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Posts posted by vinny

  1. No worries. The bubble is over IMO. According to Prechter (link to book), everything gets nominally cheaper in a deflation - including money.

    For example, rates dropping to zero didn't stop the Japanese property slide.

    Money will actually get more "expensive" in effect.

    Real interest rates are high relative to asset prices.

    An example would be that a loan made at 10% for an asset that is going up by 20% means that the (loan) money is very cheap.

    A loan that is made near 0% for an asset going down 20% becomes expensive.

    Durch - you keep referencing Prechter's book - I think you are correct to do so and I recommend it without reservation.

  2. Whoops - I expect deflation to be a drawn out process occuring in either Gold or fiat terms (or both) with perhaps a similar time frame to yourself. It will take time to beat the confidence out of people. Have you had a look at Ian Gordon's Long wave analyst web page??? May be of interest to you.

    Pluto - Thanks for the correction.

  3. Oh yes, great book. It's a bit technical, goes into a lot of detail on the Recessions of '73, '79 and '89. Also talks about the depression from the UK's side.

    He was Executive Director of the Bank of England. Brown proof read one of the chapters which I found very disturbing.

    Brown proof read one of the chapters?????? :blink:

    Perhaps I'll give this book a whirl - cheers.

  4. Japanese deflation was the result of banks tightening lending criteria. BoJ lowered rates to zero, but banks were unwilling to lend the money out to marginal buyers. The banks got burnt during the previous credit expansion.

    Freidman and then Bernanke stated that this type of deflation could be avoided if the money could be given to people directly thereby avoiding the banks lending criteria. This was termed the Helicopter drop and basically it is giving folk tax breaks. You can google what I am saying and you will find it correct.

    Pluto - I am not doubting that you have read this somewhere - I disagree with the source.

    Many wise, and, many ultra stupid utterances fell from the lips of Freidman.

    I think Benanke is, possibly, a smart man - but if he was'nt before then he is mostly a politician now. He must foster a confidence in the currency, the markets, and induce a certain level ofdebt to keep everything moving smoothly.

  5. Cutting taxes (or the helicopter drop) could be done once IR's were dropped to zero. This would put money in the pockets of nearly everyone, bypassing banks lending criteria, as Freidman proposed as an answer to Japan style deflation.

    How would it?

    Bypassing lending criteria? Banks would have to be willing to lend at 0% and people would have to be willing borrow money. Banks AND people would reject debt and hoard money IF it's value was rising against assets and/or goods.

    If Freidman was correct why have we got a carry trade and why has Japan endured an extended period of deflation???

    The Japanese are SLOWLY rejecting debt, as we have embraced it.

    Japanese are human - but their current social mood is different to ours.

    As for dropping rates to zero - I don't think the markets would be as forgiving a second time around - the currency would be toast - something the central banks would wish to avoid at all costs.

  6. Taking the US as an example – let us set the record straight (if I am wrong please correct me but as I understand it) : currency production is passive.

    There is no basis in law for the central bank to just print notes – let alone drop them from helicopters. There has to be an equal number of, effectively, bonds issued for every last dollar printed. If there are no takers for government / treasury debt then no notes can be issued. This may change in the future, but let us be clear that, as things stand, Benanke was bluffing as the Fed was panicked that a real deflationary episode was unfolding.

    Every last card has been played IMHO to defeat deflation bar proactive currency production, here is some of the evidence since 2000:

    Fractional Reserve requirements of banks = practically nil.

    Interest rates = effectively nil. (changing now I know).

    Ultra loose credit standards (also changing at the moment).

  7. Well to me, the way things are at present and what I envisage happening within the next couple of years, doesn't cause me to lose any sleep with regards to confiscation. Yes, confiscation's at the back of my mind, but so is getting run over crossing the road tomorrow.

    Cheer up, it might never happen... :)

    PS. I've already stated that I'm not a goldbug, just an opportunist when it comes to PMs, so I don't subscribe to the prospect of confiscation...

    My thinking on confiscation has little to do with being a gold bug per se.

