Where is the dollar headed and whats that mean for metals?

mghcal

Greenie
Dec 26, 2008
13
3
Where is the dollar headed and what's that mean for metals?

Hi guys,
I'm mainly a lurker around here but wanted to see if anyone has thoughts on the world markets as a whole? Do many here think that we'll be seeing the end of the EU soon? Italy's 10 year bond yield surpassed the 7% mark and they have 2 trillion Euros debt, the 4th largest debt in the world. Many economists believe the 7% mark is the point of no return. I've been contemplating what that will mean not only to european markets but also to the US and gold and silver prices. Someone's going to be on the hook for alot of worthless bonds and the exposure of our banks to that will be pretty significant. I'm reminded of the MF Global fiasco and their $6.3 billion in european debt but that's just the tip of the iceberg.

Every winter I go and visit my great-uncle down in West Palm Beach for a week or two. We spend alot of time over at the Breakers and occasionally the Mar-A-Lago, eating lunch or getting a shot of scotch and just shooting the breeze with the others there for the winter. I used to think it was just a bunch of boring old people talking about their money but the last couple years it's gotten interesting. They're all scared to death! These aren't trust fund kids, they've built their wealth over a whole lifetime and are determined to hold onto it. The problem is that they can't agree on how to do that. Many are running these hedge funds and banks that will ultimately fail if things keep going in the direction they are. Commodities have been the order of the day for most. They've invested in South America and heavily invest in Brazil, a market that they say should do better then most in the catastrophe that's coming. The threat of left/right instability in that region doesn't seem to scare them as much as holding onto worthless US and EU currency. Some have bought agricultural property and still other's prefer different assets like water rights. To them it's all about asset preservation for the opportunities that will present themselves in the aftermath of a collapse. Gold and precious metals will be their liquid assets to fund these opportunities and they seem to all agree on setting aside a significant chunk of their assets for that purpose. I've had discussions with them about the liquidity of gold and if that's a wise decision to count on that liquidity. During the Soviet collapse people had literally hours to capitalize on different opportunities and the early bird always got the worm. In my opinion a basket of currencies of low debt/resource rich low export countries would be better then gold but few of these wealthy men agree with me. However you pay for it one needs only to look to the former Soviet Union and the billionaires who made their fortunes off of that collapse. Major assets will be bought for pennies on the dollar and those who put their hopes on politicians fixing the very mess that they created will be destitute. Try to catch the falling knife in the soon to be tremendous volatility in metals prices to your own peril. I'll be carefully accumulating buying on the dips. To sell now would be a huge mistake in my view since a sudden EU collapse would surely collapse many US banks making gold skyrocket. Worst case scenario would be having to wait a couple years for the US default or a hyperinflationary move. Not worried that somehow the US dollar makes it out of this, we burnt that bridge long ago. Physical only!!! Asset preservation is key!

I don't see how Europe can come through this crisis without outside help. Will the US throw more money at the EU problem? Either way, collapse or bailout, it's not going to be good for the dollar long term. Many have talked of deflation, true that a collapse in world markets might lead to that but if it does then the US will surely be in trouble with it's debt. Personally, I think the US was trying to do everything possible to stave off deflation which is the reason for such low interest rates and some of their actions lately such as monetization. They desperately want inflation! Our only way out is the dreaded inflation but the problem is that our politicians have run out of ideas to make that happen without a catastrophe. They're going to let the EU and the world banks collapse, they'll watch as the dollar becomes worthless and if it's not low enough then they'll print more to get it down there. We'll be the next Zimbabwe, you all wanted to be millionaires well you might just get your wish :wink: This is all my personal opinion and please don't base your decisions on the rambling thoughts of a young man. My intent with this is to generate discussion in the hope that someone sees a different outcome then the one I've described and that perhaps they can ease a weary mind. :help: :dontknow:
 

Re: Where is the dollar headed and what's that mean for metals?

Great topic and welcome out into the open from lurking mghcal. Also just read your link, interesting but 300 billion just doesn't seem like a lot these days but maybe they could buy Portugal or Italy. :laughing9: I don't usually say much ( as I can't put my thoughts into words) and I tend to listen from the sidelines and see what people are saying like MTS and Jim4Silver and I bet they will be along sooner than later.
So I'm sure you'll get some response. :thumbsup:
Have A Happy Christmas
 

Re: Where is the dollar headed and what's that mean for metals?

You mentioned that the old folks are scared- anyone with even moderate intelligence should be scared as hell about the prognosis of both our economy and that of the EU. While many average joes know things are not great because they might be unemployed or have family members who are, most probably don't try to see (or maybe don't want to see) where we are headed. It is easy to just hope for the best and not plan ahead.

Nobody knows for sure what the future holds, but I think the powers that be will keep inflating as you mention as long as they can to keep things rolling along. At some point such a tactic must fail. Even though the gov can technically print money forever, it can only continue as long as other countries have faith in the dollar's strength. There has been much talk lately about China not being in such great shape financially as everyone thinks. I don't know if that is true or not, but once they stop buying our debt, it will be up to the fed reserve to buy it to keep the coffers full (unless of course other countries step up to fill the void from China). That is not sustainable long term solution in my opinion. Right now the dollar is doing well because people are afraid of the euro's future. But if the euro were to fail, it would cause ripples that would spread throughout the world in that many of our financial institutions have investments there and they would fail too if not bailed out. Plus our stock markets would take a big hit and many citizens' 401Ks, etc, could lose a big chunk so they would be screaming and crying about that, which would not help our economy here.

My "guess" is that at some point down the road, the Euro will fail as will the dollar (with respect their value and the public faith in them). If/when that happens, a new currency involving one or more nations will be created that will backed (for real or allegedly) by PMs or even a basket of commodities to give it a perceived strength that all unbacked currencies do not have. If such were to happen, it would probably cause an end to the PM bull market and would be the time to cash your PMs in for the new currency (if possible while PM prices were still high). If this were to happen it would probably not be for a few years or more.

This is all just my opinion and pure conjecture.

Jim
 

Re: Where is the dollar headed and what's that mean for metals?

mghcal,

Wow, you mean those yankee dollars in my pocket are WORTHLESS? When did that happen? How am I going to buy a new
metal detector. Would you supply me a list of dealers who take worn silver dimes in exchange. How am I going to buy milk for
the kiddos now with WORTHLESS bucks?

I know, you're young and prone to exaggeration but SHIAEEESE already.
 

Re: Where is the dollar headed and what's that mean for metals?

lastleg said:
mghcal,

Wow, you mean those yankee dollars in my pocket are WORTHLESS? When did that happen? How am I going to buy a new
metal detector. Would you supply me a list of dealers who take worn silver dimes in exchange. How am I going to buy milk for
the kiddos now with WORTHLESS bucks?

I know, you're young and prone to exaggeration but SHIAEEESE already.
Someone has never read about the Weimar Republic I see..... Just keep pretending, like our elected officials and so many others do.... " The USA can NEVER fail!".... "Shiaeeese" right back at ya...
 

Re: Where is the dollar headed and what's that mean for metals?

While you were studying the Weimar Republic and ancient Germanic history most people gained insight from the mistake of
foolish Huns. BTW what currency do you use? Pesos?
 

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