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Posted 03/09/2012 7:30 pm
Barry... I agree that gold and silver could come down a lot in price but for that to happen, the list of things that would need to change for the better looks virtually impossible to me. We would have to: 1) get the Federal budget under control; 2) set up a process whereby we would begin paying down the national debt; get the balance of payments to our trading partners in much closer balance (this "we sell, you buy" nonsense HAS to end); reduce the amount of US currency now in circulation; grow our economy at a 5-6% rate or higher; and probably several other things I can't think of right now. The ones mentioned so far look so unlikely to me that adding any more items to the list really won't matter a whole lot. All that said, gold and silver will very likely be more expensive in the future than they are today, particularly when measured in FRNs.
For a REAL eye-opener, look up a chart of the Dow 30 as measured in ounces of gold sometime. That really puts the "growth" lie to the test because the Dow 30 is lower today in gold terms than it was 10 years ago. Practically all of the growth in the Dow 30 for the past 3 years has come from the Fed dumping trillions of dollars into the economy. As we all know from supply and demand, adding a lot more money to the system while production remains stagnant means that prices HAVE to increase... and that includes share prices as well as consumer goods and services.
I have read in a number of places that if we want a very good estimate of the rate of inflation in an economy, all we need do is measure the current money supply and divide that by last year's money supply. The result multiplied by 100 will be very close to the rate of inflation over that 1 year time period. If the rate of production is similar from one year to the next, this will work reasonably well. If, for example, we had $2.5T in the money supply in 2010 and $2.7T in 2011, then the rate of inflation over 2011 would be given by 2.7 / 2.5 x 100 = 8%. While a figure like this is reasonably accurate, it does not show what the Fed and the US government want so they massage the numbers in various ways until an acceptable answer is created. Apparently, perception matters more to them than the facts. Unfortunately for this approach, it is difficult to hide the truth of the situation for very long and when the citizens become aware of the game that is being played on them, they will become very angry and very distrustful of any further comments from the fed and the government.
For a REAL eye-opener, look up a chart of the Dow 30 as measured in ounces of gold sometime. That really puts the "growth" lie to the test because the Dow 30 is lower today in gold terms than it was 10 years ago. Practically all of the growth in the Dow 30 for the past 3 years has come from the Fed dumping trillions of dollars into the economy. As we all know from supply and demand, adding a lot more money to the system while production remains stagnant means that prices HAVE to increase... and that includes share prices as well as consumer goods and services.
I have read in a number of places that if we want a very good estimate of the rate of inflation in an economy, all we need do is measure the current money supply and divide that by last year's money supply. The result multiplied by 100 will be very close to the rate of inflation over that 1 year time period. If the rate of production is similar from one year to the next, this will work reasonably well. If, for example, we had $2.5T in the money supply in 2010 and $2.7T in 2011, then the rate of inflation over 2011 would be given by 2.7 / 2.5 x 100 = 8%. While a figure like this is reasonably accurate, it does not show what the Fed and the US government want so they massage the numbers in various ways until an acceptable answer is created. Apparently, perception matters more to them than the facts. Unfortunately for this approach, it is difficult to hide the truth of the situation for very long and when the citizens become aware of the game that is being played on them, they will become very angry and very distrustful of any further comments from the fed and the government.
