold as a currency? if not, i don't really see why you're discussing ths.
u dont have to use the full gold standard. as i said, many investors, ranging from viet nam refugees to the gov't of USA buys gold as a store of value. u dont see the US gov pulling trucks out of Fort Knox every day do u? its just for protection.
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On September 18 2008 14:38 dybydx wrote:Show nested quote +On September 18 2008 14:36 mahnini wrote:
are you actually advocating the use of gold as a currency? if not, i don't really see why you're discussing ths. u dont have to use the full gold standard. as i said, many investors, ranging from viet nam refugees to the gov't of USA buys gold as a store of value. u dont see the US gov pulling trucks out of Fort Knox every day do u? its just for protection.
you didn't answer my question, using gold as a store of value and using it as currency are two very different things.
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Vietnam's economy collapsing cannot be compared to America's economy collapsing. If we want to talk about hyperinflation, Zimbabwe is a much better example than Vietnam, but this isn't about hyperinflation or a stagflation, but rather a major global meltdown in finances. The US economy collapsing would have way too much of an effect on the worldwide industry to allow for the kind of liquidity that you want from an exchange medium to be found in gold.
As for China, yes, KMT brought a large supply of gold with them when they escaped to Taiwan, which jump started the Taiwanese economy in many ways. That, however, isn't a case where the world is disrupted economically. The point is that the failure of the finances of the United States will disrupt markets and industries around the world so much that gold loses its value as an universal currency.
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I think in the election Obama will have the upper hand here. He is known for his specific economic views and Mccain is known for being less of an economic stickler/republican dick. Whats happening here is the market for huge loans has been corrupted/declining and these major companies that give out gigantic loans (Fanny mae and Freddie Mac) just cant keep up with the forclosures and bankruptcy either caused by the bad economy or a series of financial mistakes. What this means is that they are getting fucked out dey minds and its bringing down everyones economy, so yes we are in a recession. As soon as they hit rock bottom it will begin to go up, so expect some expensive fucking bread.
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On September 18 2008 14:40 Ecael wrote:
Vietnam's economy collapsing cannot be compared to America's economy collapsing. If we want to talk about hyperinflation, Zimbabwe is a much better example than Vietnam, but this isn't about hyperinflation or a stagflation, but rather a major global meltdown in finances. The US economy collapsing would have way too much of an effect on the worldwide industry to allow for the kind of liquidity that you want from an exchange medium to be found in gold.
As for China, yes, KMT brought a large supply of gold with them when they escaped to Taiwan, which jump started the Taiwanese economy in many ways. That, however, isn't a case where the world is disrupted economically. The point is that the failure of the finances of the United States will disrupt markets and industries around the world so much that gold loses its value as an universal currency.
i agree that nothing u can do with gold will solve the economic troubles in the US. but the issue was brought up by someone asking why ppl should buy gold. i answered that it was to protect their savings.
i do agree that its not in everyone's interest for the system to collapse, but someone needs some brutal spanking for putting the world's population at peril and i m pointing my fingers on some selected few americans. lawlz.
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On September 18 2008 09:22 SweeTLemonS[TPR] wrote:Show nested quote +On September 18 2008 08:59 statix wrote:On September 18 2008 08:54 Caller wrote:
buy gold and silver people have been saying to buy gold for some time now but ive never quite understood why. can you or someone else explain please? If you have physical gold and silver, when the fiat currency we now have becomes worthless, you will still have a viable source of money. That's the idea. To the OP it's not just one person that is responsible. It's the heads of unimaginably greedy companies that made loans, which should never have been made, to make their own pockets fatter. They were giving 200k+ loans to people who made 30k a year. How the fuck are they going to pay that off? Especially when that 2.5% APR jumps to a 9.5%?
Very important note here. Paper gold and silver (futures/stocks) can crash as well. There is much more paper out there than the real thing, and when crunch time comes, all the physical will be long gone.
This is evidenced by the decoupling of the spot of physical and paper. Go ahead, you can buy paper at the current prices all day long, however, you go into a coin shop or an online vendor, and you will pay some pretty steep premiums, because they themselves can't get it at "spot". Just evidence of market manipulation.
But yes, buy physical gold and silver. In hard times, its one thing no one can take away from you. Empires and currencies rise and fall, companies go bankrupt, but gold has always been worth something. Not to mention the (massive) inflation which by all rights should have cause gold and silver to go way up in price a long time ago.
