10 ms·
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 t
by TheAdamAndChe 7y ago
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.
- pferdone 7y agoI feel like I'm reading a video of "All Gas No Brakes" haha
- nl 7y agoThat will cause such a high rate of inflation Hey I remember this prediction in 2008/9. Still waiting for that one to happen...
- aguyfromnb 7y agoExactly. 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.
- discobean 7y agoYou could say it is the least worst, they have that going for them :)
- deleted 7y ago[deleted]
- BubRoss 7y agoNo inflation? Asset prices are a lot higher than they were.
- nl 7y agoThat'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 7y agoIf 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 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 7y agoMoney 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 7y agoThe "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.
- BallyBrain 7y agoThe 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 7y agoIf 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.
- throw0101a 7y ago> The inflation has been in speculative assets. From what I recall, all the 'inflation hawks' that were complaining about the Fed's QE were talking about the CPI and turning into Zimbabwe (or wherever): > The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht... > Thus when Bloomberg tried, four years later, to track down economists who signed the infamous open letter to Ben Bernanke insisting that quantitative easing would “debase the dollar,” it couldn’t find a single person to admit that the original warning was wrong. * https://www.nytimes.com/2018/01/23/opinion/the-durability-of-inflation-derp.html https://www.nytimes.com/2018/01/23/opinion/the-durability-of... > In addition, there is debate about how accurate the inflation figures are. There are different inflation figures, and they each focus on slightly different things, and there is some debate as to what best measure what "real people" experience in day-to-day life. There are also "perma-too-low" types who say that the books are being cooked, but I think it's been shown that the official numbers are fairly accurate: * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project > Some alternative measures are far higher. Do you have example(s) of these "alternative measures"?
- aguyfromnb 7y ago>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 7y agoThe 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 7y agoThey're taken from thin air. The Fed just prints it.
- neuronic 7y agoThereby devaluing the rest of the money. What that means should be abundantly clear.
- owenmarshall 7y agoThe 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 7y agoMost money isn't from printing presses. Banks create money by handing out loans.
- nabla9 7y agoI 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.
- nl 7y agoAnd the depression he's worried about comes after a recovery from the current crises. I wish I had those predictive powers.
- TheAdamAndChe 7y agoYes, 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-price-index-1930-1939/ https://inflationdata.com/articles/inflation-cpi-consumer-pr...
- nabla9 7y agoBy 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 7y agoI 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.
- QuesnayJr 7y agoIf 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 7y agoI don't think they'll get that much for those sub prime auto loans and over inflated stocks they're accepting now...
- QuesnayJr 7y agoThe 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.
- sfj 7y ago> 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). From their press release on 3/17: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200317b1.pdf https://www.federalreserve.gov/newsevents/pressreleases/file... Eligible Collateral•Collateral eligible for pledge under the PDCF includes all collateral eligible for pledge in open market operations (OMO); plus investment grade corporate debt securities, international agency securities, commercial paper, municipal securities, mortgage-backed securities, and asset-backed securities; plus equity securities. Foreign currency-denominated securities are not eligible for pledge under the PDCF at this time. -- equity securities == stocks. I admit I was exaggerating about the subprime auto loans, but they also state that: Additional collateral may become eligible at a later date upon further analysis., so who knows? I agree with you they have plenty of stuff old stuff to sell from QE 1-4, but this certainly is a new class of assets from them, and is almost certain to lose money.
- balola 7y agoThe problem with silver is it's not a currency it used to be, it's just a cheap metal nowadays.
- Cthulhu_ 7y agoOne 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 7y agoIf 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 7y agoThe 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 7y agoSilver 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.
- kasey_junk 7y agoAmmo
- taborj 7y agoBuy .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 7y agoBut shorting markets is already being banned on some platforms i believe
- SuoDuanDao 7y agoI'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.
- joquarky 7y agoAlso, 190 proof alcohol has many uses.
- fbn79 7y agoGold 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 https://en.wikipedia.org/wiki/Gold_fixing
- barry-cotter 7y agoYou 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 7y agoOn 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.
- forkerenok 7y agoI'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 https://www.coursera.org/learn/money-banking
- nscalf 7y agoCurrently 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 7y agoSince most payments are now dematerialized in developed countries, a bank run would cause little issue in practice though.
- lolc 7y agoThe problem with a bank run is not the physicality of it, but the insolvency.
- DubiousPusher 7y agoI 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 7y ago> 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 https://geology.com/minerals/gold.shtml
- rafiki6 7y agoThe 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.
- agumonkey 7y agoshouldn't we organize globally instead of individually for this ? or will it make no difference
- bhandziuk 7y agoDid you have the silver shipped to you so you are now holding that silver in your hands?
- MichaelDickens 7y agoIf 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.