[HN Gopher] The Longest Record Broken: Gold/Silver Ratio Hits Hi...
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The Longest Record Broken: Gold/Silver Ratio Hits Highest in Over
5,000 Years
Author : nabla9
Score : 183 points
Date : 2020-03-18 10:16 UTC (12 hours ago)
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| gjabbar wrote:
| Gold is long term cash.
|
| Sovereign funds / private wealth purchase gold as a hedge against
| inflation. Ie their short term cash (actual cash) being worth
| less tomorrow. It has this characteristic because gold
| fundamentally has zero yield.
|
| When you enter a crisis period or period of deflation. Which we
| are seeing now. There is a flight to short term cash (USD).
|
| Good bugs who hoard gold or draw parallels to Armageddon and huge
| price increases in gold do not account for the simple fact that
| gold is long term cash.
|
| During the GFC the same liquidation profile was observed for
| gold.
| dumbfoundded wrote:
| In some ways, gold is the only real money. Governments have
| been secretly taxing their citizens by forcing them to use the
| gov't issued currency while printing more of it. Savers lose
| value in this process to finance short term needs.
|
| You can't print gold. Even when gold prices wildly fluctuate,
| gold production doesn't b/c it's already so hard. In times like
| now, we're going to print lots of USD in one way or another.
|
| Is there a gov't issued currency that's held its price better
| than gold?
| gjabbar wrote:
| My first job was at a mining startup that found perhaps the
| best copper/gold discovery in a decade. We were ultimately
| acquired. It's a reality. Mines take a minimum of ten years
| from discovery to bring into production. This is without the
| typical roadblocks of
| political/environmental/management/technical showstoppers.
|
| Gold has long been thought of a long-term store of value for
| this exact reason. Governments cannot help themselves,
| particularly democratic ones, from following a path of
| unfunded austerity. It becomes the power cycle, at some point
| there is a financial reckoning, and citizens' wealth is
| destroyed.
|
| Then the cycle begins all over again, usually tied to a metal
| (like gold) before breaking into fiat when the unfunded
| liabilities exceed the ability of the country to fund them.
|
| US dollars are the best among the worst in fiat. That will
| change, as it always has historically. Gold will remain as a
| store of value, as it always has.
| kyuudou wrote:
| >Gold is long term cash.
|
| The assessment I came to was that gold is a store of wealth,
| not a currency or investment. It's a way of preserving, not
| creating wealth. It's what could be passed on to your offspring
| along with land that holds its value, more or less, over
| generations.
|
| It damn sure isn't the FRN. If you held on to one of those from
| 1920ish, you'd have about maybe 3-4% of its worth in terms of
| buying power (of staples like eggs, bread etc)
|
| Money and currency are for spending to get things of actual
| value, whatever those things may be.
|
| There are apocryphal stories about Jews in WW2 Germany who had
| all their wealth in gold (as was common back then) who used the
| malleability of gold to flatten it out in very thin sheets then
| make thread from that, then sewed the threads into their
| clothing so that their wealth wouldn't be confiscated when they
| were fleeing the Nazis. I don't have any citations, though.
|
| Cranky old man perspective: https://grandfather-economic-
| report.com/inflation.htm
| gjabbar wrote:
| It's why the two used to be tied via the gold standard. Then
| cash became fiat and by nature short-term. Governments can't
| help themselves.
|
| The anecdote on the gold threads is fascinating.
| morley wrote:
| I'm a little confused. Maybe I'm interpreting this news or other
| commenter reactions incorrectly? They seem to be saying that the
| price of gold is on the rise, but the price of the gold ETF has
| gone DOWN in the last few days:
|
| https://spdrgoldshares.com/#home
|
| And the futures markets are down too:
|
| https://www.investing.com/commodities/gold
|
| Are other commenters only speculating that the price is going to
| go way up, and that the price is a good deal right now? If so,
| that doesn't seem to be supported by financial indicators, and
| the speculation around it doesn't seem much better than, say,
| saying that Bitcoin is going to go up in any given environment.
| I'm surprised to see this discussion on HN. I hope I'm grokking
| things wrong.
| chewz wrote:
| More like silver going down. YTD -30%.
|
| Also flight to liquidity.
| lordnacho wrote:
| This is a graph of the _ratio_ between gold and silver.
| mulle_nat wrote:
| My impression of the gold market is this: The gold bugs always
| say, that now is the right time to buy. It rarely is though.
| That's because issuers and supporters of fiat currency have an
| interest in the gold price not exploding, because it's
| basically a counter currency. So you see the current divide of
| reported gold demand and the price being "artificially"
| depressed.
|
| But the gold bugs can't really win, because the fiat currency
| owners wield infinite power, unless inflation really kicks in
| at some point. So gold is usually not that great of an
| investment.
|
| That's my perception, I am not at all an expert on these
| matters.
| sfj wrote:
| It's more due to the rest of the world having to sell
| everything to pay their dollar denominated debts, because,
| during this global economic shutdown, they have no USD coming
| in.
| AnimalMuppet wrote:
| I don't think that fiat currency issuers have infinite power
| to _suppress_ the price of gold, because they have at most
| limited amounts of gold to sell. They can certainly
| _increase_ the price an infinite amount, though.
| appleflaxen wrote:
| Gold fell, but silver fell more.
|
| So the ratio of gold:silver went up
| aSplash0fDerp wrote:
| Precious metals and gems will still provide value in areas of the
| world that are not devastated by war or disease.
|
| If the dollar goes tits up, I think the criminal accounting will
| take down gold with it, leaving the next in line metals to reap
| the rewards of integrity.
|
| You cannot trust any of the accounting with gold.
| lazyjones wrote:
| Peculiar situation. Hoarding Gold purely as an investment
| strategy is largely a psychological phenomenon now, since it has
| lost most of its value as a currency in harsh times. Or what
| exactly are you going to buy with your gold coins when all supply
| chains are broken and most goods can't be produced even at a
| higher price? Better hoard canned tuna...
| kareemm wrote:
| I always wondered about this. Gold is now valuable only as a
| shared fiction. In hard times I'd much rather have useful
| things (food, meds, water, fire) than a pile of stuff that is
| valuable only because others think it is... which could and
| does change over time.
|
| Clearly I'm missing something...?
| jariel wrote:
| "Gold is now valued only as a shared fiction."
|
| Every Fiat currency is a 'shared fiction'.
|
| Currency is a social contract.
|
| Then, if we all agree that Gold is a currency, then it has
| value in that regard, and since it always has been a currency
| across pretty much all cultures, across all time, it remains
| a form of rough currency.
|
| If 'civilization fell apart' (and it won't) we would _still_
| need currency and if anything it would probably be gold.
| peteradio wrote:
| Guaranteed lead.
| tsimionescu wrote:
| Wouldn't cash dollars be a better bet than gold? Harder to
| counterfeit, easier to carry around, easier to split.
| dangerface wrote:
| > Harder to counterfeit
|
| How do you counterfeit gold? Alchemy?
| bhandziuk wrote:
| You can turn it into a sheet and wrap it around lesser
| metals.
| logfromblammo wrote:
| Tungsten, mainly. Anti-counterfeit testing now includes
| ringing the purportedly gold coin like a bell, if it
| passes the density test. A clad-tungsten counterfeit will
| have a duller, less sonorous sound.
|
| This is where all those hours of listening to drummers
| drone on and on about the metallurgical qualities of
| cymbal brass--and the audible differences between Paiste,
| Sabian, and Zildjian--can come in handy.
| Izkata wrote:
| Pyrite (aka "fool's gold"), if we're talking about the
| average person rather than someone who knows well how to
| test it.
| sfj wrote:
| If no one was printing more of 'em, they'd disintegrate
| after awhile if heavily used.
| jariel wrote:
| First, it's worth remembering that the USD was ostensibly
| backed by gold up until one generation ago, until the
| Vietnam War. No kidding. There was some amount of Gold
| reserve to back dollars, that's why 'Fort Knox' exists.
| So even the USD was 'just a paper you could trade for
| gold'! Though really, you couldn't, it was a weird
| theoretically reality.
|
| Now (and really even then) USD is only as good as the
| integrity of the US Gov and the Fed. If they crash, USD
| won't be worth the paper it's printed on. In addition,
| mechanically, physical currency takes a lot of effort to
| keep going, and with nobody doing that, well it goes
| kaput.
|
| Digital currencies rely on various layers of trust:
| networking, security, legal, financial, regulatory,
| institutional. If any of those break, we can't use
| digital currency. Technically, there might be some kind
| of super cook block-chain that could work without needing
| the internet, surely, but it's too complicated for
| regular use as a currency. Maybe for larger transactions
| between fiefdoms!
|
| But gold and other precious metals would probably be used
| as s currency until institutional trust could be built
| back up into institutions so that they could have real
| fiat currencies.
|
| If knowledge and responsibility were very strongly
| maintained at the local level, it's entirely possible for
| regional economies to maintain their own fiats. This
| requires exceptional knowledge and fiscal/monetary
| discipline.
|
| If you have a populist, dirtbag leader who can corrupt
| the integrity of the monetary system, it will destroy
| everything. This is the source of most hyperinflation
| scenarios.
| kyuudou wrote:
| There's some more detail to this. There was kind of a
| gray area between WW2 and the end of the Bretton Woods
| arrangement in 1971. After 1971, the Federal Reserve Note
| could no longer be converted into gold by other
| countries' central banks.