Btw, gold and silver have dramatically dropped in price in recent weeks, even though we are currently in very troubling financial times. One of the reasons for this strange situation is because there are a lot of hedge funds in trouble right now, and they are selling off their commodities to stay afloat.
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On September 18 2008 13:26 ahrara_ wrote:Show nested quote +On September 18 2008 12:37 gchan wrote:On September 18 2008 09:08 dybydx wrote:On September 18 2008 08:59 statix wrote:On September 18 2008 08:54 Caller wrote:
buy gold and silver people have been saying to buy gold for some time now but ive never quite understood why. can you or someone else explain please? gold and silver are the universally accepted currency. the US dollar is backed by the US econ, when the US econ fails, US dollar is just paper money. gold and silver is different. the price of gold relative to US dollar changes each year due to strenght of US econ, but if you compare gold to bread and butter, you will see that the value of gold always raises consistently or stay about the same. 1 once of gold can buy u 100 loaf of bread in 1900, it can still buy you 100 loaf of bread today. in contrast, 1 us dollar buy you 10 loaf of bread in 1900, it buy you 1/2 of a loaf of bread today. thus, when in doubt, covert you cash to gold. thus, unlike paper money (ie US dollar), gold is a hard asset. gold also has alot of industrial and commercial use, so the value of gold never plumets in real term. This is the psychological belief people have behind purchasing gold and silver, but for all intents and purposes, the USD is not just a piece of paper. If the US econ fails and the USD becomes worthless, you will have a lot more to be worried about than just the little hoard of gold you have...which leads to my next point. When you buy gold, you're not actually buying physical gold but a contract that says you own a portion of gold--on the market. If the US economy fails, you can pretty much kiss your contract goodbye as the whole financial system would go down with it. In the larger picture, "buying" gold and silver doesn't really hedge against stock (or other assets). The US, EU, and other players have been pumping so much liquidity into the market the last couple decades that even physical assets and commodities have become as easy to buy and sell as cash. That's kind of what happened with the housing market--because mortgages (which are traditionally long term assets) were so liquid, people swapped and over speculated their actual value. hey so I have a couple of questions. Monetary theory confuses the shit out of me. Can you explain exactly how the performance of the economy and the value of currency is linked? Why was the dollar on the decline for so long? Why is it going up again? What do you mean by pumping liquidity into the market? is that the same as having lots of very liquid assets? How are mortgages liquid? How does that liquidity lead to overspeculation?
Well, the first few questions are actually contest in academic economics because in theory, if an economy is doing well relative to others, the value of its currency goes up. The problem is that this applies only to the real exchange rate (the true value of the currency), but measuring real exchange rates is near impossible to do and what is actually reflected in the markets is the nominal value. The data on nominal exchange rates doesn't really match the theory so macroeconomists don't really know what to do; some economists like Milton Friedman and others mathematically showed that monetary policy is neutral and doesn't really affect the real exchange rate (I tend to follow this school of thought). As for why the USD was on decline for a while, it was mainly because the Fed cut interest rates and the mini commodity bubble. Back in January/February, the Fed cut interest rate by a considerable amount and this increased the money supply a ton (which lowered it's relative value). That plus lots of people put their USDs into commodities which decreased the demand for the USD. Increasing supply + decreasing demand = drastic drop in price. But of course, this was purely nominal as the USD economy didn't really decline that much (unemployment increased only about half a percent in the period--not really enough to account for a 20%+ loss in exchange rate). When people realized this, people rebought USDs so demand went up for it (that and the commodity bubble burst).
Making the market more liquid means making assets easier to sell/buy. Generally this means money, but when the Fed was under Alan Greenspan, he made virtually all assets easy to buy/sell. For example, when Alan Greenspan cut the interest rate down to 0.75%, he highly encouraged people to refinance with variable rate mortages. This creates liquidity as the cash flow from mortages is no longer fixed but rather float around with the conditions of the market. I think he did this too with equity too during the dotcom bubble, but I'm not sure exactly how. As for why liquidity increases speculation, it's because when assets like mortages are easier to trade/sell, people expect higher cash flows in the future (with thinner margins), and bankers embed this into their present valuation of the asset. Of course at some point, they valued these assets too high and paid the price for it now.
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On September 18 2008 08:58 zulu_nation8 wrote:
Why is this happening, are we in recession.
