Prices, Inflation/Deflation, Interest Rates & The Fed

I don't dislike gold. I wish more people held gold, and used it regularly.
But it is a fact that it is a currency, and not an investment (look at the definition of money, and few things meet that definition, but gold is one).

In ancient times, before the evils of fiat currency and floating exchange rates, men did not grow their wealth merely by "having gold."
Gold (real money) was something they used to grow their wealth in other ways. For example, opening a restaurant where customers will pay you in gold every day for meals, and then you eventually have more gold than you started out with.

Gold will preserve your wealth, because it is real money, the same way a house will generally preserve your wealth, as it is a real asset.

Now some will claim that both gold and housing can be investments, but this is not true in the long run. In the short run, one can make money buying or speculating on just about anything.

In a world of rampant inflation, which we are now entering, "merely" preserving one's wealth could be a fantastic thing. As I have zero ideas for investment, besides purchasing international assets, which I know little about, gold could very well be the best answer for what to do today.

Gold has thousands of years of history and has stood the test of time. Almost everything made of gold still exists. I has an allure and beauty that makes it desirable. Thus, even without a dividend, Gold looks like a good investment. Bitcoin lacks all of those qualities though.
 

Max Roscoe

Pelican
Orthodox Inquirer
Currency is not *supposed* to change in value. That's what makes gold so valuable as money. You know that the value of an ounce of gold is the same for hundreds of years (hence why certain things, excluding technology, tend to cost the same in gold that they have for thousands of years). No one likes volatile currencies, except usurious cosmopolitan financial traders.

This is perhaps the main reason why Bitcoin is a terrible currency. How could you run a business taking bitcoin? You would have to change the prices of all your products every day. With gold, you could carve a sign out of stone, and a thousand years later the prices should still be accurate.
 

budoslavic

Eagle
Orthodox
Gold Member

The Central Banks New Mandate: Social Justice, Race, Gender Issues, Climate Change And Inequality​

One upon a time, when central bank "independence" first materialized - even though as we have noted in the past central banks are anything but independent...their mandate was to control inflation and generally this was their absolute priority.

However, as DB's Jim Reid writes today, recent years have seen central banks increasingly enter the debate on numerous other topics including fiscal policy, social justice, race, gender issues, climate change and inequality.

Enter Reid's "chart of the day", which shows a snapshot of this in terms of mentions of inequality over time in speeches from developed market central bank officials.

central%20banks%20mentioning%20inequality.jpg


As Reid says, while "these are all admirable and crucial topics to discuss and could help make the world a better place" it does however show "how central bank power and influence has changed and also how they seem to be giving governments cover to spend on these issues."

He also adds that this is one of the reasons an increasingly vocal minority of the DB Research staff thinks inflation is more likely going forward (see DB's thoughts on why Inflation Is About To Explode "Leaving Global Economies Sitting On A Time Bomb"). As Reid concludes, governments want to spend more to deal with the issues above and central banks seem increasingly comfortable to support them in that aim. As a result, co-ordinated monetary and fiscal policy is more likely going forward. It's also time to ask just who elected these "independent" central bankers, and demand independence from their ideological bias.
 

NoMoreTO

Hummingbird
Catholic
@Troller, check out this crazy hyperinflation! When does our bet expire?

Any of you wondering yet why people keep buying these "worthless" assets like they're going outta style?


View attachment 31858

Bank of Canada is planning to raise rates 2nd half of 2022. These guys all work in unison so I'd guess the fed is going to raise rates then (as per Bullard) but is managing expectations to prevent a market crash.

Once the rates raise, real estate could have a serious shakeout with many people unable to pay their mortgages due to perseistent unemployment. That's when blackrock and company really move in for some deals.

People should be being frugal, getting their financial houses in order, and their personal savings rate up. As prices rise it will be important to have a buffer in your cost of living.
 

EndlessGravity

Pelican
Protestant
Bank of Canada is planning to raise rates 2nd half of 2022. These guys all work in unison so I'd guess the fed is going to raise rates then (as per Bullard) but is managing expectations to prevent a market crash.

Once the rates raise, real estate could have a serious shakeout with many people unable to pay their mortgages due to perseistent unemployment. That's when blackrock and company really move in for some deals.

People should be being frugal, getting their financial houses in order, and their personal savings rate up. As prices rise it will be important to have a buffer in your cost of living.

There's a reason I took that bet about rates. It's a joke when they say they'll raise them.

10y hit 1.25% this morning as more people wake up to the coming economic depression and how there never was any inflation.

TSYs us ES 2021-07-08_7-11-56.jpg
 
It's not "scheduled," obviously. Given the scramble for collateral going on and what we saw in March 2020...more people are realizing the re-fllation pump and dump is coming to a close already. Regular people also seem to be waking up to how we have collapsed our economy. With rates ticking back down, I'd say you have 12 months, tops.

Your statement about inflation doesn't hold up to the facts nor the reasons you're seeing the price increases you mentioned. We have had no substantive inflation. "But those used car prices and airline prices!!!!!!!" Please realize the dollar is a global currency and the mainstream media is dumb.