|
| The average citizen, after the 1930s when the gold
| standard was abandoned (and for a time, private gold
| ownership was literally outlawed and people were
| obligated to turn all their gold in) could not go to a
| bank and say "give me my $ worth of gold" but other
| _countries_ could. Between the Federal Reserve Act of
| 1913 and that, though, one could actually redeem a
| Federal Reserve Note for gold.
|
| Now the US dollar's value is assessed by comparing it to
| a basket of other nations' currencies and dollar foreign
| policy sometimes favors a cheaper dollar. An analogous
| situation happened with the Swiss franc when the Swiss
| central bank deliberately devalued it to make Swiss
| exports more affordable and attractive to buy again.
|
| In 1980, the Hunt Brothers cornered the commodities
| market for silver by buying up billions of dollars of it
| and "artificially" pumping the price up over 50$/oz. This
| is a good example of where metallism (backing a currency
| with a commodity like gold or silver or both) can fail as
| long as the commodity itself can also be traded. It would
| be quite difficult to do the same to the gold market
| though since silver has many more industrial uses.
|
| The currency of a nation is only as good as the
| government that issues it, which in a democratic form of
| government means constant vigilance by voting citizens
| over the stewards of it.
| logicchains wrote:
| >Though really, you couldn't, it was a weird
| theoretically reality.
|
| This is not how other countries saw it.
|
| From https://en.wikipedia.org/wiki/Exorbitant_privilege :
| "In February 1965 President Charles de Gaulle announced
| his intention to exchange its U.S. dollar reserves for
| gold at the official exchange rate. He sent the French
| Navy across the Atlantic to pick up the French reserve of
| gold and was followed by several countries. As it
| resulted in considerably reducing U.S. gold stock and
| U.S. economic influence, it led U.S. President Richard
| Nixon to end unilaterally the convertibility of the
| dollar to gold on August 15, 1971 (the "Nixon Shock").
| This was meant to be a temporary measure but the dollar
| became permanently a floating fiat money and in October
| 1976, the U.S. government officially changed the
| definition of the dollar; references to gold were removed
| from statutes."
| tsimionescu wrote:
| I'm not talking about relying on the US dollar as a
| currency, but relying on physical US dollar bills as a
| medium of exchange,just as you would on gold coins/bars.
| lawn wrote:
| And also much easier for someone to create a huge amount
| of, altering the supply and making the worth less
| (inflation).
|
| Also curiously enough if that's your criteria
| cryptocurrencies would be even better.
| tsimionescu wrote:
| How is it easier to print a realistic dollar bill, with
| all the easy to test security measures, than it is to
| alloy some gold with something else, or use some other
| golden substance?
|
| And no, anything dependent on computers (an especially on
| a country's worth of electricity) to function is not a
| safe bet if we are imagining doomsday scenarios.
| _red wrote:
| >Gold is now valuable only as a shared fiction.
|
| While this is true, its important to understand that "all
| value is subjective" the concept of "inherent value" is a
| fallacy that distorts ones worldview.
|
| A glass of water has a different value at the oasis vs the
| dessert.
| singularity2001 wrote:
| "all value is subjective"
|
| no, water and tuna have measurable and objective value to
| your biological system.
| whb07 wrote:
| Not if you live in a rainforest with ample access to
| water. It's got very little value, whereas in a desert
| it's got high value.
| js2 wrote:
| Please edit your comment to remove the last sentence.
| AnimalMuppet wrote:
| Why? What's wrong with the last sentence? (Or has it
| already been removed?)
| js2 wrote:
| It previously had an insult as the last sentence. I'm
| glad it was edited and I'm sorry it's too late for me to
| delete my request now.
| AnimalMuppet wrote:
| Eh, no worries. You gave good advice, and it sounds like
| it was heeded. You left me confused, but no big deal -
| I've been confused a few times before...
| [deleted]
| nybble41 wrote:
| You are mistaking biological utility for economic value.
|
| And even then, water and tuna have very little utility to
| a biological system that already has plenty of both. The
| utility of adding more may even be negative.
| lawn wrote:
| It's still subjective.
|
| Someone dying of thirst values water much higher than
| someone drowning in it.
|
| Someone allergic to tuna will value it much lower than
| someone who's not.
| TheAdamAndChe wrote:
| It shouldn't be seen as an investment, but as a hedge against
| inflation IMO. Silver and gold has fixed supplies, unlike
| fiat currencies.
| londons_explore wrote:
| Only semi-fixed supplies.
|
| If gold gets too valuable relative to labour, more
| mountains in South America will be pulled down to extract
| the gold.
|
| Think of the way hundreds of millions of dollars have been
| put into bitcoin mining ASICS just because someone saw a
| return could be pulled out if thin air... Gold mining is
| pulling a return out of rock when the economic conditions
| are right.
| AnimalMuppet wrote:
| I seem to recall that when the Spanish conquered Central
| and (most of) South America, and found and mined huge
| amounts of gold and silver, it increased the supply of
| gold by 20%.
|
| Sure, mining may increase the supply of gold... a very
| small amount compared to the existing supply. It's not
| going to move the needle in terms of supply vs. demand,
| though.
| lawn wrote:
| Your analogy is slightly wrong, as more ASICs won't
| increase the Bitcoin supply.
|
| (Technically it will a little until the network
| difficulty adjusts.)
| NickBusey wrote:
| Yup. There are plenty of dormant mines here in Colorado
| because "there is 100 million dollars worth of gold in
| that mine but it will cost 200 million dollars to extract
| it". Once the first number changes enough in relation to
| the second, those mines will start right back up.
| blevin wrote:
| A high profile example is the Donlin project in Alaska.
| They've been spending decades on de-risking and
| logistics, and once the gold becomes valuable enough to
| extract it's likely to be one of the largest mines in the
| world.
|
| https://www.novagold.com/properties/donlin_gold/overview/
| aguyfromnb wrote:
| > _Silver and gold has fixed supplies, unlike fiat
| currencies._
|
| It can be counterfeited or debased. Will you carry around a
| scale and testing supplies?
| evbpcapfxy wrote:
| You can transfer ownership of gold without moving your
| gold. Just as you can transfer ownership of a house
| without moving the house.
|
| Paper money began as a claim on an asset stored in a
| vault.
| Symmetry wrote:
| And historically the amount mined somewhat depended on
| the price so, as with fiat currency, there was at least
| some feedback mechanism on the price. Though if you
| discover a new source it can be bad, see the price
| revolution[1].
|
| [1]https://en.wikipedia.org/wiki/Price_revolution
| rabidrat wrote:
| You might be able to bribe the ticket taker or border guard
| with gold, which you can't do with items like food and meds
| that have lower value-density and less liquidity. IOW it's
| more useful when human systems and group behavior are the
| source of the trouble...which is usually.
| GrumpyNl wrote:
| I place my bet on my vegetable garden.
| hathym wrote:
| how are you going to buy your 9999.99$ can of tuna?
| zeckalpha wrote:
| All value of money is a shared fiction. Smith (1776) talked
| about this.
| jonhohle wrote:
| Gold has utility as well: it's highly conductive, doesn't
| oxidize easily, is hypoallergenic, malleable, etc.
|
| Napkin math tells me that over 50 tons of gold have been used
| just in iPhones over the past 13 years. Just like any
| commodity - if there is demand, there is probably value.
| chii wrote:
| > utility as well ...
|
| you didn't list utility. You listed physical properties.
|
| Utility is how those physical properties help/hinder the
| use of said material for a purpose.
|
| The utility of gold, when society is broken, will be
| minimal. Except as a barter currency, as it's widely
| recognized.
|
| However, under such a circumstance, i would say other goods
| are better - such as food staples, guns and bullets, and a
| shelter you can defend (like a bunker).
| theandrewbailey wrote:
| ... and toilet paper, apparently.
| vermilingua wrote:
| And to extract any of that utility, you need an industrial
| economy. People buy gold when they begin to question the
| longevity of such an economy.
| Symmetry wrote:
| Bismuth is priced at $.39 per gram, copper at $.0074. I
| would bet gold would end up somewhere in that range or so
| as opposed to the $48 per gram it's at now.
| DubiousPusher wrote:
| No because it's much more rare. All the gold mined in the
| history of the world could fit into one moderately sized
| warehouse.
|
| 190,000 tons of gold mined in the history of the world
| vs. 700,000,000 tons of copper.
| Symmetry wrote:
| Well, we've mined 320,000 tons of bismuth so that's
| probably a better comparison than copper. This is all
| just to get a wide ballpark estimate.
| neuronic wrote:
| Looking forward to Bismuth necklaces and Bismuth dental
| crowns.
| Symmetry wrote:
| Bismuth has low toxicity for a heavy metal but I think
| I'd recommend skipping the dental crowns. Bismuth makes
| very pretty dangly bits handing off earring or necklaces
| though.
|
| https://www.google.com/search?q=bismuth+jewelry
| logfromblammo wrote:
| Gold is valued because it doesn't tarnish. Bismuth, on
| the other hand, becomes beautiful only with a patina of
| oxide.
| tmn wrote:
| It's not an either or. Someone can easily have 50k of gold
| and 10k of material goods. 60k of material goods may be
| excessive in volume and use.
| chewz wrote:
| Good luck keeping $1milion in canned tuna.
