<<In periods of deflation, asset prices decline relative to cash>>
... (i) gold is the best cash, (ii) gold did brilliant between 1929 and 1934, both nominally as well as against all other assets and (iii) against monies. gold mining also did well. iow, deflation is supportive for gold, from argentina through to zimbabwe.
<<I'm not sure the Fed can undertake sufficient QE to create major inflation without a political uproar from the electorate.>>
... it is not so important that the fed be successful in creating inflation. it is only important that the fed tries with all sincerity to create inflation. the electorates have already taken a lot dished out by the fed. the electorates shall take in much more. iow, inflation is a positive for gold, back from zimbabwe through to argentina.
<<However, they can attempt to maintain some form of status quo, preventing an all-out deflationary spiral and liquidity trap, where some assets decline while others hold level or actually appreciate.>>
... once the priorities are set, price control shall be put in place to hold down some prices, and capital flight countermeasures would be activated to prevent electorates from saving themselves. gold value shall zoom up in such a dire environment.
<<Again, this is going to take re-establishment of the demand curve.>>
... difficult to re-establish demand when there is an absence of true savings.
... troublesome to enable true savings when taxes 'must' rise.
... if-ish to generate taxes when jobs are absent.
... nasty to create jobs when there is a minimum wage law interfering with the free market.
... ticklish to push free market when the entire society is undergoing massive socialization.
... impossible to trigger reform when the basic money system remains a fraud.
<<And how the government spends money will be critical. "Make work" stimulus is not the answer. Long-term investment in national infrastructure and R&D that yields productivity enhancements and technological advancement is the key, IMO.
... the caliber of government would determine what happens and whether successful. let us watch & brief.
<<But again, as my previous link pointed out, a lot of this depends on straightening out the mortgage mess ...>>
... recommendation: monetary zero-state hard reset would significantly shorten the elapsed time of misery>>
<<And Europe is facing a similar situation, and the chances are that China is as well.>>
... simplest thing for europe is to do a sovereign default, mark to gold, and allow folks to experience free market anew while they collectively still have true savings.
in the case of china, the real estate is well supported by equity
<<Btw, over the past 30 years, just how volatile has the price of gold actually been? Remember when it was $800/ounce in 1980? And then it went to just under $300 back in 1999?
goldprice.org (last chart).
That's a 28 year wait that gold investors in 1980 had to wait for until they were break even.>>
... i now see where your confusion is at.
(i) allocation in gold should be measured in troy ounces and not in randomely chosen paper currency. by that measure, gold savings did quite well, every troy ounce would be accounted for by the ltbh crowd.
(ii) in randomely chosen usd terms, gold has returned 5% per annum since 1929. a fair return for savings.
(iii) gold return in haphazardly selectived zimbabwe dollar terms is effectively infinity. platinum did better than effectively infinity.
so did platinum mine based in zimbabwe finance.yahoo.com
a wager i participated in with gusto and created much value from Subject 53084
here, paper, gold and platinum monies. thought experiment: you choose the money, but choose wisely (platinum ring is off limits ;0):
(iv) re usd, perhaps one best invest in kimberly clark finance.yahoo.com ; they also turn out paper, more absorbant, much more useful, and they yield almost 5%.
(v) in case you are wondering, gold does not do well in times of disinflation. there is little chance of that at the mo, for the operative words are 'inflation', 'hyperinflation', and 'depression', 'great depression', and 'diaper depression'.
(vi) common complaint against gold is that it does not earn a yield to which i counter my gold has yielded plenty, in both up as well as down markets, by way of option trades constructed on top of gold position, and as i do trades in both up as well as down markets and generally take profit to buy physical, the system of gaming, or earning yield and mineralizing profit, is a virtuous and close-loop schema.
cheers, tj
p.s. the operative page is not
the centerfold page is
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