View attachment 31775
Even The Fed is admitting there is inflation, and it's growing: https://www.marketwatch.com/story/f...s-are-temporary-11625684469?mod=mw_latestnews
 

EndlessGravity

Pelican
Protestant

The 10-year Treasury drifted to an intraday low yield around 1.308% and the 2-year and 10-year yield curve, or differential between short-dated government debt and its longer-dated counterpart was at 1.096 percentage points, according to FactSet.

A narrowing yield curve means borrowers pay less of a premium than previously to borrow over a longer period and suggests investors fear economic growth may be peak

Don't say I didn't warn you guys about the deflation.
 

NoMoreTO

Hummingbird
Catholic
Got this in an email from my Fertilizer supplier. I asked for the prior quote 1 Month ago!

As with every other sector, we have seen significant increases in fertilizer costs even since the last time we discuss your hay field.

I did my best to mitigate the increase on your job, but it will work out to alittle more (9% or $9.3/ac) than we originally discussed.

See updated summary as attached.



Let me know if you are OK with the updated quote as attached and we will get er on the books.

Then we can see how the weather works out and get it spread as your finish up.
 

Arado

Pelican
Gold Member
The bond watchers would agree like Steve Van Meter, but the bond market is broken. Investors are looking for a capital gain because they know that the Fed is going to step in and buy bonds and send yields lower. I would like to see what rates would be if the Fed were to announce they were tapering the balance sheet and will not buy bonds no matter what. If they really were expecting deflation would junk bonds also be trading at such low yields? Or is it just because they know there is a Fed put that will keep the bond market propped up no matter what?

On another note:



Oops! I'm sure this speech inspires massive confidence that inflation is transitory or they have the willingness to use the tools to stop it (aka stop printing money and crash asset prices). The elite would never lie to us about the economy, right? Just remember Ben 'subprime is contained' Bernanke....

Then again, I wouldn't be surprised if the media puts out an inflation narrative to suck everyone into the markets and get them to lever up, then slam on the breaks with some short term tapering so that insiders can scoop up hard assets on the cheap.
 
Last edited:

cosine

Robin
People here touting gold seem to forget that gold is actually mined, and in significant amounts. Roughly 2% per year.

If you bought gold 30 years ago, you'd get a 400% return, or about 4.7% annually.

If you bought the S&P, you'd get 10.7% compounding annually. If you picked tech stocks on the other hand....

If you bought real estate in decent areas, it'd be 8.5 - 11% compounding after leverage.

Gold is a pretty pathetic investment. Only way to do well with bonds is by trading the spreads, or leveraging.
 

Attachments

  • Screen Shot 2021-07-15 at 11.56.58 PM.png
    Screen Shot 2021-07-15 at 11.56.58 PM.png
    312.2 KB · Views: 2

NoMoreTO

Hummingbird
Catholic
People here touting gold seem to forget that gold is actually mined, and in significant amounts. Roughly 2% per year.

If you bought gold 30 years ago, you'd get a 400% return, or about 4.7% annually.

If you bought the S&P, you'd get 10.7% compounding annually. If you picked tech stocks on the other hand....

If you bought real estate in decent areas, it'd be 8.5 - 11% compounding after leverage.

Gold is a pretty pathetic investment. Only way to do well with bonds is by trading the spreads, or leveraging.

I tout Gold. Your numbers are good, but the question is should someone hold gold now, not over the past 30 years. Past performance does not indicate future results. When we invest, we are looking at what works now. Gold is relatively cheap, off it's all time highs and you can still buy it. If a financial collapse comes, banks will all be looking for Gold, countries like Russia, China are increasing their reserves. China prohibits export, they seem to be whipping Western Capitalist mentalities' arse lately.

Gold is a very average "investment" in good times. Where it excels is as sound money in an environment where there is none. When people lose faith in the currency, there is a run on sound money, wealth preservation. This is a once in 50 / 100 year situation.

We are already seeing breakdowns in the economy associated with the lockdowns and expansion of money supply. Imagine a hyperinflationary environment:
- Your stonks will fly, but you'll end up bleeding out in capital gains.
- Real Estate is more solid, but your rental property will likely be subject to rent controls on price increases. You can easily end up giving up 25% of your equity in your house in Capital gains. But is that really profit in a high inflation environment? One point is, did the value of the house or stonks really go up, or did they just get inflated? Can they be passed onto your children?

Gold can, gold privately held, portable, and universally accepted.

On another note, people tend to look at whether their investments will ride this cycle. But they don't examine whether their job will leave them stuck. Remember your wages will always be 'sticky', one step if not two behind inflation.

Investment is part of it, but your source(s) of income in the real world are equally important.
 

EndlessGravity

Pelican
Protestant
The bond watchers would agree like Steve Van Meter, but the bond market is broken. Investors are looking for a capital gain because they know that the Fed is going to step in and buy bonds and send yields lower. I would like to see what rates would be if the Fed were to announce they were tapering the balance sheet and will not buy bonds no matter what. If they really were expecting deflation would junk bonds also be trading at such low yields? Or is it just because they know there is a Fed put that will keep the bond market propped up no matter what?