| gbear605 wrote:
| Good luck redeeming $1million in gold
| kevin_thibedeau wrote:
| Just need to corner the wheelbarrow market.
| dangerface wrote:
| > since it has lost most of its value as a currency in harsh
| times?
|
| Gold isn't a currency its money.
|
| A currency is backed by a store of value, money is a store
| value.
|
| Gold is a great store of value because its rare and doesn't
| expire this is why humans used it as the first form of money
| thousands of years ago, and it's why people continued to use it
| up until very recently.
|
| > what exactly are you going to buy with your gold coins when
| all supply chains are broken and most goods can't be produced
| even at a higher price?
|
| Total global economic collapse seems very unlikely, but let's
| say the US government collapses in that case the US currency
| Dollars collapses completely, it has no value its just monopoly
| money.
|
| Today in a war zone where supply chains are broken, local
| currency or dollars are worthless, but gold will still have the
| same value world wide no matter what, simply because it is the
| value.
|
| Tuna goes off after a year so while valuable its not a good
| store of value.
|
| Gold doesn't go off, it doesn't rust, it has lots of uses in
| electronics like phones and computer, only a very small
| percentage of the worlds supply of gold is used for jewellery /
| decoration.
| TheAdamAndChe wrote:
| I bought $300 worth of silver last night, and I plan to buy more
| while I can. The government is injecting a massively gigantic
| amount of cash into the economy to counter the decreased velocity
| of money, but within a year and a half or so, the velocity of
| money will sharply increase, possibly higher than before. That
| will cause such a high rate of inflation that I'm afraid of what
| could happen. I bought physical coins because I don't know if the
| financial institutions will waver, crumple, or at very least
| become inaccessible for a while. I've stashed some cash too in
| case there's a run on the banks, but I don't know if they will be
| worth as much.
|
| Basically I'm preparing for a global depression. This sudden
| shock to the economy is unprecedented in any modern time, and we
| have no idea what could happen.
| forkerenok wrote:
| I'm currently taking the "Economics of Money and Banking"
| course on coursera [0] and, as far as my understanding has
| developed, the Fed injecting cash is not an irreversible thing.
|
| When the liquidity crunch is over, the Fed will start gradually
| increasing the rate. That will make rolling over existing
| overnight loans taken from the Fed less attractive and a lot of
| money will flow back to the Fed.
|
| I hope people more familiar with the subject will correct me if
| I'm wrong.
|
| [0]: https://www.coursera.org/learn/money-banking
| nscalf wrote:
| Currently the issue is that the fed has removed the overnight
| liquidity requirements. This opens up the threat of a bank
| run. All of this is due to years of aggressively propping up
| the economy for political means, in reality we should have
| had a market decline a few years ago, but the government
| massively mismanaged their responsibilities and pushed us
| into more than one bubble, while hamstringing their ability
| to respond.
| littlestymaar wrote:
| Since most payments are now dematerialized in developed
| countries, a bank run would cause little issue in practice
| though.
| lolc wrote:
| The problem with a bank run is not the physicality of it,
| but the insolvency.
| dmurdoch wrote:
| Major US banks will NOT be rendered insolvent. The fed
| won't allow it. They are literally too big to fail.
| They'll just be bailed out.
| chalst wrote:
| US banks have deposit insurance of $250k per account for
| retail banks.
|
| https://www.fdic.gov/deposit/deposits/faq.html
| coldtea wrote:
| Without physicality though, it's not hard to restrict
| automatically the demand. Capital control measures...
| barry-cotter wrote:
| The Fed and other central banks have almost total control
| over nominal inflation because they control the printing
| presses. They can create money by buying bonds and destroy it
| by selling them. They have bugger all control over real
| inflation but that's a matter for the fiscal authorities to
| try and deal with by demand management.
|
| "Inflation is always and everywhere a monetary phenomenon."
| Milton Friedman
|
| Edited to fix elementary mistake as pointed out by forkerenok
| littlestymaar wrote:
| That's funny to quote Milton Friedman in 2020 because the
| monetarist analysis have had zero predictive power since
| the 80s!
| barry-cotter wrote:
| Yes, if you stop doing the thing that reliably leads to
| hyperinflation you don't get any more hyperinflation.
| littlestymaar wrote:
| First of all, inflation and hyperinflation are two really
| different things. The first one being common in history
| while the second one is rare but catastrophic.
|
| Then, In Friedman's book inflation is related to the
| amount of money in circulation, yet since the 80s the
| amount of money and inflation have almost zero
| correlation in the US. Some of Friedman's concepts were
| useful to reach that point, but still: we now have been
| living for 40 years in a world where Friedman's model is
| unable to explain anything.
| jfengel wrote:
| We've never had hyperinflation in the US. We've had high
| inflation, but never hyperinflation. And we've had very
| low inflation since the 80s, including during the decade-
| plus period of practically-zero interest rates.
|
| Hyperinflation is a completely different issue from
| inflation, and it's kind of odd for it to become the
| monetarist bugaboo. When the US has a massive war debt
| payable immediately, or a complete economic collapse that
| the government decides to cope with by price controls,
| then you'll see hyperinflation. But then, hyperinflation
| will be the least of your problems.
| gph wrote:
| Not technically the US, but the Confederacy did
| experience hyperinflation during the war. They ran the
| printing presses at full-tilt without anything tangible
| to back them up. And obviously once the tide of the war
| shifted things got real bad.
| AnimalMuppet wrote:
| Well... the 1970s weren't a hyperinflation, but we were
| trending there. Inflation was not only high, it was
| increasing. Would we have wound up at hyperinflation if
| Volcker hadn't clamped down at the Fed? I don't know;
| that's alternate history. But it felt like we were headed
| there.
| littlestymaar wrote:
| I'm sorry, but this is just wrong: inflation was high but
| fluctuated a lot and by no way you can say it was
| "increasing". You're rewriting history in favor of your
| political bias.
|
| Inflation in the 70s (chart):
| https://inflationdata.com/articles/wp-
| content/uploads/2014/0...
| AnimalMuppet wrote:
| I'm sorry, are you psychic? I didn't say anything about a
| political bias, nor anything to even hint at one. You're
| making up stuff that you think you know about me, with no
| basis.
|
| To the data: I agree that there are fluctuations there.
| But average inflation for the decade of the 1960s was
| 2.45%. For the 1950s, it was 1.82%. The inflation rate
| even for 1972 was above the average rate for the 1950s
| and 1960s. 1976, the bottom of the next trough, was
| higher than 1972. And then you look at 1974 and 1979, in
| the context of the 1950s and 1960s, and yes, it sure does
| look like inflation is increasing. Yes, there are
| decreases (business cycle), but each cycle is higher than
| the last one.
| [deleted]
| radford-neal wrote:
| That's mostly true (except as another comment says, the
| "sell" and "buy" are backwards).
|
| Certainly the central bank can create as much inflation as
| it wants, by simply printing and distributing more money
| (which usually takes the form of the central bank buying
| assets such as bonds with the new money). There's no limit
| to the ability of the central bank to make the currency
| valueless.
|
| In the other direction, they can usually increase the value
| of money (ie, create deflation) by reducing the money
| supply, but it is possible that at some point the public
| might simply stop regarding the government's money as being
| worth anything. The only thing that might stop that is that
| people would still need government money to pay taxes.
| forkerenok wrote:
| > They can create money by selling bonds...
|
| Did you actually mean it the other way around as in they
| can create money by buying govt bonds/treasury bills/etc
| and retire them by selling them back to the market.
| barry-cotter wrote:
| Yes, will edit. Thanks.
| tathougies wrote:
| > The Fed and other central banks have almost total control
| over nominal inflation because they control the printing
| presses.
|
| Not quite true. Every bank can print money (well, the
| modern day equivalent of increasing a digital number
| somewhere), and does so when they make loans.
| DubiousPusher wrote:
| I don't think this is correct. Because as you can see the spot
| price of silver has gone down, the price for silver coins has
| gone up by more than double the amount the spot price has
| declined. Meaning, people are buying silver out of fear.
|
| My guess is that this is the product of silver prices being
| driven by industry much more than gold prices are. We're
| looking at a supply side decline here which means a decline in
| demand for the things that go into making other things.
|
| Gold is far less useful industrially than silver.
| generalpass wrote:
| > I don't think this is correct. Because as you can see the
| spot price of silver has gone down, the price for silver
| coins has gone up by more than double the amount the spot
| price has declined. Meaning, people are buying silver out of
| fear.
|
| > My guess is that this is the product of silver prices being
| driven by industry much more than gold prices are. We're
| looking at a supply side decline here which means a decline
| in demand for the things that go into making other things.
|
| > Gold is far less useful industrially than silver.
|
| For whatever reason, there is a common misconception
| regarding the usefulness of gold. Commonly on any of the
| popular investment shows and websites, you will see various
| people stating "gold has no use" without any measure of a
| qualifying statement.
|
| My perception is that these people likely mean "gold has no
| use [as an asset]." The degree to which this is correct is
| not what I'm trying to address, but rather the literal
| interpretation of the statement that could be read as "gold
| has [absolutely] no use."
|
| Here is the intro from the article on gold at geology.com[1],
| which doesn't have a dog in this fight:
|
| > What is Gold?
|
| > Native gold is an element and a mineral. It is highly
| prized by people because of its attractive color, its rarity,
| resistance to tarnish, and its many special properties - some
| of which are unique to gold. No other element has more uses
| than gold. All of these factors help support a price of gold
| that is higher than all but a few other metals.