We been in recession.
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On September 18 2008 14:02 Ecael wrote:
dybydx, if we are going to point at physical objects, it is by far more practical to have life necessities than gold in the case of a financial failure. Should the US financial system crash, even gold in physical form won't be particularly useful. I for one would much rather have stores of food and other necessities to barter with. Caller when he brought up the gold/silver point was much more likely to be pointing at it as a kind of security against inflation rather than the kind of medium of exchange you are suggesting.
I agree, food is much, much better than gold. Ammo is probably better too.
On September 18 2008 13:26 ahrara_ wrote:Show nested quote +On September 18 2008 12:37 gchan wrote:On September 18 2008 09:08 dybydx wrote:On September 18 2008 08:59 statix wrote:On September 18 2008 08:54 Caller wrote:
buy gold and silver people have been saying to buy gold for some time now but ive never quite understood why. can you or someone else explain please? gold and silver are the universally accepted currency. the US dollar is backed by the US econ, when the US econ fails, US dollar is just paper money. gold and silver is different. the price of gold relative to US dollar changes each year due to strenght of US econ, but if you compare gold to bread and butter, you will see that the value of gold always raises consistently or stay about the same. 1 once of gold can buy u 100 loaf of bread in 1900, it can still buy you 100 loaf of bread today. in contrast, 1 us dollar buy you 10 loaf of bread in 1900, it buy you 1/2 of a loaf of bread today. thus, when in doubt, covert you cash to gold. thus, unlike paper money (ie US dollar), gold is a hard asset. gold also has alot of industrial and commercial use, so the value of gold never plumets in real term. This is the psychological belief people have behind purchasing gold and silver, but for all intents and purposes, the USD is not just a piece of paper. If the US econ fails and the USD becomes worthless, you will have a lot more to be worried about than just the little hoard of gold you have...which leads to my next point. When you buy gold, you're not actually buying physical gold but a contract that says you own a portion of gold--on the market. If the US economy fails, you can pretty much kiss your contract goodbye as the whole financial system would go down with it. In the larger picture, "buying" gold and silver doesn't really hedge against stock (or other assets). The US, EU, and other players have been pumping so much liquidity into the market the last couple decades that even physical assets and commodities have become as easy to buy and sell as cash. That's kind of what happened with the housing market--because mortgages (which are traditionally long term assets) were so liquid, people swapped and over speculated their actual value. hey so I have a couple of questions. Monetary theory confuses the shit out of me. Can you explain exactly how the performance of the economy and the value of currency is linked? Why was the dollar on the decline for so long? Why is it going up again? What do you mean by pumping liquidity into the market? is that the same as having lots of very liquid assets? How are mortgages liquid? How does that liquidity lead to overspeculation?
Basically the the power of the dollar is our government saying "don't worry, we're good for it. We may have a lot of debt, but we're good for it." When the economy is doing well, that statement becomes more believable.
Liquidity essentially refers to cash flow. Just like credit card companies don't care how much debt you have as long as you have good cash flow, people aren't worried about having dollars as long as its easy to buy and sell fast. You wouldn't feel so confident if it took you a month to cash out, would you? Would you put your money in the bank if it wasn't liquid? I don't think so.
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On September 18 2008 14:10 dybydx wrote:Show nested quote +On September 18 2008 14:02 Ecael wrote:
dybydx, if we are going to point at physical objects, it is by far more practical to have life necessities than gold in the case of a financial failure. Should the US financial system crash, even gold in physical form won't be particularly useful. I for one would much rather have stores of food and other necessities to barter with. Caller when he brought up the gold/silver point was much more likely to be pointing at it as a kind of security against inflation rather than the kind of medium of exchange you are suggesting.
ahrara, forex is rather weird like that. Currency theoretically reflect the strength of the economy backing, but really it points closer to the relative strength of the particular economy in comparison to another. The decline earlier in the year, particularly from the period after Bear Stearns rescue was due to the relative strength of Europe in comparison to America, and that showed in Q1 growth as well. The recent boom of the dollar was much due to the slowing of growth in Europe as people switched to greenbacks for better security, and as we see now people are switching to the Japanese Yen in favor of the dollar.
I am not quite sure as to why gchan worded that part about liquidity like that though, so I'll leave it to him to explain that part better.
Not_Computer, crude oil is in many ways more reliant on the industry than gold and silver.
