What Happens to PM's (Precious Metals) in Deflation or Hyperinflation?

[ponnarasi]

I see alot of the perpetual "myths" being floated on the internet. One is that in a deflationary recession or depression, the dollar will be hyperinflated. Well, that would pretty much negate any possibility of a deflation wouldn't it ? You can't have "more money" and "less money" in circulation simultaneously, that's impossible.

Another outright myth perpetuated by the main-stream PM (Precious Metal) hawks and dealers over the years is that the metals will be your savior during inflation, recession, depression, or any other scenario. That's pure hogwash ! If we ever go into a serious deflation, the metals will go with us. Cash will be king in such a scenario. When the supply of something is shrinking while the demand for it is increasing, especially so the standard currency of a society (i.e. the dollar in an all-out deflation), then THAT is what you want to be holding.

Gold and silver may meet the definition of "money" as a somewhat stable form of retainable purchasing power over time, but they are NOT "currency" in the sense that the DOLLAR is currency, readily liquid at any time and any place. Any societies MOST LIQUID form of payment tends to retain it's place as the CURRENCY of that society, and for us that is still the dollar. Try going to the local grocery store and buying your weekly shopping with a Krugerrand. It won't take long to realize the difference between gold "money" and liquid "currency". Sure, you can take the coin and sell it and THEN go buy your groceries, but that is still a step away from true and immediate liquidity in trade for other things you may want or need. You are still a step away from true liquidity in terms of "currency" trade.

Gold and silver tend to be looked upon as another "asset" to be bought and sold, and during a true deflation, they will act accordingly, more likely falling in price rather than rising, unless of course they revert back to currency status, whether officially or un-officially. When the true "currency" supply starts to constrict, there is LESS OF IT. When that happens, the demand necessarily increases. People still have to pay their bills. Gold and silver will remain "liquid", but at what "price" in dollar (currency) terms ? You can only have one "king of the hill" in terms of what remains societies MOST LIQUID form of currency used as a standard of payment. If the supply of CASH in circulation is deflating, demand for it will increase......that's just simple economic principle. Gold and silver as "secondary assets" will be sold off as needed if cash remains as the more desirable form of payment to the general public. And as the metals flow back into the market, the price will drop based on that very same "supply and demand" principle......i.e. more available = lower prices.

Hyperinflation will be another ballgame ! In that case, you'd better grab every little scrap of PM that you can get your paws on.

The question is, which scenario do you personally feel is the most likely, deflation or inflation ? How do you position yourself according to those beliefs ? What do you do if you are not quite sure ? How about a 50/50 mix of PMs and cash, and a re-balancing program to keep you at that same 50/50position over time ? Balance off the metals side, selling when the metals are high and re-balancing your cash holdings back to the 50% level, or buy back metals when they are down, re-balancing your metals holdings back to that same 50% level. This forces you to buy low and sell high, and keeps open the options and ability to buy extra metals on a big downward correction, since you always have available cash, or the ability to sell metals into a high-flying upward move once you believe it has reached a point of unsustainability. Such a program offers alot of advantages over being invested all in cash or all in metals.
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..........Three nations (black, white and Chicano) under ZOG, very divisible, with liberty and justice for the super rich Elite.........

[Attindill]

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[malbostar]

This current deflation comes about because of unrestrained debt ie borrowed $$'s of the last 25yrs to create massive profits by hedge funds with various asset class bubbles worldwide that sucked the average joe into. With pension & 401k super funds invested in REIT's, stocks commodities, CDO's banks We are talking multi trillions of wealth destroyed. The latest debt driven bubble being housing ie cdo's Results in decreasing asset values. No new debt to keep values buoyant until all of this borrowed $$ gets repaid WITH INTEREST. How long will it take ? Can it ever be repaid?? By what "next" generation? Whats the INTEREST on $33trn?? Do you really think the central bankers can keep interest rates at historic near zero rates annually?? Deflation is the only strategy geithner has to use. Rising costs and at the same time shrinking asset values. That's whats happening now. You have banks hoarding money and not lending ie consumer demand destruction .Savings has increases exponetially since Sept 08.. Interest rates budging northward now to attract in savers That spells financial armageddon for a spend economy Especially when that spend is financed by OTHER PPL"S MONEY!!
Gold has increased in value since 2002. The value of gold to US$ has risen sharply. In 2006 AUS$ gold was bought by me at $A600 an ounce In Mar 09. I sold gold at $A1500.Paper $$'s are a modern creation. You need to do a gold silver history lesson thru time Go back at least 4000 yrs. Since the times of the egyptians persians thru to the romans the catholic church the middle ages and now. Gold silver have always been seen as currencies in their own right for trading. $$'s arent an asset class and when the $$ US depreciates drastically silver oil commodites will be solely sought after Its a crisis of confidence occuring plus a cast tgransference of wealth When other countries decide not to finance how americans live ie not to buy US treasuries then you will witness a huge slide in US$ value because US lifestyle will diminish. Check the US exchange rate against a basket of intern'l currencies for validation And you do have scarcity of $$$, whilst bankers engage in biggest money print in history The world has lost $33trn .The demand for $$ isn't increasing. Its the price of goods and services increasing. You have to pay more for goods and services. You need more $$ to buy the goods. That devalues your currency. With such heavy debt to repay the taxes increase. The average joe gets slugged more and we still havent talked about the average joe's hours of work diminishing+ rising unemployment!!
At the present time 29% of all US taxes collected goes to paying off the "interest" on US debt Thats crisis time The US govt doesnt have a clue WE HAD OBAMA URGING AMERICANS TO SPEND TO GO INTO DEBT! The trouble is we dont have a bigger economy to increase GDP Mars and the moon arent economic at the resent time. With the way we set up economies of scale we need increased GDP BUt the figures reveal we are contracting more so than ever during the 1930's depression !!! Yes we are in depression Mostly deflationary The stimulus only bringing forward demand to do now BUt with govt officials pulling the strings private enterprise is crushed and uninspired to create the MISSING GDP = lost entreprenial foresight
The question is how central bankers can 1/ hyperflate demand again 2/ not create runaway inflation the gold chart is prophetic It reveals all Gold demand is at very high levels
gold chart shows inverted bullish head and shoulders pattern A setup to the midpoint POG high in 2010 No matter how hard bankers try to keep POG down by heavily shorting gold The demand for real currency/ real asset ie gold silver transcends all these issues and thereby maintaining asset value
Mate check out prices of gold companies in USA during depression HOW's 5000% INCREASE over 5 years!!!I hope to do the same over the next 3-5 yrs

Back up your statements with historical references otherwise you get mistaken for a US$ bug!! MalboStar