|
| In case you missed that sentence in there:
|
| > No other element has more uses than gold.
|
| [1] https://geology.com/minerals/gold.shtml
| rafiki6 wrote:
| The argument being made is about industrial use. Outside of
| electronics which have such little gold that it's not even
| worth the chemicals to extract it back out, Gold really
| doesn't have much use industrially. It's use as a currency
| and jewelry is quite obvious, but that's another human
| fiction like fiat currency. It has no other inherent value.
| We can't eat it. We can't even really wipe our butts with
| it. Gold is shiny, and remains shiny for a long time. End
| of story.
| generalpass wrote:
| > The argument being made is about industrial use.
| Outside of electronics which have such little gold that
| it's not even worth the chemicals to extract it back out,
| Gold really doesn't have much use industrially. It's use
| as a currency and jewelry is quite obvious, but that's
| another human fiction like fiat currency. It has no other
| inherent value. We can't eat it. We can't even really
| wipe our butts with it. Gold is shiny, and remains shiny
| for a long time. End of story.
|
| Sounds like a very scientific position you've laid out
| here against the editors ate geology.com. Why don't you
| send that to them and post there response here?
| DubiousPusher wrote:
| From the Wikipedia entry on gold.
|
| "Only 10% of the world consumption of new gold produced
| goes to industry"
|
| Gold does have some industrial use and probably would
| have more if it weren't so expensive due to people
| valuing it as a reserve currency.
| generalpass wrote:
| > From the Wikipedia entry on gold.
|
| > "Only 10% of the world consumption of new gold produced
| goes to industry"
|
| > Gold does have some industrial use and probably would
| have more if it weren't so expensive due to people
| valuing it as a reserve currency.
|
| You aren't presenting a scientific argument. My entire
| point was that gold is useful and actually has more uses
| than any other element.
|
| Whatever else it is used for or the reasons the price is
| high do not present anything against my claim.
|
| It is so weird to just state scientific findings and be
| hated for it.
| agumonkey wrote:
| shouldn't we organize globally instead of individually for this
| ? or will it make no difference
| bhandziuk wrote:
| Did you have the silver shipped to you so you are now holding
| that silver in your hands?
| pferdone wrote:
| I feel like I'm reading a video of "All Gas No Brakes" haha
| marnett wrote:
| I love his content so much.
| wil421 wrote:
| Seriously, the market has gone to hell so I bought $300 worth
| of silver and some coins. Sounds like a recession proof plan.
| nl wrote:
| _That will cause such a high rate of inflation_
|
| Hey I remember this prediction in 2008/9. Still waiting for
| that one to happen...
| BallyBrain wrote:
| The inflation has been in speculative assets. This happened
| because the expansion of the money supply did not go to the
| people. In addition, there is debate about how accurate the
| inflation figures are. Some alternative measures are far
| higher.
| nl wrote:
| If he's trying to protect against inflation in speculative
| asset prices for some reason then he should invest in some
| of those assets, not silver, which is uncorrelated.
| aguyfromnb wrote:
| Exactly. The Fed and government have been _trying_ for over a
| decade to generate some inflation and decrease the value of
| the dollar. It 's proven nigh impossible, because the
| American economy is, relatively, too strong, and the demand
| for USD too great.
|
| What is going to change that? The US may be printing money,
| but so is every other country on the planet.
| BubRoss wrote:
| No inflation? Asset prices are a lot higher than they were.
| nl wrote:
| That's not what inflation means.
|
| And if the OP is trying to protect (?) against rising
| asset prices, then they should _invest in the assets that
| are appreciating_ not in silver which isn 't really
| correlated with asset prices.
| BubRoss wrote:
| If you look at the money supply graphs, there is a
| tremendous amount of money that has been making its way
| through the world in the last decade. You can probably
| redefine inflation until you get something that hasn't
| increased in the last decade but you have to at least say
| what that is.
|
| https://fred.stlouisfed.org/series/MBCURRCIR
|
| (Also saying something 'is going up' is a prediction of
| the future. You only know that something went up in the
| past tense).
| nl wrote:
| Money supply isn't inflation.
|
| I'm using the standard economics definition of inflation:
| changes in value of a standardised bucket of goods and
| services.
| nybble41 wrote:
| The "standard" definition preferred by political
| economists (for the obvious reasons) is useless for
| making accurate predictions. The economic effects of
| inflation are all due to the changes in the money supply;
| the changes in prices are an side effect of this and many
| other factors, not a cause.
| nl wrote:
| The standard definition of inflation is a standard for a
| good reason: it's what effects consumers!
|
| It's been that definition all through the 1970s when
| inflation was a real problem, so your implications it is
| that for political reasons is incorrect.
|
| You can keep trying to argue for a different definition,
| but the OP was clearly trying to hedge against consumer
| price inflation - otherwise he'd hedge for investment
| asset inflation by investing in the assets subject to
| that increases, not a metal like silver which isn't
| correlated with those increases.
| AnimalMuppet wrote:
| You can't _just_ look at the money supply. Let 's say
| that we hold the money supply perfectly constant. Then
| one dollar becomes worth, not a fixed amount, but a fixed
| fraction of the economy (assuming velocity remains
| constant).
|
| For example, let's say that there are 1000 dollars in
| circulation, and the velocity is 2 - on average, each
| dollar changes hands twice in a year. So the GDP is
| $2000.
|
| Ten years pass. We learn to be more efficient. The
| economy produces 20% more than it did ten years ago. But
| the GDP is still $2000, _because that 's how much money
| there is._
|
| That seems unreasonable to me. If I saved a dollar, why
| does that dollar give me a claim, not just to what the
| dollar would have bought when I saved it, but also a
| claim on a part of all the growth since I saved it?
| nybble41 wrote:
| > The economy produces 20% more than it did ten years
| ago. But the GDP is still $2000, because that's how much
| money there is.
|
| More or less, yes. The improved efficiency is reflected
| in the fact that prices are now 20% lower, so the same
| GDP buys more goods. I'm not saying that prices shouldn't
| be considered. Prices are an important economic metric--
| which is exactly why it's a bad idea to conflate natural
| price signals with the noise caused by artificial changes
| in the money supply.
|
| > If I saved a dollar, why does that dollar give me a
| claim, not just to what the dollar would have bought when
| I saved it, but also a claim on a part of all the growth
| since I saved it?
|
| Because the improved efficiency and growth are in part
| due to the fact you chose to save that dollar, meaning
| that during that time there were $1 worth of extra goods
| and services available for other people to invest or
| consume. You created a surplus and essentially loaned it
| to everyone else by choosing to consume $1 less than you
| produced. The drop in prices is the interest on that
| loan.
|
| Of course, it could go the other way too. If people
| choose to consume capital rather than invest in the
| future then the economy could shrink, resulting in rising
| prices. The general rate of return represented by
| deflation or inflation (in the absence of interference
| with the money supply) represents the baseline level of
| return a venture needs to offer in order to be worth
| investing in, not just for the individual--who would be
| looking for the best rate of return in any case--but for
| the economy as a whole. If you can't find anything better
| to invest in than the real-valued return you would get
| from stuffing your money in a mattress and waiting, we're
| all better off if you do just that and avoid taking
| resources away from actually beneficial investments. An
| inflationary economy incentivises people to invest more,
| but if the inflation is artificial then the result is a
| lot of _mal_ investment from people simply looking for a
| safe haven for their money, even if it's still losing
| real value over time.
| AnimalMuppet wrote:
| > Because the improved efficiency and growth are in part
| due to the fact you chose to save that dollar, meaning
| that during that time there were $1 worth of extra goods
| and services available for other people to invest or
| consume. You created a surplus and essentially loaned it
| to everyone else by choosing to consume $1 less than you
| produced. The drop in prices is the interest on that
| loan.
|
| Well, no, the "interest on that loan" is the return on
| the investment. I lent the money to company A, they
| bought some tools to improve productivity, and they paid
| me back part of the increased value they produced. That's
| my reward for consuming less - I got my $1 back, plus
| some.
|
| But at the same time, company B borrowed some money from
| somebody else, and used it to increase productivity. So
| did companies C through Z. Why should I get rewarded for
| my loan to A by the gains in productivity made by B
| through Z?
| nybble41 wrote:
| > Well, no, the "interest on that loan" is the return on
| the investment.
|
| Exactly as I said. The "return on the investment", for
| saving money in a deflationary economy, is the increase
| in the amount of stuff you can buy with that money. Which
| is exactly what I referred to earlier as the "interest on
| that loan".
|
| > I lent the money to company A, they bought some tools
| to improve productivity, and they paid me back part of
| the increased value they produced. That's my reward for
| consuming less - I got my $1 back, plus some.
|
| Except you didn't literally loan the money to company A,
| you (in effect) loaned the _value_ of the money to
| _everyone_ --including companies B through Z in your
| example--by temporarily taking it out of circulation. You
| could have bought $1 worth of stuff for yourself with
| that money but chose not to, so that stuff was available
| for others to buy, and their prices were a bit lower
| since you weren't bidding against them.
