I like your video, so you seem to have some brains :)
I'm have no background in economics whatsoever, I'm a probability professor, but I've been thinking about this whole mess for a while. I'd like to pick your brain on one thing.
At this point it seems to me that it is inevitable that there will be a quick deleveraging coming (it's been postponed way too long now to be soft). This can happen only by hyperinflation of hyperdeflation (defaults), which are basically the exact same phenomena (except for the PM/money assets): everything loses value to vital goods, which in turn lose value to the medium of exchange (fiat money in deflation and PM in inflation).
Everyone seems to be saying that QE means we will have high inflation, but I am starting to question that. It is clear that QE has not worked (6 cents on the dollar injected in the economy if even that) and nothing has gotten better. So, if the fed is not corrupt, they should stop QE and default on the banks which did not use the money they were given to boost the economy but put in PM and bonds instead. Essentially they would kill off the investment part of the bank and just keep the retail bank part running. Of course this would trigger a massive recession but if the inflation numbers were not manipulated we'd see we are already there.
My point is in that scenario the money supply should shrink BIG TIME, and PM's would plummet (along with everything else). Essentially investing capital would be wiped out (great recession style) because liquidity disappearing.
I know it sounds drastic but I think at this point everyone agrees this is not a liquidity issue, the debt is simply too high. There is no point in printing your way out of it, because it won't solve anything. It would only lead in my opinion to bigger social unrest than a great depression: letting the banks and investors go bankrupt is the fair thing to do, bailing them out is not. I think that more bailouts will be hard to justify (and that is what is happening in Europe right now).
Emerging markets are also tired of money printing which provokes high inflation (I think that's part of the reason they don't want to bail europe out).
Also by printing more dollars, the US will lose the reserve currency status eventually. If Europe does not print money, I think they might eventually become the world currency: they have more gold, more people and bigger economy (and would show that they are ready to protect their currency). This would be a big loss for the US.
Anyway, I know it's a bit "out of the mainstream", but I think this is actually the best solution to this problem. If they did implement it, I'm pretty sure PM's would crater.
So basically question: do you think this scenario is non-sense and why.
PS: I own 5-10% of my net worth in physical gold for now (I except a drop in price soon in any scenario they won't do a preventive QE), I have a bit of food and a lot of cash at home. In case they print, I'll turn to physical silver and a little silver options (the train will last enough for me to jump on the train). In case they don't cash is king.
That's my plan. (I just hold some gold in case the money guaranteed by the government is not returned (which I doubt).)
Hey,
ReplyDeleteI like your video, so you seem to have some brains :)
I'm have no background in economics whatsoever, I'm a probability professor, but I've been thinking about this whole mess for a while. I'd like to pick your brain on one thing.
At this point it seems to me that it is inevitable that there will be a quick deleveraging coming (it's been postponed way too long now to be soft). This can happen only by hyperinflation of hyperdeflation (defaults), which are basically the exact same phenomena (except for the PM/money assets): everything loses value to vital goods, which in turn lose value to the medium of exchange (fiat money in deflation and PM in inflation).
Everyone seems to be saying that QE means we will have high inflation, but I am starting to question that. It is clear that QE has not worked (6 cents on the dollar injected in the economy if even that) and nothing has gotten better. So, if the fed is not corrupt, they should stop QE and default on the banks which did not use the money they were given to boost the economy but put in PM and bonds instead. Essentially they would kill off the investment part of the bank and just keep the retail bank part running.
Of course this would trigger a massive recession but if the inflation numbers were not manipulated we'd see we are already there.
My point is in that scenario the money supply should shrink BIG TIME, and PM's would plummet (along with everything else). Essentially investing capital would be wiped out (great recession style) because liquidity disappearing.
I know it sounds drastic but I think at this point everyone agrees this is not a liquidity issue, the debt is simply too high. There is no point in printing your way out of it, because it won't solve anything. It would only lead in my opinion to bigger social unrest than a great depression: letting the banks and investors go bankrupt is the fair thing to do, bailing them out is not. I think that more bailouts will be hard to justify (and that is what is happening in Europe right now).
Emerging markets are also tired of money printing which provokes high inflation (I think that's part of the reason they don't want to bail europe out).
Also by printing more dollars, the US will lose the reserve currency status eventually. If Europe does not print money, I think they might eventually become the world currency: they have more gold, more people and bigger economy (and would show that they are ready to protect their currency). This would be a big loss for the US.
Anyway, I know it's a bit "out of the mainstream", but I think this is actually the best solution to this problem. If they did implement it, I'm pretty sure PM's would crater.
So basically question: do you think this scenario is non-sense and why.
PS: I own 5-10% of my net worth in physical gold for now (I except a drop in price soon in any scenario they won't do a preventive QE), I have a bit of food and a lot of cash at home.
In case they print, I'll turn to physical silver and a little silver options (the train will last enough for me to jump on the train).
In case they don't cash is king.
That's my plan. (I just hold some gold in case the money guaranteed by the government is not returned (which I doubt).)