EDIT - dybydx...when was the last time we raised rates. 2. the recent raise in USD isnt just against euro. the USD also raised against gold. i think it has to do with fed raising the rate as well.
Please stop saying this. The Fed has not raised the interest rate in any shape or form in the last half year. If you're talking about relative interest rates, this hasn't happened either. The Bank of England, Bank of Japan, and European Central Bank (the three largest free floating currency countries invested in the US) havn't decreased their interest rates one bit in the last half year either.
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i think greenspan spoiled the americans. and the subsequent jacking up of the rate at such a high pace doomed the homeowners. blame it on bernanke. many of homeowners suddently had to pay 5% more than they originally might have guessed. they got raped bad.
and now the bail outs will only mean... you guessed it, they get raped even more with taxes!
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On September 18 2008 15:08 gchan wrote:
Please stop saying this. The Fed has not raised the interest rate in any shape or form in the last half year. If you're talking about relative interest rates, this hasn't happened either. The Bank of England, Bank of Japan, and European Central Bank (the three largest free floating currency countries invested in the US) havn't decreased their interest rates one bit in the last half year either.
when the rate gets changed, it take some time for the market to adjust - lag issues.
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2years is a lot of lag time for our currency to be responding to an "increase" in the rates. We literally have just been dropping rates/keeping them constant for the past year.
The homeowners needing to pay more isn't a huge deal, the fact that they were getting mortgages in the first place is the issue. The idea was that everyone deserved a home...but no, not every family in the United States deserve to own a house, some people should be happy they are capable of renting in the first place. While the nature of subprime lending didn't give these people a lot of manuever room to work with, it is much less the problem of the nature of the loans than the underqualified getting them.
Before you complain about the bailouts, AIG might yet turn out to be fine, Bear Stearns' securities would fare a lot better in the case that the market improves, which is the original intention in aiding the purchase at all - to buy time and allow for stable market conditions and thus give these securities their proper value.
gchan, I thought the access to equity during the dotcom bubble was much more due to the explosion of VC activity during that time than monetary policy, rates were holding about 5% until the bubble burst.
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On September 18 2008 15:09 dybydx wrote:
i think greenspan spoiled the americans. and the subsequent jacking up of the rate at such a high pace doomed the homeowners. blame it on bernanke. many of homeowners suddently had to pay 5% more than they originally might have guessed. they got raped bad.
and now the bail outs will only mean... you guessed it, they get raped even more with taxes!
Greenspan rightly lower the rates in 200-2001 to stimulate the economy after dotcom bust; Greenspan rightly raised the rates in 2003-2007 to control inflation and decrease the size of the housing bubble; if he didn't raise it at the rate he did, we would be in a lot more trouble than we are now.
And no, the bail outs do not mean more taxes. Both presidential candidates favor tax cuts for the poor and middle class.
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dropping the overnight rate do lead to flooding the market with money. so soon we will see the US dollar depreciate. although possibly in conjunction with the economic decline if the banks continue to fail.
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On September 18 2008 15:33 gchan wrote:
Greenspan rightly lower the rates in 200-2001 to stimulate the economy after dotcom bust; Greenspan rightly raised the rates in 2003-2007 to control inflation and decrease the size of the housing bubble; if he didn't raise it at the rate he did, we would be in a lot more trouble than we are now.
And no, the bail outs do not mean more taxes. Both presidential candidates favor tax cuts for the poor and middle class.
greenspan was late on the rise and bernanke is late on the drop. while both candidates say they oppose tax raises, the reality of the matter is, money has to come from somewhere. if they dont raise taxes, they will have to "print more money".
it takes a while for the economy to adjust to the rates. namely someone has to file a loan, get it approved, get the money from the bank, which borrows from the fed (if need be). take that money to buy machinery, produce goods, sell it and repay the loan. a typical 1-2 year lag on the econ is common. although i did expect a faster impact on the exchange rate.
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Ecael, I'm not sure I completely understand it either but one of my professors mentioned it. I think it went something like it was because he didn't raise the interest rates, and US economy was growing, theres was an increase in money supply. With this large amount of accumulated capital, people bought a bunch of stock and thus overinfalted their value. That plus EFTs became really popular so your joe schmoe sitting at home could easily trade with his home money.
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When willl people stop letting private institutions manage the monetary system and let a public one do it instead.
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EPT