|
| Money is just a stand-in for other goods. It's not a
| consumable end product, an intermediate material, or a
| capital good which can be used to produce other goods
| more efficiently. If it helps, think of that $1 in
| savings as one share of ownership in the entire economy--
| a claim to a little bit of everything being produced. Or
| an extremely broad index fund. As the amount of goods
| being produced changes, the value of your share also
| changes, the same as any other equity investment. When
| you eventually trade your share in the economy for an
| equivalent fraction of the available goods, if your
| investment in the economy helped it to grow (along with
| others' investments, of course) then one share's worth of
| goods will be a bit more than it would have been before
| you invested.
|
| Do you have an issue with the idea that a person can buy
| shares of IPO stock in a company, funding the company's
| growth, and then be rewarded later by selling those
| shares a higher price? If so, I probably can't help you;
| otherwise, this is essentially the same thing but for the
| entire economy rather than one company.
| AnimalMuppet wrote:
| I can sort of twist my mind far enough to see what you're
| saying about not using the resources leaves those
| resources available to everyone else. But...
|
| I could have it both ways. I could lend the dollar to A,
| and get paid back a decade later with interest. Now I
| have (more than) a dollar after the decade. But that
| dollar is still worth 1/2000 of the year's output, so I
| _also_ got paid for everyone else 's gains, _even when I
| didn 't leave them the resources_ (because A had the
| resources, because I lent the dollar to A).
|
| Even within your perspective, I have a hard time seeing
| how that would be considered just.
| nl wrote:
| This whole discussion is missing a major point in my
| eyes.
|
| Inflationary expectations is a major driver of inflation
| of prices. If people expect the prices to increase, they
| will buy earlier. That leads to producers having pricing
| power, so they tend to increase prices, which leads to...
| higher prices, and confirms the consumer expectations.
|
| This is also why you can't really use money supply as a
| measure of inflation. As you note "money is just a stand-
| in for other goods" - which of course leads to the
| standard definition of inflation. If money is a stand-in
| for other goods, then we measure how much of these good
| money can buy. That's exactly what the standard
| definition of inflation captures.
| BallyBrain wrote:
| In reply to nl. Actual inflation is the expansion of the
| money supply and there has been a vast expansion in it
| since 2008.
|
| Where that extra money supply ends up going, is where the
| inflation is.
| nl wrote:
| "Inflation is a quantitative measure of the rate at which
| the average price level of a basket of selected goods and
| services in an economy increases over a period of time.
| It is the constant rise in the general level of prices
| where a unit of currency buys less than it did in prior
| periods"
|
| https://www.investopedia.com/terms/i/inflation.asp
|
| If you think he's using some alternative definition then
| you'll need to explain how silver protects against it.
| discobean wrote:
| You could say it is the least worst, they have that going
| for them :)
| [deleted]
| sfj wrote:
| The demand for USD being too great is not because the
| American economy is strong, but rather because there is $12
| Trillion in dollar denominated debt owed by the rest of the
| world. At 2% interest this is $240 Billion worth of USD
| that has to be paid out every year.
|
| And now because of the world economy shutting down, those
| dollars aren't being fed back into the markets outside of
| the US, meaning that no one can generate the cash to repay
| their loans.
|
| This is why cash is so high priced right now, even while
| the Fed is desperately trying to lower it. It's also why
| gold and silver are taking a beating. In order to raise
| cash not to default, foreign corporations and governments
| have no choice but to sell everything they own, including
| gold and silver (as well as cryptocurrencies).
| pontifier wrote:
| This explains a lot about what I'm seeing right now.
|
| It's probably the most terrifying thing I've read since
| this whole thing started.
| aguyfromnb wrote:
| > _Basically I 'm preparing for a global depression_
|
| There's certainly nothing wrong with being prepared.
|
| However, the idea that our institutions crumple but your hard
| currency coins are safe is naive at best. In such a scenario,
| if the metal has any value, either the government will
| confiscate it or your neighbour with the gun will take it.
|
| > _The government is injecting a massively gigantic amount of
| cash into the economy_
|
| What is "massive"? Right now they are talking about $2
| trillion, which is about 10% of GDP. Spending 10% of 1 year of
| income on "maintenance" isn't scary to me.
| neuronic wrote:
| The government isn't a household.
|
| You have to ask where those 10% are taken from so we can
| spend them on maintenance. The smartest move would be to
| immediately slash military budget in half if not more.
|
| But it will likely be taken from education, infrastructure or
| healthcare/social services.
| sfj wrote:
| They're taken from thin air. The Fed just prints it.
| neuronic wrote:
| Thereby devaluing the rest of the money. What that means
| should be abundantly clear.
| AnimalMuppet wrote:
| Take 2008, for instance. The Fed injected $4 trillion.
| Why? _Because $4 Trillion evaporated in the crash._ The
| result was that we didn 't have a deflationary meltdown,
| but it didn't result in inflation.
| owenmarshall wrote:
| The dollar is the worlds reserve currency. American
| printing presses have more life in them than other
| countries.
|
| Look at the countries that have opposed that since the
| beginning of the millennium: Libya and Iraq saw, ahem,
| "kinetic interventions", and Iran and Venezuela are still
| being crushed by sanctions for daring to price their oil
| in Euros and/or RMB.
| barrkel wrote:
| Most money isn't from printing presses. Banks create
| money by handing out loans.
| gerikson wrote:
| Most loans are against tangible, reposseable assets, or
| against future income streams. A bank that just handed
| out loans without commensurate interest rates to avoid
| the risk of default would quickly go out of business.
| treyfitty wrote:
| > What is "massive"? Right now they are talking about $2
| trillion, which is about 10% of GDP. Spending 10% of 1 year
| of income on "maintenance" isn't scary to me.
|
| The Quantitative Easing program from 2008-2014 (6 years
| duration) injected about $4T into the economy. Today, a
| similar amount is being injected in just 1 month, albeit by
| purchasing different assets.
|
| The inflation risk is very real.
| MichaelDickens wrote:
| If you expect depression plus inflation, wouldn't buying TIPS
| make more sense? Silver might have higher volatility in a
| depression, but TIPS probably won't, and they hedge against
| inflation as well as silver.
| nabla9 wrote:
| I hope you realize that you think you have figured out
| something that markets don't. Markets see decades of low
| inflation.
|
| Central banks know how to stop inflation, that's not a problem
| for them at all. The problem for the next 10 years will be low
| inflation, not large inflation.
| SuoDuanDao wrote:
| I disagree. The sudden jump in equity prices that happened
| over the last few years looks to me like a classic case of
| the markets pricing in high future inflation.
| AnimalMuppet wrote:
| I think it's kind of the reverse. Stocks should sell at
| risk-adjusted rate-of-return parity with bonds. If
| inflation is 1% (and is expected to stay there), then
| what's $1 of corporate profit worth? $100 (same as $1 of
| bond interest would cost). So the stock market has soared
| _because_ interest rates have fallen. Money has moved into
| the stock market, seeking rates of return, and has
| continued to do so until the rate of return of stocks was
| not higher than the rate of return of bonds.
| nabla9 wrote:
| Bond yield is classic indicator for future inflation.
|
| Look at Treasury yields for next 10 - 30 years.
| https://www.treasury.gov/resource-center/data-chart-
| center/i...
| SuoDuanDao wrote:
| Huge amounts of cash has been printed and used to buy
| bonds over the last ten years, I don't think the bond
| market is a useful means of price discovery as a result.
| jfengel wrote:
| Right now they're terrified of deflation. A lockdown is going
| to cause a massive drop in consumption and a massive drop in
| wages, making a vicious circle of falling prices that could
| continue well past the end of quarantine. They'll be happy
| just to keep prices stable.
| omgwtfbyobbq wrote:
| They see decades of low inflation until they don't. The post-
| WWII US had a couple decades of low inflation in the 50s/60s,
| followed by a couple decades of high inflation in the
| 70s/80s. Central banks do know how to stop inflation, but
| there can be pressure not to in some situations.
| radford-neal wrote:
| There may well be serious real problems, which the central
| bank can't magically solve. But if you're just worried that
| there might not be "enough" inflation, the central bank has
| unlimited ability to create that, if it wishes to. (Of
| course, whether such inflation would be a good idea is
| debatable, and could depend on the circumstances.)
| nabla9 wrote:
| > the central bank has unlimited ability to create that, if
| it wishes to.
|
| This is not true as the recent decade shows. Japan has
| tried to increase inflation almost two decades.
|
| Just increasing the money stock does not create inflation
| if the velocity of money decreases at the same rate.
| disease wrote:
| If I remember correctly from my econ classes, deflation
| has a nasty spiraling effect where any currency
| introduced into the system is subsequently hoarded, which
| decreases economic activity which makes money even more
| valuable which increases hoarding ...
|
| There are many tools in the toolbox for handling
| inflation. For deflation, not so much.
| AnimalMuppet wrote:
| The central bank can create unlimited inflation _in
| financial assets_. In, say, food, or cars, not so much. (I
| mean, I guess they could buy a bunch of food and cars, but
| that 's pretty far out there, even for the current
| expansive definitions of what the central banks can do.)
| anjc wrote:
| Isn't this what some governments (through purchasing
| supply) and some central banks (through relaxed lending
| restrictions) have done with real estate?
| AnimalMuppet wrote:
| Yes, but real estate is at least half in the "financial
| assets" category.
| nl wrote:
| And the depression he's worried about comes _after_ a
| recovery from the current crises.
|
| I wish I had those predictive powers.