On another note:



Oops! I'm sure this speech inspires massive confidence that inflation is transitory or they have the willingness to use the tools to stop it (aka stop printing money and crash asset prices). The elite would never lie to us about the economy, right? Just remember Ben 'subprime is contained' Bernanke....

Then again, I wouldn't be surprised if the media puts out an inflation narrative to suck everyone into the markets and get them to lever up, then slam on the breaks with some short term tapering so that insiders can scoop up hard assets on the cheap.

Just look at a historic chart of junk yields vs treasury yields to see why that doesn't make sense. (Also look at their corresponding "sell-offs"). It also doesn't explain why there's such a huge demand for collateral in the first place. (Edit: especially demand for nearly non-yielding vs stock returns).

Inflation supporters keep predicting a bond sell-off that never comes. The bet I took earlier in this thread was against the 10y hitting 2.0%...yesterday the 30y went below 2.0%. :laughter:
 
Last edited:

cosine

Robin
I tout Gold. Your numbers are good, but the question is should someone hold gold now, not over the past 30 years. Past performance does not indicate future results.
If you go back 1,000 years or more, gold is something massive like 50-75% of the world's wealth.

Now, it's something like 4%. If you really think, "now is the time" then I would say that a giant worldwide fiat money-printing cycle would be "the time". Gold barely budged, especially when you compare gains in tech giants.

Storing one bar is doable at home. Companies storing billions of dollars? Secure buildings cost money. And, people mine roughly 2% of it each year. It gets inflated by mining, and you have to spend money to store it.
 

Arado

Pelican
Gold Member
Just look at a historic chart of junk yields vs treasury yields to see why that doesn't make sense. (Also look at their corresponding "sell-offs"). It also doesn't explain why there's such a huge demand for collateral in the first place. (Edit: especially demand for nearly non-yielding vs stock returns).

Inflation supporters keep predicting a bond sell-off that never comes. The bet I took earlier in this thread was against the 10y hitting 2.0%...yesterday the 30y went below 2.0%. :laughter:

If the bond market isn't real though then hard to make predictions. How about this: do you think yields will remain low over the next 5 years without the Fed purchasing a significant percentage of bonds?

If you go back 1,000 years or more, gold is something massive like 50-75% of the world's wealth.

Now, it's something like 4%. If you really think, "now is the time" then I would say that a giant worldwide fiat money-printing cycle would be "the time". Gold barely budged, especially when you compare gains in tech giants.

Storing one bar is doable at home. Companies storing billions of dollars? Secure buildings cost money. And, people mine roughly 2% of it each year. It gets inflated by mining, and you have to spend money to store it.

Why does it have to be all or nothing? The average investor has less than 1% allocated to gold. Bump that up to 10% for precious metals and other assets that do well during monetary collapse and use the rest to invest in more mainstream assets that are dependent on the system still functioning if you love equities so much.
 

M'bare

Woodpecker
Protestant
Gold Member
If you go back 1,000 years or more, gold is something massive like 50-75% of the world's wealth.

Now, it's something like 4%. If you really think, "now is the time" then I would say that a giant worldwide fiat money-printing cycle would be "the time". Gold barely budged, especially when you compare gains in tech giants.

Storing one bar is doable at home. Companies storing billions of dollars? Secure buildings cost money. And, people mine roughly 2% of it each year. It gets inflated by mining, and you have to spend money to store it.

Are you familiar with Kinesis? They've been working on their platform since 2013, and launched about a year and a half ago. I have an account by the way.

Maybe what you've said will change in the future with blockchain tech, etc. We'll see. Have a look and would be glad to read others opinions on it. They have a number of videos explaining what it is they're doing.

 

EndlessGravity

Pelican
Protestant
If the bond market isn't real though then hard to make predictions. How about this: do you think yields will remain low over the next 5 years without the Fed purchasing a significant percentage of bonds?

Not only is the answer "YES YES YES" we have more than a decade of data to prove it. When the Fed slows down or stops, yields drop. If the the Fed is doing another QE#whatever#, yields begin rising. Just like junk, look at the dates and data.

Kinda hilariously, your argument for inflation (or re-flation) centrally relies on this fact. Otherwise, how would the mainstream media make a mountain of the molehill to claim a BOND SELLOFF!!!!!?

Edit: also you may say it's hard to make correct predictions...but that's exactly what I just did.
 
Last edited:

FactusIRX

 
Banned
I think you're right. The market fundamentals suggest deflation. The current "hyper inflation" we are witnessing is due to artificial supply chain disruptions and consumer panic buying following the fake lockdown. The economy has not improved. The labour market has not improved. The average consumer was hoping on cashing in on low interest rates, but once the prices jumped, they backed out. We are already seeing the effects with consumers going on strike for home and cars:

America Goes On A Buyer's Strike: Explosive Inflation Leads To Record Collapse In Home, Car Purchase Plans

There is a massive depression lurking behind this fake growth. It's why the central banks are refusing to increase interest rates. They know that their only hope is to continue to pump money into the economy to somehow spur more growth, but it won't work. The fundamentals are just too bad.

I predict a deflationary spiral starting sometime in the fall and continuing into next year, with it crashing by mid 2022.
 
Top