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When Money Gets Scarce by Robert Prechter Barron's 8/7/2010

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  • #16
    Re: When Money Gets Scarce by Robert Prechter Barron's 8/7/2010

    Originally posted by Milton Kuo View Post
    I assume you're talking about the period of the Great Depression? Gold went up in price against the British pound because the U.K. went off the gold standard to stop a deflationary spiral from taking root in their economy. There were other European countries that did the same thing (unlinking their currencies from gold) and, in doing so, their economies also avoided a deflationary spiral.
    Which is kind of what we are expecting today from the fed, no...... ;) Its a supply and demand thing, if you create more dollars/pounds/bupkiss they lose value, against everything else (in this case it was gold)... This time around what do they lose value against? Euro's, pounds, remnibi? Every country doesnt want its currency to appreciate too much otherwise they strangle their exports... But, the money has been created, it has to go somewhere; newly created money, like the devils hands will not stay idle for long.... Impacts: Things made abroad become more expensive, due to the exchange rate differential or commodities rally (due to weak currencies all around), similar to any third world country... Local products/services are dirt cheap for foreigners (aside from the open market commodities, meat, wheat, etc), local house maids cost almost nothing per hour in foreign currency, etc....

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    • #17
      Re: When Money Gets Scarce by Robert Prechter Barron's 8/7/2010

      Here is perhaps the other side of the coin from Prechter with Richard Russell's comments.

      http://www.zerohedge.com/article/ric...get-out-stocks

      Originally posted by lifted from zerohedge
      Richard Russell tells readers how he really feels. And, yes, the bear slams everything fiat and tells readers to leave stocks and go into gold.
      The specter of deflation is cropping up in many media outlets today. In fact, I'd say that deflation talk has almost become popular. The key question is this -- Fed Chief Bernanke is obviously reading and hearing all about the "coming deflation." What will Bernanke do about it? I think he will fight deflation with all the weapons at his command. And Bennie has a lot of weapons, least of which is printing "money."

      ...Then (believe it or not) in the same issue of Barron's we see an article by my old friend, Robert Prechter, the guru of the Elliott Wave thesis. Robert explains how a great contraction in credit and debt will bring about deflation. Robert notes that the amount of dollar-denominated debt worldwide is some $57 trillion. . . The already-issued debt and potential debt is poised to overwhelm the possibility of management monetization. The Fed's assets amount to $2.3 trillion, a drop in the global debt bucket."

      Robert concludes his frightening article as follows -- "If you are positioned for more inflation -- as the vast majority of investors are -- you are likely to find yourself on the wrong side of the monetary bet. Positioning for deflation simply means avoiding traditional investments, especially risky debt, and maintaining maximum safety in cash equivalents, held in the safest institutions. If you shed market and institutional risk, you can sail through deflationary times unscathed."

      Russell Comment -- Whew, how's that for a scary contrary opinion? Robert believes that way to safety in a deflation is to have cash, and lots of it. My concern with this approach is that I question the safety of the US dollar (and all fiat money, for that matter). So in an all-out deflation, Robert Prechter will be sitting in all cash or US Federal Reserve notes. But the dollar is collapsing, and with a US that is deflating, none of our foreign creditors will want dollars (in fact, they will be trying to get rid of dollars). With fiat money in retreat all over the world -- and currencies devaluing against each other, the world's peoples will turn to the only money they can trust -- gold. I'm aware that Prechter believes gold will be heading down in a deflation, I disagree.

      I was there during the Great Depression, and I can tell you nobody at that time had dollars. But if you did have dollars they were trusted and they were considered as good as gold. Today, it's different. The very validity of the dollar is in question.

      ...I distrust all scenarios and predictions, although I read 'em all and find many of them fascinating. In the end, I only trust the wisdom of the stock market. I haven't liked the recent action of the stock market, and I've advised my subscribers to get out of stocks.
      Courtesy of King World News.
      Jim 69 y/o

      "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

      Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

      Good judgement comes from experience; experience comes from bad judgement. Unknown.

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      • #18
        Re: When Money Gets Scarce by Robert Prechter Barron's 8/7/2010

        Here is Jesse's commentary on the Prechter -- Russell circle fu*ck.

        http://jessescrossroadscafe.blogspot...ms-robert.html

        "What Russell is saying is that Prechter is wrong in his interpretation of how deflation will play out, and what the endgame will look like. And he is saying almost the same thing that others, including Eric Janszen and myself, have been saying for quite some time, but in a slightly different ways."


        I read Jesse's comment hastily, which came across to me as rather much empty, directionless rhetoric. No doubt some if not many will disagree with my impression, and if so, please post it as you see it.
        Jim 69 y/o

        "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

        Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

        Good judgement comes from experience; experience comes from bad judgement. Unknown.

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        • #19
          Re: When Money Gets Scarce by Robert Prechter Barron's 8/7/2010

          there are two kinds of inflation in the world, real, and percieved. the Fed will most likely try to give a perception of inflation next, without the money printing, in an attempt to get people to spend. when that does not happen, i would expect the full on assault of money drops to begin -- full strafing runs with multiple waves of bombers and many trillions of tons of ordiannce. the US is f**kin' broke. period. the "easy out" is gonna be inflation -- steal from the creditors, steal from Social Security recipients, steal from everyone you ow a nickel to and who holds your currency "in reserve" like China and the Middle East. first we get to plunder their wealth in the form or energy and labor, then we get to plunder their wealth in the form of savings thru implicit debt default on the currency.

          Is there any other out? can you see ANY politician attmpting to "get real" with the populace, raise taxes, lower spending, and tell those out in the cold to f**kin' bad? I think not.

          to date th Fed has dumped massive funds into the system, only to have savings and the lack of velocity dry up all their efforts before the fruit of their labor could bloom. as things get worse, and the debt/GDP umbers keep heading in the wrong way, and the world stops turning a blind eye to the stealth monitization of UST's, I expect the floodgates to open.

          who wants the US as a reserve currency anymore anyway? Chna? No. Russia? NO. Brasil? Nope. India? Nah. the EU? don;t think so. There si all this talk of SDR's but they cannot become "serious money" until there is a true dollar crisis. We can no longer continue to run structural deficits in the Triffin's Delimna much longer, so we will have to pass off the mantle somehow. Who better than a nameless, faceless org like the IMF and their SDR's to take up the slack in the future? No country, just banksters capable of stealing from everyone everywhere, and punishing those who speak up.

          How can we not but get inflation again? Japan is "special" -- they get to borrow from themselves. We will not be so "special"...

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