| TheAdamAndChe wrote:
| Yes, this is a risk and it makes sense. During the great
| depression, there were significant decreases in inflation[1].
| But what am I risking? I might lose 50% of the few thousand
| dollars I put into silver, but it protects me against
| unexpected movements or a dollar crash during an unparalleled
| period of time in modern history. It ensures I'll have money
| to eat.
|
| [1] https://inflationdata.com/articles/inflation-cpi-
| consumer-pr...
| nabla9 wrote:
| By all means keep little silver or gold in the case the
| whole society collapses or for emotional reasons. You don't
| have to defend it. You have to defend the argumentation you
| arrived into it.
|
| The problem I had your comment was the rationalization for
| what you did.
|
| When US was trying to hold to gold standard, population
| growth was high and the country was barely industrialized,
| you could expect inflation. None of the reasons that
| applied then apply today.
|
| (Gold standard is similar to debt in denominated in foreign
| currency. It can cause out of control inflation and even
| hyperinflation.)
| TheAdamAndChe wrote:
| I understand there may be flaws in my logic, but what
| flaws were there? You basically said I was wrong and the
| market believes otherwise, but you didn't explain how my
| beliefs on the varying velocity of money wouldn't or
| couldn't create inflation in the next year or so.
| nabla9 wrote:
| Because increasing velocity of money is very unlikely.
|
| https://www.treasury.gov/resource-center/data-chart-
| center/i...
| TheAdamAndChe wrote:
| That chart kind of proves my point though. People are
| moving from stocks to bonds as risk in stocks increases,
| yet the long-term outlook of the economy(10+ years) is
| largely unchanged. Despite this, the government is
| injecting tons of money during a time of a global
| quarantine that will eventually be lifted. When that
| lifts, people will buy a surge of supplies that they are
| depleting during this time, leading to a spike in demand
| in most things. Am I seeing this wrong?
| AnimalMuppet wrote:
| That spike in demand will pass, and we will (we hope)
| settle down to a steady state. That steady state is (in
| the market's opinion) not much different from the steady
| state that we would have had without the pandemic. That's
| why the market is still predicting the 10-years-out state
| as being the same as it predicted before this crisis.
| QuesnayJr wrote:
| If that happens, then the government will take money out of
| circulation. Right now the Fed is printing money to buy assets.
| When they need to reverse it, they sell the assets, and then
| remove the money they make from circulation.
| sfj wrote:
| I don't think they'll get that much for those sub prime auto
| loans and over inflated stocks they're accepting now...
| QuesnayJr wrote:
| The Fed has $4 trillion of assets on their balance sheets
| right now. They'll find something to sell.
|
| Anyway, they're not buying subprime auto loans or
| overinflated stocks. They're buying long term risk-free
| debt, and are going to start buying commercial paper (which
| has some risk, but not much).
|
| They really did buy lots of different stuff during the
| financial crisis, and yet they never lost control of
| inflation.
| balola wrote:
| The problem with silver is it's not a currency it used to be,
| it's just a cheap metal nowadays.
| Cthulhu_ wrote:
| One could bet on people not being aware of that after the
| economy collapses. It's going to go back to bartering then,
| and initially the value of gold and silver will be pretty
| much random.
| tsimionescu wrote:
| If I understand correctly, bartering had never been a major
| mode of trade, even going back to tribal societies.
|
| That said, silver could become a medium of exchange again,
| for the same reason it had always been.
| lawn wrote:
| The problem with silver is the much larger supply
| compared to gold and the market cap is comparatively tiny
| (even less than the cryptocurrency market!). It's if
| course possible, but I find it quite unlikely.
| IAmEveryone wrote:
| Silver is unproductive and speculative. It is just as volatile
| as any single investment, and there is even less guarantee of
| it remaining stable as with gold.
|
| To actually hedge against the breakdown of societies,
| cigarettes are probably more attractive.
| SuoDuanDao wrote:
| I'm very long caffeine in that scenario actually, fewer
| smokers than the last time we had massive currency
| devaluation. It's annoyingly tough to store unfortunately.
| kasey_junk wrote:
| Ammo
| taborj wrote:
| Buy .22LR, some chickens, and a goat. You can use the
| chickens for egg and meat, the goat for milk and meat, and
| the .22LR for varmint hunting and trading.
|
| Better hurry up, though; ammo prices are skyrocketing,
| though .22LR has been fairly stable at a touch over
| $0.03/round.
| ElonsMosque wrote:
| But shorting markets is already being banned on some
| platforms i believe
| joquarky wrote:
| Also, 190 proof alcohol has many uses.
| fbn79 wrote:
| Gold price is not fixed by the free market as people think but
| by few powerful banks/company that for sure can build covered
| trusts and control it to their bests needs. See
| https://en.wikipedia.org/wiki/Gold_fixing
| barry-cotter wrote:
| You can't fix prices unless you're either willing to sell
| enough or buy enough to fix it. If you can't do that then
| eventually the peg breaks. See the collapse of the dollar
| gold peg in the 1970s when France wanted gold from the US, or
| the collapse of the UK's peg to the DM on Black Monday.
| vesinisa wrote:
| On the contrary - that article seems to show that the London
| fix is a free market process. If an individual bank wants to
| increase the price of gold they must commit to buying gold at
| great volumes to cause that market movement. OTOH if all the
| banks conspire to move gold in some direction, any one of
| them can betray and profit at the expense of all the others
| knowing the movement is artificial.
| Ottolay wrote:
| Silver is down because it is largely an industrial metal used
| heavily in many electronic components. Gold is also used in
| industry (e.g. Gold plated connectors) but less so compared to
| its use as a value store by governments[1] and private parties.
| Since the economy is expected to drop, industrial metals are
| dropping as well.
|
| [1] https://www.fiscal.treasury.gov/reports-statements/gold-
| repo...
| freepor wrote:
| The value of these metals is largely driven by the same things
| that drive any consumer fashion, so the gold/silver ratio hitting
| a new high isn't any more weird than "hoop earrings hit a 5,000
| year high in popularity."
| littlestymaar wrote:
| > The gold market seems split at the moment: while the price is
| falling, meaning there are more sellers than buyers, everything I
| read on Twitter is that physical gold is nearly unobtainable -
| many banks and refiners have run out of inventory. Apparently
| there has been a surge in retail demand for gold coins and bars
| at the same time as the price has been falling.
|
| Remember: if you "own" gold in some portfolio, you don't really
| own _gold_ , you own an IOU for gold and you have zero guarantee
| to get your money back if things go bad. And while fiat money is
| backed by states, there is nobody to back your fiat gold.
|
| (The same reasoning applies if you own bitcoin or any crypto on
| coinbase or any other exchange).
| mrfusion wrote:
| So why isn't Silver keeping up?
| ctack wrote:
| It's the highest it's been since the 1940s. Sensationalist
| headline.
| MR4D wrote:
| You didn't read the article well enough - it blew through that
| record, but in 1940 it held the record for a year (we've only
| done it for a short period so far).
| ctack wrote:
| How is breaking the 1940 not more accurate?
| MR4D wrote:
| You said "highest since 1940" and called it sensationalist.
|
| But it _broke_ the 1940 record, which means the title is
| correct and not sensationalist.
| jml7c5 wrote:
| By emphasizing a past date, the headline (and article
| itself) gives the impression that the record was set over
| 5000 years ago, and that this is the first time the
| gold/silver ratio has been higher than at that point in
| time. "Since 1940" would provide better context, and
| would not prompt such confusion. It seems likely that the
| reference to 5000 years is specifically to sensationalize
| the news and draw clicks.
|
| As an illustration of the absurdity of such a style, one
| could equivalently put "in over <x> thousand years" in
| the headline of pretty much any metric that has been on
| an upward trend through its history.
| mrnobody_67 wrote:
| This is the best explanation I've ever seen of how the Fed and US
| Dollar money printing actually works:
|
| https://www.youtube.com/watch?v=iFDe5kUUyT0
|
| Most people also don't realize that the Fed, which buys
| Treasury's drawn on a bank account with $0 in it, is privately
| owned - and distributes dividends to its private shareholders
| holders (who are not disclosed).
| Hello71 wrote:
| this seems like a fed conspiracy theory video, a la freemen on
| the land OPCA arguments.
| hosteur wrote:
| Do you have any arguments about what is actually being said
| in the video?
| 100-xyz wrote:
| Looks like a once in a life time opportunity!
| DubiousPusher wrote:
| Beware. Silver was $5/ounce for decades.
| flyGuyOnTheSly wrote:
| To do what exactly?
| bhandziuk wrote:
| To buy a bunch of precious metals which can be exchanged for
| goods and services! Much like actual money but less
| conveniently.
| spaceflunky wrote:
| Far far less convenient
| MrLeap wrote:
| I buy silver rounds every once in a while when the price
| seems cheap. They're very handy for a few different kinds
| of transactions.
|
| 1. They're handy for showing your appreciation and
| getting past a common "I don't _want your money_" barrier
| in my region.
|
| If I pass out a bunch of silver rounds to friends with
| krakens on them while loudly proclaiming "8 ARMED SEA
| GODS, TO COMMEMORATE THE FACT THAT MANY HANDS MAKE LIGHT
| WORK" everyone who helped me smiles broadly, laughs and
| receives them. An aura of gratuity emanates from the
| situation from everyone involved.
|
| If I were to pass out envelopes with a 20$ bill in each,
| it would make everyone feel weird. Many would get
| returned, I probably wouldn't have friends anymore.