    The Government will confiscate any means you have to stand on your own two feet to promote your potential reliance on them. Of course this has been more profound when dealing will their own issuance of currency. But they confiscate means of self reliance by stealth in other areas. I’m thinking here about the likes of taxing savings in general, inheritance tax and say the abolition of PEP’s etc.

    That said……read into this what you will….a true and “un - taxable” store of wealth, not denominated in any one particular currency, will be unacceptable to some.

  8. Should the worse come to the worse, the gov't can choose to confiscate just about anything it pleases including peoples' houses, bank accounts, assets, etc.

    There's only so much one can do wihout packing it all in and heading for the mountains so to speak. As I mentioned earlier, the UK has a sound reputation for not seizing assets unless you're deemed to be a terrorist or VAT dodger...

    Yes - but at least you may now consider hiding silver - your initial post on silver seems to suggest that hoarding / hiding was'nt and would'nt ever be a concern.

  9. Forget gold, buy silver as it's the best hedge against stagflation/hyperinflation.

    The UK has never confiscated gold and silver's never been confiscated by anyone.

    Latest today gold +0.4% silver +2.2%.

    PS. If you're worried about CGT, get yourself a good accountant...

    Silver was confiscated by the French Gov't in the aftermath of John Law's fiat experiment. From memory any holding above 500 livres was declared illegal.

  10. I think it's less likely that the US could enter into a Japanese style deflationary period 'post bubble' because Ben Bernanke has now given the FED an inflation target -

    So that's sorted then - no deflation because the Fed have a target! Central banks can only influence inflation at times of "stability". They are in control of very little if either asset prices OR currency is suspect.

    If inflation / deflation is an increase /decrease in money and credit issued by banks, can any resident economists explain whether so-called "inflation targetting" really exists or is this just a joke/hoax for the public?

    If central banks have any role at all it is to foster a low inflation environment and a mood of confidence in their currency/financial systems/asset prices. In other words with a fiat currency they are the ones that actually produce the inflation.

    I think that the Bank of England and the Fed have been battling deflation (an absence of demand) for a number of years. They have flooded their respective economies with liquidity (M3 growth running at 14% in the UK approx 10% in the US). This massive inflation in the money supply is of course the root cause of housing bubbles. The problem for the US and UK is that the money created has not increased productivity; in fact the manufacturing sector has contracted in both countries and trade deficits have increased. The sustainability of this inflate or die policy is questionable, debt saturation is fast approaching.

    Have they been battling deflation? - I think so.

    Have they or do they flood the system with liquidity? Well yes but only at the repo rate. It has taken willing borrowers to produce the liquidity - as with Japan there may well be no clearing rate in the end that can induce credit to be taken up, therefore the money supply may fall off. what I mean here is that credit growth is a two way street - willing lenders require willing borrowers. You can't just blame the banks.

  11. my wife has noticed a lot of 25% of everything adverts in big named retailers which she said she has never seen in early Dec, was does that tell you ?

    xmas decorations are 50% off in our local homebase & it's only the 10th Dec.

    There is something deflationary afoot.

    Funny enough I was in the Liverpool branch of Lewis - they had lots of reductions / sales on clothes.

  12. I've just been reading through a few econ releases, Taiwan and Korea exports are down sharply, why, I'm thinking (US) consumer spending slowing a lot faster than currently showing up..

    That's one of the problems we face - data should always be treated as suspect - but I don't think we should trust any "official" or VI data at the moment.

  13. well everyone knows prices go up when you have inflation !!! if you deflate the ftse100 by the growth in M4 you will see we are already in a bear market and have been for years.

    That's the thing - many bear markets look like bears only when you look back.

    What has the SM done for this year, even including dividends, when adjusted for inflation?

    One phrase if I may? - NOT WORTH THE RISK!!

  14. Has anyone noticed that the price drops every time oil's does, but there is no matching increase for Gold when oil nudges up again?

    Edit : Now sniffing at $560. Sorry, I just don't believe this is all just CB sales. Speculators are bailing.

    I hope we are now observing the start of a disconnect between oil and gold.

    Speculators (and quibblers) bailing????? - I hope so.

    $626. How do you like them apples?

    I'll take 100oz of those apples thank you!!! :)

    Tasty. I went back in at $595.

    Why the change of heart?

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