|
| 2. Garage sales ran by older people. I've found a silver
| coin has, on average, a higher buying power than
| equivalent cash. For 1oz of silver, a nice gentleman
| agreed to trade a circular saw, bench grinder parts, an
| electric motor, lathe parts, a few hammers, a tool box
| and an angle grinder last year.
|
| 3. Gifts for kids. 1 oz silver rounds are not that
| expensive, shinier than most objects, larger than most
| people expect, and tend to be received with wide eyed awe
| every time I've given them as gifts.
|
| Silver is fun.
| uwuhn wrote:
| Where do you recommend buying them?
| lordnacho wrote:
| Here's my explanation as an ex fund manager:
|
| Gold is the Schelling point flight-to-safety, anti-inflation
| good. Silver has similar qualities, and might as well be the same
| thing economically, but it isn't. You're more likely to have
| heard of gold bugs than silver bugs.
|
| When it comes to a massive market panic like this, people think
| about what other people think about. Well, they always do that,
| but when there's a panic people have certain safe haven assets
| that everyone "agrees" are more likely to be safe than others.
|
| Bonds are another one, though of course there you have
| historically had massive government intervention, making it a
| little less unintuitive why people should buy them.
| short_sells_poo wrote:
| As I wrote below, gold has been a very dubious hedge for equity
| market crashes. As a matter of fact, in the last 2 decades,
| gold sold off with the initial market panic and it only started
| appreciating with the equity recovery.
|
| Truth is that very if (if any) people understand gold, and it's
| use as a safe haven for market panic is highly questionable. It
| has certain correlation regimes with bonds and inflation, but
| given the sparsity of data on market stresses (they are by
| definition rare events), it is very difficult to draw any sound
| conclusions.
|
| I explicitly exclude any events pre-2008, as the world now is
| completely different. The only thing that perhaps translates
| from the pre-2008 environment to our current situation is the
| magnitude of the selloffs, but everything else is different.
| duxup wrote:
| Is it fair to say that gold is just as speculative and prone
| to panic as ... most things?
| short_sells_poo wrote:
| Yes. Gold has become (or always was?) as much a speculative
| asset as pretty much anything else. It's difficult to find
| a safe haven asset in any crash, because there are so many
| feedback loops and non-obvious relationships. Ex post we
| see of course many asset managers come out of the woodwork
| beating their drum on how their expertise allowed them to
| buy the safe haven asset that happened to work in a crash.
| This is survivorship bias at it's clearest.
|
| After 2008, central banks managed to stop every single
| market stress with a firehose of money. Eventually this
| became an actual trade. Every single selloff was bought
| heavily by traders because of the near-certainty that CBs
| will provide a hard backstop to the panic.
|
| Until last week, where a new regime is starting emerge
| perhaps where CB tools have suddenly stopped working, at
| least short term. Perhaps once the selloff stops, the
| massive money supply support will re-accelerate the buying,
| but right now we are in uncharted territory. The current
| market behavior is unprecedented. We saw the 3rd biggest
| one day loss in the entire history of S&P 500. Intraday
| volatility is through the roof.
| cercatrova wrote:
| Yes. Only cash is king.
| jerkstate wrote:
| This doesn't scan for me. If both are "flight to safety" assets
| to different extents, how come (a) the list price has gone down
| significantly for both assets during a "flight to safety" and
| (b) every online coin shop is selling for delivery in 4 weeks
| at 20% above spot (not too abnormal) or delivery this week for
| 50% above spot (quite abnormal). Physical silver is very hard
| to buy for the supposed "price."
|
| As an ex fund manager, what would you say to the theory that
| large financial institutions have sold a great deal of precious
| metal-backed securities ("paper" PMs) over the past couple of
| weeks to cover stock market margin calls, flooding the paper
| market, while the physical market is seeing shortages,
| indicating a price disconnect between the security and the good
| itself?
|
| What happens next?
| lordnacho wrote:
| > As an ex fund manager, what would you say to the theory
| that large financial institutions have sold a great deal of
| precious metal-backed securities ("paper" PMs) over the past
| couple of weeks to cover stock market margin calls, flooding
| the paper market, while the physical market is seeing
| shortages, indicating a price disconnect between the security
| and the good itself?
|
| Plausible. I had no idea where gold even was stored back when
| I was speculating on it. By and large, people who speculate
| on the price have separated the actual assets from the claims
| representing ownership in them. It's normally the effective
| thing to do.
|
| > What happens next?
|
| I get the feeling the news out of the US, with its health
| system being what it is, is going to get worse. There's no
| way we avoid the news being flooded with more and more issues
| related to the virus.
| Klinky wrote:
| Gold and silver are probably the best places to invest if
| you're planning for total societal collapse, but not really
| great vehicles to weather a recession.
| Dirlewanger wrote:
| Very poor choice to invest in gold if you're waiting for
| society to collapse. Looters won't give a shit that you have
| gold, they'll kill you, rape/kill your wife and children,
| steal whatever food/portable munitions you have, and leave
| the gold because it's too heavy.
| freepor wrote:
| In total societal collapse you should be investing in beans
| guns and water.
| mrnobody_67 wrote:
| Gold was the best performing asset class the last decade....
| better than the SP500
| murrayn wrote:
| But not better than bitcoin.
| brazzy wrote:
| Um... no, it wasn't?
| kragen wrote:
| Schelling points exist in cooperation games: where you and
| other players win if you choose the same move and lose if you
| choose different moves. You have a cooperation game when you
| establish a _market_ : if some traders go to Broadway and
| others go to Wall street, they won't be able to trade with each
| other, and although indium and gallium trade around the same
| price as silver, good fucking luck finding a liquid market in
| indium futures. But establishing a _position_ is not a
| cooperative game; it 's a _competitive_ game: you _lose_ if you
| take the same position as everyone else, because they drive up
| the price you have to pay if it 's a long position, or they
| drive down the price you get if it's a short position.
| Schelling points don't make any sense in competitive games.
|
| Except, of course, if you _pretend_ it 's a cooperative game,
| and persuade everyone else to take the same position as you do,
| later. That's a pump-and-dump scam.
|
| As an ex-fund-manager you know this. So why are you bringing up
| Schelling points? Maybe there's something I don't understand.
| appleflaxen wrote:
| > little less unintuitive
|
| a little more intuitive?
|
| or you made a typo? (context suggests a typo, but the double
| negative makes it difficult to understand)
| lordnacho wrote:
| Yeah good point. What I'm saying is authorities have bought
| bonds in the past, so there's kinda a reason to think there's
| someone who will support the price in the future.
| thedudeabides5 wrote:
| Bond's are a great hedge, until they are not.
|
| With the policy stimulation starting with printed money to
| buy domestic assets, and moving rapidly towards printed
| money to finance fiscal support, it's not clear that bonds
| _everywhere_ are a good hedge.
|
| https://www.tradingview.com/symbols/TVC-IT10Y/
|
| Gold on the other hand, has been a decent hedge universally
| for a couple thousand years.
| short_sells_poo wrote:
| Gold is a crap hedge for equity selloffs. It's
| correlation is highly dubious and as in 2008, in this
| current case as well it actually sold off sharply with
| the equities.
|
| Bonds are very much like gold in this respect, doubly so
| if you explicitly pick the bonds of a highly indebted
| country with a shaky economy, in the middle of a
| potentially massive pandemic - like Italy. Italian bonds
| as a hedge have been avoided like the plague by anyone
| with an ounce of insight.
| thedudeabides5 wrote:
| Depends on your currency!
|
| IF you are an American, it's an okay hedge.
|
| If you are European or Asian, it's pretty good.
|
| Problem is, you are thinking about your gold against
| dollars. Against yen, euro, rmb, it a natural hedge for
| your implicit short dollars.
| bitxbit wrote:
| Traded gold for awhile now and I can say the gold market broke
| in 2011. It's not a hedge for anything because it's correlated
| to equities (and other risk assets such as crude). It's really
| a speculation asset (think bitcoin). In fact, a lot of energy
| behind gold came out of the 2011 peak and the bust that
| followed and into crypto currencies.
|
| Having said that, with crypto now all but finished, and with
| roughly $2-3T in stimulus about to hit US and EU economies, I
| believe gold will see a rise in the next year or so. Especially
| if you buy it against the euro.
| throwaway_pdp09 wrote:
| Does that explain why _now_? I mean, stonehenge didn 't even
| exist in its big-stones form 5000 years ago - building that
| started a few hundred years later. Chew that over.
| Spooky23 wrote:
| Silver is used in industrial processes. Its plunge in price
| is a signal that industrial output is dropping.
| benibela wrote:
| In Germany there is another explanation. Gold is tax-free,
| silver is taxed.
| sbmthakur wrote:
| Won't this increase imports? I am assuming that Germany has
| to import most of its Gold.
| Animats wrote:
| Nobody uses silver as a store of value any more. It's more of an
| industrial metal. With not that many industrial uses.
| ponsin wrote:
| Why is it that there is so much advertising for investing in
| gold? Many of the podcasts that I listen to advertise it, I see
| ads for it everywhere. I would think that unlike stocks where you
| must buy through a broker (for a fee), gold can easily be bought
| by anyone. So what makes the business of helping people invest in
| gold so popular?
| mortehu wrote:
| I think most of the ads are for physical gold, for which you
| can charge any markup you want. It's more like pitching over-
| the-counter traded penny stocks.
| bradlys wrote:
| https://en.wikipedia.org/wiki/Pump_and_dump - would be my
| suspicion.
| bob1029 wrote:
| I cannot imagine investing in these types of assets. For those
| who speculate on gold & silver, would you also purchase futures
| contracts on oil, pigs, and grains? It's pretty much the same
| idea unless you are having gold bars shipped to your home.
|
| If your objective is to make money "quickly", I'd recommend
| averaging any cash you have sitting around into a market-wide
| ETF ASAP. The trick is to not get emotional. You have to hold
| every last share through events just like this one. If you
| don't use leverage or purchase options contracts you can
| literally forget the stock market exists when monster events
| are occurring. Assuming you diversified, there's really nothing
| to worry about under any circumstance. Just keep buying the
| same market-wide funds on a regular basis. Never sell. Ever.
| Selling is how you lose the game.
|
| All of this fear has created a generational buying opportunity.
| numpad0 wrote:
| The article has charts, and from it the ratio had been 18 times
| as much silver for gold in weight up until 1875. The article also
| mentions it was 2.5x in 3100 BCE, 13.33x in 560 BCE, 10.5x in 300
| AD and so on.
|
| The real change starts 1875 where it starts to rise and vibrate
| between 20x to 100x, trendline inclined at maybe 20x per century.
| And yesterday's peak was at 123.78x. Maybe I could say the human
| population is 5000 years high as well, except dips in population
| is much shallower than for this.
| anonu wrote:
| Silver is an industrial metal. Gold has no real industrial
| application and is mostly a store of value. So the article is
| comparing apples and oranges...
| tomp wrote:
| I was just wondering this. What industrial applications does
| silver have?
|
| Gold is the most malleable and one of the most ductile metal
| (can be stretched into a single-atom wire, or flattened into a
| single-atom sheet), it's a great conductor of electricity and
| almost non-reactive (therefore non-corrosive and non-toxic).
| gravitas wrote:
| In short: https://en.wikipedia.org/wiki/Silver#Applications
| neuronic wrote:
| What? Gold is used in a lot of electronics.
| DubiousPusher wrote:
| It is but silver has many more applications overall. Silver
| is driven about 50% by industrial need whereas gold is about
| 10%
| RosanaAnaDana wrote:
| That headline and they don't have a plot going back 5k years? I
| am disappoint.
| toohotatopic wrote:
| Could it be that people who used to buy bitcoins are now buying
| gold and that they are preventing the price correcting that every
| other metal is experiencing?
| gravitas wrote:
| A year ago gold was around $1300/oz and silver around $15, both
| started inflating when the trade tariff war (US/China) kicked
| off.
|
| https://www.kitco.com/LFgif/au0365nys.gif
|
| https://www.kitco.com/LFgif/ag0365nys.gif
| adaisadais wrote:
| Gold is such an odd form of value. If money, as Felix Martin puts
| it, is a social technology then gold is an antisocial technology.
| (1)
|
| Gold and silver look great in a recession because they (unlike
| the buyer) do not panic. However, in the long run they provide
| virtually no value to society (unless you make some fancy jewelry
| or cover your toilet seat) and frankly I find owning large
| amounts of gold to be a silly proposition.
|
| If society were to collapse I don't think anyone would be
| hoarding gold or silver... unless your Blackbeard or Scrooge
| McDuck.
|
| Edit: forgot to link :/ (1)
| https://www.google.com/amp/s/www.nytimes.com/2014/04/13/book...
| lackbeard wrote:
| Some contend that gold is money. The historically most
| important one and the second most popular right now behind the
| dollar.
| adaisadais wrote:
| You can buy more things with bitcoin right now than you can
| with gold. Euro, Yuan, and Yen etc. are also way more popular
| forms of currency than gold is. However if you mean "money"
| as in "investment vehicle" then yes at this time it is
| popular.
| drtillberg wrote:
| Finance is a mountain of complexity piled on an 'IOU Nothing'.
| Next time you log into Robinhood and pour your IOUs, stop and
| think if you've ever-- and I mean EVER-- examined precisely
| what it is you are buying.
|
| What makes gold valuable is exactly what used to make dollars
| valuable. No BS and you'd be nuts to borrow to buy and hold
| them (because no yield and storage costs money). That means, in
| boom times they don't bubble (as much) because ppl aren't
| buying on credit, and in busts, people see both the intrinsic
| credibility and price action as a sign of strength.
|
| Silver is a thin market more easily classified as a commodity
| somewhere between oil and gold. The oil market is in a very
| unusual situation. When that dumpster fire dies down look again
| at the movement in the gold/silver ratio.
| adaisadais wrote:
| No, I beg to differ. Gold is not some fiat currency backed by
| the U.S. Gov't (1). The US Dollar is.
|
| > you've ever-- and I mean EVER-- examined precisely it is
| you are buying.
|
| The same could be said about gold. Have you ever melted down
| the gold to check for impurities? I would hope that most
| people who invest in stocks or real estate would actually do
| just that. Investment is a much much different idea than just
| gambling by picking hot stocks. Haha I also haven't used good
| ole Robinhood in several years...
|
| (1) https://www.federalreserve.gov/faqs/does-the-federal-
| reserve...
| TheOtherHobbes wrote:
| All value is about faith in the future. In fact it's about
| faith that society will continue to function in the future.
|
| Gold works as a hedge against loss of faith, because it's a
| more tangible and less abstract symbol of hope than fiat
| money.
|
| But ultimately it's all just concentrated hope. If you need
| food and no food exists, all forms of money are useless.
| bosie wrote:
| i think you forgot the link to felix martin's article?
| klenwell wrote:
| It's actually a book. I happen to be reading it right now (on
| recommendation of HN users):
|
| https://www.goodreads.com/book/show/18050068-money
|
| Well written and fascinating.
| maxerickson wrote:
| The high price of gold reduces the direct value it provides to
| society (because people pay more to hold it than to use it).
|
| There's all sorts of uses for it. A good conductor that doesn't
| really corrode and all that.
| derefr wrote:
| Isn't platinum better for all the practical (= other than
| jewellery) use-cases people use gold for? Why don't people
| talk about speculating on platinum?
| samdung wrote:
| For years on and on financial advisors tell me not to invest in
| Gold. And on every '5 year time block' i have seen Gold
| outperform every other thing of value. The other thing with Gold,
| is it gives you peace of mind; not having to monitor your
| portfolio every often.
| Cthulhu_ wrote:
| It's always a case of hindsight; in hindsight I should've
| bought gold in the mid 2000s and sell around 2012. In hindsight
| I should've bought Apple, Nintendo, Tesla 15 years ago.
|
| But it's always a gamble. If you bought silver in 2011-2012,
| its value would still be below what you paid for it.
|
| If it's peace of mind, just put your money in an index fund and
| forget about it for a few decades. The economy, broadly
| speaking, usually goes up over a long enough timescale.
| nl wrote:
| But... it hasn't?
|
| If you do rolling 5 year blocks over the past 20 years I think
| right now (as in the last 3 days) is the only time gold out
| performs the Dow Jones.
|
| And even today - on one of the worst days in stock market
| history - gold only outperforms it by 12% (26% vs 14%).
|
| The gold price now is ~$1500/ounce. In March 2015 it was
| ~1100/ounce[1]. That's 26% increase. In March 2015 the Dow
| Jones was 18127, and now it is 21237. That's 14%
|
| That's not a great record for gold! Your financial advisors are
| right.
|
| [1] https://www.bullionbypost.co.uk/gold-price/10-year-gold-
| pric...
| um_ya wrote:
| If an ancient Roman owned gold and traveled in time to today,
| he would still be a rich man. Can't say the same about any
| currency or stock. Gold holds value long term.
| bouncycastle wrote:
| Would anyone know if low oil/energy prices impact the gold price?
| With lower energy prices, it's now less expensive to get it out
| of the ground and refine it. Could that mean more gold flooding
| the market in the future?
| DubiousPusher wrote:
| Yes. But currently that effect is being significantly offset by
| massive demand for gold as a reserve metal.
| Empact wrote:
| Silver's scarcity is less than gold but its practical portability
| and exchangeability is a bit greater than gold, because typical
| units of exchange align with practical amounts of metal (coin-
| size, rather than gram-size).
|
| However, now that a highly-scarce, highly-portable, and highly-
| divisible Bitcoin is on scene, silver is less useful as a
| monetary metal because it loses to gold and/or Bitcoin on each of
| these qualities.
| op03 wrote:
| America has lost its hive mind
| nl wrote:
| This really just shows how precious metals (except for gold) have
| been abandoned as major financial instruments.
|
| There's just no demand for them as a trading instrument anymore,
| but gold is still used.
| talkingtab wrote:
| I agree with others: everyone has heard of "flight to gold" and
| no one has heard of "flight to silver" If many inexperienced
| people panic it would be natural that they buy gold instead of
| silver or even copper for that matter.
|
| This will possibly change, the ratio go down, as people move from
| "panic flight" to "considered flight" as the crisis deepens and
| as people become more knowledgeable. And if the price of gold
| becomes too high for many people.
|
| Perhaps the best thing is to avoid anything that has speculative
| value or irrational value at this time. Gold has some irrational
| value because fewer people trading it have a full understanding
| of alternatives etc.
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